Neuberger Berman
INSTITUTIONAL CASH TRUST
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PROSPECTUS March 7, 2000
These securities, like the securities of all mutual
funds, have not been approved or disapproved by the
Securities and Exchange Commission, and the Securities
and Exchange Commission has not determined if this
prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
<PAGE>
CONTENTS
NEUBERGER BERMAN INCOME TRUST
Page 2. . . . . . Institutional Cash Trust
YOUR INVESTMENT
5. . . . . . Maintaining Your Account
7. . . . . . Share Prices
8. . . . . . Distributions and Taxes
9. . . . . . Fund Structure
The "Neuberger Berman" name and logo are service marks of Neuberger
Berman, LLC. "Neuberger Berman Management Inc." and the individual
fund name in this prospectus are either service marks or registered
trademarks of Neuberger Berman Management Inc. (COPYRIGHT) 2000
Neuberger Berman Management Inc.
<PAGE>
THIS FUND:
o is designed for investors seeking capital preservation, liquidity and
income
o offers eligible accounts the opportunity to participate in financial
markets through a professionally managed money market portfolio
o is a money market sweep fund for certain eligible retirement and other
benefit plans and other accounts
o is a mutual fund, not a bank deposit, and is not guaranteed or insured by
the FDIC or any other government agency
o uses a master/feeder structure in its portfolio; see page 9 for
information on how it works
[SIDEBAR]
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than
$54.4 billion in total assets (as of December 31, 1999) and continue an asset
management history that began in 1939.
[SIDEBAR]
RISK INFORMATION
This prospectus discusses principal risks of investment in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
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Neuberger Berman
INSTITUTIONAL CASH TRUST
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"In managing this fund we focus on the three main goals
investors look for in a money market investment:
liquidity, stability and high current income. At the
same time, we seek to maintain high standards for credit
quality, in some cases higher than required by law."
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GOAL & STRATEGY
THE FUND SEEKS THE HIGHEST AVAILABLE CURRENT INCOME CONSISTENT WITH SAFETY
AND LIQUIDITY.
To pursue this goal, the fund invests in a diversified portfolio of high-quality
money market securities. These securities may be from U.S. or foreign issuers,
including governments and their agencies, banks, and corporations, but in all
cases must be denominated in U.S. dollars. The fund seeks to maintain a stable
$1.00 share price, and seeks to reduce credit risk by diversifying among many
issuers of money market securities.
Under normal market conditions, the fund will invest more than 25% of total
assets in the obligations of companies in the financial services industries and
repurchase agreements on such obligations. These may include, but are not
limited to, U.S. and foreign banks, broker-dealers, finance companies, insurance
companies, and issuers of asset-backed securities. It is currently anticipated
that asset-backed securities will constitute a significant percentage of the
fund's investments as a result of this policy.
The fund also may invest in the securities of other investment companies,
variable and floating rate instruments (whose interest rate adjusts on certain
reset dates or whenever a specified interest rate index changes) and repurchase
agreements on non-financial services obligations. In addition, the fund may
engage in reverse repurchase agreements and securities lending. The fund may
invest up to one-third of its total assets in reverse repurchase agreements and
may lend its securities with a value of up to one-third of its total assets
(including the value of the collateral for the loan) to qualified brokers,
dealers, banks and other financial institutions in order to realize additional
income by investing the proceeds of the reverse repurchase agreement or
collateral from the loan. Investments in reverse repurchase agreements and
securities lending will be aggregated for purposes of this limitation.
The managers monitor a range of economic and financial factors to weigh the
yields of money market securities of various maturities against their levels of
interest rate and credit risk. Based on their analysis, the managers invest the
fund's assets in a mix of money market securities that is intended to provide as
high a yield as possible without violating the fund's credit quality policies or
jeopardizing the stability of its share price.
The fund is authorized to change its goal without shareholder approval, although
it does not currently intend to do so.
[SIDEBAR]
MONEY MARKET FUNDS
Money market funds are subject to federal regulations designed to help maintain
liquidity and a stable share price. The regulations set strict standards for
credit quality and for maturity (397 days or less for individual securities, 90
days or less on average for the portfolio overall).
The regulations also require money market funds to limit investments to the top
two rating categories of credit quality. This fund typically exceeds this
requirement by investing only in first-tier securities.
2
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[SIDEBAR]
OTHER RISKS
Although the fund intends to maintain a stable share price, the share price
could fluctuate, meaning that there is a chance that you could lose money by
investing in the fund.
While the fund may hold securities that carry U.S. government guarantees, these
guarantees do not extend to shares of the fund itself.
When the fund anticipates adverse market, economic, political or other
conditions, it may temporarily depart from its policy of concentrating in the
financial services group of industries. This could help the fund avoid losses
but may mean lost opportunities.
MAIN RISKS
Most of the fund's performance depends on interest rates. When interest rates
fall, the fund's yields will typically fall as well. The fund is also subject to
credit risk, which is that issuers may fail, or become less able, to make
payments when due.
The fund's emphasis on securities in the first tier of credit quality may mean
that its yields are somewhat lower than those available from certain other money
market funds. Over time, the fund may produce a lower return than bond or stock
investments. The fund's average yield is expected to outpace inflation over the
long term, but it may not do so. Except for retirement accounts, your results
relative to the rate of inflation will, of course, be affected by any taxes you
pay on fund distributions.
Because the fund normally will concentrate in the financial services industries,
factors influencing the health of those industries could have a significant
negative effect on the fund's performance. These may include economic trends,
governmental action, changes in interest rates, as well as the availability and
cost of capital funds. New legislation permits broad consolidation of companies
in the financial services sector. The impact of such consolidation on individual
issuers or industries is difficult to predict at this time, but competition
among companies in different portions of the financial services sector is likely
to increase.
The fund may use certain practices and securities involving additional risks.
Reverse repurchase agreements and securities lending could create the effect of
leverage, meaning that certain gains or losses could be amplified, increasing
share price movements. (To reduce that risk, the fund does not intend to invest
the proceeds of any reverse repurchase agreement in instruments having a
maturity longer than the reverse repurchase agreement.) Investment in foreign
securities may involve trading practices different from those that prevail in
the United States, and custody of securities by foreign banks and depositories,
which could expose the fund to some risk.
The fund's performance also could be affected if unexpected interest rate trends
cause the fund's asset-backed securities to be paid off substantially earlier or
later than expected.
PERFORMANCE -- Because the fund is new it does not have performance to report.
3
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[SIDEBAR]
MANAGEMENT
THEODORE P. GIULIANO, a Vice President and Director of Neuberger Berman
Management and a Managing Director of Neuberger Berman, LLC, is the manager of
the Fixed Income Group of Neuberger Berman, which he helped establish in 1984.
He has co-managed the fund's assets since its inception in May 2000.
JOSEPHINE MAHANEY is a Vice President of Neuberger Berman Management and a
Managing Director of Neuberger Berman, LLC. She joined the firm in 1976 and has
co-managed the fund's assets since its inception in May 2000.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For these services, the fund pays Neuberger
Berman Management a fee at the annual rate of 0.25% of average daily net assets.
INVESTOR EXPENSES
The fund does not charge you any fees for buying, selling, or exchanging shares,
or for maintaining your account. Your only fund cost is your share of annual
operating expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
ANNUAL OPERATING EXPENSES (% of average net assets)* These are deducted from
fund assets, so you pay them indirectly.
Management fees 0.25
Plus: Distribution (12b-1) fees None
Other expenses** 0.16
Equals: Total annual operating 0.41
expenses
* The table includes costs paid by the fund and its share of master portfolio
costs. For more information on master/feeder funds, see "Fund Structure" on
page 9.
** Other expenses are based on estimated amounts for the current fiscal year.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
1 YEAR 3 YEARS
Expenses $42 $132
Because the fund is new it does not have financial highlights to report.
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[SIDEBAR]
ELIGIBLE ACCOUNTS
The fund shares described in this prospectus are available to qualified
retirement and other benefit plans and other accounts managed by Neuberger
Berman.
The fees and policies outlined in this prospectus are set by the funds and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from Neuberger Berman. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, Neuberger Berman charges fees, which are
generally in addition to those described in this prospectus.
YOUR INVESTMENT
MAINTAINING YOUR ACCOUNT
The fund offers its shares to certain eligible retirement or other benefit plans
and other accounts that have established cash sweeps at Neuberger Berman. Fund
shares may be made available to other programs in the future. To open a sweep
account, contact Neuberger Berman. All investments must be made in U.S. dollars.
Contact Neuberger Berman for more information on eligible benefit plans.
The fund is offered as a money market sweep fund for the automatic investment of
free credit cash balances in eligible benefit plans and other accounts. Neither
Neuberger Berman nor any of its affiliates may recommend a specific money market
fund for automatic investment of free credit cash balances.
The fund is designed to automatically invest free credit cash balances held in
an eligible account in fund shares. All such available cash balances of $100 or
more in an eligible account are automatically invested in the fund on a daily
basis for settlement the next business day. These amounts include proceeds of
securities sold in your plan's account.
There is no sales charge or commission paid for investment in shares. The fund
does not issue certificates for shares.
5
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Under certain circumstances, the fund reserves the right to:
o suspend the offering of shares
o reject any investment order
o satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
o suspend or postpone the redemption of shares on days when trading on the
New York Stock Exchange is restricted, or as otherwise permitted by the
SEC
The proceeds from shares sold are generally credited to your account on the same
business day the sell order is executed, and nearly always within three business
days. Proceeds may be delayed beyond this time in unusual circumstances where
the law allows additional time if needed.
6
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[SIDEBAR]
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. The fund anticipates that its share price
will not fluctuate.
When valuing portfolio securities, the fund uses a constant amortization method.
SHARE PRICES
Because the fund does not have a sales charge, the price your account pays for
each share of the fund is the fund's net asset value per share. Similarly,
because the fund does not charge any fee for selling shares, the fund pays the
full share price when your account sells shares. Remember that Neuberger Berman
may charge fees for its investment management services.
The fund is open for business every day that both the New York Stock Exchange
and the Federal Reserve Wire system are open. The Exchange and the Federal
Reserve are closed on all national holidays; the Exchange is also closed on Good
Friday, and the Federal Reserve is closed on Columbus Day and Veterans Day. Fund
shares will not be priced on those days and any other day the Exchange or
Federal Reserve Wire System is closed. In general, every buy or sell order you
place will go through at the next share price to be calculated after your
account's order has been accepted.
The fund calculates its share price as of the end of regular trading on the
Exchange on business days, usually 4:00 p.m. eastern time.
7
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[SIDEBAR}
TAXES AND YOU
For non-retirement plan accounts, the taxes you actually owe on distributions
and transactions can vary with many factors, such as your tax bracket.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that we send you every
January. It details the distributions you received during the past year and
shows their tax status. A separate statement covers your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains it earns. The fund declares income dividends daily and pays them
monthly. The fund does not anticipate making any long-term capital gain
distributions. Any net short-term capital gains would be paid annually in
December.
Consult Neuberger Berman about whether distributions from the fund to your
account will be reinvested in the fund or paid to your account in cash.
HOW DISTRIBUTIONS ARE TAXED -- Fund dividends paid to qualified retirement plan
accounts are tax-free. Eventual withdrawals from retirement plan accounts
generally are subject to tax. Fund dividends paid to non-retirement plan
accounts are generally taxable to you, regardless of whether they are paid in
cash or reinvested in the fund.
Dividends are taxable in the year you receive them. In some cases, dividends you
receive in January are taxable as if they had been paid the previous year. Your
tax statement (see sidebar) will help clarify this for you.
Income distributions and net short-term capital gains (if any) are taxed as
regular income.
HOW SHARE TRANSACTIONS ARE TAXED -- When a qualified retirement plan sells fund
shares, there are no tax consequences to the plan or its beneficiaries. In the
case of other accounts, when you sell fund shares, you will not realize a
taxable gain or loss as long as the fund maintains a share price of $1.00.
8
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FUND STRUCTURE
The fund uses a "master-feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds. In
this prospectus we have used the word "fund" to mean the feeder fund and its
master portfolio.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself.
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[SIDEBAR]
OBTAINING INFORMATION
You can obtain a shareholder report, SAI, and other information from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
Web site:
www.nbfunds.com
Email:
[email protected]
They are also available from the Edgar Database on the SEC's Web site at
www.sec.gov.
You can also request copies of this information from the SEC for the cost of a
duplicating fee by sending an e-mail request to [email protected] or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
You may also view and copy the documents at the SEC's Public Reference Room in
Washington. Call 1-202-942-8090 for information about the operation of the
Public Reference Room.
NEUBERGER BERMAN INSTITUTIONAL CASH TRUST
o No load
o No sales charges
o No 12b-1 fees
If you'd like further details about this fund, you can request a free copy of
the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
o a discussion by the portfolio managers about strategies and market
conditions
o fund performance data and financial statements
o complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information about this fund, including:
o various types of securities and practices, and their risks
o investment limitations and additional policies
o information about the fund's management and business structure
The SAI is hereby incorporated by reference into this prospectus, making it
legally part of the prospectus.
Investment manager:
NEUBERGER BERMAN MANAGEMENT INC.
Sub-adviser:
NEUBERGER BERMAN, LLC
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SEC file number: 811-7724
<PAGE>
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NEUBERGER BERMAN INSTITUTIONAL CASH TRUST AND
NEUBERGER BERMAN INSTITUTIONAL MONEY MARKET PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 7, 2000
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
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Neuberger Berman Institutional Cash Trust ("Fund") is a no-load
mutual fund that offers shares pursuant to a Prospectus dated March 7, 2000. The
Fund invests all of its net investable assets in Neuberger Berman Institutional
Money Market Portfolio ("Portfolio").
Shares of the Fund are available only to qualified pension and
benefit plans and other accounts managed by Neuberger Berman, LLC ("Neuberger
Berman"), which have established sweep accounts for investment in the Fund.
The Fund's Prospectus provides basic information that an investor
should know before investing. You can get a free copy of the Prospectus from NB
Management, Institutional Services, 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 the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
The "Neuberger Berman" name and logo are service marks of Neuberger
Berman LLC. "Neuberger Berman Management Inc." and the fund and portfolio names
in this SAI are either service marks or registered trademarks of Neuberger
Berman Management Inc.(C)2000 Neuberger Berman Management Inc.
<PAGE>
TABLE OF CONTENTS
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................4
Additional Investment Information......................................4
Risks of Fixed Income Securities......................................13
CERTAIN RISK CONSIDERATIONS.................................................14
PERFORMANCE INFORMATION.....................................................14
Yield Calculations....................................................14
Comparative Information...............................................15
Other Performance Information.........................................16
TRUSTEES AND OFFICERS.......................................................17
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................21
Investment Manager and Administrator..................................21
Management and Administration Fees....................................22
Sub-Adviser...........................................................23
Investment Companies Managed..........................................24
Management and Control of NB Management and Neuberger Berman..........26
DISTRIBUTION ARRANGEMENTS...................................................26
ADDITIONAL PURCHASE INFORMATION.............................................27
Share Prices and Net Asset Value......................................27
ADDITIONAL REDEMPTION INFORMATION...........................................27
Suspension of Redemptions.............................................27
Redemptions in Kind...................................................28
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................28
ADDITIONAL TAX INFORMATION..................................................29
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<PAGE>
Taxation of the Fund..................................................29
Taxation of the Portfolio.............................................29
Taxation of the Fund's Shareholders...................................31
VALUATION OF PORTFOLIO SECURITIES...........................................31
PORTFOLIO TRANSACTIONS......................................................31
REPORTS TO SHAREHOLDERS.....................................................32
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................32
The Fund..............................................................32
The Portfolio.........................................................33
CUSTODIAN AND TRANSFER AGENT................................................34
INDEPENDENT AUDITORS........................................................35
LEGAL COUNSEL...............................................................35
REGISTRATION STATEMENT......................................................35
Appendix A.................................................................A-1
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<PAGE>
INVESTMENT INFORMATION
The Fund is a separate series of Neuberger Berman Income Trust
("Trust"), a Delaware business trust that is registered with the Securities and
Exchange Commission ("SEC") as a diversified, open-end management investment
company. The 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. The Portfolio, in turn, invests in securities in accordance with an
investment objective, policies, and limitations identical to those of the Fund.
(The Trust and Managers Trust, which is an open-end management investment
company managed by Neuberger Berman Management Inc. ("NB 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 the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the 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 the Fund or the 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 the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the 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
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The Fund has the following fundamental investment policy, to enable
it to invest in the 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.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
<PAGE>
The 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
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 the Portfolio. If events subsequent to a transaction result in
the Portfolio exceeding the percentage limitation on borrowing or illiquid
securities, NB 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 the Portfolio
are as follows:
1. Borrowing. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment, and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings in
accordance with the foregoing exceed 33-1/3% of the value of the Portfolio's
total assets, it will reduce its borrowings within three days (excluding
Sundays, holidays and any other days permitted by law or by the SEC) to the
extent necessary to comply with the 33-1/3% limitation. In addition to the
foregoing, the Portfolio may borrow from any person for temporary purposes in an
amount not exceeding 5% of the Portfolio's total assets at the time the loan is
made. (Although not a fundamental limitation, as an operating policy, the
Portfolio will not invest more than 20% of its total assets in reverse
repurchase agreements. Investments in reverse repurchase agreements and
securities lending transactions will be aggregated for purposes of the 20%
limit.)
2. Commodities. The 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. 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. (Although not a fundamental limitation, the
Portfolio is subject to the diversification requirements under Rule 2a-7 of the
1940 Act.)
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, except that the Portfolio normally
will invest more than 25% of its total assets in the obligations of issuers
having their principal business activities in the financial services industries
or repurchase agreements on such obligations. This limitation does not apply to
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<PAGE>
purchases of securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities ("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
debt securities 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 Securities Act of 1933 ("1933 Act").
The non-fundamental investment policies and limitations of the
Portfolio are as follows:
1. Investments in Any One Issuer. The Portfolio may not purchase
the securities of any one issuer (other than U.S. Government and Agency
Securities or securities subject to a guarantee issued by a non-controlled
person as defined in Rule 2a-7 under the 1940 Act) if, as a result, more than 5%
of the Portfolio's total assets would be invested in the securities of that
issuer; provided, however, that the Portfolio may invest up to 25% of its total
assets in the first-tier securities of a single issuer for up to three business
days, provided that the Portfolio may make only one such investment at a time.
2. Illiquid Securities. The Portfolio may not purchase any security
if, as a result, more than 10% 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. Lending. Except for the purchase of debt securities and engaging
in repurchase agreements, the Portfolio may not make any loans other than
securities loans.
4. 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.
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INVESTMENT INSIGHT
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Neuberger Berman's commitment to its asset management approach is
reflected in the more than $125 million the organization's employees and their
families have invested in the Neuberger Berman mutual funds.
INSTITUTIONAL CASH TRUST is a money market fund with a
dollar-weighted average portfolio maturity of up to 90 days. INSTITUTIONAL CASH
TRUST is oriented to investors who seek a high degree of liquidity while
investing in Government and corporate money market instruments. INSTITUTIONAL
CASH TRUST seeks to provide investors with the highest available current income
consistent with safety and liquidity. In pursuit of its objective, the Fund
invests in high quality U.S. dollar-denominated money-market instruments. The
portfolio co-managers select securities to maximize yield, while seeking a
stable $1.00 net asset value. They also broadly diversify among number and types
of issuers to help limit risk.
ADDITIONAL INVESTMENT INFORMATION
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The Portfolio may make the following investments, among others, some
of which are part of the Portfolio's principal investment strategies and some of
which are not. The principal risks of the Portfolio's principal strategies are
discussed in the Prospectus. It 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. 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 (also known
as the Federal National Mortgage Association), Freddie Mac (also known as the
Federal Home Loan Mortgage Corporation), Sallie Mae (formerly known as "Student
Loan Marketing Association"), 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. (See "Mortgage-Backed
Securities," below.) The market prices of U.S. Government Agency Securities are
not guaranteed by the Government and generally fluctuate inversely with changing
interest rates.
POLICIES AND LIMITATIONS. The Portfolio may invest 25% or more of
its total assets in U.S. Government and Agency Securities.
ILLIQUID SECURITIES. Illiquid securities 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 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 NB Management, acting
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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, even if they are not
registered in the United States. 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.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 10% of its
net assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the 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. Costs,
delays, or losses could result if the selling party to a repurchase agreement
becomes bankrupt or otherwise defaults. NB Management monitors the
creditworthiness of sellers.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of
more than seven days are considered to be illiquid securities; the Portfolio may
not enter into such a repurchase agreement if, as a result, more than 10% of the
value of its net assets would then be invested in such repurchase agreements and
other illiquid securities. The Portfolio may enter into a repurchase agreement
only if (1) the underlying securities are of the type (excluding maturity
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. The Portfolio may lend portfolio securities to
banks, brokerage firms, and other institutional investors judged creditworthy by
NB Management, provided that cash or equivalent collateral, equal to at least
100% of the market value of the loaned securities, is continuously maintained by
the borrower with the Portfolio. The Portfolio may invest the cash collateral
and earn income, or it may receive an agreed upon amount of interest income from
a borrower who has delivered equivalent collateral. During the time securities
are on loan, the borrower will pay the Portfolio an amount equivalent to any
dividends or interest paid on such securities. These loans are subject to
termination at the option of the Portfolio or the borrower. The Portfolio may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Portfolio does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
NB 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.
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POLICIES AND LIMITATIONS. In order to realize income, the 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 NB Management. Investments in reverse repurchase agreements and securities
lending transactions will be aggregated for purposes of the 33-1/3% limitation.
However, as an operating policy, the Portfolio will not invest more than 20% of
its total assets in securities lending transactions. Investments in reverse
repurchase agreements and securities lending transactions will be aggregated for
purposes of the 20% limit. Borrowers are required continuously to secure their
obligations to return securities on loan from the 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.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio 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 the
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 the Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. 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, the 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. Restricted
securities for which no market exists are priced by a method that the Portfolio
Trustees believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to the Portfolio's 10% limit on investments in illiquid securities.
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. The 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
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normally is deemed illiquid, NB Management may in certain cases determine that
such paper is liquid, pursuant to guidelines established by the Portfolio
Trustees.
POLICIES AND LIMITATIONS. To the extent restricted commercial paper
is deemed illiquid, purchases thereof will be subject to the Portfolio's 10%
limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the 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. Reverse repurchase agreements may increase fluctuations in the
Portfolio's and the Fund's net asset values ("NAVs") and may be viewed as a form
of leverage. 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. NB Management monitors the
creditworthiness of counterparties to reverse repurchase agreements.
The Portfolio's investment of the proceeds of a reverse repurchase
agreement involved the speculative factor known as leverage. The Portfolio
generally will enter into a reverse repurchase agreement only if the adviser
anticipates that the interest income from investment of the proceeds will be
greater than the interest expense of the transaction and the proceeds are
invested for a period no longer than the term of the agreement. In certain
circumstances the proceeds from the reverse repurchase agreement may be invested
for a longer period of time than the term of the agreement, such as where the
Fund receives a large-scale redemption near the close of regular trading on the
NYSE.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are
considered borrowings for purposes of the Portfolio's investment policies and
limitations concerning borrowings. The Fund may invest up to one-third of its
total assets in reverse repurchase agreements. Investments in reverse repurchase
agreements and securities lending transactions will be aggregated for purposes
of this investment limitation. However, as an operating policy, the Portfolio
will not invest more than 20% of its total assets in reverse repurchase
agreements. Investments in reverse repurchase agreements and securities lending
transactions will be aggregated for purposes of the 20% limit. While a reverse
repurchase agreement is outstanding, the 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 the Portfolio's obligations under
the agreement.
FINANCIAL SERVICES OBLIGATIONS. Obligations of issuers in the
financial services industries include, but are not limited to, CDs, time
deposits, bankers' acceptances, and other short-term and long-term debt
obligations issued by domestic and foreign banks, savings institutions, consumer
and industrial finance companies, issuers of asset-backed securities, securities
brokerage companies and a variety of firms in the insurance field. Because the
Portfolio normally will concentrate more than 25% of its total assets in the
obligations of companies in the financial services industries, it will have
greater exposure to the risks associated with those industries, such as adverse
interest rate trends, increased credit defaults, potentially burdensome
government regulation, the availability and cost of capital funds, and general
economic conditions.
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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
Portfolio invests typically are not covered by deposit insurance.
POLICIES AND LIMITATIONS. The Portfolio normally will invest more
than 25% of its total assets in the obligations of companies in the financial
services industries.
VARIABLE OR FLOATING RATE SECURITIES; DEMAND AND PUT FEATURES.
Variable rate securities provide for automatic adjustment of the interest rate
at fixed intervals (e.g., daily, monthly, or semi-annually); floating rate
securities provide for automatic adjustment of the interest rate whenever a
specified interest rate or index changes. The interest rate on variable and
floating rate securities (collectively, "Adjustable Rate Securities") ordinarily
is determined by reference to a particular bank's prime rate, the 90-day U.S.
Treasury Bill rate, the rate of return on commercial paper or bank CDs, an index
of short-term tax-exempt rates or some other objective measure.
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 the
Portfolio's quality standards. Accordingly, in purchasing these securities, the
Portfolio relies primarily on the creditworthiness of the credit instrument
issuer or the insurer. The 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. The
Portfolio may rely on the creditworthiness of issuers of the credit enhancements
in purchasing these securities.
Among the Adjustable 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.
POLICIES AND LIMITATIONS. The Portfolio may invest in securities
subject to demand features or guarantees as permitted by Rule 2a-7 under the
1940 Act.
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. In calculating its
dollar-weighted average maturity, the 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, NB Management considers whether the interest rate
reset is expected to cause the security to trade at approximately its par value.
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GICs are generally regarded as illiquid. Thus, the Portfolio may not
invest in such GICs if, as a result, more than 10% of the value of its net
assets would then be invested in such GICs and other illiquid securities.
OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its
total assets in the securities of other money market funds. The shares of other
money market funds are subject to the management fees and other expenses of
those funds. Therefore, investments in such other investment companies will
cause the Fund (and indirectly, the Fund's shareholders) to bear proportionately
the costs incurred by the other investment companies' operations. At the same
time, the Fund will continue to pay its own management fees and expenses with
respect to its portfolio investments, including the shares of other investment
companies.
POLICIES AND LIMITATIONS. The Portfolio's investment in such
securities is limited to (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Portfolio's total assets with respect to any one
investment company and (iii) 10% of the Portfolio's total assets in the
aggregate.
ASSET-BACKED SECURITIES. Asset-backed securities represent direct or
indirect participations in, or are secured by and payable from, among other
things, 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, or a
combination of the foregoing. 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. 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.
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
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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
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. These are
securities of foreign issuers and foreign branches of U.S. banks, including
negotiable CDs, bankers' acceptances, and commercial paper. Foreign issuers are
issuers organized and doing business principally outside the U.S. and include
banks, non-U.S. governments, and Quasi-governmental organizations. 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, nationalization,
expropriation and confiscatory taxation) 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. It may be difficult to invoke
legal process or to enforce contractual obligations abroad.
POLICIES AND LIMITATIONS. These investments are subject to the
Portfolio's quality, maturity, and duration standards.
WHEN-ISSUED TRANSACTIONS. These transactions may involve
mortgage-backed securities such as GNMA, Fannie Mae, and Freddie Mac
certificates. These transactions involve a commitment by the 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
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negotiated directly with the other party, and such commitments are not traded on
exchanges.
When-issued transactions enable the Portfolio to "lock in" what NB
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, the 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. If the
seller fails to complete the sale, the Portfolio may lose the opportunity to
obtain a favorable price.
The value of securities purchased on a when-issued basis and any
subsequent fluctuations in their value are reflected in the computation of the
Portfolio's 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.
POLICIES AND LIMITATIONS. The 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, the Portfolio may dispose of or renegotiate a
commitment after it has been entered into. The 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 the 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.
LEVERAGE. The Portfolio may make investments while borrowings are
outstanding. Leverage creates an opportunity for increased total return but, at
the same time, creates special risk considerations. For example, leverage may
amplify changes in the Portfolio's and its corresponding Fund's NAVs. Although
the principal of such borrowings will be fixed, the Portfolio's assets may
change in value during the time the borrowing is outstanding. Leverage from
borrowing creates interest expenses for the Portfolio. To the extent the income
derived from securities purchased with borrowed funds exceeds the interest the
Portfolio will have to pay, the Portfolio's total return will be greater than it
would be if leverage were not used. Conversely, if the income from the assets
obtained with borrowed funds is not sufficient to cover the cost of leveraging,
the net income of the Portfolio will be less than it would be if leverage were
not used, and therefore the amount available for distribution to the Fund's
shareholders as dividends will be reduced. Reverse repurchase agreements,
securities lending transactions and when-issued transactions may create
leverage.
POLICIES AND LIMITATIONS. The Portfolio may borrow money from banks
for temporary or emergency purposes or enter into reverse repurchase agreements
for any purpose, as long as such borrowings do not exceed 33-1/3% of the value
of its total assets (including the amount borrowed) less liabilities (other than
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borrowings). The Portfolio may also borrow up to 5% of its total assets for
temporary purposes, e.g., for the purpose of settling purchase and sale
transactions; these temporary borrowings are not subject to the 33-1/3%
limitation. However, as an operating policy, the Portfolio will not invest more
than 20% of its total assets in reverse repurchase agreements and securities
lending transactions in the aggregate.
ZERO COUPON SECURITIES. The Portfolio may invest in zero coupon
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 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. Zero coupon securities are redeemed at
face value when they mature. The discount on zero coupon securities ("original
issue discount" or "OID") must be taken into income ratably by the Portfolio
prior to the receipt of any actual payments. Pay-in-kind securities pay interest
through the issuance of additional securities.
Because the Fund must distribute substantially all of its net income
(including its share of the Portfolio's non-cash income attributable to zero
coupon securities) to its shareholders each year for income and excise tax
purposes, the Portfolio may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash, or may be required to borrow, to
satisfy the 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 a similar maturity and
credit quality.
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 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,
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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 the Portfolio's investments in municipal obligations, whereas a decline in
interest rates generally will increase that value.
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 may experience 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.
POLICIES AND LIMITATIONS. The Portfolio may invest in municipal
obligations that otherwise meet its criteria for quality and maturity.
RISKS OF FIXED INCOME SECURITIES
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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"). Securities in which the Portfolio invests react
primarily to movements in the general level of interest rates.
RATINGS OF FIXED INCOME SECURITIES
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As discussed in the Prospectus, the Portfolio may purchase
securities rated by Standard & Poor's ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or any other nationally recognized statistical rating organization
("NRSRO"). The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, duration, coupon, and rating
may have different yields. Although the Portfolio may rely on the ratings of any
NRSRO, the Portfolio mainly refers to ratings assigned by S&P and Moody's, which
are described in Appendix A. The Portfolio may also invest in unrated securities
that are deemed comparable in quality by NB Management to the rated securities
in which the Portfolio may permissibly invest.
HIGH-QUALITY DEBT SECURITIES. High-quality debt securities are
securities that have received a rating from at least one NRSRO, such as S&P or
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 NB 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.
Subsequent to its purchase by the Portfolio, the rating of an issue
of debt securities may be reduced, so that the securities would no longer be
eligible for purchase by the Portfolio. With respect to the Portfolio, NB
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Management will consider the need to dispose of such securities in accordance
with the requirements of Rule 2a-7 under the 1940 Act.
The Portfolio is required to maintain a dollar-weighted average
portfolio maturity of no more than 90 days and invest in a portfolio of debt
instruments with remaining maturities of 397 days or less.
CERTAIN RISK CONSIDERATIONS
The Fund's investment in the Portfolio may be affected by the
actions of other large investors in the Portfolio, if any. For example, if a
large investor in the Portfolio (other than the Fund) redeemed its interest in
the Portfolio, the Portfolio's remaining investors (including the Fund) might,
as a result, experience higher pro rata operating expenses, thereby producing
lower returns.
Although the 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 the Portfolio will achieve its
investment objective.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and
are not intended to indicate future performance. The yield and total return of
the Fund will vary.
YIELD CALCULATIONS
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The Fund 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 the Fund 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.
NB Management may from time to time reimburse the 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.
- 14 -
<PAGE>
COMPARATIVE INFORMATION
- -----------------------
From time to time the 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., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies
Service, IBC/Financial Data Inc.'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 Lehman
Brothers Bond Index, the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500 Index"), Dow Jones Industrial Average ("DJIA"),
S&P/BARRA Index, Russell Index, and various other domestic,
international, and global indices and changes in the U.S. Department
of Labor Consumer Price Index. The S&P 500 Index is a broad index of
common stock prices, while the DJIA represents a narrower segment of
industrial companies. Each assumes reinvestment of distributions and
is calculated without regard to tax consequences or the costs of
investing. The Portfolio may invest in different types of securities
from those included in some of the above indices.
The Fund's performance also may be compared from time to time with
the following specific indices, among others, and other measures of performance:
IBC/Financial Data Inc.'s Government Money Market Funds average and Taxable
General Purpose Money Market Funds average.
The Portfolio 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. The 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, the 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 the
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 the
Fund, bank CDs pay a fixed rate of interest for a stated period of time and are
insured up to $100,000.
- 15 -
<PAGE>
The Fund 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 Fund's 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 the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the Fund. This information may include the Portfolio's
portfolio diversification by asset type. Information used in Advertisements may
include statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
Information (including charts and illustrations) showing the effects
of compounding interest may be included in Advertisements from time to time.
Compounding is the process of earning interest on principal plus interest that
was earned earlier. Interest can be compounded at different intervals, such as
annually, semi-annually, quarterly, monthly, or daily. For example, $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year (an
increase of $90) and $1,188 at the end of the second year (an increase of $98).
The extra $8 that was earned on the $90 interest from the first year is the
compound interest. One thousand dollars compounded annually at 9% will grow to
$2,367 at the end of ten years and $5,604 at the end of twenty years. Other
examples of compounding are as follows: at 7% and 12% annually, $1,000 will grow
to $1,967 and $3,106, respectively, at the end of ten years and $3,870 and
$9,646, respectively, at the end of twenty years. All these examples are for
illustrative purposes only and are not indicative of any Fund's performance.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information (including charts and illustrations) showing the total
return performance for government funds, 6-month CDs and money market funds may
be included in Advertisements from time to time.
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.
- 16 -
<PAGE>
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 NB Management and Neuberger
Berman.
NAME, ADDRESS POSITIONS HELD
- ------------- --------------
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
Claudia A. Brandon (43) Secretary of each Employee of Neuberger Berman
Trust since 1999; Vice President
of NB Management from 1986
to 1999: Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.
John Cannon (69) Trustee of each Chairman and Chief Investment
CDC Capital Management Trust Officer of CDC Capital
450 Sentry Parkway Management (registered
Suite 105 investment adviser)
P.O. Box 1212 (1993-present).
Blue Bell, PA 19422
Stacy Cooper-Shugrue (36) Assistant Employee of Neuberger Berman
Secretary of each since 1999; Assistant Vice
Trust President of NB Management
from 1993 to 1999;
Assistant Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.
Barbara DiGiorgio (41) Assistant Employee of NB Management;
Treasurer of each Assistant Vice President of NB
Trust Management from 1993 to 1999;
Assistant Treasurer since
1996 of ten other mutual
funds for which NB
Management acts as
investment manager or
administrator.
Theodore P. Giuliano* (47) Chairman of the Vice President and Director of
Board and Trustee NB Management; Principal of
of each Trust Neuberger Berman from 1987 to
1999; Chairman of the
Board and Trustee of one
other mutual fund for
which NB Management acts
as administrator.
- 17 -
<PAGE>
NAME, ADDRESS POSITIONS HELD
- ------------- --------------
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
Barry Hirsch (66) Trustee of each Senior Vice President,
Loews Corporation Trust Secretary, and General Counsel
667 Madison Avenue of Loews Corporation
8th Floor (diversified financial
New York, NY 10021 corporation).
Robert A. Kavesh (72) Trustee of each Professor of Finance and
110 Blecker Street Trust 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.
C. Carl Randolph (62) Assistant Senior Vice President,
Secretary of each Secretary and General Counsel
Trust of Neuberger Berman, Inc.
(holding company);
Assistant Secretary of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.
William E. Rulon (67) Trustee of each Retired. Senior Vice President
1761 Hotel Circle South Trust of Foodmaker, Inc. (operator
San Diego, CA 92108 and franchiser of restaurants)
until January 1997; Secretary
of Foodmaker, Inc. until July
1996.
Richard Russell (53) Treasurer and Employee of NB Management
Principal since 1993; Vice President of
Accounting NB Management from 1993 to
Officer of each 1999; Treasurer and Principal
Trust Accounting Officer of ten
other mutual funds for which
NB Management acts as
investment manager or
administrator.
- 18 -
<PAGE>
NAME, ADDRESS POSITIONS HELD
- ------------- --------------
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
Candace L. Straight (52) Trustee of each Private investor and
518 E. Passaic Avenue Trust consultant specializing in the
Bloomfield, NJ 07003 insurance industry; Advisory
Director of Securities Capital
LLC, (a global private equity
investment firm making
investments in the insurance
sector); Trustee of Advisers
Managers Trust and Neuberger
Berman Advisers Management
Trust; 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 (60) Vice President of Senior Vice President of NB
each Trust Management since 1992; Vice
President of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Peter Sundman* (40) President and Executive Vice President and
Chief Executive Director of Neuberger Berman,
Officer of each Inc. (holding company);
Trust President and Director of NB
Management; Principal of
Neuberger Berman from 1997
to 1999; Chairman of the
Board, Chief Executive
Officer and Trustee of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.
Michael J. Weiner (52) Vice President and Principal of Neuberger Berman
Principal from 1998-99; Senior Vice
Financial Officer President of NB Management
of each Trust since 1992; Treasurer of NB
Management from 1992 to
1996; Vice President and
Principal Financial
Officer of ten other
mutual funds for which NB
Management acts as
investment manager or
administrator.
- 19 -
<PAGE>
NAME, ADDRESS POSITIONS HELD
- ------------- --------------
AND AGE(1) WITH THE TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ---------- --------------- --------------------------
Celeste Wischerth (38) Assistant Employee of NB Management;
Treasurer of each Assistant Vice President of NB
Trust Management from 1994 to 1999;
Assistant Treasurer of ten
other mutual funds for
which NB Management acts
as investment manager or
administrator.
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, NY 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Sundman and Giuliano are interested persons by
virtue of the fact that they are officers and directors of NB Management. Mr.
Sundman is an Executive Vice President, and Mr. Giuliano is a Managing Director,
of Neuberger Berman.
The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, or by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
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 10/31/99
------------------------------
Aggregate Total Compensation from Trusts
Name and Position Compensation in the Neuberger Berman Fund
With the Trust From the Trust Complex Paid to Trustees
- ------------------------ --------------- ------------------------
John Cannon $24,579 $52,000
Trustee (2 other investment companies)
- 20 -
<PAGE>
Aggregate Total Compensation from Trusts
Name and Position Compensation in the Neuberger Berman Fund
With the Trust From the Trust Complex Paid to Trustees
- ------------------------ --------------- ------------------------
Stanley Egener* $0 $0
Chairman of the Board, Chief (10 other investment
Executive Officer, and Trustee companies)
Theodore P. Giuliano $0 $0
President and Trustee (2 other investment companies)
Barry Hirsch $23,978 $49,250
Trustee (2 other investment companies)
Robert A. Kavesh $24,215 $51,250
Trustee (2 other investment companies)
William E. Rulon $23,244 $47,750
Trustee (2 other investment companies)
Candace L. Straight $23,978 $51,500
Trustee (2 other investment companies)
*Mr. Egener retired from these positions on December 16, 1999.
At February 29, 2000, 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 the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
- ------------------------------------
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. NB Management serves as
the Portfolio's investment manager pursuant to a management agreement with
Managers Trust, on behalf of the Portfolio, dated as of July 2, 1993
("Management Agreement"). The Management Agreement was approved by the holders
of the interests in the Portfolio on March 7, 2000.
The Management Agreement provides, in substance, that NB Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits NB Management to effect securities transactions
on behalf of the Portfolio through associated persons of NB Management. The
Management Agreement also specifically permits NB Management to compensate,
- 21 -
<PAGE>
through higher commissions, brokers and dealers who provide investment research
and analysis to the Portfolio, although NB Management has no current plans to
pay a material amount of such compensation.
NB Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of NB Management. Two
persons who are directors and officers and two persons who are officers of NB
Management (three of whom are officers of Neuberger Berman) presently serve as
trustees and/or officers of the Trusts. See "Trustees and Officers." The
Portfolio pays NB Management a management fee based on the Portfolio's average
daily net assets, as described in the Prospectus.
NB Management provides similar facilities, services, and personnel
to the Fund pursuant to an administration agreement with the Trust, dated May 1,
1995 ("Administration Agreement"). For such administrative services, each Fund
pays NB Management a fee based on the Fund's average daily net assets, as
described in the Prospectus. The Fund became subject to the Administration
Agreement on December 16, 1999.
Under the Administration Agreement, NB Management also provides to
the Fund and its shareholders certain shareholder, shareholder-related, and
other services that are not furnished by the Fund's shareholder servicing agent.
NB 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 the 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.
MANAGEMENT AND ADMINISTRATION FEES
- ----------------------------------
For investment management services, the Portfolio pays NB Management
a fee at the annual rate of 0.10% of the Portfolio's average daily net assets.
For administrative services, the Fund pays NB Management at the
annual rate of 0.15% of that Fund's average daily net assets. With the Fund's
consent, NB Management may subcontract to third parties some of its
responsibilities to that Fund under the administration agreement. In addition,
the Fund may compensate such third parties for accounting and other services.
The Management Agreement continues with respect to the 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
the 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 NB 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
- 22 -
<PAGE>
majority vote of the outstanding interests in the Portfolio. The Administration
Agreement continues with respect to the 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 the 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 NB 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 the Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by NB Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by NB Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
- -----------
NB Management retains Neuberger Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to the 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
Portfolio on March 7, 2000.
The Sub-Advisory Agreement provides in substance that Neuberger
Berman will furnish to NB Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger Berman, from time to
time, provides to its employees for use in managing client accounts. In this
manner, NB 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 NB
Management. The Sub-Advisory Agreement provides that NB 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 NB
Management.
The Sub-Advisory Agreement continues with respect to the 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 the
Portfolio by the Portfolio Trustees or a 1940 Act majority vote of the
outstanding interests in the Portfolio, by NB Management, or by Neuberger Berman
on not less than 30 nor more than 60 days' prior written notice to the Fund. The
Sub-Advisory Agreement also terminates automatically with respect to the
Portfolio if it is assigned or if the Management Agreement terminates with
respect to the Portfolio.
- 23 -
<PAGE>
Most money managers that come to the Neuberger Berman organization
have at least fifteen years experience. Neuberger Berman and NB Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
- ----------------------------
As of December 31, 1999, the investment companies managed by NB
Management had aggregate net assets of approximately $18.7 billion. NB
Management currently serves as investment manager of the following investment
companies:
Approximate Net Assets at
Name December 31, 1999
---- -----------------
Neuberger Berman Cash Reserves Portfolio.......................$ 1,067,386,621
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio......................$ 496,244,470
(investment portfolio for Neuberger Berman Government
Money Fund)
Neuberger Berman High Yield Bond Portfolio........................$ 17,717,320
(investment portfolio for Neuberger Berman High Yield Bond
Fund)
Neuberger Berman Limited Maturity Bond Portfolio.................$ 264,519,644
(investment portfolio for Neuberger Berman Limited
Maturity Bond Fund and NeubergerBerman Limited Maturity
Bond Trust)
Neuberger Berman Municipal Money Portfolio.......................$ 301,713,416
(investment portfolio for Neuberger Berman Municipal
Money Fund)
Neuberger Berman Municipal Securities Portfolio...................$ 32,652,269
(investment portfolio for Neuberger Berman Municipal
Securities Trust)
Neuberger Berman Century Portfolio................................$ 12,994,259
(investment portfolio for Neuberger Berman Century
Fund and Neuberger Berman Century Trust)
Neuberger Berman Focus Portfolio...............................$ 1,772,136,921
(investment portfolio for Neuberger Berman Focus Fund,
Neuberger Berman Focus Trust, and Neuberger Berman
Focus Assets)
Neuberger Berman Genesis Portfolio.............................$ 1,619,248,797
(investment portfolio for Neuberger Berman Genesis
Fund, Neuberger Berman Genesis Trust, Neuberger
Berman Genesis Assets and Neuberger Berman Genesis
Institutional)
Neuberger Berman Guardian Portfolio.......................... $ 4,406,419,837
(investment portfolio for Neuberger Berman Guardian
Fund, Neuberger Berman Guardian Trust, and Neuberger
Berman Guardian Assets)
- 24 -
<PAGE>
Neuberger Berman International Portfolio.........................$ 195,064,579
(investment portfolio for Neuberger Berman
International Fund and Neuberger Berman
International Trust)
Neuberger Berman Manhattan Portfolio.............................$ 901,991,808
(investment portfolio for Neuberger Berman Manhattan
Fund, Neuberger Berman Manhattan Trust, and Neuberger
Berman Manhattan Assets)
Neuberger Berman Millennium Portfolio............................$ 214,859,495
(investment portfolio for Neuberger Berman Millennium
Fund, Neuberger Berman Millennium Trust and Neuberger
Berman Millennium Assets)
Neuberger Berman Partners Portfolio............................$ 3,489,710,309
(investment portfolio for Neuberger Berman Partners
Fund, Neuberger Berman Partners Trust, and Neuberger
Berman Partners Assets)
Neuberger Berman Regency Portfolio................................$ 33,586,640
(investment portfolio for Neuberger Berman Regency
Fund and Neuberger Berman Regency Trust)
Neuberger Berman Socially Responsive Portfolio...................$ 146,960,016
(investment portfolio for Neuberger Berman Socially
Responsive Fund, Neuberger Berman Socially Responsive
Trust, and Neuberger Berman Socially Responsive Assets)
Advisers Managers Trust (seven series).........................$ 2,442,187,166
The investment decisions concerning the Portfolio and the other
mutual funds managed by NB Management (collectively, "Other NB Funds") have been
and will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolio to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when the Portfolio and one or more of the
Other NB 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 the
Portfolio, in other cases it is believed that the 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
Portfolio's having their advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
- 25 -
<PAGE>
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger Berman (including the Portfolio, the Other NB
Funds, and other managed accounts) and personnel of Neuberger Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger Berman that limit
the aggregate purchases, by all accounts under management, of the outstanding
shares of public companies.
MANAGEMENT AND CONTROL OF NB MANAGEMENT AND NEUBERGER BERMAN
- ------------------------------------------------------------
The directors and officers of NB Management, who are deemed "control
persons," all of whom have offices at the same address as NB Management, are
Richard A. Cantor, Director and Chairman; Theodore P. Giuliano, Director and
Vice President; Michael M. Kassen, Director, Executive Vice President and Chief
Investment Officer; Barbara Katersky, Senior Vice President; Irwin Lainoff,
Director; Daniel J. Sullivan, Senior Vice President; Philip Ambrosio, Senior
Vice President and Chief Financial Officer; Peter E. Sundman, Director and
President; Michael J. Weiner, Senior Vice President; and Lawrence Zicklin,
Director.
The directors and officers of Neuberger Berman, who are deemed
"control persons," all of whom have offices at the same address as Neuberger
Berman, are Jeffrey B. Lane, President and Chief Executive Officer; Robert
Matza, Executive Vice President and Chief Administrative Officer; Michael M.
Kassen, Executive Vice President and Chief Investment Officer; Heidi L.
Schneider, Executive Vice President; Peter E. Sundman, Executive Vice President;
Philip Ambrosio, Senior Vice President and Chief Financial Officer; C. Carl
Randolph, Senior Vice President, General Counsel and Secretary; Robert Akeson,
Senior Vice President; Salvatore A. Buonocore, Senior Vice President; Seth J.
Finkel, Senior Vice President; Robert Firth, Senior Vice President; Brian
Gaffney, Senior Vice President; Brian E. Hahn, Senior Vice President; Lawrence
J. Cohn, Senior Vice President; Joseph K. Herlihy, Senior Vice President and
Treasurer; Barbara R. Katersky, Senior Vice President; Diane E. Lederman, Senior
Vice President; Peter B. Phelan, Senior Vice President; Robert H. Splan, Senior
Vice President; Andrea Trachtenberg, Senior Vice President; Michael J. Weiner,
Senior Vice President; Marvin C. Schwartz, Managing Director.
Messrs. Giuliano, Sundman, Sullivan, and Weiner are officers of each
Trust.
Neuberger Berman and NB Management are wholly owned subsidiaries of
Neuberger Berman Inc., a publicly owned holding company owned primarily by the
employees of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to
qualified pension and benefit plans managed by Neuberger Berman. In connection
with the sale of its shares, the 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
- 26 -
<PAGE>
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 Fund's "principal underwriter"
within the meaning of the 1940 Act and, as such, acts as agent in arranging for
the sale of the Fund's shares without sales commission or other compensation and
bears all advertising and promotion expenses incurred in the sale of the Fund's
shares.
The Trust, on behalf of the Fund, and the Distributor are parties to
a Distribution Agreement that continues until July 2, 2000. The Portfolio became
a party to the Distribution Agreement on March 7, 2000. 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
SHARE PRICES AND NET ASSET VALUE
- --------------------------------
The Fund's shares are bought or sold at a price that is the Fund's
NAV per share. The NAVs for the Fund and the Portfolio are calculated by
subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent.
The Fund 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 4:00 p.m. Eastern time on each
day the NYSE and the Federal Reserve Wire are open.
If NB 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.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the New York Stock Exchange ("NYSE") or
the Fed. wire 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 the
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
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<PAGE>
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
- -------------------
The 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 in securities valued as
described in "Share Prices and Net Asset Value" above. 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
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The 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). The 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 realized gains and losses are
reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until they are
distributed. The Fund 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. Fund shares 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. Distributions of net realized capital
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 Institution elects to
receive them in cash ("cash election"). 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 the Fund remains in effect until the
participating plan 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.
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<PAGE>
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
- --------------------
In order to qualify for treatment as a RIC under the Code, the 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) ("Distribution Requirement")
and must meet several additional requirements. These requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from Hedging Instruments) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); 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. If the Fund failed to qualify for treatment as a RIC for any
taxable year, it would be taxed on the full amount of its taxable income for
that year without being able to deduct the distributions it makes to its
shareholders and the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain over
net short-term capital loss), as dividends (that is, ordinary income) to the
extent of the Fund's earnings and profits.
Other Funds, which are series of the Trust, have received rulings
from the Internal Revenue Service ("Service") that each series, as an investor
in its corresponding portfolio of Managers Trust, 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
the Fund, NB Management believes the reasoning thereof and, hence, their
conclusion apply to the Fund as well.
The 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 the
Fund of distributions to it from the portfolio in certain securities and certain
other transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
- -------------------------
Other series of Managers Trust 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 the Portfolio, NB Management believes the reasoning thereof and,
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<PAGE>
hence, their conclusion apply to the Portfolio as well. As a result, the
Portfolio is not subject to federal income tax; instead, each investor in the
Portfolio, such as the Fund, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses
and deductions without regard to whether it has received any cash distributions
from the Portfolio. The Portfolio also is not subject to Delaware or New York
income or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the 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 or loss may be recognized on an in-kind distribution by the
Portfolio. The Fund's basis for its interest in the 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 (1) the amount of cash and the basis of any
property the Portfolio distributes to the Fund and (2) the Fund's share of the
Portfolio's losses.
Dividends and interest received by the Portfolio and gains realized
by the Portfolio may be subject to income, withholding, or other taxes imposed
by foreign countries and U.S. possessions (foreign taxes) that would reduce the
yield and/or total return on its securities. Tax treaties between certain
countries and the United States may reduce or eliminate foreign taxes, however,
and many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.
The 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 the
Portfolio (other than a bond with a fixed maturity date within one year from its
issuance) generally is treated as ordinary (taxable) income, rather than capital
gain, to the extent of the bond's accrued market discount at the time of
disposition. Market discount on such a bond generally is accrued ratably, on a
daily basis, over the period from the acquisition date to the date of maturity.
In lieu of treating the disposition gain as described above, the Portfolio may
elect to include market discount in its gross income currently, for each taxable
year to which it is attributable.
The Portfolio may acquire zero coupon or other securities issued
with OID. As a holder of those securities, the Portfolio (and, through it, the
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
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<PAGE>
payment on the securities during the year. Because the Fund annually must
distribute substantially all of its investment company taxable income (including
its share of the Portfolio's accrued OID and other non-cash income) to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax, the 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 the Portfolio actually
receives. Those distributions will be made from the Fund's (or its share of the
Portfolio's) cash assets or, if necessary, from the proceeds of sales of the
Portfolio's securities. The Portfolio may realize capital gains or losses from
those sales, which would increase or decrease the Fund's investment company
taxable income and/or net capital gain.
TAXATION OF THE FUND'S SHAREHOLDERS
- -----------------------------------
Each Fund is required to withhold 31% of all dividends and capital
gain distributions payable to certain noncorporate shareholders who do not
provide the Fund with a correct taxpayer identification number. Withholding at
that rate also is required from dividends and other distributions payable to
such shareholders who otherwise are subject to backup withholding.
VALUATION OF PORTFOLIO SECURITIES
The Portfolio relies on Rule 2a-7 under the 1940 Act to use the
amortized cost method of valuation to enable the 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 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 Portfolio typically
does 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), the 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, NB
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. NB Management also may consider the
brokerage and research services that broker-dealers provide to the Portfolio or
NB Management. Under certain conditions, the Portfolio may pay higher brokerage
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<PAGE>
commissions in return for brokerage and research services, although the
Portfolio does not have a current arrangement to do so. In any case, the
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.
No affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its portfolio transactions. The Portfolio does not
effect transactions with or through broker-dealers in accordance with any
formula or for selling shares of the 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, the Portfolio unless an appropriate exemption is
available.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and for the Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
THE FUND
- --------
The Fund is a separate series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of December 23, 1992.
The Trust is registered under the 1940 Act as a diversified, open-end management
investment company, commonly known as a mutual fund. The Trust has seven
separate operating series. The Fund invests all of its net investable assets in
the Portfolio, in each case receiving a beneficial interest in the Portfolio.
The trustees of the Trust may establish additional series or classes of shares
without the approval of shareholders. The assets of each series belong only to
that series, and the liabilities of each series are borne solely by that series
and no other.
Prior to November 9, 1998, the name of the Trust was "Neuberger &
Berman Income Trust."
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 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 Fund shareholders. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
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<PAGE>
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of 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 contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
THE PORTFOLIO
- -------------
The Portfolio is a separate operating series of Managers Trust, a
New York common law trust organized as of December 1, 1992. Managers Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Managers Trust has seven separate Portfolios. The assets of each series
belong only to that series, and the liabilities of each series are borne solely
by that series and no other.
FUND'S INVESTMENT IN THE PORTFOLIO. 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. Neuberger Berman Institutional Cash
Fund, a series of Neuberger Berman Income Funds ("Income Funds"), invests all of
its net assets in the Portfolio. Income Trust does not sell its shares to
members of the general public.
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 (except 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. There is currently
no such other investment company that offers its shares directly to members of
the general public. Information regarding the other fund that invests in the
Portfolio is available from NB 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 benefiting all shareholders. However, the Fund's
investment in the Portfolio may be affected by the actions of other large
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<PAGE>
investors in the Portfolio, if any. For example, if a large investor in the
Portfolio (other than the Fund) redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at
any time, if the trustees of the Trust determine that it is in the best
interests of the Fund and its shareholders to do so. The Fund might withdraw,
for example, if there were other investors in 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 the Fund withdrew its 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.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have 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 the Fund's transfer and
shareholder servicing agent, administering 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 mailed to
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<PAGE>
Neuberger Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-01800.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected Ernst & Young LLP, 200
Clarendon Street, Boston, MA 02116, as the independent auditors who will audit
its financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its
legal counsel.
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 Fund and Portfolio.
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. 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 is qualified in all respects by such reference.
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<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
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 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 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 the issuer.
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 security 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
issuer 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 (+).
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:
A-1
<PAGE>
- 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.
A-2
