As filed with the Securities and Exchange Commission on October 26, 1998
1933 Act Registration No.
1940 Act Registration No. 811-09011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ ] [ ]
]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ ] [ ]
(Check appropriate box or boxes)
NEUBERGER BERMAN EQUITY SERIES
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Neuberger Berman Equity Trust is a "master/feeder fund." This Registration
Statement includes a signature page for the master fund, Equity Managers Trust,
and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
CONTENTS OF REGISTRATION STATMENT ON FORM N-1A
This registration statement consists of the following papers and
documents:
Cover Sheet
Contents of Registration Statement on Form N-1A
Cross Reference Sheets
Neuberger Berman Socially Responsive Assets
- -------------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
2
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
REGISTRATION STATEMENT ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for:
Neuberger Berman Socially Responsive Assets
-------------------------------------------
<TABLE>
<CAPTION>
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Front and Back Cover Pages Front and Back Cover Pages
Item 2. Risk/Return Summary: Investor Expenses; Performance; Main Risks
Investments, Risks, and
Performance
Item 3. Risk/Return Summary: Fee Table Performance; Investor Expenses
Item 4. Investment Objectives, Principal Goal & Strategy; Main Risks
Investment Strategies, and Related
Risks
Item 5. Management's Discussion of Fund Not Applicable
Performance
Item 6. Management, Organization, and Front Cover Page; Management Sidebar
Capital Structure
Item 7. Shareholder Information Your Investment; Buying Shares; Maintaining Your
Account; Privileges and Services; Share Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under Maintaining Your
Account)
Item 9. Financial Highlights Information Not Applicable
</TABLE>
<TABLE>
<CAPTION>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
<S> <C> <C>
Item 10. Cover Page and Table of Contents Cover and Table of Contents
Item 11. Fund History Information Regarding Organization, Capitalization and
Other Matters
Item 12. Description of the Fund and Its Investment Information; Certain Risk Considerations
Investments and Risks
Item 13. Management of the Fund Trustees And Officers
Item 14. Control Persons and Principal Not Applicable
Holders of Securities
3
</TABLE>
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
Item 15. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent
Auditors/Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 18. Purchase, Redemption, Additional Purchase Information;
and Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information
Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 21. Calculation of Performance Information
Performance Data
Item 22. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
-4-
<PAGE>
<PAGE>
[PHOTO OF CHESS PIECES] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY SERIES-SM-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER , 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Socially Responsive Assets
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY SERIES
PAGE 2 ...... Socially Responsive Assets
YOUR INVESTMENT
7 ...... Maintaining Your Account
9 ...... Share Prices
10 ...... Distributions and Taxes
12 ...... Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
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 $49
billion in total assets and continue an asset management history that began in
1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
9/30/98).
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAS NO CHARGES WHEN YOU BUY OR SELL SHARES
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU
SELL FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
SOCIALLY RESPONSIVE ASSETS
- --------------------------------------------------------------------------------
ABOVE: PORTFOLIO MANAGER JANET PRINDLE
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ARROW]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
SOCIAL POLICY.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
The managers initially screen companies using value investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
- - environmental concerns
- - diversity in the work force
- - progressive employment and workplace practices
The managers typically also look at a company's record in public health and the
nature of its products. The managers judge firms on their corporate citizenship
overall, considering their accomplishments as well as their goals. While these
judgments are inevitably subjective, the fund has a strict policy of avoiding
companies that receive more than 5% of their earnings from alcohol, tobacco,
gambling, or weapons, as well as companies that sell non-consumer products to
the military or are involved in nuclear power.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Socially Responsive Assets 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. These investments are not subject to the fund's social policy.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[DOLLAR SIGNS]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
- - undervalued stocks that don't meet the social criteria could outperform those
that do
- - economic or political changes could make certain companies less attractive for
investment
- - the social policy could cause the fund to sell or avoid stocks that
subsequently perform well
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; over time, however, large-cap stocks may perform better or less well
than mid-cap stocks. At any given time, one or both groups of stocks may be out
of favor with investors. If the fund emphasizes either group of stocks, its
performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested.
As a frame of reference, the table includes a broad-based market index. Fund
performance figures include all expenses; the index does not include costs of
investment.
[ARROW] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. When this prospectus was written, the fund was new and
had no performance record of its own. However, another Neuberger Berman fund,
which is not offered in this prospectus but which invests in the same portfolio
of securities, has been in operation since 1994; the performance results in the
chart and table below are those of the older fund. Because the older fund had
lower expenses, its performance was better than your fund would have realized in
the same period. This information is based on past performance; it's not a
prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 38.94%
96 18.50%
97 24.41%
BEST QUARTER: Q2 '97, up 15.54%
WORST QUARTER: Q1 '97, down 1.86%
Year-to-date performance as of 9/30/98: down
4.93%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 3/16/94
<S> <C> <C>
- --------------------------------------------------------------
SOCIALLY RESPONSIVE FUND 24.41 19.66
S&P 500 Index 33.32 24.09
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Socially Responsive Assets 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a principal
of Neuberger Berman, LLC, joined the latter firm in 1977. She has been managing
assets using social criteria since 1990.
ROBERT LADD and INGRID SAUKAITIS are Assistant Vice Presidents of Neuberger
Berman Management and Associate Managers of the fund. Ladd has been a portfolio
manager at the firm since 1992; Saukaitis was project director for a social
research group from 1995 to 1997.
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services.
[DOLLAR SIGNS]
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.
<TABLE>
<S> <C> <C>
Management/administration fees 0.95
PLUS: Distribution (12b-1) fees 0.25
Other expenses* 0.52
....
EQUALS: Total annual operating expenses 1.72
MINUS: Expense reimbursement** 0.22
....
EQUALS: Net expenses 1.50
</TABLE>
* OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
** NEUBERGER BERMAN MANAGEMENT HAS AGREED TO REIMBURSE CERTAIN EXPENSES OF THE
FUND THROUGH 12/31/99, SO THAT THE TOTAL ANNUAL OPERATING EXPENSES OF THE
FUND ARE LIMITED TO 1.50% OF AVERAGE NET ASSETS. THIS ARRANGEMENT DOES NOT
COVER INTEREST, TAXES, BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES.
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.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- --------------------------------------
Expenses*** $153 $474
</TABLE>
*** IF NEUBERGER BERMAN MANAGEMENT WAS NOT REIMBURSING EXPENSES AS DESCRIBED IN
THE FOOTNOTE ABOVE, YOUR COSTS FOR THE ONE- AND THREE-YEAR PERIODS WOULD BE
$175 AND $542, RESPECTIVELY.
6 Neuberger Berman
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
To buy or sell shares of the fund, contact your investment provider. All
investments must be made in U.S. dollars, and investment checks must be drawn on
a U.S. bank. The fund does not issue certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
Under certain circumstances, the fund reserves the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - 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
Your Investment 7
<PAGE>
MAINTAINING YOUR
ACCOUNT CONTINUED
- -------------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before the fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
DISTRIBUTION FEES -- The fund has adopted a plan under which it pays 0.25% of
its average net assets every year to support share distribution and shareholder
servicing. These fees increase the cost of investing in the fund. Over the long
term, they could result in higher overall costs than other types of sales
charges.
8 Neuberger Berman
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
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. Because the value of the fund's
securities changes every business day, the share price usually changes as well.
When valuing portfolio securities, the fund uses market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. The fund may also use these methods to
value certain types of illiquid securities.
Because the fund does not have a sales charge, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
charges no fee for selling shares, it pays you the full share price when you
sell shares. Remember that your investment provider may charge fees for its
services.
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. The fund calculates its share price as of
the end of regular trading on business days, usually 4:00 p.m. eastern time.
Depending on when your investment provider accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
Your Investment 9
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends 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 -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund makes any distributions once a year (in
December).
Consult your investment provider whether your income and capital gains
distributions from the fund will be reinvested in the fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them.
Distributions are taxable in the year you receive them. In some cases,
distributions 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 short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund or whether you reinvested your distributions.
10 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the fund's portfolio will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax implications. The exception, once again, is tax-advantaged retirement
accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
Your Investment 11
<PAGE>
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. Costs for the
feeder fund include its own costs and its share of master
portfolio costs.
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. The fund is not currently contemplating such a
move.
12
<PAGE>
- -------------------------------------------------------------
[PHOTO]
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from your investment provider, or
from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-09011
NMLRR0061298
NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS
If you'd like further details on the 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:
- - a discussion by the portfolio manager about strategies and market conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on the fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about the fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER __, 1998
A NO-LOAD MUTUAL FUND
605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NY 10158-0180
- -------------------------------------------------------------------------------
NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS ("FUND"), A SERIES OF
NEUBERGER BERMAN EQUITY SERIES ("TRUST"), IS A NO-LOAD MUTUAL FUND THAT OFFERS
SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER __, 1998. THE FUND INVESTS ALL OF
ITS NET INVESTABLE ASSETS IN NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO
("PORTFOLIO").
The Fund's Prospectus provides basic information that an investor should
know before investing. A copy of the Prospectus may be obtained, without charge,
from Neuberger Berman Management Incorporated ("NB Management"), 605 Third
Avenue, 2nd Floor, New York, NY 10158-0180, or by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by 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.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................4
Description of Social Policy...........................................6
PERFORMANCE INFORMATION.....................................................23
Other Performance Information.........................................24
CERTAIN RISK CONSIDERATIONS.................................................25
TRUSTEES AND OFFICERS.......................................................25
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................31
Investment Manager and Administrator..................................31
Management and Administration Fees....................................32
Sub-Adviser...........................................................33
Investment Companies Managed..........................................34
Management and Control of NB Management...............................36
DISTRIBUTION ARRANGEMENTS...................................................36
Distributor...........................................................36
Rule 12b-1 Plan.......................................................37
ADDITIONAL PURCHASE INFORMATION.............................................38
Share Prices and Net Asset Value......................................38
ADDITIONAL EXCHANGE INFORMATION.............................................38
ADDITIONAL REDEMPTION INFORMATION...........................................39
Suspension of Redemptions.............................................39
Redemptions in Kind...................................................39
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................39
ADDITIONAL TAX INFORMATION..................................................40
Taxation of the Fund..................................................40
Taxation of the Portfolio.............................................41
Taxation of the Fund's Shareholders...................................43
PORTFOLIO TRANSACTIONS......................................................43
Portfolio Turnover....................................................46
i
<PAGE>
REPORTS TO SHAREHOLDERS.....................................................46
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................47
The Fund..............................................................47
The Portfolio.........................................................47
CUSTODIAN AND TRANSFER AGENT................................................49
INDEPENDENT ACCOUNTANTS.....................................................49
LEGAL COUNSEL...............................................................49
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................49
REGISTRATION STATEMENT......................................................50
FINANCIAL STATEMENTS........................................................50
APPENDIX A..................................................................51
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.............................51
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INVESTMENT INFORMATION
The Fund is a separate operating series of the 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 the
Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an
investment objective identical 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 Incorporated ("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 in proportion to the
votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
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 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.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
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be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations 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 exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any other loan
if, as a result, more than 33-1/3% of its total assets (taken at current value)
would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities 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.
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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").
For purposes of the limitation on commodities, the Portfolio does not
consider foreign currencies or forward contracts to be physical commodities.
The Portfolio's non-fundamental investment policies and limitations are as
follows:
1. BORROWING. The Portfolio may not purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of the
value of its total assets in securities of foreign issuers, provided that this
limitation shall not apply to foreign securities denominated in U.S. dollars,
including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any security if, as
a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
In addition, although the Portfolio does not have a policy limiting its
investment in warrants, the Portfolio does not currently intend to invest in
warrants unless acquired in units or attached to securities.
Any part of Neuberger Berman Socially Responsive Portfolio's assets may be
retained temporarily in investment grade fixed income securities of
non-governmental issuers, U.S. Government and Agency Securities, repurchase
agreements, money market instruments, commercial paper, and cash and cash
equivalents when NB Management believes that significant adverse market,
economic political, or other circumstances require prompt action to avoid
losses. In addition, the feeder funds that invest in Neuberger Berman Socially
Responsive Portfolio deal with large institutional investors, and the Portfolio
may hold such instruments pending investment or payout when the Portfolio has
received a large influx of cash due to sales of Neuberger Berman Socially
Responsive Trust shares, or shares of another fund which invests in the
Portfolio, or when it anticipates a substantial redemption. Generally, the
foregoing temporary investments for Neuberger Berman Socially Responsive
Portfolio are selected with a concern for the social impact of each investment.
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INVESTMENT INSIGHT
Securities for the Portfolio are selected through a two-phase process. The
first is financial. The portfolio manager analyzes a universe of companies
according to NB Management's value-oriented philosophy and looks for stocks
which are undervalued for any number of reasons. The manager focuses on
financial fundamentals, including balance sheet ratios and cash flow analysis,
and meets with company management in an effort to understand how those
unrecognized values might be realized in the market.
The second part of the process is social screening. NB Management's social
research is based on the same kind of philosophy that governs its financial
approach: NB Management believes that first-hand knowledge and experience are
its most important tools. Utilizing a database, the portfolio manager does
careful, in-depth tracking and analyzes a large number of companies on some
eighty issues in six broad social categories. The manager uses a wide variety of
sources to determine company practices and policies in these areas. Performance
is analyzed in light of knowledge of the issues and of the best practices in
each industry.
Under normal conditions, at least 65% of the Portfolio's total assets are
invested in accordance with its Social Policy, and at least 65% of its total
assets are invested in equity securities. The Portfolio expects that
substantially all of its equity securities will be selected in accordance with
the Social Policy. On occasion, the portfolio manager may consider deposits with
community banks and credit unions for investment. The Portfolio may also engage
in portfolio management techniques that are not subject to the Social Policy,
such as lending securities and purchasing and selling put and call options on
securities and currencies, futures contracts, options on futures contracts, and
forward contracts.
The portfolio manager understands that, for many issues and in many
industries, absolute standards are elusive and often counterproductive. Thus, in
addition to quantitative measurements, the manager places value on such
indicators as management commitment, progress, direction, and industry
leadership.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: First things first. How do you begin your stock selection process?
A: Our first question is always: On financial grounds alone, is a company
a smart investment? For a company's stock to meet our financial test, it must
pass a number of hurdles.
We look for bargains, just like the portfolio managers of the other
portfolios managed by NB Management. More specifically, we search for companies
that we believe have terrific products, excellent customer service, and solid
balance sheets -- but because they may have missed quarterly earnings
expectations by a few pennies, because their sectors are currently out of favor,
because Wall Street overreacted to a temporary setback, or because the company's
merits aren't widely known, their stocks are selling at a discount.
While we look at the stock's fundamentals carefully, that's not all we
examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
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companies visit Neuberger Berman each year, and we're also frequently on the
road visiting dozens of corporations. From Neuberger Berman Socially Responsive
Portfolio's inception, we've met with representatives of every company we own.
When we're face to face with a CEO, we're searching for answers to two
crucial questions: "Does the company have a vision of where it wants to go?" and
"Can the management team make it happen?" We've analyzed companies for over
three decades, and we always look for companies that have both clear strategies
and management talent.
Q: When you evaluate a company's balance sheet, what matters the most to
you?
A: Definitely a company's "free cash flow." Compare it to your household's
discretionary income -- the money you have left over each month after you pay
off your monthly debt and other expenses. With ample free cash flow, a company
can do any number of things. It can buy back its stock. Make important
acquisitions. Expand its research and development spending. Or increase its
dividend payments.
When a company generates lots of excess cash flow, it has growth capital
at its disposal. It can invest for higher profits down the line and improve
shareholder value. Determining exactly how a company intends to spend its excess
cash is an entirely different matter -- and that's where the information learned
in our company meetings comes in. Still, you've got to have the extra cash in
the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and its
management. After a company passes your financial test, what do you do next?
A: After we're convinced of a company's merits on financial grounds alone,
we review its record as a corporate citizen. In particular, we look for evidence
of leadership in three key areas: concern for the environment, workplace
diversity, and enlightened employment practices.
It should be clear that our social screening always takes place after we
search far and wide for what we believe are the best investment opportunities
available. This is a crucial point, and an analogy can be used to explain it.
Let's assume you're looking to fill a vital position in your company. What you'd
pay attention to first is the candidate's competence: Can he or she do the job?
So after interviewing a number of candidates, you'd narrow your list to those
that are highly qualified. To choose from this smaller group, you might look at
the candidate's personality: Can he or she get along with everyone in your
group?
Obviously, you wouldn't hire an unqualified person simply because he or
she is likable. What you'd probably do is give the job to a highly qualified
person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts. How do
we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
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protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of looking
for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to the Fund?
A: Our shareholders are looking to invest for the future in more ways than
one. While they care deeply about their own financial futures, they're equally
passionate about the world they leave to later generations. They want to be able
to meet their college bills and leave a world where the air is a little cleaner
and where the doors to the executive suite are a little more open.
DESCRIPTION OF SOCIAL POLICY
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship between
business and society, socially responsive investing ("SRI") is a mechanism for
assuring that investors' social values are reflected in their investment
decisions. As such, SRI is a direct descendent of the successful effort begun in
the early 1970's to encourage companies to divest their South African operations
and subscribe to the Sullivan Principles. Today, a growing number of individuals
and institutions are applying similar strategies to a broad range of problems.
Although there are many strategies available to the socially responsive
investor, including proxy activism, below-market loans to community projects,
and venture capital, the SRI strategies used by the Portfolio generally fall
into two categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to avoid
holding securities of companies whose products or policies are seen as being at
odds with the social good. The most common exclusions historically have involved
tobacco companies and weapons manufacturers.
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LEADERSHIP INVESTING. A growing number of investors actively look for
companies with progressive programs that are exemplary or companies which make
it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have surprised
Adam Smith, who was, first and foremost, a moral philosopher. THE WEALTH OF
NATIONS is firmly rooted in the Enlightenment conviction that the purpose of
capital is the social good and the related belief that idle capital is both
wasteful and unethical. But, what very likely would have surprised Smith is the
sheer complexity of the social issues we face today and the diversity of our
attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger Berman, LLC ("Neuberger Berman"), the Portfolio's sub-adviser,
maintains a database of information about the social impact of the companies it
follows. NB Management uses the database to evaluate social issues after it
deems a stock acceptable from a financial standpoint for acquisition by the
Portfolio. The aim of the database is to be as comprehensive as possible, given
that much of the information concerning corporate responsibility comes from
subjective sources. Information for the database is gathered by Neuberger Berman
in many categories and then analyzed by NB Management in the following six
categories of corporate responsibility:
WORKPLACE DIVERSITY AND EMPLOYMENT. NB Management looks for companies that
show leadership in areas such as employee training and promotion policies and
benefits, such as flextime, generous profit sharing, and parental leave. NB
Management looks for active programs to promote women and minorities and takes
into account their representation among the officers of an issuer and members of
its board of directors. As a basis for exclusion, NB Management looks for Equal
Employment Opportunity Act infractions and Occupational Safety and Health Act
violations; examines each case in terms of severity, frequency, and time elapsed
since the incident; and considers actions taken by the company since the
violation. NB Management also monitors companies' progress and attitudes toward
these issues.
ENVIRONMENT. A company's impact on the environment depends largely on the
industry. Therefore, NB Management examines a company's environmental record
vis-a-vis those of its peers in the industry. All companies operating in an
industry with inherently high environmental risks are likely to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies, NB Management examines their problems in
terms of severity, frequency, and elapsed time. NB Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental policies, procedures, and practices. NB Management defines an
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environmental leadership company as one that puts into place strong affirmative
programs to minimize emissions, promote safety, reduce waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products. NB Management looks for the commitment and
active involvement of senior management in all these areas. Several major
manufacturers which still produce substantial amounts of pollution are among the
leaders in developing outstanding waste source reduction and remediation
programs.
PRODUCT. NB Management considers company announcements, press reports, and
public interest publications relating to the health, safety, quality, labeling,
advertising, and promotion of both consumer and industrial products. NB
Management takes note of companies with a strong commitment to quality and with
marketing practices which are ethical and consumer-friendly. NB Management pays
particular attention to companies whose products and services promote
progressive solutions to social problems.
PUBLIC HEALTH. NB Management measures the participation of companies in
such industries and markets as alcohol, tobacco, gambling and nuclear power. NB
Management also considers the impact of products and marketing activities
related to those products on nutritional and other health concerns, both
domestically and in foreign markets.
WEAPONS. NB Management keeps track of domestic military sales and,
whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. NB Management gathers information about a company's
participation in community affairs, its policies with respect to charitable
contributions, and its support of education and the arts. NB Management looks
for companies with a focus, dealing with issues not just by making financial
contributions, but also by asking the questions: What can we do to help? What do
we have to offer? Volunteerism, high-school mentoring programs, scholarships and
grants, and in-kind donations to specific groups are just a few ways that
companies have responded to these questions.
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by NB Management from a financial standpoint
are analyzed using Neuberger Berman's database. The companies are then evaluated
by the portfolio manager to determine if the companies' policies, practices,
products, and services withstand scrutiny in the following major areas of
concern: the environment and workplace diversity and employment. Companies are
then further evaluated to determine their track record in issues and areas of
concern such as public health, weapons, product, and corporate citizenship.
The issues and areas of concern that are tracked lend themselves to
objective analysis in varying degrees. Few, however, can be resolved entirely on
the basis of scientifically demonstrable facts. Moreover, a substantial amount
of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend on Neuberger Berman's ability to tap a wide variety of sources
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and on the experience and judgment of the people at NB Management who interpret
the information.
In applying the information in the database to stock selection for the
Portfolio, NB Management considers several factors. NB Management examines the
severity and frequency of various infractions, as well as the time elapsed since
their occurrence. NB Management also takes into account any remedial action
which has been taken by the company relating to these infractions. NB Management
notes any quality innovations made by the company in its effort to create
positive change and looks at the company's overall approach to social issues.
* * * * *
The Portfolio invests in a wide array of stocks, and no single stock makes
up more than a small fraction of the Portfolio's total assets. Of course, the
Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others. It may not
buy all of the types of securities or use all of the investment techniques that
are described.
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 pursuant to guidelines
established by the trustees of the Manager's Trusts, determines they are liquid.
Generally, foreign securities freely tradable in their principal market are not
considered restricted or illiquid. Illiquid securities may be difficult for a
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 15% 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
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enter into a repurchase agreement with a maturity of more than seven days if, as
a result, more than 15% 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 a
type 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 securities to unaffiliated
entities, including 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.
POLICIES AND LIMITATIONS. The Portfolio may lend portfolio securities with
a value not exceeding 33-1/3% of its total assets to banks, brokerage firms, or
other institutional investors judged creditworthy by NB Management. 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. Securities lending by the
Portfolio is not subject to the Social Policy.
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
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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 15% 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. 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.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
Borrowings for purposes of the portfolio's investment policies and limitations
concerning borrowings. 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.
FOREIGN SECURITIES. The Portfolio may invest in U.S. dollar-denominated
securities of foreign issuers (including banks, governments, and
quasi-governmental organizations) and foreign branches of U.S. banks, including
negotiable certificates of deposit ("CDs"), bankers' acceptances and commercial
paper. 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, or 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.
The Portfolio also may invest in equity, debt, or other income-producing
securities that are denominated in or indexed to foreign currencies, including
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(1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits,
and bankers' acceptances issued by foreign banks, (3) obligations of other
corporations, and (4) obligations of foreign governments and their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding paragraph, and the additional risks of (1) adverse changes in foreign
exchange rates, and (2) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the United
States). Additionally, dividends and interest payable on foreign securities may
be subject to foreign taxes, including taxes withheld from those payments.
Commissions on foreign securities exchanges are often at fixed rates and are
generally higher than negotiated commissions on U.S. exchanges, although the
Portfolio endeavors to achieve the most favorable net results on portfolio
transactions.
Foreign securities often trade with less frequency and in less volume than
domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement procedures.
In certain markets, there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Portfolio are uninvested and no
return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, the Portfolio may not
purchase any such security if, as a result, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio is not restricted in
the amount it may invest in securities denominated in any one foreign currency.
Investments in the securities of foreign issuers are subject to the Portfolio's
quality standards. The Portfolio may invest only in securities of issuers in
countries whose governments are considered stable by NB Management.
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FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES, FORWARD
CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "HEDGING INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and sell
interest rate futures contracts, stock and bond index futures contracts, and
foreign currency futures contracts and may purchase and sell options thereon in
an attempt to hedge against changes in the prices of securities or, in the case
of foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits the Portfolio
to enhance portfolio liquidity and maintain a defensive position without having
to sell portfolio securities. The Portfolio views investment in (i) interest
rate and securities index futures and options thereon as a maturity management
device and/or a device to reduce risk or preserve total return in an adverse
environment for the hedged securities, and (ii) foreign currency futures and
options thereon as a means of establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies that
are held or intended to be acquired by the Portfolio.
A "sale" of a futures contract (or a "short" futures position) entails the
assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the Commodity
Futures Trading Commission ("CFTC"); futures transactions must be executed
through a futures commission merchant that is a member of the relevant contract
market. The exchange's affiliated clearing organization guarantees performance
of the contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual delivery
or acquisition of the underlying securities or currency, in most cases the
contractual obligation is extinguished by being offset before the expiration of
the contract. A futures position is offset by buying (to offset an earlier sale)
or selling (to offset an earlier purchase) an identical futures contract calling
for delivery in the same month. This may result in a profit or a loss.
"Margin" with respect to a futures contract is the amount of assets that
must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
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price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its
daily net asset value ("NAV"), the Portfolio marks to market the value of its
open futures positions. The Portfolio also must make margin deposits with
respect to options on futures that it has written (but not with respect to
options on futures that it has purchased). If the futures commission merchant
holding the margin deposit goes bankrupt, the Portfolio could suffer a delay in
recovering its funds and could ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in the contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume a short futures position (if the
option is a call) or a long futures position (if the option is a put). Upon
exercise of the option, the accumulated cash balance in the writer's futures
margin account is delivered to the holder of the option. That balance represents
the amount by which the market price of the futures contract at exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option. Options on futures have characteristics and risks
similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if NB Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage; as a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, or
gain, to the investor. Losses that may arise from certain futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the price
of a futures contract or option thereon during a single trading day; once the
daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
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a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell futures
contracts and may purchase and sell options thereon in an attempt to hedge
against changes in the prices of securities or, in the case of foreign currency
futures and options thereon, to hedge against prevailing currency exchange
rates. The Portfolio does not engage in transactions in futures and options on
futures for speculation. The use of futures and options on futures by the
Portfolio is not subject to the Social Policy.
CALL OPTIONS ON SECURITIES (ALL PORTFOLIOS). The Portfolio may write
covered call options and may purchase call options on securities. The purpose of
writing call options is to hedge (I.E., to reduce, at least in part, the effect
of price fluctuations of securities held by the Portfolio on the Portfolio's and
the Fund's NAVs) or to earn premium income. Portfolio securities on which call
options may be written and purchased by the Portfolio are purchased solely on
the basis of investment considerations consistent with the Portfolio's
investment objective.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk but is capable of enhancing
the Portfolios' total return. When writing a covered call option, the Portfolio,
in return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but conversely
retains the risk of loss should the price of the security decline.
If a call option that the Portfolio has written expires unexercised, the
Portfolio will realize a gain in the amount of the premium; however, that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
When the Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date.
POLICIES AND LIMITATIONS. The Portfolio may write covered call options and
may purchase call options in related closing transactions. The Portfolio writes
only "covered" call options on securities it owns (in contrast to the writing of
"naked" or uncovered call options, which the Portfolios will not do).
The Portfolio would purchase a call option to offset a previously written
call option. The Portfolio also may purchase a call option to protect against an
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increase in the price of securities it intends to purchase. The use of call
options on securities by the Portfolio is not subject to the Social Policy.
PUT OPTIONS ON SECURITIES. The Portfolio may write and purchase put
options on securities. The Portfolio will receive a premium for writing a put
option, which obligates the Portfolio to acquire a security at a certain price
at any time until a certain date if the purchaser decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
When the Portfolio purchases a put option, it pays a premium to the writer
for the right to sell a security to the writer for a specified amount at any
time until a certain date. The Portfolio might purchase a put option in order to
protect itself against a decline in the market value of a security it owns.
Portfolio securities on which put options may be written and purchased by
the Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective. When writing a put option,
the Portfolio, in return for the premium, takes the risk that it must purchase
the underlying security at a price that may be higher than the current market
price of the security. If a put option that the Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium.
POLICIES AND LIMITATIONS. The Portfolio generally writes and purchases put
options on securities for hedging purposes (I.E., to reduce, at least in part,
the effect of price fluctuations of securities held by the Portfolio on the
Portfolio's and the Fund's NAVs). The use of put options on securities by the
Portfolio is not subject to the Social Policy.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
obligation under any option written by the Portfolio terminates upon expiration
of the option or, at an earlier time, when the Portfolio offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by the Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
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transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. NB Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. From time to time, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned to
it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets.
POLICIES AND LIMITATIONS. The Portfolio may use American-style options.
The assets used as cover (or held in a segregated account) for OTC options
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written by the Portfolio will be considered illiquid unless the OTC options are
sold to qualified dealers who agree that the Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth in
the option agreement. The cover for an OTC call option written subject to this
procedure will be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
The use of put and call options by the Portfolio is not subject to the Social
Policy.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into contracts for
the purchase or sale of a specific currency at a future date (usually less than
one year from the date of the contract) at a fixed price ("forward contracts").
The Portfolio also may engage in foreign currency exchange transactions on a
spot (I.E., cash) basis at the spot rate prevailing in the foreign currency
exchange market.
The Portfolio enters into forward contracts in an attempt to hedge against
changes in prevailing currency exchange rates. The Portfolio does not engage in
transactions in forward contracts for speculation; it views investments in
forward contracts as a means of establishing more definitely the effective
return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the Portfolio
may either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract. If the Portfolio
chooses to make delivery of the foreign currency, it may be required to obtain
such currency through the sale of portfolio securities denominated in such
currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
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in which the securities being hedged are denominated and which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate risks
perfectly, and, if NB Management is incorrect in its judgment of future exchange
rate relationships, the Portfolio could be in a less advantageous position than
if such a hedge had not been established. If the Portfolio uses proxy-hedging,
it may experience losses on both the currency in which it has invested and the
currency used for hedging if the two currencies do not vary with the expected
degree of correlation. Using forward contracts to protect the value of the
Portfolio's securities against a decline in the value of a currency does not
eliminate fluctuations in the prices of the underlying securities. Because
forward contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid. The Portfolio may experience delays in the settlement
of its foreign currency transactions.
POLICIES AND LIMITATIONS. The Portfolio may enter into forward contracts
for the purpose of hedging and not for speculation. The use of forward contracts
by the Portfolio is not subject to the Social Policy.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies. Currency options have
characteristics and risks similar to those of securities options, as discussed
herein. Certain options on foreign currencies are traded on the OTC market and
involve liquidity and credit risks that may not be present in the case of
exchange-traded currency options.
POLICIES AND LIMITATIONS. The Portfolio would use options on foreign
currencies to protect against declines in the U.S. dollar value of portfolio
securities or increases in the U.S. dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends, interest, or other payments
on those securities. The use of options on currencies by the Portfolio is not
subject to the Social Policy.
REGULATORY LIMITATIONS ON USING HEDGING INSTRUMENTS. To the extent the
Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.
COVER FOR HEDGING INSTRUMENTS. Securities held in a segregated account
cannot be sold while the futures, options, or forward strategy covered by those
securities is outstanding, unless they are replaced with other suitable assets.
As a result, segregation of a large percentage of the Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
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POLICIES AND LIMITATIONS. The Portfolio will comply with SEC Guidelines
regarding "cover" for Hedging Instruments and, if the Guidelines so require, set
aside in a segregated account with its custodian the prescribed amount of cash
or appropriate liquid securities.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using Hedging
Instruments are (1) imperfect correlation or no correlation between changes in
market value of the securities or currencies held or to be acquired by the
Portfolio and the prices of Hedging Instruments; (2) possible lack of a liquid
secondary market for Hedging Instruments and the resulting inability to close
out Hedging Instruments when desired; (3) the fact that the skills needed to use
Hedging Instruments are different from those needed to select the Portfolio's
securities; (4) the fact that, although use of these instruments for hedging
purposes can reduce the risk of loss, they also can reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
hedged investments; and (5) the possible inability of the Portfolio to purchase
or sell a portfolio security at a time that would otherwise be favorable for it
to do so, or the possible need for the Portfolio to sell a portfolio security at
a disadvantageous time, due to its need to maintain cover or to segregate
securities in connection with its use of Hedging Instruments. There can be no
assurance that the Portfolio's use of Hedging Instruments will be successful.
The Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information." Hedging Instruments may not
be available with respect to some currencies, especially those of so-called
emerging market countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of the Portfolio's underlying securities or
currency. NB Management intends to reduce the risk that the Portfolio will be
unable to close out Hedging Instruments by entering into such transactions only
if NB Management believes there will be an active and liquid secondary market.
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's investment
program is on common stocks and other equity securities, it may also invest in
money market instruments, U.S. Government and Agency Securities, and other fixed
income securities. The Portfolio may invest in investment grade corporate bonds
and debentures.
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, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and the
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may by 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
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securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investor Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating
organizations ("NRSRO") or, if unrated by any NRSRO, deemed by NB Management
comparable to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest rating category (Baa) or
Comparable Unrated Securities may be deemed to have speculative characteristics.
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, coupon, and rating may have
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
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"). The value of the fixed income securities in which the
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of the Portfolio's fixed income
investments is likely to rise. Foreign debt securities are subject to risks
similar to those of other foreign securities.
Lower-rated securities are more likely to react to developments affecting
market and credit risk than are more highly rated securities, which react
primarily to movements in the general level of interest rates. Debt securities
in the lowest rating categories may involve a substantial risk of default or may
be in default. Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuer of such securities to make principal and interest
payments than is the case for higher-grade debt securities. An economic downturn
affecting the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-rated
securities. Pricing of thinly traded securities requires greater judgment than
pricing of securities for which market transactions are regularly reported.
POLICIES AND LIMITATIONS. The Portfolio normally may invest up to 35% of
its total assets in debt securities. Subsequent to its purchase by the
Portfolio, an issue of debt securities may cease to be rated or its rating may
be reduced, so that the securities would no longer be eligible for purchase by
the Portfolio. In such a case, the Portfolio will engage in an orderly
disposition of the downgraded securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt security issued by
a corporation or bank, 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.
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While restricted commercial paper 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. The Portfolio may invest in commercial paper
only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality.
ZERO COUPON SECURITIES. The Portfolio may invest in zero coupon
securities, which are debt obligations that do not entitle the holder to any
periodic payment of interest prior to maturity or that specify a future date
when the securities begin to pay current interest. Zero coupon securities are
issued and traded at a discount from their face amount or par value. This
discount varies depending on prevailing interest rates, the time remaining until
cash payments begin, the liquidity of the security, and the perceived credit
quality of the issuer.
The discount on zero coupon securities ("original issue discount") must be
taken into account ratably by the Portfolio prior to the receipt of any actual
payments. Because the Fund must distribute substantially all of its net income
(including its share of the Portfolio's accrued original issue discount) to
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.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities. A convertible security
entitles the holder to receive the interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks of
the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier
non-convertible securities but rank senior to common stock in a corporation's
capital structure. The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
quality that do not have a conversion privilege and (2) its worth if converted
into the underlying common stock.
The price of a convertible security often reflects variations in the price
of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
22
<PAGE>
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objectives.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 20% of its net
assets in convertible securities. The Portfolio does not intend to purchase any
convertible securities that are not investment grade. Convertible debt
securities are subject to the Portfolio's investment policies and limitations
concerning fixed income securities.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and are not
intended to indicate future performance. The share price and total return of the
Fund will vary, and an investment in the Fund, when redeemed, may be worth more
or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An average annual
compounded rate of return ("T") may be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
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., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
23
<PAGE>
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 stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Russell Midcap Growth Index, Dow Jones Industrial Average
("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index, Montgomery
Securities Growth Stock Index, Value Line Index, U.S. Department of Labor
Consumer Price Index ("Consumer Price Index"), College Board Annual Survey
of Colleges, Kanon Bloch's Family Performance Index, the Barra Growth
Index, the Barra Value Index, and various other domestic, international,
and global indices. The S&P 500 Index is a broad index of common stock
prices, while the DJIA represents a narrower segment of industrial
companies. The S&P 600 Index includes stocks that range in market value
from $39 million to $2.3 billion, with an average of $451 million. The S&P
400 Index measures mid-sized companies that have an average market
capitalization of $1.6 billion. 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 may also be compared to various socially responsive
indices. These include The Domini Social Index and the indices developed by the
quantitative department of Prudential Securities, such as that department's
Large and Mid-Cap portfolio indices for various breakdowns ("Sin" Stock Free,
Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Fund's performance, its total return and comparisons
may be used in advertisements and in information furnished to current and
prospective shareholders (collectively, "Advertisements"). 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.
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. This
information may include the Portfolio's portfolio diversification by asset type
or by the social characteristics of companies owned. 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.
NB Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
24
<PAGE>
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find the Fund to be an attractive investment vehicle
also include parents saving to meet college costs for their children. For
instance, the cost of a college education is rapidly approaching the cost of the
average family home. Estimates of total four-year costs (including tuition, room
and board, books and other expenses) for students starting college in various
years may be included in Advertisements, based on the College Board Annual
Survey of Colleges.
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 regarding the effects of investing at market highs and/or
lows, and investing early versus late for retirement plans also may be included
in Advertisements, if appropriate.
CERTAIN RISK CONSIDERATIONS
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.
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.
<TABLE>
<CAPTION>
Positions Held with the
Name, Age, And Address(1) Trusts Principal Occupation(s)(2)
- ------------------------- ------ --------------------------
<S> <C> <C>
Faith Colish (63) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
25
<PAGE>
Positions Held with the
Name, Age, And Address(1) Trusts Principal Occupation(s)(2)
- ------------------------- ------ --------------------------
Stanley Egener* (64) Chairman of the Board, Principal of Neuberger Berman;
Chief Executive Officer, President and Director of NB
and Trustee of each Trust Management; Chairman of the Board,
Chief Executive Officer and Trustee of
nine other mutual funds for which NB
Management acts as investment
manager or administrator.
Howard A. Mileaf (61) Trustee of each Trust Vice President and Special Counsel to
WHX Corporation WHX Corporation (holding company)
110 East 59th Street since 1992; Director of Kevlin
30th Floor Corporation (manufacturer of
New York, NY 10022 microwave and other products).
Edward I. O'Brien* (70) Trustee of each Trust Until 1993, President of the Securities
12 Woods Lane Industry Association ("SIA") (securities
Scarsdale, NY 10583 industry's representative in government
relations and regulatory matters at the
federal and state levels); until
November 1993, employee of the SIA;
Director of Legg Mason, Inc.
John T. Patterson, Jr. (70) Trustee of each Trust Retired. Formerly, President of
7082 Siena Court SOBRO (South Bronx Overall
Boca Raton, FL 33433 Economic Development Corporation).
John P. Rosenthal (66) Trustee of each Trust Senior Vice President of Burnham
Burnahm Securities Securities Inc. (a registered broker-
Inc. dealer) since 1991; Director, Cancer
Burnham Asset Management Treatment Holdings, Inc.
Corp.
1325 Avenue of the
Americas
17th Floor
New York, NY 10019
26
<PAGE>
Positions Held with the
Name, Age, And Address(1) Trusts Principal Occupation(s)(2)
- ------------------------- ------ --------------------------
Cornelius T. Ryan (67) Trustee of each Trust General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture
315 Post Road West capital partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation; Director
of Capital Cash Management Trust
(money market fund) and Prime Cash
Fund.
Gustave H. Shubert (69) Trustee of each Trust Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard Advisory Trustee of Rand (a non-profit
Pacific Palisades, CA 90272 public interest research institution)
since 1989; Honorary Member of the
Board of Overseers of the Institute for
Civil Justice, the Policy Advisory
Committee of the Clinical Scholars
Program at the University of California,
the American Association for the
Advancement of Science, the Counsel
on Foreign Relations, and the Institute
for Strategic Studies (London); advisor
to the Program Evaluation and
Methodology Division of the U.S.
General Accounting Office; formerly
Senior Vice President and Trustee of
Rand.
Lawrence Zicklin* (62) President and Trustee of Principal of Neuberger Berman;
each Trust Director of NB Management; President
and/or Trustee of six other mutual
funds for which NB Management acts
as investment manager or
administrator.
Daniel J. Sullivan (59) Vice President of each Senior Vice President of NB
Trust Management since 1992; Vice
President of nine other mutual funds for
which NB Management acts
as investment manager or administrator.
27
<PAGE>
Positions Held with the
Name, Age, And Address(1) Trusts Principal Occupation(s)(2)
- ------------------------- ------ --------------------------
Michael J. Weiner (51) Vice President and Senior Vice President of NB Manage-
Principal Financial ment since 1992; Treasurer of NB
Officer of each Trust Management from 1992 to 1996; Vice
President and Principal Financial
Officer of nine other mutual funds for
which NB Management acts as invest-
ment manager oradministrator.
Claudia A. Brandon (42) Secretary of each Trust Vice President of NB Management;
Secretary of nine other mutual funds for
which NB Management acts as
investment manager or administrator.
Richard Russell (52) Treasurer and Principal Vice President of NB Management
Accounting Officer of since 1993; prior thereto, Assistant
each Trust Vice President of NB Management;
Treasurer and Principal Accounting
Officer of nine other mutual funds for
which NB Management acts as invest-
ment manager or administrator.
Stacy Cooper-Shugrue (35) Assistant Secretary of Assistant Vice President of NB
each Trust Management since 1993; prior thereto,
employee of NB Management;
Assistant Secretary of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.
C. Carl Randolph (61) Assistant Secretary of Principal of Neuberger Berman since
each Trust 1992; Assistant Secretary of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.
28
<PAGE>
Positions Held with the
Name, Age, And Address(1) Trusts Principal Occupation(s)(2)
- ------------------------- ------ --------------------------
Barbara DiGiorgio (40) Assistant Treasurer of Assistant Vice President of NB
each Trust Management since 1993; prior thereto,
employee of NB Management;
Assistant Treasurer since 1996 of nine
other mutual funds for which NB
Management acts as investment
manager or administrator.
Celeste Wischerth (37) Assistant Treasurer of Assistant Vice President of NB
each Trust Management since 1994; prior thereto,
employee of NB Management;
Assistant Treasurer since 1996 of nine
other mutual funds for which NB
Management acts as investment
manager or administrator.
</TABLE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of NB Management and
principals of Neuberger Berman. Mr. O'Brien is an interested person by virtue of
the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of
which, from time to time, serves as a broker or dealer to the Portfolio and
other funds for which NB Management serves as investment manager.
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, 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.
29
<PAGE>
The following table sets forth information concerning the compensation of
the trustees of the Trust. None of the Neuberger Berman Funds(R) has any
retirement plan for its trustees.
Total Compensation
Aggregate from Investment Companies in
Name and Position with Compensation the Neuberger Berman Fund
The Trust From The Trust Complex Paid To Trustees
- --------- -------------- ------------------------
Faith Colish $ 0 $ ______
Trustee (5 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief (9 other investment
Executive Officer, and Trustee companies)
Howard A. Mileaf $ 0 $ ______
Trustee (4 other investment
companies)
Edward I. O'Brien $ 0 $ ______
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 0 $ ______
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 0 $ ______
Trustee (3 other investment
companies)
Gustave H. Shubert $ 0 $ ______
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
At December 1, 1998, the trustees and officers of the Trusts, as a group,
owned beneficially or of record no 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 investment manager to the Portfolio pursuant to a management agreement with
Managers Trust, dated as of August 2, 1993 ("Management Agreement").
30
<PAGE>
The Management Agreement was approved by the holders of the interests in
the Portfolio on March 9, 1994. The Portfolio was authorized to become subject
to the Management Agreement by vote of the Portfolio Trustees on October 20,
1993, and became subject to it on March 14, 1994.
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,
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
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
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 facilities, services, and personnel, as well as
accounting, recordkeeping, and other services to the Fund pursuant to an
administration agreement with the Trust, dated December __, 1998
("Administration Agreement"). For such administrative services, the Fund pays NB
Management a fee based on the Fund's average daily net assets, as described in
the Prospectus.
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.
From time to time, NB Management or the Fund may enter into arrangements
with registered broker-dealers or other third parties pursuant to which it pays
the broker-dealer or third party a per account fee or a fee based on a
percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.
31
<PAGE>
MANAGEMENT AND ADMINISTRATION FEES
For investment management services, the Portfolio pays NB Management a fee
at the annual rate of 0.55% of the first $250 million of the Portfolio's average
daily net assets, 0.525% of the next $250 million, 0.50% of the next $250
million, 0.475% of the next $250 million, 0.45% of the next $500 million, and
0.425% of average daily net assets in excess of $1.5 billion.
NB Management provides administrative services to the Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services. For such administrative services, the Fund
pays NB Management a fee at the annual rate of 0.40% of the Fund's average daily
net assets. With the Fund's consent NB Management may subcontract some of its
responsibilities to the Fund under the Administration Agreement.
NB Management has voluntarily undertaken to reimburse the Fund for its
total operating expenses (other than interest, taxes, brokerage and
extraordinary expenses) which exceed, in the aggregate, 1.50% per annum of the
Fund's average daily net assets.
The Management Agreement continues until August 2, 1999 and is renewable
thereafter from year to year, 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 majority vote of the outstanding interests in the Portfolio. The
Administration Agreement continues until December __, 1999. 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 August 2, 1993 ("Sub-Advisory Agreement").
The Sub-Advisory Agreement was approved by the holders of the interests in
the Portfolio on March 9, 1994. The Portfolio was authorized to become subject
to the Sub-Advisory Agreement by vote of the Portfolio Trustees on October 20,
1993, and became subject to it on March 14, 1994.
32
<PAGE>
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 principals and 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 sub-adviser for all of the other mutual funds managed by
NB Management.
The Sub-Advisory Agreement continues until August 2,1999 and is renewable
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'
written notice. 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.
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 September 30, 1998, the investment companies managed by NB
Management had aggregate net assets of approximately $ billion. NB Management
currently serves as investment manager of the following investment companies:
Approximate
Net Assets at
Name September 30, 1998
- ---- ------------------
Neuberger Berman Cash Reserves Portfolio.........................$____________
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio......................$____________
(investment portfolio for Neuberger Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio.......................$____________
(investment portfolio for Neuberger Berman High Yield Bond Fund)
33
<PAGE>
Approximate
Net Assets at
Name September 30, 1998
- ---- ------------------
Neuberger Berman Limited Maturity Bond Portfolio.................$____________
(investment portfolio for Neuberger Berman Limited Maturity
Bond Fund and Neuberger Berman Limited Maturity Bond Trust)
Neuberger Berman Municipal Securities Portfolio..................$____________
(investment portfolio for Neuberger Berman Municipal Securities Trust)
Neuberger Berman Municipal Money Portfolio.......................$____________
(investment portfolio for Neuberger Berman Municipal Money Fund)
Neuberger Berman Focus Portfolio.................................$____________
(investment portfolio for Neuberger Berman Focus Fund,
Neuberger Berman Focus Trust and Neuberger Berman Focus Assets)
Neuberger Berman Genesis Portfolio...............................$____________
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger
Berman
Genesis Trust and Neuberger Berman Genesis Assets)
Neuberger Berman Guardian Portfolio............................ $____________
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger
Berman Guardian Trust and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio.........................$____________
(investment portfolio for Neuberger Berman International Fund and
Neuberger
Berman International Trust)
Neuberger Berman Manhattan Portfolio.............................$____________
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
Berman Manhattan Trust and Neuberger Berman Manhattan Assets)
Neuberger Berman Millennium Portfolio............................$____________
(investment portfolio for Neuberger Berman Millennium Fund and Neuberger
Berman Millennium Trust)
Neuberger Berman Partners Portfolio..............................$____________
(investment portfolio for Neuberger Berman Partners Fund, Neuberger
Berman
Partners Trust and Neuberger Berman Partners Assets)
Neuberger Berman Socially Responsive.............................$____________
Portfolio (investment portfolio for Neuberger Berman Socially
Responsive Fund,
Neuberger Berman Socially Responsive Trust and Neuberger Berman
NYCDC Socially Responsive Trust)
Advisers Managers Trust..........................................$____________
(seven series)
34
<PAGE>
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 its advisory arrangements with NB Management outweighs any disadvantages
that may result from contemporaneous transactions.
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
The directors and officers of NB Management, all of whom have offices at
the same address as NB Management, are Richard A. Cantor, Chairman of the Board
and director; Stanley Egener, President and director; Theodore P. Giuliano, Vice
President and director; Michael M. Kassen, Vice President and director; Irwin
Lainoff, director; Lawrence Zicklin, director; Daniel J. Sullivan, Senior Vice
President; Peter E. Sundman, Senior Vice President; Michael J. Weiner, Senior
Vice President; Claudia A. Brandon, Vice President; Patrick T. Byrne, Vice
President; Brooke A. Cobb, Vice President; Robert W. D'Alelio, Vice President;
Roberta D'Orio, Vice President; Clara Del Villar, Vice President; Brian J.
Gaffney, Vice President; Joseph G. Galli, Vice President; Robert I. Gendelman,
Vice President; Josephine P. Mahaney, Vice President; Michael F. Malouf, Vice
President; Ellen Metzger, Vice President and Secretary; Paul Metzger, Vice
President; S. Basu Mullick, Vice President; Janet W. Prindle, Vice President;
Kevin L. Risen, Vice President; Richard Russell, Vice President; Jennifer K.
Silver, Vice President; Kent C. Simons, Vice President; Frederic B. Soule, Vice
President; Judith M. Vale, Vice President; Susan Walsh, Vice President; Allan R.
White, III, Vice President; Thomas Wolfe, Vice President; Andrea Trachtenberg,
Vice President of Marketing; Robert Conti, Treasurer; Ramesh Babu, Assistant
Vice President; Valerie Chang, Assistant Vice President; Stacy Cooper-Shugrue,
Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Michael
J. Hanratty, Assistant Vice President; Leslie Holliday-Soto, Assistant Vice
35
<PAGE>
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice President;
Celeste Wischerth, Assistant Vice President; and Loraine Olavarria, Assistant
Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen, Lainoff, Risen,
Simons, Sundman and Zicklin and Mmes. Prindle, Silver and Vale are principals of
Neuberger Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs. Russell,
Sullivan, and Weiner, and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger Berman, also is an officer of each Trust.
All of the outstanding voting stock in NB Management is owned by persons
who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
DISTRIBUTOR
NB Management serves as the distributor ("Distributor") in connection with
the offering of the Fund's shares on a no-load basis to the Plan. 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
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 to the Plan 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 and Services Agreement dated December __, 1998 ("Distribution
Agreement"). The Distribution Agreement was approved by the Fund Trustees,
including a majority of the Independent Fund Trustees and a majority of those
Independent Fund Trustees who have no direct or indirect financial interest in
the Distribution Agreement or the Trust's plan pursuant to Rule 12b-1 under the
1940 Act ("Plan") ("Rule 12b-1 Trustees"), on October 22, 1998. The Distribution
Agreement continues until August 2, 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 and a majority of
the Rule 12b-1 Trustees, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated by either
party and will terminate automatically on its assignment, in the same manner as
the Management Agreement.
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<PAGE>
RULE 12B-1 PLAN
The Fund Trustees adopted the Plan on October 22, 1998. The Plan provides
that the Fund will compensate NB Management for administrative and other
services provided to the Fund, its activities and expenses related to the sale
and distribution of Fund shares, and ongoing services to investors in the Fund.
Under the Plan, NB Management receives from the Fund a fee at the annual rate of
0.25% of the Fund's average daily net assts. NB Management may pay up to the
full amount of this fee to Institutions that distribute or make available Fund
shares and/or provide services to the Fund and its shareholders. The fee paid to
an Institution is based on the level of such services provided. Institutions may
use the payments for, among other purposes, compensating employees engaged in
sales and/or shareholder servicing. The amount of fees paid by the Fund during
any year may be more or less than the cost of distribution and other services
provided to the Fund. NASD rules limit the amount of annual distribution and
service fees that may be paid by a mutual fund and impose a ceiling on the
cumulative distribution fees paid. The Trust's plan complies with these rules.
The Plan provides that a written report identifying the amounts expended
by the Fund and the purposes for which such expenditures were made must be
provided to the Fund Trustees for their review at least quarterly.
Prior to approving the Plan, the Fund Trustees considered various factors
relating to the implementation of the Plan and determined that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The Fund Trustees noted that the purpose of the master/feeder fund structure is
to permit access to a variety of markets. To the extent the Plan allows the Fund
to penetrate markets to which it would not otherwise have access, the Plan may
result in additional sales of Fund shares; this, in turn, may enable the Fund to
achieve economies of scale that could reduce expenses. In addition, certain
on-going shareholder services may be provided more effectively by Institutions
with which shareholders have an existing relationship.
The Plan continues until October 22, 1999. The Plan is renewable
thereafter 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 and (2) by a vote of the majority of Rule 12b-1 Trustees, cast in
person at a meeting called for the purpose of voting on such approval. The Plan
may not be amended to increase materially the amount of fees paid by the Fund
thereunder unless such amendment is approved by a 1940 Act majority vote of the
outstanding shares of the Fund and by the Fund Trustees in the manner described
above. The Plan is terminable with respect to the Fund at any time by a vote of
a majority of the Rule 12b-1 Trustees or by a 1940 Act majority vote of the
outstanding shares of the Fund.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are brought or sold at a price that is the Fund's NAV
per share. The NAVs for the Fund and its 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 its Portfolio, multiplied by the
Portfolio's NAV, plus any other assets). The Fund's per share NAV is calculated
37
<PAGE>
by dividing its NAV by the number of Fund shares outstanding and rounding the
result to the nearest full cent. The Fund and its Portfolio calculate their NAVs
as of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on
each day the NYSE is open.
The Portfolio values securities (including options) listed on the NYSE,
the American Stock Exchange or other national securities exchange or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices on that day. The Portfolio values
all other securities and assets, including restricted securities, by a method
that the trustees of Equity Managers Trust believe accurately reflects fair
value.
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 EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Maintaining Your Account," an Institution may exchange shares of the Fund for
shares of one or more of the other Funds, if made available through the
Institution. The Fund may terminate or modify its exchange privilege in the
future.
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective Prospectus of the Fund into which the exchange is
to be made. An exchange is treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be realized.
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") 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 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, the Plan may withdraw its offers of redemption, or
it will receive payment at the NAV per share in effect at the close of business
on the first day the NYSE is open ("Business Day") after termination of the
suspension.
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<PAGE>
REDEMPTIONS IN KIND
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the Plan 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, the
Plan 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 the Plan substantially all of its share of any net
investment income (after deducting expenses incurred directly by the Fund), any
net realized capital gains, and any net realized gains from foreign currency
transactions earned or realized by the Portfolio. The Portfolio's net investment
income consists of all income accrued on portfolio assets less accrued expenses,
but does not include capital and foreign currency gains and losses. Net
investment income and 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 NAV per share as of the close of regular trading
on the NYSE on each Business Day (usually 4:00 p.m. Eastern time).
Dividends from net investment income and distributions of net realized
capital and foreign currency gains, if any, normally are paid once annually, in
December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the shareholder 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 Institution
notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the Code, the
Fund must distribute to the Plan for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("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
39
<PAGE>
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.
Certain funds that invest in portfolios managed by NB Management have
received rulings from the Internal Revenue Service ("Service") that each such
fund, as an investor in its corresponding portfolio, will be deemed to own a
proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described above to
qualify as a RIC. Although these rulings may not be relied on as precedent by
the Fund, NB Management believes that 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 ended 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, investments by the Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
Certain portfolios managed by NB Management, including the other
portfolios of Managers Trust, have received rulings from the Service to the
effect that, among other things, each such 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 on as precedent by
the Portfolio, NB Management believes the reasoning thereof and, 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, deductions, and
credits, 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)
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<PAGE>
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, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. 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 the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder (effective
for the taxable year beginning September 1, 1998) -- that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if the Portfolio
holds stock of a PFIC, the Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund ("QEF")," then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Fund to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock in any
PFIC may elect to include in ordinary income each taxable year the excess, if
any, of the fair market value of the stock over the adjusted basis therein as of
the end of that year. Pursuant to the election, a deduction (as an ordinary, not
capital, loss) also would be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
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<PAGE>
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election would be adjusted to reflect
the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolio's use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward contracts,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses the Portfolio
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from Hedging Instruments derived by the Portfolio with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts and listed
options thereon ("Section 1256 contracts") are required to be marked to market
(that is, treated as having been sold at market value) for federal income tax
purposes at the end of the Portfolio's taxable year. Sixty percent of any net
gain or loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, proposed technical
corrections legislation would clarify that the 20% rate applies.
The Portfolio may acquire zero coupon securities or other securities
issued with original issue discount ("OID"). As a holder of those securities,
the Portfolio (and, through it, the Fund) must take into income the OID that
accrues on the securities during the taxable year, even if it receives no
corresponding payment on the securities during the year. Because the Fund
annually must distribute substantially all of its investment company taxable
income (including its share of the Portfolio's accrued OID) 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
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
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PORTFOLIO TRANSACTIONS
Neuberger Berman acts as the Portfolio's principal broker in the purchase
and sale of its portfolio securities (other than certain securities traded on
the OTC market) and in connection with the purchase and sale of options on its
securities.
During the last three fiscal years, the Portfolio paid the following
brokerage commissions:
<TABLE>
<CAPTION>
Total Brokerage % of all
Fiscal Year Brokerage Commissions Paid Commission Trades % of Commissions
ending Commissions to Neuberger Done Through Paid to
August 31, Paid Berman Neuberger Berman Neuberger Berman
---------- ---- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
1996 $208,834 $124,879 ------% ------%
1997 305,640 232,238 80.59 75.98
1998 ------- -------- ------- -------
</TABLE>
_____% of the $______ paid to other brokers by the Portfolio during the
1998 fiscal year (representing commissions on transactions involving
approximately $__________) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1998, the
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act): State Street Bank and Trust Company,
N.A.; at that date, that Portfolio held none of the securities of its regular
brokers or dealers.
Prior to June 15, 1998, portfolio securities were, from time to time,
loaned by the Portfolio to Neuberger Berman in accordance with the terms and
conditions of an order issued by the SEC. The order exempts such transactions
from provisions of the 1940 Act that would otherwise prohibit such transactions,
subject to certain conditions.
The following information reflects interest income earned by the Portfolio
from the cash collateralization of securities loans during the fiscal years
ended 1998, 1997, and 1996. As reflected below, Neuberger Berman received a
portion of the interest income from the cash collateral.
Fiscal Year ending Interest Amount Paid to Neuberger
August 31, Earned Berman
---------- ------ ------
1996 $ 0 $ 0
1997 $80,484 $51,639
1998 ------- -------
A committee of Independent Portfolio Trustees from time to time reviews,
among other things, information relating to securities loans by the Portfolio.
In effecting securities transactions, the Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
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<PAGE>
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolio's
knowledge, no affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its securities transactions.
The use of Neuberger Berman as a broker for the Portfolio is subject to
the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. Managers Trust and NB Management have expressly
authorized Neuberger Berman to retain such compensation, and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to Neuberger Berman
in connection with a purchase or sale of securities on a securities exchange may
not exceed the usual and customary broker's commission. Accordingly, it is the
Portfolio's policy that the commissions paid to Neuberger Berman must, in NB
Management's judgment, be (1) at least as favorable as those charged by other
brokers having comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by Neuberger Berman on comparable
transactions for its most favored unaffiliated customers, except for accounts
for which Neuberger Berman acts as a clearing broker for another brokerage firm
and customers of Neuberger Berman considered by a majority of the Independent
Portfolio Trustees not to be comparable to the Portfolio. The Portfolio does not
deem it practicable and in its best interests to solicit competitive bids for
commissions on each transaction effected by Neuberger Berman. However,
consideration regularly is given to information concerning the prevailing level
of commissions charged by other brokers on comparable transactions during
comparable periods of time. 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.
A committee of Independent Portfolio Trustees from time to time reviews,
among other things, information relating to the commissions charged by Neuberger
Berman to the Portfolio and to its other customers and information concerning
the prevailing level of commissions charged by other brokers having comparable
execution capability. In addition, the procedures pursuant to which Neuberger
Berman effects brokerage transactions for the Portfolio must be reviewed and
approved no less often than annually by a majority of the Independent Portfolio
Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
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<PAGE>
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will continue to execute a portion of its
transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by those brokers.
A committee comprised of officers of NB Management and principals of
Neuberger Berman who are portfolio managers of the Portfolio and/or Other NB
Funds (collectively, "NB Funds") and some of Neuberger Berman's managed accounts
("Managed Accounts") evaluates semi-annually the nature and quality of the
brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may be higher
than the amount another firm might charge if NB Management determines in good
faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting
portfolio transactions on behalf of the Managed Accounts may be used for the
Portfolio's benefit.
Janet W. Prindle, a Vice President of NB Management and a principal of
Neuberger Berman is the person primarily responsible for making decisions as to
specific action to be taken with respect to the investment portfolio of the
Portfolio. She has full authority to take action with respect to portfolio
transactions and may or may not consult with other personnel of NB Management
prior to taking such action. If Ms. Prindle is unavailable to perform her
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<PAGE>
responsibilities, Robert Ladd and/or Ingrid Saukaitis, each of whom is an
Assistant Vice President of NB Management, will assume responsibility for the
Portfolio.
PORTFOLIO TURNOVER
The Portfolio's portfolio turnover rate is calculated by dividing (1) the
lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
accountants for the Fund and 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 ongoing series of Equity Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of September 22, 1998.
The Trust is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company, commonly known as a mutual
fund. Equity Trust has eight separate series. The Fund invests all of 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 the series
belong only to that series, and the liabilities of each series are borne solely
by that series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of 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
46
<PAGE>
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.
OTHER. Because Fund shares can be bought, owned and sold only through an
account with the Plan, a client of the Plan may be unable to purchase additional
shares and/or may be required to redeem shares (and possibly incur a tax
liability) if the client no longer has a relationship with the Plan or if the
Plan no longer has a contract with NB Management to perform services.
THE PORTFOLIO
The Portfolio is a separate operating series of Equity Managers Trust, a
New York common law trust organized as of December 1, 1992. The Manager Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Equity Managers Trust has seven separate Portfolios. The assets of the
Portfolio belong only to the Portfolio, and the liabilities of the Portfolio are
borne solely by the Portfolio and no other.
FUND INVESTMENTS 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. The Sister Funds that are series of
Neuberger Berman Equity Funds ("Equity Funds") and the other mutual funds that
are series of other trusts invest all of their respective net assets in
corresponding Portfolios of Equity Managers Trust. The shares of each series of
Equity Funds are available for purchase by members of the general public. The
Trusts do not sell their shares directly 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 (including the series of Equity Funds) 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 Equity Funds) might
charge a sales commission. Therefore, Fund shareholders may have different
returns than shareholders in another investment company that invests exclusively
in the Portfolio. Information regarding the Funds that invest 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 a
series of Equity Funds or 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 its corresponding Portfolio may
be affected by the actions of other large investors in the Portfolio, if any.
47
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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 its corresponding
Portfolio at any time, if the trustees of the respective Trust determine that it
is in the best interests of the Fund and its shareholders to do so. The Fund
might withdraw, for example, if there were other investors in the Portfolio with
power to, and who did by a vote of all investors (including the Fund), change
the investment objective, policies, or limitations of the Portfolio in a manner
not acceptable to the trustees of the respective 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 respective 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 their
securities and cash. State Street also serves as the Fund's transfer agent,
administering purchases, redemptions, and transfers of Fund shares and the
payment of dividends and other distributions to the shareholders. In addition,
State Street serves as transfer agent for the Portfolio.
48
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INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected PriceWaterhouseCoopers L.L.P., One
Post Office Square, Boston, MA 02109, as the independent accountants who will
audit their 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 their
legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1998, the Deferred Compensation Plan of the City of New
York and Related Agencies and Instrumentalities, 40 Rector Street, 3rd Floor,
New York, New York 10006, owned 100% of the outstanding shares of another fund
that owned ____% of the interests in the Portfolio.
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.
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.
FINANCIAL STATEMENTS
[To Be Filed]
49
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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.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
MOODY'S 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 issue.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as "high
grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are
considered to be as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
50
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unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
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 (+).
A-2 - This designation denotes satisfactory capacity for timely payment.
However, the relative degree of safety is not as high as for issues designated
A-1.
MOODY'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions), also known as
P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions), also known as
P-2, have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
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NEUBERGER BERMAN EQUITY SERIES
REGISTRATION STATEMENT ON FORM N-1A
PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Financial Statements: To be filed.
(b) Exhibits:
Exhibit
Number Description
------ -----------
(a) (1) Certificate of Trust. Filed Herewith.
(2) Certificate of Amendment to the Certificate
of Trust. Filed Herewith.
(3) Trust Instrument of Neuberger Berman Equity
Series. Filed Herewith.
(4) Schedule A - Current Series of Neuberger
Berman Equity Series. Filed Herewith.
(b) By-laws of Neuberger Berman Equity Series. Filed
Herewith.
(c) Declaration of Trust filed under (a)
and By-laws filed under (b).
(d) (1) (i) Management Agreement Between Equity
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated
by Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File
Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 16 to Registrant's Registration
Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-98-000681.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
16 to Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Incorporated and
Neuberger Berman, LLC with Respect to
Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582, EDGAR Accession No.
0000898432-000314.
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Exhibit
Number Description
------ -----------
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 16 to Registrant's Registration
Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-98-000681.
(iii) Substitution Agreement Among Neuberger
Berman Management Incorporated, Equity
Managers Trust, Neuberger Berman, L.P., and
Neuberger Berman, LLC. Incorporated by
Reference to Amendment No. 7 to
Registration Statement of Equity Managers
Trust, File No. 811-7910, EDGAR Accession
No. 0000898432-96-000557.
(e) (1) Distribution Agreement Between Neuberger Berman
Equity Series and Neuberger Berman Management
Incorporated. To be filed.
(2) Schedule A - Series of Neuberger Berman Equity
Series Currently Subject to the Distribution
Agreement. To be filed.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) (1) Custodian Contract Between Neuberger Berman
Equity Series and State Street Bank and Trust
Company. To be filed.
(2) Schedule of Compensation under the Custodian
Contract. To be filed.
(h) (1) (i) Transfer Agency and Service Agreement
Between Neuberger Berman Equity Series and
State Street Bank and Trust Company. To be
filed.
(ii) Schedule of Compensation
under the Transfer Agency and Service
Agreement. To be filed.
(2) (i) Administration Agreement Between Neuberger
Berman Equity Series and Neuberger Berman
Management Incorporated. To be filed.
(ii) Schedule A - Series of Neuberger Berman Equity
Series. Currently Subject to the
Administration Agreement. To be filed.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. To be filed.
(i) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP
on Securities Matters with Respect to Neuberger Berman
Equity Series. To be filed.
(j) Consent of Independent Auditors. None.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. To be filed.
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Exhibit
Number Description
------ -----------
(n) Financial Data Schedule. None.
(o) Plan Pursuant to Rule 18f-3. None.
Item 24. Persons Controlled by or under Common Control with Registrant
No person is controlled by or under common control with the
Registrant. (Registrant is organized in a master/feeder structure and
technically may be considered to control the master fund in which it invests,
Equity Managers Series.)
Item 25. Indemnification.
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger and Berman
Management Incorporated ("NB Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
referred to as the "Managers Trusts") provide that neither NB Management nor any
director, officer or employee of NB Management performing services for the
series of the Managers Trusts at the direction or request of NB Management in
connection with NB Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relate; provided, that nothing in the Agreements shall be construed
(i) to protect NB Management against any liability to the Managers Trusts or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
disregard of its obligations and duties under the Agreements, or (ii) to protect
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<PAGE>
any director, officer or employee of NB Management who is or was a trustee or
officer of the Managers Trusts against any liability to the Managers Trusts or
any series thereof or their interest holders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office with the Managers Trusts.
Section 1 of the Sub-Advisory Agreements between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Managers Trusts
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreements, Neuberger Berman will not be
subject to any liability for any act or omission or any loss suffered by any
series of the Managers Trusts or their interest holders in connection with the
matters to which the Agreements relate.
Section 11 of the Distribution Agreement between the Registrant and NB
Management provides that NB Management shall look only to the assets of a Series
for the Registrant's performance of the Agreement by the Registrant on behalf of
such Series, and neither the Trustees nor any of the Registrant's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Adviser and Sub-Adviser.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of NB Management and each principal of Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger Berman Advisers
Vice President, NB Management Trust; Secretary, Advisers
Management Managers Trust; Secretary, Neuberger Berman
Income Funds; Secretary, Neuberger Berman
Income Trust; Secretary, Neuberger Berman
Equity Funds; Secretary, Neuberger Berman
Equity Trust; Secretary, Income Managers
Trust; Secretary, Equity Managers Trust;
Secretary, Global Managers Trust; Secretary,
Neuberger Berman Equity Assets; Secretary,
Neuberger Berman Equity Series.
Valerie Chang,
Assistant Vice President, NB Senior Securities Analyst, TIAA/CREF.1
Management
_______________________
1 Until 1996.
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<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Brooke A. Cobb
Vice President, NB Chief Investment Officer, Bainco
Management International Investors.2 Senior Vice
President and Senior Portfolio Manager,
Putnam Investments.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger Berman Income
Funds; Assistant Secretary, Neuberger Berman
Income Trust; Assistant Secretary, Neuberger
Berman Equity Funds; Assistant Secretary,
Neuberger Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman Equity
Series.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, NB Management Investments.3
Barbara DiGiorgio, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman Equity
Series.
Stanley Egener Chairman of the Board and Trustee, Neuberger
President and Director, Berman Advisers Management Trust; Chairman
NB Management; Principal, of the Board and Trustee, Advisers Managers
Neuberger Berman Trust; Chairman of the Board and Trustee,
Neuberger Berman Income Funds; Chairman of
the Board and Trustee, Neuberger Berman
Income Trust; Chairman of the Board and
Trustee, Neuberger Berman Equity Funds;
Chairman of the Board and Trustee, Neuberger
Berman Equity Trust; Chairman of the Board
and Trustee, Income Managers Trust; Chairman
of the Board and Trustee, Equity Managers
Trust; Chairman of the Board and Trustee,
Global Managers Trust; Chairman of the Board
and Trustee, Neuberger Berman Equity Assets;
Chairman of the Board and Trustee, Neuberger
Berman Equity Series.
Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President and Income Funds; President and Trustee,
Director, NB Management; Neuberger Berman Income Trust; President and
Principal, Neuberger Berman Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger Berman
Principal, Neuberger Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
_______________________
2 Unitl 1997.
3 Until 1996.
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NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Assistant Secretary, Neuberger Berman Income
Funds; Assistant Secretary, Neuberger Berman
Income Trust; Assistant Secretary, Neuberger
Berman Equity Funds; Assistant Secretary,
Neuberger Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman Equity
Series.
Richard Russell Treasurer, Neuberger Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
NB Management Managers Trust; Treasurer, Neuberger Berman
Income Funds; Treasurer, Neuberger Berman
Income Trust; Treasurer, Neuberger Berman
Equity Funds; Treasurer, Neuberger Berman
Equity Trust; Treasurer, Income Managers
Trust; Treasurer, Equity Managers Trust;
Treasurer, Global Managers Trust; Treasurer,
Neuberger Berman Equity Assets; Treasurer,
Neuberger Berman Equity Series.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities4
NB Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, NB Investments.5
Management; Principal,
Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
Michael J. Weiner Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
___________________
4 Until 1997.
5 Until 1997.
-10-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Celeste Wischerth, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman Equity
Series.
Lawrence Zicklin President and Trustee, Neuberger Berman
Director, NB Management; Advisers Management Trust; President and
Principal, Neuberger Berman Trustee, Advisers Managers Trust; President
and Trustee, Neuberger Berman Equity Funds;
President and Trustee, Neuberger Berman
Equity Trust; President and Trustee, Equity
Managers Trust; President, Global Managers
Trust; President and Trustee, Neuberger
Berman Equity Assets; President and Trustee,
Neuberger Berman Equity Series.
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
Item 27. Principal Underwriters.
(a) NB Management, the principal underwriter distributing securities
of the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Funds
Neuberger Berman Equity Assets
Neuberger Berman Equity Series
Neuberger Berman Income Funds
Neuberger Berman Income Trust
NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- --------------------- ---------------------
Ramesh Babu Assistant Vice President None
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
-11-
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- --------------------- ---------------------
Richard A. Cantor Chairman of the Board None
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Vice President None
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
Leslie Holliday-Soto Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
S. Basu Mullick Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
-12-
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- --------------------- ---------------------
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Allan R. White, III Vice President None
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas G. Wolfe Vice President None
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Equity Managers Trust's Declaration of Trust and By-laws, minutes
of meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
-13-
<PAGE>
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Global Managers Trust are maintained at the offices of State
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
Item 29. Management Services
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 30. Undertakings
None.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER BERMAN EQUITY
SERIES has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City and State
of New York on the 22 day of October, 1998.
NEUBERGER BERMAN EQUITY SERIES
By: /s/ Lawrence Zicklin
------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Faith Colish
- -------------------------- Trustee October 22nd, 1998
Faith Colish
/s/ Stanley Egener
- -------------------------- Chairman of the Board and October 22nd, 1998
Stanley Egener Trustee (Chief Executive
Officer)
/s/ Howard A. Mileaf
- -------------------------- Trustee October 22nd, 1998
Howard A. Mileaf
/s/ Edward I. O'Brien
- -------------------------- Trustee October 22nd, 1998
Edward I. O'Brien
<PAGE>
Signature Title Date
--------- ----- ----
/s/ John T. Patterson, Jr.
- -------------------------- Trustee October 22nd, 1998
John T. Patterson, Jr.
/s/ John P. Rosenthal
- -------------------------- Trustee October 22nd, 1998
John P. Rosenthal
/s/ Cornelius T. Ryan
- -------------------------- Trustee October 22nd, 1998
Cornelius T. Ryan
/s/ Gustave H. Shubert
- -------------------------- Trustee October 22nd, 1998
Gustave H. Shubert
/s/ Lawrence Zicklin
- -------------------------- President and Trustee October 22nd, 1998
Lawrence Zicklin
/s/ Michael J. Weiner
- -------------------------- Vice President (Principal October 22nd, 1998
Michael J. Weiner Financial Officer)
/s/ Richard Russell
- -------------------------- Treasurer (Principal October 22nd, 1998
Richard Russell Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City and State of New York on the 22 day
of October, 1998.
EQUITY MANAGERS TRUST
By: /s/ Lawrence Zicklin
------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Faith Colish
- -------------------------- Trustee October 22nd, 1998
Faith Colish
/s/ Stanley Egener
- -------------------------- Chairman of the Board and October 22nd, 1998
Stanley Egener Trustee (Chief Executive
Officer)
/s/ Howard A. Mileaf
- -------------------------- Trustee October 22nd, 1998
Howard A. Mileaf
/s/ Edward I. O'Brien
- -------------------------- Trustee October 22nd, 1998
Edward I. O'Brien
<PAGE>
Signature Title Date
--------- ----- ----
/s/ John T. Patterson, Jr.
- -------------------------- Trustee October 22nd, 1998
John T. Patterson, Jr.
/s/ John P. Rosenthal
- -------------------------- Trustee October 22nd, 1998
John P. Rosenthal
/s/ Cornelius T. Ryan
- -------------------------- Trustee October 22nd, 1998
Cornelius T. Ryan
/s/ Gustave H. Shubert
- -------------------------- Trustee October 22nd, 1998
Gustave H. Shubert
/s/ Lawrence Zicklin
- -------------------------- President and Trustee October 22nd, 1998
Lawrence Zicklin
/s/ Michael J. Weiner
- -------------------------- Vice President (Principal October 22nd, 1998
Michael J. Weiner Financial Officer)
/s/ Richard Russell
- -------------------------- Treasurer (Principal October 22nd, 1998
Richard Russell Accounting Officer)
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
REGISTRATION STATEMENT ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- -----------
(a) (1) Certificate of Trust. Filed Herewith. ____
(2) Certificate of Amendment to the Certificate ____
of Trusdt. Filed Herewith.
(3) Trust Instrument of Neuberger Berman Equity ____
Trust. Filed Herewith.
(4) Schedule A - Current Series of Neuberger ____
Berman Equity Series. Filed Herewith.
(b) By-laws of Neuberger Berman Equity Series. Filed ____
Herewith.
(c) Declaration of Trust filed under (a) N.A.
and By-laws filed under (b)
(d) (1) (i) Management Agreement Between Equity N.A.
Managers Trust and Neuberger Berman
Management Incorporated. Incorporated
by Reference to Post-Effective
Amendment No. 70 to Registration
Statement of Neuberger Berman Equity
Funds, File Nos. 2-11357 and 811-582,
EDGAR Accession No. 0000898432-000314.
(ii) Schedule A - Series of Neuberger N.A.
Berman Equity Managers Trust Currently
Subject to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
(2) (i) Sub-Advisory Agreement Between N.A.
Neuberger Berman Management
Incorporated and Neuberger Berman, LLC
with Respect to Equity Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger
Berman Equity Funds, File Nos. 2-11357
and 811-582, EDGAR Accession No.
0000898432-000314.
(ii) Schedule A - Series of Neuberger N.A.
Berman Equity Managers Trust Currently
Subject to the Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-98-000681.
-15-
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- -----------
(3) (i) Management Agreement Between Global
Managers Trust and Neuberger Berman
Management, Incorporated by Reference N.A.
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated
by Reference to Post-Effective N.A.
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, EDGAR Accession
No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to N.A.
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(4) (i) Sub-Advisory Agreement Between
Neuberger Berman Management
Incorporated and Neuberger Berman,
LLC with Respect to Global Managers N.A.
Trust. Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the N.A.
Sub-Advisory Agreement, Incorporated
by Reference to Post-Effective
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, EDGAR Accession
No. 0000898432-95-000426.
(e) (1) Distribution Agreement Between Neuberger Berman N.A.
Equity Trust and Neuberger Berman Management.
Incorporated by Reference to Post-Effective
Amendment No. 13 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-97-000519.
(2) Schedule A - Series of Neuberger Berman Equity N.A.
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 16 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No. 0000898432-98-000681.
(f) Bonus, Profit Sharing or Pension Plans. None. N.A.
-16-
<PAGE>
(g) (1) Custodian Contract Between Neuberger Berman N.A.
Equity Trust and State Street Bank and Trust
Company. To be filed.
(2) Schedule of Compensation Under the Custodian N.A.
Contract. To be filed.
(h) (1) (i) Transfer Agency and Service Agreement N.A. Between
Neuberger Berman Equity Series and State Street Bank and Trust
Company. To be filed.
(v) Schedule of Compensation under the Transfer N.A.
Agency and Service Agreement. To be filed.
(2) (i) Administration Agreement Between Neuberger N.A.
Berman Equity Series and Neuberger Berman
Management Incorporated. To be filed.
(ii) Schedule A - Series of Neuberger Berman N.A.
Equity Series Currently Subject to the
Administration Agreement. To be filed.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Administration Agreement. To be filed.
(i) (a) Opinion and Consent of Kirkpatrick & N.A.
Lockhart LLP on Securities Matters with Respect
to Neuberger Berman Equity Series. To be filed.
(j) Consent of Independent Auditors. None. N.A.
(k) Financial Statements Omitted from Prospectus. N.A.
None.
(l) Letter of Investment Intent. None. N.A.
(m) Plan Pursuant to Rule 12b-1. To be filed. N.A.
(n) Financial Data Schedule. None. N.A.
(o) Plan Pursuant to Rule 18f-3. None. N.A.
-17-
Exhibit a(1)
CERTIFICATE OF TRUST
OF
NEUBERGER BERMAN ABC TRUST
This Certificate of Trust ("Certificate") is filed in accordance with the
provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12 Section
3801 et seq.) and sets forth the following:
1. The name of the trust is: Neuberger Berman ABC Trust
2. The business address of the registered office of the Trust and of the
registered agent of the Trust is:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805
3. This Certificate is effective upon filing.
4. The Trust is a Delaware business trust to be registered under the
Investment Company Act of 1940. Notice is hereby given that the Trust
shall consist of one or more series. The debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular series of the Trust shall be enforceable
against the assets of such series only, and not against the other
assets of the Trust generally or other series.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have
executed this Certificate this 21st day of September, 1998.
/s/ CLAUDIA A. BRANDON
----------------------------------
Claudia A. Brandon, as Trustee
and not individually
/s/ RICHARD RUSSELL
-----------------------------------
Richard Russell, as Trustee
and not individually
/s/ DANIEL J. SULLIVAN
-----------------------------------
Daniel J. Sullivan, as Trustee
and not individually
<PAGE>
Address: 605 Third Avenue
New York, NY 10158
STATE OF NEW YORK
CITY OF NEW YORK
Before me this 21st day of September 1998, personally appeared the
above-named Claudia A. Brandon, Richard Russell and Daniel J. Sullivan, known to
me to be the persons who executed the foregoing instrument and who acknowledged
that they executed the same.
/s/ LORAINE OLAVARRIA
---------------------
Notary Public
My commission expires 4/15/99
-------------
Exhibit a(2)
CERTIFICATE OF AMENDMENT
TO
THE CERTIFICATE OF TRUST OF
NEUBERGER BERMAN EQUITY SERIES
(FORMERLY NEUBERGER BERMAN ABC TRUST)
This Certificate of Amendment ("Amendment") is filed in accordance with the
provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12 Section
3801 et seq.) and sets forth the following:
1. The name of the trust: NEUBERGER BERMAN EQUITY SERIES
2. The name under which the trust was originally formed: Neuberger Berman ABC
Trust
3. The date of filing of the original certificate of trust: September 22,
1998
4. The business address of the registered office of the Trust and of the
registered agent of the Trust is:
Corporation Service Company
1013 Centre Road
Wilmington, Delaware 19805
New Castle County
5. This Amendment is effective upon filing.
6. The Trust is a Delaware business trust to be registered under the
Investment Company Act of 1940. Notice is hereby given that the Trust
shall consist of one or more series. The debts, liabilities, obligations
and expenses incurred, contracted for or otherwise existing with respect
to a particular series of the Trust shall be enforceable against the
assets of such series only, and not against the other assets of the Trust
generally or other series.
IN WITNESS WHEREOF, the undersigned, being a Trustee, has executed this
Amendment to the Certificate of Trust of Neuberger Berman Equity Series this 7th
day of October, 1998.
/s/ Stanley Egener
-------------------------
Stanley Egener, as Trustee and not individually
Address: 605 Third Avenue
New York, NY 10158
STATE OF NEW YORK
CITY OF NEW YORK
Before me this 7th day of October, 1998, personally appeared the
above-named Stanley Egener, known to me to be the persons who executed the
foregoing instrument and who acknowledged that they executed the same.
/s/Thomas Fuccillo
------------------------------
Notary Public
My commission expires 4/28/99
------------
NEUBERGER BERMAN EQUITY SERIES
TRUST INSTRUMENT
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
ARTICLE II THE TRUSTEES 2
Section 1. Management of the Trust 2
Section 2. Initial Trustees; Election and Number of Trustees 2
Section 3. Term of Office of Trustees 2
Section 4. Vacancies; Appointment of Trustees 3
Section 5. Temporary Vacancy or Absence 3
Section 6. Chairman 3
Section 7. Action by the Trustees 3
Section 8. Ownership of Trust Property 4
Section 9. Effect of Trustees Not Serving 4
Section 10. Trustees, etc. as Shareholders 4
ARTICLE III POWERS OF THE TRUSTEE 4
Section 1. Powers 4
Section 2. Certain Transactions 7
ARTICLE IV SERIES; CLASSES; SHARES 7
Section 1. Establishment of Series or Class 7
Section 2. Shares. 8
Section 3. Investment in the Trust 8
Section 4. Assets and Liabilities of Series 8
Section 5. Ownership and Transfer of Shares 9
Section 6. Status of Shares; Limitation of Shareholder Liability 10
ARTICLE V DISTRIBUTIONS AND REDEMPTIONS 10
Section 1. Distributions 10
Section 2. Redemptions 10
Section 3. Determination of Net Asset Value 11
Section 4. Suspension of Right of Redemption 11
ARTICLE VI SHAREHOLDERS' VOTING POWERS AND MEETINGS 11
Section 1. Voting Powers 11
Section 2. Meetings of Shareholders 12
Section 3. Quorum; Required Vote 12
Section 3. Quorum; Required Vote 12
ARTICLE VII CONTRACTS WITH SERVICE PROVIDERS 13
Section 1. Investment Adviser 13
Section 2. Principal Underwriter 13
Section 3. Transfer Agency, Shareholder Services, and
Administration Agreements 13
Section 4. Custodian 13
Section 5. Parties to Contracts with Service Providers 14
<PAGE>
ARTICLE VIII EXPENSES OF THE TRUST AND SERIES 14
ARTICLE IX LIMITATION OF LIABILITY AND INDEMNIFICATION 15
Section 1. Limitation of Liability 15
Section 2. Indemnification 15
Section 3. Indemnification of Shareholders 16
ARTICLE X MISCELLANEOUS 17
Section 1. Trust Not a Partnership 17
Section 2. Trustee Action; Expert Advice; No Bond or Surety 17
Section 3. Record Dates 17
Section 4. Termination of the Trust 17
Section 5. Reorganization 18
Section 6. Trust Instrument 19
Section 7. Applicable Law 19
Section 8. Amendments 19
Section 9. Fiscal Year 20
Section 10. Severability 20
ii
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
TRUST INSTRUMENT
This TRUST INSTRUMENT is made on September 22, 1998, by the Trustees,
to establish a business trust for the investment and reinvestment of funds
contributed to the Trust by investors. The Trustees declare that all money and
property contributed to the Trust shall be held and managed in trust pursuant to
this Trust Instrument. The name of the Trust created by this Trust Instrument is
Neuberger Berman Equity Series.
ARTICLE I
DEFINITIONS
Unless otherwise provided or required by the context:
(a) "By-laws" means the By-laws of the Trust adopted by the Trustees,
as amended from time to time;
(b) "Class" means the class of Shares of a Series established pursuant
to Article IV;
(c) "Commission," "Interested Person," and "Principal Underwriter" have
the meanings provided in the 1940 Act;
(d) "Covered Person" means a person so defined in Article IX, Section
2;
(e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code
entitled "Treatment of Delaware Business Trusts," as amended from time to time;
(f) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" as defined in the 1940 Act;
(g) "Net Asset Value" means the net asset value of each Series of the
Trust, determined as provided in Article V, Section 3;
(h) "Outstanding Shares" means Shares shown in the books of the Trust
or its transfer agent as then issued and outstanding, but does not include
Shares which have been repurchased or redeemed by the Trust and which are held
in the treasury of the Trust;
(i) "Series" means a series of Shares established pursuant to Article
IV;
<PAGE>
(j) "Shareholder" means a record owner of Outstanding Shares;
(k) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class is divided
from time to time (including whole Shares and fractions of Shares);
(l) "Trust" means Neuberger Berman Equity Series, established hereby,
and reference to the Trust, when applicable to one or more Series, refers to
that Series;
(m) "Trustees" means the persons who have signed this Trust Instrument,
so long as they shall continue in office in accordance with the terms hereof,
and all other persons who may from time to time be duly qualified and serving as
Trustees in accordance with Article II, in all cases in their capacities as
Trustees hereunder;
(n) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the Trust or any Series
or by the Trustees on behalf of the Trust or any Series;
(o) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
ARTICLE II
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the
Trust shall be managed by or under the direction of the Trustees, and they shall
have all powers necessary or desirable to carry out that responsibility. The
Trustees may execute all instruments and take all action they deem necessary or
desirable to promote the interests of the Trust. Any determination made by the
Trustees in good faith as to what is in the interests of the Trust shall be
conclusive.
Section 2. Initial Trustees; Election and Number of Trustees. The
initial Trustees shall be the persons initially signing this Trust Instrument.
The number of Trustees (other than the initial Trustees) shall be fixed from
time to time by a majority of the Trustees; provided, that there shall be at
least two (2) Trustees. The Shareholders shall elect the Trustees (other than
the initial Trustees) on such dates as the Trustees may fix from time to time.
Section 3. Term of Office of Trustees. Each Trustee shall hold office
for life or until his successor is elected or the Trust terminates; except that
(a) any Trustee may resign by delivering to the other Trustees or to any Trust
officer a written resignation effective upon such delivery or a later date
specified therein; (b) any Trustee may be removed with or without cause at any
time by a written instrument signed by at least two-thirds of the other
Trustees, specifying the effective date of removal; (c) any Trustee who requests
to be retired, or who has become physically or mentally incapacitated or is
2
<PAGE>
otherwise unable to serve, may be retired by a written instrument signed by a
majority of the other Trustees, specifying the effective date of retirement; and
(d) any Trustee may be removed at any meeting of the Shareholders by a vote of
at least two-thirds of the Outstanding Shares.
Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy shall
exist in the Board of Trustees, regardless of the reason for such vacancy, the
remaining Trustees shall appoint any person as they determine in their sole
discretion to fill that vacancy, consistent with the limitations under the 1940
Act. Such appointment shall be made by a written instrument signed by a majority
of the Trustees or by a resolution of the Trustees, duly adopted and recorded in
the records of the Trust, specifying the effective date of the appointment. The
Trustees may appoint a new Trustee as provided above in anticipation of a
vacancy expected to occur because of the retirement, resignation, or removal of
a Trustee, or an increase in number of Trustees, provided that such appointment
shall become effective only at or after the expected vacancy occurs. As soon as
any such Trustee has accepted his appointment in writing, the trust estate shall
vest in the new Trustee, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder. The power
of appointment is subject to Section 16(a) of the 1940 Act.
Section 5. Temporary Vacancy or Absence. Whenever a vacancy in the
Board of Trustees shall occur, until such vacancy is filled, or while any
Trustee is absent from his domicile (unless that Trustee has made arrangements
to be informed about, and to participate in, the affairs of the Trust during
such absence), or is physically or mentally incapacitated, the remaining
Trustees shall have all the powers hereunder and their certificate as to such
vacancy, absence, or incapacity shall be conclusive. To the extent permitted
under the 1940 Act, any Trustee may, by power of attorney, delegate his powers
as Trustee for a period not exceeding six (6) months at any one time to any
other Trustee or Trustees.
Section 6. Chairman. The Trustees shall appoint one of their number to
be Chairman of the Board of Trustees. The Chairman shall preside at all meetings
of the Trustees, shall be authorized to execute the policies established by the
Trustees and the administration of the Trust, and may be the chief executive,
financial and/or accounting officer of the Trust.
Section 7. Action by the Trustees. The Trustees shall act by majority
vote at a meeting duly called (including at a telephonic meeting, unless the
1940 Act requires that a particular action be taken only at a meeting of
Trustees in person) at which a quorum is present or by written consent of a
majority of Trustees (or such greater number as may be required by applicable
law) without a meeting. A majority of the Trustees shall constitute a quorum at
any meeting. Meetings of the Trustees may be called orally or in writing by the
Chairman of the Board of Trustees or by any two other Trustees. Notice of the
time, date and place of all Trustees meetings shall be given to each Trustee by
telephone, facsimile or other electronic mechanism sent to his home or business
address at least twenty-four hours in advance of the meeting or by written
notice mailed to his home or business address at least seventy-two hours in
advance of the meeting. Notice need not be given to any Trustee who attends the
meeting without objecting to the lack of notice or who signs a waiver of notice
either before or after the meeting. Subject to the requirements of the 1940 Act,
the Trustees by majority vote may delegate to any Trustee or Trustees authority
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to approve particular matters or take particular actions on behalf of the Trust.
Any written consent or waiver may be provided and delivered to the Trust by
facsimile or other similar electronic mechanism.
Section 8. Ownership of Trust Property. The Trust Property of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. All of the Trust Property and legal title thereto
shall at all times be considered as vested in the Trustees on behalf of the
Trust, except that the Trustees may cause legal title to any Trust Property to
be held by or in the name of the Trust, or in the name of any person as nominee.
No Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or of any Series or any right of partition or possession
thereof, but each Shareholder shall have, as provided in Article IV, a
proportionate undivided beneficial interest in the Trust or Series represented
by Shares.
Section 9. Effect of Trustees Not Serving. The death, resignation,
retirement, removal, incapacity, or inability or refusal to serve of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Trust Instrument.
Section 10. Trustees, etc. as Shareholders. Subject to any restrictions
in the By-laws, any Trustee, officer, agent or independent contractor of the
Trust may acquire, own and dispose of Shares to the same extent as any other
Shareholder; the Trustees may issue and sell Shares to and buy Shares from any
such person or any firm or company in which such person is interested, subject
only to any general limitations herein.
ARTICLE III
POWERS OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act as
principals, free of the control of the Shareholders. The Trustees shall have
full power and authority to take or refrain from taking any action and to
execute any contracts and instruments that they may consider necessary or
desirable in the management of the Trust. The Trustees shall not in any way be
bound or limited by current or future laws or customs applicable to trust
investments, but shall have full power and authority to make any investments
which they, in their sole discretion, deem proper to accomplish the purposes of
the Trust, and to dispose of the same. The Trustees may exercise all of their
powers without recourse to any court or other authority. Subject to any
applicable limitation herein or in the By-laws or resolutions of the Trust, the
Trustees shall have power and authority, without limitation:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by any
current or future law or custom concerning investments by trustees, and to sell,
exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or
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all of the Trust Property; to invest in obligations and securities of any kind,
and without regard to whether they may mature before the possible termination of
the Trust; and without limitation to invest all or any part of its cash and
other property in securities issued by a registered investment company or series
thereof, subject to the provisions of the 1940 Act;
(b) To operate as and carry on the business of a registered investment
company, and exercise all the powers necessary and proper to conduct such a
business;
(c) To adopt By-laws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent such right is not reserved to the Shareholders;
(d) To elect and remove such officers and appoint and terminate such
agents as they deem appropriate;
(e) To employ as custodian of any assets of the Trust, subject to any
provisions herein or in the By-laws, one or more banks, trust companies or
companies that are members of a national securities exchange, or other entities
permitted by the Commission to serve as such;
(f) To retain one or more transfer agents and Shareholder servicing
agents, or both;
(g) To provide for the distribution of Shares either through a
Principal Underwriter as provided herein or by the Trust itself, or both, and,
subject to applicable law, to adopt a distribution plan of any kind;
(h) To set record dates in the manner provided for herein or in the
By-laws;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, manager,
investment adviser, custodian or underwriter, in either general or specific
terms;
(j) To sell or exchange any or all of the assets of the Trust, subject
to Article X, Section 4;
(k) To vote or give assent, or exercise any rights of ownership, with
respect to other securities or property; and, if necessary, to execute and
deliver powers of attorney delegating such power to other persons;
(l) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(m) To hold any security or other property (i) in a form not indicating
any trust, whether in bearer, book entry, unregistered or other negotiable form,
or (ii) either in the Trust's or Trustees' own name or in the name of a
custodian or a nominee or nominees, subject to safeguards according to the usual
practice of business trusts or investment companies;
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(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article IV;
(o) To the full extent permitted by Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a particular Series
and liabilities and expenses to a particular Class or to apportion the same
between or among two or more Series or Classes, provided that any liabilities or
expenses incurred by a particular Series or Class shall be payable solely out of
the assets belonging to that Series or Class as provided for in Article IV,
Section 4;
(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern whose securities are held
by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of
property by such corporation or concern; and to pay calls or subscriptions with
respect to any security held in the Trust;
(q) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(r) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for;
(s) To borrow money;
(t) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder;
(u) To establish committees for such purposes, with such membership,
and with such responsibilities as the Trustees may consider proper, including a
committee consisting of fewer than all of the Trustees then in office, which may
act for and bind the Trustees and the Trust with respect to the institution,
prosecution, dismissal, settlement, review or investigation of any legal action,
suit or proceeding, pending or threatened;
(v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares; to establish terms and
conditions regarding the issuance, sale, repurchase, redemption, cancellation,
retirement, acquisition, holding, resale, reissuance, disposition of or dealing
in Shares; and, subject to Articles IV and V, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust or of the particular Series with respect to which such
Shares are issued;
(w) To definitively interpret the investment objectives, policies and
limitations of the Trust or any Series; and
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(x) To carry on any other business in connection with or incidental to
any of the foregoing powers, to do everything necessary or desirable to
accomplish any purpose or to further any of the foregoing powers, and to take
every other action incidental to the foregoing business or purposes, objects or
powers.
The clauses above shall be construed as objects and powers, and the
enumeration of specific powers shall not limit in any way the general powers of
the Trustees. Any action by one or more of the Trustees in their capacity as
such hereunder shall be deemed an action on behalf of the Trust or the
applicable Series, and not an action in an individual capacity. No one dealing
with the Trustees shall be under any obligation to make any inquiry concerning
the authority of the Trustees, or to see to the application of any payments made
or property transferred to the Trustees or upon their order. In construing this
Trust Instrument, the presumption shall be in favor of a grant of power to the
Trustees.
Section 2. Certain Transactions. Except as prohibited by applicable
law, the Trustees may, on behalf of the Trust, buy any securities from or sell
any securities to, or lend any assets of the Trust to, any Trustee or officer of
the Trust or any firm of which any such Trustee or officer is a member acting as
principal, or have any such dealings with any investment adviser, administrator,
distributor or transfer agent for the Trust or with any Interested Person of
such person. The Trust may employ any such person or entity in which such person
is an Interested Person, as broker, legal counsel, registrar, investment
adviser, administrator, distributor, transfer agent, dividend disbursing agent,
custodian or in any other capacity upon customary terms.
ARTICLE IV
SERIES; CLASSES; SHARES
Section 1. Establishment of Series or Class. The Trust shall consist of
one or more Series. The Trustees hereby establish the Series listed in Schedule
A attached hereto and made a part hereof. Each additional Series shall be
established by the adoption of a resolution of the Trustees. The Trustees may
designate the relative rights and preferences of the Shares of each Series. The
Trustees may divide the Shares of any Series into Classes. In such case each
Class of a Series shall represent interests in the assets of that Series and
have identical voting, dividend, liquidation and other rights and the same terms
and conditions, except that expenses allocated to a Class may be borne solely by
such Class as determined by the Trustees and a Class may have exclusive voting
rights with respect to matters affecting only that Class. The Trust shall
maintain separate and distinct records for each Series and hold and account for
the assets thereof separately from the other assets of the Trust or of any other
Series. A Series may issue any number of Shares and need not issue Shares. Each
Share of a Series shall represent an equal beneficial interest in the net assets
of such Series. Each holder of Shares of a Series shall be entitled to receive
his pro rata share of all distributions made with respect to such Series. Upon
redemption of his Shares, such Shareholder shall be paid solely out of the funds
and property of such Series. The Trustees may change the name of any Series or
Class.
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Section 2. Shares. The beneficial interest in the Trust shall be
divided into Shares of one or more separate and distinct Series or Classes
established by the Trustees. The number of Shares of each Series and Class is
unlimited and each Share shall have a par value of $0.001 per Share. All Shares
issued hereunder shall be fully paid and nonassessable. Shareholders shall have
no preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust. The Trustees shall have full power and
authority, in their sole discretion and without obtaining Shareholder approval:
to issue original or additional Shares at such times and on such terms and
conditions as they deem appropriate; to issue fractional Shares and Shares held
in the treasury; to establish and to change in any manner Shares of any Series
or Classes with such preferences, terms of conversion, voting powers, rights and
privileges as the Trustees may determine (but the Trustees may not change
Outstanding Shares in a manner materially adverse to the Shareholders of such
Shares); to divide or combine the Shares of any Series or Classes into a greater
or lesser number; to classify or reclassify any unissued Shares of any Series or
Classes into one or more Series or Classes of Shares; to abolish any one or more
Series or Classes of Shares; to issue Shares to acquire other assets (including
assets subject to, and in connection with, the assumption of liabilities) and
businesses; and to take such other action with respect to the Shares as the
Trustees may deem desirable. Shares held in the treasury shall not confer any
voting rights on the Trustees and shall not be entitled to any dividends or
other distributions declared with respect to the Shares.
Section 3. Investment in the Trust. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which that Series
is authorized to invest, valued as provided in Article V, Section 3. Investments
in a Series shall be credited to each Shareholder's account in the form of full
Shares at the Net Asset Value per Share next determined after the investment is
received or accepted as may be determined by the Trustees; provided, however,
that the Trustees may, in their sole discretion, (a) impose a sales charge upon
investments in any Series or Class, (b) issue fractional Shares, or (c)
determine the Net Asset Value per Share of the initial capital contribution. The
Trustees shall have the right to refuse to accept investments, or any
investment, in any Series at any time without any cause or reason therefor
whatsoever.
Section 4. Assets and Liabilities of Series. All consideration received
by the Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof (including any proceeds derived
from the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be), shall be held and accounted for separately from the other assets of the
Trust and every other Series and are referred to as "assets belonging to" that
Series. The assets belonging to a Series shall belong only to that Series for
all purposes, and to no other Series, subject only to the rights of creditors of
that Series. Any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any particular
Series shall be allocated by the Trustees between and among one or more Series
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as the Trustees deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series for all purposes, and
such assets, earnings, income, profits or funds, or payments and proceeds
thereof shall be referred to as assets belonging to that Series. The assets
belonging to a Series shall be so recorded upon the books of the Trust, and
shall be held by the Trustees in trust for the benefit of the Shareholders of
that Series. The assets belonging to a Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series, except that liabilities and expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series or Class shall be
allocated and charged by the Trustees between or among any one or more of the
Series or Classes in such manner as the Trustees deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges or reserves
as herein provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of the Trust generally or of any other Series. Notice of this contractual
limitation on liabilities among Series may, in the Trustees' discretion, be set
forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on liabilities among Series (and the
statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may look only to the assets of that Series to satisfy or enforce any
debt, with respect to that Series. No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or belonging
to any other Series.
Section 5. Ownership and Transfer of Shares. The Trust shall maintain a
register containing the names and addresses of the Shareholders of each Series
and Class thereof, the number of Shares of each Series and Class held by such
Shareholders, and a record of all Share transfers. The register shall be
conclusive as to the identity of Shareholders of record and the number of Shares
held by them from time to time. The Trustees may authorize the issuance of
certificates representing Shares and adopt rules governing their use. The
Trustees may make rules governing the transfer of Shares, whether or not
represented by certificates.
Section 6. Status of Shares; Limitation of Shareholder Liability. (a)
Shares shall be deemed to be personal property giving Shareholders only the
rights provided in this Trust Instrument. Every Shareholder, by virtue of having
acquired a Share, shall be held expressly to have assented to and agreed to be
bound by the terms of this Trust Instrument and to have become a party hereto.
(b) No Shareholder shall be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or any Series. Neither the Trust nor the
Trustees shall have any power to bind any Shareholder personally or to demand
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payment from any Shareholder for anything, other than as agreed by the
Shareholder. Shareholders shall have the same limitation of personal liability
as is extended to shareholders of a private corporation for profit incorporated
in the State of Delaware. Every written obligation of the Trust or any Series
shall contain a statement to the effect that such obligation may only be
enforced against the assets of the Trust or such Series; however, the omission
of such statement shall not operate to bind or create personal liability for any
Shareholder or Trustee.
ARTICLE V
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may declare and pay dividends
and other distributions, including dividends on Shares of a particular Series
and other distributions from the assets belonging to that Series. The amount and
payment of dividends or distributions and their form, whether they are in cash,
Shares or other Trust Property, shall be determined by the Trustees. Dividends
and other distributions may be paid pursuant to a standing resolution adopted
once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Series shall be distributed pro rata to
the Shareholders of that Series in proportion to the number of Shares of that
Series they held on the record date established for such payment, except that
such dividends and distributions shall appropriately reflect expenses allocated
to a particular Class of such Series. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
similar plans as the Trustees deem appropriate.
Section 2. Redemptions. Each Shareholder of a Series shall have the
right at such times as may be permitted by the Trustees to require the Series to
redeem all or any part of his Shares at a redemption price per Share equal to
the Net Asset Value per Share at such time as the Trustees shall have prescribed
by resolution, less any applicable charges or sales loads. In the absence of
such resolution, the redemption price per Share shall be the Net Asset Value
next determined after receipt by the Series of a request for redemption in
proper form less such charges as are determined by the Trustees and described in
the Trust's Registration Statement for that Series under the Securities Act of
1933. The Trustees may specify conditions, prices, and places of redemption, and
may specify binding requirements for the proper form or forms of requests for
redemption. Payment of the redemption price may be wholly or partly in
securities or other assets at the value of such securities or assets used in
such determination of Net Asset Value, or may be in cash. Upon redemption,
Shares may be reissued from time to time. The Trustees may require Shareholders
to redeem Shares for any reason under terms set by the Trustees, including the
failure of a Shareholder to supply a personal identification number if required
to do so, or to have the minimum investment required, or to pay when due for the
purchase of Shares issued to him. To the extent permitted by law, the Trustees
may retain the proceeds of any redemption of Shares required by them for payment
of amounts due and owing by a Shareholder to the Trust or any Series or Class.
Notwithstanding the foregoing, the Trustees may postpone payment of the
redemption price and may suspend the right of the Shareholders to require any
Series or Class to redeem Shares during any period of time when and to the
extent permissible under the 1940 Act.
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Section 3. Determination of Net Asset Value. The Trustees shall cause
the Net Asset Value of Shares of each Series or Class to be determined from time
to time in a manner consistent with applicable laws and regulations. The
Trustees may delegate the power and duty to determine Net Asset Value per Share
to one or more Trustees or officers of the Trust or to a custodian, depository
or other agent appointed for such purpose. The Net Asset Value of Shares shall
be determined separately for each Series or Class at such times as may be
prescribed by the Trustees or, in the absence of action by the Trustees, as of
the close of trading on the New York Stock Exchange on each day for all or part
of which such Exchange is open for unrestricted trading.
Section 4. Suspension of Right of Redemption. If, as referred to in
Section 2 of this Article, the Trustees postpone payment of the redemption price
and suspend the right of Shareholders to redeem their Shares, such suspension
shall take effect at the time the Trustees shall specify, but not later than the
close of business on the business day next following the declaration of
suspension. Thereafter Shareholders shall have no right of redemption or payment
until the Trustees declare the end of the suspension. If the right of redemption
is suspended, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined after the
suspension terminates.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote
only with respect to (a) the election of Trustees as provided in Section 2 of
this Article; (b) the removal of Trustees as provided in Article II, Section
3(d); (c) any investment advisory or management contract as provided in Article
VII, Section 1; (d) any termination of the Trust as provided in Article X,
Section 4; (e) the amendment of this Trust Instrument to the extent and as
provided in Article X, Section 8; and (f) such additional matters relating to
the Trust as may be required or authorized by law, this Trust Instrument, or the
By-laws or any registration of the Trust with the Commission or any State, or as
the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted by individual Series or Class, except (a) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series or
Class, and (b) when the Trustees have determined that the matter affects the
interests of more than one Series or Class, then the Shareholders of all such
Series or Classes shall be entitled to vote thereon. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the By-laws. The By-laws
may provide that proxies may be given by any electronic or telecommunications
device or in any other manner, but if a proposal by anyone other than the
officers or Trustees is submitted to a vote of the Shareholders of any Series or
Class, or if there is a proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees, Shares may be voted only
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in person or by written proxy. Until Shares of a Series are issued, as to that
Series the Trustees may exercise all rights of Shareholders and may take any
action required or permitted to be taken by Shareholders by law, this Trust
Instrument or the By-laws.
Section 2. Meetings of Shareholders. The first Shareholders' meeting
shall be held to elect Trustees at such time and place as the Trustees
designate. Special meetings of the Shareholders of any Series or Class may be
called by the Trustees and shall be called by the Trustees upon the written
request of Shareholders owning at least ten percent of the Outstanding Shares of
such Series or Class entitled to vote. Shareholders shall be entitled to at
least fifteen days' notice of any meeting, given as determined by the Trustees.
Section 3. Quorum; Required Vote. One-third of the Outstanding Shares
of each Series or Class, or one-third of the Outstanding Shares of the Trust,
entitled to vote in person or by proxy shall be a quorum for the transaction of
business at a Shareholders' meeting with respect to such Series or Class, or
with respect to the entire Trust, respectively. Any lesser number shall be
sufficient for adjournments. Any adjourned session of a Shareholders' meeting
may be held within a reasonable time without further notice. Except when a
larger vote is required by law, this Trust Instrument or the By-laws, a majority
of the Outstanding Shares voted in person or by proxy shall decide any matters
to be voted upon with respect to the entire Trust (or, if required by law, a
Majority Shareholder Vote of the entire Trust) and a plurality of such
Outstanding Shares shall elect a Trustee; provided, that if this Trust
Instrument or applicable law permits or requires that Shares be voted on any
matter by individual Series or Classes, then a majority of the Outstanding
Shares of that Series or Class (or, if required by law, a Majority Shareholder
Vote of that Series or Class) voted in person or by proxy voted on the matter
shall decide that matter insofar as that Series or Class is concerned.
Shareholders may act as to the Trust or any Series or Class by the written
consent of a majority (or such greater amount as may be required by applicable
law, this Trust Instrument, or the By-laws) of the Outstanding Shares of the
Trust or of such Series or Class, as the case may be.
ARTICLE VII
CONTRACTS WITH SERVICE PROVIDERS
Section 1. Investment Adviser. Subject to a Majority Shareholder Vote,
the Trustees may enter into one or more investment advisory contracts on behalf
of the Trust or any Series, providing for investment advisory services,
statistical and research facilities and services, and other facilities and
services to be furnished to the Trust or Series on terms and conditions
acceptable to the Trustees. Any such contract may provide for the investment
adviser to effect purchases, sales or exchanges of portfolio securities or other
Trust Property on behalf of the Trustees or may authorize any officer or agent
of the Trust to effect such purchases, sales or exchanges pursuant to
recommendations of the investment adviser. The Trustees may authorize the
investment adviser to employ one or more sub-advisers.
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Section 2. Principal Underwriter. The Trustees may enter into contracts
on behalf of the Trust or any Series or Class, providing for the distribution
and sale of Shares by the other party, either directly or as sales agent, on
terms and conditions acceptable to the Trustees. The Trustees may adopt a plan
or plans of distribution with respect to Shares of any Series or Class and enter
into any related agreements, whereby the Series or Class finances directly or
indirectly any activity that is primarily intended to result in sales of its
Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1
thereunder, and other applicable rules and regulations.
Section 3. Transfer Agency, Shareholder Services, and Administration
Agreements. The Trustees, on behalf of the Trust or any Series or Class, may
enter into transfer agency agreements, Shareholder service agreements, and
administration and management agreements with any party or parties on terms and
conditions acceptable to the Trustees.
Section 4. Custodian. The Trustees shall at all times place and
maintain the securities and similar investments of the Trust and of each Series
in custody meeting the requirements of Section 17(f) of the 1940 Act and the
rules thereunder. The Trustees, on behalf of the Trust or any Series, may enter
into an agreement with a custodian on terms and conditions acceptable to the
Trustees, providing for the custodian, among other things, to (a) hold the
securities owned by the Trust or any Series and deliver the same upon written
order or oral order confirmed in writing, (b) receive and receipt for any moneys
due to the Trust or any Series and deposit the same in its own banking
department or elsewhere, (c) disburse such funds upon orders or vouchers, and
(d) employ one or more sub-custodians.
Section 5. Parties to Contracts with Service Providers. The Trustees
may enter into any contract with any entity, although one more of the Trustees
or officers of the Trust may be an officer, director, trustee, partner,
shareholder, or member of such entity, and no such contract shall be invalidated
or rendered void or voidable because of such relationship. No person having such
a relationship shall be disqualified from voting on or executing a contract in
his capacity as Trustee and/or Shareholder, or be liable merely by reason of
such relationship for any loss or expense to the Trust with respect to such a
contract or accountable for any profit realized directly or indirectly
therefrom; provided, that the contract was reasonable and fair and not
inconsistent with this Trust Instrument or the By-laws.
Any contract referred to in Sections 1 and 2 of this Article shall be
consistent with and subject to the applicable requirements of Section 15 of the
1940 Act and the rules and orders thereunder with respect to its continuance in
effect, its termination, and the method of authorization and approval of such
contract or renewal. No amendment to a contract referred to in Section 1 of this
Article shall be effective unless assented to as required by Section 15 of the
1940 Act, and the rules and orders thereunder.
ARTICLE VIII
EXPENSES OF THE TRUST AND SERIES
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Subject to Article IV, Section 4, the Trust or a particular Series
shall pay, or shall reimburse the Trustees from the Trust estate or the assets
belonging to the particular Series, for their expenses and disbursements,
including, but not limited to, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of Shares; certain
insurance premiums; applicable fees, interest charges and expenses of third
parties, including the Trust's investment advisers, managers, administrators,
distributors, custodians, transfer agents and fund accountants; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership in
trade associations; telecommunications expenses; funds transmission expenses;
auditing, legal and compliance expenses; costs of forming the Trust and its
Series and maintaining its existence; costs of preparing and printing the
prospectuses of the Trust and each Series, statements of additional information
and Shareholder reports and delivering them to Shareholders; expenses of
meetings of Shareholders and proxy solicitations therefor; costs of maintaining
books and accounts; costs of reproduction, stationery and supplies; fees and
expenses of the Trustees; compensation of the Trust's officers and employees and
costs of other personnel performing services for the Trust or any Series; costs
of Trustee meetings; Commission registration fees and related expenses; state or
foreign securities laws registration fees and related expenses; and for such
non-recurring items as may arise, including litigation to which the Trust or a
Series (or a Trustee or officer of the Trust acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust. The
Trustees shall have a lien on the assets belonging to the appropriate Series, or
in the case of an expense allocable to more than one Series, on the assets of
each such Series, prior to any rights or interests of the Shareholders thereto,
for the reimbursement to them of such expenses, disbursements, losses and
liabilities.
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. All persons contracting with or
having any claim against the Trust or a particular Series shall look only to the
assets of the Trust or such Series, respectively, for payment under such
contract or claim; and neither the Trustees nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Every written instrument or obligation on behalf of the Trust or any
Series shall contain a statement to the foregoing effect, but the absence of
such statement shall not operate to make any Trustee or officer of the Trust
liable thereunder. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of the
Trust, the Trustees and officers of the Trust shall not be responsible or liable
for any act or omission or for neglect or wrongdoing of them or any officer,
agent, employee, investment adviser or independent contractor of the Trust, but
nothing contained in this Trust Instrument or in the Delaware Act shall protect
any Trustee or officer of the Trust against liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
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Section 2. Indemnification. (a) Subject to the exceptions and
limitations contained in subsection (b) below:
(i) every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust ("Covered Person") shall be indemnified by the
Trust or the appropriate Series to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Covered
Person and against amounts paid or incurred by him in the settlement thereof;
provided, however, that the Trust shall not be obligated to indemnify any agent
acting pursuant to a written contract with the Trust, except to the extent
required by such contract;
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened, and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office, or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office (A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither Interested Persons
of the Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); or (C) by written
opinion of independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, and shall inure to the benefit of the heirs, executors
and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses in
connection with the preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in subsection (a) of this
Section shall be paid by the Trust or applicable Series from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust or
applicable Series if it is ultimately determined that he is not entitled to
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indemnification under this Section; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section; provided, however, that the Trust shall not
be obligated to pay the expenses of any agent acting pursuant to a written
contract with the Trust, except to the extent required by such contract;
(e) Any repeal or modification of this Article IX by the Shareholders
of the Trust, or adoption or modification of any other provision of the Trust
Instrument or By-laws inconsistent with this Article, shall be prospective only,
to the extent that such repeal or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any Covered
Person or adversely affect any indemnification available to any Covered Person
with respect to any act or omission which occurred prior to such repeal,
modification or adoption.
Section 3. Indemnification of Shareholders. If any Shareholder or
former Shareholder of any Series shall be held personally liable solely by
reason of his being or having been a Shareholder and not because of his acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his heirs, executors, administrators or other legal representatives or in the
case of any entity, its general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by such Shareholder, assume the
defense of any claim made against such Shareholder for any act or obligation of
the Series and satisfy any judgment thereon from the assets of the Series.
ARTICLE X
MISCELLANEOUS
Section 1. Trust Not a Partnership. This Trust Instrument creates a
trust and not a partnership. No Trustee shall have any power to bind personally
either the Trust's officers or any Shareholder to any obligation to which such
person has not consented.
Section 2. Trustee Action; Expert Advice; No Bond or Surety`. The
exercise by the Trustees of their powers and discretion hereunder in good faith
and with reasonable care under the circumstances then prevailing shall be
binding upon everyone interested. Subject to the provisions of Article IX, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument, and subject to the provisions of
Article IX, shall not be liable for any act or omission in accordance with such
advice or for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is obtained.
Section 3. Record Dates. The Trustees may fix in advance a date up to
ninety (90) days before the date of any Shareholders' meeting, or the date for
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the payment of any dividends or other distributions, or the date for the
allotment of any other rights, or the date when any change or conversion or
exchange of Shares shall go into effect as a record date for the determination
of the Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of such dividend or other distribution, or to
receive any such allotment of rights, or to exercise such rights in respect of
any such change, conversion or exchange of Shares.
Section 4. Termination of the Trust. (a) This Trust shall have
perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of
each Series to be affected, the Trustees may
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another Series or to another entity which is
an open-end investment company as defined in the 1940 Act, or is a series
thereof, for adequate consideration, which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or contingent, of
the Trust or any affected Series, and which may include shares of or interests
in such Series, entity, or series thereof; or
(ii) at any time sell and convert into money all or
substantially all of the assets of the Trust or any affected Series.
Upon making reasonable provision for the payment of all known liabilities of the
Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the Shareholders of the Trust or any affected
Series; however, the payment to any particular Series or Class of such Series
may be reduced by any fees, expenses or charges allocated to that Series or
Class.
(b) The Trustees may take any of the actions specified in subsection
(a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the
Trust or any Series if a majority of the Trustees determines that the
continuation of the Trust or Series is not in the best interests of the Trust,
such Series, or their respective Shareholders as a result of factors or events
adversely affecting the ability of the Trust or such Series to conduct its
business and operations in an economically viable manner. Such factors and
events may include the inability of the Trust or a Series to maintain its assets
at an appropriate size, changes in laws or regulations governing the Trust or
the Series or affecting assets of the type in which the Trust or Series invests,
or economic developments or trends having a significant adverse impact on the
business or operations of the Trust or such Series.
(c) Upon completion of the distribution of the remaining proceeds or
assets pursuant to subsection (a), the Trust or affected Series shall terminate
and the Trustees and the Trust shall be discharged of any and all further
liabilities and duties hereunder with respect thereto and the right, title and
interest of all parties therein shall be canceled and discharged. Upon
termination of the Trust, following completion of winding up of its business,
the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
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Section 5. Reorganization. Notwithstanding anything else herein, to
change the Trust's form of organization the Trustees may, without Shareholder
approval, (a) cause the Trust to merge or consolidate with or into one or more
entities, if the surviving or resulting entity is the Trust or another open-end
management investment company under the 1940 Act, or a series thereof, that will
succeed to or assume the Trust's registration under the 1940 Act, or (b) cause
the Trust to incorporate under the laws of Delaware. Any agreement of merger or
consolidation or certificate of merger may be signed by a majority of Trustees
and facsimile signatures conveyed by electronic or telecommunication means shall
be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 5 may effect any amendment to the Trust
Instrument or effect the adoption of a new trust instrument of the Trust if it
is the surviving or resulting trust in the merger or consolidation.
Section 6. Trust Instrument. The original or a copy of this Trust
Instrument and of each amendment hereto or Trust Instrument supplemental shall
be kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by a Trustee or an
officer of the Trust as to the authenticity of the Trust Instrument or any such
amendments or supplements and as to any matters in connection with the Trust.
The masculine gender herein shall include the feminine and neuter genders.
Headings herein are for convenience only and shall not affect the construction
of this Trust Instrument. This Trust Instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 7. Applicable Law. This Trust Instrument and the Trust created
hereunder are governed by and construed and administered according to the
Delaware Act and the applicable laws of the State of Delaware; provided,
however, that there shall not be applicable to the Trust, the Trustees or this
Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code, or (b) any provisions of the laws (statutory or common) of the State of
Delaware (other than the Delaware Act) pertaining to trusts which relate to or
regulate (i) the filing with any court or governmental body or agency of trustee
accounts or schedules of trustee fees and charges, (ii) affirmative requirements
to post bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a Delaware business
trust, and, without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
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power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 8. Amendments. All rights granted to Shareholders hereunder are
granted subject to a right to amend this Trust Instrument, except as otherwise
provided herein. The Trustees may, without any Shareholder vote, amend or
otherwise supplement this Trust Instrument by making an amendment, a Trust
Instrument supplemental hereto or an amended and restated trust instrument;
provided, that Shareholders shall have the right to vote on any amendment (a)
which would affect the voting rights of Shareholders granted in Article VI,
Section 1, (b) to this Section 8, (c) required to be approved by Shareholders by
law or by the Trust's registration statement(s) filed with the Commission, and
(d) submitted to them by the Trustees in their discretion. Any amendment
submitted to Shareholders which the Trustees determine would affect the
Shareholders of any Series shall be authorized by vote of the Shareholders of
such Series and no vote shall be required of Shareholders of a Series not
affected. Notwithstanding anything else herein, any amendment to Article IX
which would have the effect of reducing the indemnification and other rights
provided thereby to Trustees, officers, employees, and agents of the Trust or to
Shareholders or former Shareholders, and any repeal or amendment of this
sentence, shall each require the affirmative vote of the holders of two-thirds
of the Outstanding Shares of the Trust entitled to vote thereon.
Section 9. Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the By-laws. The Trustees may change the fiscal
year of the Trust without Shareholder approval.
Section 10. Severability. The provisions of this Trust Instrument are
severable. If the Trustees determine, with the advice of counsel, that any
provision hereof conflicts with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Trust Instrument; provided, however, that such determination
shall not affect any of the remaining provisions of this Trust Instrument or
render invalid or improper any action taken or omitted prior to such
determination. If any provision hereof shall be held invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall attach only to such
provision only in such jurisdiction and shall not affect any other provision of
this Trust Instrument.
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IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have
executed this Trust Instrument as of the date first above written.
/s/ Claudia A. Brandon
----------------------
Claudia A. Brandon, as
Trustee and not individually
/s/ Daniel J. Sullivan
----------------------
Daniel J. Sullivan, as
Trustee and not individually
/s/ Richard Russell
-------------------
Richard Russell, as
Trustee and not individually
Address: 605 Third Avenue
New York, New York 10158
STATE OF NEW YORK ss
CITY OF NEW YORK
Before me this 21st day of September 1998, personally appeared the
above-named, Claudia A. Brandon, Daniel J. Sullivan, and Richard Russell, known
to me to be the persons who executed the foregoing instrument and who
acknowledged that they executed the same.
Loraine Olavarria
-----------------
Notary Public
My Commission expires 4/15/99
20
NEUBERGER BERMAN EQUITY SERIES
BY-LAWS
September 22, 1998
<PAGE>
BY-LAWS
OF
NEUBERGER BERMAN EQUITY SERIES
These By-laws of Neuberger Berman Equity Series (the "Trust"), a
Delaware business trust, are subject to the Trust Instrument of the Trust dated
as of September 22, 1998, as from time to time amended, supplemented or restated
(the "Trust Instrument"). Capitalized terms used herein have the same meanings
as in the Trust Instrument.
ARTICLE I
PRINCIPAL OFFICE AND SEAL
SECTION 1. PRINCIPAL OFFICE. The principal office of the Trust shall be located
in New York, New York, or such other location as the Trustees determine. The
Trust may establish and maintain other offices and places of business as the
Trustees determine.
SECTION 2. SEAL. The Trustees may adopt a seal for the Trust in such form
and with such inscription as the Trustees determine. Any Trustee or officer
of the Trust shall have authority to affix the seal to any document.
ARTICLE II
MEETINGS OF TRUSTEES
SECTION 1. ACTION BY TRUSTEES. Trustees may take actions at meetings held at
such places and times as the Trustees may determine, or without meetings, all as
provided in Article II, Section 7, of the Trust Instrument.
SECTION 2. COMPENSATION OF TRUSTEES. Each Trustee who is neither an employee of
an investment adviser of the Trust or any Series nor an employee of an entity
affiliated with the investment adviser may receive such compensation from the
Trust for services and reimbursement for expenses as the Trustees may determine.
<PAGE>
ARTICLE III
COMMITTEES
SECTION 1. ESTABLISHMENT. The Trustees may designate one or more committees of
the Trustees, which shall include an Executive Committee, a Nominating
Committee, and an Audit Committee (collectively, the "Established Committees").
The Trustees shall determine the number of members of each committee and its
powers and shall appoint its members and its chair. Each committee member shall
serve at the pleasure of the Trustees. The Trustees may abolish any committee,
other than the Established Committees, at any time. Each committee shall
maintain records of its meetings and report its actions to the Trustees. The
Trustees may rescind any action of any committee, but such rescission shall not
have retroactive effect. The Trustees may delegate to any committee any of its
powers, subject to the limitations of applicable law.
SECTION 2. PROCEEDINGS; QUORUM; ACTION. Each committee may adopt such rules
governing its proceedings, quorum and manner of acting as it shall deem proper
and desirable. In the absence of such rules, a majority of any committee shall
constitute a quorum, and a committee shall act by the vote of a majority of a
quorum.
SECTION 3. EXECUTIVE COMMITTEE. The Executive Committee shall have all the
powers of the Trustees when the Trustees are not in session. The Chairman shall
be a member and the chair of the Executive Committee. A majority of the members
of the Executive Committee shall be trustees who are not "interested persons" of
the Trust, as defined in the 1940 Act ("Disinterested Trustees").
SECTION 4. NOMINATING COMMITTEE. The Nominating Committee shall nominate
individuals to serve as Trustees (including Disinterested Trustees), as
members of committees, and as officers of the Trust. The members of the
Committee shall be Disinterested Trustees.
SECTION 5. AUDIT COMMITTEE. The Audit Committee shall review and evaluate the
audit function, including recommending the selection of independent certified
public accountants for each Series. The members of the Committee shall be
Disinterested Trustees.
SECTION 6. COMPENSATION OF COMMITTEE MEMBERS. Each committee member who is a
Disinterested Trustee may receive such compensation from the Trust for services
and reimbursement for expenses as the Trustees may determine.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Trust shall be a Chairman, a President,
one or more Vice Presidents, a Treasurer, and a Secretary, and may include one
or more Assistant Treasurers or Assistant Secretaries and such other officers
("Other Officers") as the Trustees may determine.
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SECTION 2. ELECTION, TENURE AND QUALIFICATIONS OF OFFICERS. The Trustees shall
elect the officers of the Trust, except those appointed as provided in Section 9
of this Article. Each officer elected by the Trustees shall hold office until
his or her successor shall have been elected and qualified or until his or her
earlier death, inability to serve, or resignation. Any person may hold one or
more offices, except that the Chairman and the Secretary may not be the same
individual. A person who holds more than one office in the Trust may not act in
more than one capacity to execute, acknowledge, or verify an instrument required
by law to be executed, acknowledged, or verified by more than one officer. No
officer other than the Chairman need be a Trustee or Shareholder.
SECTION 3. VACANCIES AND NEWLY CREATED OFFICES. Whenever a vacancy shall
occur in any office or if any new office is created, the Trustees may fill such
vacancy or new office.
SECTION 4. REMOVAL AND RESIGNATION. Officers serve at the pleasure of the
Trustees and may be removed at any time with or without cause. The Trustees may
delegate this power to the Chairman or President with respect to any Other
Officer. Such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Any officer may resign from office at any time by
delivering a written resignation to the Trustees, Chairman, or the President.
Unless otherwise specified therein, such resignation shall take effect upon
delivery.
SECTION 5. CHAIRMAN. The Chairman shall be the chief executive officer of the
Trust. Subject to the direction of the Trustees, the Chairman shall have general
charge, supervision and control over the Trust's business affairs and shall be
responsible for the management thereof and the execution of policies established
by the Trustees. The Chairman shall preside at any Shareholders' meetings and at
all meetings of the Trustees and shall in general exercise the powers and
perform the duties of the Chairman of the Trustees. Except as the Trustees may
otherwise order, the Chairman shall have the power to grant, issue, execute or
sign such powers of attorney, proxies, agreements or other documents. The
Chairman also shall have the power to employ attorneys, accountants and other
advisers and agents for the Trust. The Chairman shall exercise such other powers
and perform such other duties as the Trustees may assign to the Chairman.
SECTION 6. PRESIDENT. The President shall have such powers and perform such
duties as the Trustees or the Chairman may determine. At the request or in the
absence or disability of the Chairman, the President shall perform all the
duties of the President and, when so acting, shall have all the powers of the
President.
SECTION 7. VICE PRESIDENT(S). The Vice President(s) shall have such powers and
perform such duties as the Trustees or the Chairman may determine. At the
request or in the absence or disability of the President, the Vice President
(or, if there are two or more Vice Presidents, then the senior of the Vice
Presidents present and able to act) shall perform all the duties of the
President and, when so acting, shall have all the powers of the President. The
Trustees may designate a Vice President as the principal financial officer of
the Trust or to serve one or more other functions. If a Vice President is
designated as principal financial officer of the Trust, he or she shall have
general charge of the finances and books of the Trust and shall report to the
Trustees annually regarding the financial condition of each Series as soon as
possible after the close of such Series's fiscal year. The Trustees also may
designate one of the Vice Presidents as Executive Vice President.
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SECTION 8. TREASURER AND ASSISTANT TREASURER(S). The Treasurer may be designated
as the principal financial officer or as the principal accounting officer of the
Trust. If designated as principal financial officer, the Treasurer shall have
general charge of the finances and books of the Trust, and shall report to the
Trustees annually regarding the financial condition of each Series as soon as
possible after the close of such Series' fiscal year. The Treasurer shall be
responsible for the delivery of all funds and securities of the Trust to such
company as the Trustees shall retain as Custodian. The Treasurer shall furnish
such reports concerning the financial condition of the Trust as the Trustees may
request. The Treasurer shall perform all acts incidental to the office of
Treasurer, subject to the Trustees' supervision, and shall perform such
additional duties as the Trustees may designate.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Trustees or the Treasurer may assign, and, in the absence of the Treasurer, may
perform all the duties of the Treasurer.
SECTION 9. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall record all
votes and proceedings of the meetings of Trustees and Shareholders in books to
be kept for that purpose. The Secretary shall be responsible for giving and
serving notices of the Trust. The Secretary shall have custody of any seal of
the Trust and shall be responsible for the records of the Trust, including the
Share register and such other books and documents as may be required by the
Trustees or by law. The Secretary shall perform all acts incidental to the
office of Secretary, subject to the supervision of the Trustees, and shall
perform such additional duties as the Trustees may designate.
Any Assistant Secretary may perform such duties of the Secretary as the
Trustees or the Secretary may assign, and, in the absence of the Secretary, may
perform all the duties of the Secretary.
SECTION 10. COMPENSATION OF OFFICERS. Each officer may receive such
compensation from the Trust for services and reimbursement for expenses as the
Trustees may determine.
SECTION 11. SURETY BOND. The Trustees may require any officer or agent of the
Trust to execute a bond (including, without limitation, any bond required by the
1940 Act and the rules and regulations of the Securities and Exchange Commission
("Commission")) to the Trust in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his or her
duties to the Trust, including responsibility for negligence and for the
accounting of any of the Trust's property, funds or securities that may come
into his or her hands.
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ARTICLE V
MEETINGS OF SHAREHOLDERS
SECTION 1. NO ANNUAL MEETINGS. There shall be no annual Shareholders' meetings,
unless required by law.
SECTION 2. SPECIAL MEETINGS. The Secretary shall call a special meeting of
Shareholders of any Series or Class whenever ordered by the Trustees.
The Secretary also shall call a special meeting of Shareholders of any
Series or Class upon the written request of Shareholders owning at least ten
percent of the Outstanding Shares of such Series or Class entitled to vote at
such meeting; provided, that (1) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (2) the Shareholders
requesting such meeting shall have paid to the Trust the reasonably estimated
cost of preparing and mailing the notice thereof, which the Secretary shall
determine and specify to such Shareholders. If the Secretary fails for more than
thirty days to call a special meeting when required to do so, the Trustees or
the Shareholders requesting such a meeting may, in the name of the Secretary,
call the meeting by giving the required notice. The Secretary shall not call a
special meeting upon the request of Shareholders of any Series or Class to
consider any matter that is substantially the same as a matter voted upon at any
special meeting of Shareholders of such Series or Class held during the
preceding twelve months, unless requested by the holders of a majority of the
Outstanding Shares of such Series or Class entitled to be voted at such meeting.
A special meeting of Shareholders of any Series or Class shall be held
at such time and place as is determined by the Trustees and stated in the notice
of that meeting.
SECTION 3. NOTICE OF MEETINGS; WAIVER. The Secretary shall call a special
meeting of Shareholders by giving written notice of the place, date, time, and
purposes of that meeting at least fifteen days before the date of such meeting.
The Secretary may deliver or mail, postage prepaid, the written notice of any
meeting to each Shareholder entitled to vote at such meeting. If mailed, notice
shall be deemed to be given when deposited in the United States mail directed to
the Shareholder at his or her address as it appears on the records of the Trust.
SECTION 4. ADJOURNED MEETINGS. A Shareholders' meeting may be adjourned one or
more times for any reason, including the failure of a quorum to attend the
meeting. No notice of adjournment of a meeting to another time or place need be
given to Shareholders if such time and place are announced at the meeting at
which the adjournment is taken or reasonable notice is given to persons present
at the meeting, and if the adjourned meeting is held within a reasonable time
after the date set for the original meeting. Any business that might have been
transacted at the original meeting may be transacted at any adjourned meeting.
If after the adjournment a new record date is fixed for the adjourned meeting,
the Secretary shall give notice of the adjourned meeting to Shareholders of
record entitled to vote at such meeting. Any irregularities in the notice of any
meeting or the nonreceipt of any such notice by any of the Shareholders shall
not invalidate any action otherwise properly taken at any such meeting.
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SECTION 5. VALIDITY OF PROXIES. Subject to the provisions of the Trust
Instrument, Shareholders entitled to vote may vote either in person or by proxy;
provided, that either (1) the Shareholder or his or her duly authorized attorney
has signed and dated a written instrument authorizing such proxy to act, or (2)
the Trustees adopt by resolution an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act, but if a proposal by anyone other than the officers or Trustees is
submitted to a vote of the Shareholders of any Series or Class, or if there is a
proxy contest or proxy solicitation or proposal in opposition to any proposal by
the officers or Trustees, Shares may be voted only in person or by written
proxy. Unless the proxy provides otherwise, it shall not be valid for more than
eleven months before the date of the meeting. All proxies shall be delivered to
the Secretary or other person responsible for recording the proceedings before
being voted. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by one of them unless at or prior to exercise
of such proxy the Trust receives a specific written notice to the contrary from
any one of them. Unless otherwise specifically limited by their terms, proxies
shall entitle the Shareholder to vote at any adjournment of a Shareholders'
meeting. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger. At every meeting of
Shareholders, unless the voting is conducted by inspectors, the chairman of the
meeting shall decide all questions concerning the qualifications of voters, the
validity of proxies, and the acceptance or rejection of votes. Subject to the
provisions of the Delaware Business Trust Act, the Trust Instrument, or these
By-laws, the General Corporation Law of the State of Delaware relating to
proxies, and judicial interpretations thereunder shall govern all matters
concerning the giving, voting or validity of proxies, as if the Trust were a
Delaware corporation and the Shareholders were shareholders of a Delaware
corporation.
SECTION 6. RECORD DATE. The Trustees may fix in advance a date up to ninety days
before the date of any Shareholders' meeting as a record date for the
determination of the Shareholders entitled to notice of, and to vote at, any
such meeting. The Shareholders of record entitled to vote at a Shareholders'
meeting shall be deemed the Shareholders of record at any meeting reconvened
after one or more adjournments, unless the Trustees have fixed a new record
date. If the Shareholders' meeting is adjourned for more than sixty days after
the original date, the Trustees shall establish a new record date.
SECTION 7. ACTION WITHOUT A MEETING. Shareholders may take any action without a
meeting if a majority (or such greater amount as may be required by law) of the
Outstanding Shares entitled to vote on the matter consent to the action in
writing and such written consents are filed with the records of Shareholders'
meetings. Such written consent shall be treated for all purposes as a vote at a
meeting of the Shareholders.
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 1. NO SHARE CERTIFICATES. Neither the Trust nor any Series or Class
shall issue certificates certifying the ownership of Shares, unless the Trustees
may otherwise specifically authorize such certificates.
SECTION 2. TRANSFER OF SHARES. Shares shall be transferable only by a transfer
recorded on the books of the Trust by the Shareholder of record in person or by
his or her duly authorized attorney or legal representative. Shares may be
freely transferred and the Trustees may, from time to time, adopt rules and
regulations regarding the method of transfer of such Shares.
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT
SECTION 1. FISCAL YEAR. The fiscal year of the Trust shall end on August 31.
SECTION 2. ACCOUNTANT. The Trust shall employ independent certified public
accountants as its Accountant to examine the accounts of the Trust and to sign
and certify financial statements filed by the Trust. The Accountant's
certificates and reports shall be addressed both to the Trustees and to the
Shareholders. A majority of the Disinterested Trustees shall select the
Accountant at any meeting held within ninety days before or after the beginning
of the fiscal year of the Trust, acting upon the recommendation of the Audit
Committee. The Trust shall submit the selection for ratification or rejection at
the next succeeding Shareholders' meeting, if such a meeting is to be held
within the Trust's fiscal year. If the selection is rejected at that meeting,
the Accountant shall be selected by majority vote of the Trust's outstanding
voting securities, either at the meeting at which the rejection occurred or at a
subsequent meeting of Shareholders called for the purpose of selecting an
Accountant. The employment of the Accountant shall be conditioned upon the right
of the Trust to terminate such employment without any penalty by vote of a
Majority Shareholder Vote at any Shareholders' meeting called for that purpose.
ARTICLE VIII
AMENDMENTS
SECTION 1. GENERAL. Except as provided in Section 2 of this Article, these
By-laws may be amended by the Trustees, or by the affirmative vote of a majority
of the Outstanding Shares entitled to vote at any meeting.
SECTION 2. BY SHAREHOLDERS ONLY. After the issue of any Shares, this Article may
only be amended by the affirmative vote of the holders of the lesser of (a) at
least two-thirds of the Outstanding Shares present and entitled to vote at any
meeting, or (b) at least fifty percent of the Outstanding Shares.
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ARTICLE IX
NET ASSET VALUE
The term "Net Asset Value" of any Series shall mean that amount by
which the assets belonging to that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Net Asset Value per Share
shall be determined separately for each Series and shall be determined on such
days and at such times as the Trustees may determine. The Trustees shall make
such determination with respect to securities for which market quotations are
readily available, at the market value of such securities, and with respect to
other securities and assets, at the fair value as determined in good faith by
the Trustees; provided, however, that the Trustees, without Shareholder
approval, may alter the method of appraising portfolio securities insofar as
permitted under the 1940 Act and the rules, regulations and interpretations
thereof promulgated or issued by the SEC or insofar as permitted by any order of
the SEC applicable to the Series. The Trustees may delegate any of their powers
and duties under this Article X with respect to appraisal of assets and
liabilities. At any time the Trustees may cause the Net Asset Value per Share
last determined to be determined again in a similar manner and may fix the time
when such redetermined values shall become effective.
ARTICLE X
REVIEW OF OPERATING STRUCTURE
SECTION 1. ANNUAL REVIEW. The Trustees, including a majority of the
Disinterested Trustees, shall determine no less frequently than annually that
the operating structure is in the best interest of Shareholders. The Trustees
shall consider, among other things, whether the expenses incurred by the Trust
are approximately the same or less than the expenses that the Trust would incur
if it invested directly in the type of securities being held by Equity Managers
Trust. The Trustees, including a majority of the Disinterested Trustees, shall
review no less frequently than annually these procedures for their continuing
appropriateness.
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TABLE OF CONTENTS
ARTICLE I PRINCIPAL OFFICE AND SEAL...........................................1
Section 1. Principal Office..........................................1
Section 2. Seal......................................................1
ARTICLE II MEETINGS OF TRUSTEES................................................1
Section 1. Action by Trustees........................................1
Section 2. Compensation of Trustees..................................1
ARTICLE III COMMITTEES.........................................................2
Section 1. Establishment.............................................2
Section 2. Proceedings; Quorum; Action...............................2
Section 3. Executive Committee.......................................2
Section 4. Nominating Committee......................................2
Section 5. Audit Committee...........................................2
Section 6. Compensation of Committee Members.........................2
ARTICLE IV OFFICERS............................................................3
Section 1. General...................................................3
Section 2. Election, Tenure and Qualifications of Officers...........3
Section 3. Vacancies and Newly Created Offices.......................3
Section 4. Removal and Resignation...................................3
Section 5. Chairman..................................................3
Section 6. President.................................................3
Section 7. Vice President(s).........................................4
Section 8. Treasurer and Assistant Treasurer(s)......................4
Section 9. Secretary and Assistant Secretaries.......................4
Section 10. Compensation of Officers.................................5
Section 11. Surety Bond..............................................5
ARTICLE V MEETINGS OF SHAREHOLDERS.............................................5
Section 1. No Annual Meetings........................................5
Section 2. Special Meetings..........................................5
Section 3. Notice of Meetings; Waiver................................5
Section 4. Adjourned Meetings........................................6
Section 5. Validity of Proxies.......................................6
Section 6. Record Date...............................................6
Section 7. Action Without a Meeting..................................7
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ARTICLE VI SHARES OF BENEFICIAL INTEREST.......................................7
Section 1. No Share Certificates.....................................7
Section 2. Transfer of Shares........................................7
ARTICLE VII FISCAL YEAR AND ACCOUNTANT.........................................7
Section 1. Fiscal Year...............................................7
Section 2. Accountant................................................7
ARTICLE VIII AMENDMENTS........................................................7
Section 1. General...................................................8
Section 2. By Shareholders Only......................................8
ARTICLE IX NET ASSET VALUE.....................................................8
ARTICLE X CONFLICT OF INTEREST PROCEDURES......................................8
Section 1. Annual Review.............................................8
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