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[LOGO]
This information supplements the Prospectus dated March 1, 1995
Neuberger&Berman GOVERNMENT INCOME Trust
Neuberger&Berman LIMITED MATURITY BOND Trust
Neuberger&Berman ULTRA SHORT BOND Trust
(each, a "Fund")
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- ---------------------------------------------------------
Theresa A. Havell, the President and a Trustee of the Trust and of Managers
Trust, is a general partner of Neuberger&Berman and a director and Vice
President of N&B Management. Ms. Havell is the Manager of the Fixed Income Group
of Neuberger&Berman, which she established in 1984. The Fixed Income Group
manages fixed income accounts that had approximately $12 billion of assets as of
June 30, 1995. Ms. Havell has overall responsibility for the activities of the
Fixed Income Group, providing guidance and reviewing portfolio strategy and
structure.
The following members of the Fixed Income Group are primarily responsible for
the day-to-day management of the listed Portfolios:
Neuberger&Berman ULTRA SHORT Bond Portfolio -- Josephine P. Mahaney, who has
been a Senior Portfolio Manager in the Fixed Income Group since 1984, an
Assistant Vice President of N&B Management from 1986 to 1994 and a Vice
President of N&B Management since November 1994.
Neuberger&Berman LIMITED MATURITY Bond Portfolio -- Theresa A. Havell and
Thomas G. Wolfe. 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 the Standard & Poor's Rating Group.
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Neuberger&Berman GOVERNMENT INCOME Portfolio -- Theresa A. Havell and William
H. Cunningham. Mr. Cunningham has been a member of the Fixed Income Group since
March 1993, a Senior Portfolio Manager in the Fixed Income Group since June 1995
and a Vice President of N&B Management since October 1995. From August 1989 to
February 1993 he was a manager in the Corporate Finance, Merger and Acquisitions
and Capital Markets Groups for a major corporation.
The date of this Supplement is November 7, 1995.
NBII00131195
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<PAGE>
[graphic]
Supplement to Prospectus dated March 1, 1995
This supplement must accompany each prospectus distributed within the STATE OF
MISSOURI.
Neuberger&Berman GOVERNMENT INCOME TRUST
Neuberger&Berman LIMITED MATURITY BOND TRUST
Neuberger&Berman ULTRA SHORT BOND TRUST
(each, a "Fund")
EACH FUND INVESTS ALL OF ITS ASSETS IN ITS CORRESPONDING PORTFOLIO (A
"PORTFOLIO") OF INCOME MANAGERS TRUST, AN OPEN-END MANAGEMENT INVESTMENT COMPANY
MANAGED BY NEUBERGER&BERMAN MANAGEMENT INCORPORATED. 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 DEPENDS ON THE PERFORMANCE OF ITS CORRESPONDING PORTFOLIO. THIS STRUCTURE
IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE
AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES. FOR MORE INFORMATION ON THIS
UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SPECIAL INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS" ON PAGE 18.
Neuberger&Berman GOVERNMENT INCOME TRUST
("GOVERNMENT INCOME" or the "Fund")
Prospective Missouri investors should note that, subject to the limitations
described in the Prospectus, Neuberger&Berman GOVERNMENT INCOME Portfolio may
leverage its investments by borrowing money to increase amounts available for
investment. It
(Continued on Back)
[logo] NBII00130395
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may also sell securities short, subject to the limitation described in the
Statement of Additional Information of GOVERNMENT INCOME and its Portfolio.
These investment strategies may increase the risk that the price of GOVERNMENT
INCOME shares will fluctuate and may increase the operating costs of the Fund.
Neuberger&Berman GOVERNMENT INCOME Portfolio may engage in short-term trading to
a substantial degree to take advantage of anticipated changes in interest rates.
It is anticipated that the portfolio turnover rate of Neuberger&Berman
GOVERNMENT INCOME Portfolio generally will exceed 300%. A high portfolio
turnover rate will result in higher brokerage commissions and other transaction
costs being borne indirectly by the Fund.
The date of this Supplement is March 1, 1995.
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PROSPECTUS
March 1, 1995
Neuberger&Berman
INCOME TRUST
Neuberger&Berman
ULTRA SHORT BOND TRUST
Neuberger&Berman
LIMITED MATURITY BOND TRUST
Neuberger&Berman
GOVERNMENT INCOME TRUST
No Sales Charges
No Redemption Fees
No 12b-1 Fees
<PAGE>
Neuberger&Berman
INCOME TRUST
No-Load Bond Funds
- ----------------------------------------------------------------------
Neuberger&Berman ULTRA SHORT BOND TRUST
Neuberger&Berman LIMITED MATURITY BOND TRUST
Neuberger&Berman GOVERNMENT INCOME TRUST
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A PENSION
PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN "INSTITUTION")
WHICH PROVIDES ACCOUNTING, RECORDKEEPING AND OTHER SERVICES TO INVESTORS AND
WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT
INCORPORATED ("N&B MANAGEMENT").
- ----------------------------------------------------------------------
EACH TRUST (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 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 WILL DIRECTLY CORRESPOND 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
UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SPECIAL INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS" ON PAGE 18.
The Funds are no-load mutual funds, so there are no sales commissions or
other charges when buying or redeeming 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. A Statement of Additional Information
("SAI") about the Funds and Portfolios, dated March 1, 1995, is on file with the
Securities and Exchange Commission. The SAI is incorporated herein by reference
(so it is legally considered a part of this Prospectus). You can obtain a free
copy of the SAI by calling N&B Management at 800-877-9700. PROSPECTUS DATED
MARCH 1, 1995
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Funds and Portfolios 3
Risk Factors 4
Management 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses for Each Fund 5
Annual Fund Operating
Expenses 5
Example 7
FINANCIAL HIGHLIGHTS 8
Ultra Short Bond Trust 8
Limited Maturity Bond
Trust 9
Government Income Trust 10
INVESTMENT PROGRAMS 12
Short-Term Trading;
Portfolio Turnover 14
Ratings of Securities 14
Borrowings 15
Other Investments 15
PERFORMANCE
INFORMATION 16
Yield 16
Total Return 16
Tax-Equivalent Yield 16
Yield and Total Return
Information 17
SPECIAL INFORMATION
REGARDING
ORGANIZATION,
CAPITALIZATION, AND
OTHER MATTERS 18
The Funds 18
The Portfolios 18
Use of Joint Prospectus
and Statement of
Additional Information 20
SHAREHOLDER SERVICES 21
How to Buy Shares 21
How to Sell Shares 21
Exchanging Shares 21
SHARE PRICES AND NET
ASSET VALUE 23
DIVIDENDS, OTHER
DISTRIBUTIONS, AND
TAXES 24
Distribution Options 24
Taxes 24
MANAGEMENT AND
ADMINISTRATION 26
Trustees and Officers 26
Investment Manager,
Administrator,
Distributor, and
Sub-Adviser 26
Expenses 27
Transfer Agent 29
DESCRIPTION OF
INVESTMENTS 30
OTHER INFORMATION 36
Directory & Funds
Eligible for Exchange 36
</TABLE>
2
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SUMMARY
The Funds and Portfolios
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Each Fund is a series of Neuberger&Berman Income Trust (the "Trust") and
invests in a corresponding Portfolio that, in turn, invests in securities in
accordance with an investment objective, policies, and limitations that are
identical to those of the Fund. The trustees of the Trust believe that this
master/feeder fund structure may benefit shareholders. For more information
about the organization of the Funds and the Portfolios, including certain
features of the master/feeder fund structure, see "Special Information Regarding
Organization, Capitalization, and Other Matters" on page 18.
In this Prospectus you will find information about three bond funds. Here is
a summary of important features of the Funds and their corresponding Portfolios.
You may want to invest in a variety of Funds to fit your particular investment
needs. Of course, there can be no assurance that a Fund will meet its investment
objective.
<TABLE>
<S> <C> <C> <C>
NEUBERGER&BERMAN INVESTMENT PRINCIPAL PORTFOLIO COMPARATIVE
INCOME TRUST OBJECTIVE INVESTMENTS INFORMATION
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ULTRA SHORT Higher total return High quality money Lowest expected
than is available market instruments price fluctuation of
from money market and short-term debt these three funds;
funds, with minimal securities of dollar-weighted
risk to principal government and average portfolio
and liquidity non-government maturity of up to
issuers two years
LIMITED MATURITY Highest current Short-to- More potential price
income consistent intermediate-term fluctuation;
with low risk to debt securities, at dollar-weighted
principal and least investment average portfolio
liquidity; and grade maturity of up to
secondarily, total five years
return
GOVERNMENT INCOME High level of At least 65% in U.S. Greater price
current income and Government and fluctuation; invests
total return, Agency securities, in securities with a
consistent with with an emphasis on wide range of
safety of principal U.S. Government maturities
mortgage-backed
securities; at least
25% in mortgage-
backed and asset-
backed securities
</TABLE>
3
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Risk Factors
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An investment in any Fund involves certain risks, depending upon the types of
investments made by its corresponding Portfolio. For example, Neuberger&Berman
ULTRA SHORT Bond Portfolio, which invests principally in high quality money
market instruments and short-term debt securities, has less risk than Neuberger&
Berman GOVERNMENT INCOME Portfolio, which invests at least 25% of its total
assets in mortgage-backed and asset-backed securities, may engage in lending
portfolio securities and other investment techniques, and may borrow for
leverage. Special risk factors apply to investments, which may be made by
certain Portfolios, in foreign securities, options and futures contracts, zero
coupon bonds, and swap agreements. The Portfolios invest in fixed income
securities, the value of which is likely to decline in times of rising interest
rates and rise in times of falling interest rates. In general, the longer the
maturity of a fixed income security, the more pronounced is the effect of a
change in interest rates on the value of the security. For more details about
each Portfolio, its investments and their risks, see "Investment Programs" on
page 12 and "Description of Investments" on page 30.
The investment program of Neuberger&Berman GOVERNMENT INCOME Portfolio is
intended to protect principal by focusing on the credit quality of the issuers.
Principal may, however, be at risk due to market rate fluctuations.
Management
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N&B Management, with the assistance of Neuberger&Berman, L.P.
("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 26. If you want to know how to buy and sell shares of the Funds or exchange
them for shares of other Neuberger&Berman Funds-SM- made available through an
Institution, see "Shareholder Services -- How to Buy Shares" on page 21,
"Shareholder Services -- How to Sell Shares" on page 21, "Shareholder
Services -- Exchanging Shares" on page 21, and the policies of the Institution
through which you are purchasing shares.
4
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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
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As shown by this table, there are no transaction charges when you buy or sell
Fund shares.
<TABLE>
<S> <C> <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>
Annual Fund Operating Expenses
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
The following table shows anticipated Annual Fund Operating Expenses, which
are paid out of the assets of each Fund and which include each Fund's pro rata
portion of the Operating Expenses of its corresponding Portfolio. These expenses
are borne indirectly by Fund shareholders. Each Fund pays N&B Management an
administration fee based on the Fund's net asset value. Each Portfolio pays N&B
Management a management fee, based on the Portfolio's average daily net assets;
a pro rata portion of this fee is borne indirectly by the corresponding Fund.
Therefore, the table combines management and administration fees. The Funds and
Portfolios also incur other expenses for things such as accounting and legal
fees and furnishing shareholder statements and Fund reports. "Operating
Expenses" exclude interest, taxes, brokerage commissions, and extraordinary
expenses. The Funds' expenses are factored into their share prices and dividends
and are not charged directly to Fund shareholders. For more information, see
"Management and Administration" and the SAI.
<TABLE>
<CAPTION>
MANAGEMENT AND TOTAL
NEUBERGER&BERMAN ADMINISTRATION 12b-1 OTHER OPERATING
INCOME TRUST FEES* FEES EXPENSES* EXPENSES*
<S> <C> <C> <C> <C>
ULTRA SHORT 0.00% NONE 0.72% 0.72%
LIMITED MATURITY 0.00% NONE 0.77% 0.77%
GOVERNMENT INCOME 0.00% NONE 0.82% 0.82%
</TABLE>
* (REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW)
Anticipated Annual Fund Operating Expenses for each Fund are annualized
projections based upon current administration fees for the Fund and management
fees for its corresponding Portfolio, with "Other Expenses" based on each Fund's
and
5
<PAGE>
Portfolio's expenses for the past fiscal year. The trustees of the Trust believe
that the aggregate per share expenses of each Fund and its corresponding
Portfolio will be approximately equal to the expenses the Fund would incur if
its assets were invested directly in the type of securities being held by its
corresponding Portfolio. The trustees of the Trust also believe that investment
in a Portfolio by investors in addition to a Fund may enable the Portfolio to
achieve economies of scale which could reduce expenses. Other feeder funds may
invest in the Portfolios, and such other funds' expenses and, correspondingly,
their returns may differ from those of the Funds.
Three mutual funds that are series of Neuberger&Berman Income Funds, which
are managed by N&B Management, each of which has a name similar to a Fund and
the same investment objective, policies and limitations as that Fund ("Sister
Fund"), also invest in the three corresponding Portfolios.
The previous table reflects N&B Management's voluntary undertaking until
February 29, 1996, to reimburse ULTRA SHORT, LIMITED MATURITY, and GOVERNMENT
INCOME for each Fund's Operating Expenses and that Fund's pro rata share of its
corresponding Portfolio's Operating Expenses which exceed, in the aggregate, the
following percentage per annum of the Fund's average daily net assets: ULTRA
SHORT, 0.65%; LIMITED MATURITY, 0.70%; GOVERNMENT INCOME, 0.75%. Effective March
1, 1995, N&B Management will reimburse each Fund for its Operating Expenses and
its pro rata share of its corresponding Portfolio's Operating Expenses that
exceed, in the aggregate, the following percentage per annum of the Fund's
average daily net assets:
<TABLE>
<S> <C>
Neuberger&Berman ULTRA SHORT 0.75%
Neuberger&Berman LIMITED MATURITY 0.80%
Neuberger&Berman GOVERNMENT INCOME 0.85%
</TABLE>
Each undertaking can be terminated by N&B Management by giving a Fund at
least 60 days' prior written notice.
Absent the reimbursement, total anticipated aggregate Fund and Portfolio
Operating Expenses would be 2.50%, 2.50%, and 2.50% per annum of the average
daily net assets of ULTRA SHORT, LIMITED MATURITY, and GOVERNMENT INCOME,
respectively, based upon the expenses of each Fund for its 1994 fiscal year.
6
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Example
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To illustrate the effect of Operating Expenses, let's assume that each Fund's
annual return is 5% and that it had annual Operating Expenses described in the
table above. For every $1,000 you invested in 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 TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
ULTRA SHORT $7 $23 $40 $89
LIMITED MATURITY $8 $25 $43 $95
GOVERNMENT INCOME $8 $26 $46 $101
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the Securities and Exchange Commission applicable to all mutual
funds. THE INFORMATION IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE
GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS
CHANGE.
7
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
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The financial information in the following tables is for each Fund as of
October 31, 1994, and the prior period. This information has been audited by
the Funds' independent auditors. You may obtain further information about the
performance of each Fund at no cost in the Trust's annual report to
shareholders by calling 800-877-9700. Also, see "Performance Information."
Neuberger&Berman
Ultra Short Bond Trust
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The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses including the Fund's proportionate share of its
corresponding Portfolio's income and expenses. It should be read in
conjunction with its corresponding Portfolio's Financial Statements and notes
thereto.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED SEPTEMBER 7, 1993(1)
OCTOBER 31, 1994 TO OCTOBER 31, 1993
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<S> <C>
Net Asset Value, Beginning of Year $ 9.97 $10.00
Income From Investment Operations
Net Investment Income .37 .05
Net Gains or Losses on Securities (both realized and unrealized) (.18) (.03)
Total from Investment Operations .19 .02
Less Distributions
Dividends (from net investment income) (.37) (.05)
Net Asset Value, End of Year $ 9.79 $ 9.97
Total Return+ +1.92% +0.17%(2)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 1.2 $ 0.2
Ratio of Expenses to Average Net Assets(4) .65% .65%(3)
Ratio of Net Income to Average Net Assets(4) 3.86% 2.98%(3)
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Limited Maturity Bond Trust
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The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses including the Fund's proportionate share of its
corresponding Portfolio's income and expenses. It should be read in
conjunction with its corresponding Portfolio's Financial Statements and notes
thereto.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED AUGUST 30, 1993(1) TO
OCTOBER 31, 1994 OCTOBER 31, 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Year $ 9.97/ $10.00
Income From Investment Operations
Net Investment Income .54 .08
Net Gains or Losses on Securities (both realized and unrealized) (.54) (.03)
Total From Investment Operations -- .05
Less Distributions
Dividends (from net investment income) (.54) (.08)
Net Asset Value, End of Year $ 9.43 $ 9.97
Total Return+ -0.01% +0.55%(2)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 6.7 $ 0.1
Ratio of Expenses to Average Net Assets(4) .70% .65%(3)
Ratio of Net Income to Average Net Assets(4) 5.72% 4.99%(3)
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Government Income Trust
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses including the Fund's proportionate share of its
corresponding Portfolio's income and expenses. It should be read in
conjunction with its corresponding Portfolio's Financial Statements and notes
thereto.
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED SEPTEMBER 13, 1993(1)
OCTOBER 31, 1994 TO OCTOBER 31, 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Year $ 9.95 $10.00
Income From Investment Operations
Net Investment Income .62 .08
Net Gains or Losses on Securities (both realized and unrealized) (.83) (.05)
Total From Investment Operations (.21) .03
Less Distributions
Dividends (from net investment income) (.58) (.08)
Tax return of capital (.04) --
Total Distributions (.62) (.08)
Net Asset Value, End of Year $ 9.12 $ 9.95
Total Return+ -2.16% +0.28%(2)
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 0.1 $ 0.1
Ratio of Expenses to Average Net Assets(4) .75% .75%(3)
Ratio of Net Income to Average Net Assets(4) 6.46% 6.02%(3)
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1) The date investment operations commenced.
2) Not annualized.
3) Annualized.
4) After reduction of expenses of the Neuberger&Berman ULTRA SHORT Bond Trust
by the administrator. Had the administrator not undertaken such action the
annualized ratios of expenses and investment income -- net to average daily net
assets would have been 2.50% and 2.01%, respectively, for the year ended October
31, 1994 and 2.50% and 1.13%, respectively, for the period ended October 31,
1993.
After reduction of expenses of the Neuberger&Berman LIMITED MATURITY Bond
Trust by the administrator. Had the administrator not undertaken such action the
annualized ratios of expenses and investment income -- net to average daily net
assets would have been 2.50% and 3.92%, respectively, for the year ended October
31, 1994 and 2.50% and 3.14%, respectively, for the period ended October 31,
1993.
After reduction of expenses of the Neuberger&Berman GOVERNMENT INCOME Trust
by the administrator. Had the administrator not undertaken such action the
annualized ratios of expenses and investment income -- net to average daily net
assets would have been 2.50% and 4.71%, respectively, for the year ended October
31, 1994 and 2.50% and 4.27%, respectively, for the period ended October 31,
1993.
5) The portfolio turnover rates for each Portfolio were as follows:
<TABLE>
<S> <C> <C>
PERIOD FROM
JULY 2, 1993
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1994 OCTOBER 31, 1993
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman ULTRA SHORT Bond Portfolio 94% 46%
Neuberger&Berman LIMITED MATURITY Bond Portfolio 102% 71%
PERIOD FROM
JULY 6, 1993
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
OCTOBER 31, 1994 OCTOBER 31, 1993
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman GOVERNMENT INCOME Portfolio 263% 119%
</TABLE>
+ 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 year, and
assumes dividends and capital gain distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would have been lower if
N&B Management had not absorbed certain expenses.
11
<PAGE>
INVESTMENT PROGRAMS
The investment policies and limitations of each Fund and its corresponding
Portfolio are identical. 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 30.
The investment objectives of the Funds and Portfolios are not fundamental.
The Funds have undertaken to a state securities commission that they will seek
shareholder approval before changing any investment objective. The Funds have
also undertaken not to change their investment objectives without 30 days' prior
notice to shareholders. There can be no assurance that the Funds or Portfolios
will achieve their objectives. Investment policies and limitations of the Funds
and the Portfolios are not fundamental unless otherwise specified in this
Prospectus or the SAI. While a non-fundamental policy or limitation may be
changed by the trustees of the Trust or of Managers Trust without shareholder
approval, the Funds intend to notify shareholders before making any material
change to such policies or limitations. Fundamental policies may not be changed
without shareholder approval. 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 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 the creditworthiness of the issuer.
The investment objective of Neuberger&Berman ULTRA SHORT Bond Trust and
Portfolio is to provide a higher total return than is available from money
market funds, with minimal risk to principal and liquidity. The investment
objective of Neuberger&Berman LIMITED MATURITY Bond Trust 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 GOVERNMENT INCOME Trust and Portfolio is to provide a high
level of current income and total return, consistent with safety of principal.
Neuberger&Berman ULTRA SHORT Bond Portfolio, Neuberger&Berman LIMITED
MATURITY Bond Portfolio, and Neuberger&Berman GOVERNMENT INCOME Portfolio each
invests in a diversified portfolio of fixed and variable rate debt securities
and seeks to increase income and preserve or enhance total return by actively
managing average portfolio maturity in light of market conditions and trends.
Neuberger&Berman ULTRA SHORT Bond Portfolio invests in a diversified
portfolio of U.S. Government and Agency securities and high-quality debt
securities issued by
12
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financial institutions, corporations, and others. These securities include
mortgage-backed and asset-backed securities, money market instruments,
repurchase agreements with respect to U.S. Government and Agency securities, and
U.S. dollar-denominated securities of foreign issuers. The Portfolio may also
purchase and sell options, futures contracts and options on futures contracts.
The Portfolio may invest 25% or more of its total assets in U.S. Government and
Agency securities or in certificates of deposit or bankers' acceptances issued
by domestic branches of U.S. banks. The Portfolio's dollar-weighted average
portfolio maturity ranges up to two years, providing greater flexibility than
money market funds.
Neuberger&Berman LIMITED MATURITY Bond Portfolio invests in a diversified
portfolio of short-to-intermediate-term U.S. Government and Agency securities
and debt securities issued by financial institutions, corporations, and others,
of at least investment grade. These securities include mortgage-backed and
asset-backed securities, repurchase agreements with respect to U.S. Government
and Agency securities, and foreign investments. The Portfolio may purchase and
sell covered call and put options, interest-rate futures contracts, and options
on those futures contracts and may engage in lending 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. The
Portfolio's dollar-weighted average portfolio maturity may range up to five
years.
Neuberger&Berman GOVERNMENT INCOME Portfolio invests at least 65% of its
total assets in U.S. Government and Agency securities, with an emphasis on U.S.
Government mortgage-backed securities. The Portfolio invests at least 25% of its
total assets in mortgage-backed securities (including U.S. Government
mortgage-backed securities) and asset-backed securities. The Portfolio may also
invest in investment grade debt securities, including foreign investments, and
securities issued by financial institutions and corporations, and may purchase
and sell covered call and put options, interest-rate and foreign currency
futures contracts, and options on those futures contracts. Although there are no
restrictions on the maturity composition of its portfolio of securities, the
Portfolio anticipates that it normally will invest in intermediate-term and
longer-term securities, but will remain flexible to respond to market conditions
and interest rate trends. The Portfolio may engage in lending portfolio
securities, short-term trading, purchasing forward commitments on securities,
and repurchase agreements, and may use leverage.
The investment program of Neuberger&Berman GOVERNMENT INCOME Portfolio is
intended to protect principal by focusing on the credit quality of the issuers.
Principal may, however, be at risk due to market rate fluctuations.
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Short-Term Trading; Portfolio Turnover
- ----------------------------------------------------------------------
GOVERNMENT INCOME Portfolio may engage in short-term trading to a substantial
degree to take advantage of anticipated changes in interest rates. This
investment policy may be considered speculative. Although neither of the other
Portfolios purchases securities with the intention of profiting from short-term
trading, each Portfolio may sell portfolio securities prior to maturity when N&B
Management believes that such action is advisable. The portfolio turnover rates
for the periods ended October 31, 1994 and 1993 for Neuberger&Berman ULTRA SHORT
Bond Portfolio, Neuberger&Berman LIMITED MATURITY Bond Portfolio and Neuberger&
Berman GOVERNMENT INCOME Portfolio are shown in the "Notes to the Financial
Highlights." It is anticipated that GOVERNMENT INCOME Portfolio's turnover rate
generally will exceed 100%. Turnover rates in excess of 100% generally result in
higher costs (which are borne directly by the Portfolio) and a possible increase
in realized short-term capital gains (or losses).
Ratings of Securities
- ----------------------------------------------------------------------
HIGH QUALITY DEBT SECURITIES (ALL PORTFOLIOS). 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
Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's"), 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.
INVESTMENT GRADE DEBT SECURITIES (NEUBERGER&BERMAN LIMITED MATURITY BOND AND
NEUBERGER&BERMAN GOVERNMENT INCOME PORTFOLIOS). Investment grade debt securities
are securities that have received a rating from at least one NRSRO in one of the
four highest rating categories or, if not rated by any NRSRO, have been
determined by N&B Management to be of comparable quality. Moody's deems
securities rated in its fourth highest category (Baa) to have speculative
characteristics; a change in economic factors could lead to a weakened capacity
of the issuer to repay.
If the quality of securities held by a Portfolio deteriorates so that the
securities would no longer satisfy its standards, the Portfolio will engage in
an orderly disposition of the downgraded securities to the extent necessary to
ensure that the Portfolio's holdings of such securities will not exceed 5% of
the Portfolio's net assets. Further information regarding the ratings assigned
to securities purchased by the Portfolios is included in the SAI.
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Borrowings
- ----------------------------------------------------------------------
(ALL PORTFOLIOS EXCEPT NEUBERGER&BERMAN GOVERNMENT INCOME PORTFOLIO). 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) 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). None
of the Portfolios expects to borrow money. As a non-fundamental policy, none of
these 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.
(Neuberger&Berman GOVERNMENT INCOME Portfolio.) The Portfolio, as a
fundamental policy, may borrow money from banks for any purpose, including to
meet redemptions and increase the amount available for investment, and enter
into reverse repurchase agreements for any purpose, so long as the aggregate
amount of borrowings and reverse repurchase agreements (including dollar rolls)
does not exceed one-third of the Portfolio's total assets (including the amount
borrowed) less liabilities (other than borrowings). Leveraging (borrowing) to
increase amounts available for investment may exaggerate the effect on net asset
value of any increase or decrease in the market value of the securities of the
Portfolio. Money borrowed for leveraging will be subject to interest costs which
may or may not be recovered by income and appreciation of the securities
purchased.
Other Investments
- ----------------------------------------------------------------------
For temporary defensive purposes, the Portfolios may invest up to 100% of
their total assets in cash or cash equivalents, or in commercial paper, U.S.
Government and Agency securities and repurchase agreements on U.S. Government
and Agency securities, the interest on which may be subject to federal and state
income taxes, and may adopt shorter weighted average maturities than normal.
15
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PERFORMANCE INFORMATION
The performance of the Funds can be measured as YIELD or as TOTAL RETURN. The
Funds' corresponding 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
risk than shorter-term bond funds. The creditworthiness of issuers of income
securities also affects their risk; for example, U.S. Government and Agency
securities are generally considered to have less risk than bonds rated
"investment grade."
The table under "Summary -- The Funds and Portfolios" shows the investment
objective, principal types of investments, and comparative information about
portfolio maturity for each Fund and its corresponding Portfolio. This should
help you decide which Fund best fits your needs. For more detailed information,
see "Investment Programs" and "Description of Investments." Further information
regarding each Fund's performance is presented in its annual report to
shareholders, which is available without charge by calling 800-877-9700.
Yield
- ----------------------------------------------------------------------
YIELD refers to the income generated by an investment over a particular
period of time, which is annualized (assumed to have been generated for one
year) and expressed as an annual percentage rate. EFFECTIVE YIELD is yield
assuming that all distributions are reinvested.
Total Return
- ----------------------------------------------------------------------
TOTAL RETURN is the change in value of an investment in a fund over a
particular period, assuming that all distributions have been reinvested. Thus,
total return reflects not only income earned, but also variations in share
prices from the beginning to the end of the period.
Tax-Equivalent Yield
- ----------------------------------------------------------------------
STATE AND LOCAL TAXES. A portion of Neuberger&Berman GOVERNMENT INCOME
Trust's dividends are not subject to income taxes in most states and localities.
For those states and localities, this Fund may measure its performance by a TAX-
EQUIVALENT YIELD. This reflects the taxable yield that an investor at the
highest marginal tax rate for that state or municipality would have to receive
to equal the yield from Neuberger&Berman GOVERNMENT INCOME Trust taking into
account that a portion is tax-exempt. Of course, all dividends paid by
Neuberger&Berman GOVERNMENT INCOME Trust are subject to federal income tax at
applicable rates.
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Yield and Total Return Information
- ----------------------------------------------------------------------
N&B Management has reimbursed the Funds for certain expenses, which has
the effect of increasing their yields and total returns. You can obtain
current performance information about each Fund by calling N&B Management at
800-877-9700.
17
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SPECIAL 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 May 6, 1993. Income Trust
is registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company, commonly known as a mutual
fund. The Funds are the three separate operating series of the Trust. 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 right to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual
meetings of shareholders of the 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 corporations. To guard against the risk that the 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 the 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
18
<PAGE>
eight separate operating Portfolios. The assets of each Portfolio belong only to
that Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund seeks to achieve its investment
objective by investing all of its net investable assets in its corresponding
Portfolio having the same investment objective, policies, and limitations as the
Fund. Accordingly, each Portfolio directly acquires its own securities and its
corresponding Fund acquires an indirect interest in those securities.
Historically, N&B Management, which is the investment manager of each Portfolio,
has sponsored, with Neuberger&Berman, traditionally structured funds since
1950. However, it has operated 12 master funds and 20 feeder funds since August
1993 and now operates 15 master funds and 24 feeder funds.
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. Three mutual funds that are series of
Neuberger&Berman Income Funds ("N&B Income Funds"), Neuberger&Berman ULTRA
SHORT Bond Fund, Neuberger&Berman LIMITED MATURITY Bond Fund, and Neuberger&
Berman GOVERNMENT INCOME Fund, invest all of their respective net investable
assets in the three Portfolios described herein. The shares of each series of
N&B Income Funds are available for purchase by 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 the Funds and will pay a
proportionate share of the Portfolio's expenses. The Trust does not sell its
shares directly to members of the general public. Other investors in a
Portfolio, including the series of N&B Income Funds, which might sell shares to
members of the general public, are not required to sell their shares at the same
public offering price as the Fund, could have different administration fees and
expenses than the Fund, and (except N&B Income Funds) might charge a sales
commission. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in the
Portfolio. Information regarding any Fund that may invest in a Portfolio in the
future will be available from N&B Management by calling 800-877-9700.
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.
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
19
<PAGE>
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 securities (as
opposed to a cash distribution) by the Portfolio. 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 would consider what action might be taken, including the investment of
all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.
INVESTOR MEETINGS AND VOTING. 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, as required by
the 1940 Act and other applicable law, 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, but not of the other Portfolios.
However, the risk of an investor in a Portfolio incurring financial loss on
account of such liability would be limited to circumstances in which the
Portfolio had inadequate insurance and was unable to meet its obligations out of
its assets. Upon liquidation of a Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
Use of Joint Prospectus and Statement
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 SAI, 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 and Portfolio's use of a single
combined Prospectus and combined SAI.
20
<PAGE>
SHAREHOLDER SERVICES
How to Buy Shares
- ----------------------------------------------------------------------
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN INSTITUTION WHICH PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND WHICH HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH N&B MANAGEMENT. N&B Management and the
Funds do not recommend or endorse, or pay to (except for services pursuant to an
administrative services agreement) or receive payments from, any Institution.
N&B Management does not provide investment advice to any Institution or its
clients nor make decisions regarding their investments.
Each Institution will establish its own procedures for the purchase of Fund
shares in its account, including minimum initial and additional investments for
shares of each Fund and the acceptable method of payment for shares. Shares are
purchased at the next price calculated on a day the New York Stock Exchange
("NYSE") is open, after a purchase order is received and accepted by an
Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern
time. The Funds will not issue certificates for your shares. An Institution must
pay for shares it purchases in U.S. dollars.
- 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 through an
exchange of shares. See "Shareholder Services -- Exchanging Shares."
How to Sell Shares
- ----------------------------------------------------------------------
You can sell (redeem) all or some of your Fund shares only through an account
with an Institution. Each Institution will establish its own procedures for the
sale of Fund shares. Shares are sold at the next price calculated on a day the
NYSE is open, after a sales order is received and accepted by an Institution.
Prices for Fund shares are usually calculated as of 4 p.m. Eastern time. Shares
will be sold at the Fund's per share NAV next calculated after your sales
(redemption) order is received and accepted by an Institution.
- Redemption proceeds will be paid to Institutions as agreed with each Fund,
but in any case within seven calendar days.
- Each Fund may suspend redemptions or postpone payments on days when the
NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the Securities and Exchange Commission.
Exchanging Shares
- ----------------------------------------------------------------------
Through an account with an Institution, you may be able to exchange shares of
one Fund for shares of another Fund. Each Institution will establish its own
exchange
21
<PAGE>
policy and procedures for its accounts. An Institution may exchange shares
of any Fund for shares of the other Funds described in this Prospectus and
for shares of Neuberger&Berman Genesis Trust, Neuberger&Berman Guardian
Trust, Neuberger&Berman Manhattan Trust, Neuberger&Berman Partners Trust,
Neuberger&Berman Focus Trust, and Neuberger&Berman Socially Responsive
Trust. Shares are exchanged at their next prices calculated on a day the NYSE
is open, after an exchange order is received and accepted by an Institution.
- Shares can be exchanged only between accounts registered in the same name,
address, and taxpayer ID number of an Institution.
- An exchange can be made only into a fund whose shares are eligible for
sale in the state in which an Institution is located.
- An exchange may have tax consequences.
- Each Fund may refuse any exchange orders from any Institution if for any
reason they are not deemed to be in the best interests of the Fund and its
shareholders.
- Each Fund may impose other restrictions on the exchange privilege, or
modify or terminate the privilege, but will try to give each Institution
advance notice whenever it can reasonably do so.
22
<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. Each Fund and its corresponding Portfolio calculate their NAVs at the same
time and on the same days.
The 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 the Portfolios 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 are 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.
23
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
Each Fund distributes substantially all of its share of its corresponding
Portfolio's net investment income (net of the Fund's expenses) and net realized
capital gains. Income dividends are declared daily for each Fund at the time its
NAV is calculated and are paid monthly, and net realized 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. 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 capital gain distributions, if
any, paid on shares of a Fund are automatically reinvested in additional shares
of that Fund, unless an Institution elects to receive them in cash. Dividends
are reinvested at the Fund's per share NAV on the last business day of each
month. Each distribution of capital gains is reinvested at the Fund's per share
NAV, usually as of the date the distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with capital gain distributions, if any, being reinvested in additional
Fund shares, or to receive both dividends and capital gain distributions in
cash.
Taxes
- ----------------------------------------------------------------------
Each Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be relieved
of federal income tax on that part of its taxable income and realized gains that
it distributes to its shareholders.
An investment has certain tax consequences, depending on the type of account
and the type of Fund in which you invest. IF YOU HAVE AN ACCOUNT UNDER A
QUALIFIED RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE
DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions of net realized capital gains are
subject to federal income tax and may also be subject to state and local income
taxes. 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 distribution was declared.
For federal income tax purposes, dividends and net short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gain
(the excess
24
<PAGE>
of net long-term capital gains over net short-term capital loss), when
designated as such, are generally taxed as long-term capital gains, no matter
how long shares have been owned.
Part of the dividends paid by Neuberger&Berman GOVERNMENT INCOME Fund
generally are expected to be exempt from state and local income taxes in most
states; however, distributions of net realized capital gains are fully subject
to those taxes. Shareholders should consult their tax advisers to determine the
taxability of those dividends and other distributions in applicable states and
localities.
Every January, each Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid in the previous
year. Information accompanying that statement will show the portion of those
distributions that generally are not subject to state and local income taxes.
TAXES ON REDEMPTIONS. Capital gains realized on redemptions, including
redemptions in connection with exchanges with other Neuberger&Berman Funds-SM-,
are subject to tax. A capital gain (or loss) is the difference between the
amount paid for the shares (including the value of any dividends or other
distributions that were reinvested) and the amount received when the shares are
sold.
When an Institutions sells shares, it will receive a confirmation statement
showing the number of shares sold and the price. Every January, Institutions
will also receive a consolidated transaction statement for the previous year.
Each Institution annually will send investors in its accounts, statements
showing distribution and transaction information for the previous year.
The foregoing is only a summary of some of the important tax considerations
affecting the Funds and their shareholders. See the SAI for additional tax
information. There may be other federal, state, local, or foreign tax
considerations applicable to a particular investor. Therefore, you should
consult your tax advisers.
25
<PAGE>
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
- ----------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have overall responsibility for the operations
of each Fund and each Portfolio, respectively. The SAI contains general
background information about each trustee and officer of the Trust and of
Managers Trust. The officers of the Trust and of Managers Trust who are officers
and/or directors of N&B Management and/or partners of Neuberger&Berman serve
without compensation from the Funds or the Portfolios. The trustees of the Trust
and of Managers Trust, including a majority of those trustees who are not
"interested persons" (as defined in the 1940 Act) of any Fund, have adopted
written procedures reasonably appropriate to deal with potential conflicts of
interest, including, if necessary, creating a separate board of trustees of
Managers Trust.
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- ----------------------------------------------------------------------
N&B Management serves as the investment manager of 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 three Portfolios,
N&B Management currently serves as investment manager or investment adviser of
other mutual funds. Neuberger&Berman, which acts as sub-adviser for the
Portfolios and other mutual funds managed by N&B Management, also serves as
investment adviser of two other investment companies. These funds had aggregate
net assets of approximately $7.4 billion as of December 31, 1994.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research information without added cost to the Portfolios.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
acts as the Portfolios' principal broker to the extent that a broker is used in
the purchase and sale of their portfolio securities. Neuberger&Berman and its
affiliates, including N&B Management, manage securities accounts that had
approximately $29 billion of assets as of December 31, 1994. All of the voting
stock of N&B Management is owned by individuals who are general partners of
Neuberger&Berman.
Theresa A. Havell, the President and a Trustee of the Trust and of Managers
Trust, is a general partner of Neuberger&Berman and a director and Vice
President of N&B Management. Ms. Havell is the Manager of the Fixed Income Group
of Neuberger&Berman, which she established in 1984. The Fixed Income Group
manages fixed
26
<PAGE>
income accounts that had approximately $9.9 billion of assets as of December 31,
1994. Ms. Havell has overall responsibility for the activities of the Fixed
Income Group, providing guidance and reviewing portfolio strategy and structure.
The following members of the Fixed Income Group are primarily responsible for
the day-to-day management of the listed Portfolios:
Neuberger&Berman ULTRA SHORT Bond Portfolio -- Josephine Mahaney, who has
been a Senior Portfolio Manager in the Fixed Income Group since 1990 and a Vice
President of N&B Management since November 1994.
Neuberger&Berman LIMITED MATURITY Bond Portfolio -- Margaret Didi
Weinblatt, who has been a Senior Portfolio Manager in the Fixed Income Group
since 1990 and a Vice President of N&B Management since November 1994.
Neuberger&Berman GOVERNMENT INCOME Portfolio -- Stephen A. White, who has
been a Senior Portfolio Manager in the Fixed Income Group since April 1993 and a
Vice President of N&B Management since November 1994. Prior to April 1993, he
was a portfolio manager of several large mutual funds managed by another
prominent investment adviser.
The partners and employees of Neuberger&Berman and officers and employees of
N&B Management, together with their families, have invested over $100 million of
their own money in Neuberger&Berman Funds-SM-.
To mitigate the possibility that a Portfolio will be adversely affected by
personal trading of employees, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions. These policies comply, in
all material respects, with the recommendations of the Investment Company
Institute.
Expenses
- ----------------------------------------------------------------------
N&B Management provides investment management services to each Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. N&B
Management provides administrative services to each Fund that include furnishing
similar facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services for Institutions and their accounts. For such
administrative services, each Fund pays N&B Management a fee at the annual rate
of 0.50% of that Fund's average daily net assets. With a Fund's consent, N&B
Management may subcontract some of its responsibilities to that Fund under the
administrative services agreement to third parties, including Institutions,
which may receive compensation for such services from N&B Management. For
investment management services, each Portfolio (except Neuberger&Berman
GOVERNMENT INCOME Portfolio) pays N&B Management a fee at the annual rate of
0.25% of the first $500 million of that Portfolio's
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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 GOVERNMENT INCOME
Portfolio pays N&B Management a fee for investment management services at the
annual rate of 0.35% of the first $500 million of that Portfolio's
average daily net assets, 0.325% of the next $500 million, 0.30% of the
next $500 million, 0.275% of the next $500 million, and 0.25% of average
daily net assets in excess of $2 billion. During the fiscal year
ended October 31, 1994, each Fund accrued management and administration fees,
as an annualized percentage of its average daily net assets, as follows:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Neuberger&Berman ULTRA SHORT Bond Trust 0.75%
Neuberger&Berman LIMITED MATURITY Bond Trust 0.75%
Neuberger&Berman GOVERNMENT INCOME Trust 0.85%
</TABLE>
Each Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. Each
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Funds and Portfolios, legal and accounting fees and
compensation for trustees who are not affiliated with N&B Management; for the
Funds, transfer agent fees and the cost of printing and sending reports and
proxy materials to shareholders; and for the Portfolios, custodial fees for
securities.
N&B Management has voluntarily undertaken until February 29, 1996, to
reimburse ULTRA SHORT, LIMITED MATURITY, and GOVERNMENT INCOME for each Fund's
Operating Expenses (including its administration fees) and that Fund's pro rata
share of its corresponding Portfolio's Operating Expenses (including its
management fees) that exceed, in the aggregate, the following percentage per
annum of the Fund's average daily net assets: ULTRA SHORT, 0.65%; LIMITED
MATURITY, 0.70%; and GOVERNMENT INCOME, 0.75%. Effective March 1, 1995, N&B
Management will reimburse each Fund for its Operating Expenses and its pro rata
share of its corresponding Portfolio's Operating Expenses that exceed in the
aggregate, the following percentage per annum of the Fund's average daily net
assets:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Neuberger&Berman ULTRA SHORT Bond Trust 0.75%
Neuberger&Berman LIMITED MATURITY Bond Trust 0.80%
Neuberger&Berman GOVERNMENT INCOME Trust 0.85%
</TABLE>
Each undertaking can be terminated by N&B Management by giving a Fund at
least 60 days' prior written notice.
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For the fiscal year ended October 31, 1994, each Fund bore Operating Expenses
as an annualized percentage of its average daily net assets, after taking into
consideration N&B Management's expense reimbursements, as follows:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Neuberger&Berman ULTRA SHORT Bond Trust 0.65%
Neuberger&Berman LIMITED MATURITY Bond Trust 0.70%
Neuberger&Berman GOVERNMENT INCOME Trust 0.75%
</TABLE>
Transfer Agent
- --------------------------------------------------------------------------------
The Funds' transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be sent to
Neuberger&Berman Management, Inc., Institutional Services, 605 Third Avenue, 2nd
Floor, New York, NY 10158.
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DESCRIPTION OF INVESTMENTS
In addition to the securities referred to in "Investment Programs" herein,
each Portfolio, as indicated below, may make the following investments, among
others, individually or in combination, although it may not necessarily buy all
of the types of securities or use all of the investment techniques that are
described. For additional information on the following investments or other
types of investments in which the Portfolios may invest, see the SAI.
Certain investment techniques, such as futures and options, securities loans,
and repurchase agreements, if used by the Portfolios, 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, instrumentalities, or other U.S.
Government-sponsored enterprises, such as the Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA"), Federal
Home Loan Mortgage Corporation ("FHLMC"), Student Loan Marketing Association,
Tennessee Valley Authority, and various federally chartered banks. Some of these
securities are supported by the full faith and credit of the United States,
while others may be supported by the issuer's ability to borrow from the U.S.
Treasury, subject to the Treasury's discretion in certain cases, or only by the
credit of the issuer. U.S. Government Agency securities include U.S. Government
mortgage-backed securities. The market prices of U.S. Government securities are
not guaranteed by the government and generally fluctuate with changing interest
rates.
VARIABLE AND FLOATING RATE SECURITIES. (ALL PORTFOLIOS EXCEPT NEUBERGER&
BERMAN GOVERNMENT MONEY PORTFOLIO). Variable and floating rate securities have
interest rate adjustment formulas that may help to stabilize their market value.
Many of these instruments carry a demand feature which permits a Portfolio to
sell them during a determined time period at par value plus accrued interest.
The demand feature is often backed by a credit instrument, such as a letter of
credit, or by a creditworthy insurer. A Portfolio may rely on the credit
instrument or the creditworthiness of the insurer in purchasing a variable or
floating rate security. For purposes of determining its dollar-weighted average
maturity, each Portfolio calculates the remaining maturity of variable and
floating rate instruments as provided in Rule 2a-7 under the 1940 Act.
REPURCHASE AGREEMENTS/SECURITIES LOANS (ALL PORTFOLIOS). 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).
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These 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 SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest up to 10% of
its net assets in illiquid securities which are securities that cannot be
expected to be sold within seven days at approximately the price at which they
are valued. Due to the absence of an active trading market, a Portfolio may
experience difficulty in valuing or disposing of illiquid securities. N&B
Management determines the liquidity of the Portfolios' securities, under
supervision of the trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS). The
Portfolios may invest in restricted securities and Rule 144A securities.
Restricted securities cannot be sold to the public without registration under
the Securities Act of 1933 ("1933 Act"). Unless registered for sale, these
securities can be sold only in privately negotiated transactions or pursuant to
an exemption from registration. Restricted securities are generally considered
illiquid. Rule 144A securities, although not registered, may be resold only to
qualified institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S under
the 1933 Act. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted securities are
liquid.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS (ALL PORTFOLIOS). In a
reverse repurchase agreement, a Portfolio sells securities and at the same time
agrees to repurchase the same securities at a later date at a fixed price.
During the period before the repurchase, the Portfolio continues to receive
principal and interest payments on the securities. 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 the fluctuation in the market value of
a Portfolio's assets and are a form of leverage. N&B Management monitors the
creditworthiness of parties to reverse repurchase agreements and dollar rolls.
WHEN-ISSUED TRANSACTIONS (ALL PORTFOLIOS). In a when-issued transaction, a
Portfolio commits to purchase securities in order to secure an advantageous
price and yield at the time of the commitment and pays for the securities when
they are
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delivered at a future date (generally within three months). 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 fluctuations in a Fund's NAV.
MORTGAGE-BACKED SECURITIES (ALL PORTFOLIOS). Mortgage-backed securities
represent interests in, or are secured by and payable from, pools of mortgage
loans, including collateralized mortgage obligations. These securities may be
U.S. Government 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, FNMA, and FHLMC
certificates. Other mortgage-backed securities are issued by private issuers,
generally originators of and investors in mortgage loans, including savings
associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities. These private mortgage-backed securities may be
supported by U.S. Government mortgage-backed securities or some form of
non-government 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 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.
ASSET-BACKED SECURITIES (ALL 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-SM-"), credit
card receivable 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 (ALL PORTFOLIOS). The Portfolios may invest in U.S.
dollar-denominated foreign securities. Foreign securities may be affected by
political or economic developments in foreign countries, the significance of
which may be
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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 abroad.
Neuberger&Berman LIMITED MATURITY Bond and Neuberger&Berman GOVERNMENT INCOME
Portfolios may also invest in foreign securities denominated in or indexed to
foreign currencies, which may also be affected by special risks, such as
governmental regulation of foreign exchange transactions and the fluctuation of
the foreign currencies relative to the U.S. dollar, irrespective of the
performance of the underlying investment. N&B Management considers these factors
in making investments for the Portfolios. Neuberger&Berman LIMITED MATURITY Bond
and Neuberger&Berman GOVERNMENT INCOME Portfolios may enter into foreign
currency forward 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 Portfolios from adverse exchange rate
changes, they involve a risk of loss if N&B Management fails to predict foreign
currency values correctly.
PUT AND CALL OPTIONS, FUTURES CONTRACTS, AND OPTIONS ON FUTURES CONTRACTS
(ALL PORTFOLIOS). Each Portfolio may try to reduce the risk of securities price
changes (hedge) or manage portfolio maturity 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 and
Neuberger&Berman GOVERNMENT INCOME Portfolios also may write covered call
options and purchase put options on debt securities in their portfolios or on
foreign currencies for hedging purposes or for the purpose of producing income.
Neuberger&Berman LIMITED MATURITY Bond and Neuberger&Berman GOVERNMENT INCOME
Portfolios will write call options on a security or currency only if it holds
that security or currency or has the right to obtain the security or currency at
no additional cost. These investment practices involve certain risks, including
price volatility and a high degree of leverage. These 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 and
options on futures contracts, and foreign currency forward contracts or options
on foreign currencies ("Hedging Instruments") are (1) imperfect correlation or
no correlation between changes in market value of the securities held by the
Portfolio and the prices of the Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out a Hedging Instrument when desired; (3) the fact that the skills needed
to use Hedging Instruments are
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<PAGE>
different from those needed to select the Portfolio's securities; (4) the fact
that, although use of these instruments for hedging purposes can reduce the risk
of loss, they also can reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in hedged investments; and (5)
the possible inability of the Portfolio to purchase or sell a security at a time
that would otherwise be favorable for it to do so, or the possible need for the
Portfolio to sell a security at a disadvantageous time, due to its need to main-
tain "cover" or to segregate securities in connection with its use of these
instruments. Futures, options, and forward contracts are generally considered
"derivatives." Losses that may arise from certain futures contracts are
potentially unlimited.
MUNICIPAL OBLIGATIONS (NEUBERGER&BERMAN LIMITED MATURITY BOND 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 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
private activity bonds -- the interest on which may be a tax perference 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 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. Both of these factors could
affect the ability of an issuer of municipal securities to meet its obligations.
ZERO COUPON SECURITIES (ALL PORTFOLIOS). Zero coupon securities do not pay
interest currently; instead, they are sold at a deep discount from their face
value and are redeemed at face value when they mature. Because zero coupon
securities do not pay current income, their prices can be very volatile when
interest rates change. In calculating their daily income, the Portfolios accrue
a portion of the difference between a zero coupon security's purchase price and
its face value.
SWAP AGREEMENTS (NEUBERGER&BERMAN GOVERNMENT INCOME PORTFOLIO). To help
enhance the value of their investments or manage their exposure to different
34
<PAGE>
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 also agree to exchange the notional
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. Swap agreements involve risks depending
upon the other party's creditworthiness and ability to perform, as well as a
Portfolio's ability to terminate its swap agreements or reduce its exposure
through offsetting transactions. Swap agreements may be illiquid. The swap
market is relatively new and is largely unregulated. Swap agreements are
generally considered "derivatives."
35
<PAGE>
OTHER INFORMATION
DIRECTORY
FUNDS ELIGIBLE FOR EXCHANGE
INVESTMENT MANAGER, ADMINISTRATOR, EQUITY TRUST
AND DISTRIBUTOR Neuberger&Berman Focus Trust
Neuberger&Berman Management Incorporated
605 Third Avenue, 2nd Floor Neuberger&Berman
New York, NY 10158-0006 Genesis Trust
Neuberger&Berman
Guardian Trust
SUB-ADVISER
Neuberger&Berman, L.P. Neuberger&Berman
605 Third Avenue Manhattan Trust
New York, NY 10158-3698 Neuberger&Berman
Partners Trust
CUSTODIAN AND TRANSFER AGENT EQUITY ASSETS
State Street Bank and Trust Company Neuberger&Berman Socially
225 Franklin Street Responsive Trust
Boston, MA 02110
Address correspondence to: INCOME TRUST
Neuberger&Berman Funds Neuberger&Berman
Institutional Services Government Income Trust
605 Third Avenue Neuberger&Berman
New York, NY 10158-0006 Limited Maturity Bond Trust
800-877-9700 Neuberger&Berman
Ultra Short Bond Trust
LEGAL COUNSEL
Kirkpatrick & Lockhart
1800 M Street, NW
Washington, DC 20036-5891
Neuberger&Berman, Neuberger&Berman Management Inc., and the above named Funds
are service marks of Neuberger&Berman Management Inc.
- -C- 1995 Neuberger&Berman Management Inc.
36
<PAGE>
Neuberger&Berman Management Inc.
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0006
SHAREHOLDER SERVICES
800.877.9700
This wrapper is not part of the prospectus.
[logo] PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS NBIP00020395
<PAGE>
