As filed with the Securities and Exchange Commission on February 27, 1998
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. 25 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 26 [ 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 March 2, 1998 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)
For Neuberger & Berman High Yield Bond Fund, the approximate date of the
proposed public offering is March 3, 1998. The public offering of Registrant's
other series is on-going. The title of securities being registered is shares of
beneficial interest.
Neuberger & Berman Income Funds is a "master/feeder fund." This
Post-Effective Amendment No. 25 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. 25 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents.
Cover Sheet
Contents of Post-Effective Amendment No. 25 on Form N-1A
Cross Reference Sheet
Neuberger & Berman Government Money Fund
Neuberger & Berman Cash Reserves
Neuberger & Berman Limited Maturity Bond Fund
Neuberger & Berman High Yield Bond Fund
Neuberger & Berman Municipal Money Fund
Neuberger & Berman Municipal Securities Trust
- ----------------------------------------------
Part A - Prospectus
Neuberger & Berman Cash Reserves
- --------------------------------
Part A - Prospectus
Neuberger & Berman Government Money Fund
Neuberger & Berman Cash Reserves
Neuberger & Berman Limited Maturity Bond Fund
Neuberger & Berman High Yield Bond Fund
- ---------------------------------------
Part B - Statement of Additional Information
Neuberger & Berman Municipal Money Fund
Neuberger & Berman Municipal Securities Trust
- ---------------------------------------------
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 25 ON FORM N-1A
Cross Reference Sheets
This cross reference sheet relates to the Prospectus for Neuberger & Berman
Government Money Fund, Neuberger & Berman Cash Reserves, Neuberger & Berman
Limited Maturity Bond Fund, Neuberger & Berman High Yield Bond Fund, Neuberger &
Berman Municipal Money Fund, and Neuberger & Berman Municipal
Securities Trust.
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 Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; 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;
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 Proceedings Not Applicable
<PAGE>
This cross reference sheet relates to the Prospectus for Neuberger & Berman Cash
Reserves.
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 Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; 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;
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 Proceedings Not Applicable
<PAGE>
This cross reference sheet relates to the Statement of Additional Information
for Neuberger & Berman Neuberger & Berman Government Money Fund, Neuberger &
Berman Cash Reserves, Neuberger & Berman Limited Maturity Bond Fund, Neuberger &
Berman High Yield Bond Fund and the Statement of Additional Information for
Neuberger & Berman Municipal Money Fund, Neuberger & Berman Municipal Securities
Trust.
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 Not Applicable
Principal Holders of
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 Additional Purchase Information;
and Pricing of Additional Exchange Information;
Securities Being Offered 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 Not Applicable
<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.
25.
<PAGE>
<PAGE>
PROSPECTUS
- -----------------------------------------
March 2, 1998
NEUBERGER&BERMAN
INCOME FUNDS-Registered Trademark-
Neuberger&Berman
GOVERNMENT MONEY FUND
Neuberger&Berman
CASH RESERVES
Neuberger&Berman
LIMITED MATURITY BOND FUND
Neuberger&Berman
HIGH YIELD BOND FUND
Neuberger&Berman
MUNICIPAL MONEY FUND
Neuberger&Berman
MUNICIPAL SECURITIES TRUST
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 LIMITED MATURITY BOND FUND-REGISTERED TRADEMARK-
Neuberger&Berman HIGH YIELD BOND FUND-SM-
Neuberger&Berman MUNICIPAL MONEY FUND-REGISTERED TRADEMARK-
Neuberger&Berman MUNICIPAL SECURITIES TRUST-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 46.
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 March 2, 1998, 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 MARCH 2, 1998
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, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Neuberger&Berman HIGH YIELD Bond Fund invests predominantly in lower-quality
debt securities, commonly referred to as "junk bonds." These securities pose
greater risks, such as the risk of default, than other debt securities.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Funds and Portfolios 3
Risk Factors 5
Management 5
EXPENSE INFORMATION 6
Shareholder Transaction Expenses
for Each Fund 6
Annual Fund Operating Expenses 6
Example 8
FINANCIAL HIGHLIGHTS 9
Selected Per Share Data and Ratios 9
Government Money Fund 10
Cash Reserves 11
Limited Maturity Bond Fund 12
Municipal Money Fund 13
Municipal Securities Trust 14
INVESTMENT PROGRAMS 17
Money Market Portfolios 17
Bond Portfolios 18
Municipal Portfolios 19
Short-Term Trading; Portfolio Turnover 20
Ratings of Debt Securities 20
Borrowings 22
Other Investments 22
Duration 23
PERFORMANCE INFORMATION 24
Yield 24
Total Return 24
Tax-Equivalent Yield 25
Yield and Total Return Information 25
Neuberger&Berman High Yield Bond Fund: Performance
of Similar Accounts 26
HOW TO BUY SHARES 27
By Mail 27
By Wire 28
By Telephone 28
By Exchanging Shares 28
Other Information 28
HOW TO SELL SHARES 30
By Mail or Facsimile Transmission (Fax) 31
By Telephone 32
By Check 32
Other Information 32
ADDITIONAL INFORMATION ON TELEPHONE
TRANSACTIONS 34
SHAREHOLDER SERVICES 35
Automatic Investing and Dollar Cost Averaging 35
Exchange Privilege 35
Systematic Withdrawal Plans 36
Retirement Plans 36
Electronic Bank Transfers 37
Internet Access 37
SHARE PRICES AND
NET ASSET VALUE 38
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES 39
Distribution Options 39
Taxes 40
MANAGEMENT AND ADMINISTRATION 42
Trustees and Officers 42
Investment Manager, Administrator, Distributor,
and Sub-Adviser 42
Expenses 44
Transfer and Shareholder Servicing Arrangements 45
INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS 46
The Funds 46
The Portfolios 46
DESCRIPTION OF INVESTMENTS 49
USE OF JOINT PROSPECTUS AND STATEMENTS OF
ADDITIONAL INFORMATION 58
DIRECTORY 59
FUNDS ELIGIBLE FOR EXCHANGE 60
APPENDIX A A-1
</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 46.
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 17.
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
LIMITED MATURITY Highest current Debt securities, Lower potential
income consistent primarily investment price fluctuation of
with low risk to grade; maximum 10% Neuberger& Berman
principal and below investment bond funds; maximum
liquidity; and grade, but no lower dollar-weighted
secondarily, total than B* average duration of
return four years
HIGH YIELD High current income Primarily lower- More potential price
and, secondarily, rated debt fluctuation and
capital growth securities; also risk, potential for
investment grade higher returns; no
income-producing and maximum
non-income-producing dollar-weighted
debt and equity average duration
securities
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**
</TABLE>
*SECURITIES THAT ARE BELOW INVESTMENT GRADE WILL BE PURCHASED ONLY IF, AT THE
TIME OF PURCHASE, THEY ARE 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 20-21.
**THIS PORTFOLIO MAY INVEST IN MUNICIPAL SECURITIES THAT ARE ISSUED TO FINANCE
PRIVATE ACTIVITIES, THE INTEREST ON WHICH MAY BE A TAX PREFERENCE ITEM FOR
PURPOSES OF THE FEDERAL ALTERNATIVE MINIMUM TAX.
Risk Factors
- ----------------------------------------------------------------------
An investment in any Fund involves certain risks, depending upon the types of
investments made by its corresponding Portfolio. The Portfolios invest primarily
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. The value of debt securities is also affected by the creditworthiness
of the issuer. Lower-rated debt securities involve greater risks of default than
higher-rated debt securities. 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, pay-in-kind 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. For more details about each Portfolio, its investments and their risks,
see "Investment Programs" on page 17 and "Description of Investments" on page
49.
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 42. 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 27, "How to Sell Shares" on page 30, and "Shareholder
Services -- Exchange Privilege" on page 35.
5
<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 anticipated annual operating expenses for
Neuberger& Berman HIGH YIELD Bond Fund and annual operating expenses for each of
the other Funds, which are paid out of the assets of the Fund and which include
the Fund's pro rata portion of the operating expenses of its corresponding
Portfolio ("Total Operating Expenses"). "Total Operating Expenses" exclude
interest, taxes, brokerage commissions, and extraordinary expenses.
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. "Management and
Administration Fees" in the following table (except with respect to
Neuberger&Berman HIGH YIELD Bond Fund) are based upon administration fees
incurred by each Fund and management fees incurred by its corresponding
Portfolio during the past fiscal year. For more information, see "Management and
Administration" and the SAI.
The Funds and Portfolios incur other expenses for things such as accounting
and legal fees, transfer agency fees, custodial fees, printing and furnishing
shareholder statements and Fund reports and compensating trustees who are not
affiliated with N&B Management ("Other Expenses"). Other Expenses in the
following table and the material following the table (except with respect to
Neuberger&Berman HIGH
6
<PAGE>
YIELD Bond Fund) are based on each Fund's and Portfolio's expenses for the past
fiscal year. Other Expenses for Neuberger&Berman HIGH YIELD Bond Fund and
Portfolio are estimated amounts for the current fiscal year and assume average
daily net assets of $25 million. There can be no assurance the Fund will achieve
that asset level. All expenses are factored into the Funds' share prices and
dividends and are not charged directly to Fund shareholders.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND Other Total Operating
INCOME FUNDS ADMINISTRATION FEES 12b-1 Fees Expenses Expenses
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
GOVERNMENT MONEY 0.52% None 0.11% 0.63%
CASH RESERVES 0.52% None 0.11% 0.63%
LIMITED MATURITY 0.52% None 0.18%* 0.70%*
HIGH YIELD 0.65% None 0.35%* 1.00%*
MUNICIPAL MONEY 0.52% None 0.20% 0.72%
MUNICIPAL SECURITIES 0.52% None 0.13%* 0.65%*
</TABLE>
*REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW
The previous table reflects N&B Management's voluntary undertaking to
reimburse LIMITED MATURITY, HIGH YIELD, and MUNICIPAL SECURITIES 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 per annum
0.70% for LIMITED MATURITY, 1.00% for HIGH YIELD, and 0.65% for MUNICIPAL
SECURITIES 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. HIGH YIELD has agreed to repay N&B Management for excess Total Operating
Expenses that N&B Management reimbursed to that Fund, so long as the Fund's
Total Operating Expenses during that period do not, as a result, exceed the 100%
expense limitation. Absent the reimbursement, Other Expenses would be 0.19%,
0.72%, and 0.53% and Total Operating Expenses would be 0.71%, 1.37%, and 1.05%
per annum of the average daily net assets of LIMITED MATURITY, HIGH YIELD, and
MUNICIPAL SECURITIES, respectively.
For more information, see "Expenses" on page 44.
7
<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 $ 6 $20 $35 $79
CASH RESERVES $ 6 $20 $35 $79
LIMITED MATURITY $ 7 $22 $39 $87
HIGH YIELD $10 $32 $-- $--
MUNICIPAL MONEY $ 7 $23 $40 $89
MUNICIPAL SECURITIES $ 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.
8
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
- ----------------------------------------------------------------------
The financial information in the following tables is for each Fund as of
October 31, 1997 and includes data related to each Fund before it was converted
into a series of the Trust on July 2, 1993 (except Neuberger&Berman HIGH YIELD
Bond Fund, which will commence operations on or about March 2, 1998). 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."
9
<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 its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988
----------------------------------------------------------------------------------------
<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 $1.0000 $1.0003 $1.0000 $ .9997 $1.0000 $1.0002
----------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0468 .0464 .0499 .0302 .0248 .0354 .0567 .0718 .0758 .0579
Net Gains or Losses on
Securities -- -- -- -- -- -- .0003 .0003 (.0002) --
----------------------------------------------------------------------------------------
Total From Investment
Operations .0468 .0464 .0499 .0302 .0248 .0354 .0570 .0721 .0756 .0579
----------------------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0468) (.0464) (.0499) (.0302) (.0248) (.0354) (.0567) (.0718) (.0758) (.0579)
Distributions (from net capital
gains) -- -- -- -- -- (.0003) -- -- (.0001) (.0002)
----------------------------------------------------------------------------------------
Total Distributions (.0468) (.0464) (.0499) (.0302) (.0248) (.0357) (.0567) (.0718) (.0759) (.0581)
----------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0003 $1.0000 $ .9997 $1.0000
----------------------------------------------------------------------------------------
Total Return(2) +4.78% +4.74% +5.10% +3.07% +2.51% +3.62% +5.82% +7.42% +7.86% +5.97%
----------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 308.2 $ 363.4 $ 308.3 $ 251.5 $ 277.2 $ 301.1 $ 246.5 $ 234.6 $ 184.3 $ 173.2
----------------------------------------------------------------------------------------
Ratio of Gross Expenses to
Average Net Assets(3) .64% .67% .65% -- -- -- -- -- -- --
----------------------------------------------------------------------------------------
Ratio of Net Expenses to
Average Net Assets .63% .67% .65% .72% .70% .66% .68% .74% .87% .79%(4)
----------------------------------------------------------------------------------------
Ratio of Net Investment Income
to Average Net Assets 4.65% 4.65% 5.00% 3.00% 2.48% 3.50% 5.66% 7.19% 7.55% 5.73%(4)
----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
10
<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 its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
April 12, 1988(5)
Year Ended October 31, to October 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $1.0000 $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 .0499 .0486 .0529 .0327 .0263 .0363 .0600 .0766 .0866 .0401
Net Gains or Losses on
Securities -- -- -- -- .0002 .0002 -- -- .0001 --
--------------------------------------------------------------------------------------------------
Total From Investment
Operations .0499 .0486 .0529 .0327 .0265 .0365 .0600 .0766 .0867 .0401
--------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0499) (.0486) (.0529) (.0327) (.0263) (.0363) (.0600) (.0766) (.0866) (.0401)
Distributions (from net
capital gains) -- -- -- (.0001) (.0002) (.0001) -- (.0001) -- --
--------------------------------------------------------------------------------------------------
Total Distributions (.0499) (.0486) (.0529) (.0328) (.0265) (.0364) (.0600) (.0767) (.0866) (.0401)
--------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $1.0000 $1.0000 $1.0000 $1.0000 $1.0001 $1.0001 $1.0000 $1.0000 $1.0001 $1.0000
--------------------------------------------------------------------------------------------------
Total Return(2) +5.11% +4.97% +5.42% +3.33% +2.68% +3.69% +6.17% +7.94% +9.01% +4.08%(6)
--------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year
(in millions) $ 664.1 $ 482.0 $ 408.9 $ 311.9 $ 273.1 $ 261.7 $ 278.9 $ 278.2 $ 267.1 $ 140.9
--------------------------------------------------------------------------------------------------
Ratio of Gross Expenses to
Average Net Assets(3) .63% .66% .65% -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------
Ratio of Net Expenses to
Average Net Assets(4) .63% .65% .65% .65% .65% .65% .65% .65% .65% .60%(7)
--------------------------------------------------------------------------------------------------
Ratio of Net Investment
Income to Average Net
Assets(4) 4.98% 4.86% 5.30% 3.31% 2.63% 3.63% 6.00% 7.66% 8.70% 7.54%(7)
--------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
11
<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 its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 1, 1988
Year Ended October 31, to October 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $ 9.99 $10.06 $ 9.88 $10.49 $10.40 $10.24 $ 9.91 $ 9.96 $ 9.88 $10.00
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .63 .60 .62 .56 .58 .63 .71 .80 .82 .48
Net Gains or Losses on
Securities (both realized
and unrealized) .04 (.07) .18 (.55) .14 .16 .33 (.05) .08 (.12)
------------------------------------------------------------------------------------------------
Total From Investment
Operations .67 .53 .80 .01 .72 .79 1.04 .75 .90 .36
------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.63) (.60) (.62) (.56) (.58) (.63) (.71) (.80) (.82) (.48)
Distributions (from net
capital gains) -- -- -- (.05) (.05) -- -- -- -- --
Distributions (in excess of
net capital gains) -- -- -- (.01) -- -- -- -- -- --
Tax return of capital -- -- -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------
Total Distributions (.63) (.60) (.62) (.62) (.63) (.63) (.71) (.80) (.82) (.48)
------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $10.03 $ 9.99 $10.06 $ 9.88 $10.49 $10.40 $10.24 $ 9.91 $ 9.96 $ 9.88
------------------------------------------------------------------------------------------------
Total Return(2) +6.97% +5.44% +8.32% +0.13% +7.09% +7.87% +10.89% +7.85% +9.56% +3.76%(6)
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $255.4 $245.7 $307.4 $308.6 $357.3 $273.0 $163.2 $101.3 $107.7 $133.5
------------------------------------------------------------------------------------------------
Ratio of Gross Expenses to
Average Net Assets(3) .70% .71% .70% -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------
Ratio of Net Expenses to
Average Net Assets(4) .70% .70% .70% .69% .65% .65% .65% .65% .65% .63%(7)
------------------------------------------------------------------------------------------------
Ratio of Net Investment
Income to Average Net
Assets(4) 6.34% 6.10% 6.21% 5.53% 5.49% 6.02% 7.07% 8.09% 8.33% 7.34%(7)
------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(8) -- -- -- -- 114% 113% 88% 88% 121% 68%
------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
12
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Municipal Money Fund
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding thoughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $.9993 $.9994 $.9995 $.9996 $.9995 $.9989 $.9989 $.9989 $.9993 $.9995
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0296 .0285 .0324 .0204 .0184 .0263 .0432 .0539 .0591 .0478
Net Gains or Losses on
Securities .0001 (.0001) (.0001) (.0001) .0001 .0006 -- -- (.0004) (.0002)
------------------------------------------------------------------------------------------------
Total From Investment
Operations .0297 .0284 .0323 .0203 .0185 .0269 .0432 .0539 .0587 .0476
------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0296) (.0285) (.0324) (.0204) (.0184) (.0263) (.0432) (.0539) (.0591) (.0478)
------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $.9994 $.9993 $.9994 $.9995 $.9996 $.9995 $.9989 $.9989 $.9989 $.9993
------------------------------------------------------------------------------------------------
Total Return(2) +3.00% +2.89% +3.29% +2.06% +1.86% +2.66% +4.40% +5.53% +6.07% +4.89%
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $156.3 $132.6 $160.9 $150.3 $181.6 $195.6 $173.9 $190.6 $204.8 $184.5
------------------------------------------------------------------------------------------------
Ratio of Gross Expenses to
Average Net Assets(3) .73% .73% .71% -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------
Ratio of Net Expenses to
Average Net Assets .72% .72% .71% .73% .74% .67% .66% .67% .74% .69%
------------------------------------------------------------------------------------------------
Ratio of Net Investment
Income to Average Net
Assets 2.95% 2.86% 3.24% 2.02% 1.85% 2.63% 4.34% 5.41% 5.91% 4.76%
------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
13
<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 its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended October 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992 1991 1990 1989 1988
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $10.78 $10.83 $10.26 $11.12 $10.53 $10.39 $10.14 $10.09 $10.08 $ 9.73
----------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .47 .47 .47 .46 .48 .54 .58 .64 .63 .59
Net Gains or Losses on Securities
(both realized and unrealized) .24 (.05) .57 (.73) .68 .14 .25 .05 .01 .35
----------------------------------------------------------------------------------------
Total From Investment Operations .71 .42 1.04 (.27) 1.16 .68 .83 .69 .64 .94
----------------------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.47) (.47) (.47) (.46) (.48) (.54) (.58) (.64) (.63) (.59)
Distributions (from net capital
gains) -- -- -- (.12) (.09) -- -- -- -- --
Distributions (in excess of net
capital gains) -- -- -- (.01) -- -- -- -- -- --
----------------------------------------------------------------------------------------
Total Distributions (.47) (.47) (.47) (.59) (.57) (.54) (.58) (.64) (.63) (.59)
----------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.02 $10.78 $10.83 $10.26 $11.12 $10.53 $10.39 $10.14 $10.09 $10.08
----------------------------------------------------------------------------------------
Total Return(2) +6.71% +3.92% +10.35% -2.57% +11.30% +6.72% +8.41% +6.99% +6.55% +9.88%
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 31.6 $ 38.9 $ 44.3 $ 51.1 $105.2 $ 37.0 $ 25.5 $ 14.1 $ 10.5 $ 9.8
----------------------------------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .66% .66% .66% -- -- -- -- -- -- --
----------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(4) .65% .65% .65% .65% .62% .50% .50% .50% .50% .50%
----------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets(4) 4.30% 4.32% 4.45% 4.24% 4.33% 5.16% 5.61% 6.28% 6.26% 5.90%
----------------------------------------------------------------------------------------
Portfolio Turnover Rate(8) -- -- -- -- 35% 46% 10% 42% 17% 23%
----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
14
<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) For fiscal periods ending after September 1, 1995, each Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements. These ratios reflect the
reimbursement of certain expenses.
4) After reimbursement of expenses by N&B Management. Had
N&B Management not undertaken such action the annualized ratios of net
expenses and net investment income to average daily net assets would have
been:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN GOVERNMENT MONEY
FUND
Year Ended
October 31,
1988
- --------------------------------------------------
<S> <C>
Net Expenses .83%
Net Investment Income 5.69%
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN CASH RESERVES
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>
Net 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>
15
<PAGE>
For the year ended October 31, 1997, there was no reimbursement of expenses
by N&B Management for Neuberger&Berman CASH RESERVES.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN LIMITED MATURITY BOND FUND
Period from
March 1,
1988 to
Year Ended October 31, October 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Expenses .71% .71% .71% .71% .73% .68% .72% .71% .77% .74%
Net Investment Income 6.33% 6.09% 6.20% 5.51% 5.42% 5.99% 7.00% 8.03% 8.21% 7.23%
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MUNICIPAL SECURITIES TRUST
Year Ended October 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Expenses 1.05% 1.04% .98% .82% 1.04% 1.16% 1.38% 1.67% 2.50% 2.00%
Net Investment Income 3.90% 3.93% 4.12% 4.07% 3.91% 4.50% 4.73% 5.11% 4.26% 4.40%
</TABLE>
5) The date investment operations commenced.
6) Not annualized.
7) Annualized.
8) 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 has invested only in its corresponding Portfolio, and that Portfolio,
rather than the Fund, has engaged in securities transactions. Therefore,
after that date neither 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,
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger&Berman LIMITED MATURITY
Bond Portfolio 89% 169% 88% 102% 71%
Neuberger&Berman MUNICIPAL
SECURITIES Portfolio 22% 3% 66% 127% 25%
</TABLE>
16
<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 49.
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 each 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. As a fundamental policy, the Portfolio
may not invest in repurchase agreements.
17
<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 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. The investment objective
of Neuberger&Berman HIGH YIELD Bond Fund and Portfolio is high current income
and, secondarily, capital growth by investing primarily in a diversified
portfolio of lower-rated debt securities.
Neuberger&Berman LIMITED MATURITY Bond 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 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 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, at
the time of purchase, 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 Debt 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.
Under normal circumstances, Neuberger&Berman HIGH YIELD Bond Portfolio will
invest at least 65% of its total assets in lower-rated debt securities.
Lower-rated
18
<PAGE>
debt securities are securities rated below investment grade or unrated
securities deemed by N&B Management to be of comparable quality. They are also
known as "junk bonds" or "high yield securities." The Portfolio has no limits on
the minimum quality or the maturity of its investments. For the definition of
lower-rated debt securities and information on the risks associated with these
securities, see "Ratings of Debt Securities."
Neuberger&Berman HIGH YIELD Bond Portfolio may also invest in investment
grade debt securities, preferred stocks, warrants, convertible securities and
common stocks. The Portfolio may not invest more than 20% of its total assets in
equity securities. This restriction does not apply to income-producing preferred
stocks and convertible securities, nor to equity securities acquired as part of
a unit with a fixed income security. The Portfolio may invest up to 25% of its
net assets in foreign securities denominated in foreign currencies and American
Depositary Receipts ("ADRs") on such securities. Within that limitation,
however, the Portfolio is not restricted in the amount it may invest in
securities denominated in any one foreign currency. 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.
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.
Each Portfolio may invest without limit in municipal securities issued to
finance private activities, the interest on which may be 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
19
<PAGE>
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 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.
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.
See "Notes to Financial Highlights" for more information about the portfolio
turnover rates of Neuberger&Berman LIMITED MATURITY Bond and MUNICIPAL
SECURITIES Portfolios. Neuberger&Berman HIGH YIELD Bond Portfolio is not
expected to exceed a 300% portfolio turnover rate. Turnover rates in excess of
100% generally result in higher transaction costs (which are borne directly by
the Portfolio and indirectly by the corresponding Fund) and a possible increase
in realized short-term capital gains or losses. See "Dividends, Other
Distributions, and Taxes" on page 39 and the SAIs.
Ratings of Debt Securities
- ----------------------------------------------------------------------
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 Services,
Inc., 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 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
20
<PAGE>
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 AND NEUBERGER&BERMAN HIGH YIELD BOND PORTFOLIO). Lower-rated debt
securities or "junk bonds" are those rated below the fourth highest category by
all NRSROs that have rated them (including those securities rated as low as D by
S&P) or unrated securities of comparable quality. 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. Although these
securities generally offer higher yields than investment grade debt securities
with similar maturities, lower-quality securities involve greater risks,
including the possibility of default or bankruptcy by the issuer or the
securities may already be in default. Changes in economic conditions, changes in
interest rates, or developments regarding the entity issuing the security are
more likely to cause price volatility and weaken the capacity of the issuer to
make principal and interest payments than is the case for higher-grade debt
securities. In addition, a fund that invests in lower-quality securities may
incur additional expenses to the extent recovery is sought on defaulted
securities. Because of the many risks involved in investing in high-yield
securities, the success of such investments is dependent on the credit analysis
of N&B Management. It is uncertain how high-yield securities will perform in a
market with rising or continually high interest rates. Additionally, lower-rated
debt securities tend to be less liquid than other securities because the market
for them may not be as broad or active; judgment may play a greater role in
pricing such securities than it does for more liquid securities. For
Neuberger&Berman LIMITED MATURITY Bond Portfolio, N&B Management seeks to reduce
the risks associated with investing in such securities by limiting that
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 fiscal year ended October 31,
1997. 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.
21
<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 15.26% TSY/AGY 15.26%
Highest quality Aaa 17.91% AAA 17.91%
High quality Aa 4.38% AA 1.81%
Upper-medium grade A 19.99% A 24.05%
Medium grade Baa 25.58% BBB 29.07%
LOWER QUALITY**
Moderately speculative Ba 12.81% BB 6.92%
Speculative B 3.94% B 4.85%
Highly speculative Caa -- CCC --
Poor quality Ca -- CC --
Lowest quality, no interest C -- C --
In default, in arrears -- -- D --
TOTAL 99.87%+ 99.87%+
</TABLE>
* 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 AND S&P DID NOT RATE EVERY SECURITY PURCHASED DURING THIS PERIOD.
See Appendix A for further information about the ratings of debt securities
assigned by S&P and Moody's.
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&
22
<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. Yields on these securities are generally lower than yields available
on the lower-rated debt securities in which Neuberger&Berman HIGH YIELD Bond
Portfolio normally invests.
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.
23
<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
(except Neuberger& Berman HIGH YIELD Bond Fund) performance is presented in its
annual report to shareholders, which is available without charge by calling
800-877-9700. Information regarding Neuberger&Berman HIGH YIELD Bond Fund's
performance will be presented in its annual report to shareholders for the
fiscal year ended October 31, 1998.
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.
24
<PAGE>
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 evens out year-to-year variations in
actual performance.
Tax-Equivalent Yield
- ----------------------------------------------------------------------
STATE AND LOCAL INCOME TAXES. Dividends paid by Neuberger&Berman GOVERNMENT
MONEY Fund that are derived from the interest received or accrued by the
Neuberger&Berman GOVERNMENT MONEY Portfolio on securities that are direct
obligations of the U.S. Government or of certain of its agencies or
instrumentalities are not subject to the income taxes of most states and
localities. For those states and localities where the income dividends are not
subject to income taxes, this Fund may measure its 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 taking into account that a portion of the dividends paid by the Fund 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 and Neuberger&Berman MUNICIPAL SECURITIES Trust 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.
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 may reimburse certain Funds from time
to time for certain expenses, which has the effect of increasing their yields
and total returns.
25
<PAGE>
Neuberger&Berman High Yield Bond Fund:
Performance of Similar Accounts
- ----------------------------------------------------------------------
As of the date of this Prospectus, Neuberger&Berman HIGH YIELD Bond Fund has
no investment history. However, Neuberger&Berman has managed a private account
with an investment objective, policies and strategy substantially similar to
those of the Fund ("Private Account"). Below you will find historical composite
total return information for the Private Account, as compared to a market index.
This composite performance information is provided to illustrate the past
performance of Neuberger&Berman in managing a substantially similar account. It
assumes reinvestment of all dividends and other distributions. THE COMPOSITE
PERFORMANCE OF THE PRIVATE ACCOUNT DOES NOT REPRESENT THE HISTORICAL PERFORMANCE
OF THE FUND AND IS NOT INDICATIVE OF THE FUND'S FUTURE PERFORMANCE.
Certain investment restrictions imposed by law on registered investment
companies such as the Fund are not applicable to the Private Account and may
have adversely affected the performance of the Private Account had they been
applicable. In addition, the Private Account has lower overall expenses than the
Fund; had the expenses of the Private Account been the same as those of the
Fund, the Private Account's total return would have been lower than shown here.
Total Returns for the periods ending December 31, 1997:
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION*
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Private Account 14.57% 16.97%
Lehman Brothers High Yield Index+ 12.76% 13.78%
</TABLE>
* INCEPTION OF THE PRIVATE ACCOUNT, JULY 1, 1996.
+ THE LEHMAN BROTHERS HIGH YIELD INDEX INCLUDES ALL U.S. DOMESTIC FIXED
INCOME SECURITIES HAVING A MAXIMUM QUALITY RATING OF Ba1 by Moody's
(including defaulted issues), a minimum principal amount outstanding of
$100 million, and a remaining term to maturity of at least one year, other
than payment-in-kind securities and Eurobonds. Unlike the Private Account
and the Fund, the Index does not take into account any of the actual costs
of investing, such as management fees.
The information set forth above relies on data supplied by Neuberger&Berman
or derived by Neuberger&Berman from statistical services, reports or other
sources Neuberger&Berman believes to be reliable.
26
<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 the close of regular trading on the NYSE, usually 4
p.m. Eastern time.
N&B Management, in its discretion, may accept or reject purchase orders or
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 TO OPEN A NEW ACCOUNT MUST BE
MADE PAYABLE ON ITS FACE TO "NEUBERGER&BERMAN FUNDS." GENERALLY, CHECKS ARE NOT
ACCEPTED UNLESS MADE PAYABLE TO "NEUBERGER&BERMAN FUNDS." N&B MANAGEMENT
RESERVES THE RIGHT TO ACCEPT CERTAIN CHECKS FOR SUBSEQUENT INVESTMENTS MADE
PAYABLE TO THE REGISTERED OWNER(S) FOR THOSE ACCOUNTS.
Checks and money orders for the purchase of shares of the Funds are accepted
only after the check or money order is received at one of the two addresses
shown above.
27
<PAGE>
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.
By Telephone
- ----------------------------------------------------------------------
Call 800-877-9700 to buy shares of Neuberger&Berman LIMITED MATURITY Bond
Fund, Neuberger&Berman HIGH YIELD Bond Fund, or Neuberger&Berman MUNICIPAL
SECURITIES Trust. 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
28
<PAGE>
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 provisions, the Internal Revenue
Service can require the Funds to withhold 31% of your distributions and
redemption proceeds (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. These institutions may have additional requirements to
buy shares. Some of these institutions (or their designees) may be
authorized to accept purchase orders on behalf of the Funds. A Fund will
be deemed to have received your purchase order when an authorized
institution (or its designee) accepts the order. Your order will receive
the next price calculated after the order has been accepted by the
authorized institution (or its designee). You should consult your
institution to determine the time by which it must receive your order for
you to purchase Fund shares at that day's price.
/ / 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 35.)
29
<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 the close of regular trading on
the NYSE, usually 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. These institutions may have
additional requirements to sell shares. Some of these institutions (or their
designees) may be authorized to accept redemption orders on behalf of the Funds.
A Fund will be deemed to have received your redemption order when an authorized
institution (or its designee) accepts the order. Your order will receive the
next price calculated after the order has been accepted by the authorized
institution (or its designee). You should consult your institution to determine
the time by which it must receive your order for you to sell Fund shares at that
day's price.
30
<PAGE>
By Mail or Facsimile Transmission (Fax)
- ----------------------------------------------------------------------
Write a redemption request letter with your name and account number, the
Fund's name, and the dollar amount or number of shares of the Fund you want to
sell, together with any other instructions, and send it by mail to:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
or by overnight courier, U.S. Express Mail, or registered or certified mail to:
Neuberger&Berman Funds
c/o State Street Bank and Trust Company
2 Heritage Drive
North Quincy, MA 02171
or by 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.
31
<PAGE>
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 N&B Management or 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."
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 by wire transfer.
/ / Each Fund may suspend redemptions or postpone payments on days when the
NYSE is closed, 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
32
<PAGE>
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.
/ / No interest will accrue on amounts represented by uncashed redemption or
distribution checks.
33
<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, 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, neither the Fund nor its agent is responsible
for the authenticity of telephone instructions or for any losses caused by
fraudulent or unauthorized telephone instructions if the Fund or its agent
reasonably believed that the instructions were genuine.
If you are unable to reach N&B Management by telephone (which might be the
case, for example, during periods of unusual market activity), consider sending
your transaction instructions by 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.
34
<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 LIMITED MATURITY Bond
Fund, Neuberger&Berman HIGH YIELD Bond Fund, or Neuberger&Berman MUNICIPAL
SECURITIES Trust 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 must be for at least the minimum
initial investment amount for that fund. Shares are
35
<PAGE>
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, although
distributions from these plans generally are taxable. In the case of so-called
"Roth IRAs," contributions are not tax-deductible but distributions from the
plan may be tax free. Please call 800-877-9700 for information on a variety of
retirement plans offered
36
<PAGE>
by N&B Management, including IRAs, simplified employee pension plans, savings
incentive match plans for employees (SIMPLE Retirement Plans) -- IRA version
only, self-employed individual retirement plans (so-called "Keogh Plans"),
corporate profit-sharing and money purchase pension plans, section 401(k) plans,
and section 403(b)(7) accounts. The assets of these plans may be invested in any
of the Funds, except Neuberger&Berman MUNICIPAL MONEY Fund, and Neuberger&Berman
MUNICIPAL SECURITIES Trust. An investment in Neuberger&Berman HIGH YIELD Bond
Fund may not be suitable for retirement accounts.
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. You can access Fund prices and yields, informative
articles, interactive worksheets to assist you in financial planning and the
prospectuses and applications for certain other Neuberger&Berman Funds.
37
<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 HIGH YIELD 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 Portfolio uses an independent pricing
service to determine the market value of its portfolio securities and
periodically verifies the valuations. The Portfolio and its corresponding Fund
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.
If N&B Management believes that the price of a security obtained under a
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
38
<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 and
Neuberger&Berman HIGH YIELD Bond Fund, any net gains from foreign currency
transactions earned or realized by the Fund's corresponding Portfolio. Income
dividends are declared daily by each Fund at the time its NAV is calculated and
are paid monthly, and net capital and foreign currency 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. No interest will accrue on amounts
represented by uncashed dividend or other distribution checks. 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.
39
<PAGE>
Taxes
- ----------------------------------------------------------------------
Your investment has certain tax consequences, depending on the type of your
account and the type of Fund in which you invest. If you have a qualified
RETIREMENT ACCOUNT, taxes are deferred.
TAXES ON DISTRIBUTIONS. Distributions (both income dividends and capital
gain distributions) are generally subject to federal income tax and, except in
the case of Neuberger&Berman GOVERNMENT MONEY Fund (see below), state and local
income taxes. However, substantially all dividends paid by the Municipal Funds
generally are expected to be exempt from federal income tax, but may be subject
to state and local taxes. Distributions of net realized capital gains by the
Municipal Funds, however, generally are subject to all such taxes. Dividends
paid by Neuberger&Berman GOVERNMENT MONEY Fund that are derived from the
interest received or accrued by Neuberger&Berman GOVERNMENT MONEY Portfolio on
securities that are direct obligations of the U.S. Government or of certain of
its agencies and instrumentalities are not expected to be subject to income
taxes of most states and localities. Not all dividends derived from interest on
securities that are backed by the full faith and credit of the United States are
exempt from state and local income taxes, and 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 that Fund's dividends and other
distributions in your state and locality.
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.
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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to a
Fund's distributions of net capital gain depending on its corresponding
Portfolio's holding periods for the securities it sold that generated the gain.
Both Neuberger& Berman CASH RESERVES 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
40
<PAGE>
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.
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 that are 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 Fund will send you a statement showing the amount of
distributions paid in cash or reinvested in Fund shares for the previous year.
You will also receive information showing (1) the portion, if any, of those
distributions that generally is not subject to state and local income taxes as
well as any dividends that constitute a tax preference item, and (2) capital
gain distributions broken down in a manner that will enable you or your tax
adviser to determine the appropriate rate of capital gains tax on such
distributions.
ALL FUNDS EXCEPT NEUBERGER&BERMAN GOVERNMENT MONEY FUND, NEUBERGER& BERMAN
CASH RESERVES, AND NEUBERGER&BERMAN MUNICIPAL MONEY FUND: TAXES ON REDEMPTIONS.
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 generally 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. Capital gain on
shares held for more than one year will be long-term capital gain, in which
event it will be subject to federal income tax at the capital gains rates
applicable to your holding period and tax bracket (if you are a non-corporate
taxpayer).
When you sell Fund shares, you will receive a confirmation statement showing
the number of shares you sold and the price.
OTHER. Every January, you will 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.
Each Fund intends to qualify for treatment as a regulated investment company
for federal income tax purposes so that it will not have to pay federal income
tax on that part of its taxable income and realized gains that it distributes to
its shareholders.
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.
41
<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.
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 Portfolios, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolios and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $20.7 billion as of
December 31, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolios. N&B
Management compensates Neuberger&Berman for its costs in connection with those
services. 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 $52.9 billion of
assets as of December 31, 1997. 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 $9.3 billion
of assets as of December 31, 1997.
42
<PAGE>
Unless otherwise indicated, the following is five-year information about the
members of the Fixed Income Group who are, along with Theodore Giuliano,
primarily responsible for the day-to-day management as a co-manager of the
listed Portfolios:
Neuberger&Berman GOVERNMENT MONEY and CASH RESERVES Portfolios -- Josephine
P. Mahaney is a co-manager of the Portfolios. 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 and Neuberger&Berman CASH RESERVES
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 is
co-manager of the Portfolio. 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 HIGH YIELD Bond Portfolio -- This portfolio is managed by a
team. The portfolio management team includes: Theodore P. Giuliano, Thomas G.
Wolfe, Miriam Zussman, and Susan Stang. Miriam Zussman, who has been a Director
of Credit Research for Neuberger&Berman since January 1996, was previously Vice
President of credit research at another financial institution from February 1994
to January 1996, and a Director of corporate finance at another institution from
October 1988 to February 1994. Susan Stang, who has performed high-grade and
high-yield research for Neuberger&Berman since May 1996, was previously a Vice
President for high yield and distressed research for another major financial
institution from March 1995 to March 1996, after being an associate for
high-grade research at another financial institution between October 1992 to
March 1995.
Neuberger&Berman MUNICIPAL MONEY and MUNICIPAL SECURITIES Portfolios -- Clara
Del Villar is co-manager of the Portfolios. 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,
and Neuberger&Berman MUNICIPAL SECURITIES Trust since December 1991.
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.
43
<PAGE>
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.
YEAR 2000. Like other financial and business organizations, the Funds and
Portfolios could be adversely affected if computer systems they rely on do not
properly process date-related information and data involving the years 2000 and
after. N&B Management and Neuberger&Berman are taking steps that they believe
are reasonable to address this problem in their own computer systems and to
obtain assurances that comparable steps are being taken by the Funds' and
Portfolios' other major service providers. N&B Management also attempts to
evaluate the potential impact of this problem on the issuers of investment
securities that the Portfolios purchase. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Funds and
Portfolios.
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 (except Neuberger&Berman HIGH
YIELD Bond 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.
Neuberger&Berman HIGH YIELD Bond Portfolio pays N&B Management this fee at
the annual rate of 0.38% of the first $500 million of that Portfolio's average
daily net assets, 0.355% of the next $500 million, 0.33% of the next $500
million, 0.305% of the next $500 million, and 0.28% of average daily net assets
in excess of $2 billion.
N&B Management provides administrative services to each Fund that include
furnishing 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 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.
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
44
<PAGE>
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page 6.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
During its 1997 fiscal year, each Fund (except Neuberger&Berman HIGH YIELD Bond
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.
N&B Management has voluntarily undertaken to reimburse CASH RESERVES, HIGH
YIELD, LIMITED MATURITY, and MUNICIPAL SECURITIES for each Fund's Total
Operating Expenses, which exceed, in the aggregate, 0.65% per annum (0.70% for
LIMITED MATURITY and 1.00% for HIGH YIELD) 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. Neuberger&Berman HIGH YIELD
Bond Fund has agreed to repay N&B Management through December 31, 1999 for
excess Total Operating Expenses that N&B Management previously reimbursed to the
Fund, so long as the Fund's Total Operating Expenses during that period do not,
as a result, exceed the 1.00% expense limitation. 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, 1997, each Fund (except Neuberger&
Berman HIGH YIELD Bond 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 0.63%
Neuberger&Berman CASH RESERVES 0.63%
Neuberger&Berman LIMITED MATURITY Bond Fund 0.70%
Neuberger&Berman MUNICIPAL MONEY Fund 0.72%
Neuberger&Berman MUNICIPAL SECURITIES Trust 0.65%
</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.
45
<PAGE>
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 six 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.
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 six 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.
46
<PAGE>
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. Neuberger&Berman LIMITED MATURITY
Bond Trust, a series of Neuberger&Berman Income Trust ("N&B Income Trust"),
invests all of its net investable assets in a corresponding Portfolio 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) 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
47
<PAGE>
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.
48
<PAGE>
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), Freddie Mac (also
known as the Federal Home Loan Mortgage Corporation), Student Loan Marketing
Association (commonly known as "Sallie Mae"), 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 HIGH YIELD 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
49
<PAGE>
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 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.
Among the variable and floating rate securities in which Neuberger&Berman
CASH RESERVES Portfolio may invest are so-called guaranteed investment contracts
("GICs") issued by insurance companies. In the event of insolvency of the
issuing insurance company, the ability of the Portfolio to recover its assets
may depend on the treatment of GICs under state insurance laws. GICs are
generally regarded as illiquid.
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 sellers and borrowers.
ILLIQUID, RESTRICTED AND RULE 144A 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. These may include unregistered or other
restricted securities and repurchase agreements maturing in greater than seven
days. Illiquid securities may also include commercial paper issued under section
4(2) of the Securities Act of 1933, as amended, and Rule 144A securities
(restricted securities that may be traded freely among qualified institutional
buyers pursuant to an exemption from the registration requirements of the
securities laws); these securities are considered illiquid unless N&B
Management, acting pursuant to guidelines established by the trustees of
Managers Trust, determines they are liquid. Generally, foreign securities freely
tradable in their principal market are not considered restricted or illiquid.
Illiquid securities may
50
<PAGE>
be difficult for a Portfolio to value or dispose of due to the absence of an
active trading market. The sale of some illiquid securities by the Portfolios
may be subject to legal restrictions which could be costly to the Portfolios.
REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS EXCEPT NEUBERGER& BERMAN
GOVERNMENT MONEY PORTFOLIO) AND DOLLAR ROLLS (NEUBERGER&BERMAN LIMITED MATURITY
BOND AND NEUBERGER&BERMAN HIGH YIELD 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
specific date. During the period before the repurchase, the Portfolio continues
to receive principal and interest payments on the securities. A Portfolio will
place cash or appropriate liquid securities in a segregated account 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 counterparties 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 LIMITED MATURITY BOND AND
NEUBERGER&BERMAN HIGH YIELD 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 Freddie Mac certificates. Neuberger&Berman GOVERNMENT
MONEY Portfolio may invest only in
51
<PAGE>
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 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
LIMITED MATURITY BOND AND NEUBERGER&BERMAN HIGH YIELD BOND 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 LIMITED MATURITY Bond Portfolio and Neuberger& Berman HIGH
YIELD 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 overcollateralized, trust preferred securities
have only one underlying payor and are not overcollateralized. Issuers of trust
preferred securities and their parents currently
52
<PAGE>
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 HIGH
YIELD BOND AND NEUBERGER&BERMAN LIMITED MATURITY BOND PORTFOLIOS). Each
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 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 and Neuberger&Berman HIGH YIELD Bond Portfolio each 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 and Neuberger&Berman HIGH YIELD
Bond Portfolio each 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 LIMITED MATURITY BOND, NEUBERGER&BERMAN HIGH YIELD BOND AND
NEUBERGER&BERMAN MUNICIPAL SECURITIES 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 and Neuberger&Berman HIGH YIELD Bond Portfolio
also may write covered call options and purchase put options on debt securities
in its portfolio or on foreign currencies in its portfolio for hedging purposes
or for the purpose of producing income. Each of these Portfolios 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. When
a Portfolio writes a covered call option against a security, the Portfolio is
obligated to sell that security to the purchaser of the option at a fixed price
at any time during a specified period if the purchaser decides to exercise the
option. These investment practices involve certain
53
<PAGE>
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
54
<PAGE>
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, STEP COUPON AND PAY-IN-KIND SECURITIES (ALL
PORTFOLIOS). Each Portfolio may invest in zero coupon securities.
Neuberger&Berman LIMITED MATURITY Bond Portfolio and Neuberger&Berman HIGH YIELD
Bond Portfolio may invest in step coupon securities. Neuberger&Berman HIGH YIELD
Portfolio may also invest in pay-in-kind securities. These securities do not pay
interest currently. Instead, zero coupon and step coupon securities are sold at
a deep discount from their face value and are redeemed at face value when they
mature; in calculating its daily income, a Portfolio accrues a portion of the
difference between these securities' purchase price and their face value.
Pay-in-kind securities pay interest through the issuance of additional
securities. Because all of these securities do not pay current income, their
prices can be very volatile when interest rates change. In addition, because
each Fund is required by the federal tax law to distribute to its shareholders
at least annually substantially all of its income, including the non-cash income
attributable to zero coupon, step coupon and pay-in-kind securities, a Portfolio
may have to dispose of securities to obtain cash for such distributions.
SWAP AGREEMENTS (NEUBERGER&BERMAN MUNICIPAL SECURITIES AND NEUBERGER&BERMAN
HIGH YIELD BOND 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
55
<PAGE>
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.
REAL ESTATE-RELATED INVESTMENTS (NEUBERGER&BERMAN HIGH YIELD BOND
PORTFOLIO). These include real estate investment trusts (also known as "REITS"),
commercial and residential mortgage-backed securities, and real estate
financings. These instruments are sensitive to factors such as changes in real
estate values, property taxes, interest rates, cash flows of underlying assets,
creditworthiness of issuers, and tax and regulatory laws.
EQUITY SECURITIES (NEUBERGER&BERMAN HIGH YIELD BOND PORTFOLIO). Equity
securities may include common stocks, preferred stocks, convertible securities
and warrants. Common stocks and preferred stocks represent shares of ownership
in a corporation. Preferred stocks usually have specific dividends and rank
after bonds and before common stock in claims on assets of the corporation
should it be dissolved. Increases and decreases in earnings are usually
reflected in a corporation's stock price. Convertible securities are debt or
preferred equity securities convertible into common stock. Usually, convertible
securities pay dividends or interest at rates higher than common stock, but
lower than other securities. Convertible securities usually participate to some
extent in the appreciation or depreciation of the underlying stock into which
they are convertible. Warrants are options to buy a stated number of shares of
common stock at a specified price anytime during the life of the warrants.
Equity securities' prices fluctuate based on changes in a corporation's
financial condition and on changes in market or economic conditions. The equity
securities of smaller companies are more sensitive to these changes than those
of larger companies.
DIRECT DEBT (NEUBERGER&BERMAN HIGH YIELD BOND PORTFOLIO). Direct debt
includes loan participations, notes, assignments and other interests in amounts
owed to financial institutions by borrowers, such as companies and governments,
including emerging market countries. The Portfolio could buy all or part of a
loan or participate in a syndicate organized by a bank. These loans may be
secured or unsecured. Investments in direct debt involve special risks. The
borrower may be in financial distress, the direct debt may be less liquid than
other types of debt instruments, there are usually less legal protections for
owners of direct debt than for owners of conventional debt securities, and the
borrowers may default or have a right to borrow additional cash from the owners
of direct debt. In the case of emerging market countries, there are the
additional risks described under "Foreign Investments" in this Prospectus.
CALLABLE BONDS (ALL PORTFOLIOS). Many bonds give the issuer the right to
repay them early. If the issuer of a callable bond exercises this right during a
period of falling interest rates, the Portfolio may not be able to invest the
proceeds at a comparably high rate of return.
RESIDUAL INTEREST BONDS (NEUBERGER&BERMAN MUNICIPAL SECURITIES PORTFOLIO).
The Portfolio may purchase one component of a municipal security that is
56
<PAGE>
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 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
PORTFOLIO). These obligations are issued by a state or local government or
authority to acquire land and a wide variety of equipment and facilities. The
obligations typically are not fully backed by the municipality's credit. If
funds are not appropriated for the following year's lease payments, the lease
may terminate, with the possibility of default on the lease obligations and
significant loss to the Portfolio. The Portfolio may also purchase certificates
of participation in municipal lease obligations or installment sales contracts,
which entitle the holder to a proportionate interest in lease-purchase payments
made.
RESOURCE RECOVERY BONDS (NEUBERGER&BERMAN MUNICIPAL MONEY AND
NEUBERGER&BERMAN MUNICIPAL SECURITIES 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 PORTFOLIO).
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.
57
<PAGE>
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.
58
<PAGE>
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
59
<PAGE>
FUNDS ELIGIBLE FOR EXCHANGE
EQUITY FUNDS
Neuberger&Berman Focus Fund
Neuberger&Berman Genesis Fund
Neuberger&Berman Guardian Fund
Neuberger&Berman International Fund
Neuberger&Berman Manhattan Fund
Neuberger&Berman Partners Fund
Neuberger&Berman Socially
Responsive Fund
MONEY MARKET FUNDS
Neuberger&Berman Government Money Fund
Neuberger&Berman Cash Reserves
BOND FUNDS
Neuberger&Berman Limited
Maturity Bond Fund
Neuberger&Berman High Yield Bond Fund
MUNICIPAL FUNDS
Neuberger&Berman Municipal Money Fund
Neuberger&Berman Municipal Securities Trust
Neuberger&Berman, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are service marks or registered trademarks of Neuberger&Berman Management
Inc.
- -C- 1998 Neuberger&Berman Management Inc.
60
<PAGE>
APPENDIX A
RATINGS OF SECURITIES
S&P CORPORATE BOND RATINGS:
INVESTMENT GRADE
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.
SPECULATIVE GRADE
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 prinicipal 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 curre ntly 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.
CCC : Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
CC : Debt rated CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C : Debt rated C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- rating. The C rating may be used to cover
a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI : The rating C is reserved for income bonds on which no interest is being
paid.
A-1
<PAGE>
D : Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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.
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.
Caa : Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca : Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C : Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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.
A-2
<PAGE>
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.
A-3 : Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B : Issues rated B are regarded as having only speculative capacity for timely
payment.
C : This rating is assigned to short-term debt obligations with doubtful
capacity for payment.
D : Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
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.
Issuers rated PRIME-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
A-3
<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.
[LOGO] PRINTED ON RECYCLED PAPER NBIP00010198
<PAGE>
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------
Neuberger&Berman CASH RESERVES-REGISTERED TRADEMARK-
INITIAL PURCHASE -- $2,000 MINIMUM
GIFT PROGRAMS AND IRAS -- $250 MINIMUM
CALL 800-877-9700
- ----------------------------------------------------------------------
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 30.
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 March 2, 1998, 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 MARCH 2, 1998
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, NOR HAS THE SECURITIES AND EXCHANGE 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 Debt 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 14
Other Information 14
HOW TO SELL SHARES 16
By Mail or Facsimile Transmission
(Fax) 17
By Telephone 18
By Check 18
Other Information 18
SHAREHOLDER SERVICES 21
Systematic Withdrawal Plans 21
Retirement Plans 21
Electronic Bank Transfers 21
Internet Access 22
SHARE PRICES AND
NET ASSET VALUE 23
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES 24
Distribution Options 24
Taxes 25
MANAGEMENT AND ADMINISTRATION 27
Trustees and Officers 27
Investment Manager, Administrator,
Distributor, and Sub-Adviser 27
Expenses 28
Transfer and Shareholder Servicing
Arrangements 29
INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS 30
The Fund 30
The Portfolio 31
DESCRIPTION OF INVESTMENTS 33
USE OF JOINT STATEMENT OF
ADDITIONAL INFORMATION 37
DIRECTORY 38
APPENDIX A A-1
</TABLE>
<PAGE>
SUMMARY
The Fund and Portfolio
- ----------------------------------------------------------------------
The Fund is a series of Neuberger&Berman Income Funds (the "Trust") and
invests in the Portfolio which, in turn, invests in securities in accordance
with an investment objective, policies, and limitations that are identical to
those of the Fund. 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
30.
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
- ------------------------------------------------------------------------------------
<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
- ----------------------------------------------------------------------
An investment in the Fund involves certain risks, depending upon the types of
investments made by the Portfolio. The Portfolio invests primarily 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 33.
Management
- ----------------------------------------------------------------------
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 27. 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 16.
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
- ----------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
The following table shows annual 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 operating expenses of the Portfolio ("Total Operating Expenses"). "Total
Operating Expenses" exclude interest, taxes, brokerage commissions, and
extraordinary expenses.
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. "Management and Administration Fees" in the
following table are based upon administration fees incurred by the Fund and
management fees incurred by the Portfolio during the past fiscal year. For more
information, see "Management and Administration" and the SAI.
The Fund and Portfolio incur other expenses for things such as accounting and
legal fees, transfer agency fees, custodial fees, printing and furnishing
shareholder statements and Fund reports and compensating trustees who are not
affiliated with N&B Management ("Other Expenses"). Other Expenses in the
following table and the material following the table are based on the Fund's and
Portfolio's expenses for the past fiscal year. The Fund's expenses are factored
into its share price and dividends and are not charged directly to Fund
shareholders.
5
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
INCOME FUNDS ADMINISTRATION FEES FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
CASH RESERVES 0.52% None 0.11% 0.63%
</TABLE>
For more information, see "Expenses" on page 28.
Example
- ----------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH RESERVES $ 6 $20 $35 $79
</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
- ----------------------------------------------------------------------
The financial information in the following tables is for the Fund as of
October 31, 1997 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
- --------------------------------------------------------------------------------
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>
Year Ended October 31,
1997(1) 1996(1) 1995(1) 1994(1) 1993(1) 1992 1991
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0001 $ 1.0001 $ 1.0000 $ 1.0000
--------------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0499 .0486 .0529 .0327 .0263 .0363 .0600
Net Gains or Losses on Securities -- -- -- -- .0002 .0002 --
--------------------------------------------------------------------------------------
Total From Investment Operations .0499 .0486 .0529 .0327 .0265 .0365 .0600
--------------------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0499) (.0486) (.0529) (.0327) (.0263) (.0363) (.0600)
Distributions (from net capital
gains) -- -- -- (.0001) (.0002) (.0001) --
--------------------------------------------------------------------------------------
Total Distributions (.0499) (.0486) (.0529) (.0328) (.0265) (.0364) (.0600)
--------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0001 $ 1.0001 $ 1.0000
--------------------------------------------------------------------------------------
Total Return(2) +5.11% +4.97% +5.42% +3.33% +2.68% +3.69% +6.17%
--------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 664.1 $ 482.0 $ 408.9 $ 311.9 $ 273.1 $ 261.7 $ 278.9
--------------------------------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(3) .63% .66% .65% -- -- -- --
--------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Assets(4) .63% .65% .65% .65% .65% .65% .65%
--------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets(4) 4.98% 4.86% 5.30% 3.31% 2.63% 3.63% 6.00%
--------------------------------------------------------------------------------------
<CAPTION>
Period from
April 12, 1988(4)
to October 31,
1990 1989 1988
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 1.0001 $ 1.0000 $1.0000
Income From Investment Operations
Net Investment Income .0766 .0866 .0401
Net Gains or Losses on Securities -- .0001 --
Total From Investment Operations .0766 .0867 .0401
Less Distributions
Dividends (from net investment
income) (.0766) (.0866) (.0401)
Distributions (from net capital
gains) (.0001) -- --
Total Distributions (.0767) (.0866) (.0401)
Net Asset Value, End of Year $ 1.0000 $ 1.0001 $1.0000
Total Return(2) +7.94% +9.01% +4.08%(5)
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 278.2 $ 267.1 $ 140.9
Ratio of Gross Expenses to Average
Net Assets(3) -- -- --
Ratio of Expenses to Average Net
Assets(4) .65% .65% .60%(6)
Ratio of Net Investment Income to
Average Net Assets(4) 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)For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements. These ratios reflect the
reimbursement of certain expenses.
4)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>
For the year ended October 31, 1997, there was no reimbursement of expenses by
N&B Management for the Fund.
5)The date investment operations commenced.
6)Not annualized.
7)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 33.
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
- ----------------------------------------------------------------------
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 Debt Securities
- ----------------------------------------------------------------------
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 Standard & Poor's ("S&P"), Moody's
Investors Services, Inc. ("Moody's"), Fitch Investors Services, Inc., 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
- ----------------------------------------------------------------------
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
- ----------------------------------------------------------------------
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 is measured as YIELD. 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
- ----------------------------------------------------------------------
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 accept or reject purchase orders or
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 TO OPEN A NEW ACCOUNT MUST BE MADE PAYABLE ON ITS FACE
TO "NEUBERGER&BERMAN FUNDS." GENERALLY, CHECKS ARE NOT ACCEPTED UNLESS MADE
PAYABLE TO "NEUBERGER&BERMAN FUNDS." NEUBERGER&BERMAN MANAGEMENT RESERVES THE
RIGHT TO ACCEPT CERTAIN CHECKS FOR SUBSEQUENT INVESTMENTS MADE PAYABLE TO THE
REGISTERED OWNER(S) FOR THOSE ACCOUNTS.
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.
13
<PAGE>
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.
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. These institutions may have additional requirements to
buy shares. Some of these institutions (or their designees) may be
authorized to accept purchase orders on behalf of the Fund. The Fund will
be deemed to have received your purchase order when an authorized
institution (or its designee) accepts the order. Your order will receive
the next price calculated after the order has been accepted by the
authorized institution (or its designee). You should consult your
institution to determine the time by which it must receive your order for
you to purchase Fund shares at that day's price.
/ / 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.
14
<PAGE>
/ / 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.
15
<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.
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. These institutions may have
additional requirements to sell shares. Some of these institutions (or their
designees) may be authorized to accept redemption orders on behalf of the Fund.
The Fund will be deemed to have received your redemption order when an
authorized institution (or its designee) accepts the order. Your order will
receive the next price calculated after the order has been accepted by the
authorized institution (or its designee). You should consult your institution to
determine the time by which it must receive your order for you to sell Fund
shares at that day's price.
16
<PAGE>
By Mail or Facsimile Transmission (Fax)
- ----------------------------------------------------------------------
Write a redemption request letter with your name and account number, the
Fund's name, and the dollar amount or number of shares of the Fund you want to
sell, together with any other instructions, and send it by mail to:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
or by overnight courier, U.S. Express Mail, or registered or certified mail to:
Neuberger&Berman Funds
c/o State Street Bank and Trust Company
2 Heritage Drive
North Quincy, MA 02171
or by 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.
17
<PAGE>
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 N&B Management or 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."
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, 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.
18
<PAGE>
/ / 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.
/ / No interest will accrue on amounts represented by uncashed redemption or
distribution checks.
19
<PAGE>
(This page has been left blank intentionally.)
20
<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, although
distributions from these plans generally are taxable. In the case of so-called
"ROTH IRAs," contributions are not tax-deductible but distributions from the
plan may be tax free. Please call 800-877-9700 for information on a variety of
retirement plans offered by N&B Management, including IRAs, simplified employee
pension plans, savings incentive match plans for employees (SIMPLE Retirement
Plans) -- IRA version only, self-employed individual retirement plans (so-called
"Keogh Plans"), corporate profit-sharing and money purchase pension plans,
section 401(k) plans, and section 403(b)(7) accounts.
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.
21
<PAGE>
Internet Access
- ----------------------------------------------------------------------
N&B Management now maintains an Internet site on the World Wide Web at
HTTP://WWW.NBFUNDS.COM. You can access Fund prices and yields, informative
articles, interactive worksheets to assist you in financial planning, and the
prospectuses and applications for certain other Neuberger&Berman Funds.
22
<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.
If N&B Management believes that the price of a security obtained under the
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
23
<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 by 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. No interest will accrue on amounts
represented by uncashed dividend or other distribution checks. 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.
24
<PAGE>
Taxes
- ----------------------------------------------------------------------
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 (both income dividends and capital
gain distributions) are generally subject to federal income tax and state and
local income taxes.
Those 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.
Under the Taxpayer Relief Act of 1997, different maximum tax rates apply to
the Fund's distributions of net capital gain depending on the Portfolio's
holding periods for the securities it sold that generated the gain. 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 in cash or reinvested in Fund shares for the previous year.
You will also receive information showing (1) the portion, if any, of those
distributions that generally is not subject to state and local income taxes, and
(2) capital gain distributions broken down in a manner that will enable you or
your tax adviser to determine the appropriate rate of capital gains tax on such
distributions.
OTHER. Every January, you will receive a consolidated transaction statement
for the previous year. Be sure to keep your statements; they will be useful to
you and your tax preparer in determining the capital gains and losses from your
redemptions.
The Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will not have to
pay federal income tax on that part of its taxable income and realized gains
that it distributes to its shareholders.
25
<PAGE>
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.
26
<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.
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 acts as sub-adviser
for the Portfolio and other mutual funds managed by N&B Management. The mutual
funds managed by N&B Management and Neuberger&Berman had aggregate net assets of
approximately $20.7 billion as of December 31, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio. N&B Management
compensates Neuberger&Berman for its costs in connection with those services.
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 $52.9 billion of assets as of
December 31, 1997. 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 as
co-managers for the day-to-day managment of the Portfolio.
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&
27
<PAGE>
Berman, which he helped to establish in 1984. The Fixed Income Group manages
fixed income accounts that had approximately $9.3 billion of assets as of
December 31, 1997.
Ms. Mahaney is co-manager of the Portfolio. 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.
YEAR 2000. Like other financial and business organizations, the Fund and
Portfolio could be adversely affected if computer systems they rely on do not
properly process date-related information and data involving the years 2000 and
after. N&B Management and Neuberger&Berman are taking steps that they believe
are reasonable to address this problem in their own computer systems and to
obtain assurances that comparable steps are being taken by the Fund's and
Portfolio's other major service providers. N&B Management also attempts to
evaluate the potential impact of this problem on the issuers of investment
securities the Portfolio purchases. However, there can be no assurance that
these steps will be sufficient to avoid any adverse impact on the Fund and
Portfolio.
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 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
28
<PAGE>
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.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page 5.
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, 1997, the Fund bore aggregate operating
expenses of 0.63% 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.
29
<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 six 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.
30
<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 six 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
31
<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.
32
<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), Freddie Mac (also known as the Federal
Home Loan Mortgage Corporation), Student Loan Marketing Association (commonly
known as "Sallie Mae"), 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.
Among the variable and floating rate securities in which the Portfolio may
invest are so-called guaranteed investment contracts ("GICs") issued by
insurance companies. In the event of insolvency of the issuing insurance
company, the ability of the Portfolio to recover its assets may depend on the
treatment of GICs under state insurance laws. GICs are generally regarded as
illiquid.
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
33
<PAGE>
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 agreement or the borrower of portfolio
securities becomes bankrupt or otherwise defaults. N&B Management monitors the
creditworthiness of sellers and borrowers.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. The Portfolio may invest up
to 10% of its net assets in illiquid securities, which are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper issued under section 4(2)
of the Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for the Portfolio to value or dispose of due to the absence of
an active trading market. The sale of some illiquid securities by the Portfolio
may be subject to legal restrictions which could be costly to the Portfolio.
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 place cash
or appropriate liquid securities in a segregated account 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
counterparties 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 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.
34
<PAGE>
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 Freddie
Mac 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 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
35
<PAGE>
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; in calculating its daily income,
the Portfolio accrues a portion of the difference between these securities'
purchase price and their face value. Because zero coupon securities do not pay
current income, their prices can be very volatile when interest rates change. In
addition, because the Fund is required by the federal tax law to distribute to
its shareholders at least annually substantially all of its income, including
the non-cash income attributable to zero coupon securities, the Portfolio may
have to dispose of securities to obtain cash for such distributions.
CALLABLE BONDS. Many bonds give the issuer the right to repay them early. If
the issuer of a callable bond exercises this right during a period of falling
interest rates, the Portfolio may not be able to invest the proceeds at a
comparably high rate of return.
36
<PAGE>
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.
37
<PAGE>
APPENDIX A
RATINGS OF SECURITIES
S&P CORPORATE BOND RATINGS:
INVESTMENT GRADE
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.
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.
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.
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.
A-1
<PAGE>
/ / 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-2
<PAGE>
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- 1998 Neuberger&Berman Management Inc.
38
<PAGE>
[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
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN INCOME FUNDS AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 2, 1998
Neuberger & Berman Neuberger & Berman
Government Money Fund Limited Maturity Bond Fund
(and Neuberger & Berman (and Neuberger & Berman
Government Money Limited Maturity Bond
Portfolio) Portfolio)
Neuberger & Berman Neuberger & Berman
Cash Reserves High Yield Bond Fund
(and Neuberger & Berman (and Neuberger & Berman
Cash Reserves Portfolio) Limited High Yield 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 LIMITED
MATURITY Bond Fund ("LIMITED MATURITY") and Neuberger & Berman HIGH YIELD Bond
Fund ("HIGH YIELD")(each a "Fund") are no-load mutual funds that offer shares
pursuant to a Prospectus dated March 2, 1998. The Funds invest all of their net
investable assets in Neuberger & Berman GOVERNMENT MONEY Portfolio, Neuberger &
Berman CASH RESERVES Portfolio, Neuberger & Berman LIMITED MATURITY Bond
Portfolio, and Neuberger & Berman HIGH YIELD 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.
<PAGE>
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...........................................7
Overview of Each Fund.....................................8
Additional Investment Information.........................9
Risks of Fixed Income Securities.........................35
Risks of Equity Securities...............................36
CERTAIN RISK CONSIDERATIONS.......................................36
PERFORMANCE INFORMATION...........................................37
Yield Calculations.......................................37
Tax Equivalent Yield - State and Local Taxes.............38
Total Return Computations................................39
Comparative Information..................................40
Other Performance Information............................41
TRUSTEES AND OFFICERS.............................................42
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.................49
Investment Manager and Administrator.....................49
Sub-Adviser..............................................52
Investment Companies Managed.............................53
Management and Control of N&B Management.................54
DISTRIBUTION ARRANGEMENTS.........................................55
ADDITIONAL PURCHASE INFORMATION...................................56
Automatic Investing and Dollar Cost Averaging............56
ADDITIONAL EXCHANGE INFORMATION...................................57
ADDITIONAL REDEMPTION INFORMATION.................................59
Suspension of Redemptions................................59
Redemptions in Kind......................................60
DIVIDENDS AND OTHER DISTRIBUTIONS.................................60
-i-
<PAGE>
ADDITIONAL TAX INFORMATION........................................61
Taxation of the Funds....................................61
Taxation of the Portfolios...............................62
Taxation of the Funds' Shareholders......................65
VALUATION OF PORTFOLIO SECURITIES.................................66
PORTFOLIO TRANSACTIONS............................................66
Portfolio Turnover.......................................68
REPORTS TO SHAREHOLDERS...........................................68
ORGANIZATION......................................................68
CUSTODIAN AND TRANSFER AGENT......................................68
INDEPENDENT AUDITORS..............................................68
LEGAL COUNSEL.....................................................69
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...............69
REGISTRATION STATEMENT............................................69
FINANCIAL STATEMENTS..............................................70
-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 objective, 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. With respect to the limitation on borrowings, Neuberger &
Berman HIGH YIELD Bond Portfolio may pledge assets in connection with permitted
borrowings. For purposes of its limitation on commodities, Neuberger & Berman
LIMITED MATURITY Bond Portfolio does not consider foreign currencies or forward
contracts to be physical commodities.
Except for the limitation on borrowing and the limitation on
illiquid securities, any maximum percentage of securities or assets contained in
any investment policy or limitation will not be considered to be exceeded unless
the percentage limitation is exceeded immediately after, and because of, a
transaction by a Portfolio. If events subsequent to a transaction result in a
Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, N&B Management will take appropriate steps to reduce the percentage
of borrowings or the percentage held in illiquid securities, as may be required
by law, within a reasonable amount of time.
The fundamental investment policies and limitations of
Neuberger & Berman GOVERNMENT MONEY Portfolio are as follows:
-2-
<PAGE>
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").
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
-3-
<PAGE>
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 following investment policies and limitations are
fundamental and apply to each of Neuberger & Berman CASH RESERVES Portfolio and
Neuberger & Berman LIMITED MATURITY Bond Portfolio unless otherwise indicated:
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
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 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. Neither 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. Neither 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
-4-
<PAGE>
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 in CDs or banker's acceptances issued
by domestic branches of U.S. banks.
5. LENDING. Neither 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.
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.
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 1933 Act.
The fundamental investment policies and limitations of
Neuberger & Berman HIGH YIELD Bond Portfolio are as follows:
1. BORROWING. The Portfolio may not borrow money, except that
it 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 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
-5-
<PAGE>
Portfolio from purchasing futures contracts or options (including options on
futures contracts, but excluding options or futures contracts on physical
commodities), foreign currency, forward contracts, swaps, caps, collars, floors
and other financial instruments, or from investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not 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. 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
purchases of U.S. Government and Agency Securities.
5. 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 a
portion of an issue of debt securities, loans, loan participations or other
forms of direct debt instruments or (ii) by engaging in repurchase agreements.
6. 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.
7. SENIOR SECURITIES. The Portfolio may not issue senior
securities, except as permitted under the 1940 Act.
8. 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 1933 Act.
The following investment policies and limitations are
non-fundamental and apply to each of Neuberger & Berman CASH RESERVES Portfolio,
-6-
<PAGE>
Neuberger & Berman LIMITED MATURITY Bond Portfolio, and Neuberger & Berman HIGH
YIELD Bond Portfolio unless otherwise indicated:
1. INVESTMENTS IN ANY ONE ISSUER. Neuberger & Berman CASH
RESERVES 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.
3. BORROWING. No Portfolio may purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
4. LENDING (NEUBERGER & BERMAN CASH RESERVES PORTFOLIO AND
NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). Except for the purchase of
debt securities and engaging in repurchase agreements, neither Portfolio may
make any loans other than securities loans.
LENDING (NEUBERGER & BERMAN HIGH YIELD BOND PORTFOLIO).
Except for the purchase of debt securities, loans, loan participations or other
forms of direct debt instruments and engaging in repurchase agreements, the
Portfolio may not 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 HIGH YIELD 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
-7-
<PAGE>
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 the Prospectus. Each Portfolio may also
invest in unrated securities that are deemed comparable in quality by N&B
Management to the rated securities in which the Portfolio may permissibly
invest.
OVERVIEW OF EACH FUND
- ---------------------
N&B 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.
For example, GOVERNMENT MONEY and CASH RESERVES are money
market funds with average portfolio maturity of up to 90 days. This is followed
by 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. Rounding out the group is HIGH YIELD which invests primarily in lower
rated debt securities. This Fund has even greater potential for higher yields
but is accompanied by increased risk. Its Portfolio has no duration, maturity or
minimum quality limitations. A more detailed discussion of each Fund follows. In
all cases, these Funds pursue attractive current income with varying levels of
risk to principal and differ 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 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.
-8-
<PAGE>
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.
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.
-9-
<PAGE>
NEUBERGER & BERMAN HIGH YIELD BOND FUND
HIGH YIELD may be appropriate for equity investors seeking to
rebalance their portfolios, or for those investors looking for higher rates of
return and willing to take on more risk. The Fund seeks high current income and,
secondarily, capital growth by investing primarily in lower-rated debt
securities. These securities are expected to generate higher returns than
investment grade fixed-income securities. The Fund may be more volatile, because
the performance of high-yield bonds is linked to the financial health of the
overall market. With this in mind, the portfolio co-managers attempt to select
securities of companies with promising upside potential. The Fund is a
well-diversified portfolio of securities that must first pass the intensive,
time-tested selection process that Neuberger & Berman applies to the security
selection in all of its stock funds.
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.
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 (also known as
the Federal National Mortgage Association), Freddie Mac (also known as the
Federal Home Loan Mortgage Corporation), 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 HIGH YIELD
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. Such securities are
backed by the full faith and credit of the U.S. Government. Because the coupon
rate on inflation-indexed securities is lower than fixed-rate U.S. Treasury
securities, the Consumer Price Index would have to rise at least to the amount
of the difference between the coupon rate of the fixed rate U.S. Treasury issues
and the coupon rate of the inflation-indexed securities, assuming all other
factors are equal, in order for such securities to match the performance of the
fixed-rate Treasury securities. Inflation-indexed securities are expected to
react primarily to changes in the "real" interest rate (i.e., the nominal (or
-10-
<PAGE>
stated) rate less the rate of inflation), while a typical bond reacts to changes
in the nominal interest rate. Accordingly, inflation-indexed securities have
characteristics of fixed-rate Treasuries having a shorter duration.
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 distribute
substantially all of its income to its shareholders to avoid payment of federal
income and excise taxes, a Portfolio may have to dispose of other investments to
obtain the cash necessary to distribute the accrued taxable income 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.
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
-11-
<PAGE>
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.
-12-
<PAGE>
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.
BANKING AND SAVINGS INSTITUTION SECURITIES (ALL PORTFOLIOS
EXCEPT NEUBERGER & BERMAN GOVERNMENT MONEY PORTFOLIO). These include CDs, time
deposits, bankers' acceptances, and other short-term and long-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.
-13-
<PAGE>
Neuberger & Berman CASH RESERVES 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, and (3) 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.
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.
Adjustable Rate Securities 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 a Portfolios' quality standards. Accordingly, in purchasing these
securities, each Portfolio relies primarily on the creditworthiness of the
credit instrument issuer or the insurer. Except for Neuberger & Berman CASH
RESERVES Portfolio, no 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, each Portfolio, except for
Neuberger & Berman CASH RESERVES Portfolio, excludes securities that do not rely
on the credit instrument or insurance for their ratings, i.e., stand on their
own credit. Neuberger & Berman CASH RESERVES Portfolio may invest in securities
subject to demand features or guarantees as permitted by Rule 2a-7 under the
1940 Act.
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 Freddie
-14-
<PAGE>
Mac), though not necessarily backed by the full faith and credit of the United
States, or may be issued by private issuers.
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 CMOs
or collateralized mortgage-backed bonds ("CBOs"). 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. CBOs 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 CBO(although, like many bonds, CBOs 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 CMOs and CBOs. 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
-15-
<PAGE>
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.
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.
REAL ESTATE-RELATED INSTRUMENTS (Neuberger & Berman HIGH YIELD
Bond Portfolio). Real estate-related instruments include real estate investment
trusts, commercial and residential mortgage-backed securities and real estate
financings. Such instruments are sensitive to factors such as real estate values
and property taxes, interest rates, cash flow of underlying real estate assets,
overbuilding, and the management skill and creditworthiness of the issuer. Real
estate-related instruments may also be affected by tax and regulatory
requirements, such as those relating to the environment.
Equity real estate investment trusts own real estate
properties, while mortgage real estate investment trusts make construction,
development, and long-term mortgage loans. Their value may be affected by
changes in the value of the underlying property of the trusts, or the quality of
the credit extended. Both types of trusts are dependent upon management skill,
are not diversified, and are subject to heavy cash flow dependency, defaults by
borrowers, self-liquidation, and the possibility of failing to qualify for
conduit treatment of income under the Internal Revenue Code of 1986, as amended
("Code") and failing to maintain exemption from the 1940 Act.
-16-
<PAGE>
ASSET-BACKED SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER &
BERMAN GOVERNMENT MONEY PORTFOLIO). 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(SERVICEMARK") 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
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
-17-
<PAGE>
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). These are
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.
FOREIGN CURRENCY DENOMINATED FOREIGN SECURITIES (NEUBERGER &
BERMAN HIGH YIELD BOND PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND
PORTFOLIO). Each Portfolio may invest up to 25% of its net assets in foreign
securities denominated in foreign currencies and, with respect to Neuberger &
Berman HIGH YIELD Bond Portfolio, American Depositary Receipts ("ADRs") on such
securities. Within that limitation, however, neither Portfolio is restricted in
-18-
<PAGE>
the amount it may invest in securities denominated in any one foreign currency.
The Portfolios invest in foreign currency denominated foreign securities of
issuers in countries whose governments are considered stable by N&B Management.
Foreign currency denominated foreign securities 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
-19-
<PAGE>
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.
AMERICAN DEPOSITARY RECEIPTS (Neuberger & Berman HIGH YIELD
Bond Portfolio). ADRs are receipts typically issued by a U.S. bank or trust
company evidencing its ownership of the underlying foreign securities. Most ADRs
are denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers
of the securities underlying sponsored ADRs, but not unsponsored ADRs, are
contractually obligated to disclose material information in the United States.
Therefore, the market value of unsponsored ADRs is less likely to reflect the
effect of such information. ADRs on foreign securities which are denominated in
foreign currencies are subject to the Portfolio's 25% limit on foreign
securities denominated in foreign currencies.
DOLLAR ROLLS (NEUBERGER & BERMAN HIGH YIELD 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 (ALL PORTFOLIOS). These transactions
may involve mortgage-backed securities such as GNMA, Fannie Mae, and Freddie Mac
certificates. 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.
-20-
<PAGE>
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.
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER & BERMAN HIGH
YIELD 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 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. The Portfolios engage 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
-21-
<PAGE>
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.
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. This may result in a profit or loss.
"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
-22-
<PAGE>
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 (but not with respect to options on futures that it
has purchased). 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. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
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 or about interest rate or currency exchange rate trends
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 due to differences between
the futures and securities markets or differences between the securities or
currencies underlying a Portfolio's futures position and the securities held by
or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
-23-
<PAGE>
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
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.
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 HIGH YIELD BOND
PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). Each
Portfolio may write and purchase put and covered call options on securities to
reduce the effect of price fluctuations of securities held by each Portfolio on
the Portfolio's and its corresponding Fund's NAVs. Each 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 a Portfolio are purchased solely
on the basis of investment considerations consistent with the Portfolio's
investment objective.
A Portfolio will receive a premium for writing a put option,
which obligates that 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. A Portfolio may be obligated to purchase the underlying security at more
than its current value.
When a 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. A Portfolio would purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
-24-
<PAGE>
When a 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. That Portfolio receives a
premium for writing the option. When writing call options, each Portfolio writes
only "covered" call options on securities it owns. So long as the obligation of
the call option continues, that Portfolio may be assigned an exercise notice,
requiring it to deliver the underlying security against payment of the exercise
price. A Portfolio may be obligated to deliver securities underlying a call
option at less than the market price.
When a 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. A 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
Portfolios will not do), but is capable of enhancing a Portfolio's total return.
When writing a covered call option, a 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, a
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 a Portfolio has written expires
unexercised, that 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 written by a Portfolio
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 a Portfolio and is
never exercised or closed out, that Portfolio will lose the entire amount of the
premium paid.
-25-
<PAGE>
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 a
Portfolio and a counterparty, with no clearing organization guarantee. Thus,
when a 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) that Portfolio
originally sold (or purchased) the option. There can be no assurance that a
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless a 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 counterparty's insolvency, a
Portfolio may be unable to liquidate its options position and the associated
cover. N&B Management monitors the creditworthiness of dealers with which the
Portfolios may engage in OTC options transactions.
The assets used as cover (or held in a segregated account) for
OTC options written by a 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 market. 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.
-26-
<PAGE>
Closing transactions are effected in order to realize a profit
(or minimize a loss) 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 a Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If a 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.
A 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.
A Portfolio pays brokerage commissions or spreads 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 HIGH
YIELD BOND PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO).
Each 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"). Each
Portfolio enters into Forward Contracts in an attempt to hedge against changes
in prevailing currency exchange rates. The Portfolios do not engage in
transactions in Forward Contracts for speculation; they view 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 them. 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
-27-
<PAGE>
by a 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, a Portfolio could be in a less
advantageous position than if such a hedge or proxy-hedge had not been
established. If a 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. Using
forward contracts to protect the value of a Portfolio's securities against a
decline in the value of a currency does not eliminate fluctuations in the prices
of the underlying securities. Because forward contracts are not traded on an
exchange, the assets used to cover such contracts may be illiquid. A Portfolio
may experience delays in the settlement of its foreign currency transactions.
OPTIONS ON FOREIGN CURRENCIES (NEUBERGER & BERMAN HIGH YIELD
BOND PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). Each
Portfolio may write and purchase covered call and put options on foreign
currencies. A 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.
Currency options have characteristics and risks similar to those of securities
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 HIGH YIELD BOND
PORTFOLIO AND NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO). To the extent
-28-
<PAGE>
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.
COVER FOR HEDGING INSTRUMENTS (NEUBERGER & BERMAN HIGH YIELD
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 HIGH
YIELD 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 market value 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
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
-29-
<PAGE>
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
certain provisions of the Code with which it must comply if its corresponding
Fund is to qualify as a regulated investment company ("RIC"). See "Additional
Tax Information -- Taxation of Portfolios."
INDEXED SECURITIES (NEUBERGER & BERMAN HIGH YIELD BOND
PORTFOLIO AND 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, STEP COUPON AND PAY-IN-KIND SECURITIES (ALL
PORTFOLIOS). Each Portfolio may invest in zero coupon securities; Neuberger &
Berman LIMITED MATURITY Bond Portfolio and Neuberger & Berman HIGH YIELD Bond
Portfolio may invest in step coupon securities. Neuberger & Berman HIGH YIELD
Bond Portfolio may also invest in pay-in-kind securities. These 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 and step coupon securities are issued
and traded at a significant 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. Pay-in-kind securities pay interest through the issuance
of additional securities.
The discount on zero coupon and step coupon securities
("original issue discount" or "OID") 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 OID) to its shareholders each
-30-
<PAGE>
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.
SWAP AGREEMENTS (NEUBERGER & BERMAN HIGH YIELD BOND
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 a swap agreement, one party agrees to make regular
payments equal to a floating rate on a specified amount in exchange for payments
equal to a fixed rate, or a different floating rate, on the same amount for a
specified period.
Swap agreements may involve leverage and may be highly
volatile; depending on how they are used, they may have a considerable impact on
the Portfolio's performance. The risks of swap agreements depend upon the other
party's creditworthiness and ability to perform, as well as the Portfolio's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. In accordance with SEC staff requirements, the
Portfolio will segregate cash or liquid 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. Swap agreements may be illiquid. The swap market is
relatively new and is largely unregulated.
MUNICIPAL OBLIGATIONS (NEUBERGER & BERMAN CASH RESERVES
PORTFOLIO, NEUBERGER & BERMAN LIMITED MATURITY BOND PORTFOLIO AND NEUBERGER &
BERMAN HIGH YIELD 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 HIGH
YIELD Bond Portfolio may invest in municipal obligations but has no current
intention of doing so. Municipal obligations include "general obligation"
-31-
<PAGE>
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.
LOWER RATED DEBT SECURITIES (NEUBERGER & BERMAN LIMITED
MATURITY BOND AND NEUBERGER & BERMAN HIGH YIELD BOND PORTFOLIOS). These
securities are deemed to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal. Lower rated debt
securities generally offer a higher current yield than that available for
investment grade issues, but they may involve significant risk under adverse
conditions. In particular, they are subject to: adverse changes in general
economic conditions and in the industries in which the issuers are engaged,
changes in the financial condition of the issuers, and price fluctuations in
response to changes in interest rates.
During periods of economic downturn or rising interest rates,
highly leveraged issuers may experience financial stress which could adversely
affect their ability to make payments of interest and principal and increase the
possibility of default. In addition, such issuers may not have more traditional
methods of financing available to them and may be unable to repay debt at
maturity by refinancing. The risk of loss due to default by such issuers is
significantly greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.
-32-
<PAGE>
The market for lower rated debt securities has expanded
rapidly in recent years, and its growth generally paralleled a long economic
expansion. In the past, the prices of many lower rated debt securities declined
substantially, reflecting an expectation that many issuers of such securities
might experience financial difficulties. As a result, the yields on lower rated
debt securities rose dramatically. However, such higher yields did not reflect
the value of the income stream that holders of such securities expected, but
rather the risk that holders of such securities could lose a substantial portion
of their value as a result of the issuers' financial restructuring or defaults.
There can be no assurance that such declines will not recur.
The market for lower rated debt issues generally is thinner or
less active than that for higher quality securities, which may limit a Fund's
ability to sell such securities at fair value in response to changes in the
economy or financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may also decrease the values and
liquidity of lower rated debt securities, especially in a thinly traded market.
DIRECT DEBT INSTRUMENTS (NEUBERGER & BERMAN HIGH YIELD BOND
PORTFOLIO). Direct debt instruments are interests in amounts owed by a
corporate, governmental, or other borrowers (including emerging market
countries) to lenders or lending syndicates. Purchasers of loans and other forms
of direct indebtedness depend primarily upon the creditworthiness of the
borrower for payment of principal and interest. If the Portfolio does not
receive scheduled interest or principal payments on such indebtedness, the
Fund's share price and yield could be adversely affected. Direct debt
instruments may involve a risk of insolvency of the lending bank or
intermediary. Direct indebtedness of developing countries involves a risk that
the governmental entities responsible for the repayment of the debt may be
unable or unwilling to pay interest and repay principal when due.
Because the Portfolio's ability to receive payments in
connection with loan participations depends on the financial condition of the
borrower, N&B Management will not rely solely on a bank or other lending
institution's credit analysis of the borrower, but will perform its own
investment analysis of the borrowers. N&B Management's analysis may include
consideration of the borrower's financial strength, managerial experience, debt
coverage, additional borrowing requirements or debt maturity schedules, changing
financial conditions, and responsiveness to changes in business conditions and
interest rates. Loan participations are not generally rated by independent
rating agencies and therefore, investments in a particular loan participation
-33-
<PAGE>
will depend almost exclusively on the credit analysis of the borrower performed
by N&B Management and the original lending institution.
Loans are often administered by a lead bank, which acts as
agent for the lenders in dealing with the borrower. In asserting rights against
the borrower, the Portfolio may be dependent on the willingness of the lead bank
to assert these rights, or upon a vote of all the lenders to authorize the
action. Assets held by the lead bank for the benefit of the Portfolio may be
subject to claims of the lead bank's creditors.
Although some of the loans in which the Portfolio invests may
be secured, there is no assurance that the collateral can be liquidated in
particular cases, or that its liquidation value will be equal to the value of
the debt. Borrowers that are in bankruptcy may pay only a small portion of the
amount owed, if they are able to pay at all. Where the Portfolio purchases a
loan through an assignment, there is a possibility that the Portfolio will, in
the event the borrower is unable to pay the loan, become the owner of the
collateral, and thus will be required to bear the costs of liabilities
associated with owning and disposing of the collateral.
The Portfolio's policies limit the percentage of its assets
that can be invested in the securities of issuers primarily involved in one
industry. Legal interpretations by the SEC staff may require the Portfolio, in
some instances, to treat both the lending bank and the borrower as "issuers" of
a loan participation by the Portfolio. In combination, the Portfolio's policies
and the SEC staff's interpretations may limit the amount the Portfolio can
invest in loan participations.
There may not be a recognizable, liquid public market for loan
participations. To the extent this is the case, the Portfolio would consider the
loan participation as illiquid and subject to the Portfolio's restriction on
investing no more than 15% of its net assets in illiquid securities.
CONVERTIBLE SECURITIES (NEUBERGER & BERMAN HIGH YIELD BOND
PORTFOLIO). A convertible security entitles the holder to receive the interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Securities
convertible into common stock are subject to the Portfolio's 20% limitation on
equity securities. Before conversion, such securities ordinarily provide a
stream of income with generally higher yields than common stocks of the same or
similar issuers, but lower than the yield on non-convertible debt. Convertible
-34-
<PAGE>
securities are usually subordinated to comparable-tier non-convertible
securities but rank senior to common stock in a corporation's capital structure.
The value of a convertible security is a function of (1) its yield in comparison
to the yields of other securities of comparable maturity and quality that do not
have a conversion privilege and (2) its worth if converted into the underlying
common stock.
The price of a convertible security often reflects variations
in the price of the underlying common stock in a way that non-convertible debt
may not. Convertible securities are typically issued by smaller capitalization
companies whose stock prices may be volatile. A convertible security may be
subject to redemption at the option of the issuer at a price established in the
security's governing instrument. If a convertible security held by the Portfolio
is called for redemption, the Portfolio will be required to convert it into the
underlying common stock, sell it to a third party or permit the issuer to redeem
the security. Any of these actions could have an adverse effect on the
Portfolio's and the Fund's ability to achieve their investment objectives.
PREFERRED STOCK (NEUBERGER & BERMAN HIGH YIELD BOND
PORTFOLIO). Unlike interest payments on debt securities, dividends on preferred
stock are generally payable at the discretion of the issuer's board of
directors. Preferred shareholders may have certain rights if dividends are not
paid but generally have no legal recourse against the issuer. Shareholders may
suffer a loss of value if dividends are not paid. The market prices of preferred
stocks are generally more sensitive to changes in the issuer's creditworthiness
than are the prices of debt securities.
WARRANTS (NEUBERGER & BERMAN HIGH YIELD BOND PORTFOLIO).
Warrants may be acquired by the Portfolio in connection with other securities or
separately and provide the Portfolio with the right to purchase at a later date
other securities of the issuer. Warrants are securities permitting, but not
obligating, their holder to subscribe for other securities or commodities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.
-35-
<PAGE>
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 Neuberger & Berman LIMITED MATURITY Bond Portfolio, N&B
Management will engage in an orderly disposition of the downgraded securities or
other securities to the extent necessary to ensure the Portfolio's holdings of
securities that are considered by the Portfolio to be below investment grade
(but rated no lower than B by Moody's or S&P) will not exceed 10% of its net
assets. Neuberger & Berman LIMITED MATURITY Bond Portfolio may hold up to 5% of
its net assets in securities that are downgraded after purchase to a rating
below that permissible by the Portfolio's investment policies. 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.
RISKS OF EQUITY SECURITIES
- --------------------------
Equity securities in which Neuberger & Berman HIGH YIELD Bond
Fund may invest include common stocks, preferred stocks, convertible securities
and warrants. To the extent this Portfolio invests in such securities, the value
of securities held by the Portfolio will be affected by changes in the stock
markets, which may be the result of domestic or international political or
economic news, changes in interest rates or changing investor sentiment. At
times, the stock markets can be volatile and stock prices can change
-36-
<PAGE>
substantially. This market risk will affect the Portfolio's and the Fund's NAVs
per share, which will fluctuate as the value of the securities held by the
Portfolio change. Not all stock prices change uniformly or at the same time and
not all stock markets move in the same direction at the same time. Other factors
affect a particular stock's prices, such as poor earnings reports by an issuer,
loss of major customers, major litigation against an issuer, or changes in
governmental regulations affecting an industry. Adverse news affecting one
company can sometimes depress the stock prices of all companies in the same
industry. Not all factors can be predicted.
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.
PERFORMANCE INFORMATION
Each Fund's performance figures (except for HIGH YIELD) 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 HIGH
YIELD 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.
The Prospectus contains total return information for a private
account managed by Neuberger & Berman with a similar investment objective,
policies and strategy to those of HIGH YIELD ("Private Account"). Custodial fees
and any expenses for services not provided by N&B Management are not reflected
in the Private Account's total return information. The method used to calculate
the total return for the Private Account is a widely-recognized method for
calculating the total return of private accounts. This method may differ in
certain respects from the method mandated by the SEC for calculating the Funds'
total return information. However, N&B Management believes that any differences
in the performance calculations resulting from the differences in these methods
-37-
<PAGE>
would be slight. If permitted by applicable law, HIGH YIELD may advertise the
Private Account's prior performance information.
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.
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)365/7] - 1.
For the seven calendar days ended October 31, 1997, the
current yields of GOVERNMENT MONEY and CASH RESERVES were 4.70% and 5.10%,
respectively. For the same period, the effective yields were 4.81% and 5.23%,
respectively.
HIGH YIELD 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 yield for LIMITED MATURITY for the 30-day
period ended October 31, 1997 was 5.85%.
-38-
<PAGE>
TAX EQUIVALENT YIELD - STATE AND LOCAL TAXES
- --------------------------------------------
GOVERNMENT MONEY. Substantially all of the dividends paid by
GOVERNMENT MONEY represent income received by its corresponding Portfolio 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.
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 1998 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 1998 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 HIGH YIELD 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")
-39-
<PAGE>
of a hypothetical initial investment of $1,000 ("P") over a period of time ("n")
according to the formula:
n
P(1+T) = ERV
Average annual total return smoothes 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,
1997, the average annual total returns for LIMITED MATURITY and its predecessor
were +6.97%, +5.55%, and +7.20%, 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 value of that investor's
holdings would have been $21,578 on October 31, 1997.
N&B Management may from time to time reimburse a Fund or
Portfolio for a portion of its expenses. Such action has the effect of
increasing yield and total return. Actual reimbursements are described in the
Prospectus and in "Investment Management and Administration Services" below.
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
-40-
<PAGE>
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' performance may be compared,
respectively, with IBC/Donoghue's Government Money Market Funds average
and Taxable General Purpose Money Market Funds average.
LIMITED MATURITY'S performance may be compared with the Merrill Lynch
1-3 year Treasury Index, 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.
HIGH YIELD'S performance may be compared with the Lehman Brothers
Aggregate Bond Index, the Lehman Brothers Corporate Bond Index, First
Boston High Yield Bond Fund Index, the Merrill Lynch High Yield Master
Bond Index, and the Lipper High Yield Bond Fund Index as well as the
performance of Treasury securities and corporate bonds.
Each Fund may invest some of its assets in different types of
securities than those included in the index used as a comparison with the Fund's
historical performance. A Fund may also compare certain indices, which represent
different segments of the securities markets, for the purpose of comparing the
historical returns and volatility of those particular market segments. Measures
of volatility show the range of historical price fluctuations. Standard
deviation may be used as a measure of volatility. There are other measures of
volatility, which may yield different results.
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
-41-
<PAGE>
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.
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. 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").
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
-42-
<PAGE>
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.
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.
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>
Positions
Name, Address Held With
and Age(1) the Trusts Principal Occupation(s)(2)
---------- ---------- --------------------------
<S> <C> <C> <C>
John Cannon (68) Trustee of each Trust Senior Vice President AMA Investment Advisers,
CDC Associates, Inc. Inc. (1991 - 1993); Chairman and Chief
620 Sentry Parkway Investment Officer of CDC Associates, Inc.
Suite 220 (registered investment adviser) (1993 -
P.O. Box 1111 present).
Blue Bell, PA 19422
-43-
<PAGE>
Positions
Name, Address Held With
and Age(1) the Trusts Principal Occupation(s)(2)
---------- ---------- --------------------------
Stanley Egener* (63) Chairman of the Board, Principal of Neuberger & Berman; President and
Chief Executive Director of N&B Management; Chairman of the
Officer, and Trustee of Board, Chief Executive Officer and Trustee of
each Trust eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Theodore P. Giuliano* (45) President and Trustee Principal of Neuberger & Berman; Vice President
of each Trust and Director of N&B Management; President and
Trustee of one other mutual fund for which N&B
Management acts as administrator.
Barry Hirsch (64) Trustee of each Trust Senior Vice President, Secretary, and General
Loews Corporation Counsel of Loews Corporation (diversified
667 Madison Avenue financial corporation).
7th Floor
New York, NY 10021
Robert A. Kavesh (70) Trustee of each Trust Professor of Finance and Economics at Stern
110 Bleecker Street School of Business, New York University;
Apt. 24B Director of Del Laboratories, Inc. and Greater
New York, NY 10012 New York Mutual Insurance Co.
William E. Rulon (65) Trustee of each Trust Retired. Senior Vice President of Foodmaker,
Foodmaker, Inc. Inc. (operator and franchiser of restaurants)
1761 Hotel Circle South until January 1997; Secretary of Foodmaker,
San Diego, CA 92108 Inc. until July 1996.
-44-
<PAGE>
Positions
Name, Address Held With
and Age(1) the Trusts Principal Occupation(s)(2)
---------- ---------- --------------------------
Candace L. Straight (50) Trustee of each Trust Private investor and consultant specializing in
518 E. Passaic Avenue the insurance industry; Principal of Head &
Bloomfield, NJ 07003 Company, LLC (limited liability company
providing investment banking and consulting
services to the insurance industry) until March
1996; Director of Drake Holdings (U.K. motor
insurer)until June 1996.
Daniel J. Sullivan (58) Vice President of each Senior Vice President of N&B Management since
Trust 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 (51) Vice President and Senior Vice President of N&B Management since
Principal Financial 1992; Treasurer of N&B Management from 1992 to
Officer of each 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.
-45-
<PAGE>
Positions
Name, Address Held With
and Age(1) the Trusts Principal Occupation(s)(2)
---------- ---------- --------------------------
Claudia A. Brandon (41) Secretary of each Trust Vice President of N&B Management; Secretary of
eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Richard Russell (51) Treasurer and Vice President of N&B Management since 1993;
Principal Accounting prior thereto, Assistant Vice President of N&B
Officer of each Trust Management; Treasurer and Principal Accounting
Officer of eight other mutual funds for which
N&B Management acts as investment manager or
administrator.
Stacy Cooper-Shugrue (35) Assistant Secretary of Assistant Vice President of N&B Management
each 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 (60) Assistant Secretary of Principal of Neuberger & Berman since 1992;
each Trust prior thereto, employee of Neuberger & Berman;
-46-
<PAGE>
Assistant Secretary of eight other mutual funds
for which N&B Management acts as investment
manager or administrator.
Barbara DiGiorgio (39) Assistant Treasurer of Assistant Vice President of N&B Management
each Trust 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 (37) Assistant Treasurer of Assistant Vice President of N&B Management
each Trust since 1994; 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.
</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.
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
-47-
<PAGE>
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.
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 10/31/97
Total Compensation from
Aggregate Trusts in the Neuberger &
Name and Position Compensation Berman Fund Complex Paid
with the Trust From the Trust to Trustees
- -------------- -------------- -------------------------
John Cannon $16,504 $34,500
Trustee (2 other investment companies)
Charles DeCarlo $3,923 $8,000
Trustee (retired 12/96) (2 other investment companies)
Stanley Egener $0 $0
Chairman of the Board,
Chief Executive (9 other investment companies)
Officer, and Trustee
Theodore P. Giuliano $0 $0
President and Trustee (2 other investment companies)
Barry Hirsch $14,809 $30,500
Trustee (2 other investment companies)
-48-
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 10/31/97
Total Compensation from
Aggregate Trusts in the Neuberger &
Name and Position Compensation Berman Fund Complex Paid
with the Trust From the Trust to Trustees
- -------------- -------------- -------------------------
Robert A. Kavesh $16,504 $35,000
Trustee (2 other investment companies)
Harold R. Logan $3,923 $8,000
Trustee (retired 12/96) (2 other investment companies)
William E. Rulon $14,809 $30,500
Trustee (2 other investment companies)
Candace L. Straight $14,809 $31,500
Trustee (2 other investment companies)
At January 30, 1998, 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.
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 (except for Neuberger &
Berman HIGH YIELD Bond Portfolio) on July 2, 1993. The Management Agreement was
approved by the holders of the interests in Neuberger & Berman High Yield Bond
Portfolio on March 2, 1998.
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
-49-
<PAGE>
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. HIGH YIELD became subject to the
Administration Agreement on February 3, 1998.
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.
Each Fund (except HIGH YIELD) accrued management and
administration fees of the following amounts (before any reimbursement of the
Funds, described below) for the fiscal years ended October 31, 1997, 1996, and
1995:
-50-
<PAGE>
1997 1996 1995
---- ---- ----
GOVERNMENT MONEY $1,703,377 $1,476,738 $1,521,937
CASH RESERVES $3,160,143 $2,425,550 $1,738,424
LIMITED MATURITY $1,275,694 $1,480,085 $1,522,574
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 for
CASH RESERVES; 0.70% per annum for LIMITED MATURITY; and 1.00% for HIGH YIELD of
that 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, 1997, 1996, and 1995, N&B
Management reimbursed the Funds the following amounts of expenses: (1) CASH
RESERVES $0, $90,855 and $109,113, respectively, and (2) LIMITED Maturity
$20,974, $16,575, and $32,042, respectively. HIGH YIELD has agreed to repay N&B
Management through December 31, 1999 for excess Total Operating Expenses that
N&B Management previously reimbursed to the Fund.
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:
November 1, 1994
TO APRIL 30, 1995
-----------------
GOVERNMENT MONEY $25,750
CASH RESERVES $31,746
LIMITED MATURITY $29,447
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
-51-
<PAGE>
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 (except for Neuberger & Berman HIGH YIELD Bond Portfolio) on July 2,
1993. The Sub-Advisory Agreement was approved by the holders of the interests in
Neuberger & Berman HIGH YIELD Bond Portfolio on March 2, 1998.
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 numerous investment
analysts, each of whom specializes in studying one or more industries, under the
-52-
<PAGE>
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' prior written notice to the
appropriate Fund. 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
- ----------------------------
As of December 31, 1997, the investment companies managed by
N&B Management had aggregate net assets of approximately $20.7 billion. N&B
Management currently serves as investment manager of the following investment
companies:
<TABLE>
<CAPTION>
NAME DECEMBER 31, 1997
---- -----------------
<S> <C>
Neuberger & Berman Cash Reserves Portfolio.................................................$ 662,861,352
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio..............................................$ 297,594,922
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio.........................................$ 294,956,156
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio...............................................$ 166,832,901
(investment portfolio for Neuberger & Berman Municipal Money Fund)
-53-
<PAGE>
Neuberger & Berman Municipal Securities Portfolio...........................................$ 32,970,458
(investment portfolio for Neuberger & Berman Municipal Securi-
ties Trust)
Neuberger & Berman Focus Portfolio.......................................................$ 1,530,971,078
(investment portfolio for Neuberger & Berman Focus Fund,
Neuberger & Berman Focus Trust, and Neuberger &
Berman Focus Assets)
Neuberger & Berman Genesis Portfolio.....................................................$ 1,841,928,659
(investment portfolio for Neuberger & Berman Genesis Fund,
Neuberger & Berman Genesis Trust, and Neuberger
& Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio.................................................. $ 8,328,032,611
(investment portfolio for Neuberger & Berman Guardian Fund,
Neuberger & Berman Guardian Trust, and
Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio.................................................$ 111,718,206
(investment portfolio for Neuberger & Berman
International Fund and Neuberger & Berman International Trust)
Neuberger & Berman Manhattan Portfolio.....................................................$ 626,632,234
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and
Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio....................................................$ 3,830,066,838
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust, and
Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive Portfolio...........................................$ 287,169,564
(investment portfolio for Neuberger & Berman Socially
Responsive Fund, Neuberger & Berman Trust and
Neuberger & Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (eight series)...................................................$ 2,644,430,313
</TABLE>
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
-54-
<PAGE>
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; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President; Ellen
Metzger, Vice President and Secretary; Paul Metzger, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice President;
Frederic 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; Ramesh Babu, Assistant Vice
President; Valerie Chang, Assistant Vice President; Stacy Cooper-Shugrue,
Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Michael
J. Hanratty, Assistant Vice President; Leslie Holliday-Soto, Assistant Vice
President; Jody L. Irwin, Assistant Vice President; Robert L. Ladd, Assistant
Vice President; Carmen G. Martinez, Assistant Vice President; Joseph S. Quirk,
Assistant Vice President; Ingrid Saukaitis, Assistant Vice President; Josephine
-55-
<PAGE>
Velez, Assistant Vice President; Celeste Wischerth, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman,
Giuliano, Kassen, Lainoff, Zicklin, Risen, Simons and Sundman and Mmes. Prindle,
Silver and Vale are principals of Neuberger & Berman.
Mr. Giuliano and Mr. Egener are trustees and officers, and
Messrs. Russell, Sullivan and Weiner 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, 1998. Neuberger
& Berman HIGH YIELD Bond Portfolio became a party to the Distribution Agreement
on February 3, 1998. The Distribution Agreement may be renewed annually if
-56-
<PAGE>
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 HIGH YIELD 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 LIMITED MATURITY
or HIGH YIELD 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 Equity, Municipal or other Income Funds that are briefly
described below, provided that the minimum investment requirements of the other
fund(s) are met.
Fund shareholders who are considering exchanging shares into
any of the funds described below 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
-57-
<PAGE>
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.
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 Genesis Fund Seeks capital
appreciation through investments 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 Seek 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.
-58-
<PAGE>
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 in securities of small-,
medium- and large-capitalization companies (with a
current focus on medium-capitalization companies)
believed to have the maximum potential for long-term
capital appreciation. The corresponding portfolio's
investment program involves greater risks and share
price volatility than programs that invest in more
undervalued securities.
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.
Neuberger & Berman Seeks long-term capital appreciation through
Socially Responsive investments primarily in securities of companies
Funds 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
-59-
<PAGE>
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.
The Funds described herein, and any of the funds described
above, may terminate or modify their exchange privileges in the future.
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, (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.
-60-
<PAGE>
REDEMPTIONS IN KIND
- -------------------
LIMITED MATURITY and HIGH YIELD 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.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders 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 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 (usually 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.
-61-
<PAGE>
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.
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 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
to request that the cash election be reinstated.
Dividend or other distribution checks that are not cashed or
deposited within 180 days from being issued will be reinvested in additional
shares of the distributing Fund at the Fund's price on the day the check is
reinvested. No interest will accrue on amounts represented by uncashed dividend
or distribution checks.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUNDS
- ---------------------
In order 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 and HIGH YIELD,
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
-62-
<PAGE>
gains from Hedging Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); and (2) 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.
The Funds (except for HIGH YIELD) have received rulings from
the Internal Revenue Service ("Service") that each series, 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 series
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied upon as precedent by HIGH YIELD, N&B Management
believes the reasoning thereof and, hence, their conclusion apply to HIGH YIELD
as well.
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 HIGH YIELD and LIMITED Maturity of distributions to them from their
corresponding Portfolios, investments by those Portfolios in certain securities,
and hedging and certain other transactions engaged in by their corresponding
Portfolios.
TAXATION OF THE PORTFOLIOS
- --------------------------
The Portfolios (except for Neuberger & Berman HIGH YIELD Bond
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 these rulings may not be relied upon as precedent by Neuberger & Berman
HIGH YIELD Bond Portfolio, N&B Management believes the reasoning thereof and,
hence, their conclusion apply to the 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,
-63-
<PAGE>
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 satisfies the requirements to qualify as a RIC, each Portfolio
intends to conduct its operations so that its corresponding Fund will be able 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 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 and gains
realized 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
and/or total return 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 HIGH YIELD 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 amount, 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
-64-
<PAGE>
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.
Exchange-traded Futures Contracts, listed options thereon, and
certain Forward Contracts ("Section 1256 contracts") are required to be marked
to market (that is, treated as having been sold at market value) for federal
income tax purposes at the end of a Portfolio's taxable year. Sixty percent of
any net 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. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
non-corporate taxpayers' net capital gain (the excess of net long-term capital
gain over net short-term capital loss) enacted by the Taxpayer Relief Act of
1997 -- 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 18 months -- instead of the 28%
rate in effect before that legislation, which now applies to gain recognized on
capital assets held for more than one year but not more than 18 months. However,
technical corrections legislation passed by the House of Representatives late in
1997 would clarify that the 20% rate applies.
Each of Neuberger & Berman CASH RESERVES Portfolio and
Neuberger & Berman LIMITED MATURITY Bond 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 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 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.
Each Portfolio may acquire zero coupon or other securities
issued with OID. Neuberger & Berman HIGH YIELD Bond Portfolio may also acquire
-65-
<PAGE>
pay-in-kind securities which pay interest through the issuance of additional
securities. As a holder of those securities, each Portfolio (and, through it,
its corresponding Fund) must take into income the OID and other non-cash income
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 (including its share of its corresponding Portfolio's accrued OID and
other non-cash income) 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.
-66-
<PAGE>
TAXATION OF THE FUNDS' SHAREHOLDERS
- -----------------------------------
If shares of HIGH YIELD 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 HIGH YIELD 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 ("IRA") (including an education
IRA and a Roth IRA) 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.
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
-67-
<PAGE>
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, 1997, Neuberger &
Berman LIMITED MATURITY Bond Portfolio acquired securities of the following of
its "regular brokers or dealers": Goldman, Sachs & Co. and Merrill Lynch,
Pierce, Fenner & Smith Inc. At October 31, 1997, that Portfolio held the
securities of its "regular brokers or dealers" with an aggregate value as
follows: Goldman, Sachs & Co., $5,211,285; Merrill Lynch, Pierce, Fenner & Smith
Inc., $5,269,344.
During the fiscal year ended October 31, 1997, Neuberger &
Berman CASH RESERVES Portfolio acquired securities of the following of its
"regular brokers or dealers": Barclays De Zoete Wedd Securities Inc, Citicorp
Securities, Inc., First Chicago Capital Markets Inc., Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan (J.P.) Securities Inc., and
Morgan Stanley, Dean Witter, Discover & Co. At October 31, 1997, that Portfolio
held the securities of its "regular brokers or dealers" with an aggregate value
as follows: First Chicago Capital Markets, Inc., $15,870,167; Goldman, Sachs &
Co., $29,862,704; Merrill Lynch, Pierce, Fenner & Smith Inc., $4,997,617; Morgan
(J.P.) Securities Inc., $15,005,829; and Morgan Stanley, Dean Witter, Discover &
Co., $24,000,000.
During the fiscal year ended October 31, 1997, Neuberger &
Berman GOVERNMENT MONEY Portfolio acquired none of the securities of its
"regular brokers or dealers." At October 31, 1997, 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 HIGH YIELD Bond Portfolio and Neuberger &
Berman LIMITED MATURITY Bond Portfolio calculate their portfolio turnover rates
by dividing (1) the lesser of the cost of the securities purchased or the
-68-
<PAGE>
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.
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 (except for HIGH YIELD) 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.
-69-
<PAGE>
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 30, 1998:
Percentage of
Ownership at
Name And Address January 30, 1998
---------------- ----------------
GOVERNMENT MONEY: Neuberger & Berman* 74.25%
11 Broadway
New York, NY 10004
CASH RESERVES: Neuberger & Berman* 61.12%
11 Broadway
New York, NY 10004
LIMITED MATURITY: Charles Schwab & Co., Inc.* 27.17%
101 Montgomery Street
San Francisco, CA 94104-4122
Nationwide Life Insurance Plan QPVA 9.59%
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, Ohio 43218-2029
Neuberger & Berman Trust Co., The 5.44%
Neuberger & Berman Employees
Profit Sharing Plan Utd
5/20/71
Attn Al Boccardo
605 Third Ave
36th Floor
New York, NY 10158
- ----------------------
* 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.
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' (except for HIGH YIELD) Annual
Report to Shareholders for the fiscal year ended October 31, 1997:
The Statements of Assets and Liabilities of the Funds and Portfolios,
including the Schedules of Investments of the Portfolios, as of October
31, 1997, 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, 1997, 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, and Neuberger & Berman
Limited Maturity Bond Fund and Portfolio.
<PAGE>
---------------------------------------------------------------
NEUBERGER & BERMAN MUNICIPAL FUNDS AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 2, 1998
Neuberger & Berman Neuberger & Berman
Municipal Money Fund Municipal Securities Trust
(and Neuberger & Berman Municipal (and Neuberger & Berman Municipal
Money Portfolio) Securities 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") and Neuberger
& Berman MUNICIPAL SECURITIES Trust ("Municipal Securities") (each a "Fund") are
no-load mutual funds that offer shares pursuant to a Prospectus dated March 2,
1998. The Funds invest all of their net investable assets in Neuberger & Berman
MUNICIPAL MONEY Portfolio and Neuberger & Berman MUNICIPAL SECURITIES Portfolio
(each a "Portfolio"), respectively.
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 Approach of Neuberger & Berman MUNICIPAL SECURITIES
Portfolio..............................................................5
Overview of Each Fund..................................................5
Types of Municipal Obligations.........................................6
Yield and Price Characteristics of Municipal Obligations...............9
Investment in Taxable Securities......................................10
Additional Investment Information.....................................12
Risks of Fixed Income Securities......................................21
CERTAIN RISK CONSIDERATIONS.................................................21
PERFORMANCE INFORMATION.....................................................23
Yield Calculations....................................................23
Tax Equivalent Yield..................................................24
Total Return Computations.............................................24
Comparative Information...............................................25
Other Performance Information.........................................27
TRUSTEES AND OFFICERS.......................................................28
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................33
Investment Manager and Administrator..................................33
Sub-Adviser...........................................................36
Investment Companies Managed..........................................37
Management and Control of N&B Management..............................38
DISTRIBUTION ARRANGEMENTS...................................................39
ADDITIONAL PURCHASE INFORMATION.............................................40
Automatic Investing and Dollar Cost Averaging.........................40
ADDITIONAL EXCHANGE INFORMATION.............................................41
ADDITIONAL REDEMPTION INFORMATION...........................................44
Suspension of Redemptions.............................................44
Redemptions in Kind...................................................44
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................45
ADDITIONAL TAX INFORMATION..................................................46
Taxation of the Funds.................................................46
Taxation of the Portfolios............................................47
<PAGE>
Taxation of the Funds' Shareholders...................................50
VALUATION OF PORTFOLIO SECURITIES...........................................51
PORTFOLIO TRANSACTIONS......................................................51
Portfolio Turnover....................................................52
REPORTS TO SHAREHOLDERS.....................................................52
ORGANIZATION................................................................53
CUSTODIAN AND TRANSFER AGENT................................................53
INDEPENDENT AUDITORS........................................................53
LEGAL COUNSEL...............................................................53
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................53
REGISTRATION STATEMENT......................................................54
FINANCIAL STATEMENTS........................................................54
Appendix A...................................................................1
RATINGS OF MUNICIPAL OBLIGATIONS AND COMMERCIAL PAPER..................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 objective, 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, as amended ("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
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, Neuberger & Berman MUNICIPAL SECURITIES Portfolio 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. Neuberger & Berman MUNICIPAL MONEY Portfolio determines the
"issuer" of a municipal obligation for purposes of its policy on industry
concentration in accordance with the principles of Rule 2a-7 under the 1940 Act.
Except for the limitation on borrowing and the limitation on illiquid
securities, any maximum percentage of securities or assets contained in an
investment policy or limitation will not be considered to be exceeded unless the
percentage limitation is exceeded immediately after, and because of, a
transaction by a Portfolio. If events subsequent to a transaction result in a
Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, N&B Management will take appropriate steps to reduce the percentage
of borrowings or the percentage held in illiquid securities, as may be required
by law, within a reasonable amount of time.
The fundamental investment policies and limitations of Neuberger &
Berman MUNICIPAL MONEY and Neuberger & Berman MUNICIPAL SECURITIES Portfolios
are as follows:
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)
-2-
<PAGE>
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
-3-
<PAGE>
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. 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, as amended ("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.
-4-
<PAGE>
INVESTMENT APPROACH OF NEUBERGER & BERMAN MUNICIPAL SECURITIES PORTFOLIO
Neuberger & Berman MUNICIPAL SECURITIES Portfolio is managed in accordance
with an investment approach developed by its 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
$9.3 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.
The dollar-weighted average duration of Neuberger & Berman MUNICIPAL
SECURITIES 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.
OVERVIEW OF EACH FUND
N&B Management offers two municipal funds - MUNICIPAL MONEY and MUNICIPAL
SECURITIES. 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.)
We take a similar approach to the management of both Portfolios.
Investments are made in municipal bond sectors that offer higher yields 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
-5-
<PAGE>
protect principal in difficult environments and 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 seeks 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, the Fund's 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.
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. (Unless otherwise indicated, both
Portfolios may invest in the obligations described below.)
-6-
<PAGE>
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.
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). 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. The 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
-7-
<PAGE>
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 the Portfolio.
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.
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
-8-
<PAGE>
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).
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.
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
-9-
<PAGE>
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 GNMA, Fannie Mae (also known as the Federal
National Mortgage Association), Freddie Mac (also known as the 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. These securities include CDs, time deposits, bankers'
acceptances, and other short-term and long-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, and (2) the bank is
on N&B Management's approved list.
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
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
-10-
<PAGE>
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 Standard & Poor's ("S&P"),
Moody's Investors Services, Inc. ("Moody's"), or any other nationally recognized
statistical rating organization ("NRSRO") or unrated securities determined by
N&B Management to be of comparable quality, (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.
SWAP AGREEMENTS (NEUBERGER & BERMAN MUNICIPAL SECURITIES PORTFOLIO). To
help enhance the value of its Portfolio or manage its exposure to different
-11-
<PAGE>
types of investments, the Portfolio may enter into interest rate and mortgage
swap agreements and may purchase and sell interest rate "caps," "floors," and
"collars." In a swap agreement, one party agrees to make regular payments equal
to a floating rate on a specified amount in exchange for payments equal to a
fixed rate, or a different floating rate, on the same amount for a specified
period.
Swap agreements may involve leverage and may be highly volatile; depending
on how they are used, they may have a considerable impact on the Portfolio's
performance. The risks of swap agreements depend upon the other party's
creditworthiness and ability to perform, as well as the Portfolio's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions. In accordance with SEC staff requirements, the Portfolio will
segregate cash or liquid 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. Swap agreements may be illiquid. The swap market is relatively new and
is largely unregulated.
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, weekly, 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.
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
-12-
<PAGE>
Portfolio relies primarily on the creditworthiness of the credit instrument
issuer or the insurer. Neuberger & Berman MUNICIPAL SECURITIES 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, Neuberger & Berman MUNICIPAL SECURITIES Portfolio
excludes securities that do not rely on the credit instrument or insurance for
their ratings, i.e., stand on their own credit. Neuberger & Berman MUNICIPAL
MONEY Portfolio may invest in securities subject to demand features or
guarantees as permitted by Rule 2a-7 under the 1940 Act.
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.
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 neither Portfolio currently intends to invest in standby
commitments, each reserves the right to do so. Neither 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
-13-
<PAGE>
the interest earned by the Portfolio on municipal obligations subject to a
standby commitment will be exempt from federal income tax. Neither 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 losses 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 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
-14-
<PAGE>
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, in the case of Neuberger & Berman MUNICIPAL SECURITIES Portfolio,
a 15% limit or in the case of Neuberger & Berman MUNICIPAL MONEY Portfolio, a
10% 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. 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
-15-
<PAGE>
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 counterparty to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
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.
-16-
<PAGE>
The discount on zero coupon securities ("original issue discount" or
"OID") must be taken into account ratably by each 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 OID) to its shareholders each year for income tax purposes,
each 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). Neuberger & Berman MUNICIPAL SECURITIES Portfolio may
purchase and sell interest rate and bond index futures contracts and options
thereon ("Futures" or "Futures Contracts") 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 the Portfolio to
enhance portfolio liquidity and maintain a defensive position without having to
sell portfolio securities. The Portfolio does not engage in transactions in
Futures or options thereon for speculation. The Portfolio views 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
-17-
<PAGE>
organization guarantees performance of the contracts between the clearing
members of the exchange.
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. This may result in a profit or loss.
"Margin" with respect to Futures is the amount of assets that must be
deposited by the 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 the 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, the Portfolio marks to
market the value of its open Futures positions. The Portfolio also must make
margin deposits with respect to options on Futures that it has written (but not
with respect to options on Futures that it has purchased). 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
-18-
<PAGE>
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 the Portfolio believes that the use of Futures Contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate trends is incorrect, the 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 due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio.
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 Portfolio. Losses that may arise from certain Futures
transactions are potentially unlimited.
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 the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
REGULATORY LIMITATIONS ON USING FUTURES AND OPTIONS ON FUTURES
(COLLECTIVELY, "HEDGING INSTRUMENTS") (NEUBERGER & BERMAN MUNICIPAL SECURITIES
PORTFOLIO). To the extent Neuberger & Berman MUNICIPAL SECURITIES 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.
-19-
<PAGE>
COVER FOR HEDGING INSTRUMENTS (NEUBERGER & BERMAN MUNICIPAL SECURITIES
PORTFOLIO). Neuberger & Berman MUNICIPAL SECURITIES 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 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 Neuberger & Berman MUNICIPAL
SECURITIES Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet current obligations. The 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). The primary risks in using Hedging Instruments are (1)
imperfect correlation or no correlation between changes in the market value of
the securities held or to be acquired by Neuberger & Berman MUNICIPAL SECURITIES
Portfolio and changes in market value 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 different from those needed to select the
Portfolio's securities; (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the 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 the Portfolio's underlying securities. N&B Management intends to reduce
the risk that the 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 the
Portfolio's use of Hedging Instruments will be successful.
Neuberger & Berman MUNICIPAL SECURITIES Portfolio's use of Hedging
Instruments may be limited by certain provisions of the Internal Revenue Code
of 1986, as amended ("Code"), with which the Portfolio must comply if its
-20-
<PAGE>
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.
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 or
other securities to the extent necessary to ensure that Neuberger & Berman
MUNICIPAL SECURITIES Portfolio's holdings of securities that are considered by
the Portfolio to be 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.
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.
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.
-21-
<PAGE>
The ratings of 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. These
proceedings could result in material and adverse changes in the rights of
holders of their obligations.
From time to time, federal legislation, such as the Tax Reform Act of 1986
(which eliminated the federal income tax exemption for interest on certain
municipal obligations) 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. If such legislation is enacted, each Fund and its
-22-
<PAGE>
corresponding Portfolio will reevaluate its investment objective, policies and
limitations. The Service occasionally challenges the tax-exempt status of the
income on municipal securities. If the Service determines that such income is
taxable, that income may be deemed taxable retroactive to the time of a
Portfolio's purchase of that security.
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 will vary, and an
investment in this Fund, 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] - 1
For the seven calendar days ended October 31, 1997, the current yield and
effective yield of MUNICIPAL MONEY were 3.07% and 3.12%, respectively.
MUNICIPAL SECURITIES 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
-23-
<PAGE>
percentage of the investment. For the 30-day period ended October 31, 1997, the
annualized yield of MUNICIPAL SECURITIES was 4.00%.
TAX EQUIVALENT YIELD
Each Fund 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 (of a taxable investment) 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, 1997,
were 5.08% and 5.21%, respectively. The tax-equivalent yield of MUNICIPAL
SECURITIES for the 30-day period ended that date was 6.62%, 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.
TOTAL RETURN COMPUTATIONS
MUNICIPAL SECURITIES 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
-24-
<PAGE>
initial investment of $1,000 ("P") over a period of time ("n") according to the
formula:
n
P (1+T) = ERV
Average annual total return smoothes 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, 1997, the
average annual total returns for MUNICIPAL SECURITIES and its predecessor were
+6.71%, +5.82%, and +6.76%, respectively. If an investor had invested $10,000 in
that predecessor's shares on July 9, 1987, and had reinvested all distributions,
the value of that investor's holdings would have been $19,009 on October 31,
1997.
N&B Management may from time to time reimburse MUNICIPAL SECURITIES or its
corresponding Portfolio for a portion of its expenses. Such action has the
effect of increasing yield and total return. Actual reimbursements are described
in the Prospectus and in "Investment Management and Administration Services"
below.
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 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
-25-
<PAGE>
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:
MUNICIPAL MONEY's performance may be compared with the
IBC/Donoghue's Tax-Free General Purpose Money Market Funds
average.
MUNICIPAL SECURITIES' 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.
Each Fund may invest some of its assets in different types of securities
than those included in the index used as a comparison with the Fund's historical
performance. A Fund may also compare certain indices, which represent different
segments of the securities markets, for the purpose of comparing the historical
returns and the volatility of those particular market segments. Measures of
volatility show the range of historical price fluctuations. Standard deviation
may be used as a measure of volatility. There are other measures of volatility
which may yield different results.
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.
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. Evaluations of the Funds' performance, and their
yield/total returns and comparisons may be used in advertisements and in
-26-
<PAGE>
information furnished to current and prospective shareholders (collectively,
"Advertisements").
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 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.
-27-
<PAGE>
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.
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 (68) Trustee of each Trust Senior Vice President AMA
CDC Associates, Inc. Investment Advisers, Inc.
620 Sentry Parkway (1991-1993); Chairman and
Suite 220 Chief Investment Officer of
P.O. Box 1111 CDC Associates, Inc.
Blue Bell, PA 19422 (registered investment
adviser) (1993-present).
Stanley Egener* (63) Chairman of the Principal of Neuberger &
Board, Chief Berman; President and Director
Executive Officer, of N&B Management; Chairman of
and Trustee of each the Board, Chief Executive
Trust Officer and Trustee of eight
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Theodore P. Giuliano* (45) President and Trustee Principal of Neuberger &
of each Trust Berman; Vice President and
Director of N&B Management;
President and Trustee of
one other mutual fund for
which N&B Management acts
as administrator.
-28-
<PAGE>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------
Barry Hirsch (64) Trustee of each Trust Senior Vice President,
Loews Corporation Secretary, and General Counsel
667 Madison Avenue of Loews Corporation
7th Floor (diversified financial
New York, NY 10021 corporation).
Robert A. Kavesh (70) 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 (65) Trustee of each Trust Retired. Senior Vice
1761 Hotel Circle So. President of Foodmaker, Inc.
San Diego, CA 92108 (operator and franchiser of
restaurants) until January
1997; Secretary of Foodmaker,
Inc. until July 1996.
Candace L. Straight (50) 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; Director of Drake
Holdings (U.K. motor insurer)
until June 1996.
Daniel J. Sullivan (58) 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.
-29-
<PAGE>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------
Michael J. Weiner (51) Vice President and Senior Vice President of N&B
Principal Financial Management since 1992; Treasurer
Officer of each Trust of N&B Management from 1992 to
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 (41) 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 (51) Treasurer and Vice President of N&B Management
Principal Accounting since 1993; prior thereto,
Officer of each Trust Assistant Vice President of N&B
Management; Treasurer and
Principal Accounting Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Stacy Cooper-Shugrue (35) Assistant Secretary Assistant Vice President of N&B
of each Trust Management 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.
-30-
<PAGE>
Name, Address Positions Held Principal
and Age(1) With the Trusts Occupation(s) (2)
- ---------- --------------- -----------------
C. Carl Randolph (60) Assistant Secretary Principal of Neuberger & Berman
of each Trust since 1992; 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 (39) Assistant Treasurer Assistant Vice President of N&B
of each Trust 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 (37) Assistant Treasurer Assistant Vice President of N&B
of each Trust Management since 1994; 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.
</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.
The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
-31-
<PAGE>
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.
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 10/31/97
Total Compensation from
Aggregate Trusts in the Neuberger &
Name and Position Compensation Berman Funds Complex Paid
With the Trust from the Trust to Trustees
- -------------- -------------- -----------
John Cannon $16,504 $34,500
Trustee (2 other investment
companies)
Charles DeCarlo $3,923 $8,000
Trustee (retired 12/96) (2 other investment
companies)
Stanley Egener $0 $0
Chairman of the Board, Chief (9 other investment
Executive Officer, and Trustee companies)
Theodore P. Giuliano $0 $0
President and Trustee (2 other investment
companies)
Barry Hirsch $14,809 $30,500
Trustee (2 other investment
companies)
-32-
<PAGE>
Total Compensation from
Aggregate Trusts in the Neuberger &
Name and Position Compensation Berman Funds Complex Paid
With the Trust from the Trust to Trustees
- -------------- -------------- -----------
Robert A. Kavesh $16,504 $35,000
Trustee (2 other investment
companies)
Harold R. Logan $3,923 $8,000
Trustee (retired 12/96) (2 other investment
companies)
William E. Rulon $14,809 $30,500
Trustee (2 other investment
companies)
Candace L. Straight $14,809 $31,500
Trustee (2 other investment
companies)
At January 30, 1998, the trustees and officers of the Trust, as a group,
owned beneficially or of record 1.45% of the outstanding shares of MUNICIPAL
MONEY and 1.29% of MUNICIPAL SECURITIES.
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 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
-33-
<PAGE>
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"). 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.
For the fiscal years ended October 31, 1997, 1996, and 1995, (1) MUNICIPAL
SECURITIES accrued advisory or management and administration fees of $171,589,
$215,161, and $225,079, respectively, and (2) MUNICIPAL MONEY Fund accrued
advisory or management and administration fees of $736,228, $832,011, and
$772,483, respectively.
-34-
<PAGE>
As noted in the Prospectus under "Management and Administration --
Expenses," N&B Management has voluntarily undertaken to reimburse MUNICIPAL
SECURITIES 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,
1997, 1996 and 1995, MUNICIPAL SECURITIES was reimbursed for its expenses in the
amounts of $131,519, $160,411, and $145,086, 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. For the period November 1, 1994 to April 30, 1995, MUNICIPAL MONEY paid
$15,415, and MUNICIPAL SECURITIES paid $4,376 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
-35-
<PAGE>
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 numerous 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' prior written notice to the appropriate Fund. 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.
-36-
<PAGE>
INVESTMENT COMPANIES MANAGED
As of December 31, 1997, the investment companies managed by N&B
Management had aggregate net assets of approximately $20.7 billion. N&B
Management currently serves as investment manager of the following investment
companies:
Approximate
Net Assets at
Name December 31, 1997
Neuberger & Berman Cash Reserves Portfolio.......................$ 662,861,352
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio....................$ 297,594,922
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio...............$ 294,956,156
(investment portfolio for Neuberger & Berman Limited Maturity Bond Fund
and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio.....................$ 166,832,901
(investment portfolio for Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio.................$ 32,970,458
(investment portfolio for Neuberger & Berman Municipal Securities Trust)
Neuberger & Berman Focus Portfolio.............................$ 1,530,971,078
(investment portfolio for Neuberger & Berman Focus Fund, Neuberger &
Berman Focus Trust, and Neuberger & Berman Focus Assets)
Neuberger & Berman Genesis Portfolio...........................$ 1,841,928,659
(investment portfolio for Neuberger & Berman Genesis Fund, Neuberger &
Berman Genesis Trust, and Neuberger & Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio........................ $ 8,328,032,611
(investment portfolio for Neuberger & Berman Guardian Fund, Neuberger &
Berman Guardian Trust, and Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio.......................$ 111,718,206
(investment portfolio for Neuberger & Berman International Fund and
Neuberger & Berman International Trust)
-37-
<PAGE>
Neuberger & Berman Manhattan Portfolio...........................$ 626,632,234
(investment portfolio for Neuberger & Berman Manhattan Fund, Neuberger &
Berman Manhattan Trust, and Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio..........................$ 3,830,066,838
(investment portfolio for Neuberger & Berman Partners Fund, Neuberger &
Berman Partners Trust, and Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive Portfolio.................$ 287,169,564
(investment portfolio for Neuberger & Berman Socially Responsive Fund,
Neuberger & Berman Socially Responsive Trust and Neuberger & Berman NYCDC
Socially Responsive Trust)
Advisers Managers Trust (eight series).........................$ 2,644,430,313
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
-38-
<PAGE>
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; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar,
Vice President; Brian J. Gaffney, Vice President; Joseph Galli, Vice
President; Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; Janet W. Prindle, Vice President; Kevin L. Risen, Vice President;
Richard Russell, Vice President; Jennifer K. Silver, Vice President; Kent C.
Simons, Vice President; Frederic 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;
Ramesh Babu, Assistant Vice President; Valerie Chang, Assistant Vice
President; Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Michael J. Hanratty, Assistant Vice President;
Leslie Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice
President; Celeste Wischerth, Assistant Vice President; and Loraine
Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano,
Kassen, Lainoff, Zicklin, Risen, Simons and Sundman and Mmes. Prindle, Silver
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
-39-
<PAGE>
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.
ADDITIONAL PURCHASE INFORMATION
AUTOMATIC INVESTING AND DOLLAR COST AVERAGING
Shareholders may arrange to have a fixed amount automatically invested in
shares of MUNICIPAL SECURITIES 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.
-40-
<PAGE>
Automatic investing enables a shareholder in MUNICIPAL SECURITIES 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.
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.
Fund shareholders who are considering exchanging shares into any of the
funds described below 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.
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.
-41-
<PAGE>
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 in securities of
small-, medium-and large-capitalization companies
(with a current focus on medium-capitalization
companies) believed to have the maximum potential
for long-term capital appreciation. The
corresponding portfolio's investment program
involves greater risks and share price volatility
than programs that invest in more undervalued
securities.
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
-42-
<PAGE>
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 investments primarily in securities of
Fund 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 current
Cash Reserves 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 the highest current income consistent Bond
Limited Maturity Fund with low risk to principal and liquidity;
and 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.
-43-
<PAGE>
The Funds described herein, and any of the funds described above, may
terminate or modify their exchange privileges in the future.
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, (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
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
-44-
<PAGE>
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 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 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 calculates its 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).
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 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 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.
-45-
<PAGE>
A cash election with respect to either 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 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 to request that the
cash election be reinstated.
Dividend or other distribution checks that are not cashed or deposited
within 180 days from being issued will be reinvested in additional shares of the
distributing Fund at the Fund's price on the day the check is reinvested. No
interest will accrue on amounts represented by uncashed dividend or distribution
checks.
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") and (2) 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 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.
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%
-46-
<PAGE>
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 series, 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 series satisfies all the requirements
described above to qualify as a RIC and to pay "exempt-interest" dividends to
its shareholders.
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 to MUNICIPAL
SECURITIES of distributions to it from its corresponding Portfolio, investments
by that Portfolio in certain securities, and hedging and certain other
transactions engaged in by its corresponding Portfolio.
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." As a result, neither 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 satisfies the requirements to qualify as a RIC and to pay
-47-
<PAGE>
"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.
The use by Neuberger & Berman MUNICIPAL SECURITIES 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 Portfolio realizes in
connection therewith. For this Portfolio, 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.
Exchange-traded Futures Contracts and listed options thereon ("Section
1256 contracts") are required to be marked to market (that is, treated as having
been sold at market value) for federal income tax purposes at the end of the
Portfolio's taxable year. Sixty percent of any net 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.
As of the date of this SAI, it is not entirely clear whether that 60% portion
will qualify for the reduced maximum tax rates on non-corporate taxpayers' net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
-48-
<PAGE>
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, technical corrections
legislation passed by the House of Representatives late in 1997 would clarify
that the 20% rate applies.
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.
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.
-49-
<PAGE>
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 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.
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 is 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
-50-
<PAGE>
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.
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,
-51-
<PAGE>
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, 1997, neither Portfolio acquired
securities of its "regular brokers or dealers" (as defined in the 1940 Act). At
October 31, 1997, neither 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 calculates 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
-52-
<PAGE>
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.
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 30, 1998:
Name and Address: Percentage of
----------------- Ownership at
January 30, 1998
----------------
MUNICIPAL MONEY: Neuberger & Berman* 87.30%
11 Broadway
New York, NY 10004
-53-
<PAGE>
Name and Address: Percentage of
----------------- Ownership at
January 30, 1998
----------------
MUNICIPAL SECURITIES: Neuberger & Berman* 13.59%
- -------------------- 11 Broadway
New York, NY 10004
Charles Schwab & Co., Inc.* 16.43%
Attn: Mutual Funds Dept.
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.
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, 1997:
The Statements of Assets and Liabilities of the Funds and Portfolios,
including the Schedules of Investments of the Portfolios, as of October 31,
1997, and the related Statements of Operations for the year then ended, the
-54-
<PAGE>
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, 1997, and
the reports of Ernst & Young LLP, independent auditors, with respect to such
audited financial statements of Neuberger & Berman Municipal Money Fund and
Portfolio and Neuberger & Berman Municipal Securities Trust and Portfolio.
-55-
<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 - 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
A-1
<PAGE>
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.
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.
A-2
<PAGE>
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.
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-3
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 25 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, 1997
for Neuberger & Berman Income Funds (with respect to Neuberger & Berman
Government Money Fund, Neuberger & Berman Cash Reserves and Neuberger & Berman
Limited Maturity Bond Fund) and Income Managers Trust (with respect to Neuberger
& Berman Government Money Portfolio, Neuberger & Berman Cash Reserves Portfolio
and Neuberger & Berman Limited Maturity Portfolio) and the reports of the
independent auditors are incorporated into the Statement of Additional
Information for such series by reference to the Annual Report to Shareholders of
Neuberger & Berman Income Funds, File Nos. 2-85229 and 811-3802, Edgar Accession
No. 0000898432-97-531.
Audited financial statements for the fiscal year ended October 31, 1997
for Neuberger & Berman Income Funds (with respect to Neuberger & Berman
Municipal Money Fund and Neuberger & Berman Municipal Securities Trust) and
Neuberger & Berman Income Managers Trust (with respect to Neuberger & Berman
Municipal Money Portfolio and Neuberger & Berman Municipal Securities Portfolio)
and the reports of the independent auditors are incorporated into the Statement
of Additional Information for such series by reference to the Annual Report to
Shareholders of Neuberger & Berman Income Funds, File No. 2-85229 and 811-3802,
Edgar Accession No. 0000898432-97-000531.
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 Limited Maturity Bond Fund, Neuberger & Berman Money Fund, and Neuberger
& Berman Municipal Securities Trust.
(b) Exhibits:
Exhibit Description
Number -----------
------
(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) Schedule A - Current Series of Neuberger &
Berman Income Funds. Filed Herewith.
<PAGE>
(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. Filed Herewith.
(iii) Schedule B - Schedule of Compensation
under the Management Agreement. Filed
Herewith.
(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. Filed Herewith.
<PAGE>
(iii) Substitution Agreement Among Neuberger &
Berman Management Incorporated, Income
Managers Trust, Neuberger & Berman, L.P., and
Neuberger & Berman, LLC. Incorporated by
Reference to Post-Effective Amendment No. 23
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802; EDGAR Accession
No. 0000898432-96-000117.
(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. Filed Herewith.
(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) Agreement between Neuberger & Berman Income Funds
and State Street Bank and Trust Company Adding
Neuberger & Berman High Yield Bond Fund as a Series
Governed by the Custodian Contract. Filed Herewith.
(c) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 23 to Registrant's
Registration Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-00017.
(9) (a) (i) 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.
<PAGE>
(ii) Agreement between Neuberger & Berman Income
Funds and State Street Bank and Trust Company
Adding Neuberger & Berman High Yield Bond
Fund as a Series Governed by the Transfer
Agency and Service Agreement. Filed Herewith.
(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 and Service Agreement. Incorporated by
Reference to Post-Effective Amendment No. 23
to Registrant's Registration Statement, File
Nos. 2-85229 and 811-3802, EDGAR Accession
No. 0000898432-96-00017.
(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. Filed
Herewith.
(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.
<PAGE>
(10) (a) Opinion and Consent of Kirkpatrick &
Lockhart on Securities Matters with
respect to Neuberger & Berman High
Yield Bond Fund. Incorporated by
Reference to Post-Effective Amendment
No. 24 to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-97-000503.
(b) Opinion and Consent of Kirkpatrick &
Lockhart LLP on Securities Matters with
respect to Neuberger & Berman Income
Funds. Filed Herewith.
(11) Other Opinions, Appraisals, Rulings and Consents.
Consent 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.)
<PAGE>
Item 26. Number of Holders of Securities.
- -------- --------------------------------
The following information is given as of February 3, 1998.
Title of Class Number of
-------------- Record Holders
--------------
Shares of beneficial interest, $0.001 par value, of:
Neuberger & Berman Government Money Fund 4,305
Neuberger & Berman Cash Reserves 11,326
Neuberger & Berman High Yield Bond Fund 0
Neuberger & Berman Limited Maturity Bond Fund 4,079
Neuberger & Berman Municipal Money Fund 1,198
Neuberger & Berman Municipal Securities Trust 963
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
<PAGE>
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.
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
<PAGE>
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 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 principal 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, N&B Management Trust; Secretary, Advisers
Management Managers Trust; 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.
Brooke A. Cobb
Vice President, N&B Chief Investment Officer, Bainco
Management International Investors.1 Senior Vice
President and Senior Portfolio Manager,
1 Until 1997.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Putnam Investments.2
Stacy Cooper-Surge Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Secretary, Advisers Managers Trust;
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.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, N&B Investments.3
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management 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; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Managers Trust; 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.
2 Until 1995.
3 Until 1996.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Theodore P. Giuliano President and Trustee, Neuberger & Berman
Vice President and Income Funds; President and Trustee,
Director, N&B Management; Neuberger & Berman Income Trust; President
Principal, Neuberger & Berman and Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
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.
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
N&B Management Managers Trust; 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.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities.4
N&B Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, N&B Investments.5
Management; Principal,
Neuberger & Berman
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; 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.
Michael J. Weiner Vice President, Neuberger & Berman Advisers
4 Until 1997.
5 Until 1997.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; 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; Assistant
N&B Management 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.
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Management; Advisers Management Trust; President and
Principal, Neuberger & Berman Trustee, Advisers Managers Trust; 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.
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:
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Trust
Neuberger & Berman Equity Assets
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the master funds in
which the above-named investment companies invest.
<PAGE>
(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 None
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
Loraine Olavarria Assistant Secretary None
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
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
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
Lawrence Zicklin Director Trustee and President
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.
<PAGE>
Item 32. Undertakings
- -------- ------------
Registrant hereby undertakes to file a Post-Effective Amendment to
its Registration Statement, containing financial statements with respect to
Neuberger & Berman High Yield Bond Fund, which need not be certified, within
four to six months from the date of the Fund's commencement of operations.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to shareholders, upon
request and without charge.
<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. 25 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 27th day of February,
1998
NEUBERGER & BERMAN INCOME FUNDS
By:/s/Theodore P. Giulano
----------------------
Theodore P. Giulano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 25 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee February 27, 1998
- ---------------
John Cannon
/s/Stanley Egener Chairman of the Board, February 27, 1998
- ----------------- Chief Executive Officer
Stanley Egener and Trustee
/s/Theodore P. Giuliano President and Trustee February 27, 1998
- -----------------------
Theodore P. Giuliano
/s/Barry Hirsch Trustee February 27, 1998
- ---------------
Barry Hirsch
/s/Robert A. Kavesh Trustee February 27, 1998
- -------------------
Robert A. Kavesh
(Signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/William E. Rulon Trustee February 27, 1998
- -------------------
William E. Rulon
/s/Richard Russell Treasurer and February 27, 1998
- ------------------ Principal Accounting Officer
Richard Russell
/s/Candace L. Straight Trustee February 27, 1998
- ----------------------
Candace L. Straight
/s/Michael J. Weiner Vice President and February 27, 1998
- -------------------- Principal Financial Officer
Michael J. Weiner
- 2 -
<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. 6
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 27th day of February, 1998.
INCOME MANAGERS TRUST
By: /s/ Theodore P. Giulano
------------------------------
Theodore P. Giulano
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 6 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ John Cannon Trustee February 27, 1998
- -------------------------
John Cannon
/s/ Stanley Egener Chairman of the Board, February 27, 1998
- ------------------------- Chief Executive Officer
Stanley Egener and Trustee
/s/ Theodore P. Giuliano President and Trustee February 27, 1998
- -------------------------
Theodore P. Giuliano
/s/ Barry Hirsch Trustee February 27, 1998
- -------------------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee February 27, 1998
- -------------------------
Robert A. Kavesh
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ William E. Rulon Trustee February 27, 1998
- -------------------------
William E. Rulon
/s/ Richard Russell Treasurer and February 27, 1998
- ------------------------- Principal Accounting
Richard Russell Officer
/s/ Candace L. Straight Trustee February 27, 1998
- -------------------------
Candace L. Straight
/s/ Michael J. Weiner Vice President and February 27, 1998
- ------------------------- Principal Financial Officer
Michael J. Weiner
2
<PAGE>
NEUBERGER & BERMAN INCOME FUNDS
POST-EFFECTIVE AMENDMENT NO. 25 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 & Berman Income Funds. Filed
Herewith.
(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 N.A.
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.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(5) (a) (i) Management Agreement Between N.A.
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. Filed Herewith.
(iii) Schedule B - Schedule of ___
Compensation Under the
Management Agreement. Filed
Herewith.
(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 Managers Trust Currently
Subject to the Sub-Advisory
Agreement. Filed Herewith.
(iii) Substitution Agreement Among N.A.
Neuberger & Berman Management
Incorporated, Income Managers
Trust, Neuberger & Berman, L.P.,
and Neuberger & Berman, LLC.
Incorporated by Reference to
Post-Effective Amendment No. 23
to Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
0000898432-96-000117.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(6) (a) Distribution 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.
(b) Schedule A - Series of Neuberger & ____
Berman Income Funds Currently Subject
to the Distribution Agreement. Filed
Herewith.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(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) Agreement between Neuberger & Berman ____
Income Funds and State Street Bank and
Trust Company Adding Neuberger & Berman
High Yield Bond Fund as a Series
Governed by the Custodian Contract.
Filed Herewith.
(c) Schedule of Compensation under the N.A.
Custodian Contract. Incorporated
by Reference to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-96-00017.
(9) (a) (i) Transfer Agency and Service N.A.
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 High
Yield Bond Fund as a Series
Governed by the Transfer Agency
and Service Agreement. Filed
Herewith.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(iii) First Amendment to Transfer N.A.
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 N.A.
the Transfer Agency and Service
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement, File Nos.
(b) (i) Administration Agreement Between N.A
Neuberger & Berman Income Funds
and Neuberger & Berman Management
Incorporated by Reference to
Post-Effective Amendment No. 21 to
Registrant's Registration
Statement, File Nos. 2-85229 and
811-3802, EDGAR Accession No.
00000898432-96-00017.
(ii) Schedule A - Series of ___
Neuberger & Berman Income Funds
Currently Subject to the
Administration Agreement. Filed
Herewith.
(iii) Schedule B - Schedule of N.A.
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.
00000898432-96-00017.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(10) (a) Opinion and consent of Kirkpatrick N.A.
& Lockhart on Securities Matters
with respect to Neuberger & Berman
High Yield Bond Incorporated by
Reference to Post-Effective
Amendment NO. 24 to Registrant's
Registration Statement, File Nos.
2-85229 and 811-3802, EDGAR
Accession No. 0000898432-97-000503
(b) Opinion and consent of Kirkpatrick ___
& Lockhart LLP on Securities
Matters with respect to Neuberger
& Berman Income Funds. Filed
Herewith.
(11) Other Opinions, Appraisals, Rulings and ___
Consents. Consent of Ernst & Young LLP,
Independent Auditors. Filed Herewith.
(12) Financial Statements Omitted from N.A.
Prospectus. None.
(13) Letter of Investment Intent. Incorporated N.A.
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. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of computation Performance N.A.
Quotations. Incorporated by Reference to
Post-Effective amendment No. 17 to
Registtrant'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.
NEUBERGER & BERMAN INCOME FUNDS
SCHEDULE A
INITIAL SERIES
--------------
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 Fun
Neuberger & Berman Municipal Securities Trust
ADDITIONAL SERIES
-----------------
Neuberger & Berman High Yield Bond Fund
DATED: March 2, 1998
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
MANAGEMENT AGREEMENT
SCHEDULE A
The Series of Income Managers Trust currently subject to this
Agreement are as follows:
Neuberger & Berman Cash Reserves Portfolio
Neuberger & Berman Government Money Portfolio
Neuberger & Berman High Yield Bond Portfolio
Neuberger & Berman Limited Maturity Bond Portfolio
Neuberger & Berman Municipal Money Portfolio
Neuberger & Berman Municipal Securities Portfolio
DATED: March 2, 1998
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Paragraph 3 of the Income Managers Trust Management
Agreement shall be calculated in accordance with the following schedule:
Neuberger & Berman Cash Reserves Portfolio
Neuberger & Berman Government Money Portfolio
Neuberger & Berman Limited Maturity Bond Portfolio
Neuberger & Berman Municipal Money Portfolio
Neuberger & Berman Municipal Securities Portfolio
.25% on the first $500 million of average daily net assets
.225% on the next $500 million of average daily net assets
.20% on the next $500 million of average daily net assets
.175% on the next $500 million of average daily net assets
.15% of average daily net assets in excess of $2 billion
Neuberger & Berman High Yield Bond Portfolio
.38% on the first $500 million of average daily net assets
.355% on the next $500 million of average daily net assets
.330% on the next $500 million of average daily net assets
.305% on the next $500 million of average daily net assets
.28% of average daily net assets in excess of $2 billion
DATED: March 2, 1998
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
SUB-ADVISORY AGREEMENT
SCHEDULE A
The Series of Income Managers Trust currently subject to this
Agreement are as follows:
Neuberger & Berman Cash Reserves Portfolio
Neuberger & Berman Government Money Portfolio
Neuberger & Berman High Yield Bond Portfolio
Neuberger & Berman Limited Maturity Bond Portfolio
Neuberger & Berman Municipal Money Portfolio
Neuberger & Berman Municipal Securities Portfolio
Neuberger & Berman Ultra Short Bond Portfolio
DATED: March 2, 1998
NEUBERGER & BERMAN INCOME FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
The Series of Neuberger & Berman Income Funds currently subject to this
Agreement are as follows:
Neuberger & Berman Cash Reserves Fund
Neuberger & Berman Government Money Fund
Neuberger & Berman High Yield Bond
Fund Neuberger & Berman Limited Maturity Bond Fund
Neuberger & Berman Municipal Money Fund
Neuberger & Berman Municipal Securities Fund
Neuberger & Berman Ultra Short Bond Fund
DATED: March 2, 1998
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
RE: NEUBERGER & BERMAN INCOME FUNDS (THE "FUND")
Gentlemen:
This is to advise you that the Fund has established a new series of shares to be
known as Neuberger & Berman High Yield Bond Fund. This is also to advise you
that Neuberger & Berman New York Insured Fund has been dissolved effective
October 24, 1997 and that Neuberger & Berman Ultra Short Bond Fund will be
merged into Neuberger, and Berman Limited Maturity Bond Fund as of the close of
business on February 27, 1998. In accordance with the Additional Funds provision
of Section 17 of the Custodian Contract dated 7/2/93 and Section 9 of the
Transfer Agency and Services Agreement dated 7/2/9, between the Fund and State
Street Bank and Trust Company, the Fund hereby requests that you act as a
Custodian and Transfer Agent for the new series under the terms of the
respective contracts and that all series subject to these agreements be set
forth in a Schedule A to both contracts. New Schedule As are attached hereto.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement returning one to the Fund and retaining one copy for your
records.
By: /s/ Michael J. Weiner
----------------------
Michael J. Weiner
Vice President
Neuberger & Berman Income Funds
Agreed to as of this 3rd day of February, 1998.
State Street Bank and Trust Company
By: /s/ Ronald E. Logue
--------------------
Title: Executive Vice President
-------------------------
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, MA 02171
RE: NEUBERGER & BERMAN INCOME FUNDS (THE "FUND")
Gentlemen:
This is to advise you that the Fund has established a new series of shares to be
known as Neuberger & Berman High Yield Bond Fund. This is also to advise you
that Neuberger & Berman New York Insured Fund has been dissolved effective
October 24, 1997 and that Neuberger & Berman Ultra Short Bond Fund will be
merged into Neuberger, and Berman Limited Maturity Bond Fund as of the close of
business on February 27, 1998. In accordance with the Additional Funds provision
of Section 17 of the Custodian Contract dated 7/2/93 and Section 9 of the
Transfer Agency and Services Agreement dated 7/2/9, between the Fund and State
Street Bank and Trust Company, the Fund hereby requests that you act as a
Custodian and Transfer Agent for the new series under the terms of the
respective contracts and that all series subject to these agreements be set
forth in a Schedule A to both contracts. New Schedule As are attached hereto.
Please indicate your acceptance of the foregoing by executing two copies of this
Letter Agreement returning one to the Fund and retaining one copy for your
records.
By: /s/ Michael J. Weiner
----------------------
Michael J. Weiner
Vice President
Neuberger & Berman Income Funds
Agreed to as of this 3rd day of February, 1998.
State Street Bank and Trust Company
By: /s/ Ronald E. Logue
--------------------
Title: Executive Vice President
-------------------------
NEUBERGER & BERMAN INCOME FUNDS
ADMINISTRATION AGREEMENT
SCHEDULE A
The Series of Neuberger & Berman Income Funds currently subject
to this Agreement are as follows:
Neuberger & Berman Cash Reserves Fund
Neuberger & Berman Government Money Fund
Neuberger & Berman High Yield Bond Fund
Neuberger & Berman Limited Maturity Bond Fund
Neuberger & Berman Municipal Money Fund
Neuberger & Berman Municipal Securities Fund
Neuberger & Berman Ultra Short Bond Fund
DATED: March 2, 1998
KIRKPATRICK & LOCKHART
1800 M Street, N.W.
Washington, D.C 20036
May 3, 1993
Neuberger & Berman Income Funds
605 Third Avenue
New York, New York 10158
Dear Sir or Madam:
You have requested our opinion regarding certain matters in connection
with the issuance of shares of beneficial interest ("Shares") of Neuberger &
Berman Income Funds ("Trust") in the following designated Series: Neuberger &
Berman Cash Reserves; Neuberger & Berman Government Income Fund; Neuberger &
Berman Government Money Fund; Neuberger & Berman Limited Maturity Bond Fund;
Neuberger & Berman Municipal Money Fund; Neuberger & Berman Municipal Securities
Trust; Neuberger & Berman Professional Investors Growth Fund; Neuberger & Berman
Professional Investors Money Fund; and Neuberger & Berman Ultra Short Bond Fund
(each a "Series").
We have, as counsel, participated in the preparation of the Trust's
organizational documents and in various other matters concerning the Trust. We
have examined copies, either certified or otherwise proved to be genuine, of the
Trust Instrument dated December 23, 1992 ("Trust Instrument") and By-Laws of the
Trust, the minutes of meetings of the trustees, and other documents relating to
the organization and operation of the Trust and the Series, and we generally are
familiar with its business. Based on the foregoing, it is our opinion that the
unlimited number of unissued Shares of each Series, which are currently being
registered, may be legally and validly issued from time to time in accordance
with the Trust Instrument and By-Laws of the Trust and subject to compliance
with the Securities Act of 1933, the Investment Company Act of 1940, and
applicable state laws regulating the offer and sale of securities; and when so
issued, such Shares will be legally issued, fully paid, and nonassessable by the
Trust or any Series.
The Trust is a business trust established pursuant to the Delaware
Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the Trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent
that the Trust or any of its shareholders become subject to the jurisdiction of
courts in states which do not have statutory or other authority limiting the
liability of business trust shareholders, such courts might not apply the
Delaware Act and could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument: (i) requires that every
written obligation of the Trust contain a statement that such obligation may
only be enforced against the assets of the Trust; however, the omission of such
a disclaimer will not operate to create personal liability for any shareholder;
and (ii) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Thus, the risk of a
Trust shareholder incurring financial loss beyond his or her investment because
<PAGE>
Neuberger & Berman Income Funds
May 3, 1993
Page 2
of shareholder liability is limited to circumstances in which: (i) a court
refuses to apply Delaware law; (ii) no contractual limitation of liability was
in effect; and (iii) the Trust itself would be unable to meet its obligations.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 14 to the Trust's Registration Statement on Form
N-1A (File Nos. 2-85229 and 811-3802) to be filed with the Securities and
Exchange Commission and to the reference to our firm under the caption "Legal
Counsel" in the Statements of Additional Information incorporated by reference
into the Series' Prospectuses.
Sincerely yours,
KIRKPATRICK & LOCKHART
By: /S/ Alan Roy Dyner
-----------------------------
Alan Roy Dyner
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 No. 25 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 5, 1997 on Neuberger&Berman Municipal Money Fund,
Neuberger&Berman Municipal Securities Trust, Neuberger&Berman Government Money
Fund, Neuberger&Berman Cash Reserves, and Neuberger&Berman Limited Maturity Bond
Fund, five of the series comprising Neuberger&Berman Income Funds, and on
Neuberger&Berman Municipal Money Portfolio, Neuberger&Berman Municipal
Securities Portfolio, Neuberger&Berman Government Money Portfolio,
Neuberger&Berman Cash Reserves Portfolio, and Neuberger&Berman Limited Maturity
Bond Portfolio, five of the series comprising Income Managers Trust, included in
the 1997 Annual Report to Shareholders of Neuberger&Berman Income Funds.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 25, 1998
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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 301,455
<INVESTMENTS-AT-VALUE> 303,088
<RECEIVABLES> 4,111
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 307,210
<PAYABLE-FOR-SECURITIES> 14,112
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 14,244
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 217,469
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 84,068
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9,839)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,268
<NET-ASSETS> 292,966
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,575
<OTHER-INCOME> 0
<EXPENSES-NET> (914)
<NET-INVESTMENT-INCOME> 18,661
<REALIZED-GAINS-CURRENT> (990)
<APPREC-INCREASE-CURRENT> 2,266
<NET-CHANGE-FROM-OPS> 19,937
<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> 25,657
<ACCUMULATED-NII-PRIOR> 65,407
<ACCUMULATED-GAINS-PRIOR> (8,849)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 697
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 914
<AVERAGE-NET-ASSETS> 278,661
<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>
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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 305,050
<INVESTMENTS-AT-VALUE> 305,050
<RECEIVABLES> 2,996
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 3
<TOTAL-ASSETS> 308,062
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118
<TOTAL-LIABILITIES> 118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 251,380
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 56,566
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 307,944
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,370
<OTHER-INCOME> 0
<EXPENSES-NET> (1,002)
<NET-INVESTMENT-INCOME> 16,368
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 16,365
<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> (54,538)
<ACCUMULATED-NII-PRIOR> 40,198
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 820
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,002
<AVERAGE-NET-ASSETS> 327,970
<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>
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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 662,805
<INVESTMENTS-AT-VALUE> 662,805
<RECEIVABLES> 3,142
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 6
<TOTAL-ASSETS> 665,970
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 206
<TOTAL-LIABILITIES> 206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 576,558
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 89,213
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (7)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 665,764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 34,546
<OTHER-INCOME> 0
<EXPENSES-NET> (1,771)
<NET-INVESTMENT-INCOME> 32,775
<REALIZED-GAINS-CURRENT> (7)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 32,768
<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> 181,789
<ACCUMULATED-NII-PRIOR> 56,438
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,506
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,771
<AVERAGE-NET-ASSETS> 613,964
<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> .29
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 155,141
<INVESTMENTS-AT-VALUE> 155,141
<RECEIVABLES> 1,362
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 62
<TOTAL-ASSETS> 156,570
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 83
<TOTAL-LIABILITIES> 83
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 136,024
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 20,481
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 156,487
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,213
<OTHER-INCOME> 0
<EXPENSES-NET> (528)
<NET-INVESTMENT-INCOME> 4,685
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,685
<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> 23,764
<ACCUMULATED-NII-PRIOR> 15,796
<ACCUMULATED-GAINS-PRIOR> (18)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 354
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 528
<AVERAGE-NET-ASSETS> 141,705
<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> .37
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 30,390
<INVESTMENTS-AT-VALUE> 31,278
<RECEIVABLES> 414
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 53
<TOTAL-ASSETS> 31,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35
<TOTAL-LIABILITIES> 35
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,683
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10,186
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (45)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 888
<NET-ASSETS> 31,712
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,633
<OTHER-INCOME> 0
<EXPENSES-NET> (166)
<NET-INVESTMENT-INCOME> 1,467
<REALIZED-GAINS-CURRENT> 210
<APPREC-INCREASE-CURRENT> 462
<NET-CHANGE-FROM-OPS> 2,139
<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> (7,250)
<ACCUMULATED-NII-PRIOR> 8,719
<ACCUMULATED-GAINS-PRIOR> (255)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 166
<AVERAGE-NET-ASSETS> 33,046
<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> .50
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 307,944
<RECEIVABLES> 584
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 308,528
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 371
<TOTAL-LIABILITIES> 371
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 308,166
<SHARES-COMMON-STOCK> 308,166
<SHARES-COMMON-PRIOR> 363,394
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (9)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 308,157
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,370
<OTHER-INCOME> 0
<EXPENSES-NET> (2,082)
<NET-INVESTMENT-INCOME> 15,288
<REALIZED-GAINS-CURRENT> (3)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,285
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,288
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 959,168
<NUMBER-OF-SHARES-REDEEMED> (1,029,506)
<SHARES-REINVESTED> 15,110
<NET-CHANGE-IN-ASSETS> (55,231)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,082
<AVERAGE-NET-ASSETS> 327,204
<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> .63
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 665,764
<RECEIVABLES> 817
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 666,581
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,518
<TOTAL-LIABILITIES> 2,518
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 664,081
<SHARES-COMMON-STOCK> 664,081
<SHARES-COMMON-PRIOR> 482,009
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 664,063
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 34,546
<OTHER-INCOME> 0
<EXPENSES-NET> (3,849)
<NET-INVESTMENT-INCOME> 30,697
<REALIZED-GAINS-CURRENT> (7)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 30,690
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (30,697)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,398,237
<NUMBER-OF-SHARES-REDEEMED> (1,246,359)
<SHARES-REINVESTED> 30,194
<NET-CHANGE-IN-ASSETS> 182,065
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (11)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,849
<AVERAGE-NET-ASSETS> 612,490
<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> .63
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 31,712
<RECEIVABLES> 11
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,723
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96
<TOTAL-LIABILITIES> 96
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,412
<SHARES-COMMON-STOCK> 2,869
<SHARES-COMMON-PRIOR> 3,609
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (673)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 888
<NET-ASSETS> 31,627
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,633
<OTHER-INCOME> 0
<EXPENSES-NET> (215)
<NET-INVESTMENT-INCOME> 1,418
<REALIZED-GAINS-CURRENT> 210
<APPREC-INCREASE-CURRENT> 462
<NET-CHANGE-FROM-OPS> 2,090
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,418)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 531
<NUMBER-OF-SHARES-REDEEMED> (1,354)
<SHARES-REINVESTED> 83
<NET-CHANGE-IN-ASSETS> (7,294)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (883)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 346
<AVERAGE-NET-ASSETS> 32,953
<PER-SHARE-NAV-BEGIN> 10.78
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> .24
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.02
<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 Limited Maturity Bond Fund 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 255,497
<RECEIVABLES> 321
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 255,818
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 412
<TOTAL-LIABILITIES> 412
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 264,627
<SHARES-COMMON-STOCK> 25,461
<SHARES-COMMON-PRIOR> 24,597
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,277)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,056
<NET-ASSETS> 255,406
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,260
<OTHER-INCOME> 0
<EXPENSES-NET> (1,716)
<NET-INVESTMENT-INCOME> 15,544
<REALIZED-GAINS-CURRENT> (950)
<APPREC-INCREASE-CURRENT> 2,103
<NET-CHANGE-FROM-OPS> 16,697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,559)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,817
<NUMBER-OF-SHARES-REDEEMED> (9,247)
<SHARES-REINVESTED> 1,294
<NET-CHANGE-IN-ASSETS> 9,717
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (9,334)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,737
<AVERAGE-NET-ASSETS> 244,982
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> .63
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> (.63)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> .70
<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 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-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 156,487
<RECEIVABLES> 59
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,546
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 225
<TOTAL-LIABILITIES> 225
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,347
<SHARES-COMMON-STOCK> 156,420
<SHARES-COMMON-PRIOR> 132,698
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (26)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 156,321
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,213
<OTHER-INCOME> 0
<EXPENSES-NET> (1,021)
<NET-INVESTMENT-INCOME> 4,192
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,192)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 228,579
<NUMBER-OF-SHARES-REDEEMED> (208,978)
<SHARES-REINVESTED> 4,121
<NET-CHANGE-IN-ASSETS> 23,722
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (99)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,021
<AVERAGE-NET-ASSETS> 141,468
<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>
