<PAGE>
PROSPECTUS
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February 3, 1997
[LOGO]
NEUBERGER & BERMAN
INCOME FUNDS-Registered Trademark-
Neuberger&Berman
CASH RESERVES
No Sales Charges
No Redemption Fees
No 12b - 1 Fees
<PAGE>
Neuberger&Berman
INCOME FUNDS
A No-Load Income Fund
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Neuberger&Berman CASH RESERVES-REGISTERED TRADEMARK-
INITIAL PURCHASE -- $2,000 MINIMUM
GIFT PROGRAMS AND IRAS -- $250 MINIMUM
CALL 800-877-9700
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Neuberger&Berman CASH RESERVES (the "Fund") invests all of its net investable
assets in Neuberger&Berman CASH RESERVES Portfolio (the "Portfolio"), a series
of Income Managers Trust ("Managers Trust"), an open-end management investment
company managed by Neuberger&Berman Management Incorporated ("N&B Management").
The Portfolio invests in securities in accordance with an investment objective,
policies, and limitations identical to those of its corresponding Fund. The
investment performance of the 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 26.
The Fund is a no-load mutual fund, so you pay no sales commissions or other
charges when you buy or redeem shares. The Fund does not pay a "12b-1 fee" to
promote or distribute its shares. The Fund declares income dividends daily and
pays them monthly.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI"), dated February 3, 1997, is on file with the Securities and Exchange
Commission ("SEC"). The SAI is incorporated herein by reference (so it is
legally considered a part of this Prospectus). You can obtain a free copy of the
SAI by calling N&B Management at 800-877-9700. AN INVESTMENT IN THE FUND, AS IN
ANY MUTUAL FUND, IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
ALTHOUGH THE FUND SEEKS TO MAINTAIN A NET ASSET VALUE OF $1.00 PER SHARE, THERE
IS NO ASSURANCE IT 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 Fund and
Portfolio.
PROSPECTUS DATED FEBRUARY 3, 1997, AS SUPPLEMENTED APRIL 7, 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 Fund and Portfolio 3
Risk Factors 4
Management 4
EXPENSE INFORMATION 5
Shareholder Transaction Expenses for
the Fund 5
Annual Fund Operating Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
Selected Per Share Data and Ratios 7
Cash Reserves 8
INVESTMENT PROGRAM 10
Short-Term Trading 11
Ratings of Securities 11
Borrowings 11
Other Investments 11
PERFORMANCE INFORMATION 12
Yield 12
Yield Information 12
HOW TO BUY SHARES 13
By Mail 13
By Wire 13
Other Information 14
HOW TO SELL SHARES 15
By Mail or Facsimile Transmission
(Fax) 15
By Telephone 16
By Check 17
Other Information 17
SHAREHOLDER SERVICES 19
Systematic Withdrawal Plans 19
Retirement Plans 19
Electronic Bank Transfers 19
Internet Access 19
SHARE PRICES AND
NET ASSET VALUE 20
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES 21
Distribution Options 21
Taxes 22
MANAGEMENT AND ADMINISTRATION 23
Trustees and Officers 23
Investment Manager, Administrator,
Distributor, and Sub-Adviser 23
Expenses 24
Transfer and Shareholder Servicing
Arrangements 25
INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS 26
The Fund 26
The Portfolio 27
DESCRIPTION OF INVESTMENTS 29
USE OF JOINT STATEMENT OF
ADDITIONAL INFORMATION 33
DIRECTORY 34
</TABLE>
<PAGE>
SUMMARY
The Fund and Portfolio
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The Fund is a series of Neuberger&Berman Income Funds (the "Trust") and
invests in the Portfolio which, in turn, invests in securities in accordance
with an investment objective, policies, and limitations that are identical to
those of the Fund. This is sometimes called a master/feeder fund structure,
because the Fund "feeds" shareholders' investments into the Portfolio, a
"master" fund. The structure looks like this:
--------------------------
SHAREHOLDERS
--------------------------
(arrow) BUY SHARES IN
--------------------------
Fund
--------------------------
(arrow) INVESTS IN
--------------------------
Portfolio
--------------------------
(arrow) INVESTS IN
--------------------------
Debt Securities & Other Securities
--------------------------
The trustees who oversee the Fund believe that this structure may benefit
shareholders; investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale that could reduce
expenses. For more information about the organization of the Fund and the
Portfolio, including certain features of the master/feeder fund structure, see
"Information Regarding Organization, Capitalization, and Other Matters" on page
26.
The following table is a summary highlighting features of the Fund and the
Portfolio. Of course, there can be no assurance that the Fund will meet its
investment objective.
3
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PRINCIPAL PORTFOLIO OTHER
INCOME FUNDS OBJECTIVE INVESTMENTS INFORMATION
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<S> <C> <C> <C>
MONEY MARKET FUNDS
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
</TABLE>
Risk Factors
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An investment in the Fund involves certain risks, depending upon the types of
investments made by the Portfolio. The Portfolio invests 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. For
more details about the Portfolio, its investments and their risks, see
"Investment Program" on page 10 and "Description of Investments" on page 29.
Management
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N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page 23. If you want to know how to buy and sell shares of the Fund or exchange
them for shares of other Neuberger&Berman Funds-Registered Trademark-, see "How
to Buy Shares" on page 13 and "How to Sell Shares" on page 15.
4
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund and
its Portfolio. See "Performance Information" for important facts about the
Fund's investment performance, after taking expenses into account.
Shareholder Transaction Expenses for The Fund
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As shown by this table, the Fund imposes no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $8.00) for each wire redemption. Shareholders who have
one or more accounts in the Neuberger&Berman 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)
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The following table shows annual Total Operating Expenses for the Fund, which
are paid out of the assets of the Fund and which include the Fund's pro rata
portion of the Total Operating Expenses of the Portfolio. The Fund pays N&B
Management an administration fee based on the Fund's average daily net assets.
The Portfolio pays N&B Management a management fee based on the Portfolio's
average daily net assets; a pro rata portion of this fee is borne indirectly by
the Fund. Therefore, the table combines management and administration fees. The
Fund and Portfolio also incur other expenses for things such as accounting and
legal fees, maintaining shareholder records, and furnishing shareholder
statements and Fund reports. "Total Operating Expenses" exclude interest, taxes,
brokerage commissions, and extraordinary expenses. The Fund's 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 SAI.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
INCOME FUNDS ADMINISTRATION FEES FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
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CASH RESERVES 0.50%* None 0.15% 0.65%*
</TABLE>
*REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW
5
<PAGE>
Total Operating Expenses for the Fund are based upon administration fees
incurred by the Fund and management fees incurred by the Portfolio during the
past fiscal year and any current expense reimbursement undertaking. "Other
Expenses" are based on the Fund's and Portfolio's expenses for the past fiscal
year. The trustees of the Trust believe that the aggregate per share expenses of
the Fund and 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 the Portfolio. The trustees of the Trust also believe that investment in the
Portfolio by investors in addition to the Fund may enable the Portfolio to
achieve economies of scale which could reduce expenses. The expenses and,
accordingly, the returns of other funds that may invest in the Portfolio may
differ from those of the Fund.
The previous table reflects N&B Management's voluntary undertaking to
reimburse CASH RESERVES, for the Fund's Total Operating Expenses and the Fund's
pro rata share of the Portfolio's Total Operating Expenses which, in the
aggregate, exceed 0.65% per annum of the Fund's average daily net assets. The
undertaking can be terminated by N&B Management by giving the Fund at least 60
days' prior written notice. Absent the reimbursement, Management and
Administration Fees would be 0.52%, and Total Operating Expenses would be 0.67%,
per annum of the average daily net assets of CASH RESERVES, based upon the
expenses of the Fund for its 1996 fiscal year..
For more information about the current expense reimbursement undertaking, see
"Expenses" on page 24.
Example
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To illustrate the effect of Total Operating Expenses, let's assume that the
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 the Fund, you would have paid
the following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
INCOME FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
CASH RESERVES $ 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 THE EXPENSE REIMBURSEMENT CHANGES.
6
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
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The financial information in the following tables is for the Fund as of
October 31, 1996 and includes data related to the Fund before it was converted
into a series of the Trust on July 2, 1993. This information has been audited by
the Fund's independent auditors. You may obtain, at no cost, further information
about the performance of the Fund in its annual report to shareholders. The
auditors' report is incorporated in the SAI by reference to the annual report.
Please call 800-877-9700 for free copies of the annual report and for up-to-date
information. Also, see "Performance Information."
7
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Cash Reserves
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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 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
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<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 --
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Total From Investment
Operations .0486 .0529 .0327 .0265 .0365 .0600 .0766 .0867 .0401
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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) -- --
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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
8
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1)The per share amounts and ratios which are shown reflect income and expenses,
including the Fund's proportionate share of the 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 the 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 the 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 CASH RESERVES
<TABLE>
<CAPTION>
Period from
April 12, 1988
Year Ended October 31, to 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>
4)The date investment operations commenced.
5)Not annualized.
6)Annualized.
9
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those of
the Portfolio. The Fund invests only in the Portfolio. Therefore, the following
shows you the kinds of securities in which the Portfolio invests. For an
explanation of some types of investments, see "Description of Investments" on
page 29.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
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 objective of the Fund and Portfolio is not fundamental. There
can be no assurance that the Fund or Portfolio will achieve its objective. The
Fund, by itself, does not represent a comprehensive investment program.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
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.
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.
The Portfolio 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. The Portfolio uses the amortized cost method
of valuation to enable the 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.
The 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.
10
<PAGE>
Short-Term Trading
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Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
prior to maturity when N&B Management believes that such action is advisable.
Ratings of Securities
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HIGH-QUALITY DEBT SECURITIES. High-quality debt securities are securities
that have received a rating from at least one nationally recognized statistical
rating organization ("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
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 the Portfolio.
Further information regarding the ratings assigned to securities purchased by
the Portfolio and their meaning is included in the SAI and in the Fund's annual
report.
Borrowings
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The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
As a non-fundamental policy, the Portfolio may not purchase portfolio securities
if its outstanding borrowings, including reverse repurchase agreements, exceed
5% of its total assets. Dollar rolls are treated as reverse repurchase
agreements for purposes of this limitation.
Other Investments
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For temporary defensive purposes, the Portfolio may invest up to 100% of its
total assets in cash or cash equivalents, commercial paper, U.S. Government and
Agency Securities and certain other money market instruments, as well as
repurchase agreements on U.S. Government and Agency Securities, and may adopt a
shorter than normal weighted average maturity.
11
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund can be measured as YIELD or as TOTAL RETURN. The
Portfolio invests in various kinds of fixed income securities, so its
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 Fund and Portfolio" shows the investment
objective, principal types of investments, and comparative information for the
Fund and Portfolio. This should help you decide whether the Fund fits your
needs. For more detailed information, see "Investment Program" and "Description
of Investments." Further information regarding the Fund's performance is
presented in its annual report to shareholders, which is available without
charge by calling 800-877-9700.
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
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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 the Fund
based on the return for a recent seven-day period are called CURRENT YIELDS.
Yield Information
- ----------------------------------------------------------------------
You can obtain current performance information about the Fund by calling N&B
Management at 800-877-9700. N&B Management has reimbursed the Fund for certain
expenses, which has the effect of increasing its yield.
12
<PAGE>
HOW TO BUY SHARES
You can buy shares of the Fund directly by mail, wire, or telephone or
through an exchange of shares with another Neuberger&Berman Fund. If you are
investing through a retirement plan, all of these methods of purchasing shares
may not be available. 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 CASH RESERVES Fund
are calculated as of noon 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. If this is your FIRST PURCHASE of
shares of the 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 the 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.
Checks and money orders for the purchase of shares of the Fund are accepted only
after the check or money order is received at one of the two addresses shown
above.
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.
13
<PAGE>
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.
/ / The Fund has the right to suspend the offering of its shares for a period
of time. The Fund also has the right to accept or reject a purchase order
in its sole discretion, including certain purchase orders using the
exchange privilege.
/ / 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 the Fund or its
agents have incurred. To recover those losses or fees, the Fund has the
right to bill you or to redeem shares from your account.
/ / When you sign your application for a new Fund account, you will be
certifying that your Social Security or other taxpayer ID number is
correct and that you are not subject to backup withholding.
/ / You can also buy shares of the Fund indirectly through certain
stockbrokers, banks, and other financial institutions, some of which may
charge you a fee.
/ / The Fund will not issue a certificate for your shares unless you write to
State Street and request 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.
/ / Through an account with an Institution, you may be able to exchange
shares of the Fund for shares of another Neuberger&Berman Fund. Investors
should consult their Institution for more details.
14
<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. HOWEVER, IF YOU HAVE A CERTIFICATE FOR YOUR
SHARES (INCLUDING SHARES OF THE 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.
TO SELL SHARES HELD IN A RETIREMENT ACCOUNT OR BY A TRUST, ESTATE, GUARDIAN,
OR BUSINESS ORGANIZATION, PLEASE CALL 800-877-9700 FOR INSTRUCTIONS. If you are
selling shares held through a retirement plan, certain of the methods of selling
shares described here may not be available.
Shares are sold at the next price calculated on a day the NYSE is open, after
your sales order is received and accepted. Prices for shares of the Fund are
calculated as of noon 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
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
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<PAGE>
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 CASH RESERVES you may sell Fund 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 Fund 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.
/ / The Fund may delay paying for any redemption until it is reasonably
satisfied that the check used to buy shares has cleared, which may take
up to 15 days after the purchase date. So if you plan to sell shares
shortly after buying them, you may want to pay for the purchase with a
certified check or money order or by wire transfer.
/ / The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the 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 the Fund falls
below $2,000, the Fund has the right to close your account after giving
you at least 60 days' written notice to reestablish the minimum balance.
If you do not do so, the Fund may redeem your remaining shares at their
price on the date of redemption and will send the redemption proceeds to
you.
/ / Through an account with an Institution, you may be able to exchange
shares of the Fund for shares of another Neuberger&Berman Fund. Investors
should consult their Institution for more details.
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18
<PAGE>
SHAREHOLDER SERVICES
Several services are available to assist you in making and managing your
investment in the Fund.
Systematic Withdrawal Plans
- ----------------------------------------------------------------------
If you own shares of the 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. 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 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.
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.
19
<PAGE>
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAV for the Fund and Portfolio are calculated by
subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent.
Neuberger&Berman CASH RESERVES tries to maintain a stable NAV of $1.00 per
share. The Portfolio values its securities at their cost at the time of purchase
and assumes a constant amortization to maturity of any discount or premium. The
Portfolio and the Fund calculate their NAVs as of noon Eastern time on each day
the NYSE is open.
20
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes substantially all of its share of any net investment
income (net of the Fund's expenses) and any net capital gains from investment
transactions earned or realized by the Portfolio. Income dividends are declared
daily for the 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 Fund whose purchase orders are converted to "federal funds" by
noon Eastern time on any given day will accrue income dividends beginning that
day.
Distribution Options
- ----------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions, if any, paid
on shares of the Fund are automatically reinvested in additional shares of the
Fund, unless you elect to receive them in cash. Dividends are reinvested at the
Fund's per share NAV on the last business day of each month. Each 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 Fund's shareholder
servicing agent.
21
<PAGE>
Taxes
- ----------------------------------------------------------------------
The Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be relieved
of federal income tax on 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 in which you invest. If you have a qualified RETIREMENT ACCOUNT, taxes
are deferred.
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. The Portfolio may invest in municipal securities. Any distributions of
income derived from these securities, however, are not tax-exempt, because the
Portfolio does not invest the percentage of its assets in municipal securities
that is required under federal tax law in order for the Fund to be eligible to
distribute tax-free income.
Every January, the 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.
The foregoing is only a summary of some of the important income tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, you should
consult your tax adviser.
22
<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 the Fund and the Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The 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 Fund or the Portfolio. The trustees of the Trust
and of Managers Trust, including a majority of those trustees who are not
"interested persons" (as defined in the 1940 Act) of the 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 the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds,
including other series of Managers Trust. Neuberger&Berman, which acts as
sub-adviser for the Portfolio and other mutual funds managed by N&B Management,
also serves as investment adviser of 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 Portfolio.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
may act as the Portfolio's 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 and Josephine P. Mahaney are primarily responsible for
the day-to-day managment of the Portfolio.
23
<PAGE>
Mr. 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.
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 the Portfolio since October 1992. She was an
Assistant Vice President of N&B Management from 1986 to 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 the 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 the 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, the Portfolio pays N&B Management a fee at the
annual rate of 0.25% of the first $500 million of the Portfolio's average daily
net assets, 0.225% of the next $500 million, 0.20% of the next $500 million,
0.175% of the next $500 million, and 0.15% of average daily net assets in excess
of $2 billion.
N&B Management provides administrative services to the Fund that include
furnishing similar facilities and personnel for the Fund and performing certain
shareholder, shareholder-related and other services. For such administrative
services, the Fund pays N&B Management a fee at the annual rate of 0.27% of the
Fund's average daily net assets. With the Fund's consent, N&B Management may
subcontract to third parties some of its responsibilities to the Fund under the
administration agreement. In addition, the Fund may compensate such third
parties for accounting and other services. During its 1996 fiscal year, the Fund
accrued administration fees, and a pro rata portion of the Portfolio's
management fees (prior to any expense reimbursement), of 0.52% of the Fund's
average daily net assets.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as
24
<PAGE>
investment manager of the Portfolio. These expenses include, but are not limited
to, for the Fund and Portfolio, legal and accounting fees and compensation for
trustees who are not affiliated with N&B Management; for the Fund, transfer
agent fees and the cost of printing and sending reports and proxy materials to
shareholders; and for the Portfolio, 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, for its
Total Operating Expenses, which include its pro rata share of the Portfolio's
Total Operating Expenses, which exceed, in the aggregate, 0.65% per annum of the
Fund's average daily net assets. N&B Management may terminate this undertaking
to the Fund by giving at least 60 days' prior written notice to the Fund. The
effect of reimbursement by N&B Management is to reduce the Fund expenses and
thereby increase its total return.
For the fiscal year ended October 31, 1996, the Fund bore aggregate operating
expenses of 0.65% as a percentage of its average daily net assets (after taking
into consideration N&B Management's expense reimbursements).
Transfer and Shareholder Servicing Arrangements
- ----------------------------------------------------------------------
The Fund's 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.
25
<PAGE>
INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS
The Fund
- ----------------------------------------------------------------------
The Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated 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. The Fund invests all of its net investable assets in the
Portfolio, 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. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other 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 Fund. The trustees will call special meetings of
shareholders of the Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders
of the Fund will not be personally liable for the obligations of the Fund; a
shareholder is entitled to the same limitation of personal liability extended to
shareholders of 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 the Fund contains 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.
26
<PAGE>
The Portfolio
- ----------------------------------------------------------------------
The Portfolio is a separate series of Managers Trust, a New York common law
trust organized as of December 1, 1992. Managers Trust is registered under the
1940 Act as a diversified, open-end management investment company. Managers
Trust has 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. The Fund is a "feeder fund" that seeks to
achieve its investment objective by investing all of its net investable assets
in the 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.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. Members of the general public may not purchase a direct
interest in the Portfolio.
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in the
Portfolio are not required to sell their shares at the same public offering
price as the Fund, could have a different administration fee and expenses than
the Fund, and might charge a sales commission. Therefore, Fund shareholders may
have different returns than shareholders in another investment company that
invests exclusively in the Portfolio. There is currently no such other
investment company that offers its shares directly to members of the general
public. Information regarding any fund that invests in the Portfolio is
available from N&B Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by other
potential investors in addition to the Fund may enable the Portfolio to realize
economies of scale that could reduce its operating expenses, thereby producing
higher returns and benefitting all shareholders.
The Fund may withdraw its entire investment from the Portfolio at any time,
if the trustees of the Trust determine that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective,
policies, or limitations of the Portfolio in a manner not acceptable to the
trustees of the Trust. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) 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 the Fund
withdrew its
27
<PAGE>
investment from the 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. The Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in the Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, the Fund will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in the Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all Portfolio investors; indeed, if other investors
hold a majority interest in the Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund, will
be liable for all obligations of the Portfolio. However, the risk of an investor
in the Portfolio incurring financial loss 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 the 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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<PAGE>
DESCRIPTION OF INVESTMENTS
In addition to the securities referred to in "Investment Programs" herein,
the Portfolio may make the following investments, among others, individually or
in combination, although it may not necessarily buy all of the types of
securities or use all of the investment techniques that are described. For
additional information on the following investments and on other types of
investments which the Portfolios may make, see the SAIs.
U.S. GOVERNMENT AND AGENCY SECURITIES. U.S. Government Securities are
obligations of the U.S. Treasury backed by the full faith and credit of the
United States. U.S. Government Agency Securities are issued or guaranteed by
U.S. Government agencies, 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.
VARIABLE AND FLOATING RATE SECURITIES. 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 the
Portfolio to sell them during a determined time period at par value plus accrued
interest. The demand feature is often backed by a credit instrument, such as a
letter of credit, or by a creditworthy insurer. The Portfolio may rely on the
credit instrument or the creditworthiness of the insurer in purchasing a
variable or floating rate security. For purposes of determining its
dollar-weighted average maturity, the Portfolio calculates the remaining
maturity of variable and floating rate instruments as provided in Rule 2a-7
under the 1940 Act.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations (but not
limitations as to maturity). The Portfolio also may lend portfolio securities to
banks, brokerage firms or institutional investors to earn income. Costs, delays,
or losses could result if the selling party to a repurchase
29
<PAGE>
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. The Portfolio may invest up to 15% of its net assets in
illiquid securities, which are securities that cannot be expected to be sold
within seven days at approximately the price at which they are valued. Due to
the absence of an active trading market, the Portfolio may experience difficulty
in valuing or disposing of illiquid securities. N&B Management determines the
liquidity of the Portfolio's securities, under general supervision of the
trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933, 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. In a reverse repurchase agreement, the
Portfolio sells securities to a bank or securities dealer and simultaneously
agrees to repurchase the same securities at a higher price on a specific date.
During the period before the repurchase, the Portfolio continues to receive
principal and interest payments on the securities. The Portfolio will maintain a
segregated account consisting of cash or appropriate liquid securities to cover
its obligations under reverse repurchase agreements. 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 may increase fluctuations in the Portfolio's and the Fund's NAV and
may be viewed as a form of leverage. N&B Management monitors the
creditworthiness of parties to reverse repurchase agreements.
WHEN-ISSUED TRANSACTIONS. In a when-issued transaction, the Portfolio
commits to purchase securities 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, the Portfolio may lose the opportunity to
obtain a favorable price
30
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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 the Fund's NAV.
MORTGAGE-BACKED SECURITIES. 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. 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 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. 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.
FOREIGN INVESTMENTS. The Portfolio 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
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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.
MUNICIPAL OBLIGATIONS. Municipal obligations are issued by or on behalf of
states, the District of Columbia, and U.S. territories and possessions and their
political subdivisions, agencies, and instrumentalities. The interest on
municipal obligations is 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
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. Zero coupon securities do not pay interest
currently; instead, they are sold at a deep discount from their face value and
are redeemed at face value when they mature. Because zero coupon securities do
not pay current income, their prices can be very volatile when interest rates
change. In calculating its daily income, the Portfolio accrues a portion of the
difference between a zero coupon security's purchase price and its face value.
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USE OF JOINT STATEMENT
OF ADDITIONAL INFORMATION
The Fund and the Portfolio each acknowledges that it is solely responsible
for all information or lack of information about the Fund and Portfolio in the
SAI, and no other series of the Trust or portfolio of Managers Trust is
responsible therefor. The trustees of the Trust and of Managers Trust have
considered this factor in approving the Fund's use of a single combined SAI.
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DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman, Neuberger&Berman Management Inc., and Neuberger&Berman Cash
Reserves are service marks or registered trademarks of Neuberger&Berman, LLC or
Neuberger&Berman Management Inc.
- -C- 1997 Neuberger&Berman Management Inc.
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[LOGO]
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.
[GRAPHIC] PRINTED ON RECYCLED PAPER NBLCR3710198
