As filed with the Securities and Exchange Commission on December 29, 1998
1933 Act Registration No. 333-66137
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. [ 1 ] [ ]
--- ---
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 Series 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
Thi scross reference sheet relates to the Prospectus and
Statement of Additional Information for:
NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS
FORM N-1A ITEM NO. CAPTION IN PART A PROSPECTUS
------------------ ----------------------------
Item 1. Front and Back Cover Front and Back Cover Pages
Pages
Item 2. Risk/Return Summary: Investor Expenses; Performance; Main
Investments, Risks, and Risks
Performance
Item 3. Risk/Return Summary: Fee Performance; Investor Expenses
Table
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related
Risks
Item 5. Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Organization, Front Cover Page; Management Sidebar
and 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 Not Applicable
Information
CAPTION IN PART B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
------------------ -----------------------------------
Item 10. Cover Page and Table of Cover and Table of Contents
Contents
Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters
Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments and Considerations
Risks
Item 13. Management of the Fund Trustees And Officers
Item 14. Control Persons and Not Applicable
Principal Holders of
Securities
-3-
<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
<PAGE>
<PAGE>
[PHOTO] NEUBERGER BERMAN
NEUBERGER BERMAN
SOCIALLY RESPONSIVE ASSETS-SM-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 30, 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.
<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>
The "Neuberger Berman" name and logo are service
marks of Neuberger Berman, LLC. "Neuberger Berman
Management Inc." and the fund name in this
prospectus are either service marks or registered
trademarks of Neuberger Berman
Management Inc. -C-1998 Neuberger Berman Management
Inc.
<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 (as of September 30, 1998) and continue an asset
management history that began in 1939.
RISK INFORMATION
This prospectus discusses principal risks of investment in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - USES A MASTER/FEEDER STRUCTURE IN ITS PORTFOLIO; SEE PAGE 12 FOR INFORMATION
ON HOW IT WORKS
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF FUND
SHARES 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.
[ICON]
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.
[ICON] 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.
[ICON]
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. 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.
* When this prospectus was written, the fund was new and had no performance
record of its own. Performance results from March 1994 are actually those of
another Neuberger Berman fund that began operations in 1994, and invests in
the same portfolio of securities. Because the older fund had lower expenses,
its performance was better than Socially Responsive Assets would have had.
That older fund is not offered in this prospectus.
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.
[ICON] 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 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>
* NEUBERGER BERMAN MANAGEMENT HAS AGREED TO REIMBURSE CERTAIN EXPENSES OF THE
FUND THROUGH 12/31/01, 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. THE
TABLE INCLUDES COSTS PAID BY THE FUND AND ITS SHARE OF MASTER PORTFOLIO
COSTS. FOR MORE INFORMATION ON MASTER/FEEDER FUNDS, SEE "FUND STRUCTURE" ON
PAGE 12.
** OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- --------------------------------------
Expenses $153 $474
</TABLE>
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;
generally, 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 the Exchange 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, and whether
you owe alternative minimum tax.
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. Fund distributions to Roth IRAs,
other individual retirement accounts and qualified retirement plans generally
are tax-free. Eventual withdrawals from a Roth IRA of those amounts also may be
tax-free, while withdrawals from other retirement accounts and plans generally
are subject to tax.
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 long-term 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.
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 Neuberger Berman
<PAGE>
[SOLID BAR]
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
212-476-8800
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.
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 managers 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]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
[RECYCLE LOGO] NMLRR1321298 SEC file number: 811-09011
<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").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER BERMAN MANAGEMENT INCORPORATED
("NB MANAGEMENT") AND/OR AN AGREEMENT WITH NB MANAGEMENT TO MAKE FUND SHARES
AVAILABLE TO ITS CLIENTS (EACH AN "INSTITUTION").
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 NB Management, Institutional Services, 605 Third Avenue, 2nd Floor,
New York, NY 10158-0180, or by calling 800-366-6264.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
The "Neuberger Berman" name and logo are service marks of Neuberger
Berman LLC. "Neuberger Berman Management Inc." and the fund and portfolio names
in this SAI are either service marks or registered trademarks of Neuberger
Berman Management Inc. (C)1998 Neuberger Berman Management Inc.
<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.........................................33
Management and Control of NB Management..............................35
DISTRIBUTION ARRANGEMENTS.....................................................36
Distributor..........................................................36
Rule 12b-1 Plan......................................................37
A`DDITIONAL 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........................................................44
Portfolio Turnover...................................................47
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REPORTS TO SHAREHOLDERS.......................................................47
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS................................47
The Fund 47
The Portfolio........................................................48
CUSTODIAN AND TRANSFER AGENT..................................................50
INDEPENDENT ACCOUNTANTS.......................................................50
LEGAL COUNSEL.................................................................50
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................50
REGISTRATION STATEMENT........................................................50
FINANCIAL STATEMENTS..........................................................51
APPENDIX A....................................................................52
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER...............................52
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INVESTMENT INFORMATION
The Fund is a separate 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 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 (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
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 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
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.
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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
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
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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.
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.
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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
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
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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
and on the experience and judgment of the people at NB Management who interpret
the information.
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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 1933 Act, 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 Managers Trust, determines they are liquid.
Generally, foreign securities freely tradable in their principal market are not
considered restricted or illiquid. Illiquid securities may be difficult for the
Portfolio to value or dispose of due to the absence of an active trading market.
The sale of some illiquid securities by the Portfolio may be subject to legal
restrictions which could be costly to the Portfolio.
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
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
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<PAGE>
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 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 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
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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
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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 (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 (and gains realized on the
disposition thereof) 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.
The Portfolio may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored
or unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers of
the securities underlying sponsored ADRs, but not unsponsored ADRs, are
contractually obligated to disclose material information in the United States.
Therefore, the market value of unsponsored ADRs may not reflect the effect of
such information. EDRs and IDRs are receipts typically issued by a European bank
or trust company evidencing its ownership of the underlying foreign securities.
GDRs are receipts issued by either a U.S. or non-U.S. banking institution
evidencing its ownership of the underlying foreign securities and are often
denominated in U.S. dollars.
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
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(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.
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
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commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its
daily 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
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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
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. 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 a call 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 Portfolio's 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
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writes only "covered" call options on securities it owns (in contrast to the
writing of "naked" or uncovered call options, which the Portfolio 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 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,
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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
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
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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
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.
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For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated and which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if 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
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cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
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 (also known as Federal National Mortgage
Association), Freddie Mac (also known as 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,
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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 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 Investors Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed by NB Management to be 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.
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.
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 receives the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality.
21
<PAGE>
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
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
22
<PAGE>
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 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
23
<PAGE>
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 $35 million to
$3.2 billion, with an average of $514 million. The S&P 400 Index
measures mid-sized companies that have an average market capitalization
of $2.1 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
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
24
<PAGE>
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.
25
<PAGE>
<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 Professional
63 Wall Street Corporation.
24th Floor
New York, NY 10005
Stanley Egener* (64) Chairman of the Board, Chief Principal of Neuberger Berman; President and
Executive Officer, and Trustee Director of NB Management; Chairman of the
of each Trust 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) since
110 East 59th Street 1992; Director of Kevlin Corporation
30th Floor (manufacturer of microwave and other products).
New York, NY 10022
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 SOBRO (South
7082 Siena Court Bronx Overall Economic Development
Boca Raton, FL 33433 Corporation).
26
<PAGE>
POSITIONS HELD WITH THE
NAME, AGE, AND ADDRESS(1) TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ------------------------- ------ --------------------------
John P. Rosenthal (66) Trustee of each Trust Senior Vice President of Burnham Securities
Burnham Securities Inc. (a registered broker-dealer) since 1991;
Inc. Director, Cancer Treatment Holdings, Inc.
Burnham Asset Management Corp.
1325 Avenue of the
Americas
17th Floor
New York, NY 10019
Cornelius T. Ryan (67) Trustee of each Trust General Partner of Oxford Partners and Oxford
Oxford Bioscience Partners Bioscience Partners (venture capital
315 Post Road West partnerships) and President of Oxford Venture
Westport, CT 06880 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 Advisory
13838 Sunset Boulevard Trustee of Rand (a non-profit public interest
Pacific Palisades, CA 90272 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.
28
<PAGE>
POSITIONS HELD WITH THE
NAME, AGE, AND ADDRESS(1) TRUSTS PRINCIPAL OCCUPATION(S)(2)
- ------------------------- ------ --------------------------
Lawrence Zicklin* (62) President and Trustee of each Principal of Neuberger Berman; Director of NB
Trust 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 Trust Senior Vice President of NB Management since
1992; Vice President of nine other mutual
funds for which NB Management acts as
investment manager or administrator.
Michael J. Weiner (51) Vice President and Principal Principal of Neuberger Berman; Senior Vice
Financial Officer of each Trust President of NB Management since 1992;
Treasurer of NB Management from 1992 to 1996;
Vice President and Principal Financial Officer
of nine other mutual funds for which NB
Management acts as investment manager or
administrator.
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 since 1993;
Accounting Officer of each Treasurer and Principal Accounting Officer of
Trust 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)
- ------------------------- ------ --------------------------
Stacy Cooper-Shugrue (35) Assistant Secretary of each Assistant Vice President of NB Management
Trust since 1993; Assistant Secretary of nine other
mutual funds for which NB Management acts as
investment manager or administrator.
C. Carl Randolph (61) Assistant Secretary of each Principal of Neuberger Berman since 1992;
Trust Assistant Secretary of nine other mutual
funds for which NB Management acts as
investment manager or administrator.
Barbara DiGiorgio (40) Assistant Treasurer of each Assistant Vice President of NB Management
Trust since 1993; 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
each Assistant Vice President of NB Management
Trust since 1994; 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.
29
<PAGE>
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.
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.
<TABLE>
<CAPTION>
NAME AND POSITION WITH AGGREGATE TOTAL COMPENSATION
THE TRUST COMPENSATION FROM INVESTMENT COMPANIES IN THE
- --------- FROM THE TRUST NEUBERGER BERMAN FUND
-------------- COMPLEX PAID TO TRUSTEES
------------------------
<S> <C> <C>
Faith Colish $ 0 $ 84,500
Trustee (5 other investment companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief (9 other investment companies)
Executive Officer, and Trustee
Howard A. Mileaf $ 0 $ 52,000
Trustee (4 other investment companies)
Edward I. O'Brien $ 0 $ 51,750
Trustee (3 other investment companies)
John T. Patterson, Jr. $ 0 $ 55,750
Trustee (4 other investment companies)
Cornelius T. Ryan $ 0 $ 48,750
Trustee (3 other investment companies)
Gustave H. Shubert $ 0 $ 48,250
Trustee (3 other investment companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment companies)
</TABLE>
30
<PAGE>
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, on behalf of the Portfolio, dated as of August 2, 1993
("Management Agreement").
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 to the Fund
pursuant to an administration agreement with the Trust, dated December 30, 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
below.
NB Management enters into administrative services agreements with
Institutions, pursuant to which it compensates Institutions for accounting,
recordkeeping and other services that they provide in connection with
investments in the Fund.
31
<PAGE>
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.
MANAGEMENT AND ADMINISTRATION FEES
NB Management provides investment management services to each Portfolio
that include, among other things, making and implementing investment decisions
and providing facilities and personnel necessary to operate the Portfolio. For
investment management services, 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 to
Institutions some of its responsibilities to the Fund under the Administration
Agreement and may compensate each Institution that provides such services at an
annual rate of 0.25% of the average net asset value of Fund shares held through
that Institution.
NB Management has contractually 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. This undertaking lasts until December 31, 2001.
The Fund has contractually undertaken to reimburse NB Management, until December
31, 2004, for excess expenses paid by NB Management, provided the reimbursements
do not cause the Fund's total operating expenses (exclusive of taxes, interest,
brokerage commissions and extraordinary expenses) to exceed an annual rate of
1.50% of average 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 August 2, 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.
32
<PAGE>
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 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 $18.5 billion. NB
Management currently serves as investment manager of the following investment
companies:
33
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
NET ASSETS AT
NAME SEPTEMBER 30, 1998
<S> <C>
Neuberger Berman Cash Reserves Portfolio...............................................................$961,277,115
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio............................................................$356,413,873
(investment portfolio for Neuberger Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio..............................................................$22,692,273
(investment portfolio for Neuberger Berman High Yield Bond Fund)
Neuberger Berman Limited Maturity Bond Portfolio.......................................................$357,429,917
(investment portfolio for Neuberger Berman Limited Maturity
Bond Fund and Neuberger Berman Limited Maturity Bond Trust)
Neuberger Berman Municipal Securities Portfolio.........................................................$38,147,017
(investment portfolio for Neuberger Berman Municipal Securities Trust)
Neuberger Berman Municipal Money Portfolio.............................................................$215,897,411
(investment portfolio for Neuberger Berman Municipal Money Fund)
Neuberger Berman Focus Portfolio.....................................................................$1,296,356,136
(investment portfolio for Neuberger Berman Focus Fund,
Neuberger Berman Focus Trust and Neuberger Berman Focus Assets)
Neuberger Berman Genesis Portfolio...................................................................$1,931,169,593
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman
Genesis Trust and Neuberger Berman Genesis Assets)
Neuberger Berman Guardian Portfolio................................................................ $5,672,663,013
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger
Berman Guardian Trust and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio...............................................................$114,793,906
(investment portfolio for Neuberger Berman International Fund and Neuberger
Berman International Trust)
Neuberger Berman Manhattan Portfolio...................................................................$555,345,009
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
Berman Manhattan Trust and Neuberger Berman Manhattan Assets)
34
<PAGE>
Neuberger Berman Millennium Portfolio...............................................(in registration as of 9/30/98)
(investment portfolio for Neuberger Berman Millennium Fund and Neuberger Berman Millennium Trust)
Neuberger Berman Partners Portfolio..................................................................$3,712,575,595
(investment portfolio for Neuberger Berman Partners Fund, Neuberger Berman
Partners Trust and Neuberger Berman Partners Assets)
Neuberger Berman Socially Responsive...................................................................$300,343,681
Portfolio (investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive Trust and Neuberger Berman
NYCDC Socially Responsive Trust)
Advisers Managers Trust..............................................................................$2,504,652,561
(seven series)
</TABLE>
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
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<PAGE>
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President; Andrea
Trachtenberg, 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; Robert Conti, Treasurer; Ramesh Babu, Assistant Vice President;
Valerie Chang, Assistant Vice President; Stacy Cooper-Shugrue, Assistant Vice
President; Barbara DiGiorgio, Assistant Vice President; Michael J. Hanratty,
Assistant Vice President; Leslie Holliday-Soto, Assistant Vice President; 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,
Weiner 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 to Institutions. 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 Institutions without sales commission 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 30, 1998 ("Distribution
36
<PAGE>
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.
RULE 12B-1 PLAN
The Plan was adopted by the Trustees on October 22, 1998, and executed
on December 30, 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 December 30, 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
37
<PAGE>
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 bought 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
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
The Nasdaq Stock Market, 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.
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<PAGE>
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 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,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described in "Share Prices and Net Asset Value," above. If payment is made in
securities, an Institution generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of its share
of any net investment income (after deducting expenses incurred directly by the
Fund), 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 Institution elects to receive them in
cash ("cash election"). To the extent dividends and other distributions are
subject to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares. A cash
39
<PAGE>
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
To continue to qualify for treatment as a RIC under the Code, the Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of 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
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer. If the Fund failed to
qualify as a RIC for any taxable year, it would be taxed on the full amount of
its taxable income for that year without being able to deduct the distributions
it makes to its shareholders and the shareholders would treat all those
distributions, including distributions of net capital gain (the excess of net
long-term capital gain over net short-term capital loss), as dividends (that is,
ordinary income) to the extent of the Fund's earnings and profits.
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.
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<PAGE>
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)
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
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<PAGE>
that voting power) as to which the Portfolio is a U.S. shareholder -- 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 the Fund most likely would have to
distribute to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax -- even if the Portfolio did not receive those earnings and gain from
the QEF. In most instances it will be very difficult, if not impossible, to make
this election because of certain requirements thereof.
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 PFIC's
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 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 (and under regulations proposed in 1992 that
provided 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 subject to Section 1256 of the Code ("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. Section 1256
contracts also may be marked-to-market for purposes of the Excise Tax. These
rules may operate to increase the amount that a Fund must distribute to satisfy
the Distribution Requirement, which will be taxable to the shareholders as
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<PAGE>
ordinary income, and to increase the net capital gain recognized by the Fund,
without in either case increasing the cash available to the Fund. The Fund may
elect to exclude certain transactions from the operation of section 1256,
although doing so may have the effect of increasing the relative proportion of
net short-term capital gain (taxable as ordinary income) and/or increasing the
amount of dividends that must be distributed to meet the Distribution
Requirement and avoid imposition of the Excise Tax.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or a futures or forward contract entered into by the Fund or
a related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale. The foregoing will not apply,
however, to any transaction during any taxable year that otherwise would be
treated as a constructive sale if the transaction is closed within 30 days after
the end of that year and the Fund holds the appreciated financial position
unhedged for 60 days after that closing (I.E., at no time during that 60-day
period is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale, or granting an option to buy substantially identical
stock or securities).
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 them 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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<PAGE>
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>
<S> <C> <C> <C> <C>
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
- ------------ ----------------- -------------------- ------------------ ----------------
1996 $208,834 $124,879 59.67% 59.80%
1997 305,640 232,238 80.59 75.98
1998 401,601 296,353 76.50 73.79
</TABLE>
98.95% of the $105,248 paid to other brokers by the Portfolio during
the 1998 fiscal year (representing commissions on transactions involving
approximately $59,563,090) 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.
Portfolio securities may, from time to time, be 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. In accordance with the order, securities loans made by the Portfolio
to Neuberger Berman are fully secured by cash collateral. The portion of the
income on the cash collateral which may be shared with Neuberger Berman is to be
determined by reference to concurrent arrangements between Neuberger Berman and
non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger Berman borrows securities from the Portfolio in order
to re-lend them to other Neuberger Berman Portfolios, Neuberger Berman may be
required to pay the Portfolio, on a quarterly basis, certain of the earnings
that Neuberger Berman otherwise has derived from the re-lending of the borrowed
securities. When Neuberger Berman desires to borrow a security that the
Portfolio has indicated a willingness to lend, Neuberger Berman must borrow such
security from the Portfolio, rather than from an unaffiliated lender, unless the
unaffiliated lender is willing to lend such security on more favorable terms (as
specified in the order) than the Portfolio. If, in any month, the Portfolio's
expenses exceed its income in any securities loan transaction with Neuberger
Berman, Neuberger Berman must reimburse the Portfolio for such loss.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio. The following information reflects interest income earned by the
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<PAGE>
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 $20,023 $10,803
In effecting securities transactions, the Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
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.
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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
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
46
<PAGE>
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
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 Series, 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
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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
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 an Institution, a client of an Institution 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
Institution or if the Institution no longer has a contract with NB Management to
perform services. Depending on the policies of the Institution involved, an
investor may be able to transfer an account from one Institution to another.
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. 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(R) ("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.
48
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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 800-366-6264.
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.
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 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.
49
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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 with
respect to Institutions and the payment of dividends and other distributions to
Institutions. All correspondence should be mailed to Neuberger Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. In
addition, State Street serves as transfer agent for the Portfolio.
INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected PricewaterhouseCoopers LLP, 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 24, 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 65.45% 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.
50
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FINANCIAL STATEMENTS
Audited financial statements for the Trust and notes thereto, dated
December 28, 1998, and the report of PricewaterhouseCoopers LLP thereon, are
attached to this SAI. Audited financial statements of the Portfolio and notes
thereto for the fiscal year ended August 31, 1998, and the report thereon of
PricewaterhouseCoopers LLP, independent accountants, are incorporated herein by
reference from the Annual Report to Shareholders of Neuberger Berman Equity
Funds for the fiscal year ended August 31, 1998.
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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
52
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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 SOCIALLY RESPONSIVE ASSETS
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 24, 1998
ASSETS:
Cash $100,000
Deferred registration costs (Note 1) 59,950
Receivable from administrator (Note 2) 29,655
--------
Total Assets 189,605
LIABILITIES:
Payable to administrator (Note 1) 89,605
--------
NET ASSETS $100,000
========
Shares Outstanding ($.001 par value; unlimited shares
of beneficial interest authorized) 10,000
======
Net Asset Value, offering and redemption price per share ($100,000
divided by 10,000 shares outstanding) $10.00
======
The accompanying notes are an integral part of these financial statements.
NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 24, 1998
Income:
Investment income $ 0
----------
Expenses:
Audit fees 1,800
Legal fees 27,755
Miscellaneous 100
-------
Total expenses 29,655
Expenses reimbursed by administrator
(Note 2) (29,655)
--------
Net expenses 0
----------
Net investment income $0
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SIGNIFICANT ACCOUNTING POLICIES:
(a) General: Neuberger Berman Equity Series (the "Trust") is a diversified,
open-end management investment company registered under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Trust was
established as a Delaware business trust organized pursuant to a Trust
instrument dated September 22, 1998. The Trust is comprised of
Neuberger Berman Socially Responsive Assets (the "Fund"), a separate
series of the Trust. The Fund will invest all of its investable assets
in a corresponding Portfolio of Equity Managers Trust which is
registered under the 1940 Act as a diversified, open-end management
investment company. The Trust has had no operations relating to its
Fund other than organizational matters and the issuance and sale of
initial shares to Neuberger Berman Management, Inc. ("Management") on
December 24, 1998.
(b) Organizational and initial registration costs: Costs incurred by the
Trust in connection with its initial registration of its shares have
been deferred and will be amortized on a straight-line basis from the
date upon which the Trust will commence its investment activities, over
a period of one year. Costs incurred by the Trust in connection with
its organization have been expensed. In the event that any of the
initial shares of the Fund are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized registration
costs in the same proportion as the number of shares being redeemed
bears to the number of initial shares outstanding at the time of such
redemptions.
(c) Federal income taxes: The Fund intends to comply with the requirements
of the Internal Revenue Code of 1986, as amended, and intends to
qualify as a regulated investment company and to make the requisite
distributions of income to its shareholders that will be sufficient to
relieve it from substantially all federal income taxes.
(d) Use of estimates: The preparation of financial statements is in
conformity with generally accepted accounting principles and requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities.
Actual results could differ from those estimates.
NOTE 2- TRANSACTIONS WITH AFFILIATES:
Management has voluntarily agreed until December 31, 2001 to reimburse the Fund
for its operating expenses plus its pro rata portion of its corresponding
Portfolio's operating expenses (including the fees payable to Management but
excluding interest, taxes, brokerage commissions, and extraordinary expenses)
("Operating Expenses") which exceed in the aggregate, 1.50% per annum of its
average daily net assets (the "Expense Limitation"). The Fund has agreed to
repay Management through December 31, 2004, for its excess Operating Expenses
previously reimbursed by Management, so long as its annual Operating Expenses
during that period do not exceed the Expense Limitation.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders
Neuberger Berman Equity Assets
In our opinion, the accompanying statement of assets and liabilities and the
related statement of operations present fairly, in all material respects, the
financial position of Neuberger Berman Socially Responsive Assets (the "Fund")
at December 24, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Trust's
management; our responsibility is to express an opinion of these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether these financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 28,1998
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
REGISTRATION STATEMENT ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: Audited financial statements for the Registrant are
included in the Statement of Additional Information. Audited financial statement
for Neuberger Berman Socially Responsive Portfolio, a series of Equity Managers
Trust, are incorporated into the SAI by reference to the Annual Report to
Shareholders of Neuberger Berman Equity Funds for the fiscal year ended August
31, 1998.
(b) Exhibits:
Exhibit
NUMBER DESCRIPTION
(a) (1) Certificate of Trust. Incorporated by
Reference to Registrant's Registration
Statement, File Nos. 33-66137 and 811-09011,
EDGAR Accession No. 0000898432-98-000699.
(2) Trust Instrument of Neuberger Berman Equity
Series. Incorporated by Reference to Registrant's
Registration Statement, File Nos. 33-66137 and
811-09011, EDGAR Accession No.
0000898432-98-000699.
(3) Schedule A - Current Series of Neuberger Berman
Equity Series. Incorporated by Reference to
Registrant's Registration Statement, File Nos.
33-66137 and 811-09011, EDGAR Accession No.
0000898432-98-000699.
(b) By-laws of Neuberger Berman Equity Series. Incorporated
by Reference to Registrant's Registration Statement,
File Nos. 33-66137 and 811-09011, EDGAR Accession No.
0000898432-98-000699.
(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 Inc.
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.
-5-
<PAGE>
Exhibit
NUMBER DESCRIPTION
(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 Inc. 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 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 Inc., 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 and Services Agreement Between
Neuberger Berman Equity Series and Neuberger
Berman Management Inc. Filed herewith.
(2) Schedule A - Series of Neuberger Berman
Equity Series Currently Subject to the
Distribution Agreement. Filed herewith.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) Form of Custodian Contract Between Neuberger Berman
Equity Series and State Street Bank and Trust Company.
Filed herewith.
(h) (1) Form of Transfer Agency and Service Agreement
Between Neuberger Berman Equity Series and
State Street Bank and Trust Company. Filed
herewith.
(2) (i) Administration Agreement Between Neuberger
Berman Equity Series and Neuberger Berman
Management Inc. Filed herewith.
(ii) Schedule A - Series of Neuberger Berman Equity
Series Currently Subject to the Administration
Agreement. Filed herewith.
(iii) Schedule B - Schedule of Compensation Under
the Administration Agreement. Filed herewith.
(i) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Equity Series. Filed herewith.
-6-
<PAGE>
Exhibit
NUMBER DESCRIPTION
(j) Consent of Independent Auditors. Filed herewith.
(k) Financial Statements Omitted from Prospectus. Filed in
SAI.
(l) Letter of Investment Intent. Filed herewith.
(m) Plan Pursuant to Rule 12b-1. Filed herewith.
(n) Financial Data Schedule. Filed herewith.
(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.
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 Berman Management
Inc. ("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
-7-
<PAGE>
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
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 Management Trust;
Vice President, NB Secretary, Advisers Managers Trust; Secretary,
Management Neuberger Berman Income Funds; Secretary, Neuberger
Berman Income Trust; Secretary, Neuberger Berman
Equity Funds; Secretary, Neuberger Berman Equity Trust;
-8-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
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 Senior Securities Analyst, TIAA/CREF.1
President, NB
Management
Brooke A. Cobb
Vice President, Chief Investment Officer, Bainco
NB Management International Investors. Senior
Vice President and Senior
Portfolio Manager, Putnam
Investments.2
Stacy Cooper-Shugrue Assistant Secretary, Neuberger Berman Advisers
Assistant Vice Management Trust; Assistant Secretary, Advisers
President, Managers Trust; Assistant Secretary, Neuberger Berman
NB Management 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 Investments.3
Vice President, NB
Management; Principal,
Neuberger Berman
Barbara DiGiorgio, Assistant Treasurer, Neuberger Berman Advisers
Assistant Vice Management Trust; Assistant Treasurer, Advisers
President, Managers Trust; Assistant Treasurer, Neuberger Berman
NB Management 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 Berman
President and Director, Advisers Management Trust; Chairman
_______________________
1 Until 1996.
2 Until 1997.
3 Until 1996.
-9-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
NB Management; of the Board and Trustee, Advisers Managers Trust;
Principal, Neuberger Chairman of the Board and Trustee, Neuberger Berman
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 Income Funds;
Vice President and President and Trustee, Neuberger Berman Income Trust;
Director, NB President and Trustee, Income Managers Trust.
Management; Principal,
Neuberger Berman
Michael F. Malouf Portfolio Manager, Dresdner RCM Global Investors.4
Vice President, NB
Management
S. Basu Mullick Portfolio Manager, Ark Asset Management.5
Vice President, NB
Management
C. Carl Randolph Assistant Secretary, Neuberger Berman Advisers
Principal, Neuberger Management Trust; Assistant Secretary, Advisers
Berman 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.
________________________
4 Until 1998.
5 Until 1998.
-10-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Ingrid Saukaitis Project Director, Council on
Assistant Vice Economic Priorities.6
President, NB
Management
Richard Russell Treasurer, Neuberger Berman Advisers Management Trust;
Vice President, Treasurer, Advisers Managers Trust; Treasurer,
NB Management 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.
Jennifer K. Silver Portfolio Manager and Director, Putnum Investments.7
Vice President, NB
Management, Principal
Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman Advisers Management
Senior Vice President, Trust; Vice President, Advisers Managers Trust;
NB Management 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.
Catherine Waterworth Managing Director, TCW Group Inc.8
Vice President, NB
Management
Michael J. Weiner Vice President, Neuberger Berman Advisers Management
Senior Vice President, Trust; Vice President, Advisers Managers Trust;
NB Management; Vice President, Neuberger Berman Income Funds;
Principal, Neuberger Vice President, Neuberger Berman Income Trust; Vice
Berman 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
________________________
6 Until 1997.
7 Until 1997.
8 Until 1998.
-11-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Trust; Vice President, Neuberger Berman Equity Assets;
Vice President, Neuberger Berman Equity Series.
Allan R. White Portfolio Manager, Salomon Asset Management.9
Vice President, NB
Management ; Principal,
Neuberger Berman
Celeste Wischerth, Assistant Treasurer, Neuberger Berman Advisers
Assistant Vice Management Trust; Assistant Treasurer, Advisers
President, Managers Trust; Assistant Treasurer, Neuberger Berman
NB Management 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 Advisers
Director, NB Management; Management Trust; President and Trustee, Advisers
Principal, Neuberger Managers Trust; President and Trustee, Neuberger
Berman 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
_______________________
9 Until 1998.
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<PAGE>
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.
NAME POSITIONS AND OFFICES POSITIONS AND
---- WITH UNDERWRITER OFFICES
--------------------- WITH REGISTRANT
---------------
Ramesh Babu Assistant Vice None
President
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Assistant Vice None
President
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice Assistant Secretary
President
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice Assistant Treasurer
President
Stanley Egener President and Chairman of the Board,
Director Chief Executive Officer,
and Trustee
Brian J. Gaffney Vice President None
Joseph G. Galli Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and None
Director
Michael J. Hanratty Assistant Vice None
President
Michael M. Kassen Vice President and None
Director
Robert L. Ladd Assistant Vice None
President
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Carmen G. Martinez Assistant Vice None
President
-13-
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND
---- WITH UNDERWRITER OFFICES
--------------------- WITH REGISTRANT
---------------
Ellen Metzger Vice President and None
Secretary
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 None
President
Kevin L. Risen Vice President None
Richard Russell Vice President Treasurer and Principal
Accounting Officer
Ingrid Saukaitis Assistant Vice None
President
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 Senior Vice President None
of Marketing
Judith M. Vale Vice President None
Josephine Velez Assistant Vice None
President
Susan Walsh Vice President None
Catherine Waterworth 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 Assistant Treasurer
President
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.
-14-
<PAGE>
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.
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.
-15-
<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 Pre-Effective Amendment No. 1 to its Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City and State of New York on the 28th day of December, 1998.
NEUBERGER BERMAN EQUITY SERIES
By: /s/Lawrence Zicklin
--------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Faith Colish Trustee December 28, 1998
- --------------------
Faith Colish
/s/ Stanley Egener
- -------------------- Chairman of the Board December 28, 1998
Stanley Egener and Trustee (Chief
Executive Officer)
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
/s/ Howard A. Mileaf
- --------------------
Howard A. Mileaf Trustee December 28, 1998
/s/ Edward I. O'Brien
- --------------------
Edward I. O'Brien Trustee December 28, 1998
/s/ John T. Patterson, Jr.
- --------------------
John T. Patterson, Jr. Trustee December 28, 1998
/s/ John P. Rosenthal
- --------------------
John P. Rosenthal Trustee December 28, 1998
/s/ Cornelius T. Ryan
- -------------------- Trustee December 28, 1998
Cornelius T. Ryan
/s/ Gustave H. Shubert
- -------------------- Trustee December 28, 1998
Gustave H. Shubert
/s/ Lawrence Zicklin
- -------------------- President December 28, 1998
Lawrence Zicklin and Trustee
/s/ Michael J. Weiner
- -------------------- Vice President (Principal December 28, 1998
Michael J. Weiner Financial Officer)
/s/ Richard Russell
- -------------------- Treasurer (Principal December 28, 1998
Richard Russell Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, EQUITY MANAGERS TRUST has duly
caused this Pre-Effective Amendment No. 1 to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City
and State of New York on the 28th day of December, 1998.
EQUITY MANAGERS TRUST
By: /s/Lawrence Zicklin
--------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Faith Colish Trustee December 28, 1998
- --------------------
Faith Colish
/s/ Stanley Egener
- -------------------- Chairman of the Board December 28, 1998
Stanley Egener and Trustee (Chief
Executive Officer)
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
/s/ Howard A. Mileaf
- --------------------
Howard A. Mileaf Trustee December 28, 1998
/s/ Edward I. O'Brien
- --------------------
Edward I. O'Brien Trustee December 28, 1998
/s/ John T. Patterson, Jr.
- --------------------
John T. Patterson, Jr. Trustee December 28, 1998
/s/ John P. Rosenthal
- --------------------
John P. Rosenthal Trustee December 28, 1998
/s/ Cornelius T. Ryan
- -------------------- Trustee December 28, 1998
Cornelius T. Ryan
/s/ Gustave H. Shubert
- -------------------- Trustee December 28, 1998
Gustave H. Shubert
/s/ Lawrence Zicklin
- -------------------- President December 28, 1998
Lawrence Zicklin and Trustee
/s/ Michael J. Weiner
- -------------------- Vice President (Principal December 28, 1998
Michael J. Weiner Financial Officer)
/s/ Richard Russell
- -------------------- Treasurer (Principal December 28, 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. Incorporated by N.A.
Reference to Registrant's Registration
Statement, File Nos. 33-66137 and 811-09011,
EDGAR Accession No. 0000898432-98-000699.
(2) Trust Instrument of Neuberger Berman Equity N.A.
Trust. Incorporated by Reference to
Registrant's Registration Statement, File Nos.
33-66137 and 811-09011, EDGAR Accession No.
0000898432-98-000699.
(3) Schedule A - Current Series of Neuberger N.A.
Berman Equity Series. Incorporated by
Reference to Registrant's Registration
Statement, File Nos. 33-66137 and 811-09011,
EDGAR Accession No. 0000898432-98-000699.
(b) By-laws of Neuberger Berman Equity Series. N.A.
Incorporated by Reference to Registrant's
Registration Statement, File Nos. 33-66137 and
811-09011, EDGAR Accession No. 0000898432-98-000699.
(c) Declaration of Trust filed under (a) and By-laws N.A.
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 Berman N.A.
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.
-16-
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(2) (i) Sub-Advisory Agreement Between Neuberger N.A.
Berman Management Inc. 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 Berman N.A.
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 N.A.
Berman Management Inc., 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. 000898432-96-000557.
(e) (1) Distribution Agreement Between Neuberger Berman Equity ____
Series and Neuberger Berman Management Inc.
Filed herewith.
(2) Schedule A - Series of Neuberger Berman Equity ____
Series Currently Subject to the Distribution
Agreement. Filed herewith.
(f) Bonus, Profit Sharing or Pension Plans. None. N.A.
(g) (1) Form of Custodian Contract Between Neuberger ____
Berman Equity Series and State Street Bank and
Trust Company. Filed herewith.
(h) (1) (i) Form of Transfer Agency and Service Agreement ____
Between Neuberger Berman Equity Series and State
Street Bank and Trust Company. Filed herewith.
(2) (i) Administration Agreement Between Neuberger ____
Berman Equity Series and Neuberger Berman
Management Inc. Filed herewith.
(ii) Schedule A - Series of Neuberger Berman Equity ____
Series Currently Subject to the Administration
Agreement. Filed herewith.
(iii) Schedule B - Schedule of Compensation Under ____
the Administration Agreement. Filed herewith.
(i) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP on ____
Securities Matters with Respect to Neuberger Berman
Equity Series. Filed herewith.
(j) Consent of Independent Auditors. Filed herewith. ____
(k) Financial Statements Omitted from Prospectus. ____
Filed in SAI.
(l) Letter of Investment Intent. Filed herewith. ____
(m) Plan Pursuant to Rule 12b-1. Filed herewith. ____
(n) Financial Data Schedule. Filed herewith. ____
(o) Plan Pursuant to Rule 18f-3. None. N.A.
-17-
DISTRIBUTION AND SERVICES AGREEMENT
This Agreement is made as of December 30, 1998, between Neuberger
Berman Equity Series, a Delaware business trust ("Trust"), and Neuberger Berman
Management Inc., a New York corporation ("Distributor).
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end, diversified management investment
company and has the power to establish several separate series of shares
("Series"), with each Series having its own assets and investment policies;
WHEREAS, the Trust desires to retain the Distributor to furnish certain
distribution, shareholder, and administrative services to each Series listed in
Schedule A attached hereto, and to such other Series of the Trust hereinafter
established as agreed to from time to time by the parties, evidenced by an
addendum to Schedule A (hereinafter "Series" shall refer to each Series which is
subject to this Agreement, and all agreements and actions described herein to be
made or taken by a Series shall be made or taken by the Trust on behalf of the
Series), and the Distributor is willing to furnish such services; and
WHEREAS, the Trust has approved a plan pursuant to Rule 12b-1 under the
1940 Act ("Plan");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. The Trust hereby appoints the Distributor as agent to sell the
shares of beneficial interest of each Series ("Shares") and the Distributor
hereby accepts such appointment. All sales by the Distributor shall be expressly
subject to acceptance by the Trust, acting on behalf of the Series. The Trust
may suspend sales of the Shares of any one or more Series at any time, and may
resume sales at any later time.
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value ("NAV") thereof as described in
Section 3 hereof, and (ii) the Series shall receive 100% of such NAV.
<PAGE>
(b) The Distributor may enter into agreements, in form and substance
satisfactory to the Trust, with dealers selected by the Distributor, providing
for the sale to such dealers and resale by such dealers of Shares at their NAV.
The Distributor may compensate dealers for services they provide under such
agreements.
3. The Trust agrees to supply to the Distributor, promptly after the
time or times at which NAV is determined, on each day on which the New York
Stock Exchange is open for unrestricted trading and on such other days as the
Board of Trustees of the Trust ("Trustees") may from time to time determine
(each such day being hereinafter called a "business day"), a statement of the
NAV of each Series, determined in the manner set forth in the then-current
Prospectus and Statement of Additional Information ("SAI") of each Series. Each
determination of NAV shall take effect as of such time or times on each business
day as set forth in the then-current Prospectus of each Series.
4. Upon receipt by the Trust at its principal place of business of a
written order from the Distributor, together with delivery instructions, the
Trust shall, if it elects to accept such order, as promptly as practicable,
cause the Shares purchased by such order to be delivered in such amounts and in
such names as the Distributor shall specify, against payment therefor in such
manner as may be acceptable to the Trust. The Trust may, in its discretion,
refuse to accept any order for the purchase of Shares that the Distributor may
tender to it.
5. (a) All sales literature and advertisements used by the
Distributor in connection with sales of Shares shall be subject to approval by
the Trust. The Trust authorizes the Distributor, in connection with the sale or
arranging for the sale of Shares of any Series, to provide only such information
and to make only such statements or representations as are contained in the
Series's then-current Prospectus and SAI or in such financial and other
statements furnished to the Distributor pursuant to the next paragraph or as may
properly be included in sales literature or advertisements in accordance with
the provisions of the Securities Act of 1933 ("1933 Act"), the 1940 Act and
applicable rules of self-regulatory organizations. Neither the Trust nor any
Series shall be responsible in any way for any information provided or
statements or representations made by the Distributor or its representatives or
2
<PAGE>
agents other than the information, statements and representations described in
the preceding sentence.
(b) Each Series shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy of
all of its financial statements and a signed copy of each report prepared for it
by its independent auditors, and shall cooperate fully in the efforts of the
Distributor to negotiate and sell Shares of such Series and in the Distributor's
performance of all its duties under this Agreement.
6. The Distributor, as agent of each Series and for the account and
risk of each Series, is authorized, subject to the direction of the Trust, to
redeem outstanding Shares of such Series when properly tendered by shareholders
pursuant to the redemption right granted to such Series' shareholders by the
Trust Instrument of the Trust, as from time to time in effect, at a redemption
price equal to the NAV per Share of such Series next determined after proper
tender and acceptance. The Trust has delivered to the Distributor a copy of the
Trust's Trust Instrument as currently in effect and agrees to deliver to the
Distributor any amendments thereto promptly upon filing thereof with the Office
of the Secretary of State of the State of Delaware.
7. The Distributor shall assume and pay or reimburse each Series for
the following expenses of such Series: (i) costs of printing and distributing
reports, prospectuses and SAIs for other than existing shareholders used in
connection with the sale or offering of the Series' Shares; (ii) costs of
preparing, printing and distributing all advertising and sales literature
relating to such Series printed at the instruction of the Distributor; and (iii)
counsel fees and expenses in connection with the foregoing. The Distributor
shall pay all its own costs and expenses connected with the sale of Shares and
may pay the compensation and expenses, including overhead and telephone and
other communication expenses, of organizations and employees that engage in or
support the distribution of Shares.
8. Each Series shall maintain a currently effective Registration
Statement on Form N-1A with respect to such Series and shall file with the
Securities and Exchange Commission ("SEC") such reports and other documents as
may be required under the 1933 Act and the 1940 Act or by the rules and
regulations of the SEC thereunder.
Each Series represents and warrants that the Registration Statement,
post-effective amendments, Prospectus and SAI (excluding statements relating to
3
<PAGE>
the Distributor and the services it provides that are based upon written
information furnished by the Distributor expressly for inclusion therein) of
such Series shall not contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that all statements or information
furnished to the Distributor, pursuant to Section 5(b) hereof, shall be true and
correct in all material respects.
9. In addition to the foregoing, the Distributor agrees to provide
or obtain certain administrative and shareholder services for the Series. Such
services shall include, but are not limited to, administering periodic
investment and periodic withdrawal programs; researching and providing
historical account activity information for shareholders requesting it;
preparing and mailing account and confirmation statements to account holders;
preparing and mailing tax forms to account holders; serving as custodian for
retirement plans investing in the Series; dealing appropriately with abandoned
accounts; collating and reporting the number of Shares attributable to each
state for blue sky registration and reporting purposes; identifying and
reporting transactions exempt from blue sky registration requirements; and
providing and maintaining ongoing shareholder services for the duration of the
shareholders' investment in each Series, which may include updates on
performance, total return, other related statistical information, and a
continual analysis of the suitability of the investment in each Series. The
Distributor may subcontract to third parties some or all of its responsibilities
to the Series under this paragraph. The Distributor may pay compensation and
expenses, including overhead and telephone and other communication expenses, to
organizations and employees who provide such services.
10. As compensation for the distribution, shareholder and
administrative services provided under this Agreement, the Distributor shall
receive from each Series a fee at the rate and under the terms and conditions
set forth in the Plan adopted by the Series, as such Plan may be amended from
time to time. In addition to the expenditures specifically authorized herein,
the Distributor may spend such amounts as it deems appropriate for any purpose
consistent with the Plan, as amended from time to time.
11. The Distributor shall prepare, at least quarterly, reports for
the Trustees showing expenditures under this Agreement and the purposes for
4
<PAGE>
which such expenditures were made. Such reports shall be in a format suitable to
ensure compliance with the applicable requirements of the SEC and the National
Association of Securities Dealers.
12. (a) This Agreement shall become effective on December 30, 1998
and shall remain in full force and effect until August 2, 1999 and may be
continued from year to year thereafter; PROVIDED, that such continuance shall be
specifically approved each year by the Trustees or by a majority of the
outstanding voting securities of the Series, and in either case, also by a
majority of the Trustees who are not interested persons of the Trust or the
Distributor ("Disinterested Trustees") and by a majority of those Disinterested
Trustees who have no direct or indirect financial interest in the Plan or this
Agreement ("Rule 12b-1 Trustees"). This Agreement may be amended as to any
Series with the approval of the Trustees or of a majority of the outstanding
voting securities of such Series; PROVIDED, that in either case, such amendment
also shall be approved by a majority of both the Disinterested Trustees and the
Rule 12b-1 Trustees.
(b) Either party may terminate this Agreement without the
payment of any penalty, upon not more than sixty days' nor less than thirty
days' written notice delivered personally or mailed by registered mail, postage
prepaid, to the other party; PROVIDED, that in the case of termination by any
Series, such action shall have been authorized (i) by resolution of the
Trustees, (ii) by vote of a majority of the outstanding voting securities of
such Series or (iii) by written consent of a majority of the Disinterested
Trustees or the Rule 12b-1 Trustees.
(c) This Agreement shall automatically terminate if it is
assigned by the Distributor.
(d) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "interested persons," "assignment" and "vote of a
majority of the outstanding voting securities," as used in this Agreement, shall
have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition,
when the effect of a requirement of the 1940 Act reflected in any provision of
this Agreement is modified, interpreted or relaxed by a rule, regulation or
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<PAGE>
order of the SEC, whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule, regulation or order. The
Trust and the Distributor may from time to time agree on such provisions
interpreting or clarifying the provisions of this Agreement as, in their joint
opinion, are consistent with the general tenor of this Agreement and with the
specific provisions of this Section 12(d). Any such interpretations or
clarifications shall be in writing signed by the parties and annexed hereto, but
no such interpretation or clarification shall be effective if in contravention
of any applicable federal or state law or regulations, and no such
interpretation or clarification shall be deemed to be an amendment of this
Agreement.
No term or provision of this Agreement shall be construed to
require the Distributor to provide distribution, shareholder, or administrative
services to any series of the Trust other than the Series, or to require any
Series to pay any compensation or expenses that are properly allocable, in a
manner approved by the Trustees, to a series of the Trust other than such
Series.
(e) This Agreement is made and to be principally performed in
the State of New York, and except insofar as the 1940 Act or other federal laws
and regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York.
(f) This Agreement is made by the Trust solely with respect to
the Series, and the obligations created hereby with respect to one Series bind
only assets belonging to that Series and are not binding on any other series of
the Trust.
13. The Distributor or one of its affiliates may from time to time
deem it desirable to offer to the list of shareholders of each Series the shares
of other mutual funds for which it acts as Distributor, including other series
of the Trust or other products or services; however, any such use of the list of
shareholders of any Series shall be made subject to such terms and conditions,
if any, as shall be approved by a majority of the Disinterested Trustees.
14. The Distributor shall look only to the assets of a Series for
the performance of this Agreement by the Trust on behalf of such Series, or
satisfaction of any claim hereunder, and neither the shareholders, the Trustees
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed by their duly authorized officers and under their respective
seals.
NEUBERGER BERMAN
EQUITY SERIES
By: /s/ Michael Weiner
----------------------
Title: Vice President
---------------------
NEUBERGER BERMAN
MANAGEMENT INC.
By: /s/ Stanley Egener
----------------------
Title: President
----------------------------
7
/
DISTRIBUTION AND SERVICES AGREEMENT
SCHEDULE A
SERIES DATE MADE PARTY TO AGREEMENT
Neuberger Berman Socially Responsive Assets December 30, 1998
CUSTODIAN CONTRACT
Between
NEUBERGER BERMAN EQUITY SERIES
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
======================================================
TABLE OF CONTENTS
Page
======================================================
1. Employment of Custodian and Property
to be Held By It......................1
======================================================
2. Duties of the Custodian with Respect to
Property of the Fund Held by the
Custodian in the United States...........2
======================================================
2.1 Holding Securities...................2
2.2 Delivery of Securities...............2
2.3 Registration of Securities...........4
2.4 Bank Accounts........................4
2.5 Availability of Federal Funds........4
2.6 Collection of Income.................4
2.7 Payment of Fund Monies...............5
2.8 Liability for Payment in Advance
of Receipt of Securities
Purchased................................6
2.9 Appointment of Agents................6
2.10 Deposit of Fund Assets in
Securities System........................6
2.11 Fund Assets Held in the
Custodian's Direct Paper
System...................................7
2.12 Segregated Account..................8
2.13 Ownership Certificates for
Tax Purposes.............................9
2.14 Proxies.............................9
2.15 Communications Relating to
Portfolio Securities.....................9
======================================================
3. Duties of the Custodian with Respect
to Property of the Fund Held Outside
of the United States..................9
======================================================
3.1 Appointment of Foreign
Sub-Custodians...........................9
3.2 Assets to be Held...................10
3.3 Foreign Securities
Depositories............................10
3.4 Agreements with Foreign
Banking Institutions....................10
3.5 Access of Independent
Accountants of the Fund.................10
3.6 Reports by Custodian................10
3.7 Transactions in Foreign
Custody Account.........................10
3.8 Liability of Foreign
Sub-Custodians..........................11
3.9 Liability of Custodian..............11
3.10 Reimbursement for Advances.........11
3.11 Monitoring Responsibilities........12
3.12 Branches of U.S. Banks.............13
3.13 Foreign Exchange Transactions......13
<PAGE>
======================================================
3.13 Tax Law............................13
======================================================
4. Payments for Sales or Repurchase or
Redemptions of Shares of the Fund.......14
======================================================
5. Proper Instructions..................14
======================================================
6. Actions Permitted Without Express
Authority...............................15
======================================================
7. Evidence of Authority................15
======================================================
8. Duties of Custodian With Respect to
the Books of Account and Calculations
of Net Asset Value and Net Income....15
======================================================
9. Records..............................16
======================================================
10. Opinion of Fund's Independent
Accountants.............................16
======================================================
11. Reports to Fund by Independent Public
Accountants.............................16
======================================================
12. Compensation of Custodian...........16
======================================================
13. Responsibility of Custodian.........17
======================================================
14. Effective Period, Termination and
Amendment...............................17
======================================================
15. Successor Custodian.................18
======================================================
16. Interpretive and Additional
Provisions..........................19
======================================================
17. Additional Funds....................19
======================================================
18. Massachusetts Law to Apply..........19
======================================================
19. Limitation of Trustee, Officer and
Shareholder Liability ..................19
======================================================
20. No Liability of Other Portfolios....20
======================================================
21. Confidentiality.....................20
======================================================
22. Assignment..........................20
======================================================
23. Severability........................20
======================================================
24. Prior Contracts.....................20
======================================================
25. Shareholder Communications Election.20
======================================================
<PAGE>
CUSTODIAN CONTRACT
This Contract between Neuberger Berman Equity Series, a business trust
organized and existing under the laws of Delaware, having its principal place of
business at 605 Third Avenue, New York, New York 10158 hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series,
Neuberger Berman Socially Responsive Assets (such series together with all other
series subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
each Portfolio, including securities which the Fund, on behalf of the applicable
Portfolio desires to be held in places within the United States ("domestic
securities") and securities it desires to be held outside the United States
("foreign securities") pursuant to the provisions of the Trust Instrument. The
Fund on behalf of each Portfolio agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Portfolio(s) from time to time, and the cash consideration received
by it for such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of a
Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian pursuant to Section
2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
2
<PAGE>
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of
the Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, BUT ONLY against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for a Portfolio, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind, as
may be described from time to time in the currently effective
3
<PAGE>
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of requests
by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund which shall contain only property held by the Custodian as
custodian for that Portfolio, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio, other than cash
maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for a Portfolio may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust company shall
be qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
4
<PAGE>
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian
or its agent and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder.
Collection of income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Custodian so long as the securities are registered and remain in the name
of the Fund, the Custodian, or its nominee, or in the Depository Trust
Company account of the Custodian, but otherwise shall be the
responsibility of the Fund and the Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to
act as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Portfolio or
in the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of repurchase
agreements entered into between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund as
defined in Article 5;
5
<PAGE>
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to
be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund on behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, and its rules or regulations to act as a custodian, as
its agent to carry out such of the provisions of this Article 2 as the
Custodian may from time to time direct; PROVIDED, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
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1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Portfolio.
Copies of all advices from the Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Portfolio confirmation of
each transfer to or from the account of the Portfolio in the form of
a written advice or notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian (or by any agent appointed by the
Custodian pursuant to Section 2.9) on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the certificate required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if
and to the extent that the Portfolio has not been made whole for any
such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
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1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on the Custodian's system of internal accounting control
as the Fund may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
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Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers
of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Portfolio shall when reasonably
possible notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for each Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of a
Portfolio's assets.
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3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect a Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to each Portfolio, the
foreign securities of the Portfolio held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of each Portfolio shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of each Portfolio held by the foreign sub-custodian will be subject
only to the instructions of the Custodian or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of each Portfolio held by foreign sub-custodians, including
but not limited to an identification of entities having possession of each
Portfolio's securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession of such
securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and
2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
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(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any
such nominee harmless from any liability as a holder of record of such
securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.9, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or the like, in each
case under circumstances where the Custodian and State Street London Ltd.
have exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange ("Advance"), or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Contract, except such as may arise from its or its nominee's own
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negligent action, negligent failure to act or willful misconduct
("Liability") then in such event property equal in value to not more than
125% of such Advance and accrued interest on the Advance or the
anticipated amount of such Liability, held at any time for the account of
the appropriate Portfolio by the Custodian or sub-custodian may be held as
security for such Liability or for such Advance and accrued interest on
the Advance. The Custodian shall designate the security or securities
constituting security for an Advance or Liability (the "Designated
Securities") by notice in writing to the Fund (which may be sent by tested
telefax or telex). In the event the value of the Designated Securities
shall decline to less than 110% of the amount of such Advance and accrued
interest on the Advance or the anticipated amount of such Liability, then
the Custodian may designate in the same manner an additional security for
such obligation ("Additional Securities"), but the aggregate value of the
Designated Securities and Additional Securities shall not be in excess of
125% of the amount of such Advance and the accrued interest on the Advance
or the anticipated amount of such Liability. At the request of the Fund,
on behalf of a Portfolio, the Custodian shall agree to substitution of a
security or securities which have a value equal to the value of the
Designated or Additional Securities which the Fund desires be released
from their status as security, and such release from status as security
shall be effective upon the Custodian and the Fund agreeing in writing as
to the identity of the substituted security or securities, which shall
thereupon become Designated Securities.
Notwithstanding the above, the Custodian shall, at the request of the
Fund, on behalf of a Portfolio, immediately release from their status as
security any or all of the Designated Securities or Additional Securities
upon the Custodian's receipt from such of Portfolio cash or cash
equivalents in an amount equal to 100% of the value of the Designated
Securities or Additional Securities that the Fund desires to be released
from their status as security pursuant to this Section. The applicable
Portfolio shall reimburse or indemnify the Custodian in respect of a
Liability and shall pay any Advances upon demand; provided, however, that
the Custodian first notified the Fund on behalf of the Portfolio of such
demand for repayment, reimbursement or indemnification. If, upon
notification, the Portfolio shall fail to pay such Advance or interest
when due or shall fail to reimburse or indemnify the Custodian promptly in
respect of a Liability, the Custodian shall be entitled to dispose of the
Designated Securities and Additional Securities to the extent necessary to
obtain repayment, reimbursement or indemnification. Interest, dividends
and other distributions paid or received on the Designated Securities and
Additional Securities, other than payments of principal or payments upon
retirement, redemption or repurchase, shall remain the property of the
Portfolio, and shall not be subject to this Section. To the extent that
the disposition of the Portfolio's property, designated as security for
such Advance or Liability, results in an amount less than necessary to
obtain repayment, reimbursement or indemnification, the Portfolio shall
continue to be liable to the Custodian for the differences between the
proceeds of the disposition of the Portfolio's property, designated as
security for such Advance or Liability, and the amount of the repayment,
reimbursement or indemnification due to the Custodian and the Custodian
shall have the right to designate in the same manner described above an
additional security for such obligation which shall constitute Additional
Securities hereunder.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
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the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of a
Portfolio's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 FOREIGN EXCHANGE TRANSACTIONS. (a) Upon receipt of Proper Instructions,
the Custodian shall settle foreign exchange contracts or options to
purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of a Portfolio with such brokers, banks or
trust companies other than the Custodian ("Currency Brokers") as the Fund
may determine and direct pursuant to Proper Instructions or as the
Custodian may select ("Transactions Other Than As Principal").
(b) The Custodian shall not be obligated to enter into foreign exchange
transactions as principal ("Transactions As Principal"). However, if the
Custodian has made available to the Fund its services as a principal in
foreign exchange transactions and subject to any separate agreement
between the parties relating to such transactions, the Custodian shall
enter into foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf of and for the
account of a Portfolio, with the Custodian as principal.
(c) If, in a Transaction Other Than As Principal, a Currency Broker is
selected by the Fund, on behalf of a Portfolio, the Custodian shall have
no duty with respect to the selection of the Currency Broker, or, so long
as the Custodian acts in accordance with Proper Instructions, for the
failure of such Currency Broker to comply with the terms of any contract
or option. If, in a Transaction Other Than As Principal, the Currency
Broker is selected by the Custodian or if the Custodian enters into a
Transaction As Principal, the Custodian shall be responsible for the
selection of the Currency Broker and the failure of such Currency Broker
to comply with the terms of nay contract or option.
(d) In Transactions Other Than As Principal and Transactions As Principal,
the Custodian shall be responsible for any transfer of cash, the
transmission of instructions to and from a Currency Broker, if any, the
safekeeping of all certificates and other documents and agreements
evidencing or relating to such foreign exchange transactions and the
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maintenance of proper records as set forth in Section 9 of this Contract.
3.14 TAX LAW. Except to the extent that imposition of any tax liability arises
from State Street's failure to perform in accordance with the terms of
this Section 3.14 or from the failure of any sub-custodian to perform in
accordance with the terms of the applicable subcustody agreement, State
Street shall have no responsibility or liability for any obligations now
or hereafter imposed on each Portfolio by the tax law of the domicile of
each Portfolio or of any jurisdiction in which each Portfolio is invested
or any political subdivision thereof. It shall be the responsibility of
State Street to use due care to perform such steps as are required to
collect any tax refund, to ascertain the appropriate rate of tax
withholding and to provide such information and documents as may be
required to enable each Portfolio to receive appropriate tax treatment
under applicable tax laws and any applicable treaty provisions. Unless
otherwise informed by each Portfolio, State Street, in performance of its
duties under this Section, shall be entitled to apply categorical
treatment of each Portfolio according to the nationality of each
Portfolio, the particulars of its organization and other relevant details
that shall be supplied by each Portfolio. State Street shall be entitled
to rely on any information supplied by each Portfolio. State Street may
engage reasonable professional advisors disclosed to each Portfolio by
State Street, which may include attorneys, accountants or financial
institutions in the regular business of investment administration and may
rely upon advice received therefrom. It shall be the duty of each
Portfolio to inform State Street of any change in the organization,
domicile or other relevant fact concerning tax treatment of each Portfolio
and further to inform State Street if each Portfolio is or becomes the
beneficiary of any special ruling or treatment not applicable to the
general nationality and category of entity of which each Portfolio is a
part under general laws and treaty provisions.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Trust Instrument and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
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5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing
signed or initialled by two or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Fund and the
Custodian are satisfied that such procedures afford adequate safeguards for the
Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three party
agreement which requires a segregated asset account in accordance with Section
2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Trust Instrument as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
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8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
If, and to the extent requested by the Fund, the Custodian shall cooperate
with and supply necessary information to the entity or entities appointed by the
Board of Trustees of the Fund to keep the books of account of each Portfolio
and/or compute the net asset value per share of the outstanding shares of each
Portfolio or, if directed in writing to do so by the Fund on behalf of the
Portfolio, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Portfolio as described in the Fund's currently effective
prospectus related to such Portfolio and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time in the
Fund's currently effective prospectus related to such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each Portfolio at such
times as the Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
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<PAGE>
relating to the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
As a condition to the indemnification provided for in this Section 13, if
in any case the indemnifying party is asked to indemnify and hold the
indemnified party harmless, the indemnified party shall fully and promptly
advise the indemnifying party of all pertinent facts concerning the situation in
question, and shall use all reasonable care to identify, and promptly notify the
indemnifying party of, any situation which presents or appears likely to present
the probability of such a claim for indemnification against the indemnifying
party. The indemnifying party shall be entitled, at its own expense, to
participate in the investigation and to be consulted as to the defense of any
such claim, and in such event, the indemnified party shall keep the indemnifying
party fully and currently informed of all developments relating to such
investigation or defense. At any time, the indemnifying party shall be entitled
at its own expense to conduct the defense of any such claim, provided that the
indemnifying party: (a) reasonably demonstrates to the other party its ability
to pay the full amount of potential liability in connection with such claim and
(b) first admits in writing to the other party that such claim is one in respect
of which the indemnifying party is obligated to indemnify the other party
hereunder. Upon satisfaction of the foregoing conditions, the indemnifying party
shall take over complete defense of the claim, and the indemnified party shall
initiate no further legal or other expenses for which it shall seek
indemnification. The indemnified party shall in no case confess any claim or
make any compromise in any case in which the indemnifying party may be asked to
indemnify the indemnified party, except with the indemnifying party's prior
written consent.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
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<PAGE>
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue
in full force and effect with respect to each Portfolio until terminated as
hereinafter provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination to
take effect not sooner than thirty (30) days after the date of such delivery or
mailing; PROVIDED, however that the Custodian shall not with respect to a
Portfolio act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the use of a particular Securities System by
such Portfolio as required by Rule 17f-4 under the Investment Company Act of
1940, as amended and that the Custodian shall not with respect to a Portfolio
act under Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the use by such
Portfolio of the Direct Paper System; PROVIDED FURTHER, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Trust Instrument, and
further provided, that the Fund on behalf of one or more of the Portfolios may
at any time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements. Termination of the Contract with respect to
one Portfolio (but less than all of the Portfolios) will not constitute
termination of the Contract, and the terms of the Contract continue to apply to
the other Portfolios.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
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<PAGE>
securities, funds and other properties in accordance with such vote. In the
event that no written order designating a successor custodian or certified copy
of a vote of the Board of Trustees shall have been delivered to the Custodian on
or before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the Investment Company Act of 1940, doing business in
Boston, Massachusetts, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held by the
Custodian relative thereto and all other property held by it under this Contract
on behalf of each applicable Portfolio and to transfer to an account of such
successor custodian all of the securities of each such Portfolio held in any
Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Trust Instrument of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to Neuberger Berman Socially Responsive Assets with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
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<PAGE>
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. LIMITATION OF TRUSTEE, OFFICER AND SHAREHOLDER LIABILITY
It is expressly agreed that the obligations of the Fund and each Portfolio
hereunder shall not be binding upon any of the Trustees, officers, agents or
employees of the Fund or upon the shareholders of any Portfolio personally, but
shall only bind the assets and property of the Fund, as provided in its Trust
Instrument. The execution and delivery of this Contract have been authorized by
the Trustees of the Fund, and this Contract has been executed and delivered by
an authorized officer of the Fund acting as such; neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Fund, as
provided in its Trust Instrument.
20. NO LIABILITY OF OTHER PORTFOLIOS
Notwithstanding any other provision of this Contract, the parties agree
that the assets and liabilities of each Portfolio are separate and distinct from
the assets and liabilities of each other Portfolio and that no Portfolio shall
be liable or shall be charged for any debt, obligation or liability of any other
Portfolio, whether arising under this Contract or otherwise.
21. CONFIDENTIALITY
The Custodian agrees that all books, records, information and data
pertaining to the business of the Fund which are exchanged or received pursuant
to the negotiation or carrying out of this Contract shall remain confidential,
shall not be voluntarily disclosed to any other person, except as may be
required by law, and shall not be used by the Custodian for any purpose not
directly related to the business of the Fund, except with the Fund's written
consent.
22. ASSIGNMENT
Neither the Fund nor the Custodian shall have the right to assign any of
its rights or obligations under this Contract without the prior written consent
of the other party.
23. SEVERABILITY
If any provision of this Contract is held to be unenforceable as a matter
of law, the other terms and provisions hereof shall not be affected thereby and
shall remain in full force and effect.
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<PAGE>
24. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios, or any
predecessor(s) thereto, and the Custodian relating to the custody of the Fund's
assets.
25. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
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<PAGE>
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [x] The Custodian is not authorized to release the Fund's
name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the ___ day of December, 1998.
ATTEST NEUBERGER BERMAN EQUITY SERIES
- ----------------------- --------------------------------
By: Stanley Egener
ATTEST STATE STREET BANK AND TRUST COMPANY
- ----------------------- --------------------------------
By:
Title:
22
TRANSFER AGENCY AND SERVICE AGREEMENT
between
NEUBERGER BERMAN EQUITY SERIES
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Terms of Appointment; Duties of the Bank....................... 1
2. Fees and Expenses.............................................. 3
3. Representations and Warranties of the Bank..................... 4
4. Representations and Warranties of the Fund..................... 4
5. Data Access and Proprietary Information........................ 4
6. Indemnification................................................ 5
7. Covenants of the Fund and the Bank............................. 7
8. Termination of Agreement....................................... 7
9. Additional Funds................................................ 8
10. Assignment...................................................... 8
11. Amendment....................................................... 8
12. Massachusetts Law to Apply...................................... 8
13. Force Majeure................................................... 8
14. Consequential Damages........................................... 9
15. Merger of Agreement............................................. 9
16. Limitations of Liability of the Trustees and Shareholders,
Officers,Employees and Agent.................................... 9
17. Counterparts.................................................... 9
18. Notices......................................................... 9
2
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the ____ day of December, 1998, by and between NEUBERGER
BERMAN EQUITY SERIES, a Delaware business trust, having its principal office and
place of business at 605 Third Avenue, New York, New York 10158 (the "Fund"),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having
its principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, Neuberger
Berman Socially Responsive Assets (such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 9, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of beneficial interest of the Fund
representing interests in each of the respective Portfolios ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and agent
in connection with any accumulation, open-account or similar plans
provided to the shareholders of each of the respective Portfolios of the
Fund ("Shareholders") and set out in the currently effective prospectus
and statement of additional information ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Trust Instrument of the Fund
(the "Custodian");
<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit (or credit the appropriate
shareholder account) payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to
the Bank and protecting the Bank and the Fund, and the
Bank at its option, may issue replacement certificates
in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(ix) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to
monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing
Shareholder reports and prospectuses to current Shareholders,
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<PAGE>
withholding taxes on U.S. resident and non-resident alien accounts,
preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund, on
behalf of each Portfolio agrees to pay the Bank an annual maintenance fee
for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund, on behalf
of the applicable Portfolio, agrees to reimburse the Bank for
out-of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche, tabulating
proxies, records storage, or advances incurred by the Bank for the items
set out in the fee schedule attached hereto. In addition, any other
expenses incurred by the Bank at the request or with the consent of the
Fund, will be reimbursed by the Fund on behalf of the applicable
Portfolio.
2.3 The Fund, on behalf of the applicable Portfolio, agrees to pay all fees
and reimbursable expenses within five days following the mailing of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date
of such materials.
3
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of Delaware.
4.2 It is empowered under applicable laws and by its Trust Instrument and
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Trust Instrument and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the computer programs, screen formats, report
formats (except such screen formats and report formats as may be necessary
to respond to shareholder problems or inquiries), interactive design
techniques, and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and
ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Bank
4
<PAGE>
or other third party. In no event shall Proprietary Information be deemed
Customer Data. The Fund agrees to treat all Proprietary Information as
proprietary to the Bank and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information (such transactions constituting a "COEFI"), then in such
event the Bank shall be entitled to rely on the validity and authenticity
of such instruction without undertaking any further inquiry as long as
such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
5
<PAGE>
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar.
(d) The reasonable reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund
on behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
6.2 The Bank shall indemnify and hold the Fund and each Portfolio thereof
harmless from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or
attributed to any action or failure or omission to act by the Bank as a
result of the Bank's lack of good faith, negligence or willful misconduct.
6.3 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reasonable
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Fund. The
Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers
of the Fund, and the proper countersignature of any former transfer agent
or former registrar, or of a co-transfer agent or co-registrar.
6
<PAGE>
6.4 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the Fund of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with
the party seeking indemnification in the defense of such claim or to
defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any
claim or make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior written
consent.
7. COVENANTS OF THE FUND AND THE BANK
7.1 The Fund shall on behalf of each Portfolio promptly furnish to the Bank
the following:
(a) A certified copy of the resolution of the Trustees of the Fund
authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Trust Instrument and By-Laws of the Fund and all
amendments thereto.
7.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
7.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
7.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
7.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
7.6 Notwithstanding any other provision of this Agreement, the parties agree
that the assets and liabilities of each Portfolio of the Fund are separate
and distinct from the assets and liabilities of each other Portfolio and
that no Portfolio shall be liable or shall be charged for any debt,
obligation or liability of any other Portfolio, whether arising under the
Agreement or otherwise.
7
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8. TERMINATION OF AGREEMENT
8.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
8.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination.
9. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to Neuberger Berman Socially Responsive Assets, with respect to
which it desires to have the Bank render services as transfer agent under
the terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
10. ASSIGNMENT
10.1 Except as provided in Section 10.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
10.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(l) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(l) or (iii) a
BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
11. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Trustees
of the Fund.
12. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of
Massachusetts.
13. FORCE MAJEURE
8
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In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
14. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
15. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
16. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS, OFFICERS,
EMPLOYEES AND AGENT
A copy of the Trust Instrument of the Fund is on file with the Secretary
of the State Of Delaware. The parties agree that neither the Shareholders,
Trustees, officers, employees nor any agent of the Fund shall be liable
hereunder and that the parties to this Agreement other than the Fund shall
look solely to the Fund property for the performance of this Agreement or
payment of any claim under this Agreement.
17. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
18. NOTICES
All notices, requests, consents and other communications hereunder
(collectively "communications") shall be in writing and shall be
personally delivered or mailed, first class postage prepaid,
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(a) if to the Fund, to
Neuberger Berman Equity Series
605 Third Avenue
New York, NY 10158
Attention: Michael J. Weiner
Vice President
(b) if to the Bank, to
Boston Financial Data Services, Inc.
Two Heritage Drive
North Quincy, MA 02171
Attn: Paul Alsama
or such other address as either party shall have furnished to the other in
writing; provided that any communication may be sent by "tested" telex or
any other form of electronic transmission capable of producing a permanent
record and agreed upon by the parties in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
NEUBERGER BERMAN EQUITY SERIES
BY:
--------------------------------
Michael Weiner
ATTEST:
- ------------------
STATE STREET BANK AND TRUST COMPANY
BY:
--------------------------------
Executive Vice President
ATTEST:
- ------------------
10
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
Bank Fund
---- ----
1. Receives orders X X
for the purchase (if in (if by
of Shares. writing) phone)
2. Issue Shares and X
hold Shares in
Shareholders
accounts.
3. Receive X X
redemption (if in (if by
requests. writing) phone)
4. Effect X
transactions 1-3 (2 is
above directly always
with BFDS)
broker-dealers.
5. Pay over monies X
to redeeming
Shareholders.
6. Effect transfers X
of Shares.
7. Prepare and X
transmit
dividends and
distributions.
8. Issue X
Replacement
Certificates.
9. Reporting of X
abandoned
property.
10. Maintain records X
of account.
11. Maintain and keep X
a current and
accurate control
book for each
issue of securities.
11
<PAGE>
Service Performed Responsibility
12. Mail proxies. X
13. Mail Shareholder X
reports.
14. Mail X
prospectuses to
current
Shareholders.
15. Withhold taxes X
on U.S. resident
and non-resident
alien accounts.
16. Prepare and file X
U.S. Treasury
Department forms.
17. Prepare and mail X
account and
confirmation
statements for
Shareholders.
18. Provide X
Shareholder
account
information.
19. Blue Sky X
reporting.
o Such services are more fully described in Section 1.2 (a), (b) and (c) of the
Agreement.
12
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
BY:
--------------------------------
Michael Weiner
ATTEST:
- ------------------
STATE STREET BANK AND TRUST COMPANY
BY:
--------------------------------
Executive Vice President
ATTEST:
- ------------------
13
ADMINISTRATION AGREEMENT
This Agreement is made as of December 30, 1998, between Neuberger
Berman Equity Series, a Delaware business trust ("Trust"), and Neuberger Berman
Management Inc., a New York corporation ("Administrator").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end, diversified management investment
company and may establish several separate series of shares ("Series"), with
each Series having its own assets and investment policies; and
WHEREAS, the Trust desires to retain the Administrator to furnish
administrative services, including shareholder accounting, recordkeeping, and
other services to shareholders, to each Series listed in Schedule A attached
hereto, and to such other Series of the Trust hereinafter established as agreed
to from time to time by the parties, evidenced by an addendum to Schedule A
(hereinafter "Series" shall refer to each Series which is subject to this
Agreement and all agreements and actions described herein to be made or taken by
a Series shall be made or taken by the Trust on behalf of the Series), and the
Administrator is willing to furnish such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. SERVICES OF THE ADMINISTRATOR.
1.1 ADMINISTRATIVE SERVICES. The Administrator shall supervise each
Series's business and affairs and shall provide such services required for
effective administration of such Series as are not provided by employees or
other agents engaged by such Series; PROVIDED, that the Administrator shall not
have any obligation to provide under this Agreement any direct or indirect
<PAGE>
services to a Series's shareholders, any services related to the distribution of
a Series's shares, or any other services that are the subject of a separate
agreement or arrangement between a Series and the Administrator. Subject to the
foregoing, in providing administrative services hereunder, the Administrator
shall:
1.1.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without
cost to each Series, or pay the cost of, such office space, office equipment and
office facilities as are adequate for the Series's needs;
1.1.2 PERSONNEL. Provide, without remuneration from or other
cost to each Series, the services of individuals competent to perform all of the
Series's executive, administrative and clerical functions that are not performed
by employees or other agents engaged by the Series or by the Administrator
acting in some other capacity pursuant to a separate agreement or arrangement
with the Series;
1.1.3 AGENTS. Assist each Series in selecting and coordinating
the activities of the other agents engaged by the Series, including the Series's
shareholder servicing agent, custodian, independent auditors and legal counsel;
1.1.4 TRUSTEES AND OFFICERS. Authorize and permit the
Administrator's directors, officers or employees who may be elected or appointed
as trustees or officers of the Trust to serve in such capacities, without
remuneration from or other cost to the Trust or any Series;
1.1.5 BOOKS AND RECORDS. Assure that all financial, accounting
and other records required to be maintained and preserved by each Series are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations; and
2
<PAGE>
1.1.6 REPORTS AND FILINGS. Assist in the preparation of (but
not pay for) all periodic reports by each Series to shareholders of such Series
and all reports and filings required to maintain the registration and
qualification of the Series and the Series's shares, or to meet other regulatory
or tax requirements applicable to the Series, under federal and state securities
and tax laws.
1.2 SHAREHOLDER AND RELATED SERVICES. The Administrator shall
provide each of the following services as may be required by any Series, its
shareholders (each of which must be either a broker-dealer, pension plan
administrator, or other institution that provides certain accounting,
recordkeeping and other services to its accounts ("Accounts") and which has
entered into an administrative services agreement with the Administrator (each,
an "Institution")), or the Accounts, as specified; PROVIDED, that the
Administrator's obligation to furnish any service to Accounts or Account holders
of any Institution shall be dependent upon receipt of all necessary information
from that Institution:
1.2.1 PURCHASE ORDERS. Receive for acceptance, as agent for
the Series, orders from Institutions and Accounts for the purchase of Series
shares transmitted or delivered to the office of the Administrator, note the
time and date of each order when received, promptly deliver payment for such
purchases to the Series' custodian ("Custodian"), and coordinate with the Series
or its designees for the issuance of the appropriate number of shares so
purchased to the appropriate Institution or Account;
1.2.2 RECORDS. Maintain records of the number of shares of
each Series attributable to each Account (including name, address and taxpayer
identification number), record all changes to such shares held in each Account
on a daily basis, and furnish to each Series each business day the total number
of shares of such Series attributable to all Accounts;
3
<PAGE>
1.2.3 REDEMPTION REQUESTS. Receive for acceptance requests and
directions from Institutions and Accounts for the redemption of Series shares
transmitted or delivered to the office of the Administrator, note the time and
date of each request when received, process such requests and directions in
accordance with the redemption procedures set forth in the then current
Prospectus and Statement of Additional Information ("SAI") of the Series, and
deliver the appropriate documentation to the Custodian;
1.2.4 WIRE TRANSFERS. Coordinate and implement
bank-to-bank wire transfers in connection with Series share purchases and
redemptions by Institutions;
1.2.5 REDEMPTION PAYMENTS. Upon receipt of monies paid to it
by the Custodian with respect to any redemption of Series shares, pay or cause
such monies to be paid pursuant to instructions by the appropriate Account or
Institution.
1.2.6 EXCHANGES. Receive and execute orders from Accounts and
Institutions to exchange shares by concurrent purchases and redemptions of
shares of a Series and shares of other Series or of other investment companies
or series thereof pursuant to each Series's then current Prospectus and SAI;
1.2.7 DIVIDENDS. Based upon information received from a Series
regarding dividends or other distributions on Series shares, calculate the
dividend or distribution attributable to each Account; if such dividend or
distribution is payable in shares or by reinvestment in shares, calculate such
4
<PAGE>
shares for each Account and record same in the share records for each Account,
and if such dividend or distribution is payable in cash, upon receipt of monies
therefor from the Custodian, pay or cause such monies to be paid to the
appropriate Account or as such Account may direct;
1.2.8 INQUIRIES. Respond to telephonic, mail, and in-person
inquiries from Institutions, Account holders, or their representatives
requesting information regarding matters such as shareholder account or
transaction status, net asset value ("NAV") of Series shares, Series
performance, Series services, plans and options, Series investment policies,
Series portfolio holdings, and Series distributions and taxation thereof;
1.2.9 COMPLAINTS. Deal with complaints and correspondence
of Institutions and Account holders directed to or brought to the attention
of the Administrator;
1.2.10 REPORTS; PROXIES. Distribute as appropriate to all
Account holders all Series reports, dividend and distribution notices, and proxy
material relating to any meeting of Series shareholders, and soliciting,
processing and tabulating proxies for such meetings;
1.2.11 SPECIAL REPORTS. Generate or develop and distribute
special data, notices, reports, programs and literature required by Institutions
or by Account holders generally in light of developments, such as changes in tax
laws; and
1.2.12 AGENTS. Assist any institutional servicing agent
("Agent") engaged by the Series in the development, implementation and
maintenance of the following special programs and systems to enhance each
Series's capability to service its shareholders and Account holders servicing
capability:
5
<PAGE>
(a) Training programs for personnel of such Agent;
(b) Joint programs with such Agent for the development of systems
software, shareholder information reports, and other special reports;
(c) Automatic data exchange facilities with shareholders and such
Agent;
(d) Automated clearing house transfer procedures between
shareholders and such Agent; and
(e) Touch-tone telephone information and transaction systems for
shareholders.
2. EXPENSES OF EACH SERIES.
2.1 EXPENSES TO BE PAID BY THE ADMINISTRATOR. The Administrator
shall pay all salaries, expenses and fees of the officers, trustees, or
employees of the Trust who are officers, directors or employees of the
Administrator. If the Administrator pays or assumes any expenses of the Trust or
a Series not required to be paid or assumed by the Administrator under this
Agreement, the Administrator shall not be obligated hereby to pay or assume the
same or any similar expense in the future; PROVIDED, that nothing herein
contained shall be deemed to relieve the Administrator of any obligation to the
Trust or to a Series under any separate agreement or arrangement between the
parties.
2.2 EXPENSES TO BE PAID BY THE SERIES. Each Series shall bear all
expenses of its operation, except those specifically allocated to the
Administrator under this Agreement or under any separate agreement between such
Series and the Administrator. Expenses to be borne by such Series shall include
6
<PAGE>
both expenses directly attributable to the operation of that Series and the
offering of its shares, as well as the portion of any expenses of the Trust that
is properly allocable to such Series in a manner approved by the trustees of the
Trust ("Trustees"). Subject to any separate agreement or arrangement between the
Trust or a Series and the Administrator, the expenses hereby allocated to each
Series, and not to the Administrator, include, but are not limited to:
2.2.1 CUSTODY. All charges of depositories, custodians, and
other agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property;
2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent (other
than the Administrator hereunder) engaged by a Series to service shareholder
accounts;
2.2.3 SHAREHOLDER REPORTS. All expenses of preparing,
setting in type, printing and distributing reports and other communications
to shareholders of a Series;
2.2.4 PROSPECTUSES. All expenses of preparing, setting in
type, printing and mailing annual or more frequent revisions of a Series's
Prospectus and SAI and any supplements thereto and of supplying them to
shareholders of the Series and Account holders;
2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of
computing a Series's net asset value ("NAV") per share, including any equipment
or services obtained for the purpose of pricing shares or valuing the Series's
investment portfolio;
7
<PAGE>
2.2.6 COMMUNICATIONS. All charges for equipment or services
used for communications between the Administrator or the Series and any
custodian, shareholder servicing agent, portfolio accounting services agent, or
other agent engaged by a Series;
2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services
and expenses of a Series's legal counsel and independent auditors;
2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of
Trustees other than those affiliated with the Administrator, all expenses
incurred in connection with such unaffiliated Trustees' services as Trustees,
and all other expenses of meetings of the Trustees or committees thereof;
2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to
holding meetings of shareholders, including the printing of notices and proxy
materials, and proxy solicitation therefor;
2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust and each Series under
the 1940 Act and the registration of each Series's shares under the Securities
Act of 1933 (the "1933 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing, and filing of any
Registration Statement, Prospectus and SAI under the 1933 Act or the 1940 Act,
and any amendments or supplements that may be made from time to time;
2.2.11 STATE REGISTRATION FEES. All fees and expenses of
qualifying and maintaining the qualification of the Trust and each Series and of
each Series's shares for sale under securities laws of various states or
8
<PAGE>
jurisdictions, and of registration and qualification of each Series under all
other laws applicable to a Series or its business activities (including
registering the Series as a broker-dealer, or any officer of the Series or any
person as agent or salesman of the Series in any state);
2.2.12 SHARE CERTIFICATES. All expenses of preparing and
transmitting a Series's share certificates, if any;
2.2.13 CONFIRMATIONS. All expenses incurred in connection with
the issue and transfer of a Series's shares, including the expenses of
confirming all share transactions;
2.2.14 BONDING AND INSURANCE. All expenses of bond, liability,
and other insurance coverage required by law or regulation or deemed advisable
by the Trustees, including, without limitation, such bond, liability and other
insurance expense that may from time to time be allocated to the Series in a
manner approved by the Trustees;
2.2.15 BROKERAGE COMMISSIONS. All brokers' commissions
and other charges incident to the purchase, sale or lending of a Series's
portfolio securities;
2.2.16 TAXES. All taxes or governmental fees payable by or
with respect to a Series to federal, state or other governmental agencies,
domestic or foreign, including stamp or other transfer taxes;
2.2.17 TRADE ASSOCIATION FEES. All fees, dues and other
expenses incurred in connection with a Series's membership in any trade
association or other investment organization;
2.2.18 NONRECURRING AND EXTRAORDINARY EXPENSES. Such
nonrecurring and extraordinary expenses as may arise, including the costs of
9
<PAGE>
actions, suits, or proceedings to which the Series is a party and the expenses a
Series may incur as a result of its legal obligation to provide indemnification
to the Trust's officers, Trustees and agents;
2.2.19 ORGANIZATIONAL EXPENSES. All organizational expenses of
each Series paid or assessed by the Administrator, which such Series shall
reimburse to the Administrator at such time or times and subject to such
condition or conditions as shall be specified in the Prospectus and SAI pursuant
to which such Series makes the initial public offering of its shares; and
2.2.20 INVESTMENT ADVISORY SERVICES. Any fees and expenses for
investment advisory services that may be incurred or contracted for by a Series.
3. ADMINISTRATION FEE.
3.1 FEE. As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Administrator to or for each Series
under this Agreement, such Series shall pay the Administrator an annual fee as
set out in Schedule B to this Agreement.
3.2 COMPUTATION AND PAYMENT OF FEE. The administration fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accruals for each
Series shall be computed by multiplying the fraction of one divided by the
number of days in the calendar year by the applicable annual administration fee
rate (as set forth in Schedule B hereto), and multiplying this product by the
NAV of such Series, determined in the manner set forth in such Series's
then-current Prospectus, as of the close of business on the last preceding
business day on which such Series's NAV was determined.
10
<PAGE>
3.3 STATE EXPENSE LIMITATION. If in any fiscal year a Series's
operating expenses plus such Series's pro rata portion of the operating expenses
of any portfolio of Equity Managers Trust in which such Series invests all or
substantially all of its assets ("Aggregate Operating Expenses"), which includes
any fees or expense reimbursements payable to the Administrator pursuant to this
Agreement and any compensation payable to the Administrator pursuant to (i) the
Management Agreement between such portfolio and the Administrator, or (ii) any
other agreement or arrangement with respect to such Series, but excluding
interest, taxes, brokerage commissions, litigation and indemnification expenses,
and other extraordinary expenses not incurred in the ordinary course of such
Series's business) exceed the lowest applicable percentage expense limitation
imposed under the securities law and regulations of any state in which such
Series's shares are qualified for sale (the "State Expense Limitation"), then
the administration fee payable to the Administrator under this Agreement by such
Series shall be reduced by the amount of such excess; PROVIDED, that the
Administrator shall have no obligation hereunder to reimburse the Series for any
such expenses which exceed such administration fee.
Any reduction in the administration fee shall be made monthly, by
annualizing the Aggregate Operating Expenses of such Series for each month as of
the last day of such month. An adjustment shall be made on or before the last
day of the first month of the next succeeding fiscal year if Aggregate Operating
Expenses for such Series's fiscal year do not exceed the State Expense
Limitation or if for such fiscal year there is no applicable State Expense
Limitation.
4. OWNERSHIP OF RECORDS. All records required to be maintained and
preserved by each Series pursuant to the provisions or rules or regulations of
the Securities and Exchange Commission ("SEC") under Section 31(a) of the 1940
Act and maintained and preserved by the Administrator on behalf of such Series
are the property of such Series and shall be surrendered by the Administrator
promptly on request by the Series; PROVIDED, that the Administrator may at its
own expense make and retain copies of any such records.
11
<PAGE>
5. REPORTS TO ADMINISTRATOR. Each Series shall furnish or otherwise make
available to the Administrator such copies of that Series's Prospectus, SAI,
financial statements, proxy statements, reports, and other information relating
to its business and affairs as the Administrator may, at any time or from time
to time, reasonably require in order to discharge its obligations under this
Agreement.
6. REPORTS TO EACH SERIES. The Administrator shall prepare and furnish to
each Series such reports, statistical data and other information in such form
and at such intervals as such Series may reasonably request.
7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS. All computer programs,
written procedures and similar items developed or acquired and used by the
Administrator in performing its obligations under this Agreement shall be the
property of the Administrator, and no Series will acquire any ownership interest
therein or property rights with respect thereto.
8. CONFIDENTIALITY. The Administrator agrees, on its own behalf and on
behalf of its employees, agents and contractors, to keep confidential any and
all records maintained and other information obtained hereunder which relates to
any Series or to any of a Series's former, current or prospective shareholders,
EXCEPT that the Administrator may deliver records or divulge information (a)
when requested to do so by duly constituted authorities after prior notification
to and approval in writing by such Series (which approval will not be
unreasonably withheld and may not be withheld by such Series where the
Administrator advises such Series that it may be exposed to civil or criminal
contempt proceedings or other penalties for failure to comply with such request)
or (b) whenever requested in writing to do so by such Series.
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<PAGE>
9. THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON SERIES' INSTRUCTIONS, LEGAL
OPINIONS, ETC.; SERIES' COMPLIANCE WITH LAWS.
9.1 The Administrator may at any time apply to an officer of the
Trust for instructions, and may consult with legal counsel for a Series or with
the Administrator's own legal counsel, in respect of any matter arising in
connection with this Agreement; and the Administrator shall not be liable for
any action taken or omitted to be taken in good faith in and with due care in
accordance with such instructions or with the advice or opinion of such legal
counsel. The Administrator shall be protected in acting upon any such
instructions, advice or opinion and upon any other paper or document delivered
by a Series or such legal counsel which the Administrator believes to be genuine
and to have been signed by the proper person or persons, and the Administrator
shall not be held to have notice of any change of status or authority of any
officer or representative of the Trust, until receipt of written notice thereof
from the Series.
9.2 Except as otherwise provided in this Agreement or in any
separate agreement between the parties and except for the accuracy of
information furnished to each Series by the Administrator, each Series assumes
full responsibility for the preparation, contents, filing and distribution of
its Prospectus and SAI, and full responsibility for other documents or actions
required for compliance with all applicable requirements of the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act, and any other applicable laws,
rules and regulations of governmental authorities having jurisdiction over such
Series.
10. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the
freedom of the Administrator or any affiliated person of the Administrator to
render administrative or shareholder services to other investment companies, to
13
<PAGE>
act as administrator to other persons, firms, or corporations, or to engage in
other business activities.
11. LIMITATION OF LIABILITY REGARDING THE TRUST. The Administrator shall
look only to the assets of each Series for performance of this Agreement by the
Trust on behalf of such Series, and neither the Trustees of the Trust
("Trustees") nor any of the Trust's officers, employees or agents, whether past,
present or future shall be personally liable therefor.
12. INDEMNIFICATION BY SERIES. Each Series shall indemnify the
Administrator and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by the
Administrator that result from: (i) any claim, action, suit or proceeding in
connection with the Administrator's entry into or performance of this Agreement
with respect to such Series; or (ii) any action taken or omission to act
committed by the Administrator in the performance of its obligations hereunder
with respect to such Series; or (iii) any action of the Administrator upon
instructions believed in good faith by it to have been executed by a duly
authorized officer or representative of the Trust with respect to such Series;
PROVIDED, that the Administrator shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or misconduct on the
part of the Administrator or its employees, agents or contractors. Before
confessing any claim against it which may be subject to indemnification by a
Series hereunder, the Administrator shall give such Series reasonable
opportunity to defend against such claim in its own name or in the name of the
Administrator.
13. INDEMNIFICATION BY THE ADMINISTRATOR. The Administrator shall
indemnify each Series and hold it harmless from and against any and all losses,
damages and expenses, including reasonable attorneys' fees and expenses,
incurred by such Series which result from: (i) the Administrator's failure to
14
<PAGE>
comply with the terms of this Agreement with respect to such Series; or (ii) the
Administrator's lack of good faith in performing its obligations hereunder with
respect to such Series; or (iii) the Administrator's negligence or misconduct or
that of its employees, agents or contractors in connection herewith with respect
to such Series. A Series shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of that Series or its employees, agents or contractors other than the
Administrator unless such negligence or misconduct results from or is
accompanied by negligence or misconduct on the part of the Administrator, any
affiliated person of the Administrator, or any affiliated person of an
affiliated person of the Administrator. Before confessing any claim against it
which may be subject to indemnification hereunder, a Series shall give the
Administrator reasonable opportunity to defend against such claim in its own
name or in the name of the Trust on behalf of such Series.
14. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to
require the Trust or any Series to take any action contrary to the Trust
Instrument or By-laws of the Trust or any applicable law, regulation or order to
which it is subject or by which it is bound, or to relieve or deprive the
Trustees of their responsibility for and control of the conduct of the business
and affairs of the Series or Trust.
15. TERM OF AGREEMENT. The term of this Agreement shall begin on December
30, 1998 with respect to each Series and, unless sooner terminated as
hereinafter provided, this Agreement shall remain in effect through August 2,
1999. Thereafter, this Agreement shall continue in effect with respect to each
Series from year to year, subject to the termination provisions and all other
terms and conditions hereof; PROVIDED, such continuance with respect to a Series
is approved at least annually by vote or written consent of the Trustees,
including a majority of the Trustees who are not interested persons of either
party hereto ("Disinterested Trustees"); and PROVIDED FURTHER, that the
15
<PAGE>
Administrator shall not have notified a Series in writing at least sixty days
prior to the first expiration date hereof or at least sixty days prior to any
expiration date in any year thereafter that it does not desire such
continuation. The Administrator shall furnish any Series, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.
16. AMENDMENT OR ASSIGNMENT OF AGREEMENT. Any amendment to this Agreement
shall be in writing signed by the parties hereto; PROVIDED, that no such
amendment shall be effective unless authorized on behalf of any Series (i) by
resolution of the Trustees, including the vote or written consent of a majority
of the Disinterested Trustees, or (ii) by vote of a majority of the outstanding
voting securities of such Series. This Agreement shall terminate automatically
and immediately in the event of its assignment; provided, that with the consent
of a Series, the Administrator may subcontract to another person any of its
responsibilities with respect to such Series and may obtain any of the services
required of it hereunder from its affiliate, Neuberger Berman, LLC.
17. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time
by either party hereto, without the payment of any penalty, upon at least sixty
days' prior written notice to the other party; PROVIDED, that in the case of
termination by any Series, such action shall have been authorized (i) by
resolution of the Trustees, including the vote or written consent of the
Disinterested Trustees, or (ii) by vote of a majority of the outstanding voting
securities of such Series.
18. NAME OF A SERIES. Each Series hereby agrees that if the Administrator
shall at any time for any reason cease to serve as administrator to a Series,
such Series shall, if and when requested by the Administrator, eliminate from
such Series's name the name "Neuberger Berman" and thereafter refrain from using
the name "Neuberger Berman" or the initials "NB" in connection with its business
16
<PAGE>
or activities, and the foregoing agreement of each Series shall survive any
termination of this Agreement and any extension or renewal thereof.
19. INTERPRETATION AND DEFINITION OF TERMS. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by reference to
such term or provision of the 1940 Act and to interpretation thereof, if any, by
the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC validly issued pursuant
to the 1940 Act. Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested persons," "assignment" and "affiliated person,"
as used in this Agreement shall have the meanings assigned to them by Section
2(a) of the 1940 Act. In addition, when the effect of a requirement of the 1940
Act reflected in any provision of this Agreement is modified, interpreted or
relaxed by a rule, regulation or order of the SEC, whether of special or of
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
20. CHOICE OF LAW. This Agreement is made and to be principally performed
in the State of New York, and except insofar as the Act or other federal laws
and regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York.
21. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
22. EXECUTION IN COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
NEUBERGER BERMAN EQUITY SERIES
By: /s/ Michael Weiner
----------------------
Title: Vice President
---------------------
NEUBERGER BERMAN
MANAGEMENT INC.
By: /s/ Stanley Egener
----------------------
Title: President
----------------------------
18
NEUBERGER BERMAN EQUITY SERIES
ADMINISTRATION AGREEMENT
SCHEDULE A
SERIES DATE MADE A PARTY TO AGREEMENT
- ------ ------------------------------
Neuberger Berman Socially Responsive Assets December 30, 1998
NEUBERGER BERMAN EQUITY SERIES
ADMINISTRATION AGREEMENT
SCHEDULE B
Compensation pursuant to Paragraph 3 of the Neuberger Berman Equity Series
Administration Agreement shall be 0.40% per annum of the average daily net
assets of each Series.
Dated:
December 30, 1998
December 29, 1998
Neuberger Berman Equity Series
605 Third Avenue, Second Floor
New York, New York 10158-0180
Ladies and Gentlemen:
Neuberger Berman Equity Series ("Trust") is a business trust organized
under the laws of the State of Delaware and governed by a Trust Instrument dated
September 22, 1998. You have requested our opinion regarding certain matters in
connection with the Trust's issuance of shares of beneficial interest, par value
$0.001 per share ("Shares"), in its series, Neuberger Berman Socially Responsive
Assets ("Fund").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine, of the Trust Instrument and the By-laws of the
Trust, the minutes of meetings of its board of trustees and other documents
relating to its organization and operation, and we are generally familiar with
its business affairs. Based upon the foregoing, it is our opinion that the
Shares of the Fund may be legally and validly issued in accordance with the
Trust's Trust Instrument and By-laws and subject to compliance with the
Securities Act of 1933, the Investment Company Act of 1940 and applicable state
laws regulating the offer and sale of securities; and when so issued, the Shares
will be legally issued, fully paid and non-assessable by the Trust.
The Trust is a business trust established pursuant to the Delaware
Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the Trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent
that the Trust or any of its shareholders becomes subject to the jurisdiction of
courts in states which do not have statutory or other authority limiting the
liability of business trust shareholders, such courts might not apply the
Delaware Act and could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument: (i) requires that
every written obligation of the Trust contain a statement that such obligation
may be enforced only against the assets of the Trust; however, the omission of
<PAGE>
Neuberger Berman Equity Series
December 29, 1998
Page 2
such a disclaimer will not operate to create personal liability for any
shareholder; and (ii) provides for indemnification out of Trust property of any
shareholder held personally liable, solely by reason of being a shareholder, for
the obligations of the Trust. Thus, the risk of a Trust shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which: (i) a court refuses to apply Delaware law;
(ii) no contractual limitation of liability is in effect; and (iii) the Trust
itself is unable to meet its obligations.
We express no opinion as to compliance with the Securities Act of 1933,
the Investment Company Act of 1940, or applicable state securities laws in
connection with the sale of Shares.
We hereby consent to the filing of this opinion in connection with
Pre-Effective Amendment No. 1 to the Trust's Registration Statement on Form N-1A
(File Nos. 333-66137 and 811-09011) to be filed with the Securities and Exchange
Commission. We also consent to the reference to our firm in the Prospectus and
Statement of Additional Information filed as part of the Registration Statement.
Sincerely,
KIRKPATRICK & LOCKHART LLP
/s/Arthur C. Delibert
By:-----------------------
Arthur C. Delibert
Consent of Independent Accountants
We consent to the incorporation by reference in the Prospectus and inclusion in
the Statement of Additional Information constituting parts of Pre-Effective
Amendment No. 1 to the Registration Statement of Neuberger Berman Equity Series
("the Trust"): Neuberger Berman Socially Responsive Assets ("the Fund") on Form
N-1A (File No. 333-66137) of our report dated December 28, 1998, on our audit of
the statement of assets and liabilities and statement of operation of the Fund,
as of and for the period ending December 24, 1998. We also consent to the use of
our opinion dated October 9, 1998, which is incorporated by reference in this
Statement of Additional Information, for Neuberger & Berman Socially Responsive
Portfolio, a series of Equity Managers Trust, for the year ended August 31,
1998.
We also consent to the references to our firm under the caption "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 29, 1998
Neuberger Berman Management, Inc.
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(212) 476-8800
December 24, 1998
Neuberger Berman Equity Series
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Ladies and Gentleman:
Please be advised that the 10,000 shares of Neuberger Berman Equity Series which
we have today purchased from you in the aggregate amount of $100,000 were
purchased as an investment with no present intention of redeeming or selling
such shares, and we do not have any intention of redeeming or selling such
shares.
Very truly yours,
NEUBERGER BERMAN MANAGEMENT, INC.
By: /s/ Michael J. Weiner
------------------------
Title: Senior Vice President
NEUBERGER BERMAN EQUITY SERIES
PLAN PURSUANT TO RULE 12B-1
WHEREAS, Neuberger Berman Equity Series ("Trust") is an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), and intends to offer for public sale shares of
beneficial interest in one or more series;
WHEREAS, the Trust desires to adopt a plan pursuant to Rule 12b-1 under
the 1940 Act and the Board of Trustees has determined that there is a reasonable
likelihood that adoption of said plan will benefit each of the series specified
on Schedule A hereto (each a "Fund") and their shareholders; and
WHEREAS, the Trust has employed Neuberger Berman Management Inc. ("NB
Management") as principal underwriter of the shares of the Trust;
NOW, THEREFORE, the Trust hereby adopts this Plan pursuant to Rule 12b-1
("Plan") in accordance with Rule 12b-1 under the 1940 Act on the following terms
and conditions:
1. This Plan applies to the Funds listed on Schedule A.
2. A. Each Fund shall pay to NB Management, as compensation for selling
Fund shares or for providing shareholder and administration services, a fee at
the rate specified for that Fund on Schedule A, such fee to be calculated and
accrued daily and paid monthly or at such other intervals as the Board shall
determine.
B. The fees payable hereunder are payable without regard to the
aggregate amount that may be paid over the years, PROVIDED THAT, so long as the
limitations set forth in Article III, Section 26(d) of the Rules of Fair
Practice ("Section 26(d)") of the National Association of Securities Dealers,
Inc. ("NASD") remain in effect and apply to recipients of payments made under
this Plan, the amounts paid hereunder shall not exceed those limitations,
including permissible interest.
3. A. As principal underwriter of the Trust's shares, NB Management may
spend such amounts as it deems appropriate on any activities or expenses
primarily intended to result in the sale of shares of the Funds, including, but
not limited to, compensation to employees of NB Management; compensation to NB
Management and other broker-dealers that engage in or support the distribution
of shares; expenses of NB Management and such other broker-dealers, including
overhead and telephone and other communication expenses; the printing of
prospectuses, statements of additional information, and reports for other than
existing shareholders; and the preparation and distribution of sales literature
and advertising materials.
B. NB Management may spend such amounts as it deems appropriate on
the administration and servicing of shareholder accounts, including, but not
limited to, administering periodic investment and periodic withdrawal programs;
researching and providing historical account activity information for
shareholders requesting it; preparing and mailing account and confirmation
statements to account holders; preparing and mailing tax forms to account
holders; serving as custodian for retirement plans investing in the Funds;
dealing appropriately with abandoned accounts; collating and reporting the
number of shares attributable to each state for blue sky registration and
reporting purposes; identifying and reporting transactions exempt from blue sky
<PAGE>
registration requirements; and providing and maintaining ongoing shareholder
services for the duration of the shareholders' investment in each Fund, which
may include updates on fund performance, total return, other related statistical
information, and a continual analysis of the suitability of the investment in
each Fund; and may pay compensation and expenses, including overhead and
telephone and other communication expenses, to organizations and employees who
provide such services.
4. This Plan shall take effect on December 30, 1998 and shall continue in
effect with respect to each Fund for successive periods of one year from that
date for so long as such continuance is specifically approved with respect to
such Fund at least annually together with any related agreements, by votes of a
majority of both (a) the Board of Trustees of the Trust and (b) those Trustees
who are not "interested persons" of the Trust, as defined in the 1940 Act, and
who have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Rule 12b-1 Trustees"), cast in person at a
meeting or meetings called for the purpose of voting on this Plan and such
related agreements; and only if the Trustees who approve the implementation or
continuation of the Plan have reached the conclusion required by Rule 12b-1(e)
under the 1940 Act.
5. Any person authorized to direct the disposition of monies paid or
payable by a Fund pursuant to this Plan or any related agreement shall provide
to the Trust's Board of Trustees and the Board shall review, at least quarterly,
a written report of the amounts so expended and the purposes for which such
expenditures were made.
6. This Plan may be terminated with respect to a Fund at any time by vote
of a majority of the Rule 12b-1 Trustees or by vote of a majority of the
outstanding voting securities of that Fund.
7. This Plan may not be amended to increase materially the amount of fees
to be paid by any Fund hereunder unless such amendment is approved by a vote of
at least a majority of the outstanding securities (as defined in the 1940 Act)
of that Fund, and no material amendment to the Plan shall be made unless such
amendment is approved in the manner provided in paragraph 4 hereof for annual
approval.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Trust, as defined in the 1940 Act, shall
be committed to the discretion of Trustees who are themselves not interested
persons.
9. The Trust shall preserve copies of this Plan and any related agreements
for a period of not less than six years from the date of expiration of the Plan
or agreement, as the case may be, the first two years in an easily accessible
place; and shall preserve copies of each report made pursuant to Paragraph 5
hereof for a period of not less than six years from the date of such report, the
first two years in an easily accessible place.
2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this Plan pursuant to Rule
12b-1 as of the day and year set forth below.
NEUBERGER BERMAN EQUITY SERIES
Date: 12-30-98
By: /s/ Michael Weiner
----------------------
Agreed and assented to by
NEUBERGER BERMAN MANAGEMENT INC.
By: /s/ Stanley Egener
----------------------
3
<PAGE>
NEUBERGER BERMAN EQUITY SERIES PLAN
PURSUANT TO RULE 12B-1
SCHEDULE A
FEE (AS A PERCENTAGE OF DATE MADE A PARTY TO
SERIES AVERAGE DAILY NET ASSETS) PLAN
------ ------------------------- ----
Neuberger Berman Socially 0.25% December 30, 1998
Responsive Assets
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Socially Responsive Portfolio Annual Report and is
qualified in its entirety to such document.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> NEUBERGER&BERMAN SOCIALLY RESPONSIVE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 269,553
<INVESTMENTS-AT-VALUE> 286,066
<RECEIVABLES> 507
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 9
<TOTAL-ASSETS> 286,588
<PAYABLE-FOR-SECURITIES> 951
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,787
<TOTAL-LIABILITIES> 3,738
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 266,337
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,513
<NET-ASSETS> 282,850
<DIVIDEND-INCOME> 3,981
<INTEREST-INCOME> 760
<OTHER-INCOME> 0
<EXPENSES-NET> (1,878)
<NET-INVESTMENT-INCOME> 2,863
<REALIZED-GAINS-CURRENT> 26,331
<APPREC-INCREASE-CURRENT> (50,773)
<NET-CHANGE-FROM-OPS> (21,579)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 26,569
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,696
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,878
<AVERAGE-NET-ASSETS> 311,191
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001070872
<NAME> NEUBERGER BERMAN EQUITY SERIES
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-22-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 90
<OTHER-ITEMS-ASSETS> 100
<TOTAL-ASSETS> 190
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90
<TOTAL-LIABILITIES> 90
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 10
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 100
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
