As filed with the Securities and Exchange Commission on January 31, 1997
1933 Act Registration No. 2-85229
1940 Act Registration No. 811-3802
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [__X__]
Pre-Effective Amendment No. ______ [ ]
Post-Effective Amendment No. __23__ [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. __24__ [ X ]
(Check appropriate box or boxes)
NEUBERGER & BERMAN INCOME FUNDS
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Theodore P. Giuliano, President
Neuberger & Berman Income Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
_X_ on February 3, 1997 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
____ on ________________ pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph
____ (a)(2) on __________ pursuant to paragraph (a)(2)
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and the notice required by such rule
for its 1996 fiscal year was filed on December 27, 1996.
Neuberger & Berman Income Funds is a "master/feeder fund." This
Post-Effective Amendment No. 23 includes a signature page for the master fund,
Income Managers Trust, and appropriate officers and trustees thereof.
Page ______ of ______
Exhibit Index
Begins on Page _______
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 23 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents.
Cover Sheet
Contents of Post-Effective Amendment No. 23 on Form N-1A
Cross Reference Sheet
Neuberger & Berman Government Money Fund
Neuberger & Berman Cash Reserves
Neuberger & Berman Ultra Short Bond Fund
Neuberger & Berman Limited Maturity
Bond Fund Neuberger & Berman Municipal Money Fund
Neuberger & Berman Municipal Securities Trust
Neuberger & Berman New York Insured Intermediate Fund
- ------------------------------------------------------
Part A - Prospectus
Neuberger & Berman Government Money Fund
Neuberger & Berman Cash Reserves
Neuberger & Berman Ultra Short Bond Fund
Neuberger & Berman Limited Maturity Bond Fund
- ---------------------------------------------
Part B - Statement of Additional Information
Neuberger & Berman Municipal Money Fund
Neuberger & Berman Municipal Securities Trust
Neuberger & Berman New York Insured Intermediate Fund
- -----------------------------------------------------
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 23 ON FORM N-1A
Cross Reference Sheets
This cross reference sheet relates to the Prospectus for Neuberger & Berman Cash
Reserves, Neuberger & Berman Government Money Fund, Neuberger & Berman Limited
Maturity Bond Fund, Neuberger & Berman Ultra Short Bond Fund, Neuberger & Berman
Municipal Money Fund, Neuberger & Berman Municipal Securities Trust, and
Neuberger & Berman New York Insured Intermediate Fund.
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Financial Highlights; Performance
Information Information
Item 4. General Description of Investment Programs; Description of
Registrant Investments; Special Information
Regarding Organization,
Capitalization and Other Matters
Item 5. Management of the Fund Management and Administration; Back
Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other
Securities Distributions, and Taxes; Special
Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities How to Buy Shares; Additional
Being Offered Information on Telephone
Transactions; Shareholder
Services; Share Prices and Net Asset
Value; Management and Administration
Item 8. Redemption or Repurchase How to Sell Shares; Additional
Information on Telephone
Transactions; Shareholder Services;
Share Prices and Net Asset Value
Item 9. Pending Legal Not Applicable
Proceedings
<PAGE>
This cross reference sheet relates to the Statement of Additional Information
for Neuberger & Berman Cash Reserves, Neuberger & Berman Government Money Fund,
Neuberger & Berman Limited Maturity Bond Fund, and Neuberger & Berman
Ultra Short Bond Fund.
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Not Applicable
History
Item 13. Investment Objectives Investment Information; Certain Risk
and Policies Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Control Persons And Principal Holders
Principal Holders of of Securities
Securities
Item 16. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption Valuation of Portfolio Securities;
and Pricing of Additional Purchase Information;
Securities Being Additional Exchange Information;
Offered Additional Redemption Information;
Distribution Arrangements
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and 1.
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
<PAGE>
This cross reference sheet relates to the Statement of Additional Information
for Neuberger & Berman Municipal Money Fund, Neuberger & Berman Municipal
Securities Trust, and Neuberger & Berman New York Insured Intermediate Fund.
Caption in Part B
Form N-1A Item No. Statement of Additional Information
Item 10. Cover page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Not applicable
History
Item 13. Investment Objectives Investment Information; Certain Risk
and Policies Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Control Persons And Principal Holders
Principal Holders of of Securities
Securities
Item 16. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption Valuation of Portfolio Securities
and Pricing of (Neuberger & Berman Municipal Money
Securities Being Portfolio);
Offered Additional Purchase Information;
Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No.
23.
<PAGE>
<PAGE>
PROSPECTUS
- -------------------------------------------------------------------------------
February 3, 1997
[LOGO]
Neuberger & Berman
INCOME FUNDS -Registered Trademark-
Neuberger&Berman
GOVERNMENT MONEY FUND
Neuberger&Berman
CASH RESERVES
Neuberger&Berman
ULTRA SHORT BOND FUND
Neuberger&Berman
LIMITED MATURITY BOND FUND
Neuberger&Berman
MUNICIPAL MONEY FUND
Neuberger&Berman
MUNICIPAL SECURITIES TRUST
Neuberger&Berman
NEW YORK INSURED INTERMEDIATE FUND
No Sales Charges
No Redemption Fees
No 12b - 1 Fees
<PAGE>
Neuberger&Berman
INCOME FUNDS
No-Load Income Funds
- ----------------------------------------------------------------------
Neuberger&Berman GOVERNMENT MONEY FUND-REGISTERED TRADEMARK-
Neuberger&Berman CASH RESERVES-REGISTERED TRADEMARK-
Neuberger&Berman ULTRA SHORT BOND FUND-REGISTERED TRADEMARK-
Neuberger&Berman LIMITED MATURITY BOND FUND-REGISTERED TRADEMARK-
Neuberger&Berman MUNICIPAL MONEY FUND-REGISTERED TRADEMARK-
Neuberger&Berman MUNICIPAL SECURITIES TRUST-REGISTERED TRADEMARK-
Neuberger&Berman NEW YORK INSURED INTERMEDIATE FUND-REGISTERED TRADEMARK-
INITIAL PURCHASE -- $2,000 MINIMUM
AUTOMATIC INVESTING -- $100 MINIMUM PER MONTH
GIFT PROGRAMS AND IRAS -- $250 MINIMUM
CALL 800-877-9700
- ------------------------------------------------------------------------------
Each of the above-named funds (a "Fund") invests all of its net investable
assets in its corresponding portfolio (a "Portfolio") of Income Managers Trust
("Managers Trust"), an open-end management investment company managed by
Neuberger&Berman Management Incorporated ("N&B Management"). Each Portfolio
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of its corresponding Fund. The investment
performance of each Fund directly corresponds with the investment performance of
its corresponding 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 structure that
you should consider, see "Summary" on page 3 and "Information Regarding
Organization, Capitalization, and Other Matters" on page 48.
The Funds are no-load mutual funds, so you pay no sales commissions or other
charges when you buy or redeem shares. The Funds do not pay "12b-1 fees" to
promote or distribute their shares. The Funds declare income dividends daily and
pay them monthly.
Please read this Prospectus before investing in any of the Funds and keep it
for future reference. It contains information about the Funds that a prospective
investor should know before investing. Statements of Additional Information
("SAIs"), one about the municipal Funds and Portfolios and one about the taxable
Funds and Portfolios, dated February 3, 1997, are on file with the Securities
and Exchange Commission ("SEC"). The SAIs are incorporated herein by reference
(so they are legally considered a part of this Prospectus). You can obtain a
free copy of either SAI by calling N&B Management at 800-877-9700. AN INVESTMENT
IN THE FUNDS, AS IN ANY MUTUAL FUND, IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. ALTHOUGH NEUBERGER&BERMAN GOVERNMENT MONEY FUND,
NEUBERGER&BERMAN CASH RESERVES, AND NEUBERGER&BERMAN MUNICIPAL MONEY FUND SEEK
TO MAINTAIN NET ASSET VALUES OF $1.00 PER SHARE, THERE IS NO ASSURANCE THEY WILL
BE ABLE TO DO SO.
The SEC maintains a Website (http://www.sec.gov) that contains the SAI,
material incorporated by reference, and other information regarding the Funds
and Portfolios.
PROSPECTUS DATED FEBRUARY 3, 1997
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Funds and Portfolios 3
Risk Factors 5
Management 6
EXPENSE INFORMATION 7
Shareholder Transaction Expenses for
Each Fund 7
Annual Fund Operating Expenses 7
Example 9
FINANCIAL HIGHLIGHTS 10
Selected Per Share Data and Ratios 10
Government Money Fund 11
Cash Reserves 12
Ultra Short Bond Fund 13
Limited Maturity Bond Fund 14
Municipal Money Fund 15
Municipal Securities Trust 16
New York Insured Intermediate Fund 17
INVESTMENT PROGRAMS 20
Money Market Portfolios 20
Bond Portfolios 21
Municipal Portfolios 22
Short-Term Trading; Portfolio
Turnover 25
Ratings of Securities 25
Borrowings 27
Other Investments 27
Duration 28
PERFORMANCE INFORMATION 29
Yield 29
Total Return 29
Tax-Equivalent Yield 29
Yield and Total Return Information 30
HOW TO BUY SHARES 31
By Mail 31
By Wire 31
By Telephone 32
By Exchanging Shares 32
Other Information 32
HOW TO SELL SHARES 34
By Mail or Facsimile Transmission
(Fax) 34
By Telephone 35
By Check 36
Other Information 36
ADDITIONAL INFORMATION ON
TELEPHONE TRANSACTIONS 37
SHAREHOLDER SERVICES 38
Automatic Investing and Dollar Cost
Averaging 38
Exchange Privilege 38
Systematic Withdrawal Plans 39
Retirement Plans 39
Electronic Bank Transfers 40
Internet Access 40
SHARE PRICES AND
NET ASSET VALUE 41
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES 42
Distribution Options 42
Taxes 43
MANAGEMENT AND ADMINISTRATION 45
Trustees and Officers 45
Investment Manager, Administrator,
Distributor, and Sub-Adviser 45
Expenses 46
Transfer and Shareholder Servicing
Arrangements 47
INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS 48
The Funds 48
The Portfolios 49
DESCRIPTION OF INVESTMENTS 51
USE OF JOINT PROSPECTUS AND
STATEMENTS OF ADDITIONAL
INFORMATION 59
OTHER INFORMATION 60
Directory 60
Funds Eligible for Exchange 60
</TABLE>
<PAGE>
SUMMARY
The Funds and Portfolios
- ----------------------------------------------------------------------
Each Fund is a series of Neuberger&Berman Income Funds (the "Trust") and
invests in its corresponding Portfolio which, in turn, invests in securities in
accordance with an investment objective, policies, and limitations that are
identical to those of the Fund. This is sometimes called a master/feeder fund
structure, because each Fund "feeds" shareholders' investments into its
corresponding Portfolio, a "master" fund. The structure looks like this:
--------------------------
SHAREHOLDERS
--------------------------
(arrow) BUY SHARES IN
--------------------------
Funds
--------------------------
(arrow) INVEST IN
--------------------------
Portfolios
--------------------------
(arrow) INVEST IN
--------------------------
Debt Securities & Other Securities
--------------------------
The trustees who oversee the Funds believe that this structure may benefit
shareholders; investment in a Portfolio by investors in addition to a Fund may
enable the Portfolio to achieve economies of scale that could reduce expenses.
For more information about the organization of the Funds and the Portfolios,
including certain features of the master/feeder fund structure, see "Information
Regarding Organization, Capitalization, and Other Matters" on page 48.
In this Prospectus, you will find information about three different basic
types of income mutual funds -- money market funds, bond funds, and municipal
funds.
The following table is a summary highlighting features of the Funds and their
corresponding Portfolios. You may want to invest in a variety of Funds to fit
your particular investment needs. Please see "Investment Programs" on page 20.
Of course, there can be no assurance that a Fund will meet its investment
objective.
3
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PRINCIPAL PORTFOLIO COMPARATIVE
INCOME FUNDS OBJECTIVE INVESTMENTS INFORMATION
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET FUNDS
GOVERNMENT MONEY Maximum safety and U.S. Treasury Seeks to maintain a
liquidity with the obligations and constant share price
highest available other money market of $1.00;
current income instruments backed dollar-weighted
by the full faith average portfolio
and credit of the maturity of up to 90
United States days
CASH RESERVES Highest current High-quality money Seeks to maintain a
income consistent market instruments constant share price
with safety and of government and of $1.00;
liquidity non-government dollar-weighted
issuers average portfolio
maturity of up to 90
days
BOND FUNDS
ULTRA SHORT Current income with Money market Lower expected price
minimal risk to instruments and fluctuation of
principal and investment grade Neuberger& Berman
liquidity debt securities of bond funds; maximum
government and dollar-weighted
non-government average duration of
issuers two years
LIMITED MATURITY Highest current Debt securities, More potential price
income consistent primarily investment fluctuation; maximum
with low risk to grade; maximum 10% dollar- weighted
principal and below investment average duration of
liquidity; and grade, but no lower four years
secondarily, total than B*
return
MUNICIPAL FUNDS
MUNICIPAL MONEY Maximum current High-quality, Seeks to maintain a
tax-exempt income short-term municipal constant share price
consistent with securities of $1.00;
safety and dollar-weighted
liquidity** average portfolio
maturity of up to 90
days
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PRINCIPAL PORTFOLIO COMPARATIVE
INCOME FUNDS OBJECTIVE INVESTMENTS INFORMATION
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL High current tax- Investment grade More potential price
SECURITIES exempt income with municipal securities fluctuation; maximum
low risk to dollar- weighted
principal, limited average duration of
price fluctuation, 10 years
and liquidity; and
secondarily, total
return**
NEW YORK INSURED High level of Primarily New York Maximum dollar-
INTERMEDIATE*** current income Municipal Securities weighted average
exempt from federal rated Aaa/AAA and duration of 10 years
income tax and New guaranteed by
York State and New private insurance
York City personal companies; the
income taxes, remainder in
consistent with uninsured New York
preservation of Municipal Securities
capital** of investment grade
and certain other
instruments
</TABLE>
*SECURITIES THAT ARE BELOW INVESTMENT GRADE WILL BE PURCHASED ONLY IF RATED B
OR HIGHER BY EITHER MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") OR STANDARD &
POOR'S ("S&P") OR, IF UNRATED BY EITHER OF THOSE ENTITIES, DEEMED BY N&B
MANAGEMENT TO BE OF COMPARABLE QUALITY. SEE PAGES 25-26.
**THIS PORTFOLIO MAY INVEST IN MUNICIPAL SECURITIES THAT ARE ISSUED TO FINANCE
PRIVATE ACTIVITIES, THE INTEREST ON WHICH MAY BE SUBJECT TO THE FEDERAL
ALTERNATIVE MINIMUM TAX.
***AVAILABLE TO RESIDENTS OF NEW YORK AND FLORIDA ONLY.
Risk Factors
- ----------------------------------------------------------------------
An investment in any Fund involves certain risks, depending upon the types of
investments made by its corresponding Portfolio. The Portfolios invest in fixed
income securities, which are likely to decline in value in times of rising
market interest rates and to rise in value 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. Special risk factors apply to investments, which may be made by
certain Portfolios, in debt securities rated below investment grade, foreign
securities, options and futures contracts, residual interest bonds, municipal
leases, zero coupon bonds and swap agreements. The value of many municipal
securities depends on the profitability of private companies or projects in
connection with which the securities were issued. The value and yield of New
York Municipal
5
<PAGE>
Securities in which Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio
invests are subject to a variety of factors, including political and economic
conditions in New York State. For more details about each Portfolio, its
investments and their risks, see "Investment Programs" on page 20 and
"Description of Investments" on page 51.
Management
- ----------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolios. N&B
Management also provides administrative services to the Portfolios and the Funds
and acts as distributor of Fund shares. See "Management and Administration" on
page 45. If you want to know how to buy and sell shares of the Funds or exchange
them for shares of other Neuberger&Berman Funds-Registered Trademark-, see "How
to Buy Shares" on page 31, "How to Sell Shares" on page 34, and "Shareholder
Services -- Exchange Privilege" on page 38.
6
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of each Fund
and its corresponding Portfolio. See "Performance Information" for important
facts about the investment performance of each Fund, after taking expenses into
account.
Shareholder Transaction Expenses for Each Fund
- ----------------------------------------------------------------------
As shown by this table, the Funds impose 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 Funds' transfer agent
charges a fee (currently $8.00) for each wire redemption. Shareholders who have
one or more accounts in the Neuberger&Berman Funds aggregating $200,000 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 DAILY NET ASSETS)
- --------------------------------------------------------------------------------
The following table shows annual Total Operating Expenses for each Fund,
which are paid out of the assets of the Funds and which include the Fund's pro
rata portion of the Total Operating Expenses of its corresponding Portfolio.
Each Fund pays N&B Management an administration fee based on the Fund's average
daily net assets. Each 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 corresponding Fund. Therefore, the table combines
management and administration fees. The Funds and Portfolios also incur other
expenses for things such as accounting and legal fees, maintaining shareholder
records, and furnishing shareholder statements and Fund reports. "Total
Operating Expenses" exclude interest, taxes, brokerage commissions, and
extraordinary expenses. The Funds' expenses are factored into their share prices
and dividends and are not charged directly to Fund shareholders. For more
information, see "Management and Administration" and the SAIs.
7
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
INCOME FUNDS ADMINISTRATION FEES FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
GOVERNMENT MONEY 0.52% None 0.15% 0.67%
CASH RESERVES 0.50%* None 0.15% 0.65%*
ULTRA SHORT 0.33%* None 0.32% 0.65%*
LIMITED MATURITY 0.51%* None 0.19% 0.70%*
MUNICIPAL MONEY 0.52% None 0.20% 0.72%
MUNICIPAL SECURITIES 0.13%* None 0.52% 0.65%*
NEW YORK INSURED INTERMEDIATE 0.00%* None 0.65%* 0.65%*
</TABLE>
*REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW
Total Operating Expenses for each Fund are based upon administration fees
incurred by the Fund and management fees incurred by its corresponding Portfolio
during the past fiscal year and any current expense reimbursement undertaking.
"Other Expenses" are based on each Fund's and Portfolio's expenses for the past
fiscal year. The trustees of the Trust believe that the aggregate per share
expenses of each Fund and its corresponding Portfolio will be approximately
equal to the expenses the Fund would incur if its assets were invested directly
in the type of securities held by its corresponding Portfolio. The trustees of
the Trust also believe that investment in a Portfolio by investors in addition
to a Fund may enable the Portfolio to achieve economies of scale which could
reduce expenses. The expenses and, accordingly, the returns of other funds that
may invest in the Portfolios may differ from those of the Funds.
The previous table reflects N&B Management's voluntary undertaking to
reimburse CASH RESERVES, ULTRA SHORT, LIMITED MATURITY, MUNICIPAL SECURITIES,
and NEW YORK INSURED INTERMEDIATE for each Fund's Total Operating Expenses and
that Fund's pro rata share of its corresponding Portfolio's Total Operating
Expenses which, in the aggregate, exceed 0.65% per annum (0.70% for LIMITED
MATURITY) of the Fund's average daily net assets. Each undertaking can be
terminated by N&B Management by giving a Fund at least 60 days' prior written
notice. Absent the reimbursement, Management and Administration Fees would be
0.52%, 0.52%, 0.52%, 0.52%, and 0.52% and Total Operating Expenses would be
0.67%, 0.84%, 0.71%, 1.04% and 1.97% per annum of the average daily net assets
of CASH RESERVES, ULTRA SHORT, LIMITED MATURITY, MUNICIPAL SECURITIES, and NEW
YORK INSURED INTERMEDIATE, respectively, based upon the expenses of each Fund
for its 1996 fiscal year. Absent the reimbursement, Other Expenses would be
1.45% per annum of the average daily net assets of NEW YORK INSURED
INTERMEDIATE.
For more information about the current expense reimbursement undertakings,
see "Expenses" on page 46.
8
<PAGE>
Example
- ----------------------------------------------------------------------
To illustrate the effect of Total Operating Expenses, let's assume that each
Fund's annual return is 5% and that it had Total Operating Expenses described in
the table above. For every $1,000 you invested in each 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>
NEUBERGER&BERMAN
INCOME FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GOVERNMENT MONEY $ 7 $21 $37 $83
CASH RESERVES $ 7 $21 $36 $81
ULTRA SHORT $ 7 $21 $36 $81
LIMITED MATURITY $ 7 $22 $39 $87
MUNICIPAL MONEY $ 7 $23 $40 $89
MUNICIPAL SECURITIES $ 7 $21 $36 $81
NEW YORK INSURED INTERMEDIATE $ 7 $21 $36 $81
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
9
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
- ----------------------------------------------------------------------
The financial information in the following tables is for each Fund as of
October 31, 1996 and includes data related to each Fund before it was converted
into a series of the Trust on July 2, 1993 (except Neuberger&Berman NEW YORK
INSURED INTERMEDIATE Fund, which commenced operations on February 1, 1994). This
information has been audited by the Funds' independent auditors. You may obtain,
at no cost, further information about the performance of the Funds in their
annual reports to shareholders. The auditors' reports are incorporated in the
SAIs by reference to the annual reports. Please call 800-877-9700 for free
copies of the annual reports and for up-to-date information. Also, see
"Performance Information."
10
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Government Money Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with the corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1987
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0003 $1.0000 $ .9997 $1.0000 $ 1.0002 $ 1.0002
-----------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0464 .0499 .0302 .0248 .0354 .0567 .0718 .0758 .0579 .0504
Net Gains or Losses on
Securities -- -- -- -- -- .0003 .0003 (.0002) -- .0002
-----------------------------------------------------------------------------------------------
Total From Investment
Operations .0464 .0499 .0302 .0248 .0354 .0570 .0721 .0756 .0579 .0506
-----------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0464) (.0499) (.0302) (.0248) (.0354) (.0567) (.0718) (.0758) (.0579) (.0504)
Distributions (from net
capital gains) -- -- -- -- (.0003) -- -- (.0001) (.0002) (.0002)
-----------------------------------------------------------------------------------------------
Total Distributions (.0464) (.0499) (.0302) (.0248) (.0357) (.0567) (.0718) (.0759) (.0581) (.0506)
-----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0003 $1.0000 $ .9997 $ 1.0000 $ 1.0002
-----------------------------------------------------------------------------------------------
Total Return(2) +4.74% +5.10% +3.07% +2.51% +3.62% +5.82% +7.42% +7.86% +5.97% +5.18%
-----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year
(in millions) $ 363.4 $ 308.3 $ 251.5 $ 277.2 $ 301.1 $ 246.5 $ 234.6 $ 184.3 $ 173.2 $ 266.4
-----------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets .67% .65% .72% .70% .66% .68% .74% .87% .79%(3) .75%(3)
-----------------------------------------------------------------------------------------------
Ratio of Net Investment
Income to Average Net
Assets 4.65% 5.00% 3.00% 2.48% 3.50% 5.66% 7.19% 7.55% 5.73%(3) 5.11%(3)
-----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
11
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Cash Reserves
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with the corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
April 12, 1988(4)
Year Ended October 31, to October 31,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $1.0000 $1.0000 $1.0001 $1.0001 $1.0000 $1.0000 $1.0001 $1.0000 $1.0000
-----------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0486 .0529 .0327 .0263 .0363 .0600 .0766 .0866 .0401
Net Gains or Losses on
Securities -- -- -- .0002 .0002 -- -- .0001 --
-----------------------------------------------------------------------------------------
Total From Investment
Operations .0486 .0529 .0327 .0265 .0365 .0600 .0766 .0867 .0401
-----------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0486) (.0529) (.0327) (.0263) (.0363) (.0600) (.0766) (.0866) (.0401)
Distributions (from net
capital gains) -- -- (.0001) (.0002) (.0001) -- (.0001) -- --
-----------------------------------------------------------------------------------------
Total Distributions (.0486) (.0529) (.0328) (.0265) (.0364) (.0600) (.0767) (.0866) (.0401)
-----------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.0000 $1.0000 $1.0000 $1.0001 $1.0001 $1.0000 $1.0000 $1.0001 $1.0000
-----------------------------------------------------------------------------------------
Total Return(2) +4.97% +5.42% +3.33% +2.68% +3.69% +6.17% +7.94% +9.01% +4.08%(5)
-----------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year
(in millions) $ 482.0 $ 408.9 $ 311.9 $ 273.1 $ 261.7 $ 278.9 $ 278.2 $ 267.1 $ 140.9
-----------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets(3) .65% .65% .65% .65% .65% .65% .65% .65% .60%(6)
-----------------------------------------------------------------------------------------
Ratio of Net Investment
Income to Average Net
Assets(3) 4.86% 5.30% 3.31% 2.63% 3.63% 6.00% 7.66% 8.70% 7.54%(6)
-----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
12
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Ultra Short Bond Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with the corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 1, 1988 Year Ended
Year Ended October 31, to October 31, February 29,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1988
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 9.53 $ 9.47 $ 9.64 $ 9.70 $ 9.83 $ 9.79 $ 9.83 $ 9.87 $ 9.93 $ 9.98
-----------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .52 .52 .35 .40 .56 .68 .79 .89 .47 .66
Net Gains or Losses
on Securities
(both realized and
unrealized) (.04) .06 (.17) (.06) (.13) .04 (.04) (.04) (.06) (.05)
-----------------------------------------------------------------------------------------------------
Total From
Investment
Operations .48 .58 .18 .34 .43 .72 .75 .85 .41 .61
-----------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.52) (.52) (.35) (.40) (.56) (.68) (.79) (.89) (.47) (.66)
-----------------------------------------------------------------------------------------------------
Net Asset Value, End of
Year $ 9.49 $ 9.53 $ 9.47 $ 9.64 $ 9.70 $ 9.83 $ 9.79 $ 9.83 $ 9.87 $ 9.93
-----------------------------------------------------------------------------------------------------
Total Return(2) +5.23% +6.26% +1.96% +3.53% +4.44% +7.64% +7.98% +9.05% +4.20%(5) +6.31%
-----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Year (in millions) $ 89.0 $100.5 $101.1 $104.4 $103.3 $ 97.9 $ 85.8 $103.3 $101.0 $125.3
-----------------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net
Assets(3) .65% .65% .65% .65% .65% .65% .65% .65% .63%(6) .50%
-----------------------------------------------------------------------------------------------------
Ratio of Net
Investment Income to
Average Net
Assets(3) 5.53% 5.44% 3.72% 4.09% 5.70% 6.97% 8.14% 9.06% 7.01%(6) 6.72%
-----------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate(7) -- -- -- 115% 66% 89% 120% 85% 47% 121%
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
13
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Limited Maturity Bond Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with the corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 1, 1988 Year Ended
Year Ended October 31, to October 31, February 29,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1988
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $10.06 $ 9.88 $10.49 $10.40 $10.24 $ 9.91 $ 9.96 $ 9.88 $10.00 $10.17
-----------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .60 .62 .56 .58 .63 .71 .80 .82 .48 .69
Net Gains or Losses
on Securities
(both realized and
unrealized) (.07) .18 (.55) .14 .16 .33 (.05) .08 (.12) (.17)
-----------------------------------------------------------------------------------------------------
Total From
Investment
Operations .53 .80 .01 .72 .79 1.04 .75 .90 .36 .52
-----------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.60) (.62) (.56) (.58) (.63) (.71) (.80) (.82) (.48) (.69)
Distributions (from
net capital gains) -- -- (.05) (.05) -- -- -- -- -- --
Distributions (in
excess of net
investment
income and net
capital gains) -- -- (.01) -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------
Total Distributions (.60) (.62) (.62) (.63) (.63) (.71) (.80) (.82) (.48) (.69)
-----------------------------------------------------------------------------------------------------
Net Asset Value, End of
Year $ 9.99 $10.06 $ 9.88 $10.49 $10.40 $10.24 $ 9.91 $ 9.96 $ 9.88 $10.00
-----------------------------------------------------------------------------------------------------
Total Return(2) +5.44% +8.32% +0.13% +7.09% +7.87% +10.89% +7.85% +9.56% +3.76%(5) +5.39%
-----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Year (in millions) $245.7 $307.4 $308.6 $357.3 $273.0 $163.2 $101.3 $107.7 $133.5 $107.3
-----------------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net
Assets(3) .70% .70% .69% .65% .65% .65% .65% .65% .63%(6) .50%
-----------------------------------------------------------------------------------------------------
Ratio of Net
Investment Income to
Average Net
Assets(3) 6.10% 6.21% 5.53% 5.49% 6.02% 7.07% 8.09% 8.33% 7.34%(6) 6.97%
-----------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate(7) -- -- -- 114% 113% 88% 88% 121% 68% 158%
-----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
14
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Municipal Money Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with the corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1987
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $.9994 $.9995 $.9996 $.9995 $.9989 $.9989 $.9989 $.9993 $.9995 $1.0000
---------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0285 .0324 .0204 .0184 .0263 .0432 .0539 .0591 .0478 .0388
Net Gains or Losses
on Securities (.0001) (.0001) (.0001) .0001 .0006 -- -- (.0004) (.0002) (.0005)
---------------------------------------------------------------------------------------
Total From
Investment
Operations .0284 .0323 .0203 .0185 .0269 .0432 .0539 .0587 .0476 .0383
---------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0285) (.0324) (.0204) (.0184) (.0263) (.0432) (.0539) (.0591) (.0478) (.0388)
---------------------------------------------------------------------------------------
Net Asset Value, End of
Year $.9993 $.9994 $.9995 $.9996 $.9995 $.9989 $.9989 $.9989 $.9993 $ .9995
---------------------------------------------------------------------------------------
Total Return(2) +2.89% +3.29% +2.06% +1.86% +2.66% +4.40% +5.53% +6.07% +4.89% +3.95%
---------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Year (in millions) $132.6 $160.9 $150.3 $181.6 $195.6 $173.9 $190.6 $204.8 $184.5 $ 226.1
---------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net Assets .72% .71% .73% .74% .67% .66% .67% .74% .69% .71%
---------------------------------------------------------------------------------------
Ratio of Net
Investment Income to
Average Net Assets 2.86% 3.24% 2.02% 1.85% 2.63% 4.34% 5.41% 5.91% 4.76% 3.90%
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
15
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Municipal Securities Trust
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with the corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
July 9,
1987(4)
Year Ended October 31, to October 31,
1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988 1987
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $10.83 $10.26 $11.12 $10.53 $10.39 $10.14 $10.09 $10.08 $ 9.73 $10.00
----------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .47 .47 .46 .48 .54 .58 .64 .63 .59 .15
Net Gains or Losses
on Securities
(both realized and
unrealized) (.05) .57 (.73) .68 .14 .25 .05 .01 .35 (.27)
----------------------------------------------------------------------------------------------
Total From
Investment
Operations .42 1.04 (.27) 1.16 .68 .83 .69 .64 .94 (.12)
----------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.47) (.47) (.46) (.48) (.54) (.58) (.64) (.63) (.59) (.15)
Distributions (from
net capital gains) -- -- (.12) (.09) -- -- -- -- -- --
Distributions (in
excess of capital
gains) -- -- (.01) -- -- -- -- -- -- --
----------------------------------------------------------------------------------------------
Total Distributions (.47) (.47) (.59) (.57) (.54) (.58) (.64) (.63) (.59) (.15)
----------------------------------------------------------------------------------------------
Net Asset Value, End of
Year $10.78 $10.83 $10.26 $11.12 $10.53 $10.39 $10.14 $10.09 $10.08 $ 9.73
----------------------------------------------------------------------------------------------
Total Return(2) +3.92% +10.35% -2.57% +11.30% +6.72% +8.41% +6.99% +6.55% +9.88% -1.15%(5)
----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Year (in millions) $ 38.9 $ 44.3 $ 51.1 $105.2 $ 37.0 $ 25.5 $ 14.1 $ 10.5 $ 9.8 $ 6.7
----------------------------------------------------------------------------------------------
Ratio of Expenses to
Average Net
Assets(3) .65% .65% .65% .62% .50% .50% .50% .50% .50% .50%(6)
----------------------------------------------------------------------------------------------
Ratio of Net
Investment Income to
Average Net
Assets(3) 4.32% 4.45% 4.24% 4.33% 5.16% 5.61% 6.28% 6.26% 5.90% 5.29%(6)
----------------------------------------------------------------------------------------------
Portfolio Turnover
Rate(7) -- -- -- 35% 46% 10% 42% 17% 23% 0%
----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
16
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
New York Insured Intermediate Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year 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 the
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
Year Ended February 1, 1994(4)
October 31, to October 31,
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $10.01 $ 9.25 $10.00
---------------------------------------
Income From Investment Operations
Net Investment Income .40 .41 .29
Net Gains or Losses on
Securities
(both realized and unrealized) (.05) .76 (.75)
---------------------------------------
Total From Investment
Operations .35 1.17 (.46)
---------------------------------------
Less Distributions
Dividends (from net investment
income) (.40) (.41) (.29)
---------------------------------------
Net Asset Value, End of Year $ 9.96 $10.01 $ 9.25
---------------------------------------
Total Return(2) +3.58% +12.88% -4.63%(5)
---------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 9.6 $ 11.5 $ 14.7
---------------------------------------
Ratio of Expenses to Average
Net Assets(3) .66% .66% .65%(6)
---------------------------------------
Ratio of Net Investment Income
to Average Net Assets(3) 4.03% 4.24% 4.10%(6)
---------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
17
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1)The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
income and expenses.
2)Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. For each Fund (except Neuberger&Berman
MUNICIPAL MONEY Fund), total return would have been lower if N&B Management
had not reimbursed certain expenses.
3)After reimbursement of expenses by N&B Management. Had N&B Management
not undertaken such action the annualized ratios to average daily net assets
would have been:
NEUBERGER&BERMAN GOVERNMENT MONEY FUND
<TABLE>
<CAPTION>
Year Ended October
31,
1988 1987
<S> <C> <C>
Expenses .83% .90%
Net Investment Income 5.69% 4.96%
</TABLE>
NEUBERGER&BERMAN CASH RESERVES
<TABLE>
<CAPTION>
Period from
April 12,
1988 to
Year Ended October 31, October 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses .67% .68% .71% .76% .69% .69% .72% .83% 1.03%
Net Investment Income 4.84% 5.27% 3.25% 2.52% 3.59% 5.96% 7.59% 8.52% 7.11%
</TABLE>
NEUBERGER&BERMAN ULTRA SHORT BOND FUND
<TABLE>
<CAPTION>
Period from
March 1, 1988 Year Ended
Year Ended October 31, to October 31, February 29,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses .84% .87% .86% .95% .87% .87% .81% .92% .89% .95%
Net Investment Income 5.34% 5.22% 3.51% 3.79% 5.48% 6.75% 7.98% 8.79% 6.75% 6.27%
</TABLE>
NEUBERGER&BERMAN LIMITED MATURITY BOND FUND
<TABLE>
<CAPTION>
Period from
March 1, 1988 Year Ended
Year Ended October 31, to October 31, February 29,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses .71% .71% .71% .73% .68% .72% .71% .77% .74% .78%
Net Investment Income 6.09% 6.20% 5.51% 5.42% 5.99% 7.00% 8.03% 8.21% 7.23% 6.69%
</TABLE>
18
<PAGE>
NEUBERGER&BERMAN MUNICIPAL SECURITIES TRUST
<TABLE>
<CAPTION>
Period from
July 9, 1987
Year Ended October 31, to October 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses 1.04% .98% .82% 1.04% 1.16% 1.38% 1.67% 2.50% 2.00% 1.50%
Net Investment Income 3.93% 4.12% 4.07% 3.91% 4.50% 4.73% 5.11% 4.26% 4.40% 4.29%
</TABLE>
NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE FUND
<TABLE>
<CAPTION>
Period from
February 1,
Year Ended October 1994 to
31, October 31,
1996 1995 1994
<S> <C> <C> <C>
Expenses 1.97% 1.83% 1.53%
Net Investment Income 2.72% 3.07% 3.22%
</TABLE>
4)The date investment operations commenced.
5)Not annualized.
6)Annualized.
7)Neuberger&Berman ULTRA SHORT Bond Fund, Neuberger&Berman LIMITED
MATURITY Bond Fund, and Neuberger&Berman MUNICIPAL SECURITIES Trust
transferred all of their investment securities into their corresponding
Portfolios on July 2, 1993. After that date each Fund invested only in its
corresponding Portfolio, and that Portfolio, rather than the Fund, engaged in
securities transactions. Therefore, after that date, no Fund has calculated a
portfolio turnover rate. The portfolio turnover rates for each Portfolio were
as follows:
<TABLE>
<CAPTION>
Period from
July 2, 1993
(Commencement
of Operations)
Year Ended October 31, to October 31,
1996 1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Neuberger&Berman ULTRA SHORT Bond Portfolio 173% 148% 94% 46%
Neuberger&Berman LIMITED MATURITY Bond
Portfolio 169% 88% 102% 71%
Neuberger&Berman MUNICIPAL SECURITIES
Portfolio 3% 66% 127% 25%
</TABLE>
<TABLE>
<CAPTION>
Period from
February 1,
1994
(Commencement
Year Ended October of Operations)
31, to October 31,
1996 1995 1994
<S> <C> <C> <C>
Neuberger&Berman NEW YORK INSURED
INTERMEDIATE Portfolio 45% 17% 96%
</TABLE>
19
<PAGE>
INVESTMENT PROGRAMS
The investment policies and limitations of each Fund are identical to those
of its corresponding Portfolio. Each Fund invests only in its corresponding
Portfolio. Therefore, the following shows you the kinds of securities in which
each Portfolio invests. For an explanation of some types of investments, see
"Description of Investments" on page 51.
Investment policies and limitations of the Funds and Portfolios are not
fundamental unless otherwise specified in this Prospectus or the SAIs.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
The investment objectives of the Funds and Portfolios are not fundamental.
There can be no assurance that the Funds or Portfolios will achieve their
objectives. Each Fund, by itself, does not represent a comprehensive investment
program.
Additional investment techniques, features, and limitations concerning the
Portfolios' investment programs are described in the SAIs.
The value of fixed income securities is likely to rise in times of falling
market interest rates and fall in times of rising interest rates. Investments in
shorter-term income securities normally are less affected by interest rate
changes than are investments in longer-term securities. The value of income
securities is also affected by changes in the creditworthiness of the issuer.
Money Market Portfolios
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman GOVERNMENT MONEY Fund and
Portfolio is to provide maximum safety and liquidity with the highest available
current income. The investment objective of Neuberger&Berman CASH RESERVES and
Neuberger&Berman CASH RESERVES Portfolio is to provide the highest current
income consistent with safety and liquidity.
Neuberger&Berman GOVERNMENT MONEY Portfolio and Neuberger&Berman CASH
RESERVES Portfolio each invests in a portfolio of debt instruments with
remaining maturities of 397 days or less and maintains a dollar-weighted average
portfolio maturity of not more than 90 days. Each Portfolio uses the amortized
cost method of valuation to enable its corresponding Fund to maintain a stable
$1.00 share price. Of course, there is no guarantee that either Fund will be
able to maintain a $1.00 share price.
As a fundamental policy, Neuberger&Berman GOVERNMENT MONEY Portfolio may
invest only in U.S. Treasury obligations and other securities backed by the full
faith and credit of the United States. Currently, the Portfolio invests only in
U.S. Treasury obligations. As a fundamental policy, the Portfolio may not invest
in repurchase agreements.
20
<PAGE>
Neuberger&Berman CASH RESERVES Portfolio invests in high-quality U.S. dollar-
denominated money market instruments of U.S. and foreign issuers, including
governments and their agencies and instrumentalities, banks and other financial
institutions, and corporations, and may invest in repurchase agreements with
respect to these instruments. The Portfolio may invest 25% or more of its total
assets in U.S. Government and Agency Securities or in certificates of deposit or
bankers' acceptances issued by domestic branches of U.S. banks. The Portfolio
may also invest in municipal obligations that otherwise meet its criteria for
quality and maturity.
Bond Portfolios
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman ULTRA SHORT Bond Fund and
Portfolio is to provide current income with minimal risk to principal and
liquidity. The investment objective of Neuberger&Berman LIMITED MATURITY Bond
Fund and Portfolio is to provide the highest current income consistent with low
risk to principal and liquidity; and secondarily, total return.
Neuberger&Berman ULTRA SHORT Bond Portfolio and Neuberger&Berman LIMITED
MATURITY Bond Portfolio each invests in a diversified portfolio of debt
securities and seeks to increase income and preserve or enhance total return by
actively managing average portfolio duration in light of market conditions and
trends.
Neuberger&Berman ULTRA SHORT Bond Portfolio invests in a diversified
portfolio of U.S. Government and Agency Securities and investment grade debt
securities issued by financial institutions, corporations, and others. The
Portfolio's dollar-weighted average duration will not exceed two years, although
the Portfolio may invest in individual securities of any duration. Securities in
which the Portfolio may invest include mortgage-backed and asset-backed
securities, money market instruments, repurchase agreements with respect to U.S.
Government and Agency Securities, and U.S. dollar-denominated securities of
foreign issuers. The Portfolio may also enter into futures contracts and
purchase and sell options on futures contracts. The Portfolio may invest 25% or
more of its total assets in U.S. Government and Agency Securities or in
certificates of deposit or bankers' acceptances issued by domestic branches of
U.S. banks. The Portfolio may also invest in municipal obligations.
Neuberger&Berman LIMITED MATURITY Bond Portfolio invests in a diversified
portfolio consisting primarily of U.S. Government and Agency Securities and
investment grade debt securities issued by financial institutions, corporations,
and others. The dollar-weighted average duration of the Portfolio will not
exceed four years, although the Portfolio may invest in individual securities of
any duration. The Portfolio's dollar-weighted average maturity may range up to
five years. Securities in which the Portfolio may invest include mortgage-backed
and asset-backed securities, repurchase agreements with respect to U.S.
Government and Agency Securities, and foreign investments. The Portfolio may
invest up to 10% of its net assets in fixed
21
<PAGE>
income securities that are below investment grade, including unrated securities
deemed by N&B Management to be of comparable quality. The Portfolio will not
invest in such securities unless they are rated at least B by Moody's or S&P or,
if unrated by either of those entities, deemed by N&B Management to be of
comparable quality. For information on the risks associated with investments in
securities rated below investment grade, see "Ratings of Securities." The
Portfolio may purchase and sell covered call and put options, interest-rate
futures contracts, and options on those futures contracts and may lend portfolio
securities. The Portfolio may invest up to 5% of its net assets in municipal
securities when N&B Management believes such securities may outperform other
available issues.
Municipal Portfolios
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman MUNICIPAL MONEY Fund and
Portfolio is to provide the maximum current income exempt from federal income
tax ("tax-exempt income") consistent with safety and liquidity. The investment
objective of Neuberger&Berman MUNICIPAL SECURITIES Trust and Portfolio is to
provide high current tax-exempt income with low risk to principal, limited price
fluctuation and liquidity, and secondarily, total return. The investment
objective of Neuberger& Berman NEW YORK INSURED INTERMEDIATE Fund and 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.
Each Portfolio may invest without limit in municipal securities issued to
finance private activities, the interest on which is a tax-preference item for
purposes of the federal alternative minimum tax. To the extent a Portfolio makes
those investments, a portion of your dividends from the corresponding Fund may
be subject to that tax. See "Dividends, Other Distributions, and Taxes."
Neuberger&Berman MUNICIPAL MONEY Portfolio and Neuberger&Berman MUNICIPAL
SECURITIES Portfolio each normally invests only in municipal obligations. In
addition, when, in N&B Management's opinion, market conditions warrant a
defensive posture, each Portfolio may temporarily invest in short-term,
high-quality taxable securities.
Neuberger&Berman MUNICIPAL MONEY Portfolio invests in high-quality municipal
obligations with remaining maturities of 397 days or less and maintains a
dollar-weighted average portfolio maturity of not more than 90 days. The
Portfolio uses the amortized cost method of valuation to enable its
corresponding Fund to maintain a stable $1.00 share price. Of course, there is
no guarantee that the Fund will be able to maintain a $1.00 share price.
Neuberger&Berman MUNICIPAL SECURITIES Portfolio normally invests in
investment grade municipal securities. As a fundamental policy, the Portfolio
invests at least 80% of its total assets in municipal obligations. The
Portfolio's dollar-weighted average duration will not exceed ten years. The
Portfolio seeks to increase income and
22
<PAGE>
preserve or enhance total return by actively managing the average portfolio
duration in light of market conditions and trends. The Portfolio also may seek
to hedge all or a part of its portfolio against changes in securities prices
resulting from changes in interest rates by buying or selling interest-rate
futures contracts and options on those contracts.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio invests in municipal
obligations issued by the State of New York, its authorities, multi-state
authorities, municipalities, counties, and any other political subdivisions and
in municipal obligations issued by territories or possessions of the United
States, such as the Virgin Islands, Guam, and Puerto Rico, the interest income
from which is exempt, in the opinion of counsel for the issuer of the
obligation, from federal income tax and New York State and New York City
personal income taxes ("New York Municipal Securities"). At least 65% of the
Portfolio's total assets normally will be invested in the highest-rated New York
Municipal Securities which are insured as to the timely payment of principal and
interest by municipal bond insurance ("Municipal Bond Insurance"). Municipal
Bond Insurance provides an unconditional and irrevocable guarantee that the
insured bond's principal and interest will be paid when due. The insurance is
purchased from a private, non-governmental insurance company. The insurance does
not guarantee the market value of the municipal bonds. The insured bonds
purchased by the Portfolio must at the time of purchase have the highest credit
rating available from a nationally recognized statistical rating organization
("NRSRO"). For such insured bonds to receive the highest credit rating, at least
one NRSRO must rate the claims-paying ability or financial strength of the
insurance company in the highest category (within which there may be
gradations). There is, of course, no guarantee that the claims-paying ability or
financial strength of the insurers will continue to receive the highest credit
ratings or that the insurers will be able to pay all claims when due.
The insured municipal bonds purchased by Neuberger&Berman NEW YORK INSURED
INTERMEDIATE Portfolio will carry Municipal Bond Insurance obtained to improve
the bond's credit rating. Once purchased, Municipal Bond Insurance cannot be
canceled by the insurer, and the protection it affords continues as long as the
bonds are outstanding and the insurer remains solvent. The Municipal Bond
Insurance covering the municipal securities purchased by the Portfolio will be
either new issue insurance ("New Issue Insurance") or secondary insurance
("Secondary Insurance"). New Issue Insurance is purchased by the respective
issuers of the municipal securities at the time of the original issuance of
those securities. Secondary Insurance may be purchased by a 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.
23
<PAGE>
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio may purchase bonds
insured by AMBAC Indemnity Corporation, Municipal Bond Investors Assurance
Corporation or Financial Guaranty Insurance Company (known as AMBAC, MBIA and
FGIC, respectively), or any other insurance company that has received the
highest credit rating. The Portfolio may invest more than 25% of its assets in
bonds insured by the same insurance company. Further information regarding
Municipal Bond Insurance and insurance companies is included in the SAI.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio's remaining assets
normally will be invested in investment grade New York Municipal Securities that
are not so insured 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. See "Dividends, Other Distributions, and Taxes."
During seasonal variations or other shortages in the supply of suitable New
York Municipal Securities, Neuberger&Berman NEW YORK INSURED INTERMEDIATE
Portfolio may purchase uninsured New York Municipal Securities; municipal
securities, the interest income on which is exempt from federal income tax, but
not New York State and New York City personal income taxes; or taxable U.S.
Government and Agency Securities. However, as a fundamental policy, the
Portfolio normally invests at least 80% of its total assets in municipal
obligations.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio's dollar-weighted
average duration will not exceed ten years. The Portfolio seeks to increase
income and preserve or enhance total return by actively managing average
portfolio duration in light of market conditions and trends. The Portfolio also
may seek to hedge all or a part of its portfolio against changes in securities
prices by buying or selling interest-rate futures contracts and options.
Although Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio is
"non-diversified" for federal securities law purposes, it will limit its
investments to meet federal tax law provisions 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. For
purposes of complying with the above limitations regarding investments in the
securities of a single issuer or a single industry, the Portfolio identifies the
"issuer" of a municipal obligation that is not a general obligation note or bond
by the obligation's characteristics; the most significant of these
24
<PAGE>
characteristics is the source of funds for the payment of principal and interest
on the obligation. Developments affecting a single issuer or industry, or
securities financing particular types of projects, could thus have a significant
effect on the Portfolio.
Because Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio invests
primarily in New York Municipal Securities, the 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 experience future fiscal instabilities. Further information
regarding the financial condition of the State and the City may be found in the
SAI.
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. A new law will
phase out favorable tax treatment that has been available to businesses located
in Puerto Rico. The Portfolio is not able to predict the ultimate impact of this
change on the Puerto Rican economy.
Short-Term Trading; Portfolio Turnover
- ----------------------------------------------------------------------
Although none of the Portfolios purchases securities with the intention of
profiting from short-term trading, each Portfolio may sell portfolio securities
prior to maturity when N&B Management believes that such action is advisable.
The portfolio turnover rates of Neuberger&Berman ULTRA SHORT Bond, LIMITED
MATURITY Bond, MUNICIPAL SECURITIES and NEW YORK INSURED INTERMEDIATE Portfolios
for 1996 and earlier years are set forth under "Notes to Financial Highlights."
Turnover rates in excess of 100% generally result in higher transaction costs
(which are borne directly by the Portfolio) and a possible increase in realized
short-term capital gains or losses. See "Dividends, Other Distributions and
Taxes" on page 42 and the SAIs.
Ratings of Securities
- ----------------------------------------------------------------------
HIGH-QUALITY DEBT SECURITIES. High-quality debt securities are securities
that have received a rating from at least one NRSRO, such as S&P, Moody's, Fitch
Investors Service L.P., or Duff & Phelps Credit Rating Co. in one of the two
highest rating categories (the highest category in the case of commercial paper)
or, if not rated by any NRSRO, such as U.S. Government and Agency Securities,
have been determined by N&B Management to be of comparable quality. If two or
more NRSROs
25
<PAGE>
have rated a security, at least two of them must rate it as high quality if the
security is to be eligible for purchase by a Money Market Portfolio, (including
Neuberger&Berman MUNICIPAL MONEY Portfolio).
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities that have received a rating from at least one NRSRO in one of the
four highest rating categories or, if not rated by any NRSRO, have been
determined by N&B Management to be of comparable quality. Securities rated by
Moody's in its fourth highest category (Baa) may have speculative
characteristics; a change in economic factors could lead to a weakened capacity
of the issuer to repay.
LOWER-RATED DEBT SECURITIES (NEUBERGER&BERMAN LIMITED MATURITY BOND
PORTFOLIO). Securities rated below investment grade may be considered
speculative. Securities rated B are judged to be predominantly speculative with
respect to their capacity to pay interest and repay principal in accordance with
the terms of the obligations. Changes in economic conditions or developments
regarding the individual issuer are more likely to cause price volatility and
weaken the capacity of the issuer of such securities to make principal and
interest payments than is the case for higher grade debt securities. An economic
downturn affecting the issuer may result in an increased incidence of default.
The market for lower-rated securities may be thinner and less active than for
higher-rated securities. N&B Management seeks to reduce the risks associated
with investing in such securities by limiting Neuberger&Berman LIMITED MATURITY
Bond Portfolio's holdings in them and by extensively analyzing the potential
benefits of such an investment in relation to the associated risks.
The following table shows the ratings of debt securities held by Neuberger&
Berman LIMITED MATURITY Bond Portfolio during the period March 1, 1996* to
October 31, 1996. The percentages in each category represent the average of
dollar-weighted month-end holdings during the period. These percentages are
historical only and are not necessarily representative of the ratings of current
and future holdings. During this period, the Portfolio did not invest in any
unrated corporate securities.
26
<PAGE>
<TABLE>
<CAPTION>
MOODY'S S&P
(AS A % OF (AS A % OF
INVESTMENTS) INVESTMENTS)
INVESTMENT GRADE RATING AVERAGE RATING AVERAGE
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury/Agency** TSY/AGY 24.95% TSY/AGY 24.95%
Highest quality Aaa 14.83% AAA 14.83%
High quality Aa 4.03% AA 0.81%
Upper-medium grade A 21.65% A 21.45%
Medium grade Baa 18.20% BBB 25.61%
LOWER QUALITY***
Moderately speculative Ba 13.57% BB 10.45%
Speculative B 1.34% B 1.90%
Highly Speculative Caa -- CCC --
Poor Quality Ca -- CC --
Lowest quality, no interest C -- C --
In default, in arrears -- -- D --
TOTAL 98.57%+ 100%
</TABLE>
* AS OF MARCH 1, 1996, THE PORTFOLIO WAS AUTHORIZED TO INVEST UP TO 10% OF ITS
NET ASSETS IN DEBT SECURITIES THAT ARE BELOW INVESTMENT GRADE.
** U.S. GOVERNMENT AND AGENCY SECURITIES ARE NOT RATED BY MOODY'S OR S&P.
*** INCLUDES SECURITIES RATED INVESTMENT GRADE BY OTHER NRSROS.
+ MOODY'S DID NOT RATE EVERY SECURITY PURCHASED DURING THIS PERIOD.
Further information regarding the ratings assigned to securities purchased by
the Portfolios and their meaning is included in the SAIs and in the Funds'
annual reports.
Borrowings
- ----------------------------------------------------------------------
Each Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) except for Neuberger&Berman GOVERNMENT
MONEY Portfolio, enter into reverse repurchase agreements for any purpose, so
long as the aggregate amount of borrowings and reverse repurchase agreements
does not exceed one-third of the Portfolio's total assets (including the amount
borrowed) less liabilities (other than borrowings). As a non-fundamental policy,
none of the Portfolios may purchase portfolio securities if its outstanding
borrowings, including reverse repurchase agreements, exceed 5% of its total
assets. Dollar rolls are treated as reverse repurchase agreements for purposes
of this limitation.
Other Investments
- ----------------------------------------------------------------------
For temporary defensive purposes, each Portfolio may invest up to 100% of its
total assets in cash or cash equivalents, commercial paper (except for
Neuberger& Berman GOVERNMENT MONEY Portfolio), U.S. Government and Agency
Securities and certain other money market instruments, as well as (except for
Neuberger&
27
<PAGE>
Berman GOVERNMENT MONEY Portfolio) repurchase agreements on U.S. Government and
Agency Securities, the interest on which may be subject to federal and state
income taxes, and may adopt shorter than normal weighted average maturities or
durations.
Duration
- ----------------------------------------------------------------------
Duration is a measure of the sensitivity of debt securities to changes in
market interest rates, based on the entire cash flow associated with the
securities, including payments occurring before the final repayment of
principal. For all Portfolios except the money market portfolios, N&B Management
utilizes duration as a tool in portfolio selection instead of the more
traditional measure known as "term to maturity." "Term to maturity" measures
only the time until a debt security provides its final payment, taking no
account of the pattern of the security's payments prior to maturity. Duration
incorporates a bond's yield, coupon interest payments, final maturity and call
features into one measure. Duration therefore provides a more accurate
measurement of a bond's likely price change in response to a given change in
market interest rates. The longer the duration, the greater the bond's price
movement will be as interest rates change. For any fixed income security with
interest payments accruing prior to the payment of principal, duration is always
less than maturity.
Futures, options and options on futures have durations which are generally
related to the duration of the securities underlying them. Holding long futures
or call option positions will lengthen a Portfolio's duration by approximately
the same amount as would holding an equivalent amount of the underlying
securities. Short futures or put options have durations roughly equal to the
negative duration of the securities that underlie these positions, and have the
effect of reducing portfolio duration by approximately the same amount as would
selling an equivalent amount of the underlying securities.
There are some situations where even the standard duration calculation does
not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage-backed securities. The stated final
maturity of such securities is generally 30 years, but current and expected
prepayment rates are critical in determining the securities' interest rate
exposure. In these and other similar situations, N&B Management, where
permitted, will use more sophisticated analytical techniques that incorporate
the expected economic life of a security into the determination of its interest
rate exposure.
28
<PAGE>
PERFORMANCE INFORMATION
The performance of the Funds can be measured as YIELD or as TOTAL RETURN. The
Portfolios invest in various kinds of fixed income securities, so their
performance is related to changes in interest rates. Generally, investments in
shorter-term income securities are less affected by interest rate changes than
are investments in longer-term income securities. For this reason, longer-term
bond funds usually have higher yields and carry more interest-rate risk than
shorter-term bond funds. Money market funds, which seek to maintain a stable
share price and invest only in income securities with remaining maturities of
397 days or less, have the least interest-rate risk. The creditworthiness of
issuers of income securities also affects risk; for example, U.S. Government and
Agency securities are generally considered to have less credit risk than
investment grade bonds.
The table under "Summary -- The Funds and Portfolios" shows the investment
objective, principal types of investments, and comparative information for each
Fund and its corresponding Portfolio. This should help you decide which Fund
best fits your needs. For more detailed information, see "Investment Programs"
and "Description of Investments." Further information regarding each Fund's
performance is presented in its annual report to shareholders, which is
available without charge by calling 800-877-9700.
Past results do not, of course, guarantee future performance. Share prices
may vary, and your shares when redeemed may be worth more or less than your
original purchase price.
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. Annualized yields for money
market funds based on the return for a recent seven-day period are called
CURRENT YIELDS.
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 a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This smooths out year-to-year variations in
actual performance.
Tax-Equivalent Yield
- ----------------------------------------------------------------------
STATE AND LOCAL INCOME TAXES. Substantially all of Neuberger&Berman
GOVERNMENT MONEY Fund's income dividends are not subject to the income taxes of
most states and localities. Substantially all income dividends paid by
Neuberger&
29
<PAGE>
Berman NEW YORK INSURED INTERMEDIATE Fund are expected to be exempt from New
York State and New York City personal income taxes. For those states and
localities where the income dividends are not subject to income taxes, these
Funds may measure their performance by a TAX-EQUIVALENT YIELD. This reflects the
taxable yield that an individual investor at the highest marginal income tax
rate for that state or municipality would have to receive to equal the yield
from Neuberger&Berman GOVERNMENT MONEY Fund or Neuberger&Berman NEW YORK INSURED
INTERMEDIATE Fund, taking into account that a portion of the dividends paid by
those Funds is tax-exempt. Of course, all dividends paid by Neuberger&Berman
GOVERNMENT MONEY Fund are subject to federal income tax at applicable rates.
FEDERAL INCOME TAX. Substantially all income dividends paid by Neuberger&
Berman MUNICIPAL MONEY Fund, Neuberger&Berman MUNICIPAL SECURITIES Trust and
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Fund are exempt from federal
income tax. The Municipal Funds also may measure their performance by a
TAX-EQUIVALENT YIELD. This reflects the taxable yield that an investor at the
highest marginal federal income tax rate would have to receive to equal the
primarily tax-exempt yield from each Municipal Fund.
Before investing in one of the Municipal Funds, you may want to determine
which investment -- tax-free or taxable -- will result in a higher after-tax
yield. To do this, divide the tax-free yield on the investment by the decimal
determined by subtracting from 1 the highest federal tax rate you pay. For
example, if the tax-free yield is 4% and your maximum federal tax bracket is
39.6%, the computation is:
4% Tax-Free Yield DIVIDED BY (1 - .396 Tax Rate)
= 4% DIVIDED BY .604 = 6.62% Tax-Equivalent Yield
In this example, your after-tax return from the 4% tax-free investment would
be higher if available taxable yields are below 6.62%. Conversely, the taxable
investment would provide a higher yield when taxable yields exceed 6.62%. This
example assumes that all of the income from the investment is exempt.
To calculate the after-tax yield for Neuberger&Berman NEW YORK INSURED
INTERMEDIATE Fund, divide the yield on the tax-free investment by the decimal
determined by subtracting from 1 the highest effective combination of federal
income tax and New York State and New York City personal income tax rates you
pay. For example, if the tax-free yield is 4% and your maximum effective
combined tax bracket is 46.7%, the computation is:
4% Tax-Free Yield DIVIDED BY (1 - .467 Tax Rate)
= 4% DIVIDED BY .533 = 7.50% Tax-Equivalent Yield
In this example, your after-tax return from the 4% tax-free investment would
be higher if available taxable yields are below 7.50%. Conversely, the taxable
investment would provide a higher yield when taxable yields exceed 7.50%. This
example assumes that all of the income from the investment is exempt.
Yield and Total Return Information
- ----------------------------------------------------------------------
You can obtain current performance information about each Fund by calling N&B
Management at 800-877-9700. N&B Management has reimbursed certain Funds for
certain expenses, which has the effect of increasing their yields and total
returns.
30
<PAGE>
HOW TO BUY SHARES
You can buy shares of any Fund directly by mail, wire, or telephone or
through an exchange of shares with another Neuberger&Berman Fund (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 purchase order is
received and accepted. Prices for shares of Neuberger&Berman GOVERNMENT MONEY
Fund, Neuberger&Berman CASH RESERVES, and Neuberger&Berman MUNICIPAL MONEY Fund
are calculated as of noon Eastern time; prices for shares of all other Funds are
usually calculated as of 4 p.m. Eastern time.
N&B Management, in its discretion, may waive the minimum investment
requirements.
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 whose shares you want to buy. If this
is your FIRST PURCHASE of shares of a Fund, please complete and sign an
application for a new Fund account and send it along with a check or money order
for a minimum of $2,000. For each ADDITIONAL PURCHASE, please send at least $100
for shares of any Fund. YOUR CHECK OR MONEY ORDER MUST BE MADE PAYABLE ON ITS
FACE TO NEUBERGER&BERMAN FUNDS, OTHERWISE IT CANNOT BE ACCEPTED. THIRD PARTY
CHECKS WILL NOT BE ACCEPTED.
By Wire
- ----------------------------------------------------------------------
Call 800-877-9700 for instructions on how to 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 whose shares you want to buy, and your
account number. The minimum for a FIRST PURCHASE of shares of a Fund is $2,000.
For an ADDITIONAL PURCHASE, you should wire at least $1,000.
31
<PAGE>
By Telephone
- ----------------------------------------------------------------------
Call 800-877-9700 to buy shares of Neuberger&Berman ULTRA SHORT Bond Fund,
Neuberger&Berman LIMITED MATURITY Bond Fund, Neuberger&Berman MUNICIPAL
SECURITIES Trust, or Neuberger&Berman NEW YORK INSURED INTERMEDIATE Fund. The
minimum for a FIRST PURCHASE of shares of any of these Funds 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 third business day after your
order is placed. In that case you could be liable for any resulting losses or
fees a 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 three-day
deadline, you can wire payment, send a check through overnight mail, or call
800-877-9700 for information on how to make an electronic transfer through your
bank. 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 Fund for shares of a Fund. To buy Fund shares through
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 a 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" and "Funds Eligible for Exchange."
Other Information
- ----------------------------------------------------------------------
/ / You must pay for your shares in U.S. dollars by check or money order
(drawn on a U.S. bank), by bank or federal funds wire transfer, or by an
electronic bank transfer; cash cannot be accepted.
/ / Each Fund has the right to suspend the offering of its shares for a
period of time. Each 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 pay by check and your check does not clear, or if you order 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 a Fund or its agents
have incurred. To recover those losses or fees, a 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 that you are not subject to backup withholding. If you
violate certain federal income tax
32
<PAGE>
provisions, the Internal Revenue Service can require the Funds to
withhold 31% of your distributions and redemptions (other than
redemptions from Neuberger&Berman GOVERNMENT MONEY Fund, Neuberger&Berman
CASH RESERVES, and Neuberger&Berman MUNICIPAL MONEY Fund).
/ / You can also buy shares of the Funds indirectly through certain
stockbrokers, banks, and other financial institutions, some of which may
charge you a fee.
/ / The Funds will not issue a certificate for your shares unless you write
to State Street and request one. Most shareholders do not want a
certificate, 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 fax. If you
lose your certificate, you will have to pay the expense of replacing it.
/ / You can invest as little as $100 each month under an automatic investing
plan. (See "Automatic Investing and Dollar Cost Averaging" on page 39.)
/ / Neuberger&Berman NEW YORK INSURED INTERMEDIATE Fund is available to
residents of New York and Florida only.
33
<PAGE>
HOW TO SELL SHARES
You can sell (redeem) all or some of your shares at any time by mail, fax, or
telephone, or by writing a check (for certain Funds only). HOWEVER, IF YOU HAVE
A CERTIFICATE FOR YOUR SHARES (INCLUDING SHARES OF A FUND'S PREDECESSOR), 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 Funds; see
"Shareholder Services -- Exchange Privilege" for details.
TO SELL SHARES HELD IN A RETIREMENT ACCOUNT OR BY A TRUST, ESTATE, GUARDIAN,
OR BUSINESS ORGANIZATION, PLEASE CALL 800-877-9700 FOR INSTRUCTIONS.
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 Neuberger&Berman
GOVERNMENT MONEY Fund, Neuberger&Berman CASH RESERVES, and Neuberger& Berman
MUNICIPAL MONEY Fund are calculated as of noon Eastern time; prices for shares
of all other Funds 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 transfer
your sales proceeds electronically (at no charge to you) or will wire your sales
proceeds. State Street currently charges a fee of $8.00 for each wire. However,
if you have one or more accounts in the Neuberger&Berman Funds aggregating
$200,000 or more in value, you will not be charged for wire redemptions; your
$8.00 fee will be paid by N&B Management.
If you purchased shares indirectly through certain stockbrokers, banks, or
other financial institutions, you may sell those shares only through those
organizations, some of which may charge you a fee.
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
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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 fax, to redeem up to $50,000 worth of shares, to 212-476-8848. 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. If shares are
issued in certificate form, they are not eligible to be redeemed by fax. If you
have changed the record address by telephone or fax, shares may not be redeemed
by fax for 15 days after receipt of the address change. Please call 800-877-9700
to confirm receipt and acceptance of any order submitted by fax.
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, (2) you want the redemption check to be made out to
someone other than the record owner, (3) you want the check to be mailed
somewhere other than the record address, or (4) you want the proceeds to be
wired or transferred electronically to a bank account not named in your
application or in your prior 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. A
redemption request that requires a signature guarantee should be sent by mail.
For a redemption request sent by FAX, limited to not more than $50,000, the
redemption check may be made out only to the record owner and mailed to the
record address or the proceeds wired or transferred electronically to a bank
account named in your application or in a written instruction from the record
owner with a signature guarantee.
Please call 800-877-9700 for more information about the signature guarantee
requirement.
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, (2) you have a certificate for such shares, or (3) you
want to sell shares from a retirement account. In addition, if you have changed
the record address by telephone or fax, shares may not be redeemed by telephone
for 15 days after receipt of the address change.
Please refer to "Additional Information on Telephone Transactions."
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<PAGE>
By Check
- ----------------------------------------------------------------------
For Neuberger&Berman GOVERNMENT MONEY Fund, Neuberger&Berman CASH RESERVES,
and Neuberger&Berman MUNICIPAL MONEY Fund only, you may sell shares by writing a
check for at least $250 on your account. If you requested this service on your
application, you will receive a supply of checks. You may write an unlimited
number of checks, and there is no charge. Because the amount in your account
varies daily, you cannot sell all your shares and close your account by writing
a check.
Other Information
- ----------------------------------------------------------------------
/ / Usually, redemption proceeds will be mailed on the next business day
following the receipt of a proper redemption request, but in any case
within three business days of such receipt (under unusual circumstances,
the Funds may take longer, as permitted by law). You may also call
800-877-9700 for information on how to receive electronic transfers
through your bank.
/ / Each Fund may delay paying for any redemption until it is reasonably
satisfied that the check used to buy shares has cleared, which may take
up to 15 days after the purchase date. 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.
/ / Each 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 SEC.
/ / If you sell shares by writing a check on your account for an amount
greater than the value of your shares, or if the check is for less than
$250 or has an irregularity (such as no signature), your check will be
returned to you and you may be charged $15 by redeeming shares with that
value from your account. The check writing redemption service may be
modified or terminated at any time, or other charges may be imposed on
it.
/ / If, because you sold shares, your account balance with any 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
price on the date of redemption and will send the redemption proceeds to
you.
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<PAGE>
ADDITIONAL INFORMATION ON TELEPHONE TRANSACTIONS
A Fund at any time can limit the number of its shares you can buy by
telephone or can stop accepting telephone orders. You can 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. Each 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, no Fund or 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 fax, overnight courier, or U.S. Express Mail.
You can buy, sell or exchange shares using an automated telephone service
that is available 24 hours a day, every day, to investors using a touch-tone
phone. Further information regarding this service, including use of a Personal
Identification Number (PIN) and a menu of features, is available from N&B
Management by calling 800-877-9700.
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<PAGE>
SHAREHOLDER SERVICES
Several services are available to assist you in making and managing your
investment in the Funds.
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 Neuberger&Berman ULTRA SHORT Bond Fund,
Neuberger&Berman LIMITED MATURITY Bond Fund, Neuberger&Berman MUNICIPAL
SECURITIES Trust, or Neuberger&Berman NEW YORK INSURED INTERMEDIATE Fund using
dollar cost averaging. Under this plan, you buy a fixed dollar amount of shares
in any of these Funds at pre-set intervals. You may pay for the shares by
automatic transfers from your accounts in Neuberger&Berman GOVERNMENT MONEY
Fund, Neuberger&Berman CASH RESERVES, or Neuberger&Berman MUNICIPAL MONEY Fund
or by pre-authorized checks or electronic transfers drawn on your bank account.
You buy more shares when a Fund's share price is relatively low and fewer shares
when a Fund's share price is relatively high. Thus, under this plan your average
cost of shares would generally be lower than if you bought a fixed number of
shares at the same intervals. 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 a Fund for shares in another Neuberger&Berman
Fund, 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 "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 10158-0180,
Attention: [Name of Fund], or by submitting the letter by fax 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 Neuberger&Berman Fund
whose shares you want to buy. Please call 800-877-9700 to confirm receipt and
acceptance of any order submitted by fax. If you have a certificate for your
shares, you can exchange them only by mailing the certificate with your letter
requesting the exchange. 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 Neuberger&Berman Fund, it
38
<PAGE>
must be for at least the minimum initial investment amount for that fund. Shares
are exchanged at the next price calculated on a day the NYSE is open, after 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.
/ / An exchange order cannot be modified or canceled.
/ / You can exchange ONLY into a 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 a Fund's performance, each Fund may refuse any exchange orders
(1) if they appear to the Fund to be market-timing transactions involving
significant portions of the Fund's assets or (2) from any shareholder
account if the shareholder previously has been notified by the Fund that
the shareholder's 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.
/ / Each 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 Plans
- ----------------------------------------------------------------------
If you own shares of a Fund worth at least $5,000, you can open a Systematic
Withdrawal Plan. Under such a 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
each Fund (other than Neuberger&Berman GOVERNMENT MONEY Fund, Neuberger&Berman
CASH RESERVES, and Neuberger&Berman MUNICIPAL MONEY Fund) fluctuates, you may
incur capital gains or losses when you redeem shares of the Funds through a
Systematic Withdrawal Plan or by other methods. Call 800-877-9700 for more
information.
Retirement Plans
- ----------------------------------------------------------------------
Retirement plans permit you to defer paying taxes on investment income and
capital gains. Contributions to these plans may also be tax-deductible. Please
call 800-877-9700 for information on a variety of retirement plans offered by
N&B Management, including individual retirement accounts, simplified employee
pension
39
<PAGE>
plans, self-employed individual retirement plans (so-called "Keogh Plans"),
corporate profit-sharing and money purchase pension plans, section 401(k) plans,
section 403(b)(7) accounts, and savings incentive match plans for employees
(SIMPLE Retirement Plans) -- IRA version only. The assets of these plans may be
invested in any of the Funds, except Neuberger&Berman MUNICIPAL MONEY Fund,
Neuberger& Berman MUNICIPAL SECURITIES Trust, and Neuberger&Berman NEW YORK
INSURED INTERMEDIATE Fund.
Electronic Bank Transfers
- ----------------------------------------------------------------------
You may designate, either in your application or later by writing or by
submitting an appropriate form to State Street, a bank account through which
State Street will electronically transfer monies to you or from you at pre-set
intervals (such as under a Systematic Withdrawal Plan or automatic investing
plan or for payment of cash distributions) or upon your request. Please include
a voided check with your application. This service is not available for
retirement accounts.
State Street does not charge a fee for this service; however, you should
contact your bank to ensure that it is able to process electronic transfers.
Please call 800-877-9700 for more information. If you wish to terminate this
service, you must call at least 10 calendar days before the next scheduled
electronic transfer.
Internet Access
- ----------------------------------------------------------------------
N&B Management now maintains an Internet site on the World Wide Web at
HTTP://WWW.NBFUNDS.COM. Fund prices and yields, informative articles,
interactive worksheets, and the prospectuses of certain other Neuberger&Berman
Funds can be accessed.
40
<PAGE>
SHARE PRICES AND NET ASSET VALUE
Each Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for each Fund and its corresponding Portfolio
are calculated by subtracting liabilities from total assets (in the case of a
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of a Fund, its percentage interest in its
corresponding Portfolio, multiplied by the Portfolio's NAV, plus any other
assets). Each 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.
Neuberger&Berman GOVERNMENT MONEY Fund, Neuberger&Berman CASH RESERVES, and
Neuberger&Berman MUNICIPAL MONEY Fund try to maintain stable NAVs of $1.00 per
share. Their corresponding Portfolios value their securities at their cost at
the time of purchase and assume a constant amortization to maturity of any
discount or premium. These Portfolios and their corresponding Funds calculate
their NAVs as of noon Eastern time on each day the NYSE is open.
Neuberger&Berman ULTRA SHORT Bond and Neuberger&Berman LIMITED MATURITY Bond
Portfolios value their securities on the basis of bid quotations from
independent pricing services or principal market makers, or, if quotations are
not available, by a method that the trustees of Managers Trust believe
accurately reflects fair value. The Portfolios periodically verify valuations
provided by the pricing services. Short-term securities with remaining
maturities of less than 60 days may be valued at cost which, when combined with
interest earned, approximates market value. These Portfolios and their
corresponding Funds calculate their NAVs as of the close of regular trading on
the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open.
Neuberger&Berman MUNICIPAL SECURITIES and Neuberger&Berman NEW YORK INSURED
INTERMEDIATE Portfolios use an independent pricing service to determine the
market value of their portfolio securities and periodically verify the
valuations. These Portfolios and their corresponding Funds calculate their NAVs
as of the close of regular trading on the NYSE on each day the NYSE is open.
41
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
Each Fund distributes substantially all of its share of any net investment
income (net of the Fund's expenses), any net capital gains from investment
transactions and, for Neuberger&Berman LIMITED MATURITY Bond Fund, any net gains
from foreign currency transactions earned or realized by the Fund's
corresponding Portfolio. Income dividends are declared daily for each Fund at
the time its NAV is calculated and are paid monthly, and net capital gains, if
any, are normally distributed annually in December. Investors who are
considering the purchase of Fund shares in December should take this into
account because of the tax consequences of such distributions. Investors in the
Money Market Funds (including Neuberger&Berman MUNICIPAL MONEY Fund) whose
purchase orders are converted to "federal funds" by noon Eastern time on any
given day will accrue income dividends beginning that day. For other Funds,
income dividends will accrue beginning on the day after an investor's purchase
order is converted to "federal funds."
Distribution Options
- ----------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions, if any, paid
on shares of a Fund are automatically reinvested in additional shares of that
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 other
distribution is reinvested at the Fund's per share NAV, usually as of the date
the distribution is payable. For RETIREMENT ACCOUNTS, all distributions are
automatically reinvested in shares; when you are at least 59 1/2 years old, you
can receive distributions in cash without incurring a premature distribution
penalty tax.
DIVIDENDS IN CASH. You may elect to receive dividends in cash, with other
distributions being reinvested in additional Fund shares, by checking that
election box on your Fund application.
ALL DISTRIBUTIONS IN CASH. You may elect to receive all dividends and other
distributions in cash, by checking that election box on your Fund application.
Checks for cash dividends and other distributions usually will be mailed no
later than seven days after the payable date. 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. Cash dividends and other distributions may
be paid through an electronic transfer to a bank account designated in your Fund
application. Call 800-877-9700 for more information. You can change any
distribution election by writing to State Street, the Funds' shareholder
servicing agent.
42
<PAGE>
Taxes
- ----------------------------------------------------------------------
Each 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 that part of its taxable income and realized gains that
it distributes to its shareholders.
Your investment has certain tax consequences, depending on the type of
account and the type of Fund in which you invest. If you have a qualified
RETIREMENT ACCOUNT, taxes are deferred.
MONEY MARKET FUNDS (INCLUDING NEUBERGER&BERMAN MUNICIPAL MONEY FUND) AND
BOND FUNDS: TAXES ON DISTRIBUTIONS. Distributions are subject to federal income
tax and may also be subject to state and local income taxes. Your distributions
are taxable when 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 distributions were
declared.
For federal income tax purposes, income dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally taxed as long-term capital gain, no matter how long you have
owned your shares. Distributions of net capital gain may include gains from the
sale of portfolio securities that appreciated in value before you bought your
shares. Each of Neuberger&Berman CASH RESERVES Portfolio, Neuberger&Berman ULTRA
SHORT BOND Portfolio and Neuberger&Berman LIMITED MATURITY Bond Portfolio may
invest in municipal securities. Any distributions of income derived from these
securities, however, are not tax-exempt, because these Portfolios do not invest
the percentage of their assets in municipal securities that is required under
federal tax law in order for their corresponding Funds to be eligible to
distribute tax-free income.
Substantially all dividends paid by Neuberger&Berman GOVERNMENT MONEY Fund
generally are not expected to be subject to state and local income taxes;
however, distributions by that Fund of net realized capital gains are fully
subject to those taxes. You should consult your tax adviser to determine the
taxability of those dividends and other distributions in your state and
locality.
Every January, your Fund will send you a statement showing the amount of
distributions paid (or deemed paid) to you in the previous year. Information
accompanying your statement will show the portion, if any, of those
distributions that generally are not subject to state and local income taxes.
MUNICIPAL FUNDS: TAXES ON DISTRIBUTIONS. Substantially all dividends paid by
the Municipal Funds generally are expected to be exempt from federal income tax
(and New York State and New York City personal income taxes in the case of
Neuberger&
43
<PAGE>
Berman NEW YORK INSURED INTERMEDIATE Fund), but may be subject to state or local
taxes. Distributions of net realized capital gains, however, generally are
subject to all such taxes. Those distributions that are not tax-exempt are
taxable when 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 distributions were
declared.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio, Neuberger& Berman
MUNICIPAL MONEY Portfolio and Neuberger&Berman MUNICIPAL SECURITIES Portfolio
each may invest up to 100% of its assets in private activity bonds.
Distributions to you attributable to the interest on these bonds may be a tax
preference item for purposes of calculating your federal alternative minimum
taxable income.
Every January, your Municipal Fund will send you a statement showing the
amounts of tax-exempt and taxable distributions paid (or deemed paid) to you in
the previous year, including the portion of any dividends paid to individuals
that constitutes a tax preference item.
ALL FUNDS EXCEPT NEUBERGER&BERMAN GOVERNMENT MONEY FUND, NEUBERGER& BERMAN
CASH RESERVES, AND NEUBERGER&BERMAN MUNICIPAL MONEY FUND: TAXES ON REDEMPTIONS
AND DISTRIBUTIONS. Capital gains realized on redemptions of Fund shares,
including redemptions in connection with exchanges to other Neuberger& Berman
Funds, are subject to tax. A capital gain or loss is the difference between the
amount you paid for the shares (including the amount of any dividends and 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.
If you buy shares of a Bond Fund just before it deducts a capital gain
distribution from its NAV, you will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
The foregoing is only a summary of some of the important income tax
considerations affecting each Fund and its shareholders. See the SAIs 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 adviser.
44
<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 oversight responsibility for the operations
of each Fund and each Portfolio, respectively. The SAIs contain general
background information about each trustee and officer of the Trust and of
Managers Trust. The trustees and officers of the Trust and of Managers Trust who
are officers and/or directors of N&B Management and/or principals of
Neuberger&Berman serve without compensation from the Funds or the Portfolios.
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
Trust or Managers Trust, have adopted written procedures reasonably appropriate
to deal with potential conflicts of interest between the Trust and Managers
Trust, 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 each Portfolio, as
administrator of each Fund, and as distributor of the shares of each 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 seven Portfolios,
N&B Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolios and other mutual
funds managed by N&B Management, also serves as investment adviser of one other
investment company. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $15.2 billion as of
December 31, 1996.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolios.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
may act as the Portfolios' principal broker to the extent that a broker is used
in the purchase and sale of portfolio securities and the sale of covered call
options. Neuberger&Berman and its affiliates, including N&B Management, manage
securities accounts that had approximately $44.7 billion of assets as of
December 31, 1996. All of the voting stock of N&B Management is owned by
individuals who are principals of Neuberger&Berman.
Theodore P. Giuliano, the President and a Trustee of the Trust and of
Managers Trust, is a principal of Neuberger&Berman and a director and Vice
President of N&B Management. Mr. Giuliano is the Manager of the Fixed Income
Group of Neuberger&Berman, which he helped to establish in 1984. The Fixed
Income Group manages fixed income accounts that had approximately $10.5 billion
of assets as of December 31, 1996.
The following members of the Fixed Income Group are, along with Theodore
Giuliano, primarily responsible for the day-to-day management of the listed
Portfolios:
45
<PAGE>
Neuberger&Berman GOVERNMENT MONEY, CASH RESERVES, and ULTRA SHORT Bond
Portfolios -- Josephine P. Mahaney. Ms. Mahaney, who has been a Senior Portfolio
Manager in the Fixed Income Group since 1984, and a Vice President of N&B
Management since November 1994, has been primarily responsible for
Neuberger&Berman GOVERNMENT MONEY Portfolio, Neuberger&Berman CASH RESERVES
Portfolio and Neuberger&Berman ULTRA SHORT Bond Portfolio since October 1992.
She was an Assistant Vice President of N&B Management from 1986 to 1994.
Neuberger&Berman LIMITED MATURITY Bond Portfolio -- Thomas G. Wolfe. Mr.
Wolfe has been primarily responsible for Neuberger&Berman LIMITED MATURITY Bond
Portfolio since October 1995. Mr. Wolfe has been a Senior Portfolio Manager in
the Fixed Income Group since July 1993, Director of Fixed Income Credit Research
since July 1993 and a Vice President of N&B Management since October 1995. From
November 1987 to June 1993, he was Vice President in the Corporate Finance
Department of Standard & Poor's.
Neuberger&Berman MUNICIPAL MONEY, MUNICIPAL SECURITIES and NEW YORK INSURED
INTERMEDIATE Portfolios -- Clara Del Villar. Ms. Del Villar, who has been a
Senior Portfolio Manager in the Fixed Income Group since December 1991 and a
Vice President of N&B Management since November 1994, has been primarily
responsible for Neuberger&Berman MUNICIPAL MONEY Portfolio since August 1993,
Neuberger&Berman MUNICIPAL SECURITIES Trust since December 1991, and
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio since October 1994.
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds.
To mitigate the possibility that a Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger& Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
Expenses
- ----------------------------------------------------------------------
N&B Management provides investment management services to each Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. For
investment management services, each Portfolio pays N&B Management a fee at the
annual rate of 0.25% of the first $500 million of that Portfolio's average daily
net assets, 0.225% of the next $500 million, 0.20% of the next $500 million,
0.175% of the next $500 million, and 0.15% of average daily net assets in excess
of $2 billion.
N&B Management provides administrative services to each Fund that include
furnishing similar facilities and personnel for the Fund and performing certain
shareholder, shareholder-related and other services. For such administrative
services, each Fund pays N&B Management a fee at the annual rate of 0.27% of
that Fund's average daily net assets. With a Fund's consent, N&B Management may
subcontract to third
46
<PAGE>
parties some of its responsibilities to that Fund under the administration
agreement. In addition, a Fund may compensate such third parties for accounting
and other services. During its 1996 fiscal year, each Fund accrued
administration fees, and a pro rata portion of the corresponding Portfolio's
management fees (prior to any expense reimbursement), of 0.52% of the Fund's
average daily net assets.
Each 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. Each
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Funds and Portfolios, legal and accounting fees and
compensation for trustees who are not affiliated with N&B Management; for the
Funds, transfer agent fees and the cost of printing and sending reports and
proxy materials to shareholders; and for the Portfolios, custodial fees for
securities.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
N&B Management has voluntarily undertaken to reimburse CASH RESERVES, ULTRA
SHORT, LIMITED MATURITY, MUNICIPAL SECURITIES and NEW YORK INSURED INTERMEDIATE
for each Fund's Total Operating Expenses, which include that Fund's pro rata
share of its corresponding Portfolio's Total Operating Expenses, which exceed,
in the aggregate, 0.65% per annum (0.70% for LIMITED MATURITY) of the Fund's
average daily net assets. N&B Management may terminate this undertaking to any
Fund by giving at least 60 days' prior written notice to the Fund. The effect of
reimbursement by N&B Management is to reduce a Fund's expenses and thereby
increase its total return.
For the fiscal year ended October 31, 1996, each Fund bore aggregate
operating expenses as a percentage of its average daily net assets (after taking
into consideration N&B Management's expense reimbursements) as follows:
<TABLE>
<S> <C>
Neuberger&Berman GOVERNMENT MONEY Fund 0.67%
Neuberger&Berman CASH RESERVES 0.65%
Neuberger&Berman ULTRA SHORT Bond Fund 0.65%
Neuberger&Berman LIMITED MATURITY Bond Fund 0.70%
Neuberger&Berman MUNICIPAL MONEY Fund 0.72%
Neuberger&Berman MUNICIPAL SECURITIES Trust 0.65%
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Fund 0.66%
</TABLE>
Transfer and Shareholder Servicing Arrangements
- ----------------------------------------------------------------------
The Funds' transfer and 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.
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INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS
The Funds
- ----------------------------------------------------------------------
Each Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated as of December 23, 1992. The
Trust is registered under the 1940 Act as a diversified, open-end management
investment company, commonly known as a mutual fund. The Trust has seven
separate series. Each Fund invests all of its net investable assets in its
corresponding Portfolio, in each case receiving a beneficial interest in that
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. Each Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of each
Fund represent equal proportionate interests in the assets of that Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual
meetings of shareholders of the Funds. The trustees will call special meetings
of shareholders of a Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders
of a Fund will not be personally liable for the obligations of any Fund; a
shareholder is entitled to the same limitation of personal liability extended to
shareholders of a corporation. To guard against the risk that Delaware law might
not be applied in other states, the Trust Instrument requires that every written
obligation of the Trust or a Fund contain a statement that such obligation may
be enforced only against the assets of the Trust or Fund and provides for
indemnification out of Trust or Fund property of any shareholder nevertheless
held personally liable for Trust or Fund obligations, respectively.
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The Portfolios
- ----------------------------------------------------------------------
Each 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 seven separate Portfolios. The assets of each Portfolio belong only to
that Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that seeks to
achieve its investment objective by investing all of its net investable assets
in its corresponding Portfolio, which is a "master fund." The Portfolio, which
has the same investment objective, policies, and limitations as the Fund, in
turn invests in securities; the Fund thus acquires an indirect interest in those
securities.
Each Fund's investment in its corresponding Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in a Portfolio. Two mutual funds that are series of
Neuberger&Berman Income Trust ("N&B Income Trust"), Neuberger&Berman ULTRA SHORT
Bond Trust and Neuberger&Berman LIMITED MATURITY Bond Trust, invest all of their
respective net investable assets in two corresponding Portfolios of Managers
Trust. N&B Income Trust does not sell its shares directly to members of the
general public.
Each Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
a Portfolio on the same terms and conditions as a Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in a Portfolio
are not required to sell their shares at the same public offering price as a
Fund, could have a different administration fee and expenses than a Fund, and
(except N&B Income Trust) 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 invests in a Portfolio is
available from N&B Management by calling 800-877-9700.
The trustees of the Trust believe that investment in a Portfolio by a series
of N&B Income Trust or by other potential investors in addition to a Fund may
enable the Portfolio to realize economies of scale that could reduce its
operating expenses, thereby producing higher returns and benefitting all
shareholders.
Each Fund may withdraw its entire investment from its corresponding 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. A Fund might withdraw, for
example, if there were other investors in a 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 portfolio securities (as opposed to a cash distribution)
49
<PAGE>
by the Portfolio to the Fund. That distribution could result in a less
diversified portfolio of investments 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 a Fund withdrew its investment from a Portfolio, the
trustees of the Trust would consider what actions 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. Each Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in a 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, a 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 a 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 a Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in a Portfolio, including a Fund, will be
liable for all obligations of the Portfolio. However, the risk of an investor in
a Portfolio incurring financial loss beyond the amount of its investment 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 a Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
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DESCRIPTION OF INVESTMENTS
In addition to the securities referred to in "Investment Programs" herein,
each Portfolio (except as noted) may make the following investments, among
others, individually or in combination, although it may not necessarily buy all
of the types of securities or use all of the investment techniques that are
described. For additional information on the following investments and on other
types of investments which the Portfolios may make, see the SAIs.
Certain investment techniques available to the Municipal Portfolios, such as
futures and options, securities loans, and repurchase agreements, may produce
taxable income and capital gains or losses.
U.S. GOVERNMENT AND AGENCY SECURITIES (ALL PORTFOLIOS). U.S. Government
Securities are obligations of the U.S. Treasury backed by the full faith and
credit of the United States. U.S. Government Agency Securities are issued or
guaranteed by U.S. Government agencies, or by instrumentalities of the U.S.
Government, such as the Government National Mortgage Association ("GNMA"),
Fannie Mae (formerly, Federal National Mortgage Association), Federal Home Loan
Mortgage Corporation ("FHLMC"), Student Loan Marketing Association ("SLMA"), and
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may be supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government Agency Securities are not
guaranteed by the Government and generally fluctuate inversely with changing
interest rates.
INFLATION-INDEXED SECURITIES (NEUBERGER&BERMAN LIMITED MATURITY BOND AND
NEUBERGER&BERMAN ULTRA SHORT BOND PORTFOLIOS.) Each Portfolio may invest in U.S.
Treasury securities whose principal value is adjusted daily in accordance with
changes to the Consumer Price Index. Interest is calculated on the basis of the
current adjusted principal value. The principal value of inflation-indexed
securities declines in periods of deflation, but holders at maturity receive no
less than par. If inflation is lower than expected during the period a Portfolio
holds the security, the Portfolio may earn less on it than on a conventional
bond. Any increase in principal value is taxable in the year the increase
occurs, even though holders do not receive cash representing the increase until
the security matures. Changes in market interest rates from causes other than
inflation will likely affect the market prices of inflation-indexed securities
in the same manner as conventional bonds.
VARIABLE AND FLOATING RATE SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER&
BERMAN GOVERNMENT MONEY PORTFOLIO). Variable and floating rate securities have
interest rate adjustment formulas that may help to stabilize their market value.
Many of these instruments carry a demand feature which permits a Portfolio to
sell them during a determined time period at par value plus accrued interest.
The demand feature is often backed by a credit instrument, such as a letter of
credit, or by a
51
<PAGE>
creditworthy insurer. A Portfolio may rely on the credit instrument or the
creditworthiness of the insurer in purchasing a variable or floating rate
security. For purposes of determining its dollar-weighted average maturity, each
Portfolio calculates the remaining maturity of variable and floating rate
instruments as provided in Rule 2a-7 under the 1940 Act.
REPURCHASE AGREEMENTS/SECURITIES LOANS (ALL PORTFOLIOS EXCEPT
NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO). In a repurchase agreement, a
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations (but not
limitations as to maturity or duration). The Portfolios also may lend portfolio
securities to banks, brokerage firms or institutional investors to earn income.
Costs, delays, or losses could result if the selling party to a repurchase
agreement or the borrower of portfolio securities becomes bankrupt or otherwise
defaults. N&B Management monitors the creditworthiness of borrowers and
repurchase agreement sellers.
ILLIQUID SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER&BERMAN GOVERNMENT MONEY
PORTFOLIO). Each Portfolio may invest up to 15% of its net assets in illiquid
securities (10% in the case of the Money Market Portfolios and Neuberger&Berman
MUNICIPAL MONEY Portfolio), which are securities that cannot be expected to be
sold within seven days at approximately the price at which they are valued. Due
to the absence of an active trading market, a Portfolio may experience
difficulty in valuing or disposing of illiquid securities. N&B Management
determines the liquidity of the Portfolios' securities, under general
supervision of the trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO). Each Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933, as
amended ("1933 Act"). Unless registered for sale, these securities can be sold
only in privately negotiated transactions or pursuant to an exemption from
registration. Rule 144A securities, although not registered, may be resold to
qualified institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S under
the 1933 Act. Foreign securities that are freely tradeable in their principal
market are not considered restricted securities even if they are not registered
for sale in the United States. Restricted securities are generally considered
illiquid. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted or Rule 144A
securities are liquid.
REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBERGER& BERMAN
GOVERNMENT MONEY PORTFOLIO) AND DOLLAR ROLLS (NEUBERGER&BERMAN ULTRA SHORT BOND
AND NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIOS). In a reverse repurchase
agreement, a Portfolio sells securities to a bank or securities dealer and
simultaneously agrees to repurchase the same securities at a higher price on a
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<PAGE>
specific date. During the period before the repurchase, the Portfolio continues
to receive principal and interest payments on the securities. A Portfolio will
maintain a segregated account consisting of cash or appropriate liquid
securities to cover its obligations under reverse repurchase agreements. Dollar
rolls are similar to reverse repurchase agreements. In a dollar roll, a
Portfolio sells securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type and coupon) securities
on a specified future date from the same party. During the period before the
repurchase, the Portfolio forgoes principal and interest payments on the
securities. The Portfolio is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop"), as well as by the interest earned on the cash proceeds of the
initial sale. Reverse repurchase agreements and dollar rolls may increase
fluctuations in a Portfolio's and its corresponding Fund's NAVs and may be
viewed as a form of leverage. N&B Management monitors the creditworthiness of
parties to reverse repurchase agreements and dollar rolls.
WHEN-ISSUED TRANSACTIONS (ALL PORTFOLIOS). In a when-issued transaction, a
Portfolio commits to purchase securities that will be issued at a future date
(generally within three months) in order to secure an advantageous price and
yield at the time of the commitment and pays for the securities when they are
delivered. If the seller fails to complete the sale, a Portfolio may lose the
opportunity to obtain a favorable price and yield. When-issued securities may
decline or increase in value during the period from the Portfolio's investment
commitment to the settlement of the purchase, which may magnify fluctuation in a
Fund's NAV. None of the Municipal Portfolios may invest more than 10% of its
total assets in when-issued securities.
MORTGAGE-BACKED SECURITIES (NEUBERGER&BERMAN GOVERNMENT MONEY,
NEUBERGER&BERMAN CASH RESERVES, NEUBERGER&BERMAN ULTRA SHORT BOND AND
NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIOS). Mortgage-backed securities
represent interests in, or are secured by and payable from, pools of mortgage
loans, including collateralized mortgage obligations. These securities include
U.S. Government Agency mortgage-backed securities, which are issued or
guaranteed by a U.S. Government agency or instrumentality (though not
necessarily backed by the full faith and credit of the United States), such as
GNMA, Fannie Mae, and FHLMC certificates. Neuberger&Berman GOVERNMENT MONEY
Portfolio may invest only in U.S. Government Agency mortgage-backed securities
that are backed by the full faith and credit of the United States. Other
mortgage-backed securities are issued by private issuers, generally originators
of and investors in mortgage loans. These issuers include savings associations,
mortgage bankers, commercial banks, investment bankers, and special purpose
entities. Private mortgage-backed securities may be supported by U.S. Government
Agency mortgage-backed securities or some form of non-governmental credit
enhancement. Mortgage-backed securities may have either fixed or adjustable
interest rates. Tax or regulatory changes may adversely affect the mortgage
securities market. In addition, changes in the market's perception of the issuer
may affect the value of mortgage-backed securities. The rate of return on
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mortgage-backed securities may be affected by prepayments of principal on the
underlying loans, which generally increase as market interest rates decline; as
a result, when interest rates decline, holders of these securities normally do
not benefit from appreciation in market value to the same extent as holders of
other non-callable debt securities. N&B Management determines the effective life
of mortgage-backed securities based on industry practice and current market
conditions. If N&B Management's determination is not borne out in practice, it
could positively or negatively affect the value of the Portfolio when market
interest rates change. Increasing market interest rates generally extend the
effective maturities of mortgage-backed securities, increasing their sensitivity
to interest rate changes.
ASSET-BACKED SECURITIES (NEUBERGER&BERMAN CASH RESERVES, NEUBERGER& BERMAN
ULTRA SHORT BOND, NEUBERGER&BERMAN LIMITED MATURITY BOND, AND NEUBERGER&BERMAN
NEW YORK INSURED INTERMEDIATE PORTFOLIOS). Asset-backed securities represent
interests in, or are secured by and payable from, pools of assets, such as
consumer loans, CARS-SM- ("Certificates for Automobile Receivables"), credit
card receivables securities, and installment loan contracts. Although these
securities may be supported by letters of credit or other credit enhancements,
payment of interest and principal ultimately depends upon individuals paying the
underlying loans, which may be affected adversely by general downturns in the
economy. The risk that recovery on repossessed collateral might be unavailable
or inadequate to support payments on asset-backed securities is greater than in
the case of mortgage-backed securities.
Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio may purchase units
of beneficial interest in pools of purchase contracts, financing leases, and
sales agreements entered into by municipalities. These municipal obligations may
be created when a municipality enters into an installment purchase contract or
lease with a vendor and may be secured by the assets purchased or leased by the
municipality. However, except in very limited circumstances, there will be no
recourse against the vendor if the municipality stops making payments. Pools may
also hold other types of investments. The market for tax-exempt asset-backed
securities is still relatively new. Certain of these obligations are likely to
involve unscheduled prepayments of principal. In purchasing such securities, the
Portfolio typically relies on an opinion from the issuer's counsel that interest
on the asset-backed securities is exempt from income taxes.
Neuberger&Berman LIMITED MATURITY Bond Portfolio and Neuberger& Berman ULTRA
SHORT Bond Portfolio each may invest in trust preferred securities, which are a
type of asset-backed security. Trust preferred securities represent interests in
a trust formed by a parent company to finance its operations. The trust sells
preferred shares and invests the proceeds in debt securities of the parent. This
debt may be subordinated and unsecured. Dividend payments on the trust preferred
securities match the interest payments on the debt securities; if no interest is
paid on the debt securities, the trust will not make current payments on its
preferred securities. Unlike typical asset-backed securities, which have many
underlying payors and are usually
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overcollateralized, trust preferred securities have only one underlying payor
and are not overcollateralized. Issuers of trust preferred securities and their
parents currently enjoy favorable tax treatment. If the tax characterization of
trust preferred securities were to change, they could be redeemed by the
issuers, which could result in a loss to a Portfolio.
FOREIGN INVESTMENTS (NEUBERGER&BERMAN CASH RESERVES, NEUBERGER& BERMAN ULTRA
SHORT BOND AND NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIOS). The
Portfolios may invest in U.S. dollar-denominated foreign securities. Foreign
securities may be affected by potentially adverse local, political, economic,
social or diplomatic developments in foreign countries, the investment
significance of which may be difficult to discern. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations. In
addition, foreign markets may be less liquid or more volatile than U.S. markets
and may offer less protection to investors. It may be difficult to invoke legal
process or to enforce contractual obligations abroad. Neuberger&Berman LIMITED
MATURITY Bond Portfolio may also invest in foreign securities denominated in or
indexed to foreign currencies. Such securities may be affected by special risks,
such as governmental regulation of foreign exchange transactions and the
fluctuation of foreign currencies relative to the U.S. dollar, which could
result in losses irrespective of the performance of the underlying investment.
In addition, Neuberger&Berman LIMITED MATURITY Bond Portfolio may enter into
forward foreign currency contracts or futures contracts (agreements to exchange
one currency for another at a specified price at a future date) and related
options to manage currency risks and to facilitate transactions in foreign
securities. Although these contracts can protect the Portfolio from adverse
exchange rate changes, they involve a risk of loss if N&B Management fails to
predict foreign currency values correctly; see the discussion of Hedging
Instruments, below.
PUT AND CALL OPTIONS, FUTURES CONTRACTS, AND OPTIONS ON FUTURES CONTRACTS
(NEUBERGER&BERMAN ULTRA SHORT BOND, NEUBERGER&BERMAN LIMITED MATURITY BOND,
NEUBERGER&BERMAN MUNICIPAL SECURITIES AND NEUBERGER&BERMAN NEW YORK INSURED
INTERMEDIATE PORTFOLIOS). Each Portfolio may try to reduce the risk of
securities price changes (hedge) or manage portfolio duration by (1) entering
into interest-rate futures contracts traded on futures exchanges and (2)
purchasing and writing options on futures contracts. Neuberger&Berman LIMITED
MATURITY Bond Portfolio also may write covered call options and purchase put
options on debt securities in its portfolio or on foreign currencies for hedging
purposes or for the purpose of producing income. Neuberger&Berman NEW YORK
INSURED INTERMEDIATE Portfolio also may purchase and sell call options and put
options on debt securities in its portfolio for hedging purposes or for the
purpose of producing income. Neuberger&Berman LIMITED MATURITY Bond Portfolio
and Neuberger&Berman NEW YORK INSURED INTERMEDIATE Portfolio each will write a
call option on a security or currency only if it holds that security or currency
or has the right to obtain the security or currency at no additional cost. These
investment practices involve
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certain risks, including price volatility and a high degree of leverage. The
Portfolios may engage in transactions in futures contracts and related options
only as permitted by regulations of the Commodity Futures Trading Commission.
The primary risks in using put and call options, futures contracts, options
on futures contracts, forward foreign currency contracts or options on foreign
currencies ("Hedging Instruments") are (1) imperfect correlation or no
correlation between changes in market value of the securities or currencies held
by a Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that use of Hedging
Instruments is a highly specialized activity that involves skills, techniques,
and risks (including price volatility and a high degree of leverage) different
from those associated with selection of a Portfolio's securities; and (4) the
fact that, although use of these instruments for hedging purposes can reduce the
risk of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments. When a
Portfolio uses Hedging Instruments, the Portfolio will place cash or appropriate
liquid securities in a segregated account, or will "cover" its position, to the
extent required by SEC staff policy. Another risk of Hedging Instruments is the
possible inability of a Portfolio to purchase or sell a security at a time that
would otherwise be favorable for it to do so, or the possible need for a
Portfolio to sell a security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of these
instruments. Losses that may arise from certain futures transactions are
potentially unlimited.
MUNICIPAL OBLIGATIONS (ALL PORTFOLIOS EXCEPT NEUBERGER&BERMAN GOVERNMENT
MONEY PORTFOLIO). Municipal obligations are issued by or on behalf of states,
the District of Columbia, and U.S. territories and possessions and their
political subdivisions, agencies, and instrumentalities. The interest on
municipal obligations is generally exempt from federal income tax. Municipal
obligations include "general obligation" securities, which are backed by the
full taxing power of a municipality, and "revenue" securities, which are backed
by the income from a specific project, facility, or tax. Municipal obligations
also include industrial development and other private activity bonds -- the
interest on which may be a tax preference item for purposes of the federal
alternative minimum tax -- which are issued by or on behalf of public
authorities and are not backed by the credit of any governmental or public
authority. "Anticipation notes" are issued by municipalities in expectation of
future proceeds from the issuance of bonds, or from taxes or other revenues, and
are payable from those bond proceeds, taxes, or revenues. Municipal obligations
also include tax-exempt commercial paper, which is issued by municipalities to
help finance short-term capital or operating requirements. Current efforts to
restructure the federal budget and the relationship between the federal
government and state and local governments may adversely impact the financing of
some issuers of municipal securities. Some states and localities are
experiencing substantial deficits and may find it difficult for political or
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economic reasons to increase taxes. Efforts are under way that may result in a
restructuring of the federal income tax system. These developments could reduce
the value of all municipal securities, or the securities of particular issuers.
ZERO COUPON SECURITIES (ALL PORTFOLIOS). Zero coupon securities do not pay
interest currently; instead, they are sold at a deep discount from their face
value and are redeemed at face value when they mature. Because zero coupon
securities do not pay current income, their prices can be very volatile when
interest rates change. In calculating their daily income, the Portfolios accrue
a portion of the difference between a zero coupon security's purchase price and
its face value.
SWAP AGREEMENTS (NEUBERGER&BERMAN MUNICIPAL SECURITIES AND NEUBERGER&BERMAN
NEW YORK INSURED INTERMEDIATE PORTFOLIOS). To help enhance the value of their
investments or manage their exposure to different types of investments, the
Portfolios may enter into interest rate, currency, and mortgage swap agreements
and may purchase and sell interest-rate "caps," "floors," and "collars."
In a typical interest-rate swap agreement, one party agrees to make regular
payments equal to a floating interest rate on a specified amount (the "notional
principal amount") in return for payments equal to a fixed interest rate on the
same amount for a specified period. If a swap agreement provides for payment in
different currencies, the parties may agree to exchange the principal amount.
Mortgage swap agreements are similar to interest-rate swap agreements, except
the notional principal amount is tied to a reference pool of mortgages.
In a cap or floor, one party agrees, usually in return for a fee, to make
payments under particular circumstances. For example, the purchaser of an
interest-rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed level; the purchaser of an interest-rate floor
has the right to receive payments to the extent a specified interest rate falls
below an agreed level. A collar entitles the purchaser to receive payments to
the extent a specified interest rate falls outside an agreed range.
Swap agreements, including caps and floors, may involve leverage and may be
highly volatile; depending on how they are used, they may have a considerable
impact on a Portfolio's performance. The risks of swap agreements depend upon
the other party's creditworthiness and ability to perform, as well as a
Portfolio's ability to terminate its swap agreements or reduce its exposure
through offsetting transactions. Swap agreements may be illiquid. The swap
market is relatively new and is largely unregulated.
RESIDUAL INTEREST BONDS (NEUBERGER&BERMAN MUNICIPAL SECURITIES AND
NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS). The Portfolios may
purchase one component of a municipal security that is structured in two parts:
a variable rate security and a residual interest bond. The interest rate for the
variable rate security is determined by an index or an auction process held
approximately every 35 days, while the residual interest bond holder receives
the balance of the income less an auction fee. These instruments are also known
as inverse floaters because the income
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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.
MUNICIPAL LEASE OBLIGATIONS (NEUBERGER&BERMAN MUNICIPAL SECURITIES AND
NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS). These obligations
are issued by a state or local government or authority to acquire land and a
wide variety of equipment and facilities. The obligations typically are not
fully backed by the municipality's credit. If funds are not appropriated for the
following year's lease payments, the lease may terminate, with the possibility
of default on the lease obligations and significant loss to the Portfolio. The
Portfolios may also purchase certificates of participation in municipal lease
obligations or installment sales contracts, which entitle the holder to a
proportionate interest in lease-purchase payments made.
RESOURCE RECOVERY BONDS (NEUBERGER&BERMAN MUNICIPAL MONEY, NEUBERGER&BERMAN
MUNICIPAL SECURITIES AND NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE
PORTFOLIOS). Resource recovery bonds are a type of revenue bond issued to build
facilities such as solid waste incinerators or waste-to-energy plants.
Typically, a private corporation will be involved on a temporary basis during
the construction of the facility, and the revenue stream will be secured by fees
or rents paid by municipalities for use of the facilities. The credit and
quality of resource recovery bonds may be affected by the viability of the
project itself, tax incentives for the project, and changing environmental
regulations or interpretations thereof.
TENDER OPTION BONDS (NEUBERGER&BERMAN MUNICIPAL SECURITIES AND
NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIOS). Tender option bonds
are created by coupling an intermediate-term or long-term, fixed rate tax-exempt
bond with a tender agreement that gives the holder the option to tender the bond
at its face value. A sponsor, such as a bank, broker-dealer or other financial
institution, in return for providing the tender option, receives periodic fees
equal to the difference between the bond's fixed coupon rate and the rate that
would cause the bond, with the tender option, to trade at par value. A sponsor
may terminate the tender option if, for example, the issuer of the bond defaults
on interest payments or the bond's rating falls below investment grade. The tax
treatment of tender option bonds is unclear, and the Portfolios will not invest
in any such bonds unless N&B Management has assurances that the interest thereon
will be exempt from federal income tax.
58
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USE OF JOINT PROSPECTUS AND STATEMENTS
OF ADDITIONAL INFORMATION
Each Fund and its corresponding Portfolio acknowledges that it is solely
responsible for all information or lack of information about that Fund and
Portfolio in this Prospectus or in the SAIs, and no other Fund or Portfolio is
responsible therefor. The trustees of the Trust and of Managers Trust have
considered this factor in approving each Fund's use of a single combined
Prospectus and combined SAIs.
59
<PAGE>
OTHER INFORMATION
DIRECTORY FUNDS ELIGIBLE FOR EXCHANGE
INVESTMENT MANAGER, ADMINISTRATOR, EQUITY FUNDS
AND DISTRIBUTOR Neuberger&Berman Focus Fund
Neuberger&Berman Management Neuberger&Berman Genesis Fund
Incorporated Neuberger&Berman Guardian Fund
605 Third Avenue 2nd Floor Neuberger&Berman International Fund
New York, NY 10158-0180 Neuberger&Berman Manhattan Fund
800-877-9700 Neuberger&Berman Partners Fund
Institutional Services 800-366-6264 Neuberger&Berman Socially
SUB-ADVISER Responsive Fund
Neuberger&Berman, LLC MONEY MARKET FUNDS
605 Third Avenue Neuberger&Berman Government Money
New York, NY 10158-3698 Fund
CUSTODIAN AND SHAREHOLDER Neuberger&Berman Cash Reserves
SERVICING AGENT BOND FUNDS
State Street Bank and Trust Company Neuberger&Berman Ultra Short Bond
225 Franklin Street Fund
Boston, MA 02110 Neuberger&Berman Limited
ADDRESS CORRESPONDENCE TO: Maturity Bond Fund
Neuberger&Berman Funds MUNICIPAL FUNDS
Boston Service Center Neuberger&Berman Municipal Money
P.O. Box 8403 Fund
Boston, MA 02266-8403 Neuberger&Berman Municipal
LEGAL COUNSEL Securities Trust
Kirkpatrick & Lockhart LLP Neuberger&Berman New York Insured
1800 Massachusetts Avenue, NW Intermediate Fund (available to
2nd Floor residents of New York and Florida
Washington, DC 20036-1800 only)
Neuberger&Berman, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are service marks or registered trademarks of Neuberger&Berman Management
Inc.
- -C- 1997 Neuberger&Berman Management Inc.
60
<PAGE>
Neuberger & Berman Management Inc. -Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
www.nbfunds.com
This wrapper is not part of the prospectus.
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN INCOME FUNDS AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 3, 1997
Neuberger & Berman Neuberger & Berman
Government Money Fund Ultra Short Bond Fund
(and Neuberger & Berman (and Neuberger & Berman
Government Money Ultra Short Bond Portfolio)
Portfolio)
Neuberger & Berman Neuberger & Berman
Cash Reserves Limited Maturity Bond Fund
(and Neuberger & Berman (and Neuberger & Berman
Cash Reserves Portfolio) Limited Maturity Bond
Portfolio)
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger & Berman GOVERNMENT MONEY Fund ("GOVERNMENT MONEY"),
Neuberger & Berman CASH RESERVES ("CASH RESERVES"), Neuberger & Berman ULTRA
SHORT Bond Fund ("ULTRA SHORT"), and Neuberger & Berman LIMITED MATURITY Bond
Fund ("LIMITED Maturity") (each a "Fund") are no-load mutual funds that offer
shares pursuant to a Prospectus dated February 3, 1997. The Funds invest all of
their net investable assets in Neuberger & Berman GOVERNMENT MONEY Portfolio,
Neuberger & Berman CASH RESERVES Portfolio, Neuberger & Berman ULTRA SHORT Bond
Portfolio, and Neuberger & Berman LIMITED MATURITY Bond Portfolio (each a
"Portfolio"), respectively.
The Funds' Prospectus, which is also the prospectus for certain
municipal funds administered by Neuberger & Berman Management Incorporated ("N&B
Management"), provides basic information that an investor should know before
investing. A copy of the Prospectus may be obtained, without charge, from N&B
Management, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 or by calling
800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations.....................................1
Rating Agencies.........................................................5
Overview of Each Fund...................................................6
Additional Investment Information.......................................8
Risks of Fixed Income Securities.......................................27
PERFORMANCE INFORMATION.....................................................28
Yield Calculations.....................................................28
Tax Equivalent Yield - State and Local Taxes...........................29
Total Return Computations..............................................30
Comparative Information................................................31
Other Performance Information..........................................32
CERTAIN RISK CONSIDERATIONS.................................................33
TRUSTEES AND OFFICERS.......................................................34
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................39
Investment Manager and Administrator...................................39
Sub-Adviser............................................................42
Investment Companies Managed...........................................43
Management and Control of N&B Management...............................45
DISTRIBUTION ARRANGEMENTS...................................................46
ADDITIONAL PURCHASE INFORMATION.............................................47
Automatic Investing and Dollar Cost Averaging..........................47
ADDITIONAL EXCHANGE INFORMATION.............................................47
ADDITIONAL REDEMPTION INFORMATION...........................................51
Suspension of Redemptions..............................................51
Redemptions in Kind....................................................51
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................51
ADDITIONAL TAX INFORMATION..................................................52
Taxation of the Funds..................................................52
Taxation of the Portfolios.............................................54
Taxation of the Funds' Shareholders....................................56
VALUATION OF PORTFOLIO SECURITIES...........................................57
PORTFOLIO TRANSACTIONS......................................................57
Portfolio Turnover.....................................................59
REPORTS TO SHAREHOLDERS.....................................................59
ORGANIZATION................................................................59
CUSTODIAN AND TRANSFER AGENT................................................60
INDEPENDENT AUDITORS........................................................60
LEGAL COUNSEL...............................................................60
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................60
REGISTRATION STATEMENT......................................................62
FINANCIAL STATEMENTS........................................................62
Appendix A...................................................................1
RATINGS OF SECURITIES...................................................1
Appendix B...................................................................1
THE ART OF INVESTMENT:..................................................1
A CONVERSATION WITH ROY NEUBERGER..................................1
<PAGE>
INVESTMENT INFORMATION
Each Fund is a separate series of Neuberger & Berman Income Funds
("Trust"), a Delaware business trust that is registered with the Securities and
Exchange Commission ("SEC") as an open-end management investment company. Each
Fund seeks its investment objective by investing all of its net investable
assets in a Portfolio of Income Managers Trust ("Managers Trust") that has an
investment objective identical to, and a name similar to, that of the Fund. Each
Portfolio, in turn, invests in securities in accordance with an investment
objective, policies, and limitations identical to those of its corresponding
Fund. (The Trust and Managers Trust, which is an open-end management investment
company managed by N&B Management, are together referred to below as the
"Trusts.")
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of each Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of each Fund and Portfolio are not
fundamental. Any investment policy or limitation that is not fundamental may be
changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust
("Portfolio Trustees") without shareholder approval. The fundamental investment
policies and limitations of a Fund or a Portfolio may not be changed without the
approval of the lesser of (1) 67% of the total units of beneficial interest
("shares") of the Fund or Portfolio represented at a meeting at which more than
50% of the outstanding Fund or Portfolio shares are represented or (2) a
majority of the outstanding shares of the Fund or Portfolio. These percentages
are required by the Investment Company Act of 1940 ("1940 Act") and are referred
to in this SAI as a "1940 Act majority vote." Whenever a Fund is called upon to
vote on a change in a fundamental investment policy or limitation of its
corresponding Portfolio, the Fund casts its votes thereon in proportion to the
votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
- -----------------------------------
Each Fund has the following fundamental investment policy, to enable
it to invest in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
<PAGE>
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.
For purposes of the investment limitation on concentration in a
particular industry, N&B Management determines the "issuer" of a municipal
obligation that is not a general obligation note or bond based on the
obligation's characteristics. The most significant of these characteristics is
the source of funds for the repayment of principal and payment of interest on
the obligation. If an obligation is backed by an irrevocable letter of credit or
other guarantee, without which the obligation would not qualify for purchase
under Neuberger & Berman LIMITED MATURITY Bond Portfolio's or Neuberger & Berman
CASH RESERVES Portfolio's quality restrictions, the issuer of the letter of
credit or the guarantee is considered an issuer of the obligation. If an
obligation meets a Portfolio's quality restrictions without credit support, the
Portfolio treats the commercial developer or the industrial user, rather than
the governmental entity or the guarantor, as the only issuer of the obligation,
even if the obligation is backed by a letter of credit or other guarantee. Also,
for purposes of the investment limitation on concentration in a particular
industry, both mortgage-backed and asset-backed securities are grouped together
as a single industry.
Except for the limitation on borrowing and the limitation on ownership
of portfolio securities by officers and trustees, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Portfolio.
The fundamental investment policies and limitations of Neuberger &
Berman GOVERNMENT MONEY Portfolio are as follows:
1. BORROWING. The Portfolio may not borrow money, except from banks
for temporary or emergency purposes and not for leveraging or investment, in an
amount not exceeding 33-1/3% of the value of its total assets (including the
amount borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of the Portfolio's total assets, it will
reduce its borrowings within three days (excluding Sundays and holidays) to the
extent necessary to comply with the 33-1/3% limitation.
2. COMMODITIES AND REAL ESTATE. The Portfolio may not purchase or sell
commodities, commodity contracts, foreign exchange, or real estate, including
interests in real estate investment trusts and real estate mortgage loans,
except securities issued by the Government National Mortgage Association
("GNMA").
2
<PAGE>
3. LENDING. The Portfolio may not make loans. The acquisition of a
portion of an issue of publicly distributed bonds, debentures, notes, and other
securities as permitted by Managers Trust's Declaration of Trust shall not be
deemed to be the making of loans.
4. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
5. UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that the Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
6. SHORT SALES AND PUTS, CALLS, STRADDLES, OR SPREADS. The Portfolio
may not effect short sales of securities or write or purchase any puts, calls,
straddles, spreads, or any combination thereof.
The non-fundamental investment policies and limitations of Neuberger &
Berman GOVERNMENT MONEY Portfolio are as follows:
1. BORROWING. The Portfolio may not purchase securities if outstanding
borrowings exceed 5% of its total assets.
2. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions.
3. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to (i) purchases
of securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government and Agency Securities") or (ii) investments
in certificates of deposit ("CDs") or banker's acceptances issued by domestic
branches of U.S. banks.
The fundamental investment policies and limitations of Neuberger &
Berman CASH RESERVES Portfolio, Neuberger & Berman ULTRA SHORT Bond Portfolio,
and Neuberger & Berman LIMITED MATURITY Bond Portfolio are as follows:
3
<PAGE>
1. BORROWING. No Portfolio may borrow money, except that a Portfolio
may (i) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment, and (ii) enter into reverse repurchase agreements;
provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of
its total assets (including the amount borrowed) less liabilities (other than
borrowings). If at any time borrowings exceed 33-1/3% of the value of a
Portfolio's total assets, that Portfolio will reduce its borrowings within three
days (excluding Sundays and holidays) to the extent necessary to comply with the
33-1/3% limitation.
2. COMMODITIES. Neuberger & Berman ULTRA SHORT Bond Portfolio and
Neuberger & Berman LIMITED MATURITY Bond Portfolio may not purchase physical
commodities or contracts thereon, unless acquired as a result of the ownership
of securities or instruments, but this restriction shall not prohibit a
Portfolio from purchasing futures contracts or options (including options on
futures contracts, but excluding options or futures contracts on physical
commodities) or from investing in securities of any kind. Neuberger & Berman
CASH RESERVES Portfolio may not purchase commodities or contracts thereon, but
this restriction shall not prohibit the Portfolio from purchasing the securities
of issuers that own interests in any of the foregoing.
3. DIVERSIFICATION. No Portfolio may, with respect to 75% of the value
of its total assets, purchase the securities of any issuer (other than U.S.
Government and Agency Securities) if, as a result, (i) more than 5% of the value
of the Portfolio's total assets would be invested in the securities of that
issuer or (ii) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer.
4. INDUSTRY CONCENTRATION. No Portfolio may purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to (i) purchases of U.S.
Government and Agency Securities, or (ii) investments by Neuberger & Berman CASH
RESERVES Portfolio or Neuberger & Berman ULTRA SHORT Bond Portfolio in CDs or
banker's acceptances issued by domestic branches of U.S. banks.
5. LENDING. No Portfolio may lend any security or make any other loan
if, as a result, more than 33-1/3% of its total assets (taken at current value)
would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
4
<PAGE>
6. REAL ESTATE. No Portfolio may purchase real estate unless acquired
as a result of the ownership of securities or instruments, but this restriction
shall not prohibit a Portfolio from purchasing securities issued by entities or
investment vehicles that own or deal in real estate or interests therein, or
instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. No Portfolio may issue senior securities, except
as permitted under the 1940 Act.
8. UNDERWRITING. No Portfolio may underwrite securities of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the 1933
Act.
The non-fundamental investment policies and limitations of Neuberger &
Berman CASH RESERVES Portfolio, Neuberger & Berman ULTRA SHORT Bond Portfolio,
and Neuberger & Berman LIMITED MATURITY Bond Portfolio are as follows:
1. INVESTMENTS IN ANY ONE ISSUER. Neuberger & Berman CASH RESERVES
Portfolio and Neuberger & Berman ULTRA Short Bond Portfolio may not purchase the
securities of any one issuer (other than U.S. Government and Agency Securities)
if, as a result, more than 5% of the Portfolio's total assets would be invested
in the securities of that issuer.
2. ILLIQUID SECURITIES. No Portfolio may purchase any security if, as
a result, more than 15% of its net assets (10% in the case of Neuberger & Berman
CASH RESERVES Portfolio) would be invested in illiquid securities. Illiquid
securities include securities that cannot be sold within seven days in the
ordinary course of business for approximately the amount at which the Portfolio
has valued the securities, such as repurchase agreements maturing in more than
seven days.
5
<PAGE>
3. BORROWING. No Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
4. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, no Portfolio may make any loans other than securities
loans.
5. MARGIN TRANSACTIONS. No Portfolio may purchase securities on margin
from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. For Neuberger & Berman ULTRA SHORT Bond Portfolio and Neuberger &
Berman LIMITED MATURITY Bond Portfolio, margin payments in connection with
transactions in futures contracts and options on futures contracts shall not
constitute the purchase of securities on margin and shall not be deemed to
violate the foregoing limitation.
RATING AGENCIES
As discussed in the Prospectus, the Portfolios may purchase securities
rated by Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
or any other nationally recognized statistical rating organization ("NRSRO").
The ratings of an NRSRO represent its opinion as to the quality of securities it
undertakes to rate. Ratings are not absolute standards of quality; consequently,
securities with the same maturity, duration, coupon, and rating may have
different yields. Although the Portfolios may rely on the ratings of any NRSRO,
the Portfolios mainly refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
OVERVIEW OF EACH FUND
- ---------------------
Neuberger & Berman Management offers a group of taxable mutual funds
designed with varying degrees of risk and return based on the duration and/or
maturity of each Portfolio. Duration measures a bond's exposure to interest rate
risk. Duration incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure. In general, the longer you extend a
bond's duration, the greater its potential return and exposure to interest rate
fluctuations.
6
<PAGE>
For example, GOVERNMENT MONEY and CASH RESERVES are money market funds
with average portfolio maturity of up to 90 days. This is followed by ULTRA
SHORT which offers investors the prospect of higher returns than money market
funds in exchange for a moderate incremental increase in risk. This Fund can
invest in a portfolio of bonds with a maximum average duration of two years.
Rounding out the group is LIMITED MATURITY which seeks a higher income but can
experience more price fluctuation. Its Portfolio of bonds has a maximum average
duration of four years. A more detailed discussion of each Fund follows. In all
cases, these Funds pursue attractive current income with low risk to principal
and vary according to their investment guidelines. These guidelines include
maturity or duration, type of bonds, and the credit quality of these bonds.
Money Market Funds
- ------------------
Neuberger & Berman Government Money Fund
- ----------------------------------------
GOVERNMENT MONEY is oriented to investors who seek maximum liquidity
with virtually no credit risk. It is managed to maintain a constant one dollar
net asset value. Through its corresponding Portfolio, the Fund invests
exclusively in securities issued or guaranteed by the United States Government.
The income earned by investors in U.S. Treasury issues is generally free of
state taxation. Thus, this Fund will have particular appeal to investors who
live in states that levy a tax on interest income and who are looking for a
temporary investment vehicle.
Neuberger & Berman Cash Reserves
- --------------------------------
CASH RESERVES is oriented to investors who seek a high degree of
liquidity while investing in Government and corporate money market instruments.
The Fund is invested to maintain a constant one dollar net asset value. Through
its corresponding Portfolio, the Fund invests only in securities that enjoy one
of the two highest credit ratings or unrated securities deemed equivalent by N &
B Management.
Bond Funds
- ----------
Our bond funds are managed on the basis of a strategy of investment in
fixed income sectors we believe are attractively priced, and the selection of
the most attractively priced issues in those sectors based on their perceived
risk and returns. We also manage the duration of the portfolios. Sector
investments include corporate bonds, mortgage-backed securities, asset backed
securities, CMOs (Collateralized Mortgages Obligations), Treasuries and
Government agencies.
7
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Neuberger & Berman Ultra Short Bond Fund
- ----------------------------------------
ULTRA SHORT is oriented to investors who seek attractive current
income with minimal risk to principal and liquidity.
Through its Portfolio, the Fund invests in a broad array of investment
grade fixed income sectors in order to increase the yield of the Portfolio.
Within each bond sector we seek out securities that offer superior yield to
alternative investments while not compromising our credit quality standards.
This is a total return fund so that the investor's return will include earned
income on the underlying bonds, plus or minus changes in their principal values.
Therefore, the duration of the Fund is also actively managed in response to the
trend of interest rates. The Portfolio is limited to a maximum duration of two
years, which, combined with its moderately conservative portfolio of securities,
is intended to result in only limited fluctuation in principal value.
NEUBERGER & BERMAN LIMITED MATURITY BOND FUND
LIMITED MATURITY is appropriate for investors who seek to participate
in the returns of the bond market, but wish to avoid significant fluctuations in
principal value. In order to achieve its investment goal through its Portfolio,
this Fund has the flexibility to invest across the full range of bond sectors
(corporate, mortgage-backed securities, etc.) and may invest a limited portion
of its assets in foreign securities denominated in foreign currencies as well as
lower-rated "high yield" issues.
The investment strategy of this Fund is based upon the demonstrated
ability of short and intermediate duration portfolios to deliver virtually all
of the income of riskier long-term maturity portfolios. Thus, this Fund limits
its maximum average duration to four years. However, in order to improve total
return, it invests across a broad range of fixed income sectors and within each
sector seeks out securities that have a higher yield than counterpart issues
that we believe have a similar credit risk. It may opportunistically invest in
foreign issues when they offer higher yield than U.S. issues. In addition, it
may invest up to 10% of its net assets in "high yield" issues when these issues
offer the prospect of higher total return to the Portfolio. It is the manager's
belief that the combination of broad sector diversification, active security
selection and flexible maturity and duration management can offer investors the
prospect of total returns that will approximate the bond market as a whole, with
only moderate fluctuation in principal value.
Additional Investment Information
- ---------------------------------
Some or all of the Portfolios, as indicated below, may make the
following investments, among others, although they may not buy all of the types
of securities or use all of the investment techniques that are described.
8
<PAGE>
U.S. GOVERNMENT AND AGENCY SECURITIES (ALL PORTFOLIOS). U.S. Government
and Agency Securities are direct obligations of the U.S. Government or its
agencies and instrumentalities, such as GNMA, Fannie Mae, Federal Home Loan
Mortgage Corporation ("FHLMC"), Student Loan Marketing Association ("SLMA"), and
Tennessee Valley Authority. Many agency securities are not backed by the full
faith and credit of the United States.
INFLATION-INDEXED SECURITIES (NEUBERGER & BERMAN ULTRA SHORT BOND AND
NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIOS). The Portfolios may invest
in U.S. Treasury securities whose principal value is adjusted daily in
accordance with changes to the Consumer Price Index. Any increase in principal
value is taxable in the year the increase occurs, even though holders do not
receive cash representing the increase until the security matures. Because each
Fund must pay substantially all of its income to investors to avoid payment of
an excise tax, a Portfolio may have to dispose of other investments to obtain
the cash necessary to distribute the gain on inflation-indexed securities.
REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBERGER & BERMAN
GOVERNMENT MONEY PORTFOLIO). In a repurchase agreement, a Portfolio purchases
securities from a bank that is a member of the Federal Reserve System or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. Repurchase agreements with
a maturity of more than seven days are considered to be illiquid securities; no
Portfolio may enter into such a repurchase agreement if, as a result, more than
15% (10% in the case of Neuberger & Berman CASH RESERVES Portfolio) of the value
of its net assets would then be invested in such repurchase agreements and other
illiquid securities. A Portfolio may enter into a repurchase agreement only if
(1) the underlying securities are of the type (excluding maturity and duration
limitations) that the Portfolio's investment policies and limitations would
allow it to purchase directly, (2) the market value of the underlying
securities, including accrued interest, at all times equals or exceeds the
repurchase price, and (3) payment for the underlying securities is made only
upon satisfactory evidence that the securities are being held for the
Portfolio's account by its custodian or a bank acting as the Portfolio's agent.
9
<PAGE>
SECURITIES LOANS (ALL PORTFOLIOS EXCEPT NEUBERGER & BERMAN GOVERNMENT
MONEY PORTFOLIO). In order to realize income, each of these Portfolios may lend
portfolio securities with a value not exceeding 33-1/3% of its total assets to
banks, brokerage firms, or institutional investors judged creditworthy by N&B
Management. Borrowers are required continuously to secure their obligations to
return securities on loan from a Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily. N&B
Management believes the risk of loss on these transactions is slight because, if
a borrower were to default for any reason, the collateral should satisfy the
obligation. However, as with other extensions of secured credit, loans of
portfolio securities involve some risk of loss of rights in the collateral
should the borrower fail financially.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER & BERMAN GOVERNMENT MONEY Portfolio). The Portfolios may invest in
restricted securities, which are securities that may not be sold to the public
without an effective registration statement under the 1933 Act. Before they are
registered, such securities may be sold only in a privately negotiated
transaction or pursuant to an exemption from registration. In recognition of the
increased size and liquidity of the institutional market for unregistered
securities and the importance of institutional investors in the formation of
capital, the SEC has adopted Rule 144A under the 1933 Act. Rule 144A is designed
to facilitate efficient trading among institutional investors by permitting the
sale of certain unregistered securities to qualified institutional buyers. To
the extent privately placed securities held by a Portfolio qualify under Rule
144A and an institutional market develops for those securities, the Portfolio
likely will be able to dispose of the securities without registering them under
the 1933 Act. To the extent that institutional buyers become, for a time,
uninterested in purchasing these securities, investing in Rule 144A securities
could increase the level of a Portfolio's illiquidity. N&B Management, acting
under guidelines established by the Portfolio Trustees, may determine that
certain securities qualified for trading under Rule 144A are liquid. Foreign
securities that are freely tradable in their principal markets are not
considered to be restricted. Regulation S under the 1933 Act permits the sale
abroad of securities that are not registered for sale in the United States.
Where registration is required, a Portfolio may be obligated to pay
all or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases thereof will
be subject to each Portfolio's 15% (10% in the case of Neuberger & Berman CASH
RESERVES Portfolio) limit on investments in illiquid securities. Restricted
securities for which no market exists are priced by a method that the Portfolio
Trustees believe accurately reflects fair value.
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COMMERCIAL PAPER (ALL PORTFOLIOS EXCEPT NEUBERGER & BERMAN GOVERNMENT
MONEY PORTFOLIO). Commercial paper is a short-term debt security issued by a
corporation, bank, municipality, or other issuer, usually for purposes such as
financing current operations. Each Portfolio may invest in commercial paper that
cannot be resold to the public without an effective registration statement under
the 1933 Act. While restricted commercial paper normally is deemed illiquid, N&B
Management may in certain cases determine that such paper is liquid, pursuant to
guidelines established by the Portfolio Trustees.
REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBERGER &
BERMAN GOVERNMENT MONEY PORTFOLIO). In a reverse repurchase agreement, a
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of each
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, a Portfolio will deposit in a
segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to each Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio. None of
the Portfolios currently expects to enter into reverse repurchase agreements or
borrow money.
BANKING AND SAVINGS INSTITUTION SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER & BERMAN GOVERNMENT MONEY Portfolio). The Portfolios may invest in
banking and savings institution obligations, which include CDs, time deposits,
bankers' acceptances, and other short-term debt obligations issued by commercial
banks and savings institutions. CDs are receipts for funds deposited for a
specified period of time at a specified rate of return; time deposits generally
are similar to CDs, but are uncertificated. Bankers' acceptances are time drafts
drawn on commercial banks by borrowers, usually in connection with international
commercial transactions. The CDs, time deposits, and bankers' acceptances in
which the Portfolios invest typically are not covered by deposit insurance.
A Portfolio may invest in securities issued by a commercial bank or
savings institution only if (1) the bank or institution has total assets of at
least $1,000,000,000, (2) the bank or institution is on N&B Management's
approved list, (3) in the case of a U.S. bank or institution, its deposits are
insured by the Federal Deposit Insurance Corporation, and (4) in the case of a
foreign bank or institution, the securities are, in N&B Management's opinion, of
an investment quality comparable with other debt securities that may be
purchased by the Portfolio. These limitations do not prohibit investments in
securities issued by foreign branches of U.S. banks that meet the foregoing
requirements.
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VARIABLE OR FLOATING RATE SECURITIES; DEMAND AND PUT FEATURES (ALL
PORTFOLIOS EXCEPT NEUBERGER & BERMAN GOVERNMENT MONEY PORTFOLIO). Variable rate
securities provide for automatic adjustment of the interest rate at fixed
intervals (e.g., daily, monthly, or semi-annually); floating rate securities
provide for automatic adjustment of the interest rate whenever a specified
interest rate or index changes. The interest rate on variable and floating rate
securities (collectively, "Adjustable Rate Securities") ordinarily is determined
by reference to a particular bank's prime rate, the 90-day U.S. Treasury Bill
rate, the rate of return on commercial paper or bank CDs, an index of short-term
tax-exempt rates or some other objective measure.
The Adjustable Rate Securities in which the Portfolios invest
frequently permit the holder to demand payment of the obligations' principal and
accrued interest at any time or at specified intervals not exceeding one year.
The demand feature usually is backed by a credit instrument (e.g., a bank letter
of credit) from a creditworthy issuer and sometimes by insurance from a
creditworthy insurer. Without these credit enhancements, some Adjustable Rate
Securities might not meet the Portfolios' quality standards. Accordingly, in
purchasing these securities, each Portfolio relies primarily on the
creditworthiness of the credit instrument issuer or the insurer. A Portfolio may
not invest more than 5% of its total assets in securities backed by credit
instruments from any one issuer or by insurance from any one insurer. For
purposes of this limitation, each Portfolio, except for Neuberger & Berman CASH
RESERVES Portfolio and Neuberger & Berman GOVERNMENT MONEY Portfolio, excludes
securities that do not rely on the credit instrument or insurance for their
rating, i.e., stand on their own credit.
A Portfolio can also buy fixed rate securities accompanied by a demand
feature or by a put option, which permits the Portfolio to sell the security to
the issuer or third party at a specified price. A Portfolio may rely on the
creditworthiness of issuers of the credit enhancements in purchasing these
securities.
In calculating its dollar-weighted average maturity and duration, each
Portfolio is permitted to treat certain Adjustable Rate Securities as maturing
on a date prior to the date on which the final repayment of principal must
unconditionally be made. In applying such maturity shortening devices, N&B
Management considers whether the interest rate reset is expected to cause the
security to trade at approximately its par value.
MORTGAGE-BACKED SECURITIES (ALL PORTFOLIOS). Mortgage-backed
securities represent direct or indirect participations in, or are secured by and
payable from, pools of mortgage loans. They may be issued or guaranteed by a
U.S. Government agency or instrumentality (such as GNMA, Fannie Mae, and FHLMC),
though not necessarily backed by the full faith and credit of the United States,
or may be issued by private issuers.
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Because many mortgages are repaid early, the actual maturity and
duration of mortgage-backed securities are typically shorter than their stated
final maturity and their duration calculated solely on the basis of the stated
life and payment schedule. In calculating its dollar-weighted average maturity
and duration, a Portfolio may apply certain industry conventions regarding the
maturity and duration of mortgage-backed instruments. Different analysts use
different models and assumptions in making these determinations. The Portfolios
use an approach that N&B Management believes is reasonable in light of all
relevant circumstances.
Mortgage-backed securities may be issued in the form of collateralized
mortgage obligations ("CMOs") or mortgage-backed bonds. CMOs are obligations
that are fully collateralized, directly or indirectly, by a pool of mortgages;
payments of principal and interest on the mortgages are passed through to the
holders of the CMOs, although not necessarily on a pro rata basis, on the same
schedule as they are received. Mortgage-backed bonds are general obligations of
the issuer that are fully collateralized, directly or indirectly, by a pool of
mortgages. The mortgages serve as collateral for the issuer's payment
obligations on the bonds, but interest and principal payments on the mortgages
are not passed through either directly (as with mortgage-backed "pass-through"
securities issued or guaranteed by U.S. Government agencies or
instrumentalities) or on a modified basis (as with CMOs). Accordingly, a change
in the rate of prepayments on the pool of mortgages could change the effective
maturity or the duration of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds may be callable by the issuer
prior to maturity). To the extent that rising interest rates cause prepayments
to occur at a slower than expected rate, a CMO could be converted into a
longer-term security that is subject to greater risk of price volatility.
Governmental, government-related, and private entities (such as
commercial banks, savings institutions, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers, including securities
broker-dealers and special purpose entities that generally are affiliates of the
foregoing established to issue such securities) may create mortgage loan pools
to back mortgage pass-through and mortgage-collateralized investments. Such
issuers may be the originators and/or servicers of the underlying mortgage
loans, as well as the guarantors of the mortgage-backed securities. Pools
created by non-governmental issuers generally offer a higher rate of interest
than governmental and government-related pools because of the absence of direct
or indirect government or agency guarantees. Various forms of insurance or
guarantees, including individual loan, title, pool, and hazard insurance and
letters of credit, may support timely payment of interest and principal of
non-governmental pools. Governmental entities, private insurers, and mortgage
poolers issue these forms of insurance and guarantees. N&B Management considers
such insurance and guarantees, as well as the creditworthiness of the issuers
thereof, in determining whether a mortgage-backed security meets a Portfolio's
investment quality standards. There can be no assurance that private insurers or
guarantors can meet their obligations under insurance policies or guarantee
arrangements.
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A Portfolio may buy mortgage-backed securities without insurance or
guarantees, if N&B Management determines that the securities meet the
Portfolio's quality standards. A Portfolio may not purchase mortgage-backed
securities that, in N&B Management's opinion, are illiquid if, as a result, more
than 15% (10% in the case of Neuberger & Berman CASH RESERVES Portfolio) of the
Portfolio's net assets would be invested in illiquid securities. Neuberger &
Berman GOVERNMENT MONEY Portfolio may invest in U.S. Government mortgage-backed
securities only if they are backed by the full faith and credit of the United
States. N&B Management will, consistent with the Portfolios' investment
objective, policies and limitations and quality standards, consider making
investments in new types of mortgage-backed securities as such securities are
developed and offered to investors.
ASSET-BACKED SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER & BERMAN
GOVERNMENT MONEY PORTFOLIO). The Portfolios may purchase asset-backed
securities, including commercial paper. Asset-backed securities represent direct
or indirect participations in, or are secured by and payable from, pools of
assets such as motor vehicle installment sales contracts, installment loan
contracts, leases of various types of real and personal property, and
receivables from revolving credit (credit card) agreements. These assets are
securitized through the use of trusts and special purpose corporations. Credit
enhancements, such as various forms of cash collateral accounts or letters of
credit, may support payments of principal and interest on asset-backed
securities. Asset-backed securities are subject to the same risk of prepayment
described with respect to mortgage-backed securities. The risk that recovery on
repossessed collateral might be unavailable or inadequate to support payments,
however, is greater for asset-backed securities than for mortgage-backed
securities.
Certificates for Automobile Receivables[SERVICEMARK] ("CARS[SERVICE-
MARK]") represent undivided fractional interests in a trust whose assets consist
of a pool of motor vehicle retail installment sales contracts and security
interests in the vehicles securing those contracts. Payments of principal and
interest on the underlying contracts are passed through monthly to certificate
holders and are guaranteed up to specified amounts by a letter of credit issued
by a financial institution unaffiliated with the trustee or originator of the
trust. Underlying installment sales contracts are subject to prepayment, which
may reduce the overall return to certificate holders. Certificate holders also
may experience delays in payment or losses on CARS[SERVICEMARK] if the trust
does not realize the full amounts due on underlying installment sales contracts
because of unanticipated legal or administrative costs of enforcing the
contracts; depreciation, damage, or loss of the vehicles securing the contracts;
or other factors.
Credit card receivable securities are backed by receivables from
revolving credit card agreements ("Accounts"). Credit balances on Accounts are
generally paid down more rapidly than are automobile contracts. Most of the
credit card receivable securities issued publicly to date have been pass-through
certificates. In order to lengthen their maturity or duration, most such
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securities provide for a fixed period during which only interest payments on the
underlying Accounts are passed through to the security holder; principal
payments received on the Accounts are used to fund the transfer of additional
credit card charges made on the Accounts to the pool of assets supporting the
securities. Usually, the initial fixed period may be shortened if specified
events occur which signal a potential deterioration in the quality of the assets
backing the security, such as the imposition of a cap on interest rates. An
issuer's ability to extend the life of an issue of credit card receivable
securities thus depends on the continued generation of principal amounts in the
underlying Accounts and the non-occurrence of the specified events. The
non-deductibility of consumer interest, as well as competitive and general
economic factors, could adversely affect the rate at which new receivables are
created in an Account and conveyed to an issuer, thereby shortening the expected
weighted average life of the related security and reducing its yield. An
acceleration in cardholders' payment rates or any other event that shortens the
period during which additional credit card charges on an Account may be
transferred to the pool of assets supporting the related security could have a
similar effect on its weighted average life and yield.
Credit cardholders are entitled to the protection of state and federal
consumer credit laws. Many of those laws give a holder the right to set off
certain amounts against balances owed on the credit card, thereby reducing
amounts paid on Accounts. In addition, unlike the collateral for most other
asset-backed securities, Accounts are unsecured obligations of the cardholder.
U.S. DOLLAR-DENOMINATED FOREIGN DEBT SECURITIES (ALL PORTFOLIOS EXCEPT
NEUBERGER & BERMAN GOVERNMENT MONEY Portfolio). The Portfolios may invest in
U.S. dollar-denominated debt securities of foreign issuers (including banks,
governments and quasi-governmental organizations) and foreign branches of U.S.
banks, including negotiable CDs, bankers' acceptances, and commercial paper.
These investments are subject to each Portfolio's quality, maturity, and
duration standards. While investments in foreign securities are intended to
reduce risk by providing further diversification, such investments involve
sovereign and other risks, in addition to the credit and market risks normally
associated with domestic securities. These additional risks include the
possibility of adverse political and economic developments (including political
instability) and the potentially adverse effects of unavailability of public
information regarding issuers, less governmental supervision and regulation of
financial markets, reduced liquidity of certain financial markets, and the lack
of uniform accounting, auditing, and financial reporting standards or the
application of standards that are different or less stringent than those applied
in the United States.
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FOREIGN CURRENCY DENOMINATED FOREIGN SECURITIES (NEUBERGER & BERMAN
LIMITED MATURITY BOND PORTFOLIO). The Portfolio may invest in debt or other
income-producing securities (of issuers in countries whose governments are
considered stable by N&B Management) that are denominated in or indexed to
foreign currencies, including (1) CDs, commercial paper, fixed time deposits,
and bankers' acceptances issued by foreign banks, (2) obligations of other
corporations, and (3) obligations of foreign governments, their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding section, and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxation,
and (3) adverse changes in investment or exchange control regulations (which
could prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments.
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
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In order to limit the risks inherent in investing in foreign currency
denominated securities, the Portfolio may not purchase any such security if, as
a result, more than 25% of its net assets (taken at market value) would be
invested in foreign currency denominated securities. Within that limitation,
however, the Portfolio is not restricted in the amount it may invest in
securities denominated in any one foreign currency.
DOLLAR ROLLS (NEUBERGER & BERMAN ULTRA SHORT BOND PORTFOLIO AND
NEUBERGER & BERMAN LIMITED MATURITY BOND Portfolio). In a "dollar roll," a
Portfolio sells securities for delivery in the current month and simultaneously
agrees to repurchase substantially similar (i.e., same type and coupon)
securities on a specified future date from the same party. A "covered roll" is a
specific type of dollar roll in which the Portfolio holds an offsetting cash
position or a cash-equivalent securities position that matures on or before the
forward settlement date of the dollar roll transaction. Dollar rolls are
considered borrowings for purposes of the Portfolios' investment policies and
limitations concerning borrowings. There is a risk that the contra-party will be
unable or unwilling to complete the transaction as scheduled, which may result
in losses to the Portfolio.
WHEN-ISSUED TRANSACTIONS (NEUBERGER & BERMAN GOVERNMENT MONEY
PORTFOLIO, NEUBERGER & BERMAN CASH RESERVES PORTFOLIO, NEUBERGER & BERMAN ULTRA
SHORT BOND PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO).
The Portfolios may purchase securities (including mortgage-backed securities
such as GNMA, Fannie Mae, and FHLMC certificates) on a when-issued basis. These
transactions involve a commitment by a Portfolio to purchase securities that
will be issued at a future date (ordinarily within two months, although the
Portfolio may agree to a longer settlement period). The price of the underlying
securities (usually expressed in terms of yield) and the date when the
securities will be delivered and paid for (the settlement date) are fixed at the
time the transaction is negotiated. When-issued purchases are negotiated
directly with the other party, and such commitments are not traded on exchanges.
When-issued transactions enable a Portfolio to "lock in" what N&B
Management believes to be an attractive price or yield on a particular security
for a period of time, regardless of future changes in interest rates. In periods
of falling interest rates and rising prices, a Portfolio might purchase a
security on a when-issued basis and sell a similar security to settle such
purchase, thereby obtaining the benefit of currently higher yields.
The value of securities purchased on a when-issued basis and any
subsequent fluctuations in their value are reflected in the computation of a
Portfolio's net asset value ("NAV") starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date.
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A Portfolio will purchase securities on a when-issued basis only with
the intention of completing the transaction and actually purchasing the
securities. If deemed advisable as a matter of investment strategy, however, a
Portfolio may dispose of or renegotiate a commitment after it has been entered
into. A Portfolio also may sell securities it has committed to purchase before
those securities are delivered to the Portfolio on the settlement date. The
Portfolio may realize capital gains or losses in connection with these
transactions.
When a Portfolio purchases securities on a when-issued basis, it will
deposit in a segregated account with its custodian, until payment is made,
appropriate liquid securities having an aggregate market value (determined
daily) at least equal to the amount of the Portfolio's purchase commitments.
This procedure is designed to ensure that the Portfolio maintains sufficient
assets at all times to cover its obligations under when-issued purchases.
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER & BERMAN ULTRA SHORT
BOND PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). The
Portfolios may purchase and sell interest rate and bond index futures contracts
and options thereon, and Neuberger & Berman LIMITED MATURITY Bond Portfolio may
purchase and sell foreign currency futures contracts (with interest rate and
bond index futures contracts, "Futures" or "Futures Contracts") and options
thereon. The Portfolios engage in interest rate and bond index Futures and
options transactions in an attempt to hedge against changes in securities prices
resulting from changes in prevailing interest rates; Neuberger & Berman LIMITED
MATURITY Bond Portfolio engages in foreign currency Futures and options
transactions in an attempt to hedge against changes in prevailing currency
exchange rates. Because the futures markets may be more liquid than the cash
markets, the use of Futures permits a Portfolio to enhance portfolio liquidity
and maintain a defensive position without having to sell portfolio securities.
The Portfolios do not engage in transactions in Futures or options thereon for
speculation. The Portfolios view investment in (1) interest rate and bond index
Futures and options thereon as a maturity or duration management device and/or a
device to reduce risk and preserve total return in an adverse interest rate
environment for the hedged securities and (2) foreign currency Futures and
options thereon as a means of establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies held
or intended to be acquired by the Portfolios.
A "sale" of a Futures Contract (or a "short" Futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a Futures Contract (or a "long" Futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
Futures, including bond index Futures, are settled on a net cash payment basis
rather than by the sale and delivery of the securities underlying the Futures.
U.S. Futures (except certain currency Futures) are traded on exchanges
that have been designated as "contract markets" by the Commodity Futures Trading
Commission ("CFTC"); Futures transactions must be executed through a futures
commission merchant that is a member of the relevant contract market. The
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
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Although Futures Contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract, without the parties having to make or take delivery of the
assets. A Futures position is offset by buying (to offset an earlier sale) or
selling (to offset an earlier purchase) an identical Futures Contract calling
for delivery in the same month.
"Margin" with respect to Futures is the amount of assets that must be
deposited by a Portfolio with, or for the benefit of, a futures commission
merchant in order to initiate and maintain the Portfolio's Futures positions.
The margin deposit made by a Portfolio when it enters into a Futures Contract
("initial margin") is intended to assure its performance of the contract. If the
price of the Futures Contract changes -- increases in the case of a short (sale)
position or decreases in the case of a long (purchase) position -- so that the
unrealized loss on the contract causes the margin deposit not to satisfy margin
requirements, the Portfolio will be required to make an additional margin
deposit ("variation margin"). However, if favorable price changes in the Futures
Contract cause the margin on deposit to exceed the required margin, the excess
will be paid to the Portfolio. In computing its daily NAV, each Portfolio marks
to market the value of its open Futures positions. A Portfolio also must make
margin deposits with respect to options on Futures that it has written. If the
futures commission merchant holding the deposit goes bankrupt, the Portfolio
could suffer a delay in recovering its funds and could ultimately suffer a loss.
An option on a Futures Contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short Futures
position (if the option is a call) or a long Futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's Futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the Futures Contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option.
Although each Portfolio believes that the use of Futures Contracts
will benefit it, if N&B Management's judgment about the general direction of the
markets is incorrect, a Portfolio's overall return would be lower than if it had
not entered into any such contracts. The prices of Futures are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of Futures and of the securities
and currencies being hedged can be only approximate. Decisions regarding
whether, when, and how to hedge involve skill and judgment. Even a
well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate or currency exchange rate trends, or lack of
correlation between the futures markets and the securities markets. Because of
the low margin deposits required, Futures trading involves an extremely high
degree of leverage; as a result, a relatively small price movement in a Futures
Contract may result in an immediate and substantial loss, or gain, to the
investor. Losses that may arise from certain Futures transactions are
potentially unlimited.
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Most U.S. futures exchanges limit the amount of fluctuation in the
price of a Futures Contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable Futures and options positions and
subjecting investors to substantial losses. If this were to happen with respect
to a position held by a Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
PUT AND CALL OPTIONS (NEUBERGER & BERMAN LIMITED MATURITY BOND
PORTFOLIO). The Portfolio may write and purchase put and call options on
securities. Generally, the purpose of writing and purchasing these options is to
reduce the effect of price fluctuations of securities held by the Portfolio on
the Portfolio's and its corresponding Fund's NAVs. The Portfolio may also write
covered call options to earn premium income. Portfolio securities on which call
and put options may be written and purchased by the Portfolio are purchased
solely on the basis of investment considerations consistent with the Portfolio's
investment objective.
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser of the option decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
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When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio would purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the option. The Portfolio writes only "covered" call options on
securities it owns. So long as the obligation of the call option continues, the
Portfolio may be assigned an exercise notice, requiring it to deliver the
underlying security against payment of the exercise price. The Portfolio may be
obligated to deliver securities underlying a call option at less than the market
price, thereby giving up any additional gain on the security.
When the Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date. The Portfolio would purchase a call option to protect against an
increase in the price of securities it intends to purchase or to offset a
previously written call option.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk (in contrast to the
writing of "naked" or uncovered call options, which the Portfolio will not do),
but is capable of enhancing the Portfolio's total return. When writing a covered
call option, the Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. When writing a put option, the Portfolio, in return for the premium,
takes the risk that it must purchase the underlying security at a price which
may be higher than the current market price of the security. If a call or put
option that the Portfolio has written expires unexercised, the Portfolio will
realize a gain in the amount of the premium; however, in the case of a call
option, that gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Portfolio will realize a gain or loss from the sale of the underlying
security.
The exercise price of an option may be below, equal to, or above the
market value of the underlying security at the time the option is written.
Options normally have expiration dates between three and nine months from the
date written. The obligation under any option terminates upon expiration of the
option or, at an earlier time, when the writer offsets the option by entering
into a "closing purchase transaction" to purchase an option of the same series.
If an option is purchased by the Portfolio and is never exercised, the Portfolio
will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the U.S. are issued
by a clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
"closing transaction" with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. N&B Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions, and limits the
Portfolio's counter-parties in such transactions to dealers with a net worth of
at least $20 million as reported in their latest financial statements.
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The assets used as cover for OTC options written by the Portfolio will
be considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement. The cover
for an OTC call option written subject to this procedure will be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable exchange, less (or plus) a commission. The premium may reflect,
among other things, the current market price of the underlying security, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security, the length of the option period, the
general supply of and demand for credit, and the interest rate environment. The
premium received by the Portfolio for writing an option is recorded as a
liability on the Portfolio's statement of assets and liabilities. This liability
is adjusted daily to the option's current market value, which is the last
reported sales price before the time the Portfolio's NAV is computed on the day
the option is being valued or, in the absence of any trades thereof on that day,
the mean between the bid and asked prices as of that time.
Closing transactions are effected in order to realize a profit on an
outstanding option, to prevent an underlying security from being called, or to
permit the sale or the put of the underlying security. Furthermore, effecting a
closing transaction permits the Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or both.
If the Portfolio desires to sell a security on which it has written a call
option, it will seek to effect a closing transaction prior to, or concurrently
with, the sale of the security. There is, of course, no assurance that the
Portfolio will be able to effect closing transactions at favorable prices. If
the Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
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The Portfolio pays brokerage commissions in connection with purchasing
or writing options, including those used to close out existing positions. These
brokerage commissions normally are higher than those applicable to purchases and
sales of portfolio securities. From time to time, the Portfolio may purchase an
underlying security for delivery in accordance with an exercise notice of a call
option assigned to it, rather than delivering the security from its portfolio.
In those cases, additional brokerage commissions are incurred.
FORWARD FOREIGN CURRENCY CONTRACTS (NEUBERGER & BERMAN LIMITED
MATURITY BOND PORTFOLIO). The Portfolio may enter into contracts for the
purchase or sale of a specific foreign currency at a future date at a fixed
price ("Forward Contracts"). The Portfolio enters into Forward Contracts in an
attempt to hedge against changes in prevailing currency exchange rates. The
Portfolio does not engage in transactions in Forward Contracts for speculation;
it views investments in Forward Contracts as a means of establishing more
definitely the effective return on, or the purchase price of, securities
denominated in foreign currencies that are held or intended to be acquired by
it. Forward Contract transactions include forward sales or purchases of foreign
currencies for the purpose of protecting the U.S. dollar value of securities
held or to be acquired by the Portfolio that are denominated in a foreign
currency or protecting the U.S. dollar equivalent of dividends, interest, or
other payments on those securities.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a Forward Contract to sell that
foreign currency or a proxy-hedge involving a Forward Contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated and which is available on
more advantageous terms. However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and, if N&B Management is incorrect in its
judgment of future exchange rate relationships, the Portfolio could be in a less
advantageous position than if such a hedge or proxy-hedge had not been
established. If the Portfolio uses proxy-hedging, it may experience losses on
both the currency in which it has invested and the currency used for hedging if
the two currencies do not vary with the expected degree of correlation. Because
forward contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid.
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OPTIONS ON FOREIGN CURRENCIES (NEUBERGER & BERMAN LIMITED MATURITY
BOND PORTFOLIO). The Portfolio may write and purchase covered call and put
options on foreign currencies. The Portfolio would engage in such transactions
to protect against declines in the U.S. dollar value of portfolio securities or
increases in the U.S. dollar cost of securities to be acquired, or to protect
the dollar equivalent of dividends, interest, or other payments on those
securities. As with other types of options, however, writing an option on
foreign currency constitutes only a partial hedge, up to the amount of the
premium received. The Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
risks of currency options are similar to the risks of other options, as
discussed herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in the
case of exchange-traded currency options.
REGULATORY LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES, OPTIONS
ON SECURITIES AND FOREIGN CURRENCIES, AND FORWARD CONTRACTS (COLLECTIVELY,
"HEDGING INSTRUMENTS") (NEUBERGER & BERMAN ULTRA SHORT BOND PORTFOLIO AND
NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). To the extent a Portfolio
sells or purchases Futures Contracts and/or writes options thereon or options on
foreign currencies that are traded on an exchange regulated by the CFTC other
than for BONA FIDE hedging purposes (as defined by the CFTC), the aggregate
initial margin and premiums on these positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Portfolio's net assets. In
addition, Neuberger & Berman LIMITED MATURITY Bond Portfolio does not currently
intend to purchase a put option if, as a result, more than 5% of its total
assets would be invested in put options.
COVER FOR HEDGING INSTRUMENTS (NEUBERGER & BERMAN ULTRA SHORT BOND
PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). Each
Portfolio will comply with SEC guidelines regarding "cover" for Hedging
Instruments and, if the guidelines so require, set aside in a segregated account
with its custodian the prescribed amount of cash or appropriate liquid
securities. Securities held in a segregated account cannot be sold while the
Futures, option, or forward strategy covered by those securities is outstanding,
unless they are replaced with other suitable assets. As a result, segregation of
a large percentage of a Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet current obligations. A Portfolio may be unable
promptly to dispose of assets which cover, or are segregated with respect to, an
illiquid Futures, options, or forward position; this inability may result in a
loss to the Portfolio.
GENERAL RISKS OF HEDGING INSTRUMENTS (NEUBERGER & BERMAN ULTRA SHORT
BOND PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). The
primary risks in using Hedging Instruments are (1) imperfect correlation or no
correlation between changes in market value of the securities or currencies held
or to be acquired by a Portfolio and changes in the prices of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments when
desired; (3) the fact that the skills needed to use Hedging Instruments are
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<PAGE>
different from those needed to select a Portfolio's securities; (4) the fact
that, although use of Hedging Instruments for hedging purposes can reduce the
risk of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments; and (5)
the possible inability of a Portfolio to purchase or sell a portfolio security
at a time that would otherwise be favorable for it to do so, or the possible
need for a Portfolio to sell a portfolio security at a disadvantageous time, due
to its need to maintain cover or to segregate securities in connection with its
use of Hedging Instruments. N&B Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of a Portfolio's underlying securities or
currency. N&B Management intends to reduce the risk that a Portfolio will be
unable to close out Hedging Instruments by entering into such transactions only
if N&B Management believes there will be an active and liquid secondary market.
There can be no assurance that a Portfolio's use of Hedging Instruments will be
successful.
A Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if its corresponding Fund is to continue to qualify as a
regulated investment company ("RIC"). See "Additional Tax Information --
Taxation of Portfolios."
INDEXED SECURITIES (NEUBERGER & BERMAN LIMITED MATURITY BOND
PORTFOLIO). The Portfolio may invest in securities whose value is linked to
interest rates, commodities, foreign currencies, indices, or other financial
indicators ("indexed securities"). Most indexed securities are short- to
intermediate-term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified underlying
instruments. The value of indexed securities may increase or decrease if the
underlying instrument appreciates, and they may have return characteristics
similar to direct investment in the underlying instrument or to one or more
options thereon. An indexed security may be more volatile than the underlying
instrument itself.
ZERO COUPON SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in
zero coupon securities, which are debt obligations that do not entitle the
holder to any periodic payment of interest prior to maturity or that specify a
future date when the securities begin to pay current interest. Zero coupon
securities are issued and traded at a discount from their face amount or par
value. This discount varies depending on prevailing interest rates, the time
remaining until cash payments begin, the liquidity of the security, and the
perceived credit quality of the issuer.
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The discount on zero coupon securities ("original issue discount")
must be taken into income ratably by each such Portfolio prior to the receipt of
any actual payments. Because its corresponding Fund must distribute
substantially all of its net income (including its share of the Portfolio's
accrued original issue discount) to its shareholders each year for income and
excise tax purposes, each such Portfolio may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash, or may be
required to borrow, to satisfy its corresponding Fund's distribution
requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically. Zero
coupon securities are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having similar maturities and
credit quality.
MUNICIPAL OBLIGATIONS (NEUBERGER & BERMAN CASH RESERVES PORTFOLIO,
NEUBERGER & BERMAN ULTRA SHORT BOND PORTFOLIO, AND NEUBERGER & BERMAN LIMITED
MATURITY BOND PORTFOLIO). Neuberger & Berman LIMITED MATURITY Bond Portfolio may
invest up to 5% of its net assets in municipal obligations, which are securities
issued by or on behalf of states (as used herein, including the District of
Columbia), territories, and possessions of the United States and their political
subdivisions, agencies, and instrumentalities. Neuberger & Berman CASH RESERVES
Portfolio may invest in municipal obligations that otherwise meet its criteria
for quality and maturity; Neuberger & Berman ULTRA SHORT Bond Portfolio may also
invest in municipal obligations. Municipal obligations include "general
obligation" securities, which are backed by the full taxing power of a
municipality, and "revenue" securities, which are backed only by the income from
a specific project, facility, or tax. Municipal obligations also include
industrial development and private activity bonds which are issued by or on
behalf of public authorities, but are not backed by the credit of any
governmental or public authority. "Anticipation notes" are issued by
municipalities in expectation of future proceeds from the issuance of bonds or
from taxes or other revenues, and are payable from those bond proceeds, taxes,
or revenues. Municipal obligations also include tax-exempt commercial paper,
which is issued by municipalities to help finance short-term capital or
operating requirements.
The value of municipal obligations is dependent on the continuing
payment of interest and principal when due by the issuers of the municipal
obligations (or, in the case of industrial development bonds, the revenues
generated by the facility financed by the bonds or, in certain other instances,
the provider of the credit facility backing the bonds). As with other fixed
income securities, an increase in interest rates generally will reduce the value
of a Portfolio's investments in municipal obligations, whereas a decline in
interest rates generally will increase that value. Efforts are underway that may
result in a restructuring of the federal income tax system. Any of these factors
could affect the value of municipal securities.
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Risks Of Fixed Income Securities
- --------------------------------
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Changes in economic conditions or developments regarding the individual
issuer are more likely to cause price volatility and weaken the capacity of the
issuer of such securities to make principal and interest payments than is the
case for higher-grade debt securities. An economic downturn affecting the issuer
may result in an increased incidence of default. The market for lower-rated
securities may be thinner and less active than for higher-rated securities.
Pricing of thinly traded securities requires greater judgment than pricing of
securities for which market transactions are regularly reported.
Subsequent to its purchase by a Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by that Portfolio. In such a case, with
respect to the non-money market Portfolios, N&B Management will engage in an
orderly disposition of the downgraded securities to the extent necessary to
ensure that the Portfolio's holdings of securities that are below investment
grade will not exceed 5% of its net assets (10% in the case of Neuberger &
Berman LIMITED MATURITY Bond Portfolio). With respect to the money market
Portfolios, N&B Management will consider the need to dispose of such securities
in accordance with the requirements of Rule 2a-7 under the 1940 Act.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and
are not intended to indicate future performance. The yield and total return of
each Fund will vary. The share prices of ULTRA SHORT and LIMITED MATURITY will
vary, and an investment in either of these Funds, when redeemed, may be worth
more or less than an investor's original cost.
Yield Calculations
- ------------------
GOVERNMENT MONEY AND CASH RESERVES. Each of these Funds may advertise
its "current yield" and "effective yield" in the financial press and other
publications. A Fund's CURRENT YIELD is based on the return for a recent
seven-day period and is computed by determining the net change (excluding
capital changes) in the value of a hypothetical account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period. The result is a
"base period return," which is then annualized -- that is, the amount of income
generated during the seven-day period is assumed to be generated each week over
a 52-week period -- and shown as an annual percentage of the investment.
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The EFFECTIVE YIELD of these Funds is calculated similarly, but the
base period return is assumed to be reinvested. The assumed reinvestment is
calculated by adding 1 to the base period return, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result, according to
the following formula:
Effective Yield = [(Base Period Return + 1)[SUPERSCRIPT]365/7] - 1.
For the seven calendar days ended October 31, 1996, the current yields
of GOVERNMENT MONEY and CASH RESERVES were 4.62% and 4.84%, respectively. For
the same period, the effective yields were 4.73% and 4.96%, respectively.
ULTRA SHORT AND LIMITED MATURITY. Each of these Funds may advertise
its "yield" based on a 30-day (or one month) period. This YIELD is computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period. The result then
is annualized and shown as an annual percentage of the investment.
The annualized yields for LIMITED MATURITY and ULTRA SHORT for the
30-day period ended October 31, 1996, were 6.24% and 5.45%, respectively.
Tax Equivalent Yield - State And Local Taxes
- --------------------------------------------
GOVERNMENT MONEY. Substantially all of the dividends paid by
GOVERNMENT MONEY represent income received on direct obligations of the U.S.
Government and, as a result, are not subject to income tax in most states and
localities. From time to time, this Fund may advertise a "tax equivalent yield"
for one or more of those states or localities that reflects the taxable yield
that an investor subject to the highest marginal rate of state or local income
tax would have had to receive in order to realize the same level of after-tax
yield produced by an investment in the Fund. TAX EQUIVALENT YIELD is calculated
according to the following formula:
Tax Equivalent Yield = Y1 + Y2
1-MR
where Y1 equals that portion of the Fund's current or effective yield that is
not subject to state or local income tax, Y2 equals that portion of the Fund's
current or effective yield that is subject to that tax, and MR equals the
highest marginal tax rate of the state or locality for which the tax equivalent
yield is being calculated.
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The calculation of tax equivalent yield can be illustrated by the
following example. If the current yield for a 7-day period was 5%, and during
that period 100% of the income was attributable to interest on direct
obligations of the U.S. Government and, therefore, was not subject to income
taxation in most states and localities, a taxpayer residing in New York (and
subject to that state's highest marginal 1997 tax rate of 7.35%) would have to
have received a taxable current yield of 5.40% in order to equal the 5%
after-tax yield. Moreover, if that taxpayer also were subject to income taxation
by New York City at a marginal 1997 rate of 4.46%, the taxpayer would have to
have received a taxable current yield of 5.67% to equal the 5% after-tax yield.
The use of a 5% yield in this example is for illustrative purposes
only and is not indicative of the Fund's future performance. Of course, all
dividends paid by GOVERNMENT MONEY are subject to federal income taxation at
applicable rates.
TOTAL RETURN COMPUTATIONS
LIMITED MATURITY and ULTRA SHORT may advertise certain total return
information. An average annual compounded rate of return ("T") may be computed
by using the redeemable value at the end of a specified period ("ERV") of a
hypothetical initial investment of $1,000 ("P") over a period of time ("n")
according to the formula:
P(1+T)[SUPERSCRIPT]n = ERV
Average annual total return smooths out year-to-year variations in performance
and, in that respect, differs from actual year-to-year results.
For the one-, five-, and ten-year periods ended October 31, 1996, the
average annual total returns for LIMITED MATURITY and its predecessor were
+5.44%, +5.72%, and +6.82%, respectively. If an investor had invested $10,000 in
that predecessor's shares on June 9, 1986, and had reinvested all capital gain
distributions and income dividends, the NAV of that investor's holdings would
have been $20,173 on October 31, 1996.
For the one- and five-year periods ended October 31, 1996, and for the
period from November 7, 1986 (commencement of operations) through October 31,
1996, the average annual total returns for ULTRA SHORT and its predecessor were
+5.23%, +4.27%, and +5.83%, respectively. If an investor had invested $10,000 in
that predecessor's shares on November 7, 1986, and had reinvested all capital
gain distributions and income dividends, the NAV of that investor's holdings
would have been $17,611 on October 31, 1996.
N&B Management reimbursed the Funds and their predecessors for certain
expenses during the periods mentioned above, which has the effect of increasing
yield and total return. Of course, past performance cannot guarantee future
results.
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COMPARATIVE INFORMATION
From time to time each Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance
of mutual funds, such as Lipper Analytical Services, Inc., C.D.A.
Investment Technologies, Inc., Wiesenberger Investment Companies
Service, IBC/Donoghue's Money Market Fund Report, Investment Company
Data Inc., Morningstar Inc., Micropal Incorporated and quarterly
mutual fund rankings by Money, Fortune, Forbes, Business Week,
Personal Investor, and U.S. News & World Report magazines, The Wall
Street Journal, The New York Times, Kiplinger's Personal Finance, and
Barron's Newspaper, or
(2) recognized bond, stock, and other indices such as the Shearson Lehman
Bond Index, the Standard & Poor's "500" Composite Stock Price Index
("S&P 500 Index"), Dow Jones Industrial Average ("DJIA"), S&P/BARRA
Index, Russell Index, and various other domestic, international, and
global indices and changes in the U.S. Department of Labor Consumer
Price Index. The S&P 500 Index is a broad index of common stock
prices, while the DJIA represents a narrower segment of industrial
companies. Each assumes reinvestment of distributions and is
calculated without regard to tax consequences or the costs of
investing. Each Portfolio may invest in different types of securities
from those included in some of the above indices.
Each Fund's performance also may be compared from time to time with
the following specific indices and other measures of performance:
GOVERNMENT MONEY'S and CASH RESERVES'S performance may be compared,
respectively, with IBC/Donoghue's Government Money Market Funds average and
Taxable General Purpose Money Market Funds average.
ULTRA SHORT'S performance may be compared with the Merrill Lynch 2-year
Treasury Index and the Salomon Brothers 6-month and 1-year Treasury Bill
Indices, as well as the performance of Treasury Securities and the Lipper
Short Investment Grade Debt Funds category.
LIMITED MATURITY'S performance may be compared with the Merrill Lynch 1-3
year Treasury Index and the Lehman Brothers Intermediate
Government/Corporate Bond Index, as well as the performance of Treasury
Securities, corporate bonds, and the Lipper Short Investment Grade Debt
Funds category.
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In addition, each Fund's performance may be compared at times with
that of various bank instruments (including bank money market accounts and CDs
of varying maturities) as reported in publications such as The Bank Rate
Monitor. Any such comparisons may be useful to investors who wish to compare a
Fund's past performance with that of certain of its competitors. Of course, past
performance is not a guarantee of future results. Unlike an investment in a
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.
Evaluations of the Funds' performance, their yield/ total returns and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
Other Performance Information
- -----------------------------
From time to time, information about a Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for its corresponding Fund. This information may include the
Portfolio's portfolio diversification by asset type. Information used in
Advertisements may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents.
Information (including charts and illustrations) showing the effects
of compounding interest may be included in Advertisements from time to time.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded at different intervals, such as
annually, semi-annually, quarterly, monthly, or daily. For example, $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year (an
increase of $90) and $1,188 at the end of the second year (an increase of $98).
The extra $8 that was earned on the $90 interest from the first year is the
compound interest. One thousand dollars compounded annually at 9% will grow to
$2,367 at the end of ten years and $5,604 at the end of twenty years. Other
examples of compounding are as follows: at 7% and 12% annually, $1,000 will grow
to $1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are for
illustrative purposes only and are not indicative of any Fund's performance.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information (including charts and illustrations) showing the total
return performance for government funds, 6-month CDs and money market funds may
be included in Advertisements from time to time.
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Information regarding the effects of automatic investing and
systematic withdrawal plans, investing at market highs and/or lows, and
investing early versus late for retirement plans also may be included in
Advertisements, if appropriate.
From time to time the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Funds' Advertisements. This
philosophy is described in further detail in "The Art of Investment: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
CERTAIN RISK CONSIDERATIONS
A Fund's investment in its corresponding Portfolio may be affected by
the actions of other large investors in the Portfolio, if any. For example, if a
large investor in a Portfolio (other than a 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.
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that any Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman.
Positions
Name, Address Held With
and Age(1) the Trusts Principal Occupation(s)(2)
- ------------- ---------- --------------------------
John Cannon (67) Trustee of President, AMA Investment Advisers,
CDC Associates, Inc. each Trust Inc. (registered investment adviser)
620 Sentry Parkway (1976 - 1991); Senior Vice President
Suite 220 AMA Investment Advisers, Inc. (1991 -
Blue Bell, PA 19422 1993); President of AMA Family Funds
(investment companies) (1976 - 1991);
Chairman and Chief Investment Officer
of CDC Associates, Inc. (registered
investment adviser) (1993 - present).
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Stanley Egener* (62) Chairman of Principal of Neuberger & Berman;
the Board, President and Director of N&B
Chief Management; Chairman of the Board,
Executive Chief Executive Officer and Trustee
Officer, and of eight other mutual funds for which
Trustee of N&B Management acts as investment
each Trust manager or administrator.
Theodore P. Giuliano* (44) President and Principal of Neuberger & Berman; Vice
Trustee of President and Director of N&B
each Trust Management; President and Trustee of
one other mutual fund for which N&B
Management acts as administrator.
Barry Hirsch (63) Trustee of Senior Vice President, Secretary, and
Loews Corporation each Trust General Counsel of Loews Corporation
667 Madison Avenue (diversified financial corporation).
7th Floor
New York, NY 10021
Robert A. Kavesh (69) Trustee of Professor of Finance and Economics at
110 Bleecker Street each Trust Stern School of Business, New York
Apt. 24B University; Director of Del
New York, NY 10012 Laboratories, Inc. and Greater New
York Mutual Insurance Co.
William E. Rulon (64) Trustee of Retired. Senior Vice President of
Foodmaker, Inc. each Trust Foodmaker, Inc. (operator and
1761 Hotel Circle South franchiser of restaurants) until
San Diego, CA 92108 January 1997; Secretary of Foodmaker,
Inc. until July 1996.
Candace L. Straight (49) Trustee of Private investor and consultant
518 E. Passaic Avenue each Trust specializing in the insurance
Bloomfield, NJ 07003 industry; Principal of Head &
Company, LLC (limited liability
company providing investment banking
and consulting services to the
insurance industry) until March 1996;
President of Integon Corporation,
(marketer of life insurance,
annuities, and property and casualty
insurance), 1990-1992; Director of
Drake Holdings (U.K. motor
insurer)until June 1996.
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Daniel J. Sullivan (57) Vice Senior Vice President of N&B
President of Management since 1992; prior thereto,
each Trust Vice President of N&B Management;
Vice President of eight other mutual
funds for which N&B Management acts
as investment manager or
administrator.
Michael J. Weiner (49) Vice Senior Vice President of N&B
President and Management since 1992; Treasurer of
Principal N&B Management from 1992 to 1996;
Financial prior thereto, Vice President and
Officer of Treasurer of N&B Management and
each Trust Treasurer of certain mutual funds for
which N&B Management acted as
investment adviser; Vice President
and Principal Financial Officer of
eight other mutual funds for which
N&B Management acts as investment
manager or administrator.
Claudia A. Brandon (40) Secretary of Vice President of N&B Management;
each Trust Secretary of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
Richard Russell (50) Treasurer Vice President of N&B Management
and since 1993; prior thereto, Assistant
Principal Vice President of N&B Management;
Accounting Treasurer and Principal Accounting
Officer of Officer of eight other mutual funds
each Trust for which N&B Management acts as
investment manager or administrator.
Stacy Cooper-Shugrue (33) Assistant Assistant Vice President of N&B
Secretary of Management since 1993; prior thereto,
each Trust employee of N&B Management; Assistant
Secretary of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
C. Carl Randolph (59) Assistant Principal of Neuberger & Berman since
Secretary of 1992; prior thereto, employee of
each Trust Neuberger & Berman; Assistant
Secretary of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
Barbara DiGiorgio (38) Assistant Assistant Vice President of of N&B
Treasurer Management since 1993; prior thereto,
each Trust employee of N&B Management; Assistant
Treasurer of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
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Celeste Wischerth (36) Assistant Assistant Vice President of of N&B
Treasurer Management since 1994; prior thereto,
each Trust employee of N&B Management; Assistant
Treasurer of eight other mutual funds
for which N&B Management acts as
investment manager or administrator.
- --------------------
(1) Unless otherwise indicated, the business address of each listed person
is 605 Third Avenue, New York, NY 10158.
(2) Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within
the meaning of the 1940 Act. Messrs. Egener and Giuliano are interested persons
by virtue of the fact that they are officers and directors of N&B Management and
principals of Neuberger & Berman.
The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (a) engaged in bad faith, willful misfeasance, gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices, or (b) did not act in good faith in the reasonable belief that their
action was in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined (by a court
or other body approving the settlement or other disposition, or by a majority of
disinterested trustees based upon a review of readily available facts, or in a
written opinion of independent counsel) that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
For the fiscal year ended October 31, 1996, each Fund and Portfolio
paid and accrued the following fees and expenses to Fund and Portfolio Trustees
who were not affiliated with N&B Management or Neuberger & Berman: Neuberger &
Berman GOVERNMENT MONEY Fund and Portfolio - $43,965; Neuberger & Berman CASH
RESERVES and CASH RESERVES Portfolio - $68,889; Neuberger & Berman ULTRA SHORT
Bond Fund and Portfolio - $21,175; and Neuberger & Berman LIMITED MATURITY Bond
and Portfolio - $45,557.
The following table sets forth information concerning the compensation
of the trustees and officers of the Trust. None of the Neuberger & Berman
Funds(REGISTERED TRADEMARK] has any retirement plan for its trustees or
officers.
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TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/96
------------------------------
Aggregate Total Compensation from
Compensation Trusts in the Neuberger
Name and Position from the Berman Fund Complex
with the Trust Trust Paid To Trustees
- ------------------ ------------- --------------------------
John Cannon $14,758 $31,000
Trustee (2 other investment
companies)
Charles DeCarlo $17,222 $35,000
Trustee (retired 12/96) (2 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive Officer, companies)
and Trustee
Theodore P. Giuliano $ 0 $ 0
President and Trustee (2 other investment
companies)
Barry Hirsch $17,468 $35,500
Trustee (2 other investment
companies)
Robert A. Kavesh $14,758 $31,000
Trustee (2 other investment
companies)
Harold R. Logan $15,005 $30,500
Trustee (retired 12/96) (2 other investment
companies)
William E. Rulon $15,005 $30,500
Trustee (2 other investment
companies)
Candace L. Straight $14,758 $30,500
Trustee (2 other investment
companies)
At January 14, 1997, the trustees and officers of the Trust and
Managers Trust, as a group, owned beneficially or of record less than 1% of the
outstanding shares of each Fund.
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INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager And Administrator
- ------------------------------------
Because all of the Funds' net investable assets are invested in their
corresponding Portfolios, the Funds do not need an investment manager. N&B
Management serves as the Portfolios' investment manager pursuant to a management
agreement with Managers Trust, on behalf of the Portfolios, dated as of July 2,
1993 ("Management Agreement"). The Management Agreement was approved by the
holders of the interests in all the Portfolios on July 2, 1993.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolios in its
discretion and will continuously develop an investment program for the
Portfolios' assets. The Management Agreement permits N&B Management to effect
securities transactions on behalf of each Portfolio through associated persons
of N&B Management. The Management Agreement also specifically permits N&B
Management to compensate, through higher commissions, brokers and dealers who
provide investment research and analysis to the Portfolios, although N&B
Management has no current plans to pay a material amount of such compensation.
N&B Management provides to each Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
officers and directors of N&B Management (who also are principals of Neuberger &
Berman) presently serve as trustees and officers of the Trusts. See "Trustees
and Officers." Each Portfolio pays N&B Management a management fee based on the
Portfolio's average daily net assets, as described in the Prospectus.
N&B Management provides similar facilities, services, and personnel to
each Fund pursuant to an administration agreement with the Trust, dated May 1,
1995 ("Administration Agreement"). For such administrative services, each Fund
pays N&B Management a fee based on the Fund's average daily net assets, as
described in the Prospectus.
Under the Administration Agreement, N&B Management also provides to
each Fund and its shareholders certain shareholder, shareholder-related, and
other services that are not furnished by the Fund's shareholder servicing agent.
N&B Management provides the direct shareholder services specified in the
Administration Agreement, assists the shareholder servicing agent in the
development and implementation of specified programs and systems to enhance
overall shareholder servicing capabilities, solicits and gathers shareholder
proxies, performs services connected with the qualification of each Fund's
shares for sale in various states, and furnishes other services the parties
agree from time to time should be provided under the Administration Agreement.
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<PAGE>
From time to time, N&B Management or a Fund may enter into
arrangements with registered broker-dealers or other third parties pursuant to
which it pays the broker-dealer or third party a per account fee or a fee based
on a percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.
Each Fund accrued management and administration fees of the following
amounts (before any reimbursement of the Funds, described below) for the fiscal
years ended October 31, 1996, 1995, and 1994:
1996 1995 1994
---- ---- ----
Government Money $1,476,738 $1,521,937 $1,105,665
Cash Reserves $2,425,550 $1,738,424 $1,448,365
Ultra Short $ 491,399 $ 459,038 $ 532,340
Limited Maturity $1,480,085 $1,522,574 $1,655,333
As noted in the Prospectus under "Management and Administration --
Expenses," N&B Management has voluntarily undertaken to reimburse each Fund
other than GOVERNMENT MONEY for its Operating Expenses (including fees under the
Administration Agreement) and the Fund's pro rata share of the corresponding
Portfolio's Operating Expenses (including fees under the Management Agreement)
that exceed, in the aggregate, 0.65% per annum (0.70% per annum for LIMITED
MATURITY) of the Fund's average daily net assets. Operating Expenses exclude
interest, taxes, brokerage commissions, and extraordinary expenses. N&B
Management can terminate each undertaking by giving the Fund at least 60 days'
prior written notice. For the fiscal years ended October 31, 1996, 1995, and
1994, N&B Management reimbursed the Funds the following amounts of expenses: (1)
CASH RESERVES $90,855, $109,113, and $171,012, respectively, (2) ULTRA SHORT
$177,129, $196,865, and $222,161, respectively, and (3) LIMITED MATURITY
$16,575, $32,042, and $77,866, respectively.
Prior to May 1, 1995, the shareholder services described above were
provided pursuant to a separate agreement between the Trust and N&B Management.
As compensation for these services, each Fund paid N&B Management a monthly fee
calculated at the annual rate of 0.02% of the average daily net assets of the
Fund. Before February 1, 1994, the monthly fee under the shareholder service
agreement then in effect was calculated at an annual rate of $6.00 per
shareholder account. For these services, each Fund paid and accrued the
following amounts for the period from November 1, 1994 to April 30, 1995 and the
fiscal year ended October 31, 1994:
November 1, 1994
To April 30, 1995 1994
----------------- ----
GOVERNMENT MONEY $25,750 $39,595
CASH RESERVES $31,746 $55,583
ULTRA SHORT $ 9,038 $21,515
LIMITED MATURITY $29,447 $55,399
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<PAGE>
The Management Agreement continues with respect to each Portfolio for
a period of two years after the date the Portfolio became subject thereto. The
Management Agreement is renewable thereafter from year to year with respect to
each Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in that Portfolio. The Administration
Agreement continues with respect to each Fund for a period of two years after
the date the Fund became subject thereto. The Administration Agreement is
renewable from year to year with respect to a Fund, so long as its continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of N&B Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in that Fund.
The Management Agreement is terminable, without penalty, with respect
to a Portfolio on 60 days' written notice either by Managers Trust or by N&B
Management. The Administration Agreement is terminable, without penalty, with
respect to a Fund on 60 days' written notice either by N&B Management or by the
Trust. Each Agreement terminates automatically if it is assigned.
Sub-Adviser
- -----------
N&B Management retains Neuberger & Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to each Portfolio pursuant to a
sub-advisory agreement dated July 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolios on July 2, 1993.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger & Berman. This staff consists of approximately
fourteen investment analysts, each of whom specializes in studying one or more
industries, under the supervision of the Director of Research, who is also
available for consultation with N&B Management. The Sub-Advisory Agreement
provides that N&B Management will pay for the services rendered by Neuberger &
Berman based on the direct and indirect costs to Neuberger & Berman in
connection with those services. Neuberger & Berman also serves as a sub-adviser
for all of the other mutual funds managed by N&B Management.
39
<PAGE>
The Sub-Advisory Agreement continues with respect to each Portfolio
for a period of two years after the date the Portfolio became subject thereto,
and is renewable thereafter from year to year, subject to approval of its
continuance in the same manner as the Management Agreement. The Sub-Advisory
Agreement is subject to termination, without penalty, with respect to each
Portfolio by the Portfolio Trustees or a 1940 Act majority vote of the
outstanding interests in that Portfolio, by N&B Management, or by Neuberger &
Berman on not less than 30 nor more than 60 days' written notice. The
Sub-Advisory Agreement also terminates automatically with respect to each
Portfolio if it is assigned or if the Management Agreement terminates with
respect to that Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
Investment Companies Managed
- ----------------------------
N&B Management currently serves as investment manager of the following
investment companies. As of December 31, 1996, these companies, along with one
other investment company advised by Neuberger & Berman, had aggregate net assets
of approximately $15.2 billion, as shown in the following list:
Approximate
Net Assets at
Name December 31, 1996
---- -----------------
Neuberger & Berman Cash Reserves Portfolio......................$ 499,989,187
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio...................$ 402,843,399
(investment portfolio for Neuberger & Berman Government Money
Fund)
Neuberger & Berman Limited Maturity Bond Portfolio..............$ 272,342,178
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond Portfolio....................$ 89,819,435
(investment portfolio for Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short Bond Trust)
40
<PAGE>
Neuberger & Berman Municipal Money Portfolio....................$ 135,494,410
(investment portfolio for Neuberger & Berman Municipal Money
Fund)
Neuberger & Berman Municipal Securities Portfolio................$ 38,634,808
(investment portfolio for Neuberger & Berman Municipal
Securities Trust)
Neuberger & Berman New York Insured Intermediate
Portfolio .....................................................$ 9,877,137
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Focus Portfolio............................$ 1,260,252,029
(investment portfolio for Neuberger & Berman Focus Fund,
Neuberger & Berman Focus Trust, and Neuberger & Berman Focus
Assets)
Neuberger & Berman Genesis Portfolio............................$ 398,343,946
(investment portfolio for Neuberger & Berman Genesis Fund,
Neuberger & Berman Genesis Trust, and Neuberger & Berman
Genesis Assets)
Neuberger & Berman Guardian Portfolio....................... $ 7,071,702,448
(investment portfolio for Neuberger & Berman Guardian Fund,
Neuberger & Berman Guardian Trust, and Neuberger & Berman
Guardian Assets)
Neuberger & Berman International Portfolio.................$ 73,377,704
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio........................$ 574,606,109
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and Neuberger & Berman
Manhattan Assets)
Neuberger & Berman Partners Portfolio.........................$ 2,405,865,742
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust, and Neuberger & Berman
Partners Assets)
Neuberger & Berman Socially Responsive
Portfolio .................................................$ 188,366,394
(investment portfolio for Neuberger & Berman Socially
Responsive Fund and Neuberger & Berman NYCDC Socially
Responsive Trust)
Advisers Managers Trust (six series)..........................$ 1,695,378,078
In addition, Neuberger & Berman serves as investment adviser to one
investment company, Plan Investment Fund with assets of $70,276,858 at December
31, 1996.
41
<PAGE>
The investment decisions concerning the Portfolios and the other
mutual funds managed by N&B Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolios. Even where the investment objectives are similar, however, the
methods used by the Other N&B Funds and the Portfolios to achieve their
objectives may differ. The investment results achieved by all of the funds
managed by N&B Management have varied from one another in the past and are
likely to vary in the future.
There may be occasions when a Portfolio and one or more of the Other
N&B Funds or other accounts managed by Neuberger & Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
Management And Control Of N&B Management
- -----------------------------------------
The directors and officers of N&B Management, all of whom have offices
at the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Robert Conti, Treasurer; William Cunningham,
Vice President; Clara Del Villar, Vice President; Mark R. Goldstein, Vice
President; Michael Lamberti, Vice President; Josephine P. Mahaney, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; Janet W. Prindle, Vice President; Felix Rovelli, Vice President;
Richard Russell, Vice President; Kent C. Simons, Vice President; Frederick B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice President of
Marketing; Robert Conti, Treasurer; Stacy Cooper-Shugrue, Assistant Vice
President; Barbara DiGiorgio, Assistant Vice President; Roberta D'Orio,
Assistant Vice President; Joseph G. Galli, Assistant Vice President; Robert I.
Gendelman, Assistant Vice President; Leslie Holliday-Soto, Assistant Vice
President; Jody L. Irwin, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Kevin L.
Risen, Assistant Vice President; Susan Switzer, Assistant Vice President;
Celeste Wischerth, Assistant Vice President; KimMarie Zamot, Assistant Vice
President; and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener,
Gendelman, Giuliano, Lainoff, Zicklin, Goldstein, Kassen, Risen, Simons and
Sundman and Mmes. Prindle and Vale are principals of Neuberger & Berman.
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<PAGE>
Mr. Giuliano and Mr. Egener are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-Shugrue, DiGiorgio and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of each Fund's shares on a no-load basis. In connection with
the sale of its shares, each Fund has authorized the Distributor to give only
the information, and to make only the statements and representations, contained
in the Prospectus and this SAI or that properly may be included in sales
literature and advertisements in accordance with the 1933 Act, the 1940 Act, and
applicable rules of self-regulatory organizations. Sales may be made only by the
Prospectus, which may be delivered personally, through the mails, or by
electronic means. The Distributor is the Funds' "principal underwriter" within
the meaning of the 1940 Act and, as such, acts as agent in arranging for the
sale of each Fund's shares without sales commission or other compensation and
bears all advertising and promotion expenses incurred in the sale of the Funds'
shares.
The Distributor or one of its affiliates may, from time to time, deem
it desirable to offer to shareholders of the Funds, through use of their
shareholder lists, the shares of other mutual funds for which the Distributor
acts as distributor or other products or services. Any such use of the Funds'
shareholder lists, however, will be made subject to terms and conditions, if
any, approved by a majority of the Independent Fund Trustees. These lists will
not be used to offer to the Funds' shareholders any investment products or
services other than those managed or distributed by N&B Management or Neuberger
& Berman.
The Trust, on behalf of each Fund, and the Distributor are parties to
a Distribution Agreement that continues until July 2, 1997. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
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ADDITIONAL PURCHASE INFORMATION
Automatic Investing And Dollar Cost Averaging
- ---------------------------------------------
Shareholders may arrange to have a fixed amount automatically invested
in shares of ULTRA SHORT or LIMITED MATURITY each month. To do so, a shareholder
must complete an application, available from the Distributor, electing to have
automatic investments funded either through (1) redemptions from his or her
account in a money market fund for which N&B Management serves as investment
manager or (2) withdrawals from the shareholder's checking account. In either
case, the minimum monthly investment is $100. A shareholder who elects to
participate in automatic investing through his or her checking account must
include a voided check with the completed application. A completed application
should be sent to Neuberger & Berman Management Incorporated, 605 Third Avenue,
2nd Floor, New York, NY 10158-0180.
Automatic investing enables a shareholder in ULTRA SHORT or LIMITED
MATURITY to take advantage of "dollar cost averaging." As a result of dollar
cost averaging, a shareholder's average cost of shares in those Funds generally
would be lower than if the shareholder purchased a fixed number of shares at the
same pre-set intervals. Additional information on dollar cost averaging may be
obtained from the Distributor.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Shareholder Services -- Exchange Privilege," shareholders may redeem at least
$1,000 worth of a Fund's shares and invest the proceeds in shares of one or more
of the other Funds or the Equity or Municipal Funds that are briefly described
below, provided that the minimum investment requirements of the other fund(s)
are met.
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<PAGE>
EQUITY FUNDS
- ------------
Neuberger & Berman Seeks long-term capital appreciation through
Focus Fund investments principally in common stocks selected
from 13 multi-industry economic sectors. The
corresponding portfolio uses a value-oriented
approach to select individual securities and then
focuses its investments in the sectors in which the
undervalued stocks are clustered. Through this
approach, 90% or more of the portfolio's investments
are normally made in not more than six sectors.
Neuberger & Berman Seeks capital appreciation through investments
Genesis Fund primarily in common stocks of companies with small
market capitalizations (i.e., up to $1.5 billion) at
the time of the Portfolio's investment. The
corresponding portfolio uses a value-oriented
approach to the selection of individual securities.
Neuberger & Berman Seeks capital appreciation through investments
Guardian Fund primarily in common stocks of long-established,
high-quality companies that N&B Management believes
are well-managed. The corresponding portfolio uses a
value-oriented approach to the selection of
individual securities. Current income is a secondary
objective. The fund (or its predecessor) has paid
its shareholders an income dividend every quarter,
and a capital gain distribution every year, since
its inception in 1950, although there can be no
assurance that it will be able to continue to do so.
Neuberger & Berman Seeks long-term capital appreciation through
International Fund investmentsprimarily in a diversified portfolio of
equity securities of foreign issuers. Assets will be
allocated among economically mature countries and
emerging industrialized countries.
Neuberger & Berman Seeks capital appreciation, without regard to
Manhattan Fund income, through investments generally in securities
of small-, medium- and large-capitalization
companies that N&B Management believes have the
maximum potential for increasing total NAV. The
corresponding portfolio's "growth at a reasonable
price" investment approach involves greater risks
and share price volatility than programs that invest
in securities thought to be undervalued.
Neuberger & Berman Seeks capital growth through an investment approach
Partners Fund that is designed to increase capital with reasonable
risk. Its investment program seeks securities
believed to be undervalued based on strong
fundamentals such as a low price-to-earnings ratio,
consistent cash flow, and the company's track record
through all parts of the market cycle. The
corresponding portfolio uses the value-oriented
investment approach to the selection of individual
securities.
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<PAGE>
Neuberger & Berman Seeks long-term capital appreciation through
Socially Responsive Fund investments primarily in securities of companies
that meet both financial and social criteria.
MUNICIPAL FUNDS
- ---------------
Neuberger & Berman A money market fund seeking the maximum current
Municipal Money Fund income exempt from federal income tax, consistent
with safety and liquidity. The corresponding
Portfolio invests in high quality, short-term
municipal securities. It seeks to maintain a
constant purchase and redemption price of $1.00.
Neuberger & Berman Seeks high current tax-exempt income with low risk
Municipal Securities to principal, limited price fluctuation, and
Trust liquidity; and secondarily, total return. The
corresponding portfolio invests in investment grade
municipal securities. Maximum dollar-weighted
average duration of 10 years.
Neuberger & Berman New Seeks a high level of current income exempt from
York Insured federal income tax and New York State and New York
Intermediate fund City personal income taxes, consistent with
preservation of capital. Maximum dollar-weighted
average duration of 10 years.
Any Fund described herein, and any of the Equity or Municipal Funds,
may terminate or modify its exchange privilege in the future.
Fund shareholders who are considering exchanging shares into any of
the Equity or Municipal Funds should note that (1) like the Funds, the Municipal
Funds are series of the Trust, (2) the Equity Funds are series of a Delaware
business trust (named "Neuberger & Berman Equity Funds") that is registered with
the SEC as an open-end management investment company, (3) each of the Equity and
Municipal Funds invests all of its net investable assets in a corresponding
portfolio that has an investment objective, policies, and limitations identical
to those of the fund.
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<PAGE>
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. The Municipal Funds share a prospectus with the Funds, while the
Equity Funds share a separate prospectus. An exchange is treated as a sale for
federal income tax purposes, and, depending on the circumstances, a short- or
long-term capital gain or loss may be realized.
There can be no assurance that CASH RESERVES, GOVERNMENT MONEY, or
Neuberger & Berman Municipal Money Fund, each of which is a money market fund
that seeks to maintain a constant purchase and redemption share price of $1.00,
will be able to maintain that price. An investment in any of the
above-referenced funds, as in any other mutual fund, is neither insured nor
guaranteed by the U.S. Government.
ADDITIONAL REDEMPTION INFORMATION
Suspension Of Redemptions
- -------------------------
The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the New York Stock Exchange ("NYSE") is
closed (other than weekend and holiday closings), (2) when trading on the NYSE
is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for its corresponding Portfolio to dispose of securities
it owns or fairly to determine the value of its net assets, or (4) for such
other period as the SEC may by order permit for the protection of the Fund's
shareholders. Applicable SEC rules and regulations shall govern whether the
conditions prescribed in (2) or (3) exist. If the right of redemption is
suspended, shareholders may withdraw their offers of redemption, or they will
receive payment at the NAV per share in effect at the close of business on the
first day the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
ULTRA SHORT and LIMITED MATURITY reserve the right, under certain
conditions, to honor any request for redemption (or a combination of requests
from the same shareholder in any 90-day period) exceeding $250,000 or 1% of the
net assets of the Fund, whichever is less, by making payment in whole or in part
in securities valued as described under "Share Prices and Net Asset Value" in
the Prospectus. GOVERNMENT MONEY and CASH RESERVES also reserve the right, under
certain conditions, to honor any request for redemption by making payment in
whole or in part in securities. If payment is made in securities, a shareholder
generally will incur brokerage expenses or other transaction costs in converting
those securities into cash and will be subject to fluctuation in the market
prices of those securities until they are sold. The Funds do not redeem in kind
under normal circumstances, but would do so when the Fund Trustees determined
that it was in the best interests of a Fund's shareholders as a whole.
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DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders amounts equal to
substantially all of its share of any net investment income (after deducting
expenses incurred directly by the Fund), any net realized capital gains (both
long-term and short-term), and any net realized gains from foreign currency
transactions earned or realized by its corresponding Portfolio. A Portfolio's
net investment income consists of all income accrued on portfolio assets less
accrued expenses but does not include net realized or unrealized capital and
foreign currency gains and losses. Net investment income and net gains and
losses are reflected in a Portfolio's NAV (and, hence, its corresponding Fund's
NAV) until they are distributed. GOVERNMENT MONEY and CASH RESERVES calculate
their net investment income and share price as of noon (Eastern time) on each
Business Day; the other Funds calculate their net investment income and share
price as of the close of regular trading on the NYSE on each Business Day
(currently 4 p.m. Eastern time).
Income dividends are declared daily; dividends declared for each month
are paid on the last Business Day of the month. Shares of GOVERNMENT MONEY and
CASH RESERVES begin earning income dividends on the Business Day the proceeds of
the purchase order are converted into "federal funds" and continue to earn
dividends through the Business Day before they are redeemed; shares of the other
Funds begin earning income dividends on the Business Day after the proceeds of
the purchase order have been converted to "federal funds" and continue to earn
dividends through the Business Day they are redeemed. Distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the shareholder elects to
receive them in cash ("cash election"). Shareholders may make a cash election on
the original account application or at a later date by writing to State Street
Bank and Trust Company ("State Street"), c/o Boston Service Center, P.O. Box
8403, Boston, MA 02266-8403. Cash distributions can be paid through an
electronic transfer to a bank account designated in the shareholder's original
account application. To the extent dividends and other distributions are subject
to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares.
48
<PAGE>
A cash election with respect to any Fund remains in effect until the
shareholder notifies State Street in writing to discontinue the election. If it
is determined, however, that the U.S. Postal Service cannot properly deliver
Fund mailings to the shareholder or if checks remain uncashed for 180 days, the
Fund will terminate the shareholder's cash election. Thereafter, the
shareholder's dividends and other distributions will automatically be reinvested
in additional Fund shares until the shareholder notifies State Street or the
Fund in writing of his or her correct address and requests in writing that the
cash election be reinstated.
ADDITIONAL TAX INFORMATION
Taxation Of The Funds
- ---------------------
In order to continue to qualify for treatment as a RIC under the Code,
each Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and, for LIMITED MATURITY, net gains from
certain foreign currency transactions) ("Distribution Requirement") and must
meet several additional requirements. With respect to each Fund, these
requirements include the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans, and gains from the sale or other disposition of securities
or foreign currencies, or other income (including gains from Hedging
Instruments) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months
- -- (i) Hedging Instruments (other than those on foreign currencies) or (ii)
foreign currencies or Hedging Instruments thereon that are not directly related
to the Fund's principal business of investing in securities (or options and
Futures with respect thereto) ("Short-Short Limitation"); and (3) at the close
of each quarter of the Fund's taxable year, (i) at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities limited, in respect of
any one issuer, to an amount that does not exceed 5% of the value of the Fund's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities, and (ii) not more than 25% of the value of its
total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
49
<PAGE>
The Funds have received rulings from the Internal Revenue Service
("Service") that each Fund, as an investor in its corresponding Portfolio, will
be deemed to own a proportionate share of the Portfolio's assets and income for
purposes of determining whether the Fund satisfies all the requirements
described above to qualify as a RIC.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to (1)
ULTRA SHORT and LIMITED MATURITY of hedging and certain other transactions
engaged in by their corresponding Portfolios and (2) to all the Funds on certain
matters involving the Portfolios.
Taxation Of The Portfolios
- --------------------------
The Portfolios have received rulings from the Service to the effect
that, among other things, each Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." As a result, no Portfolio is subject to federal income tax;
instead, each investor in a Portfolio, such as a Fund, is required to take into
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, credits, and tax preference
items, without regard to whether it has received any cash distributions from the
Portfolio. Each Portfolio also is not subject to Delaware or New York income or
franchise tax.
Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund qualifies as a RIC, each Portfolio intends to continue to conduct its
operations so that its corresponding Fund will be able to continue to satisfy
all those requirements.
Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
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<PAGE>
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, (3)
loss will be recognized if a liquidation distribution consists solely of cash
and/or unrealized receivables and (4) gain (and, in certain situations, loss)
may be recognized on an in-kind distribution by the Portfolio. A Fund's basis
for its interest in its corresponding Portfolio generally equals the amount of
cash and the basis of any property the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (a) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (b) the Fund's share of the Portfolio's losses.
Dividends and interest received by a Portfolio may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
The use by Neuberger & Berman ULTRA SHORT Bond Portfolio and Neuberger
& Berman LIMITED MATURITY Bond Portfolio of hedging strategies, such as writing
(selling) and purchasing Futures Contracts and options and entering into Forward
Contracts, involves complex rules that will determine for income tax purposes
the character and timing of recognition of the gains and losses the Portfolios
realize in connection therewith. For each of these Portfolios, gains from the
disposition of foreign currencies (except certain gains that may be excluded by
future regulations), and gains from Hedging Instruments derived with respect to
its business of investing in securities or foreign currencies, will qualify as
permissible income for its corresponding Fund under the Income Requirement.
However, income from the disposition by a Portfolio of Hedging Instruments
(other than those on foreign currencies) will be subject to the Short-Short
Limitation for its corresponding Fund if they are held for less than three
months. Income from the disposition of foreign currencies, and Hedging
Instruments on foreign currencies, that are not directly related to a
Portfolio's principal business of investing in securities (or options and
Futures with respect thereto) also will be subject to the Short-Short Limitation
for its corresponding Fund if they are held for less than three months.
If Neuberger & Berman ULTRA SHORT Bond Portfolio or Neuberger & Berman
LIMITED MATURITY Bond Portfolio satisfies certain requirements, any increase in
value of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging position
during the period of the hedge for purposes of determining whether its
corresponding Fund satisfies the Short-Short Limitation. Thus, only the net gain
(if any) from the designated hedge will be included in gross income for purposes
of that limitation. Each of these Portfolios will consider whether it should
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<PAGE>
seek to satisfy those requirements to enable its corresponding Fund to qualify
for this treatment for hedging transactions. To the extent a Portfolio does not
so qualify, it may be forced to defer the closing out of certain Hedging
Instruments or foreign currency positions beyond the time when it otherwise
would be advantageous to do so, in order for its corresponding Fund to continue
to qualify as a RIC.
Exchange-traded Futures Contracts and listed options thereon
constitute "Section 1256 contracts." Section 1256 contracts are required to be
marked to market (that is, treated as having been sold at market value) at the
end of a Portfolio's taxable year. Sixty percent of any gain or loss recognized
as a result of these "deemed sales," and 60% of any net realized gain or loss
from any actual sales, of Section 1256 contracts are treated as long-term
capital gain or loss, and the remainder is treated as short-term capital gain or
loss.
Neuberger & Berman CASH RESERVES Portfolio, Neuberger & Berman ULTRA
SHORT Bond Portfolio, and Neuberger & Berman LIMITED MATURITY Bond Portfolio may
each invest in municipal bonds that are purchased with market discount (that is,
at a price less than the bond's principal amount or, in the case of a bond that
was issued with original issue discount ("OID"), a price less than the amount of
the issue price plus accrued OID) ("municipal market discount bonds"). If a
bond's market discount is less than the product of (1) 0.25% of the redemption
price at maturity times (2) the number of complete years to maturity after the
taxpayer acquired the bond, then no market discount is considered to exist. Gain
on the disposition of a municipal market discount bond purchased by the
Portfolio (other than a bond with a fixed maturity date within one year from its
issuance), generally is treated as ordinary (taxable) income, rather than
capital gain, to the extent of the bond's accrued market discount at the time of
disposition. Market discount on such a bond generally is accrued ratably, on a
daily basis, over the period from the acquisition date to the date of maturity.
In lieu of treating the disposition gain as above, the Portfolio may elect to
include market discount in its gross income currently, for each taxable year to
which it is attributable.
Each Portfolio may acquire zero coupon or other securities issued with
OID. As a holder of those securities, each Portfolio (and, through it, its
corresponding Fund) must take into income the OID that accrues on the securities
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<PAGE>
during the taxable year, even if it receives no corresponding payment on the
securities during the year. Because each Fund annually must distribute
substantially all of its investment company taxable income (including its share
of its corresponding Portfolio's accrued OID) to satisfy the Distribution
Requirement and to avoid imposition of the Excise Tax, a Fund may be required in
a particular year to distribute as a dividend an amount that is greater than its
share of the total amount of cash its corresponding Portfolio actually receives.
Those distributions will be made from a Fund's (or its share of its
corresponding Portfolio's) cash assets or, if necessary, from the proceeds of
sales of that Portfolio's securities. A Portfolio may realize capital gains or
losses from those sales, which would increase or decrease its corresponding
Fund's investment company taxable income and/or net capital gain (the excess of
net long-term capital gain over net short-term capital loss). In addition, any
such gains may be realized on the disposition of securities held for less than
three months. Because of the Short-Short Limitation, any such gains would reduce
a Portfolio's ability to sell other securities, or certain Hedging Instruments
or foreign currency positions held for less than three months that it might wish
to sell in the ordinary course of its portfolio management.
Taxation Of The Funds' Shareholders
- -----------------------------------
If shares of ULTRA SHORT or LIMITED MATURITY are sold at a loss after
being held for six months or less, the loss will be treated as long-term,
instead of short-term, capital loss to the extent of any capital gain
distributions received on those shares.
Each Fund is required to withhold 31% of all dividends and capital
gain distributions, and each of ULTRA SHORT and LIMITED MATURITY is required to
withhold 31% of redemption proceeds payable to any individuals and certain other
noncorporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to such shareholders who otherwise are
subject to backup withholding.
As described under "How to Sell Shares" in the Prospectus, a Fund may
close a shareholder's account with the Fund and redeem the remaining shares if
the account balance falls below the specified minimum and the shareholder fails
to reestablish the minimum balance after being given the opportunity to do so.
If an account that is closed pursuant to the foregoing was maintained for an
individual retirement account or a qualified retirement plan (including a
simplified employee pension plan, "Savings Incentive Match Plan for Employees"
("SIMPLE") self-employed individual retirement plan (so-called "Keogh plan"),
corporate profit-sharing and money purchase pension plan, section 401(k) plan,
and section 403(b)(7) account), the Fund's payment of the redemption proceeds
may result in adverse tax consequences for the accountholder. The accountholder
should consult his or her tax adviser regarding any such consequences.
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VALUATION OF PORTFOLIO SECURITIES
Each of Neuberger & Berman GOVERNMENT MONEY Portfolio and Neuberger &
Berman CASH RESERVES Portfolio relies on Rule 2a-7 under the 1940 Act to use the
amortized cost method of valuation to enable its corresponding Fund to stabilize
the purchase and redemption price of its shares at $1.00 per share. This method
involves valuing portfolio securities at their cost at the time of purchase and
thereafter assuming a constant amortization (or accretion) to maturity of any
premium (or discount), regardless of the impact of interest rate fluctuations on
the market value of the securities. Although the Portfolios' reliance on Rule
2a-7 and use of the amortized cost valuation method should enable the Funds,
under most conditions, to maintain a stable $1.00 share price, there can be no
assurance they will be able to do so. An investment in either of these Funds, as
in any mutual fund, is neither insured nor guaranteed by the U.S. Government.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities generally are transacted
with issuers, underwriters, or dealers that serve as primary market-makers, who
act as principals for the securities on a net basis. The Portfolios typically do
not pay brokerage commissions for such purchases and sales. Instead, the price
paid for newly issued securities usually includes a concession or discount paid
by the issuer to the underwriter, and the prices quoted by market-makers reflect
a spread between the bid and the asked prices from which the dealer derives a
profit.
In purchasing and selling portfolio securities other than as described
above (for example, in the secondary market), each Portfolio seeks to obtain
best execution at the most favorable prices through responsible broker-dealers
and, in the case of agency transactions, at competitive commission rates. In
selecting broker-dealers to execute transactions, N&B Management considers such
factors as the price of the security, the rate of commission, the size and
difficulty of the order, and the reliability, integrity, financial condition,
and general execution and operational capabilities of competing broker-dealers.
N&B Management also may consider the brokerage and research services that
broker-dealers provide to the Portfolio or N&B Management. Under certain
conditions, a Portfolio may pay higher brokerage commissions in return for
brokerage and research services, although no Portfolio has a current arrangement
to do so. In any case, each Portfolio may effect principal transactions with a
dealer who furnishes research services, may designate any dealer to receive
selling concessions, discounts, or other allowances, or otherwise may deal with
any dealer in connection with the acquisition of securities in underwritings.
During the fiscal year ended October 31, 1996, Neuberger & Berman
ULTRA SHORT Bond Portfolio acquired securities of the following of its "regular
brokers or dealers" (as defined in the 1940 Act): Goldman, Sachs & Co.; Merrill
Lynch, Pierce, Fenner & Smith Inc.; and Morgan (J.P.) Securities Inc. At October
31, 1996, that Portfolio held the securities of its "regular brokers or dealers"
with an aggregate value as follows: Morgan (J.P.) Securities Inc., $3,003,150.
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<PAGE>
During the fiscal year ended October 31, 1996, Neuberger & Berman
LIMITED MATURITY Bond Portfolio acquired securities of the following of its
"regular brokers or dealers": Goldman, Sachs & Co. At October 31, 1996, that
Portfolio held the securities of its "regular brokers or dealers" with an
aggregate value as follows: Goldman, Sachs & Co., $5,045,352.
During the fiscal year ended October 31, 1996, Neuberger & Berman CASH
RESERVES Portfolio acquired securities of the following of its "regular brokers
or dealers": CS First Boston; First Chicago Capital Markets; Goldman, Sachs &
Co.; Merrill Lynch, Pierce, Fenner & Smith Inc.; Morgan (J.P.) Securities Inc.;
and Morgan Stanley & Co. Inc. At October 31, 1996, that Portfolio held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: CS First Boston, $15,000,000; First Chicago Capital Markets, Inc.,
$6,437,656; Goldman, Sachs & Co., $9,739,931; Merrill Lynch, Pierce, Fenner &
Smith Inc., $6,000,000; Morgan (J.P.) Securities Inc., $9,983,500; and Morgan
Stanley & Co. Inc., $15,000,000.
During the fiscal year ended October 31, 1996, Neuberger & Berman
GOVERNMENT MONEY Portfolio acquired none of the securities of its "regular
brokers or dealers." At October 31, 1996, that Portfolio held none of the
securities of its "regular brokers or dealers."
No affiliate of any Portfolio receives give-ups or reciprocal business
in connection with its portfolio transactions. No Portfolio effects transactions
with or through broker-dealers in accordance with any formula or for selling
shares of any Fund. However, broker-dealers who execute portfolio transactions
may from time to time effect purchases of Fund shares for their customers. The
1940 Act generally prohibits Neuberger & Berman from acting as principal in the
purchase of portfolio securities from, or the sale of portfolio securities to, a
Portfolio unless an appropriate exemption is available.
Portfolio Turnover
- ------------------
Neuberger & Berman ULTRA SHORT Bond Portfolio and Neuberger & Berman
LIMITED MATURITY Bond Portfolio calculate a portfolio turnover rate by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
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<PAGE>
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and for its corresponding Portfolio. Each Fund's
statements show the investments owned by its corresponding Portfolio and the
market values thereof and provide other information about the Fund and its
operations, including the Fund's beneficial interest in its corresponding
Portfolio.
ORGANIZATION
The predecessors of the Funds were converted into separate series of
the Trust on July 2, 1993; these conversions were approved by the shareholders
of the Funds in April 1993.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street, 225 Franklin
Street, Boston, MA 02110 as custodian for its securities and cash. State Street
also serves as each Fund's transfer and shareholder servicing agent,
administering purchases, redemptions, and transfers of Fund shares and the
payment of dividends and other distributions through its Boston Service Center.
All correspondence should be mailed to Neuberger & Berman Funds, c/o Boston
Service Center, P.O. Box 8403, Boston, MA 02266-8403.
INDEPENDENT AUDITORS
Each Fund and Portfolio has selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors who will audit its
financial statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal
counsel.
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at January 14, 1997:
Percentage of
Ownership at
Name and Address January 14, 1997
---------------- ----------------
Government Money : Neuberger & Berman* 72.63%
- ----------------- 11 Broadway
New York, NY 10004
Cash Reserves: Neuberger & Berman* 53.42%
- -------------- 11 Broadway
New York, NY 10004
D Leon Leonhardt Retirement 5.83%
Benefit Accumulation Plan
for Employees of Price
Waterhouse LLP
3109 W DR Martin Luther King
Blvd
Tampa, FL 33607
For Partners & Principals of 5.01%
Price Waterhouse DTD 6/28/95
3109 W DR Martin Luther King
Blvd
Tampa, FL 33607
Ultra Short: Charles Schwab & Co., Inc.* 28.12%
- ------------ 101 Montgomery Street
San Francisco, CA 94104-4122
Limited Maturity: Charles Schwab & Co., Inc.* 28.48%
- ----------------- 101 Montgomery Street
San Francisco, CA 94104-4122
Nationwide Life Insurance Plan 10.61%
QPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218-2029
- ---------------------------
* Charles Schwab & Co., Inc. and Neuberger & Berman hold these shares of
record for the accounts of certain of their clients and have informed the
Funds of their policies to maintain the confidentiality of holdings in
their client accounts unless disclosure is expressly required by law.
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REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C. The SEC maintains a Website (http://www.sec.gov)
that contains this SAI, material incorporated by reference, and other
information regarding the Funds and Portfolios.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of any contract or
other document filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to Shareholders
for the fiscal year ended October 31, 1996:
The Statements of Assets and Liabilities of the Funds and Portfolios,
including the Schedules of Investments of the Portfolios, as of
October 31, 1996, and the related Statements of Operations for the
year then ended, the Statements of Changes in Net Assets for each of
the two years in the period then ended, the Financial Highlights for
each of the periods indicated therein, the notes to each of the
foregoing for the fiscal year ended October 31, 1996 and the reports
of Ernst & Young LLP, independent auditors, with respect to such
audited financial statements of Neuberger & Berman Government Money
Fund and Portfolio, Neuberger & Berman Cash Reserves and Portfolio,
Neuberger & Berman Ultra Short Bond Fund and Portfolio, and Neuberger
& Berman Limited Maturity Bond Fund and Portfolio.
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Appendix A
RATINGS OF SECURITIES
S&P Corporate Bond Ratings:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B - Bonds rated BB or B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation. While these bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is used for debt subordinated to senior debt that is assigned an
actual or implied BBB- rating.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
PLUS (+) OR MINUS (-): The ratings above may be modified by the addition of
a plus or minus sign to show relative standing within major categories.
59
<PAGE>
MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds rated AAA are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or an exceptionally stable
margin, and principal is secure. Although the various protective elements are
likely to change, such changes that can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA - Bonds rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
"high-grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in AAA-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in AAA-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are
considered to be upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
BAA - Bonds which are rated BAA are considered as medium-grade obligations;
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA - Bonds which are rated BA are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
60
<PAGE>
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
company ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the company
ranks in the lower end of its generic rating category.
S&P Commercial Paper Ratings:
-----------------------------
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely payment.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's Commercial Paper Ratings:
---------------------------------
Issuers rated PRIME-1 (or related supporting institutions), also known as
P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- - Leading market positions in well-established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - Well-established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions), also known as
P-2, have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
61
<PAGE>
Appendix B
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
- 62 -
<PAGE>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure
that some of your investments, make sure that some of your principal is kept
safe, and principal is kept safe, and try to increase try to increase your
income your income as well as your capital. as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
- 63 -
<PAGE>
Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
- 64 -
<PAGE>
One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a
book, the last thing to particular security. It is after all just a
fall in love with is a sheet of paper indicating a part ownership in
particular security." a corporation and its use is purely
mercenary. If you must love a security, stay
in love with it until it gets overvalued;
then let somebody else fall in love.
[PICTURE OF ROY NEUBERGER]
- 65 -
<PAGE>
ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL
INVESTING STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
- 66 -
<PAGE>
The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR
INVESTING STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
- 67 -
<PAGE>
Both are an art, although picking stocks is a
minor art compared with painting, sculpture
"When things look bad, I or literature. I started buying art in the
become optimistic. When 30s, and in the 40s it was a daily, almost
everything looks rosy, and hourly occurrence. My inclination to buy the
the crowd is optimistic, I works of living artists comes from Van Gogh,
like to be a seller." who sold only one painting during his
lifetime. He died in poverty, only then to
become a legend and have his work sold for
millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
- 68 -
<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
- 69 -
<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
- 70 -
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
- 71 -
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
- 72 -
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN MUNICIPAL FUNDS AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 3, 1997
Neuberger & Berman Neuberger & Berman
Municipal Money Fund Municipal Securities Trust
(and Neuberger & Berman (and Neuberger & Berman
Municipal Money Portfolio) Municipal Securities Portfolio)
Neuberger & Berman
New York Insured Intermediate Fund
(and Neuberger & Berman New York
Insured Intermediate Portfolio)
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger & Berman Municipal Money Fund ("Municipal Money"), Neuberger
& Berman Municipal Securities Trust ("Municipal Securities"), and Neuberger &
Berman New York Insured Intermediate Fund ("New York Insured Intermediate")
(each a "Fund") are no-load mutual funds that offer shares pursuant to a
Prospectus dated February 3, 1997. The Funds invest all of their net investable
assets in Neuberger & Berman Municipal Money Portfolio, Neuberger & Berman
Municipal Securities Portfolio, and Neuberger & Berman New York Insured
Intermediate Portfolio (each a "Portfolio"), respectively. Shares of New York
Insured Intermediate are available to investors in New York and Florida only.
The Funds' Prospectus, which is also the prospectus for certain taxable
fixed income funds administered by Neuberger & Berman Management Incorporated
("N&B Management"), provides basic information that an investor should know
before investing. A copy of the Prospectus may be obtained, without charge, from
N&B Management, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 or by
calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT INFORMATION........................................................1
Investment Policies and Limitations.........................................1
Investment Approaches of Neuberger & Berman Municipal Securities
Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio...................................................................6
Municipal Bond Insurance (Neuberger & Berman New York Insured
Intermediate Portfolio).....................................................7
Overview of Each Fund.......................................................8
Types of Municipal Obligations.............................................10
Yield and Price Characteristics of Municipal Obligations...................13
Investment in Taxable Securities...........................................13
Additional Investment Information..........................................15
Risks of Fixed Income Securities...........................................26
PERFORMANCE INFORMATION......................................................27
Yield Calculations..................................................27
Tax Equivalent Yield................................................28
Total Return Computations...........................................29
Comparative Information.............................................30
Other Performance Information.......................................31
CERTAIN RISK CONSIDERATIONS..................................................32
New York City.......................................................34
New York State......................................................35
Puerto Rico.........................................................37
TRUSTEES AND OFFICERS........................................................37
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES............................43
Investment Manager and Administrator................................43
Sub-Adviser.........................................................46
Investment Companies Managed........................................47
Management and Control of N&B Management............................49
DISTRIBUTION ARRANGEMENTS....................................................50
ADDITIONAL PURCHASE INFORMATION..............................................51
Automatic Investing and Dollar Cost Averaging.......................51
ADDITIONAL EXCHANGE INFORMATION..............................................51
<PAGE>
ADDITIONAL REDEMPTION INFORMATION............................................55
Suspension of Redemptions...........................................55
Redemptions in Kind.................................................55
DIVIDENDS AND OTHER DISTRIBUTIONS............................................55
ADDITIONAL TAX INFORMATION...................................................56
Taxation of the Funds...............................................56
Taxation of the Portfolios..........................................58
Taxation of the Funds' Shareholders.................................60
VALUATION OF PORTFOLIO SECURITIES............................................62
PORTFOLIO TRANSACTIONS.......................................................62
Portfolio Turnover..................................................63
REPORTS TO SHAREHOLDERS......................................................64
ORGANIZATION.................................................................64
CUSTODIAN AND TRANSFER AGENT.................................................64
INDEPENDENT AUDITORS.........................................................64
LEGAL COUNSEL................................................................64
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................64
REGISTRATION STATEMENT.......................................................65
FINANCIAL STATEMENTS.........................................................66
Appendix A..................................................................A-1
RATINGS OF MUNICIPAL OBLIGATIONS AND COMMERCIAL PAPER..............A-1
Appendix B..................................................................B-1
THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER....................B-1
- ii -
<PAGE>
INVESTMENT INFORMATION
Each Fund is a separate series of Neuberger & Berman Income Funds
("Trust"), a Delaware business trust that is registered with the Securities and
Exchange Commission ("SEC") as an open-end management investment company. Each
Fund seeks its investment objective by investing all of its net investable
assets in a Portfolio of Income Managers Trust ("Managers Trust") that has an
investment objective identical to, and a name similar to, that of the Fund. Each
Portfolio, in turn, invests in securities in accordance with an investment
objective, policies, and limitations identical to those of its corresponding
Fund. (The Trust and Managers Trust, which is an open-end management investment
company managed by N&B Management, are together referred to below as the
"Trusts.")
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of each Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of each Fund and Portfolio are not
fundamental. Any investment policy or limitation that is not fundamental may be
changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust
("Portfolio Trustees") without shareholder approval. The fundamental investment
policies and limitations of a Fund or a Portfolio may not be changed without the
approval of the lesser of (1) 67% of the total units of beneficial interest
("shares") of the Fund or Portfolio represented at a meeting at which more than
50% of the outstanding Fund or Portfolio shares are represented or (2) a
majority of the outstanding shares of the Fund or Portfolio. These percentages
are required by the Investment Company Act of 1940 ("1940 Act") and are referred
to in this SAI as a "1940 Act majority vote." Whenever a Fund is called upon to
vote on a change in a fundamental investment policy or limitation of its
corresponding Portfolio, the Fund casts its votes thereon in proportion to the
votes of its shareholders at a meeting thereof called for that purpose.
Investment Policies and Limitations
- -----------------------------------
Municipal Money and Municipal Securities have the following fundamental
investment policy, to enable them to invest in their corresponding Portfolios:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
<PAGE>
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
New York Insured Intermediate has the following fundamental investment
policy, to enable it to invest in its corresponding Portfolio:
Notwithstanding any other investment policy or limitation of the Fund,
the Fund may invest all of its investable assets in an open-end
management investment company having substantially the same investment
objective, policies, and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.
For purposes of the investment limitation on concentration in a
particular industry, N&B Management determines the "issuer" of a municipal
obligation that is not a general obligation note or bond based on the
obligation's characteristics. The most significant of these characteristics is
the source of funds for the repayment of principal and payment of interest on
the obligation. If an obligation is backed by an irrevocable letter of credit or
other guarantee, without which the obligation would not qualify for purchase
under a Portfolio's quality restrictions, the issuer of the letter of credit or
the guarantee is considered an issuer of the obligation. If an obligation meets
a Portfolio's quality restrictions without credit support, the Portfolio treats
the commercial developer or the industrial user, rather than the governmental
entity or the guarantor, as the only issuer of the obligation, even if the
obligation is backed by a letter of credit or other guarantee.
Except for the limitation on borrowing and the limitation on ownership
of portfolio securities by officers and trustees, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Portfolio.
The fundamental investment policies and limitations of Neuberger &
Berman Municipal Money and Neuberger & Berman Municipal Securities Portfolios
are as follows:
- 2 -
<PAGE>
1. BORROWING. Neither Portfolio may borrow money, except that a
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
transactions for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of a Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. Neuberger & Berman Municipal Money Portfolio may not
purchase commodities or contracts thereon, except that it may purchase the
securities of issuers that own interests in any of the foregoing. Neuberger &
Berman Municipal Securities Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit Neuberger & Berman
Municipal Securities Portfolio from purchasing futures contracts or options
(including options on futures contracts, but excluding options or future
contracts on physical commodities) or from investing in securities of any kind.
3. DIVERSIFICATION. Neither Portfolio may, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities ("U.S. Government and Agency Securities")) if, as a result,
(i) more than 5% of the value of the Portfolio's total assets would be invested
in the securities of that issuer or (ii) the Portfolio would hold more than 10%
of the outstanding voting securities of that issuer.
4. INDUSTRY CONCENTRATION. Neither Portfolio may invest 25% or more of
its total assets in the securities of issuers having their principal business
activities in the same industry, except that this limitation does not apply to
(i) U.S. Government and Agency Securities, (ii) municipal securities, or (iii)
certificates of deposit ("CDs") or bankers' acceptances issued by domestic
banks.
5. LENDING. Neither Portfolio may lend any securities or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations (i) through the purchase of a portion of an
issue of debt securities and (ii) by engaging in repurchase agreements.
6. REAL ESTATE. Neither Portfolio may purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit a Portfolio from purchasing securities issued by
entities or investment vehicles that own or deal in real estate or interests
therein, or instruments secured by real estate or interests therein.
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7. SENIOR SECURITIES. Neither Portfolio may issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. Neither Portfolio may underwrite securities of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
The non-fundamental investment policies and limitations of Neuberger &
Berman Municipal Money and Neuberger & Berman Municipal Securities Portfolios
are as follows:
1. GEOGRAPHIC CONCENTRATION. Neither Portfolio will invest 25% or more
of its total assets in securities issued by governmental units located in any
one state, territory, or possession of the United States (but this limitation
does not apply to project notes backed by the full faith and credit of the
United States).
2. ILLIQUID SECURITIES. Neither Portfolio may purchase any security if,
as a result, more than 15% (10% in the case of Neuberger & Berman Municipal
Money Portfolio) of its net assets would be invested in illiquid securities.
Illiquid securities include securities that cannot be sold within seven days in
the ordinary course of business for approximately the amount at which the
Portfolio has valued the securities, such as repurchase agreements maturing in
more than seven days.
3. BORROWING. Neither Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
4. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, neither Portfolio may make any loans other than
securities loans.
5. MARGIN TRANSACTIONS. Neither Portfolio may purchase securities on
margin from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. For Neuberger & Berman Municipal Securities Portfolio, margin
payments in connection with transactions in futures contracts and options on
futures contracts shall not constitute the purchase of securities on margin and
shall not be deemed to violate the foregoing limitation.
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The fundamental investment policies and limitations of Neuberger &
Berman New York Insured Intermediate Portfolio are as follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
transactions for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to U.S.
Government and Agency Securities. State and local governments, their agencies
and instrumentalities, including multi-state agencies, are not considered part
of any "industry."
4. LENDING. The Portfolio may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations (i) through the purchase of debt securities
and (ii) by engaging in repurchase agreements.
5. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein, or instruments secured by real estate or interests therein.
6. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
7. UNDERWRITING. The Portfolio may not engage in the business of
underwriting securities of other issuers, except to the extent that the
Portfolio, in disposing of portfolio securities, may be deemed to be an
underwriter within the meaning of the 1933 Act.
The non-fundamental investment policies and limitations of Neuberger &
Berman New York Insured Intermediate Portfolio are as follows:
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1. DIVERSIFICATION. At the close of each quarter of the Portfolio's
taxable year, (i) not more than 25% of its total assets may be invested in the
securities of a single issuer and (ii) with regard to at least 50% of its total
assets, not more than 5% of its total assets may be invested in the securities
of a single issuer. These limitations do not apply to U.S. Government and Agency
Securities.
2. ILLIQUID SECURITIES. The Portfolio may not purchase any security if,
as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
3. BORROWING. The Portfolio may not purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
4. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
5. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
Investment Approaches of Neuberger & Berman Municipal Securities Portfolio and
Neuberger & Berman New York Insured Intermediate Portfolio
- --------------------------------------------------------------------------------
Neuberger & Berman Municipal Securities Portfolio and Neuberger &
Berman New York Insured Intermediate Portfolio are managed in accordance with an
investment approach developed by their sub-adviser, Neuberger & Berman, LLC
("Neuberger & Berman"), and currently used by that firm in managing taxable and
tax-exempt fixed income portfolios with an aggregate value of approximately
$10.5 billion. In the tax-exempt area, the approach is based, in part, on market
studies that compared the yield and price volatility of short- to
intermediate-term municipal obligations -- securities having maturities of five
to ten years -- with the yield and price volatility of long-term municipal bonds
- -- securities having maturities of up to thirty years. The studies showed that
municipal obligations with maturities of five to ten years have generally
produced from 80% to 90% of the yield but have been subject to only one-half to
two-thirds of the price volatility of 30-year municipal bonds.
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The dollar-weighted average duration of each Portfolio is actively
managed and may not exceed ten years. Futures, options and options on futures
have durations which are generally related to the duration of the securities
underlying them. There are some situations where even the standard duration
calculation does not properly reflect the interest rate exposure of a security.
For example, variable or floating rate securities often have final maturities of
ten or more years; however, their interest rate exposure corresponds to the
frequency of the coupon reset. See "Investment Information -- Variable or
Floating Rate Securities; Demand and Put Features." In this and other, similar
situations, N&B Management, where permitted, will use more sophisticated
analytical techniques that incorporate the economic life of a security into the
determination of its interest rate exposure.
Municipal Bond Insurance (Neuberger & Berman New York Insured Intermediate
Portfolio)
- --------------------------------------------------------------------------------
Neuberger & Berman New York Insured Intermediate Portfolio will
purchase insured bonds only if, at the time of purchase, they have the highest
credit rating available from a nationally recognized statistical rating
organization ("NRSRO"). For an insured bond to receive the highest credit
rating, an NRSRO must rate the claims-paying ability or financial strength of
the insurance company in the highest category. There is, of course, no guarantee
that the insurance company will continue to receive the highest credit rating or
that it will be able to meet its obligation to the Portfolio. See Appendix A for
a summary of the highest ratings of Municipal Bond Insurance companies by
Standard & Poor's ("S&P") and Moody's Investors Service, Inc. ("Moody's").
The Municipal Bond Insurance covering the New York Municipal Securities
purchased by the Portfolio may be either new issue insurance ("New Issue
Insurance") or secondary insurance ("Secondary Insurance"). New Issue Insurance
is purchased by the issuer of the municipal security at the time of the original
issuance of such security. Secondary Insurance may be purchased by the broker,
another investor or the Portfolio after the municipal security is originally
issued. Generally, the Portfolio expects to purchase New York Municipal
Securities that have been insured by another party.
The Portfolio may purchase bonds insured by AMBAC Indemnity Corporation
("AMBAC"), Municipal Bond Investors Assurance Corporation ("MBIA Corp."),
Financial Guaranty Insurance Company ("FGIC"), or any other insurance company
that has received the highest credit rating from at least one NRSRO. The
Portfolio may invest more than 25% of its assets in bonds insured by the same
insurance company. AMBAC, FGIC and MBIA Corp. collectively hold a market share
in excess of 90% of the Municipal Bond Insurance market.
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<PAGE>
AMBAC is a wholly-owned subsidiary of AMBAC Inc. and is licensed to do
business in all 50 states, the District of Columbia, and Puerto Rico. AMBAC is
the successor to the business of the oldest Municipal Bond Insurance company,
which wrote the first Municipal Bond Insurance policy in 1971. According to its
shareholder or other reports, AMBAC is a Wisconsin-domiciled stock insurance
corporation with admitted assets of approximately $2,421,000,000 (unaudited) and
statutory capital of approximately $1,359,000,000 (unaudited) as of December 31,
1995. Statutory capital consists of AMBAC Indemnity's policyholders' surplus and
statutory contingency reserve. AMBAC primarily provides New Issue Insurance.
MBIA Corp. is a wholly-owned subsidiary of MBIA Inc. and is licensed to
do business in all 50 states, the District of Columbia, Guam, the Northern
Mariana Islands, the U.S. Virgin Islands, and Puerto Rico. MBIA Corp. primarily
provides New Issue Insurance and Secondary Insurance. It also provides surety
bonds for debt service reserve funds. MBIA Corp. also insures other types of
obligations, such as asset-backed securities, debt of investor-owned utilities
and municipal deposits in approved financial institutions. According to its
shareholder or other reports, as of June 30, 1996, MBIA Corp. had admitted
assets of $4.2 billion (unaudited), total liabilities of $2.8 billion
(unaudited), and total capital and surplus of $1.4 billion (unaudited)
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. According to its shareholder or
other reports, as of December 31, 1995, MBIA Corp. had admitted assets of $3.8
billion (audited), total liabilities of $2.5 billion (audited), and total
capital and surplus of $1.3 billion (audited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.
FGIC is a wholly-owned subsidiary of FGIC Corporation, which is a
subsidiary of General Electric Capital Corporation. FGIC is licensed to do
business in all 50 states, the District of Columbia, the United Kingdom and
France. FGIC is a leading insurer of municipal bonds, and also insures a variety
of structured debt issues in the taxable market. According to its shareholder or
other reports, as of September 30, 1996, the total capital and surplus of FGIC
was approximately $1,097,000,000. Approximately 86% of the business written to
date by FGIC has been Municipal Bond Insurance.
Overview of Each Fund
- ---------------------
Neuberger&Berman Management offers three municipal funds - Municipal
Money, Municipal Securities and New York Insured Intermediate. Through their
Portfolios, these Funds invest in municipal securities. These Funds are oriented
to investors who seek to benefit from the tax-advantaged status of municipal
bonds. (Each Fund may invest in securities whose income is subject to the
federal alternative minimum tax.)
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<PAGE>
We take a similar approach to the management of all three Funds'
Portfolios. Investments are made in municipal bond sectors that offer higher
yield than other sectors with what we believe is appropriate risk. Within the
sectors, we seek individual securities that offer attractive income as well as
liquidity appropriate to the Fund. The duration of the Portfolios is managed in
order to protect principal in difficult environments and actively manage the
Portfolios to provide a high level of tax-exempt income. Duration incorporates a
bond's yield, coupon interest payments, final maturity and call features into
one measure. In general, the longer you extend a bond's duration, the greater
its potential return and exposure to interest rate fluctuations.
Neuberger&Berman Municipal Money Fund
- -------------------------------------
Municipal Money is invested in order to provide maximum current
tax-exempt income while seeking to maintain a constant one dollar net asset
value. Through its Portfolio, this Fund invests in high quality, short-term
municipal securities that are selected based upon their perceived ability to
provide high current income consistent with safety and liquidity. Since this
portfolio invests exclusively in short-term municipal securities, its
shareholders avoid the market fluctuations and risk that come with investment in
longer-term municipal bonds, while receiving dividends that are exempt from
federal income tax.
Neuberger&Berman Municipal Securities Trust
- -------------------------------------------
Municipal Securities seeks to maximize total return on a risk-adjusted
basis by generating high tax-exempt current income and investing strategically
in short-to-intermediate maturities. Our studies have shown that municipal
portfolios of up to ten years in duration deliver a significant portion of the
income and performance of longer, more volatile issues. As we focus on this
intermediate area of the market, we also seek to increase returns through sector
diversification. Sectors utilized include pre-refunded bonds, general obligation
issues and essential service revenue bonds such as water and sewer authorities.
In addition, we selectively choose among Housing Authority, health care and
pollution control revenue issues. In order to further reduce risk, all the
securities we purchase are of at least investment grade. In addition, we
actively manage the Portfolio's duration with the objective of protecting
principal, and enhancing total return through capital appreciation. The maximum
average duration of the Portfolio is ten years.
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<PAGE>
Neuberger&Berman New York Insured Intermediate Fund
- ---------------------------------------------------
New York Insured Intermediate seeks to provide investors with a high
level of income that is exempt from Federal income tax and New York State and
New York City personal income taxes. In order to provide investors with the
highest degree of safety of principal, at least 65% of the Portfolio's value
will be invested in securities that are rated in the highest investment grades
and additionally have coupon and principal payments that are guaranteed by
insurance companies. The balance of the issues will be investment grade issues
that may or may not be insured. We actively seek out issues that, because of
supply and demand considerations, offer better yield than other municipal issues
of comparable quality. Sectors held in the Portfolio will include revenue bonds,
general obligation issues, hospital authority issues, and industrial revenue
bonds. Similar to our Municipal Securities, this Fund invests in a Portfolio of
securities that has a maximum average duration of ten years. In addition, the
Portfolio's average duration is actively managed with the intention of
controlling risk and providing the possibility of capital appreciation.
Types of Municipal Obligations
- ------------------------------
The tax-exempt status of any issue of municipal obligations is
determined on the basis of an opinion of the issuer's bond counsel at the time
the obligations are issued. Except as otherwise provided in the Prospectus and
this SAI, the Portfolios' investment portfolios may consist of any combination
of the types of municipal obligations described in the Prospectus or in this
SAI. The proportions in which each Portfolio invests in various types of
municipal obligations will vary from time to time.
General Obligation Bonds. A general obligation bond is backed by the
governmental issuer's pledge of its full faith and credit and power to raise
taxes for payment of principal and interest under the bond. The taxes or special
assessments that can be levied for the payment of debt service may be limited or
unlimited as to rate or amount. Many jurisdictions face political and economic
constraints on their ability to raise taxes. These limitations and constraints
may adversely affect the ability of the governmental issuer to meet its
obligations under the bonds in a timely manner.
Revenue Bonds. Revenue bonds are issued to finance a wide variety of
public projects, including (1) housing, (2) electric, gas, water, and sewer
systems, (3) highways, bridges, and tunnels, (4) port and airport facilities,
(5) colleges and universities, and (6) hospitals. In some cases, repayment of
these bonds depends upon annual legislative appropriations; in other cases, if
the issuer is unable to meet its legal obligation to repay the bond, repayment
becomes an unenforceable "moral commitment" of a related governmental unit
(subject, however, to appropriations). Revenue bonds issued by housing finance
authorities are backed by a wider range of security, including partially or
fully insured mortgages, rent subsidized and/or collateralized mortgages, and
net revenues from housing projects.
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<PAGE>
Most industrial development bonds are revenue bonds, in that principal
and interest are payable only from the net revenues of the facility financed by
the bonds. These bonds generally do not constitute a pledge of the general
credit of the public or private operator or user of the facility. In some cases,
however, payment may be secured by a pledge of real and personal property
constituting the facility.
Municipal Lease Obligations (Neuberger & Berman Municipal Securities
Portfolio and Neuberger & Berman New York Insured Intermediate Portfolio). These
obligations, which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. A
Portfolio will usually invest in municipal lease obligations through
certificates of participation ("COPs"), which give the Portfolio a specified,
undivided interest in the obligation. For example, a COP may be created when
long-term revenue bonds are issued by a governmental corporation to pay for the
acquisition of property. The payments made by the municipality under the lease
are used to repay interest and principal on the bonds. Once these lease payments
are completed, the municipality gains ownership of the property. These
obligations are distinguished from general obligation or revenue bonds in that
they typically are not backed fully by the municipality's credit, and their
interest may become taxable if the lease is assigned. The lease subject to the
transaction usually contains a "non-appropriation" clause. A non-appropriation
clause states that, while the municipality will use its best efforts to make
lease payments, the municipality may terminate the lease without penalty if the
municipality's appropriating body does not allocate the necessary funds. Such
termination would result in a significant loss to a Portfolio. start here
Municipal Notes. Municipal notes include the following:
1. Project notes are issued by local issuing agencies created
under the laws of a state, territory, or possession of the United States to
finance low-income housing, urban redevelopment, and similar projects. These
notes are backed by an agreement between the local issuing agency and the
Department of Housing and Urban Development ("HUD"). Although the notes are the
primary obligations of the local issuing agency, the HUD agreement provides the
full faith and credit of the U.S. as additional security.
2. Tax anticipation notes are issued to finance working capital
needs of municipalities. Generally, they are issued in anticipation of future
seasonal tax revenues, such as income, sales, use, and business taxes, and are
payable from these future revenues.
3. Revenue anticipation notes are issued in expectation of
receipt of other types of revenue, such as that available under federal
revenue-sharing programs. Because of proposed measures to reform the federal
budget and alter the relative obligations of federal, state, and local
governments, many revenue-sharing programs are in a state of uncertainty.
4. Bond anticipation notes are issued to provide interim
financing until long-term bond financing can be arranged. In most cases, the
long-term bonds provide the funds for the repayment of the notes.
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<PAGE>
5. Construction loan notes are sold to provide construction
financing. After completion of construction, many projects receive permanent
financing from Fannie Mae or the Government National Mortgage Association
("GNMA").
6. Tax-exempt commercial paper is a short-term obligation issued
by state or local governments or their agencies to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term
financing.
7. Pre-refunded and "escrowed" municipal bonds are bonds with
respect to which the issuer has deposited, in an escrow account, an amount of
securities and cash, if any, that will be sufficient to pay the periodic
interest on and principal amount of the bonds, either at their stated maturity
date or on the date the issuer may call the bonds for payment. This arrangement
gives the investment a quality equal to the securities in the account, usually
U.S. Government Securities. The Portfolios can also purchase bonds issued to
refund earlier issues. The proceeds of these refunding bonds are often used for
escrow to support refunding.
Tender Option Bonds (Neuberger & Berman Municipal Securities Portfolio
and Neuberger & Berman New York Insured Intermediate Portfolio). Tender option
bonds are created by coupling an intermediate- or long-term fixed rate
tax-exempt bond (generally held pursuant to a custodial arrangement) with a
tender agreement that gives the holder the option to tender the bond at its face
value. As consideration for providing the tender option, the sponsor (usually a
bank, broker-dealer, or other financial institution) receives periodic fees
equal to the difference between the bond's fixed coupon rate and the rate
(determined by a remarketing or similar agent) that would cause the bond,
coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, the Portfolio effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. N&B Management considers the creditworthiness of the issuer of
the underlying bond, the custodian, and the third party provider of the tender
option. In certain instances, a sponsor may terminate a tender option if, for
example, the issuer of the underlying bond defaults on interest payments or the
bond's rating falls below investment grade.
Yield and Price Characteristics of Municipal Obligations
- --------------------------------------------------------
Municipal obligations generally have the same yield and price
characteristics as other debt securities. Yields depend on a variety of factors,
including general conditions in the money and bond markets and, in the case of
any particular securities issue, its amount, maturity, duration, and rating.
Market prices of fixed income securities usually vary upward or downward in
inverse relationship to market interest rates.
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<PAGE>
Municipal obligations with longer maturities or durations tend to
produce higher yields. They are generally subject to potentially greater price
fluctuations, and thus greater appreciation or depreciation in value, than
obligations with shorter maturities or durations and lower yields. An increase
in interest rates generally will reduce the value of a Portfolio's investments,
whereas a decline in interest rates generally will increase that value. The
ability of each Portfolio to achieve its investment objective also is dependent
on the continuing ability of the issuers of the municipal obligations in which
the Portfolios invest (or, in the case of industrial development bonds, the
revenues generated by the facility financed by the bonds or, in certain other
instances, the provider of the credit facility backing the bonds) to pay
interest and principal when due.
Investment in Taxable Securities
- --------------------------------
The types of taxable securities in which each Portfolio temporarily may
invest are limited to the following short-term fixed income securities, with
maturities of one year or less from the time of purchase:
U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government and Agency
Securities are direct obligations of the U.S. Government, or its agencies and
instrumentalities, such as the GNMA, Fannie Mae, Federal Home Loan Mortgage
Corporation, Student Loan Marketing Association and Tennessee Valley Authority.
Many agency securities are not backed by the full faith and credit of the United
States.
BANKING SECURITIES. The Portfolios may invest in banking obligations,
which include CDs, time deposits, bankers' acceptances, and other short-term
debt obligations issued by U.S. commercial banks. CDs are receipts for funds
deposited for a specified period of time at a specified rate of return; time
deposits generally are similar to CDs, but are uncertificated. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers, usually in
connection with international commercial transactions. The CDs, time deposits,
and bankers' acceptances in which the Portfolios invest typically are not
covered by deposit insurance.
A Portfolio may invest in securities issued by a U.S. commercial bank
only if (1) the bank has total assets of at least $1,000,000,000, (2) the bank
is on N&B Management's approved list, and (3) its deposits are insured by the
Federal Deposit Insurance Corporation.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio purchases
securities from a bank that is a member of the Federal Reserve System or a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. Repurchase agreements with
a maturity of more than seven days are considered to be illiquid securities. No
Portfolio may enter into such a repurchase agreement if, as a result, more than
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15% (or 10% in the case of Neuberger & Berman Municipal Money Portfolio) of the
value of its net assets would then be invested in such repurchase agreements and
other illiquid securities. A Portfolio may enter into a repurchase agreement
only if (1) the underlying securities are of the type (excluding maturity and
duration limitations) that the Portfolio's investment policies and limitations
would allow it to purchase directly, except that Neuberger & Berman Municipal
Money Portfolio may invest only in repurchase agreements with respect to
securities rated in the highest rating category by S&P, Moody's, or any other
NRSRO, (2) the market value of the underlying securities, including accrued
interest, at all times equals or exceeds the repurchase price, and (3) payment
for the underlying securities is made only upon satisfactory evidence that the
securities are being held for the Portfolio's account by its custodian or a bank
acting as the Portfolio's agent.
SECURITIES LOANS. In order to realize income, each Portfolio may lend
portfolio securities with a value not exceeding 33-1/3% of its total assets to
banks, brokerage firms, or institutional investors judged creditworthy by N&B
Management. Borrowers are required continuously to secure their obligations to
return securities on loan from a Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily. N&B
Management believes the risk of loss on these transactions is slight because, if
a borrower were to default for any reason, the collateral should satisfy the
obligation. However, as with other extensions of secured credit, loans of
portfolio securities involve some risk of loss of rights in the collateral
should the borrower fail financially.
COMMERCIAL PAPER. Commercial paper is a short-term debt security issued
by a corporation, bank, municipality, or other issuer, usually for purposes such
as financing current operations. Each Portfolio may invest only in commercial
paper receiving the highest rating from S&P (A-1) or Moody's (P-1), or deemed by
N&B Management to be of equivalent quality. Each Portfolio may invest in
commercial paper that cannot be resold to the public without an effective
registration statement under the 1933 Act. While restricted commercial paper
normally is deemed illiquid, N&B Management may in certain cases determine that
such paper is liquid, pursuant to guidelines established by the Portfolio
Trustees.
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<PAGE>
Swap Agreements (Neuberger & Berman Municipal Securities Portfolio and
New York Insured Intermediate Portfolio). To help enhance the value of its
portfolio or manage its exposure to different types of investments, the
Portfolio may enter into interest rate and mortgage swap agreements and may
purchase and sell interest rate "caps," "floors," and "collars." In accordance
with SEC staff requirements, the Portfolio will segregate cash or liquid
high-grade debt securities in an amount equal to its obligations under swap
agreements; when an agreement provides for netting of the payments by the two
parties, the Portfolio will segregate only the amount of its net obligation, if
any.
Additional Investment Information
The Portfolios' investments in municipal obligations and taxable
securities may take the form of the following types of investments:
Variable or Floating Rate Securities; Demand and Put Features. Variable
rate securities provide for automatic adjustment of the interest rate at fixed
intervals (e.g., daily, monthly, or semi-annually); floating rate securities
provide for automatic adjustment of the interest rate whenever a specified
interest rate or index changes. The interest rate on variable and floating rate
securities (collectively, "Adjustable Rate Securities") ordinarily is determined
by reference to a particular bank's prime rate, the 90-day U.S. Treasury Bill
rate, the rate of return on commercial paper or bank CDs, an index of short-term
tax-exempt rates, or some other objective measure.
The Adjustable Rate Securities in which the Portfolios invest are
municipal obligations which frequently permit the holder to demand payment of
the obligations' principal and accrued interest at any time or at specified
intervals not exceeding one year. The demand feature usually is backed by a
credit instrument (e.g., a bank letter of credit) from a creditworthy issuer and
sometimes by municipal bond insurance from a creditworthy insurer. Without these
credit enhancements, some Adjustable Rate Securities might not meet the
Portfolios' quality standards. Accordingly, in purchasing these securities, each
Portfolio relies primarily on the creditworthiness of the credit instrument
issuer or the insurer. Neither Neuberger & Berman Municipal Money Portfolio nor
Neuberger & Berman Municipal Securities Portfolio may invest more than 5% of its
total assets in securities backed by credit instruments from any one issuer or
by insurance from any one insurer. For purposes of this limitation, Neuberger &
Berman Municipal Securities Portfolio excludes securities that do not rely on
the credit instrument or insurance for their rating, i.e., stand on their own
credit.
A Portfolio can also buy fixed rate securities accompanied by a demand
feature or by a put option, which permits the Portfolio to sell the security to
the issuer or third party at a specified price. A Portfolio may rely on the
creditworthiness of issuers of the credit enhancements in purchasing these
securities.
In calculating its dollar-weighted average maturity and duration, each
Portfolio is permitted to treat certain Adjustable Rate Securities as maturing
on a date prior to the date on which the final repayment of principal must
unconditionally be made. In applying such maturity shortening devices, N&B
Management considers whether the interest rate reset is expected to cause the
security to trade at approximately its par value.
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<PAGE>
Purchases with a Standby Commitment to Repurchase. When a Portfolio
purchases municipal obligations, it also may acquire a standby commitment
obligating the seller to repurchase the obligations at an agreed price on a
specified date or within a specified period. A standby commitment is the
equivalent of a nontransferable "put" option held by a Portfolio that terminates
if the Portfolio sells the obligations to a third party.
The Portfolios may enter into standby commitments only with banks and
(if permitted under the 1940 Act) securities dealers determined to be
creditworthy. A Portfolio's ability to exercise a standby commitment depends on
the ability of the bank or securities dealer to pay for the obligations on
exercise of the commitment. If a bank or securities dealer defaults on its
commitment to repurchase such obligations, a Portfolio may be unable to recover
all or even part of any loss it may sustain from having to sell the obligations
elsewhere.
Although none of the Portfolios currently intends to invest in standby
commitments, each reserves the right to do so. No Portfolio will invest in
standby commitments unless it receives an opinion of counsel or a ruling of the
Internal Revenue Service ("Service") satisfactory to the Portfolio Trustees that
the interest earned by the Portfolio on municipal obligations subject to a
standby commitment will be exempt from federal income tax. No Portfolio will
acquire standby commitments with a view to exercising them when the exercise
price exceeds the current value of the underlying obligations; a Portfolio will
do so only to facilitate portfolio liquidity. By enabling a Portfolio to dispose
of municipal obligations at a predetermined price prior to maturity, this
investment technique allows the Portfolio to be fully invested while preserving
the flexibility to make commitments for when-issued securities, take advantage
of other buying opportunities, and meet redemptions.
Standby commitments are valued at zero in determining net asset value
("NAV"). The maturity or duration of municipal obligations purchased by a
Portfolio is not shortened by a standby commitment. Therefore, standby
commitments do not affect the dollar-weighted average maturity or duration of
the Portfolio's investment portfolio.
PARTICIPATION INTERESTS. The Portfolios may purchase from banks
participation interests in all or part of specific holdings of short-term
municipal obligations. Each participation interest is backed by an irrevocable
letter of credit issued by a selling bank determined to be creditworthy. A
Portfolio has the right to sell the participation interest back to the bank,
usually after seven days' notice, for the full principal amount of its
participation, plus accrued interest, but only (1) to provide portfolio
liquidity, (2) to maintain portfolio quality, or (3) to avoid loss when the
underlying municipal obligations are in default. Although no Portfolio currently
intends to acquire participation interests, each reserves the right to do so in
the future. No Portfolio will purchase participation interests unless it
receives an opinion of counsel or a ruling of the Service satisfactory to the
Portfolio Trustees that interest earned by the Portfolio on municipal
obligations in which it holds participation interests is exempt from federal
income tax.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolios may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
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<PAGE>
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed further to facilitate efficient trading among institutional
investors by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of a Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid.
Where registration is required, a Portfolio may be obligated to pay all
or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. To the extent restricted
securities, including Rule 144A securities are illiquid, purchases thereof will
be subject to each Portfolio's 15% (or 10% in the case of Neuberger & Berman
Municipal Money Portfolio) limit on investments in illiquid securities.
Restricted securities for which no market exists are priced by a method that the
Portfolio Trustees believe accurately reflects fair value.
WHEN-ISSUED TRANSACTIONS. Each Portfolio may purchase securities on a
when-issued basis. These transactions involve a commitment by a Portfolio to
purchase securities that will be issued at a future date (ordinarily within two
months, although the Portfolio may agree to a longer settlement period). The
price of the underlying securities (usually expressed in terms of yield) and the
date when the securities will be delivered and paid for (the settlement date)
are fixed at the time the transaction is negotiated. When-issued purchases are
negotiated directly with the other party, and such commitments are not traded on
exchanges.
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<PAGE>
When-issued transactions enable a Portfolio to "lock in" what N&B
Management believes to be an attractive price or yield on a particular security
for a period of time, regardless of future changes in interest rates. In periods
of falling interest rates and rising prices, a Portfolio might purchase a
security on a when-issued basis and sell a similar security to settle such
purchase, thereby obtaining the benefit of currently higher yields.
The value of securities purchased on a when-issued basis and any
subsequent fluctuations in their value are reflected in the computation of a
Portfolio's net asset value ("NAV") starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date.
A Portfolio will purchase securities on a when-issued basis only with
the intention of completing the transaction and actually purchasing the
securities. If deemed advisable as a matter of investment strategy, however, a
Portfolio may dispose of or renegotiate a commitment after it has been entered
into. A Portfolio also may sell securities it has committed to purchase before
those securities are delivered to the Portfolio on the settlement date. The
Portfolio may realize capital gains or losses in connection with these
transactions.
When a Portfolio purchases securities on a when-issued basis, it will
deposit in a segregated account with its custodian, until payment is made,
appropriate liquid securities having an aggregate market value (determined
daily) at least equal to the amount of the Portfolio's purchase commitments.
This procedure is designed to ensure that the Portfolio maintains sufficient
assets at all times to cover its obligations under when-issued purchases.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of each
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, a Portfolio will deposit in a
segregated account with its custodian cash, or appropriate liquid securities,
marked to market daily, in an amount at least equal to each Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio. None of
the Portfolios currently expects to enter into reverse repurchase agreements or
borrow money.
ZERO COUPON SECURITIES. Zero coupon securities are debt obligations
that do not entitle the holder to any periodic payment of interest prior to
maturity or that specify a future date when the securities begin to pay current
interest. Zero coupon securities are issued and traded at a discount from their
face amount or par value. This discount varies depending on prevailing interest
rates, the time remaining until cash payments begin, the liquidity of the
securities, and the perceived credit quality of the issuer.
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<PAGE>
The discount on zero coupon securities ("original issue discount") must
be taken into account ratably by each such Portfolio prior to the receipt of any
actual payments. Because its corresponding Fund must distribute substantially
all of its net income (including its share of the Portfolio's accrued tax-exempt
original issue discount) to its shareholders each year for income tax purposes,
each such Portfolio may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash, or may be required to borrow, to
satisfy its corresponding Fund's distribution requirements. See "Additional Tax
Information."
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically. Zero coupon
securities are likely to respond to changes in interest rates to a greater
degree than other types of debt securities having the same or similar maturities
and credit quality.
Futures Contracts and Options Thereon (Neuberger & Berman Municipal
Securities Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio). Neuberger & Berman Municipal Securities and Neuberger & Berman New
York Insured Intermediate Portfolios may purchase and sell Futures Contracts and
options thereon in an attempt to hedge against changes in the prices of
municipal obligations and other securities resulting from changes in prevailing
interest rates. Because the futures markets may be more liquid than the cash
markets, the use of Futures permits a Portfolio to enhance portfolio liquidity
and maintain a defensive position without having to sell portfolio securities.
The Portfolios do not engage in transactions in Futures or options thereon for
speculation. The Portfolios view investment in Futures and options thereon as a
duration management device and/or a device to reduce risk and preserve total
return in an adverse interest rate environment for the hedged securities.
A "sale" of a Futures Contract (or a "short" Futures position) entails
the assumption of a contractual obligation to deliver the securities underlying
the contract at a specified price at a specified future time. A "purchase" of a
Futures Contract (or a "long" Futures position) entails the assumption of a
contractual obligation to acquire the securities underlying the contract at a
specified price at a specified future time. Certain Futures, including bond
index Futures, are settled on a net cash payment basis rather than by the sale
and delivery of the securities underlying the Futures.
U.S. Futures are traded on exchanges that have been designated as
"contract markets" by the Commodity Futures Trading Commission ("CFTC"); Futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. The exchange's affiliated clearing
organization guarantees performance of the contracts between the clearing
members of the exchange.
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<PAGE>
Although Futures Contracts by their terms may require the actual
delivery or acquisition of the underlying securities, in most cases the
contractual obligation is extinguished by being offset before the expiration of
the contract, without the parties having to make or take delivery of the assets.
A Futures position is offset by buying (to offset an earlier sale) or selling
(to offset an earlier purchase) an identical Futures Contract calling for
delivery in the same month.
"Margin" with respect to Futures is the amount of assets that must be
deposited by a Portfolio with, or for the benefit of, a futures commission
merchant in order to initiate and maintain the Portfolio's Futures positions.
The margin deposit made by a Portfolio when it enters into a Futures Contract
("initial margin") is intended to assure its performance of the contract. If the
price of the Futures Contract changes -- increases in the case of a short (sale)
position or decreases in the case of a long (purchase) position -- so that the
unrealized loss on the contract causes the margin deposit not to satisfy margin
requirements, the Portfolio will be required to make an additional margin
deposit ("variation margin"). However, if favorable price changes in the Futures
Contract cause the margin deposit to exceed the required margin, the excess will
be paid to the Portfolio. In computing its daily NAV, each Portfolio marks to
market the value of its open Futures positions. A Portfolio also must make
margin deposits with respect to options on Futures that it has written. If the
futures commission merchant holding the deposit goes bankrupt, the Portfolio
could suffer a delay in recovering its funds and could ultimately suffer a loss.
An option on a Futures Contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short Futures
position (if the option is a call) or a long Futures position (if the option is
a put). Upon exercise of the option, the assumption of offsetting Futures
positions by the writer and holder of the option is accompanied by delivery of
the accumulated cash balance in the writer's Futures margin account is delivered
to the holder of the option. That balance represents the amount by which the
market price of the Futures Contract at exercise exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option.
Although each Portfolio believes that the use of Futures Contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets is incorrect, a Portfolio's overall return would be lower than if it had
not entered into any such contracts. The prices of Futures are volatile and are
influenced by, among other things, actual and anticipated changes in interest
rates, which in turn are affected by fiscal and monetary policies and by
national and international political and economic events. At best, the
correlation between changes in prices of Futures and of the securities being
hedged can be only approximate. Decisions regarding whether, when, and how to
hedge involve skill and judgment. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or interest
rate trends, or lack of correlation between the futures markets and the
securities markets. Because of the low margin deposits required, Futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a Futures Contract may result in an immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain Futures
transactions are potentially unlimited.
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<PAGE>
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a Futures Contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable Futures and option positions and
subjecting investors to substantial losses. If this were to happen with respect
to a position held by a Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
Put and Call Options (Neuberger & Berman New York Insured Intermediate
Portfolio). Neuberger & Berman New York Insured Intermediate Portfolio may write
and purchase put and call options on municipal securities and other securities.
Generally, the purpose of writing and purchasing these options is to reduce the
effect of price fluctuations of securities held by the Portfolio on the
Portfolio's and its corresponding Fund's NAVs. The Portfolio may also write
covered call options to earn premium income. Portfolio securities on which call
and put options may be written and purchased by the Portfolio are purchased
solely on the basis of investment considerations consistent with the Portfolio's
investment objective.
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser of the option decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio would purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date,
if the purchaser decides to exercise the option. The Portfolio receives a
premium for writing the option. The Portfolio writes only "covered" call options
on securities it owns. So long as the obligation of the call option continues,
the Portfolio may be assigned an exercise notice, requiring it to deliver the
underlying security against payment of the exercise price. The Portfolio may be
obligated to deliver securities underlying a call option at less than the market
price, thereby giving up any additional gain on the security.
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<PAGE>
When the Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date. The Portfolio would purchase a call option to protect against an
increase in the price of securities it intends to purchase or to offset a
previously written call option.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk (in contrast to the
writing of "naked" or uncovered call options, which the Portfolio will not do),
but is capable of enhancing the Portfolio's total return. When writing a covered
call option, the Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. When writing a put option, the Portfolio, in return for the premium,
takes the risk that it must purchase the underlying security at a price which
may be higher than the current market price of the security. If a call or put
option that the Portfolio has written expires unexercised, the Portfolio will
realize a gain in the amount of the premium; however, in the case of a call
option, that gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Portfolio will realize a gain or loss from the sale of the underlying
security.
The exercise price of an option may be below, equal to, or above the
market value of the underlying security at the time the option is written.
Options normally have expiration dates between three and nine months from the
date written. The obligation under any option terminates upon expiration of the
option or, at an earlier time, when the writer offsets the option by entering
into a "closing purchase transaction" to purchase an option of the same series.
If an option is purchased by the Portfolio and is never exercised, the Portfolio
will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the U.S. are issued
by a clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
"closing transaction" with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. N&B Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions, and limits the
Portfolio's counter-parties in such transactions to dealers with a net worth of
at least $20 million as reported in their latest financial statements.
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<PAGE>
The assets used as cover for OTC options written by the Portfolio will
be considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement. The cover
for an OTC call option written subject to this procedure will be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable exchange, less (or plus) a commission. The premium may reflect,
among other things, the current market price of the underlying security, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security, the length of the option period, the
general supply of and demand for credit, and the interest rate environment. The
premium received by the Portfolio for writing an option is recorded as a
liability on the Portfolio's statement of assets and liabilities. This liability
is adjusted daily to the option's current market value, which is the last
reported sales price before the time the Portfolio's NAV is computed on the day
the option is being valued or, in the absence of any trades thereof on that day,
the mean between the bid and asked prices as of that time.
Closing transactions are effected in order to realize a profit on an
outstanding option, to prevent an underlying security from being called, or to
permit the sale or the put of the underlying security. Furthermore, effecting a
closing transaction permits the Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or both.
If the Portfolio desires to sell a security on which it has written a call
option, it will seek to effect a closing transaction prior to, or concurrently
with, the sale of the security. There is, of course, no assurance that the
Portfolio will be able to effect closing transactions at favorable prices. If
the Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
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<PAGE>
The Portfolio pays brokerage commissions in connection with purchasing
or writing options, including those used to close out existing positions. These
brokerage commissions normally are higher than those applicable to purchases and
sales of portfolio securities. From time to time, the Portfolio may purchase an
underlying security for delivery in accordance with an exercise notice of a call
option assigned to it, rather than delivering the security from its portfolio.
In those cases, additional brokerage commissions are incurred.
Regulatory Limitations on Using Futures, Options on Futures, and
Options on Securities (collectively, "Hedging Instruments") (Neuberger & Berman
Municipal Securities Portfolio and Neuberger & Berman New York Insured
Intermediate Portfolio). To the extent a Portfolio sells or purchases Futures
Contracts and/or writes options thereon other than for bona fide hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums on
these positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the Portfolio's net assets.
Cover for Hedging Instruments (Neuberger & Berman Municipal Securities
Portfolio and Neuberger & Berman New York Insured Intermediate Portfolio).
Neuberger & Berman Municipal Securities and Neuberger & Berman New York Insured
Intermediate Portfolios will comply with SEC guidelines regarding "cover" for
Hedging Instruments and, if the guidelines so require, set aside in a segregated
account with its custodian the prescribed amount of cash or appropriate liquid
securities. Securities held in a segregated account cannot be sold while the
Futures or option strategy covered by those securities is outstanding, unless
they are replaced with other suitable assets. As a result, segregation of a
large percentage of a Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet current obligations. A Portfolio may be unable
promptly to dispose of assets which cover, or are segregated with respect to, an
illiquid Futures or options position; this inability may result in a loss to the
Portfolio.
General Risks of Hedging Instruments (Neuberger & Berman Municipal
Securities Portfolio and Neuberger & Berman New York Insured Intermediate
Portfolio). The primary risks in using Hedging Instruments are (1) imperfect
correlation or no correlation between changes in the prices of the securities
held or to be acquired by a Portfolio and changes in market value of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
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Instruments and the resulting inability to close out Hedging Instruments when
desired; (3) the fact that the skills needed to use Hedging Instruments are
different from those needed to select a Portfolio's securities; (4) the fact
that, although use of these instruments for hedging purposes can reduce the risk
of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments; and (5)
the possible inability of a Portfolio to purchase or sell a portfolio security
at a time that would otherwise be favorable for it to do so, or the possible
need for a Portfolio to sell a portfolio security at a disadvantageous time, due
to its need to maintain cover or to segregate securities in connection with its
use of Hedging Instruments. N&B Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of a Portfolio's underlying securities. N&B
Management intends to reduce the risk that a Portfolio will be unable to close
out Hedging Instruments by entering into such transactions only if N&B
Management believes there will be an active and liquid secondary market. There
can be no assurance that a Portfolio's use of Hedging Instruments will be
successful.
Neuberger & Berman Municipal Securities and Neuberger & Berman New York
Insured Intermediate Portfolios' use of Hedging Instruments may be limited by
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
each of those Portfolios must comply if its corresponding Fund is to continue to
qualify as a regulated investment company ("RIC"). See "Additional Tax
Information."
Risks of Fixed Income Securities
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates.
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Subsequent to its purchase by a Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by that Portfolio. In such a case, N&B
Management will engage in an orderly disposition of the downgraded securities to
the extent necessary to ensure that Neuberger & Berman Municipal Securities or
Neuberger & Berman New York Insured Intermediate Portfolio's holdings of
securities that are below investment grade will not exceed 5% of its net assets.
With respect to Neuberger & Berman Municipal Money Portfolio, N&B Management
will consider the need to dispose of such securities in accordance with the
requirements of Rule 2a-7 under the 1940 Act.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The yield and total return of each
Fund will vary. The share prices of Municipal Securities and New York Insured
Intermediate will vary, and an investment in either of these Funds, when
redeemed, may be worth more or less than an investor's original cost.
Yield Calculations
Municipal Money may advertise its "current yield" and "effective yield"
in the financial press and other publications. The Fund's current yield is based
on the return for a recent seven-day period and is computed by determining the
net change (excluding capital changes) in the value of a hypothetical account
having a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, and
dividing the difference by the value of the account at the beginning of the base
period. The result is a "base period return," which is then annualized -- that
is, the amount of income generated during the seven-day period is assumed to be
generated each week over a 52-week period -- and shown as an annual percentage
of the investment.
The effective yield of Municipal Money is calculated similarly, but the
base period return is assumed to be reinvested. The assumed reinvestment is
calculated by adding 1 to the base period return, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result, according to
the following formula:
Effective Yield = [(Base Period Return + 1)365/7[SUPERSCRIPT]] - 1
For the seven calendar days ended October 31, 1996, the current yield
and effective yield of Municipal Money were 2.84% and 2.88%, respectively.
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<PAGE>
Each of Municipal Securities and New York Insured Intermediate may
advertise its "yield" based on a 30-day (or one month) period. This yield is
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period.
The result then is annualized and shown as an annual percentage of the
investment. For the 30-day period ended October 31, 1996, the annualized yields
of Municipal Securities and New York Insured Intermediate were 4.14% and 4.16%,
respectively.
Tax Equivalent Yield
Each of Municipal Money and Municipal Securities may advertise a "tax
equivalent yield" that reflects the taxable yield that an investor subject to
the highest marginal rate of federal income tax (currently 39.6%) would have had
to receive in order to realize the same level of after-tax yield produced by an
investment in a Fund. Tax equivalent yield is calculated according to the
following formula:
Tax Equivalent Yield = Y1 + Y2
----
1-MR
where Y1 equals that portion of a Fund's current or effective yield that is not
subject to federal income tax, Y2 equals that portion of the Fund's current or
effective yield that is subject to that tax, and MR equals the highest marginal
federal tax rate.
For example, if the tax-free yield is 4%, there is no income subject to
federal income tax, and the maximum tax rate is 39.6%, the computation is:
4% / (1 - .396) = 4 / .604 = 6.62% Tax Equivalent Yield
In this example, the after-tax yield will be lower than the 4% tax-free
investment if available taxable yields are below 6.62%; conversely, the taxable
investment will provide a higher after-tax yield, when taxable yields exceed
6.62%. The tax equivalent current yield and tax-equivalent effective yield of
Municipal Money for the 7-day period ended October 31, 1996, were 4.70% and
4.81%, respectively. The tax-equivalent yield of Municipal Securities for the
30-day period ended that date was 6.85%, assuming a marginal tax rate of 39.6%.
The use of a 4% yield in these examples is for illustrative purposes
only and is not indicative of the Funds' future performance.
- 27 -
<PAGE>
New York Insured Intermediate also may advertise a "tax equivalent
yield" that reflects the taxable yield that an investor subject to the highest
marginal rates of federal individual, and New York State and New York City
personal, income taxes (currently totaling 46.7%) would have had to receive in
order to realize the same level of after-tax yield that an investment in the
Fund produced. This tax-equivalent yield is calculated by dividing the Fund's
yield (calculated as described above) by the decimal resulting from subtracting
the combined maximum income tax rate from one.
For example, if the tax-free yield is 4%, there is no income
subject to federal income tax, and the maximum combined tax rate is 46.7%, the
computation is:
4 / (1 - .467) = 4 / .533 = 7.50% Tax-Equivalent Yield
In this example, the after-tax yield will be higher from the 4% tax-free
investment if available taxable yields are below 7.50%; conversely, the taxable
investment will provide a higher after-tax yield when taxable yields exceed
7.50%. This example assumes that all of the Fund's dividends are exempt from
federal income tax and New York State and New York City personal income taxes.
The tax-equivalent yield of New York Insured Intermediate for the
30-day period ended October 31, 1996 was 7.80%, assuming a combined tax rate of
46.7%.
Total Return Computations
Municipal Securities and New York Insured Intermediate may advertise
certain total return information. An average annual compounded rate of return
("T") may be computed by using the redeemable value at the end of a specified
period ("ERV") of a hypothetical initial investment of $1,000 ("P") over a
period of time ("n") according to the formula:
P (1+T)n[SUPERSCRIPT] = ERV
Average annual total return smooths out year-to-year variations in performance
and, in that respect, differs from actual year-to-year results.
For the one- and five-year periods ended October 31, 1996, and the
period from July 9, 1987 (commencement of operations) through October 31, 1996,
the average annual total returns for Municipal Securities and its predecessor
were +3.92%, +5.82%, and +6.39%, respectively. If an investor had invested
$10,000 in that predecessor's shares on July 9, 1987, and had reinvested all
distributions and income dividends, the NAV of that investor's holdings would
have been $17,813 on October 31, 1996.
For the one-year period ended October 31, 1996 and for the period from
February 1, 1994 (commencement of operations) to October 31, 1996 the average
annual total returns for New York Insured Intermediate were +3.58% and +4.04%,
respectively. If an investor had invested $10,000 in Fund shares on February 1,
1994, and had reinvested all distributions, the NAV of that investor's holdings
would have been $11,150 on October 31, 1996.
- 28 -
<PAGE>
N&B Management has reimbursed the Funds and, in the case of Municipal
Securities, its predecessor for certain expenses during the periods mentioned
above, which has the effect of increasing yield and total return.
Comparative InformationComparative Information
From time to time each Fund's performance may be compared
with:
(1) data (that may be expressed as rankings or ratings) published
by independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the
performance of mutual funds, such as Lipper Analytical
Services, Inc., C.D.A. Investment Technologies, Inc.,
Wiesenberger Investment Companies Service, IBC/Donoghue's
Money Market Fund Report, Investment Company Data Inc.,
Morningstar Inc., Micropal Incorporated and quarterly mutual
fund rankings by Money, Fortune, Forbes, Business Week,
Personal Investor, and U.S. News & World Report magazines, The
Wall Street Journal, New York Times, Kiplinger's Personal
Finance, and Barron's Newspaper, or
(2) recognized bond, stock, and other indices such as the
Municipal Bond Buyers Indices (and other indices of municipal
obligations), Shearson Lehman Bond Index, the Standard &
Poor's "500" Composite Stock Price Index ("S&P 500 Index"),
Dow Jones Industrial Average ("DJIA"), S&P/BARRA Index,
Russell Index, and various other domestic, international, and
global indices and changes in the U.S. Department of Labor
Consumer Price Index. The S&P 500 Index is a broad index of
common stock prices, while the DJIA represents a narrower
segment of industrial companies. Each assumes reinvestment of
distributions and is calculated without regard to tax
consequences or the costs of investing. Each Portfolio may
invest in different types of securities from those included in
some of the above indices.
Each Fund's performance also may be compared from time to time
with the following specific indices and other measures of performance:
- 29 -
<PAGE>
Municipal Money's performance may be compared with the IBC/Donoghue's
Tax-Free General Purpose Money Market Funds average.
Municipal Securities' and New York Insured Intermediate's performance
may be compared with the Lehman Brothers 3-year G.O. and 5-year G.O.
Bond Indices, 3-year and 5-year general obligation bonds, and the
Lipper Intermediate Municipal Debt Funds category.
In addition, each Fund's performance may be compared at times with that
of various bank instruments (including bank money market accounts and CDs of
varying maturities) as reported in publications such as The Bank Rate Monitor.
Any such comparisons may be useful to investors who wish to compare a Fund's
past performance with that of certain of its competitors. Of course, past
performance is not a guarantee of future results. Unlike an investment in a
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.
Evaluations of the Funds' performance, and their yield/total returns
and comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
Other Performance Information
From time to time, information about a Portfolio's portfolio allocation
and holdings as of a particular date may be included in Advertisements for its
corresponding Fund. This information may include the Portfolio's portfolio
diversification by asset type. Information used in Advertisements may include
statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
Information (including charts and illustrations) showing the effects of
compounding interest may be included in Advertisements from time to time.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded at different intervals, such as
annually, semi-annually, quarterly, monthly, or daily. For example, $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year (an
increase of $90) and $1,188 at the end of the second year (an increase of $98).
The extra $8 that was earned on the $90 interest from the first year is the
compound interest. One thousand dollars compounded annually at 9% will grow to
$2,367 at the end of ten years and $5,604 at the end of twenty years. Other
examples of compounding are as follows: at 7% and 12% annually, $1,000 will grow
to $1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are for
illustrative purposes only and are not indicative of any Fund's performance.
- 30 -
<PAGE>
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information relating to how much you would have to earn with a taxable
investment in order to match the tax-exempt yield of a municipal bond fund also
may be included in Advertisements. The chart below illustrates this.
Federal Tax Bracket 31.0% 36.0% 39.6%
Municipal Bond Yield 4.0% 4.0% 4.0%
Equivalent Taxable Yield 5.8% 6.3% 6.6%
Information regarding the effects of automatic investing and systematic
withdrawal plans, and investing at market highs and/or lows also may be included
in Advertisements, if appropriate.
From time to time the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Funds' Advertisements. This
philosophy is described in further detail in "The Art of Investment: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
CERTAIN RISK CONSIDERATIONS
A Fund's investment in its corresponding Portfolio may be affected by
the actions of other larger investors in the Portfolio, if any. For example, if
a large investor in a Portfolio (other than a 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.
- 31 -
<PAGE>
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance any Portfolio will achieve its
investment objective. Each Portfolio's ability to achieve its investment
objective is dependent on the continuing ability of the issuers of municipal
obligations in which the Portfolio invests (and, in certain circumstances, of
banks issuing letters of credit or insurers issuing insurance backing those
obligations) to pay interest and principal when due.
The ratings of New York Municipal Securities and other municipal
securities by S&P, Moody's, and other NRSROs, as well as their ratings of
municipal bond insurers, represent their opinions as to the quality of municipal
obligations and companies they undertake to rate. Ratings are not absolute
standards of quality; consequently, municipal obligations with the same
maturity, duration, coupon, and rating may have different yields. There are
variations in municipal obligations and in bond insurers, both within a
particular classification and between classifications. These variations result
from numerous factors, each of which could affect the obligation's or insurer's
rating. See Appendix A to this SAI for ratings by S&P and Moody's of municipal
obligations and claims-paying ability or financial strength of municipal bond
insurers.
Unlike other types of investments, municipal obligations have
traditionally not been subject to the registration requirements of the federal
securities laws, although there have been proposals to provide for such
registration in the future. This lack of SEC regulation has adversely affected
the quantity and quality of information available to the bond markets about
issuers and their financial condition. The SEC has responded to the need for
such information by recently amending Rule 15c2-12 of the Securities Exchange
Act of 1934, as amended (the "Rule"). The Rule requires that underwriters must
reasonably determine that an issuer of municipal securities undertakes in a
written agreement for the benefit of the holders of such securities to file with
a nationally recognized municipal securities information repository certain
information regarding the financial condition of the issuer and material events
relating to such securities. The SEC's intent in adopting the Rule was to
provide holders and potential holders of municipal securities with more adequate
financial information concerning issuers of municipal securities. The Rule
provides exemptions for issuances with a principal amount of less than
$1,000,000 and certain privately placed issuances.
The federal bankruptcy statutes provide that, in certain circumstances,
political subdivisions and authorities of states may initiate bankruptcy
proceedings without prior notice to or consent of their creditors, which
proceedings could result in material and adverse changes in the rights of
holders of their obligations. In addition, there have been lawsuits challenging
the issuance of pollution control revenue bonds and certain general obligation
bonds of New York City and the validity of their issuance under state or federal
law that could ultimately affect the validity of such bonds or the tax-free
nature of the interest thereon.
- 32 -
<PAGE>
The Tax Reform Act of 1986 eliminated the federal income tax exemption
for interest on certain municipal obligations and, as a result, has affected the
availability of municipal obligations for investment by each Portfolio. There
can be no assurance that similar legislation affecting the tax-exempt status of
other municipal obligations will not be enacted in the future. In the event such
legislation is enacted, each Fund and its corresponding Portfolio will
reevaluate its investment objective, policies and limitations.
The following information as to certain New York City ("City"), New
York State ("State"), and Puerto Rico risk factors is given to investors in view
of the policy of Neuberger & Berman New York Insured Intermediate Portfolio of
concentrating its investments in New York Municipal Securities. Such information
constitutes only a brief discussion, does not purport to be a complete
description, and is based on information from sources believed to be reliable,
including official statements relating to securities offerings of the State and
municipal issuers, and periodic publications by national ratings organizations.
Such information, however, has not been independently verified by Neuberger &
Berman New York Insured Intermediate Fund or Portfolio.
New York City
The City faces potential economic problems which could seriously affect
its ability to meet its financial obligations.
The national economic downturn which began in July 1990 adversely
affected the City's economy, which had been declining since late 1989. After
noticeable improvements in the City's economy during calendar year 1994,
economic growth slowed in calendar year 1995, and the City's current four-year
financial plan assumes that moderate growth will continue through calendar year
2000.
For each of the 1981 through 1996 fiscal years, the City achieved
balanced operating results as reported in accordance with then applicable
generally accepted accounting principles ("GAAP"). The City was required to
close substantial budget gaps in recent years in order to maintain balanced
operating results. There can be no assurance that the City will continue to
maintain a balanced budget, as required by New York State law, without
additional tax or other revenue increases or reductions in City services or
entitlement programs, which could adversely affect the City's economic base.
- 33 -
<PAGE>
Pursuant to the New York State Financial Emergency Act for the City of
New York (the "Financial Emergency Act" or the "Act"), the City prepares a
four-year annual financial plan, which is reviewed and revised on a quarterly
basis and which includes the City's capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps. The
City submitted to the New York State Financial Control Board ("Control Board")
on June 21, 1996 a financial plan for the 1997 through 2000 fiscal years (the
"Financial Plan") which was subsequently modified on November 14, 1996 to
reflect actual receipts and expenditures since the release of the Financial
Plan. A further modification to the Financial Plan for the City's 1997 through
2000 fiscal years is expected to be published shortly. The City's projections
set forth in the Financial Plan are based on various assumptions and
contingencies which are uncertain and which may not materialize. Changes in
major assumptions could significantly affect the City's ability to balance its
budget as required by State law and meet its annual cash flow and financing
requirements.
From 1975 to 1986, the City's financial condition was subject to
oversight and review by the Control Board. As of 1986, the Control Board's
supervisory power was suspended due to the City's satisfaction of certain
statutory conditions required under the Financial Emergency Act. The City is
still required to submit its four-year financial plan to the Control Board for
the Control Board's limited review until the expiration of the Financial
Emergency Act on July 1, 2008.
In 1975, S&P suspended its A rating of City bonds. This suspension
remained in effect until March 1981, at which time the City received an
investment grade rating of BBB from S&P. On July 2, 1985, S&P revised its rating
of City bonds upward to BBB+ and on November 19, 1987, to A-. On July 10, 1995,
S&P revised downward its rating in City general obligation bonds from A- to
BBB+. Moody's ratings of City bonds were revised in November 1981 from B (in
effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in
May 1988 to A and again in February 1991, to Baa1. Since July 15, 1993, Fitch
has rated City bonds A-. On February 28, 1996, Fitch placed the City's general
obligation bonds on FitchAlert with negative implications. On November 5, 1996,
Fitch removed the City's general obligation bonds from FitchAlert, although
Fitch stated that the outlook remains negative.
- 34 -
<PAGE>
New York State
The State's 1996-1997 Financial Plan is projected to be balanced on a
cash basis. The State issued its first update to the cash-basis 1996-1997 State
Financial Plan on October 25, 1996, reflecting a continued balance in the
State's 1996-1997 Financial Plan with a reserve for contingencies in the General
Fund of $300 million. This reserve will be utilized to help affect a variety of
potential risks and other unexpected contingencies the State may face during the
balance of the 1996-1997 fiscal year. The State Division of the Budget, however,
cautioned that these projections were subject to various risks, including state
and national economic forecasts and recently adopted federal welfare
legislation.
The Governor is required to submit a balanced budget to the State
Legislature and has indicated he will close any potential imbalance in the
1997-1998 Financial Plan primarily through General Fund expenditure reductions
and without increases in taxes or deferrals of scheduled tax reductions. It is
expected that the State's 1997-1998 Financial Plan will reflect a continuing
strategy of substantially reduced State spending, including agency
consolidations, reductions in the State workforce, and efficiency and
productivity initiatives. The Division of the Budget intends to update the State
Financial Plan upon release of the 1997-1998 Executive Budget. The Governor has
not yet submitted a proposed budget for the State's 1997-1998 fiscal year. There
can be no assurances that the Budget will be enacted before April 1, 1997.
The State Financial Plan is comprised of four governmental funds, of
which the General Fund is the largest. The General Fund is the principal
operating fund of the State and is used to account for all financial
transactions, except those required to be accounted for in another fund. It is
the State's largest fund and receives almost all State taxes and other resources
not dedicated to particular purposes. In the State's 1996-1997 fiscal year, the
General Fund is expected to account for approximately 47 percent of total
Governmental Funds disbursements and 71 percent of total State Funds
disbursements.
Based on the revised economic outlook and actual receipts for the first
six months of 1996-1997, projected General Fund receipts for the 1996-1997 State
fiscal year have been increased by $240 million. Most of this projected increase
is in the yield of the personal income tax ($241 million), with additional
increases now expected in business taxes ($124 million) and other tax receipts
($49 million). Projected collections from user taxes and fees have been revised
downward slightly ($5 million).
The projected closing fund balance in the General Fund is $337 million
and reflects a balance of $252 million in the Tax Stabilization Reserve Fund
(following a payment of $15 million during the current fiscal year) and a
deposit of $85 million to the Contingency Reserve Fund.
There can be no assurance that the State's economy will not experience
worse-than-predicted results in the 1996-1997 fiscal year, or that the State
will not face substantial budget gaps in the future. Such incidents could cause
material and adverse effects on the State's projections of receipts and
disbursements.
- 35 -
<PAGE>
New York State's economy is expected to expand modestly through the
second half of 1996 with employment, wages and incomes continuing their modest
rise. State personal income is projected to increase by 5.2% in 1996 and 4.7% in
1997.
Certain State agencies and local governments require State assistance
to meet their financial obligations. The ability of the State to meet its own
obligations or to obtain additional financing could be adversely affected if
there is an increased need for assistance by State agencies and local
governments.
On June 6, 1990, Moody's changed its ratings on all of the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and January
13, 1992, S&P changed its ratings on all of the State's outstanding general
obligation bonds from AA- to A and from A to A-, respectively.
Puerto Rico
The economy of Puerto Rico is closely linked with that of the U.S. and
will depend on several factors, including the condition of the U.S. economy, the
exchange rate for the U.S. dollar, the price stability of oil imports, and
interest rates. Businesses have enjoyed a federal tax advantage from locating
certain of their operations in Puerto Rico. However, this program will be phased
out over the next several years, with uncertain effect on the Puerto Rican
economy.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman.
<TABLE>
<CAPTION>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
---------- --------------- -----------------
<S> <C> <C>
John Cannon (67) Trustee of each Trust President, AMA Investment
CDC Associates, Inc. Advisers, Inc. (registered
620 Sentry Parkway investment adviser) (1976 -
Suite 220 1991); Senior Vice President AMA
Blue Bell, PA 19422 Investment Advisers, Inc. (1991-
1993); President of AMA Family
of Funds (investment companies)
(1976 - 1991); Chairman and
Chief Investment Officer of CDC
Associates, Inc. (registered
investment adviser) (1993 -
present)
</TABLE>
- 36 -
<PAGE>
<TABLE>
<CAPTION>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
---------- --------------- -----------------
<S> <C> <C>
Stanley Egener* (62) Chairman of the Principal of Neuberger & Berman;
Board, Chief Executive President and Trustee and
Officer, and Trustee Director of N&B Management;
of each Trust Chairman of the Board, Chief
Executive Officer and Trustee of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Theodore P. Giuliano* (44) President and Principal of Neuberger & Berman;
Trustee of each Vice President and Director of
Trust N&B Management; President and
Trustee of one other mutual fund
for which N&B Management acts as
administrator.
Barry Hirsch (63) Trustee of each Senior Vice President, Secre-
Loews Corporation Trust tary, and General Counsel of
667 Madison Avenue Loews Corporation (diversified
7th Floor finan- cial corporation).
New York, NY 10021
Robert A. Kavesh (69) Trustee of each Trust Professor of Finance and
110 Bleecker Street Economics at Stern School of
Apt. 24B Business, New York University;
New York, NY 10012 Director of Del Laboratories,
Inc. and Greater New York Mutual
Insurance Co.
William E. Rulon (64) Trustee of each Trust Retired. Senior Vice President
Foodmaker, Inc. of Foodmaker, Inc. (operator and
1761 Hotel Circle So. franchiser of restaurants) until
San Diego, CA 92108 January 1997; Secretary of
Foodmaker, Inc. until July 1996.
Candace L. Straight (49) Trustee of each Trust Private investor and consultant
578 E. Passaic Avenue specializing in the insurance
Bloomfield, NJ 07003 industry; Principal of Head &
Company, LLC (limited liability
company providing investment
banking and consulting services
to the insurance industry) until
March 1996; President of Integon
Corporation (marketer of life
insurance, annuities, and
property and casualty
insurance), 1990-1992; Director
of Drake Holdings (U.K. motor
insurer) until June 1996.
</TABLE>
- 37 -
<PAGE>
<TABLE>
<CAPTION>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
---------- --------------- -----------------
<S> <C> <C>
Daniel J. Sullivan (57) Vice President of Senior Vice President of N&B
each Trust Management since 1992; prior
thereto, Vice President of N&B
Management; Vice President of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Michael J. Weiner (49) Vice President and Senior Vice President of N&B
Principal Financial Management since 1992; Treasurer
Officer of each of N&B Management from 1992 to
Trust 1996; prior thereto, Vice
President and Treasurer of N&B
Management and Treasurer of
certain mutual funds for which
N&B Management acted as
investment adviser; Vice
President and Principal
Financial Officer of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
Claudia A. Brandon (40) Secretary of each Vice President of N&B
Trust Management; Secretary of eight
other mutual funds for which N&B
Management acts as investment
manager or administrator.
Richard Russell (50) Treasurer and Vice President of N&B Management
Principal Accounting since 1993; Accounting Officer
Officer of each of each Trust prior thereto,
Trust Assistant Vice President of N&B
Management; Treasurer and Prin-
cipal Accounting Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
</TABLE>
- 38 -
<PAGE>
<TABLE>
<CAPTION>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
---------- --------------- -----------------
<S> <C> <C>
Stacy Cooper-Shugrue (33) Assistant Secre- Assistant Vice President of N&B
tary of each Trust Management Trust since 1993;
prior thereto, employee of N&B
Management; Assistant Secretary
of eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
C. Carl Randolph (59) Assistant Secretary Principal of Neuberger & Berman
of each Trust since 1992; Trust prior thereto,
employee of Neuberger & Berman;
Assistant Secretary of eight
other mutual funds for which N&B
Management acts as investment
manager or administrator.
Barbara DiGiorgio (38) Assistant Treasurer Assistant Vice
of each Trust President of N&B Management
since 1993; prior thereto,
employee of N&B Management;
Assistant Treasurer of eight
other mutual funds for which N&B
Management acts as investment
manager or administrator.
Celeste Wischerth (36) Assistant Treasurer Assistant Vice President of N&B
of each Trust Management since 1994; prior
thereto, employee of N&B Manage-
ment; Assistant Treasurer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
</TABLE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, NY 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Giuliano are interested persons by
virtue of the fact that they are officers and directors of N&B Management and
principals of Neuberger & Berman.
- 39 -
<PAGE>
The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (a) engaged in bad faith, willful misfeasance, gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices, or (b) did not act in good faith in the reasonable belief that their
action was in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined (by a court
or other body approving the settlement or other disposition, or by a majority of
disinterested trustees based upon a review of readily available facts, or in a
written opinion of independent counsel) that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
For the fiscal year ended October 31, 1996, trustees' fees and expenses
aggregating $30,039, $15,163 and $11,290 were paid and accrued by Neuberger &
Berman Municipal Money Fund and Portfolio, Neuberger & Berman Municipal
Securities Trust and Portfolio, and Neuberger & Berman New York Insured
Intermediate Fund and Portfolio, respectively, to Fund and Portfolio Trustees
who were not affiliated with N&B Management or Neuberger & Berman.
The following table sets forth information concerning the compensation
of the trustees and officers of the Trust. None of the Neuberger & Berman
Funds(R) has any retirement plan for its trustees or officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/96
Total Compensation
from Trusts in the
Aggregate Neuberger & Berman
Name and Position Compensation from Funds to Complex
with the Trust the Trust Paid to Trustees
- ----------------- ------------------ --------------------
John Cannon $14,758 $31,000
Trustee (2 other investment companies)
Charles DeCarlo $17,222 $35,000
Trustee (retired 12/96) (2 other investment companies)
- 40 -
<PAGE>
Total Compensation
from Trusts in the
Aggregate Neuberger & Berman
Name and Position Compensation from Funds to Complex
with the Trust the Trust Paid to Trustees
- ----------------- ------------------ --------------------
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment companies)
Chief Executive
Officer, and Trustee
Theodore P. Giuliano $ 0 $ 0
President and Trustee (2 other investment companies)
Barry Hirsch $17,468 $35,500
Trustee (2 other investment companies)
Robert A. Kavesh $14,758 $31,000
Trustee (2 other investment companies)
Harold R. Logan $15,005 $30,500
Trustee (retired 12/96) (2 other investment companies)
William E. Rulon $15,005 $30,500
Trustee (2 other investment companies)
Candace L. Straight $14,758 $30,500
Trustee (2 other investment companies)
At January 14, 1997, the trustees and officers of the Trust, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
Municipal Money. As of that date, such trustees and officers, as a group, owned
3.00% and 11.03% of Municipal Securities and New York Insured Intermediate,
respectively.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager and Administrator
Because all of the Funds' net investable assets are invested in their
corresponding Portfolios, the Funds do not need an investment manager. N&B
Management serves as the Portfolios' investment manager pursuant to a management
agreement with Managers Trust, on behalf of the Portfolios, dated as of July 2,
1993 ("Management Agreement"). The Management Agreement was approved by the
holders of the interests in the Portfolios (except Neuberger & Berman New York
Insured Intermediate Portfolio) on July 2, 1993, and by the holders of the
interests in Neuberger & Berman New York Insured Intermediate Portfolio on
February 1, 1994. Neuberger & Berman New York Insured Intermediate Portfolio was
authorized to become subject to the Management Agreement by vote of the
Portfolio Trustees on September 30, 1993, and became subject to it on February
1, 1994.
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<PAGE>
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolios in its
discretion and will continuously develop an investment program for the
Portfolios' assets. The Management Agreement permits N&B Management to effect
securities transactions on behalf of each Portfolio through associated persons
of N&B Management. The Management Agreement also specifically permits N&B
Management to compensate, through higher commissions, brokers and dealers who
provide investment research and analysis to the Portfolios, although N&B
Management has no current plans to pay a material amount of such compensation.
N&B Management provides to each Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
officers and directors of N&B Management (who also are principals of Neuberger &
Berman) presently serve as trustees and officers of the Trusts. See "Trustees
and Officers." Each Portfolio pays N&B Management a management fee based on the
Portfolio's average daily net assets, as described in the Prospectus.
N&B Management provides similar facilities, services, and personnel to
each Fund pursuant to an administration agreement with the Trust dated July 2,
1993 ("Administration Agreement"). New York Insured Intermediate was authorized
to become subject to the Administration Agreement by vote of the Fund Trustees
on September 30, 1993, and became subject to it on February 1, 1994. For such
administrative services, each Fund pays N&B Management a fee based on the Fund's
average daily net assets, as described in the Prospectus.
Under the Administration Agreement, N&B Management also provides to
each Fund and its shareholders certain shareholder, shareholder-related, and
other services that are not furnished by the Fund's shareholder servicing agent.
N&B Management provides the direct shareholder services specified in the
Administration Agreement, assists the shareholder servicing agent in the
development and implementation of specified programs and systems to enhance
overall shareholder servicing capabilities, solicits and gathers shareholder
proxies, performs services connected with the qualification of each Fund's
shares for sale in various states, and furnishes other services the parties
agree from time to time should be provided under the Administration Agreement.
From time to time, N&B Management or a Fund may enter into arrangements
with registered broker-dealers or other third parties pursuant to which it pays
the broker-dealer or third party a per account fee or a fee based on a
percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.
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<PAGE>
For the fiscal years ended October 31, 1996, 1995, and 1994, (1)
Municipal Securities accrued advisory or management and administration fees of
$215,161, $225,079, and $407,968, respectively, and (2) Municipal Money Fund
accrued advisory or management and administration fees of $832,011, $772,483,
and $823,482, respectively. For the fiscal years ended October 31, 1996 and 1995
and the fiscal period from February 1, 1994 (commencement of operations) through
October 31, 1994, New York Insured Intermediate accrued management and
administration fees of $52,745, $58,306 and $56,483, respectively.
As noted in the Prospectus under "Management and Administration --
Expenses," N&B Management has voluntarily undertaken to reimburse each of
Municipal Securities and New York Insured Intermediate for its Operating
Expenses (including fees under the Administration Agreement) and the pro rata
share of its corresponding Portfolio's Operating Expenses (including fees under
the Management Agreement) that exceed, in the aggregate 0.65% per annum of the
Fund's average daily net assets. Operating Expenses exclude interest, taxes,
brokerage commissions, and extraordinary expenses. N&B Management can terminate
each undertaking by giving the Fund at least 60 days' prior written notice. For
the fiscal years ended October 31, 1996, 1995, and 1994, Municipal Securities
was reimbursed for its expenses in the amounts of $160,411, $145,086, and
$140,055, respectively. For the fiscal years ended October 31, 1996 and 1995 and
the fiscal period ended October 31, 1994, N&B Management reimbursed New York
Insured Intermediate $133,004, $134,191, and $100,692, respectively.
Prior to May 1, 1995, the shareholder services described above were
provided pursuant to a separate agreement between the Trust and N&B Management.
As compensation for these services, each Fund paid N&B Management a monthly fee
calculated at the annual rate of 0.02% of the average daily net assets of the
Fund. Before February 1, 1994, the monthly fee paid by Municipal Money and
Municipal Securities to N&B Management was calculated at an annual rate of $6.00
per shareholder account. For the period November 1, 1994 to April 30, 1995 and
for the fiscal year ended October 31, 1994, Municipal Money paid $15,415, and
$26,499, respectively, and Municipal Securities paid $4,376, and $12,704,
respectively, for these services. For the fiscal period ended October 31, 1994
and for the period from November 1, 1994 to April 30, 1995, New York Insured
Intermediate paid $2,257 and $1,226, respectively, for these services.
The Management Agreement continues with respect to each Portfolio for a
period of two years after the date the Portfolio became subject thereto. The
Management Agreement is renewable thereafter from year to year with respect to
each Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding shares in that Portfolio. The Administration
Agreement continues with respect to each Fund for a period of two years after
the date the Fund became subject thereto. The Administration Agreement is
renewable from year to year with respect to a Fund, so long as its continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of N&B Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in that Fund.
The Management Agreement is terminable, without penalty, with respect
to a Portfolio on 60 days' written notice either by Managers Trust or by N&B
Management. The Administration Agreement is terminable, without penalty, with
respect to a Fund on 60 days' written notice either by N&B Management or by the
Trust. Each Agreement terminates automatically if it is assigned.
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<PAGE>
Sub-Adviser
N&B Management retains Neuberger & Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to each Portfolio pursuant to a
sub-advisory agreement dated July 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolios (except Neuberger & Berman New York Insured Intermediate Portfolio)
on July 2, 1993 and by the holders of the interests in Neuberger & Berman New
York Insured Intermediate Portfolio on February 1, 1994. Neuberger & Berman New
York Insured Intermediate Portfolio was authorized to become subject to the
Sub-Advisory Agreement by vote of the Portfolio Trustees on September 30, 1993,
and became subject to it on February 1, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger & Berman. This staff consists of approximately
fourteen investment analysts, each of whom specializes in studying one or more
industries, under the supervision of the Director of Research, who is also
available for consultation with N&B Management. The Sub-Advisory Agreement
provides that N&B Management will pay for the services rendered by Neuberger &
Berman based on the direct and indirect costs to Neuberger & Berman in
connection with those services. Neuberger & Berman also serves as a sub-adviser
for all of the other mutual funds managed by N&B Management.
The Sub-Advisory Agreement continues with respect to each Portfolio for
a period of two years after the date the Portfolio became subject thereto, and
is renewable thereafter from year to year, subject to approval of its
continuance in the same manner as the Management Agreement. The Sub-Advisory
Agreement is subject to termination, without penalty, with respect to each
Portfolio by the Portfolio Trustees or a 1940 Act majority vote of the
outstanding interests in that Portfolio, by N&B Management, or by Neuberger &
Berman on not less than 30 nor more than 60 days' written notice. The
Sub-Advisory Agreement also terminates automatically with respect to each
Portfolio if it is assigned or if the Management Agreement terminates with
respect to that Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
Investment Companies Managed
N&B Management currently serves as investment manager of the following
investment companies. As of December 31, 1996, these companies, along with one
other investment company advised by Neuberger & Berman, had aggregate net assets
of approximately $15.2 billion, as shown in the following list:
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<PAGE>
Approximate
Net Assets at
Name December 31,1996
Neuberger & Berman Cash Reserves Portfolio...................... $499,989,187
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio.................. .$402,843,399
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio.................$272,342,178
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond Portfolio......................$ 89,819,435
(investment portfolio for Neuberger & Berman Ultra Short
Bond Fund and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Municipal Money Portfolio.......................$135,494,410
(investment portfolio for Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio..................$ 38,634,808
(investment portfolio for Neuberger & Berman Municipal Securities Trust)
Neuberger & Berman New York Insured Intermediate
Portfolio ......................................................$ 9,877,137
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Focus Portfolio...............................$1,260,252,029
(investment portfolio for Neuberger & Berman Focus Fund,
Neuberger & Berman Focus Trust, and Neuberger & Berman Focus Assets)
Neuberger & Berman Genesis Portfolio.............................$ 398,343,946
(investment portfolio for Neuberger & Berman Genesis Fund,
Neuberger & Berman Genesis Trust, and Neuberger & Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio........................... $7,071,702,448
(investment portfolio for Neuberger & Berman Guardian Fund,
Neuberger & Berman Guardian Trust, and Neuberger & Berman
Guardian Assets)
Neuberger & Berman International Portfolio.......................$ 73,377,704
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio...........................$ 574,606,109
(investment portfolio for Neuberger & Berman Manhattan
Fund, Neuberger & Berman Manhattan Trust, and Neuberger &
Berman Manhattan Assets)
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<PAGE>
Approximate
Net Assets at
Name December 31,1996
Neuberger & Berman Partners Portfolio............................$2,405,865,742
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust, and Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive
Portfolio ...................................................$ 188,366,394
(investment portfolio for Neuberger & Berman Socially
Responsive Fund and Neuberger & Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (six series).............................$1,695,378,078
In addition, Neuberger & Berman serves as investment adviser to one
investment company, Plan Investment Fund, with assets of $70,276,858 at December
31, 1996.
The investment decisions concerning the Portfolios and the other mutual
funds managed by N&B Management (collectively, "Other N&B Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other N&B Funds differ from the Portfolios.
Even where the investment objectives are similar, however, the methods used by
the Other N&B Funds and the Portfolios to achieve their objectives may differ.
The investment results achieved by all of the funds managed by N&B Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when a Portfolio and one or more of the Other
N&B Funds or other accounts managed by Neuberger & Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
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<PAGE>
Management and Control of N&B Management
The directors and officers of N&B Management, all of whom have offices
at the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President Robert Conti, Treasurer; William Cunningham,
Vice President; Clara Del Villar, Vice President; Mark R. Goldstein, Vice
President; Michael Lamberti, Vice President; Josephine P. Mahaney, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; Janet W. Prindle, Vice President; Felix Rovelli, Vice President;
Richard Russell, Vice President; Kent C. Simons, Vice President; Frederick B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President, Thomas Wolfe, Robert Conti, Treasurer; Vice President; Andrea
Trachtenberg, Vice President of Marketing; Robert Conti, Treasurer; Stacy
Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant Vice
President; Roberta D'Orio, Assistant Vice President; Joseph G. Galli, Assistant
Vice President; Robert I. Gendelman, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Joseph S. Quirk,
Assistant Vice President; Kevin L. Risen, Assistant Vice President; Susan
Switzer, Assistant Vice President; Assistant Vice President; and Celeste
Wischerth, Assistant Vice President, KimMarie Zamot, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman,
Giuliano, Lainoff, Zicklin, Goldstein, Kassen, Risen, Simons and Sundman and
Mmes. Prindle and Vale are principals of Neuberger & Berman.
Mr. Giuliano and Mr. Egener are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-Shugrue, DiGiorgio and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of each Fund's shares on a no-load basis. In connection with
the sale of its shares, each Fund has authorized the Distributor to give only
the information, and to make only the statements and representations, contained
in the Prospectus and this SAI or that properly may be included in sales
literature and advertisements in accordance with the 1933 Act, the 1940 Act, and
applicable rules of self-regulatory organizations. Sales may be made only by the
Prospectus, which may be delivered personally, through the mails, or by
electronic means. The Distributor is the Funds' "principal underwriter" within
the meaning of the 1940 Act and, as such, acts as agent in arranging for the
sale of each Fund's shares without sales commission or other compensation and
bears all advertising and promotion expenses incurred in the sale of the Funds'
shares.
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<PAGE>
The Distributor or one of its affiliates may, from time to time, deem
it desirable to offer to shareholders of the Funds, through use of their
shareholder lists, the shares of other mutual funds for which the Distributor
acts as distributor or other products or services. Any such use of the Funds'
shareholder lists, however, will be made subject to terms and conditions, if
any, approved by a majority of the Independent Fund Trustees. These lists will
not be used to offer to the Funds' shareholders any investment products or
services other than those managed or distributed by N&B Management or Neuberger
& Berman.
The Trust, on behalf of each Fund, and the Distributor are parties to a
Distribution Agreement that continues until July 2, 1997. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL PURCHASE INFORMATION
Automatic Investing and Dollar Cost Averaging
- ---------------------------------------------
Shareholders may arrange to have a fixed amount automatically invested
in shares of Municipal Securities or New York Insured Intermediate each month.
To do so, a shareholder must complete an application, available from the
Distributor, electing to have automatic investments funded either through (1)
redemptions from his or her account in a money market fund for which N&B
Management serves as investment manager or (2) withdrawals from the
shareholder's checking account. In either case, the minimum monthly investment
is $100. A shareholder who elects to participate in automatic investing through
his or her checking account must include a voided check with the completed
application. A completed application should be sent to Neuberger & Berman
Management Incorporated, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180.
Automatic investing enables a shareholder in Municipal Securities and
New York Insured Intermediate to take advantage of "dollar cost averaging." As a
result of dollar cost averaging, a shareholder's average cost of shares in those
Funds generally would be lower than it would be if the shareholder purchased a
fixed number of shares at the same pre-set intervals. Additional information on
dollar cost averaging may be obtained from the Distributor.
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<PAGE>
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Shareholder Services -- Exchange Privilege," shareholders may redeem at least
$1,000 worth of a Fund's shares and invest the proceeds in shares of one or more
of the other Funds or the Equity or Income Funds that are briefly described
below, provided that the minimum investment requirements of the other fund(s)
are met.
EQUITY FUNDS
- ------------
Neuberger & Berman Seeks long-term capital appreciation through
Focus Fund investments principally in common stocks
selected from 13 multi-industry economic
sectors. The corresponding portfolio uses a
value-oriented approach to select individual
securities and then focuses its investments in
the sectors in which the undervalued stocks
are clustered. Through this approach, 90% or
more of the portfolio's investments are
normally made in not more than six sectors.
Neuberger & Berman Seeks capital appreciation through investments
Genesis Fund primarily in common stocks of companies with
small market capitalizations (i.e., up to $1.5
billion) at the time of the Portfolio's
investment. The corresponding portfolio uses a
value-oriented approach to the selection of
individual securities.
Neuberger & Berman Seeks capital appreciation through investments
Guardian Fund primarily in common stocks of
long-established, high-quality companies that
N&B Management believes are well-managed. The
corresponding portfolio uses a value-oriented
approach to the selection of individual
securities. Current income is a secondary
objective. The fund (or its predecessor) has
paid its shareholders an income dividend every
quarter, and a capital gain distribution every
year, since its inception in 1950, although
there can be no assurance that it will be able
to continue to do so.
Neuberger & Berman Seeks long-term capital appreciation through
International Fund investments primarily in a diversified
portfolio of equity securities of foreign
issuers. Assets will be allocated among
economically mature countries and emerging
industrialized countries.
Neuberger & Berman Seeks capital appreciation, without regard to
Manhattan fund income, through investments generally in
securities of small-, medium-, and
large-capitalization companies that N&B
Management believes have the maximum potential
for increasing total NAV. The corresponding
portfolio's "growth at a reasonable price"
investment approach involves greater risks and
share price volatility than programs that
invest in securities thought to be
undervalued.
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<PAGE>
Neuberger & Berman Seeks capital growth through an investment
Partners Fund approach that is designed to increase capital
with reasonable risk. Its investment program
seeks securities believed to be undervalued
based on strong fundamentals such as a low
price-to-earnings ratio, consistent cash flow,
and the company's track record through all
parts of the market cycle. The corresponding
portfolio uses the value-oriented investment
approach to the selection of individual
securities.
Neuberger & Berman Seeks long-term capital appreciation through
Socially Responsive Fund investments primarily in securities of
companies that meet both financial and social
criteria.
INCOME FUNDS
- ------------
Neuberger & Berman A U.S. Government money market fund seeking
Government Money Fund maximum safety and liquidity and the highest
available current income. The corresponding
portfolio invests only in U.S. Treasury
obligations and other money market instruments
backed by the full faith and credit of the
United States. It seeks to maintain a constant
purchase and redemption price of $1.00.
Neuberger & Berman A money market fund seeking the highest
Cash Reserves current income consistent with safety and
liquidity. The corresponding portfolio invests
in high-quality money market instruments. It
seeks to maintain a constant purchase and
redemption price of $1.00.
Neuberger & Berman Seeks current income, with minimal risk to
Ultra Short Bond Fund principal and liquidity. The corresponding
portfolio invests in money market instruments
and investment grade debt securities of
government and non-government issuers. Maximum
dollar-weighted average duration of two years.
Neuberger & Berman Seeks the highest current income consistent
Limited Maturity Bond with low risk to principal and liquidity; and
Fund secondarily, total return. The corresponding
portfolio invests in debt securities,
primarily investment grade; maximum 10% below
investment grade, but no lower than B.1/
Maximum dollar-weighted average duration of
four years.
_____________________________
1/ As rated by Moody's or S&P or, if unrated by either of those entities, deemed
by N&B Management to be of comparable quality.
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<PAGE>
Any Fund described herein, and any of the Other N&B Funds, may
terminate or modify its exchange privilege in the future.
Fund shareholders who are considering exchanging shares into any of the
Equity or Income Funds should note that (1) like the Funds, the Income Funds are
series of the Trust, (2) the Equity Funds are series of a Delaware business
trust (named "Neuberger & Berman Equity Funds") that is registered with the SEC
as an open-end management investment company, (3) each of the Equity and Income
Funds invests all of its net investable assets in a corresponding portfolio that
has an investment objective, policies, and limitations identical to those of the
fund.
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. The Income Funds share a prospectus with the Funds, while the Equity
Funds share a separate prospectus. An exchange is treated as a sale for federal
income tax purposes, and, depending on the circumstances, a short- or long-term
capital gain or loss may be realized.
There can be no assurance that Municipal Money, Neuberger & Berman Cash
Reserves, or Neuberger & Berman Government Money Fund, each of which is a money
market fund that seeks to maintain a constant purchase and redemption share
price of $1.00, will be able to maintain that price. An investment in any of the
above-referenced funds, as in any other mutual fund, is neither insured nor
guaranteed by the U.S. Government.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the New York Stock Exchange ("NYSE") is
closed (other than weekend and holiday closings), (2) when trading on the NYSE
is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for its corresponding Portfolio to dispose of securities
it owns or fairly to determine the value of its net assets, or (4) for such
other period as the SEC may by order permit for the protection of the Fund's
shareholders. Applicable SEC rules and regulations shall govern whether the
conditions prescribed in (2) or (3) exist. If the right of redemption is
suspended, shareholders may withdraw their offers of redemption, or they will
receive payment at the NAV per share in effect at the close of business on the
first day the NYSE is open ("Business Day") after termination of the suspension.
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<PAGE>
Redemptions in Kind
Each Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part by securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, a shareholder generally will incur brokerage expenses or
other transactions costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Funds do not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of a
Fund's shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders amounts equal to
substantially all of its share of any net investment income (after deducting
expenses incurred directly by the Fund) and any net realized capital gains (both
long-term and short-term) earned by its corresponding Portfolio. A Portfolio's
net investment income consists of all income accrued on portfolio assets less
accrued expenses but does not include net realized or unrealized capital gains
and losses. Net investment income and net capital gains and losses are reflected
in a Portfolio's NAV (and, hence, its corresponding Fund's NAV) until they are
distributed. Municipal Money calculates its net investment income and share
price as of noon (Eastern time) on each Business Day; Municipal Securities and
New York Insured Intermediate calculate their net investment income and share
price as of the close of regular trading on the NYSE on each Business Day
(usually 4 p.m. Eastern time).
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<PAGE>
Income dividends are declared daily; dividends declared for each month
are paid on the last Business Day of the month. Shares of Municipal Money begin
earning income dividends on the Business Day the proceeds of the purchase order
are converted into "federal funds" and continue to earn dividends through the
Business Day before they are redeemed; shares of Municipal Securities and New
York Insured Intermediate begin earning income dividends on the Business Day
after the proceeds of the purchase order have been converted to "federal funds"
and continue to earn dividends through the Business Day they are redeemed.
Distributions of net realized capital gains, if any, normally are paid by
Municipal Securities and New York Insured Intermediate once annually, in
December.
Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the shareholder elects to
receive them in cash ("cash election"). Shareholders may make a cash election on
the original account application or at a later date by writing to State Street
Bank and Trust Company ("State Street"), c/o Boston Service Center, P.O. Box
8403, Boston, MA 02266-8403. Cash distributions can be paid through an
electronic transfer to a bank account designated in the shareholder's original
account application. To the extent dividends and other distributions are subject
to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares.
A cash election with respect to any Fund remains in effect until the
shareholder notifies State Street in writing to discontinue the election. If it
is determined, however, that the U.S. Postal Service cannot properly deliver
Fund mailings to the shareholder or if checks remain uncashed for 180 days, the
Fund will terminate the shareholder's cash election. Thereafter, the
shareholder's dividends and other distributions will automatically be reinvested
in additional Fund shares until the shareholder notifies State Street or the
Fund in writing of his or her correct address and requests in writing that the
cash election be reinstated.
- 53 -
<PAGE>
ADDITIONAL TAX INFORMATION
Taxation of the Funds
- ---------------------
In order to continue to qualify for treatment as a RIC under the Code,
each Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain) plus its net interest income
excludable from gross income under section 103(a) of the Code ("Distribution
Requirement") and must meet several additional requirements. With respect to
each Fund, these requirements include the following: (1) the Fund must derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities, or other income (including gains from Hedging
Instruments) derived with respect to its business of investing in securities
("Income Requirement"); (2) the Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of securities or
Hedging Instruments that were held for less than three months ("Short-Short
Limitation"); and (3) at the close of each quarter of the Fund's taxable year,
(i) at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RICs and other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and (ii) not more than 25% of
the value of its total assets may be invested in securities (other than U.S.
Government securities or securities of other RICs) of any one issuer.
In addition, in order to be able to pay "exempt-interest dividends" to
its shareholders, each Fund must (and intends to continue to) satisfy the
additional requirement that, at the close of each quarter of its taxable year,
at least 50% of the value of its total assets consists of securities the
interest on which is excludable from gross income under section 103(a) of the
Code. "Exempt-interest" dividends constitute the portion of the aggregate
dividends (not including capital gain distributions), as designated by a Fund,
equal to the excess of the Fund's excludable interest over certain amounts
disallowed as deductions. The shareholders' treatment of dividends from a Fund
under local and state income tax laws may differ from the treatment thereof
under the Code.
Municipal Money and Municipal Securities have received rulings from the
Service that each Fund, as an investor in its corresponding Portfolio, will be
deemed to own a proportionate share of the Portfolio's assets and income for
purposes of determining whether the Fund satisfies all the requirements
described above to qualify as a RIC and to pay "exempt-interest" dividends to
its shareholders. Although these rulings may not be relied on as precedent by
New York Insured Intermediate, N&B Management believes that the reasoning
thereof, and hence this conclusion, apply to this Fund as well.
- 54 -
<PAGE>
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its (taxable) ordinary income for that year and capital
gain net income for the one-year period ending on October 31 of that year, plus
certain other amounts.
See the next section for a discussion of the tax consequences (1) to
Municipal Securities and New York Insured Intermediate of hedging and certain
other transactions engaged in by their corresponding Portfolios and (2) to all
the Funds of certain other matters involving the Portfolios.
Taxation of the Portfolios
Neuberger & Berman Municipal Money Portfolio and Neuberger & Berman
Municipal Securities Portfolio have received rulings from the Service to the
effect that, among other things, each Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." Although this ruling may not be relied on as precedent by
Neuberger & Berman New York Insured Intermediate Portfolio, N&B Management
believes the reasoning thereof and, hence, this conclusion apply to that
Portfolio as well. As a result, no Portfolio is subject to federal income tax;
instead, each investor in a Portfolio, such as a Fund, is required to take into
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, credits, and tax preference
items, without regard to whether it has received any cash distributions from the
Portfolio. Each Portfolio also is not subject to Delaware or New York income or
franchise tax.
Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund qualifies as a RIC and to pay "exempt-interest" dividends to its
shareholders, each Portfolio intends to continue to conduct its operations so
that its corresponding Fund will be able to continue to satisfy all those
requirements.
Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, (3)
loss will be recognized if a liquidation distribution consists solely of cash
and/or unrealized receivables, and (4) gain (and, in certain situations, loss)
may be recognized on an in-kind distribution by the Portfolio. A Fund's basis
for its interest in its corresponding Portfolio generally equals the amount of
cash and the basis of any property the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income (including tax-exempt income)
and capital gains and decreased by (a) the amount of cash and the basis of any
property the Portfolio distributes to the Fund and (b) the Fund's share of the
Portfolio's losses.
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<PAGE>
The use by Neuberger & Berman Municipal Securities Portfolio and New
York Insured Intermediate Portfolio of hedging strategies, such as writing
(selling) and purchasing Hedging Instruments, involves complex rules that will
determine for income tax purposes the character and timing of recognition of the
gains and losses the Portfolios realize in connection therewith. For each of
these Portfolios, gains from Hedging Instruments derived with respect to its
business of investing in securities will qualify as permissible income for its
corresponding Fund under the Income Requirement. However, income from the
disposition by a Portfolio of Hedging Instruments will be subject to the
Short-Short Limitation for its corresponding Fund if they are held for less than
three months.
If Neuberger & Berman Municipal Securities Portfolio or Neuberger &
Berman New York Insured Intermediate Portfolio satisfies certain requirements,
any increase in value of a position that is part of a "designated hedge" will be
offset by any decrease in value (whether realized or not) of the offsetting
hedging position during the period of the hedge for purposes of determining
whether its corresponding Fund satisfies the Short-Short Limitation. Thus, only
the net gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. Each of these Portfolios will consider whether
it should seek to satisfy those requirements to enable its corresponding Fund to
qualify for this treatment for its hedging transactions. To the extent a
Portfolio does not so qualify, it may be forced to defer the closing out of
certain Hedging Instruments beyond the time when it otherwise would be
advantageous to do so, in order for its corresponding Fund to continue to
qualify as a RIC.
Exchange-traded Futures Contracts and listed options thereon constitute
"Section 1256 contracts." Section 1256 contracts are required to be marked to
market (that is, treated as having been sold at market value) at the end of a
Portfolio's taxable year. Sixty percent of any gain or loss recognized as a
result of these "deemed sales," and 60% of any net realized gain or loss from
any actual sales, of Section 1256 contracts are treated as long-term capital
gain or loss, and the remainder are treated as short-term capital gain or loss.
Each Portfolio may invest in municipal bonds that are purchased with
market discount (that is, at a price less than the bond's principal amount or,
in the case of a bond that was issued with original issue discount ("OID"), at a
price less than the amount of the issue price plus accrued OID) ("municipal
market discount bonds"). If a bond's market discount is less than the product of
(1) 0.25% of the redemption price at maturity times (2) the number of complete
years to maturity after the taxpayer acquired the bond, then no market discount
is considered to exist. Gain on the disposition of a municipal market discount
bond purchased by a Portfolio (other than a bond with a fixed maturity date
within one year from its issuance), generally is treated as ordinary (taxable)
income, rather than capital gain, to the extent of the bond's accrued market
discount at the time of disposition. Market discount on such a bond generally is
accrued ratably, on a daily basis, over the period from the acquisition date to
the date of maturity. In lieu of treating the disposition gain as above, a
Portfolio may elect to include market discount in its gross income currently,
for each taxable year to which it is attributable.
- 56 -
<PAGE>
Each Portfolio may acquire zero coupon or other municipal securities
issued with OID. As a holder of those securities, each Portfolio (and, through
it, its corresponding Fund) must take into account the OID that accrues on the
securities during the taxable year, even if it receives no corresponding payment
on the securities during the year. Because each Fund annually must distribute
substantially all of its investment company taxable income plus its share of its
corresponding Portfolio's accrued tax-exempt OID to satisfy the Distribution
Requirement, a Fund may be required in a particular year to distribute as a
dividend an amount that is greater than its share of the total amount of cash
its corresponding Portfolio actually receives. Those distributions will be made
from a Fund's (or its share of its corresponding Portfolio's) cash assets or, if
necessary, from the proceeds of sales of that Portfolio's securities. A
Portfolio may realize capital gains or losses from those sales, which would
increase or decrease its corresponding Fund's investment company taxable income
and/or net capital gain (the excess of net long-term capital gain over net
short-term capital loss). In addition, any such gains may be realized on the
disposition of securities held for less than three months. Because of the
Short-Short Limitation, any such gains would reduce a Portfolio's ability to
sell other securities, or certain Hedging Instruments, held for less than three
months, that it might wish to sell in the ordinary course of its portfolio
management.
Taxation of the Funds' Shareholders
Interest on indebtedness incurred or continued by a shareholder to
purchase or carry Fund shares is not deductible. Furthermore, entities or
persons who are "substantial users" (or related persons) of facilities financed
by industrial development bonds or private activity bonds should consult their
tax advisers before purchasing shares of a Fund because, for users of certain of
these facilities, the interest on those bonds is not exempt from federal income
tax. For these purposes, the term "substantial user" is defined generally to
include a non-exempt person who regularly uses in trade or business a part of a
facility financed from the proceeds of those bonds.
If Municipal Securities or New York Insured Intermediate shares are
sold at a loss after being held for six months or less, the loss will be
disallowed to the extent of any exempt-interest dividends received on those
shares, and the allowed portion of the loss, if any, will be treated as
long-term, instead of short-term, capital loss to the extent of any capital gain
distributions received on those shares.
Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as a Fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from a Fund still are
tax-exempt to the extent described above; they are only included in the
calculation of whether a recipient's income exceeds the established amounts.
- 57 -
<PAGE>
If a Portfolio invests in any instruments that generate taxable
interest income, under the circumstances described in the Prospectus,
distributions by its corresponding Fund attributable to that interest will be
taxable to the Fund's shareholders as ordinary income to the extent of the
Fund's earnings and profits. Similarly, if a Portfolio realizes capital gain as
a result of market transactions, any distribution by its corresponding Fund
attributable to that gain will be taxable to the Fund's shareholders. There may
be additional federal income tax consequences regarding the receipt of
tax-exempt dividends by shareholders such as "S" corporations, financial
institutions, and property and casualty insurance companies. A shareholder
falling into any such category should consult its tax adviser concerning its
investment in shares of a Fund.
Each Fund is required to withhold 31% of all taxable dividends, and
Municipal Securities and New York Insured Intermediate are required to withhold
31% of all capital gain distributions and redemption proceeds, payable to any
individuals and certain other non-corporate shareholders who do not provide the
Fund with a correct taxpayer identification number. Withholding at that rate
also is required from taxable dividends and capital gain distributions payable
to such shareholders who otherwise are subject to backup withholding.
As described under "How to Sell Shares" in the Prospectus, a Fund may
close a shareholder's account with the Fund and redeem the remaining shares if
the account balance falls below the specified minimum and the shareholder fails
to reestablish the minimum balance after being given the opportunity to do so.
New York State and New York City Income Taxes. The portion of New York
Insured Intermediate's exempt-interest dividends equal to the proportion which
Neuberger & Berman New York Insured Intermediate Portfolio's interest on New
York Municipal Securities bears to all of the Portfolio's tax-exempt interest
(whether or not distributed) also will be exempt from New York State and New
York City personal income taxes. Shareholders subject to income taxation in
states other than New York will realize a lower after-tax rate of return than
New York shareholders because the dividends distributed by the Fund generally
will not be exempt, to any significant degree, from income taxation by such
other states.
Interest on indebtedness incurred or continued to purchase or carry the
Fund's shares is not deductible for New York State and New York City personal
income tax purposes to the extent attributable to interest income exempt from
New York State and New York City personal income taxes. Tax-exempt dividends
paid to a corporate shareholder will be subject to the New York State corporate
franchise tax and New York City general corporation tax.
- 58 -
<PAGE>
VALUATION OF PORTFOLIO SECURITIES
Neuberger & Berman Municipal Money Portfolio relies on Rule 2a-7 under
the 1940 Act to use the amortized cost method of valuation to enable its
corresponding Fund to stabilize the purchase and redemption price of its shares
at $1.00 per share. This method involves valuing portfolio securities at their
cost at the time of purchase and thereafter assuming a constant amortization (or
accretion) to maturity of any premium (or discount), regardless of the impact of
interest rate fluctuations on the market value of the securities. Although
Neuberger & Berman Municipal Money Portfolio's reliance on Rule 2a-7 and use of
the amortized cost valuation method should enable the Fund, under most
conditions, to maintain a stable $1.00 share price, there can be no assurance it
will be able to do so. An investment in the Fund, as in any mutual fund, is
neither insured nor guaranteed by the U.S. Government.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities generally are transacted
with issuers, underwriters, or dealers that serve as primary market-makers, who
act as principals for the securities on a net basis. The Portfolios typically do
not pay brokerage commissions for such purchases and sales. Instead, the price
paid for newly issued securities usually includes a concession or discount paid
by the issuer to the underwriter, and the prices quoted by market-makers reflect
a spread between the bid and the asked prices from which the dealer derives a
profit.
In purchasing and selling portfolio securities other than as described
above (for example, in the secondary market), each Portfolio seeks to obtain
best execution at the most favorable prices through responsible broker-dealers
and, in the case of agency transactions, at competitive commission rates. In
selecting broker-dealers to execute transactions, N&B Management considers such
factors as the price of the security, the rate of commission, the size and
difficulty of the order, and the reliability, integrity, financial condition,
and general execution and operational capabilities of competing broker-dealers.
N&B Management also may consider the brokerage and research services that
broker-dealers provide to the Portfolio or N&B Management. Under certain
conditions, a Portfolio may pay higher brokerage commissions in return for
brokerage and research services, although no Portfolio has a current arrangement
to do so. In any case, each Portfolio may effect principal transactions with a
dealer who furnishes research services, may designate any dealer to receive
selling concessions, discounts, or other allowances, or otherwise may deal with
any dealer in connection with the acquisition of securities in underwritings.
- 59 -
<PAGE>
During the fiscal year ended October 31, 1996, no Portfolio acquired
securities of its "regular brokers or dealers" (as defined in the 1940 Act). At
October 31, 1996, no Portfolio held any securities of its "regular brokers or
dealers."
No affiliate of any Portfolio receives give-ups or reciprocal business
in connection with its portfolio transactions. No Portfolio effects transactions
with or through broker-dealers in accordance with any formula or for selling
shares of a Fund. However, broker-dealers who effect or execute portfolio
transactions may from time to time effect purchases of Fund shares for their
customers. The 1940 Act generally prohibits Neuberger & Berman from acting as
principal in the purchase of portfolio securities from, or the sale of portfolio
securities to, a Portfolio unless an appropriate exemption is available.
Portfolio Turnover
- ------------------
Neuberger & Berman Municipal Securities Portfolio and Neuberger &
Berman New York Insured Intermediate Portfolio calculate a portfolio turnover
rate by dividing (1) the lesser of the cost of the securities purchased or the
proceeds from the securities sold by the Portfolio during the fiscal year other
than securities, including options, whose maturity or expiration date at the
time of acquisition was one year or less by (2) the month-end average value of
such securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and for its corresponding Portfolio. Each Fund's
statements show the investments owned by its corresponding Portfolio and the
market values thereof and provide other information about the Fund and its
operations, including the Fund's beneficial interest in its corresponding
Portfolio.
ORGANIZATION
The predecessors of Municipal Money and Municipal Securities were
converted into separate series of the Trust on July 2, 1993; these conversions
were approved by the shareholders of the predecessors of these Funds in April
1993.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for
its securities and cash. State Street also serves as each Fund's transfer and
shareholder servicing agent, administering purchases, redemptions, and transfers
of Fund shares and the payment of dividends and other distributions through its
Boston Service Center. All correspondence should be mailed to Neuberger & Berman
Funds, c/o Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.
- 60 -
<PAGE>
INDEPENDENT AUDITORS
Each Fund and Portfolio has selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors who will audit its
financial statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal
counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at January 14, 1997:
Percentage of
Ownership at
Name and Address: January 14, 1997
Municipal Money: Neuberger & Berman* 86.85%
11 Broadway
New York, NY 10004
Municipal Securities: Charles Schwab & Co., Inc.* 11.72%
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
Neuberger & Berman* 17.14%
11 Broadway
New York, NY 10004
- 61 -
<PAGE>
New York Insured Neuberger & Berman* 18.93%
Intermediate: 11 Broadway
Attn: Operations Control
New York, NY 10004-1303
Stanley Egener 11.03%
605 Third Avenue
New York, NY 10158
Neuberger & Berman 11.15%
Management Inc.
Attn: M. Weiner
605 Third Avenue
2nd Floor
New York, NY 10158-0180
Charles Schwab & Co., Inc.* 13.74%
101 Montgomery Street
San Francisco, CA 94104-4122
* Charles Schwab & Co., Inc. and Neuberger & Berman hold these shares of
record for the accounts of certain of their clients and have informed
the Funds of their policies to maintain the confidentiality of holdings
in their client accounts unless disclosure is expressly required by
law.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included
in the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration statement,
including the exhibits filed therewith, may be examined at the SEC's offices in
Washington, D.C. The SEC maintains a Website (http://www.sec.gov) that contains
this SAI, material incorporated by reference, and other information regarding
the Funds and Portfolios.
- 62 -
<PAGE>
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance where reference is made to the copy of any
contract or other document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to Shareholders
for the fiscal year ended October 31, 1996:
The Statements of Assets and Liabilities of the Funds and
Portfolios, including the Schedules of Investments of the Portfolios,
as of October 31, 1996, and the related Statements of Operations for
the year then ended, the Statements of Changes in Net Assets for each
of the two years in the period then ended, the Financial Highlights for
each of the periods indicated therein, the notes to each of the
foregoing for the fiscal year ended October 31, 1996, and the reports
of Ernst & Young LLP, independent auditors, with respect to such
audited financial statements of Neuberger & Berman Municipal Money Fund
and Portfolio, Neuberger & Berman Municipal Securities Trust and
Portfolio, and Neuberger & Berman New York Insured Intermediate Fund
and Portfolio.
- 63 -
<PAGE>
Appendix A
RATINGS OF MUNICIPAL OBLIGATIONS AND COMMERCIAL PAPER
S&P municipal bond ratings:
---------------------------
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
Plus (+) or Minus (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
Moody's municipal bond ratings:
-------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or an exceptionally stable
margin, and principal is secure. Although the various protective elements are
likely to change, the changes that can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as "high
grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A-1
<PAGE>
A - Bonds rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Modifiers - Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
company ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the company
ranks in the lower end of its generic rating category.
S&P municipal note ratings:
---------------------------
SP-1 - This designation denotes very strong or strong capacity to pay
principal and interest. Those issuers determined to possess overwhelming safety
characteristics are given a plus (+) designation.
SP-2 - This designation denotes satisfactory capacity to pay principal
and interest.
SP-3 - This designation denotes speculative capacity to pay principal
and interest.
Moody's municipal note ratings:
-------------------------------
MIG 1/VMIG 1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support, or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 - This designation denotes high quality. Margins of
protection are ample, although not so large as in the preceding group.
MIG 3/VMIG 3 - This designation denotes favorable quality. All security
elements are accounted for, but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow, and market
access for refinancing is likely to be less well established.
A-2
<PAGE>
MIG 4/VMIG 4 - This designation denotes adequate quality, carrying
specific risk but having protection and not distinctly or predominantly
speculative. The designation VMIG indicates a variable rate demand note.
S&P commercial paper ratings:
-----------------------------
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issuers determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's Commercial Paper Ratings:
---------------------------------
Issuers rated Prime-1 (or related supporting institutions), also known
as P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions), also known
as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
A-3
<PAGE>
S&P Claims-Paying Ability Ratings of Insurance Companies:
---------------------------------------------------------
AAA - Insurers rated AAA offer superior financial security on both an
absolute and relative basis. They possess the highest safety and have an
overwhelming capacity to meet policyholder obligations.
Moody's Financial Strength Ratings of Insurance Companies:
----------------------------------------------------------
Aaa - Insurers rated Aaa offer exceptional financial security. While
the financial strength of these companies is likely to change, such changes as
can be visualized are most unlikely to impair their fundamentally strong
positions.
A-4
<PAGE>
Appendix B
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
B-1
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
B-2
<PAGE>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure
that some of your investments, make sure that some of your principal is kept
safe, and principal is kept safe, and try to increase try to increase your
income your income as well as your capital. as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
B-3
<PAGE>
Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
B-4
<PAGE>
One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a
book, the last thing to particular security. It is after all just a
fall in love with is a sheet of paper indicating a part ownership in
particular security." a corporation and its use is purely
mercenary. If you must love a security, stay
in love with it until it gets overvalued;
then let somebody else fall in love.
[PICTURE OF ROY NEUBERGER]
B-5
<PAGE>
ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL
INVESTING STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
B-6
<PAGE>
The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR
INVESTING STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
B-7
<PAGE>
Both are an art, although picking stocks is a
minor art compared with painting, sculpture
"When things look bad, I or literature. I started buying art in the
become optimistic. When 30s, and in the 40s it was a daily, almost
everything looks rosy, and hourly occurrence. My inclination to buy the
the crowd is optimistic, I works of living artists comes from Van Gogh,
like to be a seller." who sold only one painting during his
lifetime. He died in poverty, only then to
become a legend and have his work sold for
millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
B-8
<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
B-9
<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
B-10
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
B-11
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
B-12
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 23 ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
Audited financial statements for the fiscal year ended October 31, 1996
for Neuberger & Berman Income Funds (with respect to Neuberger & Berman
Government Money Fund, Neuberger & Berman Cash Reserves, Neuberger &
Berman Ultra Short Bond Fund, Neuberger & Berman Limited Maturity Bond
Fund, Neuberger & Berman Municipal Money Fund, Neuberger & Berman
Municipal Securities Trust and Neuberger & Berman New York Insured
Intermediate Fund) and Income Managers Trust (with respect to Neuberger
& Berman Government Money Portfolio, Neuberger & Berman Cash Reserves
Portfolio, Neuberger & Berman Ultra Short Bond Portfolio, Neuberger &
Berman Limited Maturity Bond Portfolio, Neuberger & Berman Municipal
Money Portfolio, Neuberger & Berman Municipal Securities Portfolio and
Neuberger & Berman New York Insured Intermediate Portfolio) and the
reports of the independent auditors are incorporated into the Statements
of Additional Information for such series by reference.
Included in Part A of this Post-Effective Amendment:
FINANCIAL HIGHLIGHTS for the periods indicated therein for
Neuberger & Berman Government Money Fund, Neuberger & Berman Cash
Reserves, Neuberger & Berman Ultra Short Bond Fund, Neuberger &
Berman Limited Maturity Bond Fund, Neuberger & Berman Municipal
Money Fund, Neuberger & Berman Municipal Securities Trust, and
Neuberger & Berman New York Insured Intermediate Fund.
(b) Exhibits:
Exhibit
Number Description
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-000117.
(b) Trust Instrument of Neuberger & Berman Income
Funds. Incorporated by Reference to Post-
Effective Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-
000117.
C-1
<PAGE>
(c) Schedule A - Current Series of Neuberger &
Berman Income Funds. Incorporated by Reference
to Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-000117.
(2) By-Laws of Neuberger & Berman Income Funds.
Incorporated by Reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-000117.
(3) Voting Trust Agreement. None.
(4) (a) Trust Instrument of Neuberger & Berman Income
Funds, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(b) By-Laws of Neuberger & Berman Income Funds,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(5) (a) (i) Management Agreement Between Income
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated
by Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File Nos.
2-85229 and 811- 3802, EDGAR Accession
No. 0000898432-96- 00017.
(ii) Schedule A - Portfolios of Income
Managers Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-
3802, EDGAR Accession No.
0000898432-96- 00017.
(iii) Schedule B - Schedule of Compensation
under the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
C-2
<PAGE>
(b) (i) Sub-Advisory Agreement Between
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
L.P. with respect to Income Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811- 3802, EDGAR
Accession No. 0000898432-96- 00017.
(ii) Schedule A - Portfolios of Income
Managers Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-
3802, EDGAR Accession No. 0000898432-
96- 00017.
(iii) Substitution Agreement Among Neuberger
& Berman Management Incorporated,
Income Managers Trust, Neuberger &
Berman, L.P., and Neuberger & Berman,
LLC. Filed Herewith.
(6) (a) Distribution Agreement between Neuberger &
Berman Income Funds and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(b) Schedule A - Series of Neuberger & Berman
Income Funds Currently Subject to the
Distribution Agreement. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger & Berman
Income Funds and State Street Bank and Trust
Company. Incorporated by Reference to Post-
Effective Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No. 0000898432-96-
00017.
(b) Schedule A - Approved Foreign Banking
Institutions and Securities Depositories Under
the Custodian Contract. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(c) Schedule of Compensation under the Custodian
Contract. Filed Herewith.
C-3
<PAGE>
(9) (a) (i) Transfer Agency Agreement Between
Neuberger & Berman Income Funds and
State Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(ii) Agreement between Neuberger & Berman
Income Funds and State Street Bank and
Trust Company Adding Neuberger & Berman
New York Insured Intermediate Fund as a
Portfolio Governed by the Transfer
Agency Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-
3802, EDGAR Accession No. 0000898432-
96- 00017.
(iii) First Amendment to Transfer Agency and
Service Agreement between Neuberger &
Berman Income Funds and State Street
Bank and Trust Company. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-
3802, EDGAR Accession No. 0000898432-
96- 00017.
(iv) Schedule of Compensation under the
Transfer Agency Agreement. Filed
Herewith.
(b) (i) Administration Agreement Between
Neuberger & Berman Income Funds and
Neuberger & Berman Management
Incorporated. Incorporated by Reference
to Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(ii) Schedule A - Series of Neuberger &
Berman Income Funds Currently Subject
to the Administration Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
C-4
<PAGE>
(10) Opinion and Consent of Kirkpatrick & Lockhart on
Securities Matters. None.
(11) Other Opinions, Appraisals, Rulings and Consents:
Consents of Ernst & Young LLP, Independent
Auditors. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. Incorporated by Reference
to Pre-Effective Amendment No. 1 to the Registration
Statement of Neuberger & Berman Multi- Series Fund,
Inc., File Nos. 33-19951 and 811-5467.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance Quotations.
Incorporated by Reference to Post-Effective Amendment
No. 17 to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802.
(17) Financial Data Schedules. Filed Herewith.
(18) Plan Pursuant to Rule 18f-3. None.
Item 25. Persons Controlled By or Under Common Control with Registrant.
- -------- --------------------------------------------------------------
No person is controlled by or under common control with the Registrant.
(Registrant is organized in a master/feeder fund structure, and technically may
be considered to control the master fund in which it invests, Income Managers
Trust.)
Item 26. Number of Holders of Securities.
- -------- --------------------------------
The following information is given as of January 9, 1997.
Number of
Title of Class Record Holders
-------------- --------------
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Government Money Fund 4,530
Neuberger & Berman Cash Reserves 10,304
Neuberger & Berman Ultra Short Bond Fund 2,224
Neuberger & Berman Limited Maturity Bond Fund 3,602
Neuberger & Berman Municipal Money Fund 1,232
Neuberger & Berman Municipal Securities Trust 952
Neuberger & Berman New York Insured 245
Intermediate Fund
C-5
<PAGE>
Item 27. Indemnification.
- -------- ----------------
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreement between Income Managers Trust
("Managers Trust") and Neuberger and Berman Management Incorporated ("N&B
Management") provides that neither N&B Management nor any director, officer or
employee of N&B Management performing services for any series of Managers Trust
(each a "Portfolio") at the direction or request of N&B Management in connection
with N&B Management's discharge of its obligations under the Agreement shall be
liable for any error of judgment or mistake of law or for any loss suffered by a
Portfolio in connection with any matter to which the Agreement relates;
provided, that nothing in the Agreement shall be construed (i) to protect N&B
Management against any liability to Managers Trust or a Portfolio or its
interestholders to which N&B Management would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of N&B Management's reckless disregard of its obligations
and duties under the Agreement, or (ii) to protect any director, officer or
employee of N&B Management who is or was a trustee or officer of Managers Trust
against any liability to Managers Trust or a Portfolio or its interestholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office with Managers Trust.
C-6
<PAGE>
Section 1 of the Sub-Advisory Agreement between N&B Management and
Neuberger & Berman, L.P. ("Neuberger & Berman") with respect to Managers Trust
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreement, Neuberger & Berman will not be
subject to liability for any act or omission or any loss suffered by any
Portfolio or its interestholders in connection with the matters to which the
Agreement relates.
Section 12 of the Administration Agreement between the Registrant and
N&B Management provides that N&B Management will not be liable to the Registrant
for any action taken or omitted to be taken by N&B Management or its employees,
agents or contractors in carrying out the provisions of the Agreement if such
action was taken or omitted in good faith and without negligence or misconduct
on the part of N&B Management, or its employees, agents or contractors. Section
13 of the Administration Agreement provides that the Registrant shall indemnify
N&B Management and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by N&B
Management that result from: (i) any claim, action, suit or proceeding in
connection with N&B Management's entry into or performance of the Agreement; or
(ii) any action taken or omission to act committed by N&B Management in the
performance of its obligations under the Agreement; or (iii) any action of N&B
Management upon instructions believed in good faith by it to have been executed
by a duly authorized officer or representative of a Series; provided, that N&B
Management will not be entitled to such indemnification in respect of actions or
omissions constituting negligence or misconduct on the part of N&B Management,
or its employees, agents or contractors. Amounts payable by the Registrant under
this provision shall be payable solely out of assets belonging to that Series,
and not from assets belonging to any other Series of the Registrant. Section 14
of the Administration Agreement provides that N&B Management will indemnify the
Registrant and hold it harmless from and against any and all losses, damages and
expenses, including reasonable attorneys' fees and expenses, incurred by the
Registrant that result from: (i) N&B Management's failure to comply with the
terms of the Agreement; or (ii) N&B Management's lack of good faith in
performing its obligations under the Agreement; or (iii) the negligence or
misconduct of N&B Management, or its employees, agents or contractors in
connection with the Agreement. The Registrant shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence or
misconduct on the part of the Registrant or its employees, agents or contractors
other than N&B Management, unless such negligence or misconduct results from or
is accompanied by negligence or misconduct on the part of N&B Management, any
affiliated person of N&B Management, or any affiliated person of an affiliated
person of N&B Management.
Section 11 of the Distribution Agreement between the Registrant and N&B
Management provides that N&B Management shall look only to the assets of a
Series for the Registrant's performance of the Agreement by the Registrant on
behalf of such Series, and neither the trustees nor any of the Registrant's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of
C-7
<PAGE>
any action, suit or proceeding) is asserted by such trustee, officer or
controlling person, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Adviser and Sub-Adviser.
- -------- ----------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of N&B Management and each partner of Neuberger & Berman is,
or at any time during the past two years has been, engaged for his or her own
account or in the capacity of director, officer, employee, partner or trustee.
NAME BUSINESS AND OTHER CONNECTIONS
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, Management Trust (Delaware business
N&B Management trust); Secretary, Advisers Managers
Trust; Secretary, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); Secretary,
Neuberger & Berman Income Funds;
Secretary, Neuberger & Berman Income
Trust; Secretary, Neuberger & Berman
Equity Funds; Secretary, Neuberger &
Berman Equity Trust; Secretary, Income
Managers Trust; Secretary, Equity
Managers Trust; Secretary, Global
Managers Trust; Secretary, Neuberger &
Berman Equity Assets.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Assistant Secretary,
Advisers Managers Trust; Assistant
Secretary, Neuberger & Berman Advisers
Management Trust (Massachusetts business
trust) (1); Assistant Secretary,
Neuberger & Berman Income Funds;
Assistant Secretary, Neuberger & Berman
Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds;
Assistant Secretary, Neuberger & Berman
Equity Trust; Assistant Secretary,
Income Managers Trust; Assistant
Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers
Trust; Assistant Secretary, Neuberger &
Berman Equity Assets.
C-8
<PAGE>
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Assistant Treasurer,
Advisers Managers Trust; Assistant
Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger &
Berman Income Trust; Assistant
Treasurer, Neuberger & Berman Equity
Funds; Assistant Treasurer, Neuberger &
Berman Equity Trust; Assistant
Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers
Trust; Assistant Treasurer, Global
Managers Trust; Assistant Treasurer,
Neuberger & Berman Equity Assets.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers Management
N&B Management; Principal, Trust (Delaware business trust);
Neuberger & Berman Chairman of the Board and Trustee,
Advisers Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); Chairman of the
Board and Trustee, Neuberger & Berman
Income Funds; Chairman of the Board and
Trustee, Neuberger & Berman Income
Trust; Chairman of the Board and
Trustee, Neuberger & Berman Equity
Funds; Chairman of the Board and
Trustee, Neuberger & Berman Equity
Trust; Chairman of the Board and
Trustee, Income Managers Trust; Chairman
of the Board and Trustee, Equity
Managers Trust; Chairman of the Board
and Trustee, Global Managers Trust;
Chairman of the Board and Trustee,
Neuberger & Berman Equity Assets.
Theodore P. Giuliano President and Trustee, Neuberger &
Vice President and Director, N&B Berman Income Funds; President and
Management; Principal, Neuberger & Trustee, Neuberger & Berman Income
Berman Trust; President and Trustee, Income
Managers Trust.
C-9
<PAGE>
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust (Delaware
business trust); Assistant Secretary,
Advisers Managers Trust; Assistant
Secretary, Neuberger & Berman Advisers
Management Trust (Massachusetts business
trust) (1); Assistant Secretary,
Neuberger & Berman Income Funds;
Assistant Secretary, Neuberger & Berman
Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds;
Assistant Secretary, Neuberger & Berman
Equity Trust; Assistant Secretary,
Income Managers Trust; Assistant
Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers
Trust; Assistant Secretary, Neuberger &
Berman Equity Assets.
Felix Rovelli Senior Vice President-Senior Equity
Vice President, N&B Management Portfolio Manager, BNP-N&B Global Asset
Management L.P. (joint venture of
Neuberger & Berman and Banque Nationale
de Paris) (2).
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, N&B Management Management Trust (Delaware business
trust); Treasurer, Advisers Managers
Trust; Treasurer, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); Treasurer,
Neuberger & Berman Income Funds;
Treasurer, Neuberger & Berman Income
Trust; Treasurer, Neuberger & Berman
Equity Funds; Treasurer, Neuberger &
Berman Equity Trust; Treasurer, Income
Managers Trust; Treasurer, Equity
Managers Trust; Treasurer, Global
Managers Trust; Treasurer, Neuberger &
Berman Equity Assets.
C-10
<PAGE>
Daniel J. Sullivan Vice President, Neuberger & Berman
Senior Vice President, N&B Management Advisers Management Trust (Delaware
business trust); Vice President,
Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management
Trust (Massachusetts business trust)
(1); Vice President, Neuberger & Berman
Income Funds; Vice President, Neuberger
& Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice
President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger &
Berman Equity Assets.
Susan Switzer Portfolio Manager, Mitchell Hutchins
Assistant Vice President, Asset Management Inc., 1285 Avenue of
N&B Management the Americas, New York, New York 10019
(3).
Michael J. Weiner Vice President, Neuberger & Berman
Senior Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Vice President,
Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management
Trust (Massachusetts business trust)
(1); Vice President, Neuberger & Berman
Income Funds; Vice President, Neuberger
& Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice
President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger &
Berman Equity Assets.
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Assistant Treasurer,
Advisers Managers Trust; Assistant
Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger &
Berman Income Trust; Assistant
Treasurer, Neuberger & Berman Equity
Funds; Assistant Treasurer, Neuberger &
Berman Equity Trust; Assistant
Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers
Trust; Assistant Treasurer, Global
Managers Trust; Assistant Treasurer,
Neuberger & Berman Equity Assets.
C-11
<PAGE>
Lawrence Zicklin President and Trustee, Neuberger &
Director, N&B Management; Berman Advisers Management Trust
Principal, Neuberger & (Delaware business trust); President and
Berman Trustee, Advisers Managers Trust;
President and Trustee, Neuberger &
Berman Advisers Management Trust
(Massachusetts business trust) (1);
President and Trustee, Neuberger &
Berman Equity Funds; President and
Trustee, Neuberger & Berman Equity
Trust; President and Trustee, Equity
Managers Trust; President, Global
Managers Trust; President and Trustee,
Neuberger & Berman Equity Assets
The principal address of N&B Management, Neuberger & Berman, and of each
of the investment companies named above, is 605 Third Avenue, New York, New York
10158.
(1) Until April 30, 1995.
(2) Until 1994.
Item 29. Principal Underwriters.
- -------- -----------------------
(a) N&B Management, the principal underwriter distributing securities of
the Registrant, is also the principal underwriter and distributor for each of
the following investment companies and any series thereof:
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Assets
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Trust
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the master funds
in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and officers
of the Registrant's principal underwriter. The principal business address of
each of the persons listed is 605 Third Avenue, New York, New York 10158-0180,
which is also the address of the Registrant's principal underwriter.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board and None
Director
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
William Cunningham Vice President None
C-12
<PAGE>
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the Board
of Trustees
(Chief Executive
Officer)
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Assistant Vice President None
Mark R. Goldstein Vice President None
Theodore P. Giuliano Vice President and Director None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Irwin Lainoff Director None
Michael Lamberti Vice President None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and None
Secretary
Paul Metzger Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Assistant Vice President None
Felix Rovelli Vice President None
Richard Russell Vice President Treasurer (Principal
Accounting Officer)
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Susan Switzer Assistant Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Clara Del Villar Vice President None
Susan Walsh Vice President None
C-13
<PAGE>
Michael J. Weiner Senior Vice President Vice President
(Principal Financial
Officer)
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
KimMarie Zamot Assistant Vice President None
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not
an affiliated person of the Registrant.
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
All accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act, as amended, and the rules promulgated
thereunder with respect to the Registrant are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Registrant's Trust Instrument and By-Laws, minutes of meetings of
the Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
Item 31. Management Services
- -------- -------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings
- -------- ------------
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, NEUBERGER & BERMAN INCOME FUNDS certifies that
it meets all of the requirements for effectiveness of the Post-Effective
Amendment No. 23 to the Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City and State of New York on the 30th day of January,
1997.
NEUBERGER & BERMAN INCOME FUNDS
By: /s/ Theodore P. Giuliano
----------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 23 has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John Cannon Trustee January 30, 1997
- ------------------------
John Cannon
/s/ Stanley Egener Chairman of the Board, January 30, 1997
- ------------------------ Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee January 30, 1997
- ------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee January 30, 1997
- ------------------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee January 30, 1997
- ------------------------
Robert A. Kavesh
/s/ William E. Rulon Trustee January 30, 1997
- ------------------------
William E. Rulon
/s/ Richard Russell Treasurer and January 30, 1997
- ------------------------ Principal Accounting
Richard Russell Officer
/s/ Candace L. Straight Trustee January 30, 1997
- -----------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and January 30, 1997
- ------------------------ Principal Financial
Michael J. Weiner Officer
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, INCOME MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of the Post-Effective Amendment No. 23
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 30th day of January, 1997.
INCOME MANAGERS TRUST
By: /s/ Theodore P. Giuliano
--------------------------
Theodore P. Giuliano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 23 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee January 30, 1997
- ------------------
John Cannon
/s/ Stanley Egener Chairman of the Board, January 30, 1997
- ------------------
Stanley Egener Chief Executive Officer
and Trustee
/s/ Theodore P. Giuliano President and Trustee January 30, 1997
- ------------------------
Theodore P. Giuliano
Trustee January 30, 1997
- -----------------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee January 30, 1997
- --------------------
Robert A. Kavesh
/s/ William E. Rulon Trustee January 30, 1997
- --------------------
William E. Rulon
/s/ Richard Russell Treasurer and January 30, 1997
- -------------------
Richard Russell Principal Accounting Officer
/s/ Candace L. Straight Trustee January 30, 1997
- -----------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and January 30, 1997
- ---------------------
Michael J. Weiner Principal Financial Officer
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 23 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------- ---------------------------------------------- ------------
(1) (a) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(b) Trust Instrument of Neuberger & Berman N.A.
Income Funds. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(c) Schedule A - Current Series of Neuberger & N.A
Berman Income Funds. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(2) By-Laws of Neuberger & Berman Income Funds. N.A.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(3) Voting Trust Agreement. None. N.A.
(4) (a) Trust Instrument of Neuberger & Berman N.A.
Income Funds, Articles IV, V, and VI.
Incorporated by Reference to Post-Effective
Amendment No. 21 to Registrant's
Registration Statement, File Nos. 2-85229
and 811-3802, EDGAR Accession No.
0000898432-96-00017.
(b) By-Laws of Neuberger & Berman Income Funds, N.A.
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(5) (a) (i) Management Agreement Between Income N.A.
Managers Trust and Neuberger & Berman
Management Incorporated.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
<PAGE>
(ii) Schedule A - Portfolios of Income N.A.
Managers Trust Currently Subject to
the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(b) (i) Sub-Advisory Agreement Between N.A.
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
L.P. with Respect to Income Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(ii) Schedule A - Portfolios of Income N.A
Managers Trust Currently Subject to
the Sub-Advisory Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(iii) Substitution Agreement Among Neuberger
& Berman Management Incorporated, ____
Income Managers Trust, Neuberger &
Berman, L.P., and Neuberger & Berman,
LLC. Filed Herewith.
(6) (a) Distribution Agreement Between Neuberger & N.A.
Berman Income Funds and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(b) Schedule A - Series of Neuberger & Berman N.A.
Income Funds Currently Subject to the
Distribution Agreement. Incorporated
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
<PAGE>
(8) (a) Custodian Contract Between Neuberger & N.A.
Berman Income Funds and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 21
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(b) Schedule A - Approved Foreign Banking N.A.
Institutions and Securities Depositories
Under the Custodian Contract. Incorporated
by Reference to Post-Effective Amendment No.
21 to Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(c) Schedule of Compensation under the Custodian ____
Contract. Filed Herewith.
(9) (a) (i) Transfer Agency Agreement Between N.A.
Neuberger & Berman Income Funds and
State Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(ii) Agreement between Neuberger & Berman N.A.
Income Funds and State Street Bank and
Trust Company Adding Neuberger & Berman
New York Insured Intermediate Fund as a
Portfolio Governed by the Transfer
Agency Agreement. Incorporated by
Reference to Post- Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.
(iii) First Amendment to Transfer Agency N.A.
and Service Agreement between
Neuberger & Berman Income Funds and
State Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(iv) Schedule of Compensation under the
Transfer Agency Agreement. Filed
Herewith. ____
<PAGE>
(b) (i) Administration Agreement Between N.A.
Neuberger & Berman Income Funds and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 21 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-
3802, EDGAR Accession No. 0000898432-
96-00017.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Income Funds Currently Subject
to the Administration Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Administration Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 21 to
Registrant's Registration Statement,
File Nos. 2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(10) Opinion and Consent of Kirkpatrick & Lockhart on N.A.
Securities Matters. None.
(11) Other Opinions, Appraisals, Rulings and Consents: ____
Consent of Ernst & Young LLP, Independent
Auditors. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. N.A.
None.
(13) Letter of Investment Intent. Incorporated by N.A.
Reference to Pre-Effective Amendment No. 1 to the
Registration Statement of Neuberger & Berman
Multi-Series Fund, Inc., File Nos. 33-19951 and
811-5467.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation Performance Quotations. N.A.
Incorporated by Reference to Post-Effective
Amendment No. 17 to Registrant's Registration
Statement, File Nos. 2-85229 and 811-3802.
(17) Financial Data Schedules. Filed Herewith. ____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Cash Reserves Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN CASH RESERVES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 483,975
<RECEIVABLES> 498
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 484,473
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,475
<TOTAL-LIABILITIES> 2,475
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 482,009
<SHARES-COMMON-STOCK> 482,009
<SHARES-COMMON-PRIOR> 408,889
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 481,998
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,674
<OTHER-INCOME> 0
<EXPENSES-NET> (3,029)
<NET-INVESTMENT-INCOME> 22,645
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 22,649
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,645)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 865,548
<NUMBER-OF-SHARES-REDEEMED> (814,685)
<SHARES-REINVESTED> 22,257
<NET-CHANGE-IN-ASSETS> 73,124
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,120
<AVERAGE-NET-ASSETS> 465,910
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Government Money Fund Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GOVERNMENT MONEY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 362,482
<RECEIVABLES> 1,261
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 363,743
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 355
<TOTAL-LIABILITIES> 355
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 363,394
<SHARES-COMMON-STOCK> 363,394
<SHARES-COMMON-PRIOR> 308,341
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 363,388
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,087
<OTHER-INCOME> 0
<EXPENSES-NET> (1,888)
<NET-INVESTMENT-INCOME> 13,199
<REALIZED-GAINS-CURRENT> (6)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 13,193
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (13,199)
<DISTRIBUTIONS-OF-GAINS> (4)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 725,958
<NUMBER-OF-SHARES-REDEEMED> (683,930)
<SHARES-REINVESTED> 13,025
<NET-CHANGE-IN-ASSETS> 55,043
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,888
<AVERAGE-NET-ASSETS> 283,674
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Limited Maturity Bond Fund Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN LIMITED MATURITY BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 246,056
<RECEIVABLES> 92
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 246,148
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 459
<TOTAL-LIABILITIES> 459
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 256,070
<SHARES-COMMON-STOCK> 24,597
<SHARES-COMMON-PRIOR> 30,567
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,334)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,047)
<NET-ASSETS> 245,689
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,331
<OTHER-INCOME> 0
<EXPENSES-NET> (1,990)
<NET-INVESTMENT-INCOME> 17,341
<REALIZED-GAINS-CURRENT> (982)
<APPREC-INCREASE-CURRENT> (1,668)
<NET-CHANGE-FROM-OPS> 14,691
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,078)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,134
<NUMBER-OF-SHARES-REDEEMED> (15,523)
<SHARES-REINVESTED> 1,419
<NET-CHANGE-IN-ASSETS> (61,722)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8,471)
<OVERDISTRIB-NII-PRIOR> (148)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,007
<AVERAGE-NET-ASSETS> 284,234
<PER-SHARE-NAV-BEGIN> 10.06
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Municipal Money Fund Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 08
<NAME> NEUBERGER&BERMAN MUNICIPAL MONEY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 132,723
<RECEIVABLES> 8
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 132,731
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132,698
<SHARES-COMMON-STOCK> 132,698
<SHARES-COMMON-PRIOR> 160,908
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (99)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 132,599
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,723
<OTHER-INCOME> 0
<EXPENSES-NET> (1,154)
<NET-INVESTMENT-INCOME> 4,569
<REALIZED-GAINS-CURRENT> 2
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,569)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 240,030
<NUMBER-OF-SHARES-REDEEMED> (272,748)
<SHARES-REINVESTED> 4,508
<NET-CHANGE-IN-ASSETS> (28,208)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (101)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,154
<AVERAGE-NET-ASSETS> 159,879
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Municipal Securities Trust Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 09
<NAME> NEUBERGER&BERMAN MUNICIPAL SECURITIES TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 38,962
<RECEIVABLES> 51
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,013
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 92
<TOTAL-LIABILITIES> 92
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 39,378
<SHARES-COMMON-STOCK> 3,609
<SHARES-COMMON-PRIOR> 4,092
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (883)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 426
<NET-ASSETS> 38,921
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,054
<OTHER-INCOME> 0
<EXPENSES-NET> (269)
<NET-INVESTMENT-INCOME> 1,785
<REALIZED-GAINS-CURRENT> 227
<APPREC-INCREASE-CURRENT> (432)
<NET-CHANGE-FROM-OPS> 1,580
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,785)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 595
<NUMBER-OF-SHARES-REDEEMED> (1,189)
<SHARES-REINVESTED> 111
<NET-CHANGE-IN-ASSETS> (5,399)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,110)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 429
<AVERAGE-NET-ASSETS> 41,322
<PER-SHARE-NAV-BEGIN> 10.83
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> (.05)
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.78
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman New York Insured Intermediate Fund Annual Report and
is qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 9,648
<RECEIVABLES> 12
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,678
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43
<TOTAL-LIABILITIES> 43
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,000
<SHARES-COMMON-STOCK> 967
<SHARES-COMMON-PRIOR> 1,149
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (373)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8
<NET-ASSETS> 9,635
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 475
<OTHER-INCOME> 0
<EXPENSES-NET> (67)
<NET-INVESTMENT-INCOME> 408
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> (40)
<NET-CHANGE-FROM-OPS> 341
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (408)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 261
<NUMBER-OF-SHARES-REDEEMED> (467)
<SHARES-REINVESTED> 24
<NET-CHANGE-IN-ASSETS> (1,860)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (346)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 200
<AVERAGE-NET-ASSETS> 10,135
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> (.05)
<PER-SHARE-DIVIDEND> (.40)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.96
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted form the
Neuberger&Berman Ultra Short Bond Fund Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN ULTRA SHORT BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 89,426
<RECEIVABLES> 87
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 89,513
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 562
<TOTAL-LIABILITIES> 562
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93,063
<SHARES-COMMON-STOCK> 9,371
<SHARES-COMMON-PRIOR> 10,551
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,449)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 337
<NET-ASSETS> 88,951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,832
<OTHER-INCOME> 0
<EXPENSES-NET> (614)
<NET-INVESTMENT-INCOME> 5,218
<REALIZED-GAINS-CURRENT> (550)
<APPREC-INCREASE-CURRENT> 153
<NET-CHANGE-FROM-OPS> 4,821
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,218)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,838
<NUMBER-OF-SHARES-REDEEMED> (4,500)
<SHARES-REINVESTED> 482
<NET-CHANGE-IN-ASSETS> (11,571)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4,660)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 791
<AVERAGE-NET-ASSETS> 94,379
<PER-SHARE-NAV-BEGIN> 9.53
<PER-SHARE-NII> .52
<PER-SHARE-GAIN-APPREC> (.04)
<PER-SHARE-DIVIDEND> (.52)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.49
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Cash Reserves Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN CASH RESERVES PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 482,179
<INVESTMENTS-AT-VALUE> 482,179
<RECEIVABLES> 1,914
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 22
<TOTAL-ASSETS> 484,141
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166
<TOTAL-LIABILITIES> 166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 427,537
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 56,438
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 483,975
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,674
<OTHER-INCOME> 0
<EXPENSES-NET> (1,407)
<NET-INVESTMENT-INCOME> 24,267
<REALIZED-GAINS-CURRENT> 4
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24,271
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 74,744
<ACCUMULATED-NII-PRIOR> 32,171
<ACCUMULATED-GAINS-PRIOR> (4)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,168
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,407
<AVERAGE-NET-ASSETS> 467,037
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Government Money Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GOVERNMENT MONEY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 360,446
<INVESTMENTS-AT-VALUE> 360,446
<RECEIVABLES> 2,020
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 111
<TOTAL-ASSETS> 362,599
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 117
<TOTAL-LIABILITIES> 117
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 322,283
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 40,198
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 362,482
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,087
<OTHER-INCOME> 0
<EXPENSES-NET> (886)
<NET-INVESTMENT-INCOME> 14,201
<REALIZED-GAINS-CURRENT> (6)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 53,997
<ACCUMULATED-NII-PRIOR> 25,997
<ACCUMULATED-GAINS-PRIOR> 7
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 711
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 886
<AVERAGE-NET-ASSETS> 284,328
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Limited Maturity Bond Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 274,509
<INVESTMENTS-AT-VALUE> 274,317
<RECEIVABLES> 3,771
<ASSETS-OTHER> 25
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 278,113
<PAYABLE-FOR-SECURITIES> 10,637
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167
<TOTAL-LIABILITIES> 10,804
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 211,748
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 65,408
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,849)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (998)
<NET-ASSETS> 267,309
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,377
<OTHER-INCOME> 0
<EXPENSES-NET> (991)
<NET-INVESTMENT-INCOME> 19,386
<REALIZED-GAINS-CURRENT> (992)
<APPREC-INCREASE-CURRENT> (1,726)
<NET-CHANGE-FROM-OPS> 16,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (52,337)
<ACCUMULATED-NII-PRIOR> 46,022
<ACCUMULATED-GAINS-PRIOR> (7,857)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 751
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 991
<AVERAGE-NET-ASSETS> 300,392
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Municipal Money Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 08
<NAME> NEUBERGER&BERMAN MUNICIPAL MONEY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 131,675
<INVESTMENTS-AT-VALUE> 131,675
<RECEIVABLES> 1,052
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 66
<TOTAL-ASSETS> 132,802
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 79
<TOTAL-LIABILITIES> 79
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,945
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 15,796
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 132,723
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,723
<OTHER-INCOME> 0
<EXPENSES-NET> (584)
<NET-INVESTMENT-INCOME> 5,139
<REALIZED-GAINS-CURRENT> 2
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5,141
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (28,371)
<ACCUMULATED-NII-PRIOR> 10,657
<ACCUMULATED-GAINS-PRIOR> (20)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 400
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 584
<AVERAGE-NET-ASSETS> 160,136
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Municipal Securities Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 09
<NAME> NEUBERGER&BERMAN MUNICIPAL SECURITIES PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 37,959
<INVESTMENTS-AT-VALUE> 38,460
<RECEIVABLES> 508
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 38
<TOTAL-ASSETS> 39,010
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 48
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,072
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8,719
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (255)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 426
<NET-ASSETS> 38,962
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,054
<OTHER-INCOME> 0
<EXPENSES-NET> (194)
<NET-INVESTMENT-INCOME> 1,860
<REALIZED-GAINS-CURRENT> 227
<APPREC-INCREASE-CURRENT> (432)
<NET-CHANGE-FROM-OPS> 1,655
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (5,458)
<ACCUMULATED-NII-PRIOR> 6,859
<ACCUMULATED-GAINS-PRIOR> (482)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 194
<AVERAGE-NET-ASSETS> 41,436
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman New York Insured Intermediate Portfolio Annual Report
and is qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> NEUBERGER&BERMAN NEW YORK INSURED INTERMEDIATE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 9,502
<INVESTMENTS-AT-VALUE> 9,510
<RECEIVABLES> 143
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 16
<TOTAL-ASSETS> 9,677
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,724
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,289
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (373)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8
<NET-ASSETS> 9,648
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 475
<OTHER-INCOME> 0
<EXPENSES-NET> (94)
<NET-INVESTMENT-INCOME> 381
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> (40)
<NET-CHANGE-FROM-OPS> 314
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,869)
<ACCUMULATED-NII-PRIOR> 908
<ACCUMULATED-GAINS-PRIOR> (346)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 94
<AVERAGE-NET-ASSETS> 10,153
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Ultra Short Bond Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN ULTRA SHORT BOND PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 94,783
<INVESTMENTS-AT-VALUE> 95,142
<RECEIVABLES> 970
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 3
<TOTAL-ASSETS> 96,122
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59
<TOTAL-LIABILITIES> 59
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,675
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 16,650
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,621)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 359
<NET-ASSETS> 96,063
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,215
<OTHER-INCOME> 0
<EXPENSES-NET> (398)
<NET-INVESTMENT-INCOME> 5,817
<REALIZED-GAINS-CURRENT> (592)
<APPREC-INCREASE-CURRENT> 172
<NET-CHANGE-FROM-OPS> 5,397
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,003)
<ACCUMULATED-NII-PRIOR> 10,833
<ACCUMULATED-GAINS-PRIOR> (2,029)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 252
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 398
<AVERAGE-NET-ASSETS> 100,852
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
SUBSTITUTION AGREEMENT
AGREEMENT, made this lst day of November, 1996, by and among
Neuberger&Berman Management Incorporated ("NBMI"), a New York corporation;
Neuberger&Berman, L.P. ("N&B L.P."), a New York limited partnership;
Neuberger&Berman, LLC, ("N&B LLC"), a Delaware limited liability company; and
Income Managers Trust, a New York common law trust (the "trust").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended ("Act"), and the Trust issues shares in several
different classes, each of which is known as a "Series": and
WHEREAS, NBMI serves as Investment Manager to the Trust pursuant to a
Management Agreement between the Trust and NBMI dated July 2, 1993; and
WHEREAS, NBMI entered into a Sub-Advisory Agreement with N&B L.P., dated
July 2, 1993 (the "Sub-Advisory Agreement"), under which N&B L.P. serves as the
Sub-Adviser for the Series of the Trust; and
WHEREAS, N&B LLC was organized on September 10, 1996, to succeed to the
investment advisory business of N&B L.P.; and
WHEREAS, N&B L.P. wishes to substitute N&B LLC in place of N&B L.P., as
a party to the Sub-Advisory Agreement; and
WHEREAS, N&B L.P. has represented to NBMI that N&B LLC is under the same
management and control as N&B L.P., that the individuals responsible for the
day-to-day operations are identical for N&B LLC and for N&B L.P., that the
investment process and procedures are identical for N&B LLC and for N&B L.P.,
and that in the event of substitution as requested by N&B L.P. the persons
rendering portfolio management services for the Series would remain the same;
and
WHEREAS, N&B LLC has entered into a written agreement with N&B L.P.
whereby N&B LLC agrees to assume all liabilities of N&B L.P.; and
WHEREAS, under these circumstances, NBMI and the Trust agree to the
substitution of N&B LLC as a party to the Sub-Advisory Agreement in place of N&B
L.P.
NOW, THEREFORE, it is agreed as follows:
1. SUBSTITUTION OF PARTY. Effective as of the date first written above,
N&B LLC hereby assumes all of the interest, rights and responsibilities of N&B
L.P. under the Sub-Advisory Agreement.
<PAGE>
2. PERFORMANCE OF DUTIES. N&B LLC hereby assumes and agrees to perform
all of N&B L.P.'s duties and obligations under the Sub-Advisory Agreement and be
subject to all of the terms and conditions of said Agreement as if they applied
to N&B LLC. Nothing in this Substitution Agreement shall make N&B LLC
responsible for any claim or demand arising under the Sub-Advisory Agreement
from services rendered prior to the effective date of this Substitution
Agreement unless otherwise agreed by N&B LLC; and nothing in this Substitution
Agreement shall make N&B L.P. responsible for any claim or demand arising under
the Sub-Advisory Agreement from services rendered after the effective date of
this Substitution Agreement unless otherwise agreed by N&B L.P.
3. REPRESENTATION OF N&B LLC. N&B LLC represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940
("Advisers Act"). N&B L.P. and N&B LLC each represent and warrant that they are
under the same control and management, and that substitution of N&B LLC as a
party to the Sub-Advisory Agreement in place of N&B L.P. shall not result in an
"assignment" of the Sub-Advisory Agreement as that term is defined in the Act or
the Advisers Act.
4. CONSENTS. NBMI and the Trust hereby consent to this assumption by N&B
LLC of the interest, rights and responsibilities of N&B L.P. under the
Sub-Advisory Agreement and agree, subject to the terms and conditions of said
Agreement, to look solely to N&B LLC for the performance of the Sub-Adviser's
duties and obligations under said Agreement after the effective date described
above.
IN WITNESS WHEREOF, the parties hereto have caused this Substitution
Agreement to be executed by their duly authorized officers hereunto daily
attested as of the date and year first written above.
Neuberger&Berman Management Incorporated
By: /s/ Stanley Egener
--------------------
President
Title
Income Managers Trust
By: /s/ Michael J. Weiner
----------------------
Vice President
Title
Neuberger&Berman, L.P.
By: /S/ C. Carl Randolph
----------------------
General Partner
Title
Neuberger&Berman, LLC
By: /S/ Lawrence Zicklin
-----------------------
Managing Principal
Title
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
NEUBERGER AND BERMAN FUND COMPLEX
EQUITY MANAGERS TRUST:
. NEUBERGER AND BERMAN FOCUS PORTFOLIO
. NEUBERGER AND BERMAN GENESIS PORTFOLIO
. NEUBERGER AND BERMAN GUARDIAN PORTFOLIO
. NEUBERGER AND BERMAN MANHATTAN PORTFOLIO
. NEUBERGER AND BERMAN PARTNERS PORTFOLIO
. NEUBERGER AND BERMAN SOCIALLY RESPONSIVE PORTFOLIO
INCOME MANAGERS TRUST:
. NEUBERGER AND BERMAN CASH RESERVES PORTFOLIO NEUBERGER AND BERMAN
. GOVERNMENT MONEY PORTFOLIO NEUBERGER AND BERMAN LIMITED MATURITY BOND
. PORTFOLIO NEUBERGER AND BERMAN MUNICIPAL MONEY PORTFOLIO NEUBERGER AND
. BERMAN MUNICIPAL SECURITIES PORTFOLIO NEUBERGER AND BERMAN NEW YORK
. INSURED INTERMEDIATE PORTFOLIO NEUBERGER AND BERMAN ULTRA SHORT BOND
ADVISERS MANAGERS TRUST:
. AMT BALANCED INVESTMENTS
. AMT GOVERNMENT INCOME INVESTMENTS
. AMT GROWTH INVESTMENTS
. AMT INTERNATIONAL INVESTMENTS
. AMT LIMITED MATURITY BOND INVESTMENTS
. AMT LIQUID ASSET INVESTMENTS
. AMT PARTNERS INVESTMENTS
- --------------------------------------------------------------------------------
I. ADMINISTRATION
- --------------------------------------------------------------------------------
CUSTODY, PORTFOLIO AND FUND ACCOUNTING SERVICE: Maintain custody of
fund assets. Settle portfolio purchase and sales. Report buy and sell
fails. Determine and collect portfolio income. Make cash disbursements
and report cash transactions. Maintain investment ledgers, provide
selected portfolio transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare daily trial balance.
Calculate net asset value daily. Provide selected general ledger
reports. Securities yield or market value quotations will be provided
to State Street by sources authorized by the funds.
The administration fee shown below is an annual charge, billed and
payable monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
-------------------------
Custody, Portfolio
Fund Net Assets and Fund Accounting
--------------- -------------------
$0 - $20 million .075%
$20 - $100 million .037%
$100 - $200 million .028%
$200 - $500 million .014%
Over $500 million .013%
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 2
- --------------------------------------------------------------------------------
II. GLOBAL CUSTODY
- --------------------------------------------------------------------------------
These fees are divided into two categories: Transaction Charges and
Holdings Charges which are calculated based on the following country
groups:
<TABLE>
<CAPTION>
A. COUNTRY GROUPING
GROUP A GROUP B GROUP C GROUP D GROUP E GROUP F
----------- ------------ ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
USA Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Euroclear Hong Kong France Philippines Brazil
Germany Netherlands Ireland Portugal Chile
Japan New Zealand Italy So. Korea China
Singapore Luxembourg Spain Columbia
Switzerland Mexico Sri Lanka Czech Republic
Norway Sweden Cyprus
Thailand Taiwan Greece
U.K. Hungary
India
Israel
Morocco
Pakistan
Peru
Poland
So. Africa
Turkey
Uruguay
Venezuela
</TABLE>
<TABLE>
<CAPTION>
B. TRANSACTIONS CHARGES
GROUP A GROUP B GROUP C GROUP D GROUP E GROUP F
------------------------- ------------ -------------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
State Street Bank $25 $50 $60 $70 $150
Repos or Euros - $7.00
DTC or Fed Book
Entry - $12.00
All Other - $25.00
</TABLE>
<TABLE>
<CAPTION>
C. HOLDINGS CHARGES
GROUP A GROUP B GROUP C GROUP D GROUP E GROUP F
--------------------- ------------ -------------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
1.5 5.0 6.0 10.0 25.0 40.0
</TABLE>
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 3
- --------------------------------------------------------------------------------
III. PORTFOLIO TRADES - FOR EACH LINE ITEM PROCESSED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
State Street Bank Repos $ 7.00
DTC of Fed Book Entry $12.00
New York Physical Settlements $25.00
Maturity Collection (NY Physical Items Only) $ 8.00
All Other Trades $16.00
- --------------------------------------------------------------------------------
IV. OPTIONS
- --------------------------------------------------------------------------------
Option charge for each option written or closing contract,
per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
- --------------------------------------------------------------------------------
V. LENDING OF SECURITIES
- --------------------------------------------------------------------------------
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of loaned securities $25.00
Loan administration - mark-to-market per day, per loan $ 3.00
- --------------------------------------------------------------------------------
VI. INTEREST RATE FUTURES
- --------------------------------------------------------------------------------
Transactions - no security movement $ 8.00
- --------------------------------------------------------------------------------
VII. PRICING SERVICE
- --------------------------------------------------------------------------------
Monthly Quote Charge (based on average number of positions in $ 6.00
portfolio)
- --------------------------------------------------------------------------------
VIII. HOLDINGS CHARGE
- --------------------------------------------------------------------------------
For each issue maintained - monthly charge $ 5.00
- --------------------------------------------------------------------------------
IX. PRINCIPAL REDUCTION PAYMENTS
- --------------------------------------------------------------------------------
Per Paydown $10.00
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 4
- --------------------------------------------------------------------------------
X. DIVIDEND/INTEREST COLLECTION CHARGES
- --------------------------------------------------------------------------------
For items held at the request of traders over record date in $50.00
street form
</TABLE>
- --------------------------------------------------------------------------------
XI. SPOKE CONFIGURATION
- --------------------------------------------------------------------------------
Annual fee of $10,000 per each series in each Spoke Entity
Spoke Entities:
---------------
Neuberger and Berman Equity Funds (except N & B International Fund)
Neuberger and Berman Equity Trust Neuberger and Berman Income Funds
Neuberger and Berman Income Trust Neuberger and Berman Advisers
Management Trust Neuberger and Berman Equity Assets
- --------------------------------------------------------------------------------
XII. SPECIAL SERVICES
- --------------------------------------------------------------------------------
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments and
the preparation of special reports will be subject to negotiation.
Yield calculation and other special items will be negotiated
separately.
- --------------------------------------------------------------------------------
XIII. OUT-OF-POCKET EXPENSES
- --------------------------------------------------------------------------------
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but
are not limited to the following:
. Wire charges relative to custodian functions ($5.25 per wire
in and $5.00 out)
. Postage and Insurance
. Courier Service
. Duplicating
. Legal fees in jointly agreed upon situations
. Supplies related to fund records
. Rush transfer -- $8.00 each
. Transfer fees
. Sub-custodian charges
. Price Waterhouse audit letter
. Federal Reserve fee for return check items over $2,500-$4.25
. GNMA Transfer - $15 each
- --------------------------------------------------------------------------------
XIV. PAYMENT AND EARNINGS CREDIT
- --------------------------------------------------------------------------------
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's
offices, contingent on fund approval.
An earnings credit of 75% of the 90 Day T-Bill rate will be applied for
fund balances.
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page: 5
NEUBERGER & BERMAN FUND COMPLEX STATE STREET BANK AND TRUST CO.
By: /s/ Michael J. Weiner By: /s/ K. Griffin
------------------------------------ -------------------------
Title: Vice President Income Managers Trust Title: Vice President
By: 7-31-96 Date: July 31, 1996
----------------------------------- -------------------------
FEE SCHEDULE
FOR
TRANSFER AGENCY AGREEMENT
BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
NEUBERGER & BERMAN INCOME FUNDS
The Portfolios within the Neuberger & Berman Income Funds will be charged an
annual fee of $12.50 per account:
New York Insured Intermediate Fund
Limited Maturity Bond Fund
Municipal Securities Trust
Ultra Short Bond Fund
Or will be charged an annual fee of $14.50 per account:
Cash Reserves
Government Money Fund
Municipal Money Fund
There will be an Account Charge of $1.00 per closed account or zero balance, and
out of pocket expenses which will be billed on a monthly basis as incurred, and
determined by product and related expense.
NEUBERGER & BERMAN INCOME FUNDS STATE STREET BANK AND TRUST COMPANY
Name: /s/ Michael J. Weiner Name: /s/ Ronald E. Logue
-------------------------- --------------------------
Title: Vice President Title: Executive Vice President
Date: 9-10-96 Date: 9-16-96
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Reports to Shareholders," "Independent
Auditors" and "Financial Statements" in the Statement of Additional Information
in Post-Effective Amendment Number 23 to the Registration Statement (Form N-1A
No. 2-85229) of Neuberger&Berman Income Funds, and to the incorporation by
reference of our reports dated December 2, 1996 on the Neuberger&Berman Cash
Reserves, Neuberger&Berman Government Money Fund, Neuberger&Berman Limited
Maturity Bond Fund, Neuberger&Berman Ultra Short Bond Fund, Neuberger&Berman
Municipal Money Fund, Neuberger&Berman Municipal Securities Trust, and
Neuberger&Berman New York Insured Intermediate Fund, and on Neuberger&Berman
Cash Reserves Portfolio, Neuberger&Berman Government Money Portfolio,
Neuberger&Berman Limited Maturity Bond Portfolio, Neuberger&Berman Ultra Short
Bond Portfolio, Neuberger&Berman Municipal Money Portfolio, Neuberger&Berman
Municipal Securities Portfolio, and Neuberger&Berman New York Insured
Intermediate Portfolio, included in the 1996 Annual Report to Shareholders of
Neuberger&Berman Income Funds.
/s/ Ernst & Young LLP
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ERNST & YOUNG LLP
Boston, Massachusetts
January 28, 1997
