NEUBERGER BERMAN ABC TRUST
497, 1998-10-28
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any such
State.
 
                                                          PRELIMINARY PROSPECTUS
                                                           Subject to Completion
[PHOTO OF CHESS PIECES]                                         October 28, 1998
                                                                NEUBERGER BERMAN
 
NEUBERGER BERMAN
EQUITY SERIES-SM-
- --------------------------------------------------------------------------------
                    PROSPECTUS DECEMBER  , 1998
 
                        The Securities and Exchange Commission does not say
                        whether any mutual fund is a good or bad investment or
                        whether the information in any prospectus is accurate or
                        complete. It is unlawful for anyone to indicate
                        otherwise.
 
Socially Responsive Assets
<PAGE>
CONTENTS
 
<TABLE>
<C>         <S>
            NEUBERGER BERMAN EQUITY SERIES
 
PAGE 2 ......  Socially Responsive Assets
 
            YOUR INVESTMENT
 
     7 ......  Maintaining Your Account
 
     9 ......  Share Prices
 
    10 ......  Distributions and Taxes
 
    12 ......  Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
 
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than $49
billion in total assets and continue an asset management history that began in
1939.
 
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
9/30/98).
 
  THIS FUND:
 
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
 
- - HAS NO CHARGES WHEN YOU BUY OR SELL SHARES
 
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
  PROFESSIONALLY MANAGED STOCK PORTFOLIO
 
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU
  SELL FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
 
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
 
                                                         1
<PAGE>
[PHOTO]
 
NEUBERGER BERMAN
SOCIALLY RESPONSIVE ASSETS
- --------------------------------------------------------------------------------
 
                              ABOVE: PORTFOLIO MANAGER JANET PRINDLE
 
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
 
                      2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
 
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
 
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
 
 [ARROW]
           THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
           SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
           SOCIAL POLICY.
 
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
 
The managers initially screen companies using value investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
 
- - environmental concerns
 
- - diversity in the work force
 
- - progressive employment and workplace practices
 
The managers typically also look at a company's record in public health and the
nature of its products. The managers judge firms on their corporate citizenship
overall, considering their accomplishments as well as their goals. While these
judgments are inevitably subjective, the fund has a strict policy of avoiding
companies that receive more than 5% of their earnings from alcohol, tobacco,
gambling, or weapons, as well as companies that sell non-consumer products to
the military or are involved in nuclear power.
 
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
 
                            Socially Responsive Assets   3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
 
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
 
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. These investments are not subject to the fund's social policy.
 
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
 
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
 
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
 
[DOLLAR SIGNS]
          Most of the fund's performance depends
          on what happens in the stock market. The market's behavior is
          unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
 
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
 
- - undervalued stocks that don't meet the social criteria could outperform those
  that do
 
- - economic or political changes could make certain companies less attractive for
  investment
 
- - the social policy could cause the fund to sell or avoid stocks that
  subsequently perform well
 
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; over time, however, large-cap stocks may perform better or less well
than mid-cap stocks. At any given time, one or both groups of stocks may be out
of favor with investors. If the fund emphasizes either group of stocks, its
performance could suffer.
 
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
 
                      4  Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
 
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested.
 
As a frame of reference, the table includes a broad-based market index. Fund
performance figures include all expenses; the index does not include costs of
investment.
 
 [ARROW]  The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
          the returns would equal if you averaged out actual performance over
various lengths of time. When this prospectus was written, the fund was new and
had no performance record of its own. However, another Neuberger Berman fund,
which is not offered in this prospectus but which invests in the same portfolio
of securities, has been in operation since 1994; the performance results in the
chart and table below are those of the older fund. Because the older fund had
lower expenses, its performance was better than your fund would have realized in
the same period. This information is based on past performance; it's not a
prediction of future results.
 
YEAR-BY-YEAR % RETURNS as of 12/31 each year
 
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
 
<TABLE>
<S>                                               <C>
1988
89
90
91
92
93
94
95                                                   38.94%
96                                                   18.50%
97                                                   24.41%
BEST QUARTER: Q2 '97, up 15.54%
WORST QUARTER: Q1 '97, down 1.86%
Year-to-date performance as of 9/30/98: down
4.93%
</TABLE>
 
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
 
<TABLE>
<CAPTION>
                                                      Since
                                                    Inception
                                        1 Year       3/16/94
<S>                                   <C>          <C>
- --------------------------------------------------------------
SOCIALLY RESPONSIVE FUND                   24.41        19.66
S&P 500 Index                              33.32        24.09
</TABLE>
 
 The S&P 500 is an unmanaged index of U.S. stocks.
 
                            Socially Responsive Assets   5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
 
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a principal
of Neuberger Berman, LLC, joined the latter firm in 1977. She has been managing
assets using social criteria since 1990.
 
ROBERT LADD and INGRID SAUKAITIS are Assistant Vice Presidents of Neuberger
Berman Management and Associate Managers of the fund. Ladd has been a portfolio
manager at the firm since 1992; Saukaitis was project director for a social
research group from 1995 to 1997.
 
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services.
 
[DOLLAR SIGNS]
          The fund does not charge you any fees for
          buying, selling, or exchanging shares, or for maintaining your
          account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
 
FEE TABLE
 
 SHAREHOLDER FEES                             None
 
- -------------------------------------------------------
 
 ANNUAL OPERATING EXPENSES (% of average net assets)
 
 These are deducted from fund assets, so you pay them indirectly.
 
<TABLE>
<S>      <C>                                  <C>
         Management/administration fees       0.95
PLUS:    Distribution (12b-1) fees            0.25
         Other expenses*                      0.52
                                              ....
EQUALS:  Total annual operating expenses      1.72
MINUS:   Expense reimbursement**              0.22
                                              ....
EQUALS:  Net expenses                         1.50
</TABLE>
 
 * OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
 ** NEUBERGER BERMAN MANAGEMENT HAS AGREED TO REIMBURSE CERTAIN EXPENSES OF THE
    FUND THROUGH 12/31/99, SO THAT THE TOTAL ANNUAL OPERATING EXPENSES OF THE
    FUND ARE LIMITED TO 1.50% OF AVERAGE NET ASSETS. THIS ARRANGEMENT DOES NOT
    COVER INTEREST, TAXES, BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES.
 
EXPENSE EXAMPLE
 
 The example assumes that you invested $10,000 for the periods shown, that you
 earned a hypothetical 5% total return each year, and that the fund's expenses
 were those in the table above. Your costs would be the same whether you sold
 your shares or continued to hold them at the end of each period. Actual
 performance and expenses may be higher or lower.
 
<TABLE>
<CAPTION>
                      1 Year   3 Years
<S>                   <C>      <C>
- --------------------------------------
Expenses***            $153     $474
</TABLE>
 
*** IF NEUBERGER BERMAN MANAGEMENT WAS NOT REIMBURSING EXPENSES AS DESCRIBED IN
    THE FOOTNOTE ABOVE, YOUR COSTS FOR THE ONE- AND THREE-YEAR PERIODS WOULD BE
    $175 AND $542, RESPECTIVELY.
 
                      6  Neuberger Berman
<PAGE>
YOUR INVESTMENT
 
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
 
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
 
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
 
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
 
To buy or sell shares of the fund, contact your investment provider. All
investments must be made in U.S. dollars, and investment checks must be drawn on
a U.S. bank. The fund does not issue certificates for shares.
 
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
 
Under certain circumstances, the fund reserves the right to:
 
- - suspend the offering of shares
 
- - reject any exchange or investment order
 
- - change, suspend, or revoke the exchange privilege
 
- - satisfy an order to sell fund shares with securities rather than cash, for
  certain very large orders
 
- - suspend or postpone the redemption of shares on days when trading on the New
  York Stock Exchange is restricted, or as otherwise permitted by the SEC
 
                                       Your Investment   7
<PAGE>
MAINTAINING YOUR
ACCOUNT CONTINUED
- -------------------------------------------------------------------
 
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
 
Because of this, if you buy shares just before the fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
 
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
 
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
 
- - in unusual circumstances where the law allows additional time if needed
 
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
  shares
 
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
 
DISTRIBUTION FEES -- The fund has adopted a plan under which it pays 0.25% of
its average net assets every year to support share distribution and shareholder
servicing. These fees increase the cost of investing in the fund. Over the long
term, they could result in higher overall costs than other types of sales
charges.
 
                      8  Neuberger Berman
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
 
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of the fund's
securities changes every business day, the share price usually changes as well.
 
When valuing portfolio securities, the fund uses market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
 
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. The fund may also use these methods to
value certain types of illiquid securities.
 
Because the fund does not have a sales charge, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
charges no fee for selling shares, it pays you the full share price when you
sell shares. Remember that your investment provider may charge fees for its
services.
 
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. The fund calculates its share price as of
the end of regular trading on business days, usually 4:00 p.m. eastern time.
Depending on when your investment provider accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
 
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
 
                                       Your Investment   9
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
 
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
 
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your transactions.
 
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
 
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund makes any distributions once a year (in
December).
 
Consult your investment provider whether your income and capital gains
distributions from the fund will be reinvested in the fund or paid to you in
cash.
 
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them.
 
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
 
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund or whether you reinvested your distributions.
 
                      10  Neuberger Berman
<PAGE>
- -------------------------------------------------------------
 
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
 
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the fund's portfolio will be affected
by either issue.
 
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
 
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax implications. The exception, once again, is tax-advantaged retirement
accounts.
 
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
 
                                      Your Investment   11
<PAGE>
FUND STRUCTURE
- -------------------------------------------------------------
 
                      The fund uses a "master-feeder" structure.
 
                      Rather than investing directly in securities, the fund is
                      a "feeder fund," meaning that it invests in a
                      corresponding "master portfolio." The master portfolio in
                      turn invests in securities, using the strategies described
                      in this prospectus. One potential benefit of this
                      structure is lower costs, since the expenses of the master
                      portfolio can be shared with any other feeder funds.
 
                      In this prospectus we have used the word "fund" to mean
                      the feeder fund and its master portfolio. Costs for the
                      feeder fund include its own costs and its share of master
                      portfolio costs.
 
                      For reasons relating to costs or a change in investment
                      goal, among others, the feeder fund could switch to
                      another master portfolio or decide to manage its assets
                      itself. The fund is not currently contemplating such a
                      move.
 
                      12
<PAGE>
- -------------------------------------------------------------
 
[PHOTO]
 
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from your investment provider, or
from:
 
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
 
Broker/Dealer and
Institutional Services:
800-366-6264
 
Web site:
www.nbfunds.com
Email:
[email protected]
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
 
Web site:
www.sec.gov
 
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
 
SEC file number: 811-09011
 
NMLRR0061298
 
NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS
 
If you'd like further details on the fund, you can request a free copy of the
following documents:
 
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
 
- - a discussion by the portfolio manager about strategies and market conditions
 
- - fund performance data and financial statements
 
- - complete portfolio holdings
 
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on the fund, including:
 
- - various types of securities and practices, and their risks
 
- - investment limitations and additional policies
 
- - information about the fund's management and business structure
 
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
 
  INVESTMENT MANAGER:
  NEUBERGER BERMAN MANAGEMENT INC.
 
  SUB-ADVISER:
  NEUBERGER BERMAN, LLC
 
       [LOGO]
  605 Third Avenue
  New York, NY 10158-0180

<PAGE>



                             SUBJECT TO COMPLETION
                PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION

                             DATED OCTOBER 28, 1998

                 NEUBERGER BERMAN SOCIALLY RESPONSIVE ASSETS

                     STATEMENT OF ADDITIONAL INFORMATION

                           DATED DECEMBER __, 1998

                            A NO-LOAD MUTUAL FUND

             605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NY 10158-0180

- -------------------------------------------------------------------------------

      NEUBERGER  BERMAN  SOCIALLY  RESPONSIVE  ASSETS  ("FUND"),   A  SERIES  OF
NEUBERGER BERMAN EQUITY SERIES  ("TRUST"),  IS A NO-LOAD MUTUAL FUND THAT OFFERS
SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER __, 1998. THE FUND INVESTS ALL OF
ITS NET INVESTABLE  ASSETS IN NEUBERGER  BERMAN  SOCIALLY  RESPONSIVE  PORTFOLIO
("PORTFOLIO").

      The Fund's  Prospectus  provides basic information that an investor should
know before investing. A copy of the Prospectus may be obtained, without charge,
from Neuberger  Berman  Management  Incorporated  ("NB  Management"),  605 Third
Avenue, 2nd Floor, New York, NY 10158-0180, or by calling 800-877-9700.

      This Statement of Additional  Information  ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus.

      No  person  has been  authorized  to give any  information  or to make any
representations  not  contained in the  Prospectus  or in this SAI in connection
with  the  offering  made  by the  Prospectus,  and,  if  given  or  made,  such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering  by the Fund or its  distributor  in any  jurisdiction  in  which  such
offering may not lawfully be made.

      Information  contained  herein is subject to completion  or  amendment.  A
registration  statement  relating  to these  securities  has been filed with the
Securities  and Exchange  Commission.  These  securities may not be sold nor may
offers to buy be accepted prior to the time the registration  statement  becomes
effective.  This  Statement  of  Additional  Information  does not  constitute a
prospectus.


<PAGE>


                                TABLE OF CONTENTS

                                                                            PAGE

INVESTMENT INFORMATION.......................................................1
      Investment Policies and Limitations....................................1
      Investment Insight.....................................................4
      Description of Social Policy...........................................6

PERFORMANCE INFORMATION.....................................................23
      Other Performance Information.........................................24

CERTAIN RISK CONSIDERATIONS.................................................25

TRUSTEES AND OFFICERS.......................................................25

INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................31
      Investment Manager and Administrator..................................31
      Management and Administration Fees....................................32
      Sub-Adviser...........................................................33
      Investment Companies Managed..........................................34
      Management and Control of NB Management...............................36

DISTRIBUTION ARRANGEMENTS...................................................36
      Distributor...........................................................36
      Rule 12b-1 Plan.......................................................37

ADDITIONAL PURCHASE INFORMATION.............................................38
      Share Prices and Net Asset Value......................................38

ADDITIONAL EXCHANGE INFORMATION.............................................38

ADDITIONAL REDEMPTION INFORMATION...........................................39
      Suspension of Redemptions.............................................39
      Redemptions in Kind...................................................39

DIVIDENDS AND OTHER DISTRIBUTIONS...........................................39

ADDITIONAL TAX INFORMATION..................................................40
      Taxation of the Fund..................................................40
      Taxation of the Portfolio.............................................41
      Taxation of the Fund's Shareholders...................................43

PORTFOLIO TRANSACTIONS......................................................43
      Portfolio Turnover....................................................46



                                       i
<PAGE>

REPORTS TO SHAREHOLDERS.....................................................46

ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................47
      The Fund..............................................................47
      The Portfolio.........................................................47

CUSTODIAN AND TRANSFER AGENT................................................49

INDEPENDENT ACCOUNTANTS.....................................................49

LEGAL COUNSEL...............................................................49

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................49

REGISTRATION STATEMENT......................................................50

FINANCIAL STATEMENTS........................................................50

APPENDIX A..................................................................51
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.............................51





                                       ii
<PAGE>



                             INVESTMENT INFORMATION

      The Fund is a separate  operating series of the Trust, a Delaware business
trust that is registered with the Securities and Exchange  Commission ("SEC") as
a  diversified  open-end  management  investment  company.  The Fund  seeks  its
investment  objective  by  investing  all of its net  investable  assets  in the
Portfolio,  a series of Equity  Managers  Trust  ("Managers  Trust") that has an
investment  objective  identical to that of the Fund.  The  Portfolio,  in turn,
invests in securities in accordance with an investment objective,  policies, and
limitations identical to those of the Fund. (The Trust and Managers Trust, which
is an  open-end  management  investment  company  managed  by  Neuberger  Berman
Management  Incorporated ("NB Management") are together referred to below as the
"Trusts.")

      The following information  supplements the discussion in the Prospectus of
the investment objective,  policies,  and limitations of the Fund and Portfolio.
The  investment  objective  and,  unless  otherwise  specified,  the  investment
policies and  limitations  of the Fund and  Portfolio are not  fundamental.  Any
investment  objective,  policy  or  limitation  that is not  fundamental  may be
changed by the  trustees of the Trust  ("Fund  Trustees")  or of Managers  Trust
("Portfolio  Trustees") without shareholder approval. The fundamental investment
policies and limitations of the Fund or the Portfolio may not be changed without
the approval of the lesser of:

      (1)...67% of the total units of beneficial interest ("shares") of the Fund
or Portfolio  represented at a meeting at which more than 50% of the outstanding
Fund or Portfolio shares are represented, or

      (2)...a majority of the outstanding shares of the Fund or Portfolio.

These  percentages  are  required by the  Investment  Company Act of 1940 ("1940
Act") and are  referred to in this SAI as a "1940 Act majority  vote."  Whenever
the Fund is called upon to vote on a change in a fundamental  investment  policy
or  limitation of the  Portfolio,  the Fund casts its votes in proportion to the
votes of its shareholders at a meeting thereof called for that purpose.

INVESTMENT POLICIES AND LIMITATIONS

      The Fund has the following fundamental  investment policy, to enable it to
invest in the Portfolio:

      Notwithstanding  any other  investment  policy  of the Fund,  the Fund may
      invest all of its investable assets in an open-end  management  investment
      company having substantially the same investment objective,  policies, and
      limitations as the Fund.

      All  other  fundamental   investment  policies  and  limitations  and  the
non-fundamental investment policies and limitations of the Fund are identical to
those  of  the  Portfolio.  Therefore,  although  the  following  discusses  the
investment policies and limitations of the Portfolio,  it applies equally to the
Fund.

      Except  for  the  limitation  on  borrowing,   any  investment  policy  or
limitation  that involves a maximum  percentage of securities or assets will not


                                       1
<PAGE>


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.



                                       2
<PAGE>


      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.



                                       3
<PAGE>


INVESTMENT INSIGHT

      Securities for the Portfolio are selected through a two-phase process. The
first is  financial.  The  portfolio  manager  analyzes a universe of  companies
according  to NB  Management's  value-oriented  philosophy  and looks for stocks
which are  undervalued  for any  number  of  reasons.  The  manager  focuses  on
financial  fundamentals,  including balance sheet ratios and cash flow analysis,
and  meets  with  company  management  in an  effort  to  understand  how  those
unrecognized values might be realized in the market.

      The second part of the process is social screening. NB Management's social
research is based on the same kind of  philosophy  that  governs  its  financial
approach:  NB Management  believes that first-hand  knowledge and experience are
its most  important  tools.  Utilizing a database,  the  portfolio  manager does
careful,  in-depth  tracking  and  analyzes a large  number of companies on some
eighty issues in six broad social categories. The manager uses a wide variety of
sources to determine company practices and policies in these areas.  Performance
is analyzed in light of  knowledge  of the issues and of the best  practices  in
each industry.

      Under normal conditions,  at least 65% of the Portfolio's total assets are
invested in  accordance  with its Social  Policy,  and at least 65% of its total
assets  are  invested  in  equity   securities.   The  Portfolio   expects  that
substantially  all of its equity  securities will be selected in accordance with
the Social Policy. On occasion, the portfolio manager may consider deposits with
community banks and credit unions for investment.  The Portfolio may also engage
in portfolio  management  techniques  that are not subject to the Social Policy,
such as lending  securities  and  purchasing and selling put and call options on
securities and currencies,  futures contracts, options on futures contracts, and
forward contracts.

      The  portfolio  manager  understands  that,  for many  issues  and in many
industries, absolute standards are elusive and often counterproductive. Thus, in
addition  to  quantitative  measurements,  the  manager  places  value  on  such
indicators  as  management  commitment,   progress,   direction,   and  industry
leadership.

AN INTERVIEW WITH THE PORTFOLIO MANAGER

      Q: First things first. How do you begin your stock selection process?

      A: Our first question is always:  On financial grounds alone, is a company
a smart  investment?  For a company's  stock to meet our financial test, it must
pass a number of hurdles.

      We look for  bargains,  just  like the  portfolio  managers  of the  other
portfolios managed by NB Management. More specifically,  we search for companies
that we believe have terrific products,  excellent  customer service,  and solid
balance  sheets  --  but  because  they  may  have  missed  quarterly   earnings
expectations by a few pennies, because their sectors are currently out of favor,
because Wall Street overreacted to a temporary setback, or because the company's
merits aren't widely known, their stocks are selling at a discount.

      While we look at the  stock's  fundamentals  carefully,  that's not all we
examine.  We meet an  awful  lot of CEOs  and  CFOs.  Top  officers  of over 400


                                       4
<PAGE>



companies  visit  Neuberger  Berman each year, and we're also  frequently on the
road visiting dozens of corporations.  From Neuberger Berman Socially Responsive
Portfolio's inception, we've met with representatives of every company we own.

      When we're face to face with a CEO,  we're  searching  for  answers to two
crucial questions: "Does the company have a vision of where it wants to go?" and
"Can the  management  team make it happen?"  We've  analyzed  companies for over
three decades,  and we always look for companies that have both clear strategies
and management talent.

      Q: When you evaluate a company's  balance sheet,  what matters the most to
you?

      A: Definitely a company's "free cash flow." Compare it to your household's
discretionary  income -- the money you have left over each  month  after you pay
off your monthly debt and other  expenses.  With ample free cash flow, a company
can do any  number  of  things.  It can  buy  back  its  stock.  Make  important
acquisitions.  Expand its research  and  development  spending.  Or increase its
dividend payments.

      When a company  generates  lots of excess cash flow, it has growth capital
at its  disposal.  It can invest for higher  profits  down the line and  improve
shareholder value. Determining exactly how a company intends to spend its excess
cash is an entirely different matter -- and that's where the information learned
in our company  meetings  comes in. Still,  you've got to have the extra cash in
the first place. Which is why we pay so much attention to it.

      Q:  So you  take  a  hard  look  at a  company's  balance  sheet  and  its
management. After a company passes your financial test, what do you do next?

      A: After we're convinced of a company's merits on financial grounds alone,
we review its record as a corporate citizen. In particular, we look for evidence
of  leadership  in three  key  areas:  concern  for the  environment,  workplace
diversity, and enlightened employment practices.

      It should be clear that our social  screening  always takes place after we
search far and wide for what we believe  are the best  investment  opportunities
available.  This is a crucial  point,  and an analogy can be used to explain it.
Let's assume you're looking to fill a vital position in your company. What you'd
pay attention to first is the candidate's competence:  Can he or she do the job?
So after  interviewing a number of  candidates,  you'd narrow your list to those
that are highly qualified.  To choose from this smaller group, you might look at
the  candidate's  personality:  Can he or she get along  with  everyone  in your
group?

      Obviously,  you wouldn't hire an  unqualified  person simply because he or
she is likable.  What you'd  probably  do is give the job to a highly  qualified
person who is ALSO compatible with your group.

      Now, let's turn to the companies  that do make our financial  cuts. How do
we decide  whether  they meet our  social  criteria?  Once  again,  our  regular
meetings  with CEOs are key.  We look for top  management's  support of programs
that put more women and  minorities  in the  pipeline to be future  officers and
board members;  that minimize  emissions,  reduce waste,  conserve  energy,  and


                                       5
<PAGE>



protect natural resources;  and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.

      We realize that companies are not all good or all bad.  Instead of looking
for  ethical  perfection,  we  analyze  how a company  responds  to  troublesome
problems.  If a company is cited for  breaking a pollution  law, we evaluate its
reaction.  We also ask: Is it the first time? Do its top executives  have a plan
for making sure it doesn't happen again -- and how committed are they?

      If  we're  satisfied  with  the  answers,  a  company  makes  it into  our
portfolio.  When all is said and done, we invest in companies  that have diverse
work forces,  strong CEOs, tough environmental  standards,  AND terrific balance
sheets.  In our  judgment,  financially  strong  companies  that are  also  good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product  unless they know it's  environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.

      Q: Why have investors been attracted to the Fund?

      A: Our shareholders are looking to invest for the future in more ways than
one. While they care deeply about their own financial  futures,  they're equally
passionate about the world they leave to later generations. They want to be able
to meet their college bills and leave a world where the air is a little  cleaner
and where the doors to the executive suite are a little more open.

DESCRIPTION OF SOCIAL POLICY

BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING

      In an era when many people are concerned  about the  relationship  between
business and society,  socially responsive  investing ("SRI") is a mechanism for
assuring  that  investors'  social  values  are  reflected  in their  investment
decisions. As such, SRI is a direct descendent of the successful effort begun in
the early 1970's to encourage companies to divest their South African operations
and subscribe to the Sullivan Principles. Today, a growing number of individuals
and institutions are applying similar strategies to a broad range of problems.

      Although there are many  strategies  available to the socially  responsive
investor,  including proxy activism,  below-market loans to community  projects,
and venture  capital,  the SRI strategies  used by the Portfolio  generally fall
into two categories:

      AVOIDANCE  INVESTING.  Most socially  responsive  investors  seek to avoid
holding  securities of companies whose products or policies are seen as being at
odds with the social good. The most common exclusions historically have involved
tobacco companies and weapons manufacturers.


                                       6
<PAGE>



      LEADERSHIP  INVESTING.  A growing  number of investors  actively  look for
companies with  progressive  programs that are exemplary or companies which make
it their business to try to solve some of the problems of today's society.

      The marriage of social and financial  objectives  would not have surprised
Adam Smith,  who was,  first and foremost,  a moral  philosopher.  THE WEALTH OF
NATIONS is firmly  rooted in the  Enlightenment  conviction  that the purpose of
capital is the social  good and the  related  belief  that idle  capital is both
wasteful and unethical.  But, what very likely would have surprised Smith is the
sheer  complexity  of the social  issues we face today and the  diversity of our
attitudes  toward  the  social  good.  War  and  peace,  race  and  gender,  the
distribution of wealth,  and the conservation of natural resources -- the social
agenda is long and  compelling.  It is also  something  about  which  reasonable
people differ. What should society's  priorities be? What can and should be done
about  them?  And  what is the  role  of  business  in  addressing  them?  Since
corporations  are on the front lines of so many key issues in today's  world,  a
growing  number of investors feel that a  corporation's  role cannot be ignored.
This is true of some of the  most  important  issues  of the day  such as  equal
opportunity and the environment.

THE SOCIALLY RESPONSIVE DATABASE

      Neuberger Berman, LLC ("Neuberger Berman"),  the Portfolio's  sub-adviser,
maintains a database of information  about the social impact of the companies it
follows.  NB  Management  uses the database to evaluate  social  issues after it
deems a stock  acceptable  from a financial  standpoint  for  acquisition by the
Portfolio.  The aim of the database is to be as comprehensive as possible, given
that much of the  information  concerning  corporate  responsibility  comes from
subjective sources. Information for the database is gathered by Neuberger Berman
in many  categories  and then  analyzed by NB  Management  in the  following six
categories of corporate responsibility:

      WORKPLACE DIVERSITY AND EMPLOYMENT. NB Management looks for companies that
show  leadership in areas such as employee  training and promotion  policies and
benefits,  such as flextime,  generous  profit  sharing,  and parental leave. NB
Management  looks for active  programs to promote women and minorities and takes
into account their representation among the officers of an issuer and members of
its board of directors.  As a basis for exclusion, NB Management looks for Equal
Employment  Opportunity Act infractions and  Occupational  Safety and Health Act
violations; examines each case in terms of severity, frequency, and time elapsed
since  the  incident;  and  considers  actions  taken by the  company  since the
violation.  NB Management also monitors companies' progress and attitudes toward
these issues.

      ENVIRONMENT.  A company's impact on the environment depends largely on the
industry.  Therefore,  NB Management examines a company's  environmental  record
vis-a-vis  those of its peers in the  industry.  All  companies  operating in an
industry  with  inherently  high  environmental  risks  are  likely  to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies,  NB Management  examines their problems in
terms of severity,  frequency, and elapsed time. NB Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental  policies,  procedures,  and practices.  NB Management  defines an


                                       7
<PAGE>


environmental  leadership company as one that puts into place strong affirmative
programs to minimize  emissions,  promote  safety,  reduce  waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products.  NB  Management  looks for the  commitment  and
active  involvement  of senior  management  in all these  areas.  Several  major
manufacturers which still produce substantial amounts of pollution are among the
leaders  in  developing  outstanding  waste  source  reduction  and  remediation
programs.

      PRODUCT. NB Management considers company announcements, press reports, and
public interest publications relating to the health, safety, quality,  labeling,
advertising,  and  promotion  of  both  consumer  and  industrial  products.  NB
Management takes note of companies with a strong  commitment to quality and with
marketing practices which are ethical and consumer-friendly.  NB Management pays
particular   attention  to  companies   whose  products  and  services   promote
progressive solutions to social problems.

      PUBLIC HEALTH.  NB Management  measures the  participation of companies in
such industries and markets as alcohol,  tobacco, gambling and nuclear power. NB
Management  also  considers  the impact of  products  and  marketing  activities
related  to those  products  on  nutritional  and other  health  concerns,  both
domestically and in foreign markets.

      WEAPONS.  NB  Management  keeps  track of  domestic  military  sales  and,
whenever  possible,  foreign  military  sales and  categorizes  them as  nuclear
weapons related,  other weapons related, and non-weapon military supplies,  such
as  micro-chip  manufacturers  and  companies  that make  uniforms  for military
personnel.

      CORPORATE CITIZENSHIP. NB Management gathers information about a company's
participation  in community  affairs,  its policies  with respect to  charitable
contributions,  and its support of education and the arts.  NB Management  looks
for  companies  with a focus,  dealing with issues not just by making  financial
contributions, but also by asking the questions: What can we do to help? What do
we have to offer? Volunteerism, high-school mentoring programs, scholarships and
grants,  and  in-kind  donations  to  specific  groups  are just a few ways that
companies have responded to these questions.

IMPLEMENTATION OF SOCIAL POLICY

      Companies deemed  acceptable by NB Management from a financial  standpoint
are analyzed using Neuberger Berman's database. The companies are then evaluated
by the portfolio  manager to determine if the  companies'  policies,  practices,
products,  and  services  withstand  scrutiny  in the  following  major areas of
concern:  the environment and workplace diversity and employment.  Companies are
then further  evaluated  to determine  their track record in issues and areas of
concern such as public health, weapons, product, and corporate citizenship.

      The  issues and areas of  concern  that are  tracked  lend  themselves  to
objective analysis in varying degrees. Few, however, can be resolved entirely on
the basis of scientifically  demonstrable facts.  Moreover, a substantial amount
of  important  information  comes  from  sources  that  do  not  purport  to  be
disinterested.  Thus,  the  quality and  usefulness  of the  information  in the
database depend on Neuberger  Berman's  ability to tap a wide variety of sources


                                       8
<PAGE>



and on the  experience and judgment of the people at NB Management who interpret
the information.

      In applying the  information  in the database to stock  selection  for the
Portfolio,  NB Management  considers several factors. NB Management examines the
severity and frequency of various infractions, as well as the time elapsed since
their  occurrence.  NB  Management  also takes into account any remedial  action
which has been taken by the company relating to these infractions. NB Management
notes  any  quality  innovations  made by the  company  in its  effort to create
positive change and looks at the company's overall approach to social issues.

                                    * * * * *

      The Portfolio invests in a wide array of stocks, and no single stock makes
up more than a small fraction of the Portfolio's  total assets.  Of course,  the
Portfolio's holdings are subject to change.

ADDITIONAL INVESTMENT INFORMATION

      The Portfolio may make the following investments, among others. It may not
buy all of the types of securities or use all of the investment  techniques that
are described.

      ILLIQUID  SECURITIES.  Illiquid  securities are securities  that cannot be
expected to be sold within seven days at  approximately  the price at which they
are valued.  These may include  unregistered or other restricted  securities and
repurchase  agreements  maturing in greater than seven days. Illiquid securities
may also include  commercial  paper under Section 4(2) of the  Securities Act of
1933, as amended,  and Rule 144A Securities  (restricted  securities that may be
traded freely among qualified institutional buyers pursuant to an exemption from
the  registration  requirements of the securities  laws);  these  securities are
considered  illiquid  unless  NB  Management,   acting  pursuant  to  guidelines
established by the trustees of the Manager's Trusts, determines they are liquid.
Generally,  foreign securities freely tradable in their principal market are not
considered  restricted or illiquid.  Illiquid  securities may be difficult for a
portfolio to value or dispose of due to the absence of an active trading market.
The sale of some  illiquid  securities  by the portfolio may be subject to legal
restrictions which could be costly to the portfolio.

      POLICIES AND  LIMITATIONS.  The  portfolio may invest up to 15% of its net
assets in illiquid securities.

      REPURCHASE AGREEMENTS.  In a repurchase agreement, the Portfolio purchases
securities  from a bank that is a member of the Federal Reserve System or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date.  Repurchase agreements generally are
for a short period of time,  usually less than a week. Costs,  delays, or losses
could result if the selling party to a repurchase  agreement becomes bankrupt or
otherwise defaults. NB Management monitors the creditworthiness of sellers.

      POLICIES AND  LIMITATIONS.  Repurchase  agreements with a maturity of more
than seven days are considered to be illiquid securities.  The Portfolio may not


                                       9
<PAGE>


enter into a repurchase agreement with a maturity of more than seven days if, as
a result, more than 15% of the value of its net assets would then be invested in
such  repurchase  agreements  and other illiquid  securities.  The Portfolio may
enter into a repurchase agreement only if (1) the underlying securities are of a
type that the Portfolio's  investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities,  including
accrued  interest,  at all times equals or exceeds the repurchase price, and (3)
payment for the underlying  securities is made only upon  satisfactory  evidence
that the securities are being held for the Portfolio's  account by its custodian
or a bank acting as the Portfolio's agent.

      SECURITIES  LOANS.  The  Portfolio  may lend  securities  to  unaffiliated
entities,  including banks,  brokerage firms, and other institutional  investors
judged  creditworthy  by  NB  Management,   provided  that  cash  or  equivalent
collateral, equal to at least 100% of the market value of the loaned securities,
is continuously maintained by the Borrower with the Portfolio. The Portfolio may
invest the cash  collateral  and earn  income,  or it may receive an agreed upon
amount  of  interest  income  from  a  Borrower  who  has  delivered  equivalent
collateral.  During the time  securities  are on loan, the Borrower will pay the
Portfolio  an  amount  equivalent  to any  dividends  or  interest  paid on such
securities.  These  loans  are  subject  to  termination  at the  option  of the
portfolio or the Borrower.  The Portfolio may pay reasonable  administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent  collateral to the Borrower or placing
broker.  The Portfolio  does not have the right to vote  securities on loan, but
would  terminate  the loan and regain the right to vote if that were  considered
important  with respect to the  investment.  NB Management  believes the risk of
loss on these transactions is slight because,  if a Borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of portfolio securities involve some risk of
loss of rights in the collateral should the Borrower fail financially.

      POLICIES AND LIMITATIONS. The Portfolio may lend portfolio securities with
a value not exceeding 33-1/3% of its total assets to banks,  brokerage firms, or
other institutional  investors judged  creditworthy by NB Management.  Borrowers
are required  continuously to secure their  obligations to return  securities on
loan from the  Portfolio by  depositing  collateral  in a form  determined to be
satisfactory by the Portfolio Trustees. The collateral,  which must be marked to
market  daily,  must be equal to at least 100% of the market value of the loaned
securities, which will also be marked to market daily. Securities lending by the
Portfolio is not subject to the Social Policy.

      RESTRICTED  SECURITIES AND RULE 144A SECURITIES.  The Portfolio may invest
in  restricted  securities,  which  are  securities  that may not be sold to the
public without an effective  registration  statement  under the 1933 Act. Before
they are registered,  such securities may be sold only in a privately negotiated
transaction or pursuant to an exemption from registration. In recognition of the
increased  size and  liquidity  of the  institutional  market  for  unregistered
securities  and the  importance of  institutional  investors in the formation of
capital, the SEC has adopted Rule 144A under the 1933 Act. Rule 144A is designed
to facilitate efficient trading among institutional  investors by permitting the
sale of certain unregistered  securities to qualified  institutional  buyers. To
the extent privately placed  securities held by the Portfolio qualify under Rule
144A and an institutional  market develops for those  securities,  the Portfolio
likely will be able to dispose of the securities without  registering them under


                                       10
<PAGE>




the 1933 Act.  To the  extent  that  institutional  buyers  become,  for a time,
uninterested in purchasing these  securities,  investing in Rule 144A securities
could increase the level of the Portfolio's illiquidity.  NB Management,  acting
under  guidelines  established  by the Portfolio  Trustees,  may determine  that
certain securities qualified for trading under Rule 144A are liquid.  Regulation
S under  the 1933  Act  permits  the  sale  abroad  of  securities  that are not
registered for sale in the United States.

      Where registration is required,  the Portfolio may be obligated to pay all
or part of the  registration  expenses,  and a  considerable  period  may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement.  If, during such a period,
adverse market  conditions  were to develop,  the Portfolio  might obtain a less
favorable  price than prevailed when it decided to sell.  Restricted  securities
for which no market  exists are priced by a method that the  Portfolio  Trustees
believe accurately reflects fair value.

      POLICIES AND LIMITATIONS.  To the extent restricted securities,  including
Rule 144A  securities,  are illiquid,  purchases  thereof will be subject to the
portfolio's 15% limit on investments in illiquid securities.

      REVERSE  REPURCHASE  AGREEMENTS.  In a reverse repurchase  agreement,  the
Portfolio sells portfolio  securities subject to its agreement to repurchase the
securities  at a later  date  for a fixed  price  reflecting  a  market  rate of
interest.  There  is a risk  that  the  counter-party  to a  reverse  repurchase
agreement will be unable or unwilling to complete the  transaction as scheduled,
which may result in losses to the Portfolio.

      POLICIES AND  LIMITATIONS.  Reverse  repurchase  agreements are considered
Borrowings for purposes of the portfolio's  investment  policies and limitations
concerning borrowings.  While a reverse repurchase agreement is outstanding, the
portfolio  will  deposit in a  segregated  account  with its  custodian  cash or
appropriate  liquid  securities,  marked to market daily,  in an amount at least
equal to the portfolio's obligations under the agreement.

      FOREIGN  SECURITIES.  The Portfolio may invest in U.S.  dollar-denominated
securities   of   foreign   issuers   (including   banks,    governments,    and
quasi-governmental  organizations) and foreign branches of U.S. banks, including
negotiable certificates of deposit ("CDs"),  bankers' acceptances and commercial
paper.  While  investments in foreign  securities are intended to reduce risk by
providing further diversification,  such investments involve sovereign and other
risks,  in  addition to the credit and market  risks  normally  associated  with
domestic  securities.  These additional risks include the possibility of adverse
political   and  economic   developments   (including   political   instability,
nationalization,  expropriation,  or confiscatory  taxation) and the potentially
adverse effects of unavailability of public information  regarding issuers, less
governmental  supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting,  auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.

      The Portfolio also may invest in equity,  debt, or other  income-producing
securities that are denominated in or indexed to foreign  currencies,  including


                                       11
<PAGE>


(1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits,
and bankers'  acceptances  issued by foreign  banks,  (3)  obligations  of other
corporations, and (4) obligations of foreign governments and their subdivisions,
agencies,  and  instrumentalities,  international  agencies,  and  supranational
entities.  Investing in foreign  currency  denominated  securities  involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding paragraph,  and the additional risks of (1) adverse changes in foreign
exchange  rates,  and (2) adverse  changes in  investment  or  exchange  control
regulations  (which  could  prevent  cash from being  brought back to the United
States). Additionally,  dividends and interest payable on foreign securities may
be subject to foreign  taxes,  including  taxes  withheld  from those  payments.
Commissions  on foreign  securities  exchanges  are often at fixed rates and are
generally  higher than negotiated  commissions on U.S.  exchanges,  although the
Portfolio  endeavors  to achieve the most  favorable  net  results on  portfolio
transactions.

      Foreign securities often trade with less frequency and in less volume than
domestic   securities  and  therefore  may  exhibit  greater  price  volatility.
Additional costs associated with an investment in foreign securities may include
higher  custodial  fees  than  apply  to  domestic   custody   arrangements  and
transaction costs of foreign currency conversions.

      Foreign markets also have different  clearance and settlement  procedures.
In certain  markets,  there have been times when settlements have been unable to
keep pace with the volume of  securities  transactions,  making it  difficult to
conduct  such  transactions.  Delays in  settlement  could  result in  temporary
periods  when a portion of the assets of the  Portfolio  are  uninvested  and no
return is earned  thereon.  The  inability  of the  Portfolio  to make  intended
security purchases due to settlement  problems could cause the Portfolio to miss
attractive   investment   opportunities.   Inability  to  dispose  of  portfolio
securities  due to settlement  problems  could result in losses to the Portfolio
due to subsequent  declines in value of the  securities or, if the Portfolio has
entered  into a  contract  to sell the  securities,  could  result  in  possible
liability to the purchaser.

      Interest  rates  prevailing  in other  countries  may affect the prices of
foreign  securities  and exchange rates for foreign  currencies.  Local factors,
including  the  strength of the local  economy,  the demand for  borrowing,  the
government's  fiscal and monetary  policies,  and the  international  balance of
payments,  often affect interest rates in other  countries.  Individual  foreign
economies  may differ  favorably or  unfavorably  from the U.S.  economy in such
respects  as  growth  of gross  national  product,  rate of  inflation,  capital
reinvestment, resource self-sufficiency, and balance of payments position.

      POLICIES  AND  LIMITATIONS.  In order  to  limit  the  risks  inherent  in
investing in foreign  currency  denominated  securities,  the  Portfolio may not
purchase any such  security  if, as a result,  more than 10% of its total assets
(taken at market  value)  would be  invested  in  foreign  currency  denominated
securities. Within that limitation,  however, the Portfolio is not restricted in
the amount it may invest in securities  denominated in any one foreign currency.
Investments in the securities of foreign  issuers are subject to the Portfolio's
quality  standards.  The  Portfolio  may invest only in securities of issuers in
countries whose governments are considered stable by NB Management.


                                       12
<PAGE>




           FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES, FORWARD
                        CONTRACTS, AND OPTIONS ON FOREIGN
                CURRENCIES (COLLECTIVELY, "HEDGING INSTRUMENTS")

      FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and sell
interest rate futures  contracts,  stock and bond index futures  contracts,  and
foreign currency futures  contracts and may purchase and sell options thereon in
an attempt to hedge against  changes in the prices of securities or, in the case
of foreign  currency  futures and options  thereon,  to hedge against changes in
prevailing  currency  exchange  rates.  Because the futures  markets may be more
liquid than the cash markets, the use of futures contracts permits the Portfolio
to enhance portfolio  liquidity and maintain a defensive position without having
to sell portfolio  securities.  The Portfolio  views  investment in (i) interest
rate and securities  index futures and options thereon as a maturity  management
device  and/or a device to reduce  risk or preserve  total  return in an adverse
environment for the hedged  securities,  and (ii) foreign  currency  futures and
options thereon as a means of establishing  more definitely the effective return
on, or the purchase price of, securities  denominated in foreign currencies that
are held or intended to be acquired by the Portfolio.

      A "sale" of a futures contract (or a "short" futures position) entails the
assumption  of a contractual  obligation  to deliver the  securities or currency
underlying  the  contract at a specified  price at a specified  future  time.  A
"purchase"  of a futures  contract (or a "long"  futures  position)  entails the
assumption  of a contractual  obligation  to acquire the  securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures,  including  stock and bond  index  futures,  are  settled on a net cash
payment basis rather than by the sale and delivery of the securities  underlying
the futures.

      U.S. futures  contracts  (except certain  currency  futures) are traded on
exchanges  that have been  designated  as  "contract  markets" by the  Commodity
Futures  Trading  Commission  ("CFTC");  futures  transactions  must be executed
through a futures commission  merchant that is a member of the relevant contract
market. The exchange's affiliated clearing organization  guarantees  performance
of the contracts between the clearing members of the exchange.

      Although futures  contracts by their terms may require the actual delivery
or  acquisition  of the  underlying  securities  or currency,  in most cases the
contractual  obligation is extinguished by being offset before the expiration of
the contract. A futures position is offset by buying (to offset an earlier sale)
or selling (to offset an earlier purchase) an identical futures contract calling
for delivery in the same month. This may result in a profit or a loss.

      "Margin"  with respect to a futures  contract is the amount of assets that
must be  deposited  by the  Portfolio  with,  or for the  benefit  of, a futures
commission  merchant in order to initiate and maintain the  Portfolio's  futures
positions.  The  margin  deposit  made by the  Portfolio  when it enters  into a
futures contract ("initial margin") is intended to assure its performance of the
contract.  If the price of the futures contract changes -- increases in the case
of a short  (sale)  position  or  decreases  in the  case  of a long  (purchase)
position  -- so that the  unrealized  loss on the  contract  causes  the  margin
deposit not to satisfy  margin  requirements,  the Portfolio will be required to
make an additional margin deposit  ("variation  margin").  However, if favorable


                                       13
<PAGE>



price  changes in the futures  contract  cause the margin  deposit to exceed the
required  margin,  the excess will be paid to the  Portfolio.  In computing  its
daily net asset value  ("NAV"),  the Portfolio  marks to market the value of its
open  futures  positions.  The  Portfolio  also must make margin  deposits  with
respect  to  options on futures  that it has  written  (but not with  respect to
options on futures that it has purchased).  If the futures  commission  merchant
holding the margin deposit goes bankrupt,  the Portfolio could suffer a delay in
recovering its funds and could ultimately suffer a loss.

      An option on a futures  contract gives the purchaser the right,  in return
for the premium  paid,  to assume a position in the contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period.  The writer of the
option is required  upon  exercise to assume a short  futures  position  (if the
option is a call) or a long  futures  position  (if the  option is a put).  Upon
exercise of the option,  the  accumulated  cash balance in the writer's  futures
margin account is delivered to the holder of the option. That balance represents
the  amount  by which the  market  price of the  futures  contract  at  exercise
exceeds,  in the case of a call,  or is less  than,  in the  case of a put,  the
exercise price of the option.  Options on futures have characteristics and risks
similar to those of securities options, as discussed herein.

      Although the  Portfolio  believes that the use of futures  contracts  will
benefit  it, if NB  Management's  judgment  about the general  direction  of the
markets or about  interest  rate or currency  exchange rate trends is incorrect,
the  Portfolio's  overall  return would be lower than if it had not entered into
any such  contracts.  The  prices of  futures  contracts  are  volatile  and are
influenced by, among other things, actual and anticipated changes in interest or
currency  exchange  rates,  which in turn are  affected  by fiscal and  monetary
policies and by national and  international  political and economic  events.  At
best,  the  correlation  between  changes in prices of futures  contracts and of
securities being hedged can be only  approximate due to differences  between the
futures  and  securities  markets  or  differences  between  the  securities  or
currencies  underlying the Portfolio's  futures position and the securities held
by or to be purchased  for the  Portfolio.  The currency  futures  market may be
dominated  by  short-term  traders  seeking to profit  from  changes in exchange
rates.  This would reduce the value of such contracts used for hedging  purposes
over a  short-term  period.  Such  distortions  are  generally  minor  and would
diminish as the contract approaches maturity.

      Because of the low margin deposits  required,  futures trading involves an
extremely  high  degree of  leverage;  as a result,  a  relatively  small  price
movement in a futures contract may result in immediate and substantial  loss, or
gain, to the investor.  Losses that may arise from certain futures  transactions
are potentially unlimited.

      Most U.S.  futures  exchanges limit the amount of fluctuation in the price
of a futures  contract or option  thereon  during a single trading day; once the
daily  limit  has been  reached,  no  trades  may be made on that day at a price
beyond  that  limit.  The daily  limit  governs  only price  movements  during a
particular  trading day,  however;  it thus does not limit potential  losses. In
fact,  it may  increase the risk of loss,  because  prices can move to the daily
limit for several  consecutive  trading days with little or no trading,  thereby
preventing   liquidation  of  unfavorable  futures  and  options  positions  and
subjecting traders to substantial losses. If this were to happen with respect to


                                       14
<PAGE>



a  position  held by the  Portfolio,  it  could  (depending  on the  size of the
position) have an adverse impact on the NAV of the Portfolio.

      POLICIES  AND  LIMITATIONS.  The  Portfolio  may purchase and sell futures
contracts  and may  purchase  and sell  options  thereon  in an attempt to hedge
against changes in the prices of securities or, in the case of foreign  currency
futures and options  thereon,  to hedge  against  prevailing  currency  exchange
rates.  The Portfolio does not engage in  transactions in futures and options on
futures  for  speculation.  The use of  futures  and  options  on futures by the
Portfolio is not subject to the Social Policy.

      CALL OPTIONS ON  SECURITIES  (ALL  PORTFOLIOS).  The  Portfolio  may write
covered call options and may purchase call options on securities. The purpose of
writing call options is to hedge (I.E., to reduce,  at least in part, the effect
of price fluctuations of securities held by the Portfolio on the Portfolio's and
the Fund's NAVs) or to earn premium income.  Portfolio  securities on which call
options may be written and purchased by the  Portfolio  are purchased  solely on
the  basis  of  investment   considerations   consistent  with  the  Portfolio's
investment objective.

      When  the  Portfolio  writes  a call  option,  it is  obligated  to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option.  The Portfolio  receives a premium
for  writing  the call  option.  So long as the  obligation  of the call  option
continues,  the  Portfolio may be assigned an exercise  notice,  requiring it to
deliver the  underlying  security  against  payment of the exercise  price.  The
Portfolio  may be obligated to deliver  securities  underlying an option at less
than the market price.

      The writing of covered call options is a conservative investment technique
that is believed to involve  relatively  little risk but is capable of enhancing
the Portfolios' total return. When writing a covered call option, the Portfolio,
in return for the  premium,  gives up the  opportunity  for profit  from a price
increase in the  underlying  security above the exercise  price,  but conversely
retains the risk of loss should the price of the security decline.

      If a call option that the Portfolio has written expires  unexercised,  the
Portfolio will realize a gain in the amount of the premium;  however,  that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.

      When the  Portfolio  purchases  a call  option,  it pays a premium for the
right to  purchase  a  security  from the writer at a  specified  price  until a
specified date.

      POLICIES AND LIMITATIONS. The Portfolio may write covered call options and
may purchase call options in related closing transactions.  The Portfolio writes
only "covered" call options on securities it owns (in contrast to the writing of
"naked" or uncovered call options, which the Portfolios will not do).

      The Portfolio would purchase a call option to offset a previously  written
call option. The Portfolio also may purchase a call option to protect against an


                                       15
<PAGE>


increase  in the price of  securities  it intends to  purchase.  The use of call
options on securities by the Portfolio is not subject to the Social Policy.

      PUT  OPTIONS ON  SECURITIES.  The  Portfolio  may write and  purchase  put
options on  securities.  The Portfolio  will receive a premium for writing a put
option,  which  obligates the Portfolio to acquire a security at a certain price
at any time  until a certain  date if the  purchaser  decides  to  exercise  the
option.  The Portfolio may be obligated to purchase the  underlying  security at
more than its current value.

      When the Portfolio purchases a put option, it pays a premium to the writer
for the right to sell a security  to the writer  for a  specified  amount at any
time until a certain date. The Portfolio might purchase a put option in order to
protect itself against a decline in the market value of a security it owns.

      Portfolio  securities on which put options may be written and purchased by
the  Portfolio are  purchased  solely on the basis of investment  considerations
consistent with the Portfolio's investment objective. When writing a put option,
the Portfolio,  in return for the premium,  takes the risk that it must purchase
the  underlying  security at a price that may be higher than the current  market
price of the security.  If a put option that the  Portfolio has written  expires
unexercised, the Portfolio will realize a gain in the amount of the premium.

      POLICIES AND LIMITATIONS. The Portfolio generally writes and purchases put
options on securities for hedging  purposes (I.E., to reduce,  at least in part,
the effect of price  fluctuations  of  securities  held by the  Portfolio on the
Portfolio's  and the Fund's  NAVs).  The use of put options on securities by the
Portfolio is not subject to the Social Policy.

      GENERAL  INFORMATION  ABOUT SECURITIES  OPTIONS.  The exercise price of an
option  may be below,  equal to, or above  the  market  value of the  underlying
security at the time the option is written.  Options  normally  have  expiration
dates  between  three  and nine  months  from the date  written.  American-style
options  are  exercisable  at any  time  prior  to their  expiration  date.  The
obligation under any option written by the Portfolio  terminates upon expiration
of the option or, at an earlier time,  when the Portfolio  offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series.  If an option is purchased by the  Portfolio  and is never  exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.

      Options  are  traded  both on  national  securities  exchanges  and in the
over-the-counter  ("OTC") market.  Exchange-traded  options in the United States
are issued by a clearing organization  affiliated with the exchange on which the
option is listed; the clearing  organization in effect guarantees  completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party,  with no clearing organization  guarantee.  Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close  out" the  option  prior to its  expiration  only by  entering  into a
closing  transaction  with  the  dealer  to whom (or from  whom)  the  Portfolio
originally  sold (or purchased)  the option.  There can be no assurance that the
Portfolio  would  be able to  liquidate  an OTC  option  at any  time  prior  to
expiration.   Unless  the  Portfolio  is  able  to  effect  a  closing  purchase


                                       16
<PAGE>



transaction in a covered OTC call option it has written,  it will not be able to
liquidate  securities  used as cover until the option expires or is exercised or
until  different  cover is  substituted.  In the  event  of the  counter-party's
insolvency,  the Portfolio  may be unable to liquidate its options  position and
the associated  cover. NB Management  monitors the  creditworthiness  of dealers
with which the Portfolio may engage in OTC options transactions.

      The  premium  received  (or  paid) by the  Portfolio  when it  writes  (or
purchases)  an option is the amount at which the option is  currently  traded on
the applicable market. The premium may reflect,  among other things, the current
market price of the underlying security,  the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option  period,  the general  supply of and demand for credit,
and the interest  rate  environment.  The premium  received by the Portfolio for
writing an option is recorded as a liability  on the  Portfolio's  statement  of
assets and liabilities. This liability is adjusted daily to the option's current
market value.

      Closing  transactions  are  effected  in order  to  realize  a profit  (or
minimize a loss) on an  outstanding  option,  to prevent an underlying  security
from being called, or to permit the sale or the put of the underlying  security.
Furthermore,  effecting a closing  transaction  permits the  Portfolio  to write
another call option on the underlying  security with a different  exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be  able  to  effect  closing  transactions  at  favorable  prices.  If the
Portfolio  cannot  enter into such a  transaction,  it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.

      The  Portfolio  will  realize a profit  or loss  from a  closing  purchase
transaction  if the cost of the  transaction  is less or more  than the  premium
received  from writing the call or put option.  Because  increases in the market
price of a call option  generally  reflect  increases in the market price of the
underlying security,  any loss resulting from the repurchase of a call option is
likely to be offset,  in whole or in part,  by  appreciation  of the  underlying
security  owned by the  Portfolio;  however,  the  Portfolio  could be in a less
advantageous position than if it had not written the call option.

      The Portfolio  pays brokerage  commissions  or spreads in connection  with
purchasing  or  writing  options,  including  those  used to close out  existing
positions.  From time to time, the Portfolio may purchase an underlying security
for delivery in accordance  with an exercise notice of a call option assigned to
it,  rather than  delivering  the security from its  portfolio.  In those cases,
additional brokerage commissions are incurred.

      The hours of trading for options may not conform to the hours during which
the  underlying  securities are traded.  To the extent that the options  markets
close before the markets for the underlying  securities,  significant  price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets.

      POLICIES AND LIMITATIONS.  The Portfolio may use  American-style  options.
The  assets  used as cover (or held in a  segregated  account)  for OTC  options


                                       17
<PAGE>



written by the Portfolio will be considered  illiquid unless the OTC options are
sold to qualified  dealers who agree that the Portfolio may  repurchase  any OTC
option it writes at a maximum  price to be  calculated by a formula set forth in
the option  agreement.  The cover for an OTC call option written subject to this
procedure  will be  considered  illiquid  only to the  extent  that the  maximum
repurchase  price under the formula  exceeds the intrinsic  value of the option.
The use of put and call  options by the  Portfolio  is not subject to the Social
Policy.

      FOREIGN CURRENCY TRANSACTIONS.  The Portfolio may enter into contracts for
the purchase or sale of a specific  currency at a future date (usually less than
one year from the date of the contract) at a fixed price ("forward  contracts").
The Portfolio also may engage in foreign  currency  exchange  transactions  on a
spot (I.E.,  cash)  basis at the spot rate  prevailing  in the foreign  currency
exchange market.

      The Portfolio enters into forward contracts in an attempt to hedge against
changes in prevailing  currency exchange rates. The Portfolio does not engage in
transactions  in forward  contracts for  speculation;  it views  investments  in
forward  contracts as a means of  establishing  more  definitely  the  effective
return  on,  or  the  purchase  price  of,  securities  denominated  in  foreign
currencies.  Forward contract transactions include forward sales or purchases of
foreign  currencies  for the  purpose of  protecting  the U.S.  dollar  value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.

      Forward  contracts are traded in the  interbank  market  directly  between
dealers (usually large commercial banks) and their customers. A forward contract
generally  has no deposit  requirement,  and no  commissions  are charged at any
stage  for  trades;  foreign  exchange  dealers  realize  a profit  based on the
difference  (the spread) between the prices at which they are buying and selling
various currencies.

      At the consummation of a forward contract to sell currency,  the Portfolio
may either make delivery of the foreign  currency or terminate  its  contractual
obligation to deliver by purchasing  an  offsetting  contract.  If the Portfolio
chooses to make delivery of the foreign  currency,  it may be required to obtain
such  currency  through the sale of  portfolio  securities  denominated  in such
currency  or  through  conversion  of other  assets of the  Portfolio  into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent  that  there has been a change in forward  contract
prices.  Closing  purchase  transactions  with respect to forward  contracts are
usually  made with the currency  dealer who is a party to the  original  forward
contract.

      NB  Management   believes  that  the  use  of  foreign   currency  hedging
techniques,  including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S.  dollar against  foreign  currencies.
For example,  the return  available from securities  denominated in a particular
foreign  currency  would  diminish  if the  value of the U.S.  dollar  increased
against that currency. Such a decline could be partially or completely offset by
an  increase  in value of a hedge  involving  a  forward  contract  to sell that
foreign  currency  or a  proxy-hedge  involving  a  forward  contract  to sell a
different  foreign  currency whose behavior is expected to resemble the currency


                                       18
<PAGE>


in which the securities  being hedged are  denominated and which is available on
more advantageous terms.

      However, a hedge or proxy-hedge cannot protect against exchange rate risks
perfectly, and, if NB Management is incorrect in its judgment of future exchange
rate relationships,  the Portfolio could be in a less advantageous position than
if such a hedge had not been established.  If the Portfolio uses  proxy-hedging,
it may  experience  losses on both the currency in which it has invested and the
currency  used for hedging if the two  currencies  do not vary with the expected
degree of  correlation.  Using  forward  contracts  to protect  the value of the
Portfolio's  securities  against a decline in the value of a  currency  does not
eliminate  fluctuations  in the  prices of the  underlying  securities.  Because
forward  contracts are not traded on an exchange,  the assets used to cover such
contracts may be illiquid. The Portfolio may experience delays in the settlement
of its foreign currency transactions.

      POLICIES AND LIMITATIONS.  The Portfolio may enter into forward  contracts
for the purpose of hedging and not for speculation. The use of forward contracts
by the Portfolio is not subject to the Social Policy.

      OPTIONS  ON  FOREIGN  CURRENCIES.  The  Portfolio  may write and  purchase
covered  call and put  options  on foreign  currencies.  Currency  options  have
characteristics  and risks similar to those of securities  options, as discussed
herein.  Certain options on foreign  currencies are traded on the OTC market and
involve  liquidity  and  credit  risks  that may not be  present  in the case of
exchange-traded currency options.

      POLICIES  AND  LIMITATIONS.  The  Portfolio  would use  options on foreign
currencies  to protect  against  declines in the U.S.  dollar value of portfolio
securities or increases in the U.S.  dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends,  interest, or other payments
on those  securities.  The use of options on  currencies by the Portfolio is not
subject to the Social Policy.

      REGULATORY  LIMITATIONS  ON USING HEDGING  INSTRUMENTS.  To the extent the
Portfolio  sells or purchases  futures  contracts or writes  options  thereon or
options on foreign  currencies  that are traded on an exchange  regulated by the
CFTC other than for BONA FIDE  hedging  purposes  (as defined by the CFTC),  the
aggregate  initial margin and premiums on those positions  (excluding the amount
by which options are  "in-the-money")  may not exceed 5% of the  Portfolio's net
assets.

      COVER FOR HEDGING  INSTRUMENTS.  Securities  held in a segregated  account
cannot be sold while the futures,  options, or forward strategy covered by those
securities is outstanding,  unless they are replaced with other suitable assets.
As a result,  segregation of a large percentage of the Portfolio's  assets could
impede  portfolio   management  or  the  Portfolio's  ability  to  meet  current
obligations.  The  Portfolio  may be unable  promptly to dispose of assets which
cover,  or are  segregated  with respect to, an illiquid  futures,  options,  or
forward position; this inability may result in a loss to the Portfolio.


                                       19
<PAGE>



      POLICIES AND  LIMITATIONS.  The Portfolio  will comply with SEC Guidelines
regarding "cover" for Hedging Instruments and, if the Guidelines so require, set
aside in a segregated  account with its custodian the prescribed  amount of cash
or appropriate liquid securities.

      GENERAL RISKS OF HEDGING  INSTRUMENTS.  The primary risks in using Hedging
Instruments are (1) imperfect  correlation or no correlation  between changes in
market  value of the  securities  or  currencies  held or to be  acquired by the
Portfolio and the prices of Hedging  Instruments;  (2) possible lack of a liquid
secondary  market for Hedging  Instruments and the resulting  inability to close
out Hedging Instruments when desired; (3) the fact that the skills needed to use
Hedging  Instruments  are different from those needed to select the  Portfolio's
securities;  (4) the fact that,  although use of these  instruments  for hedging
purposes can reduce the risk of loss,  they also can reduce the  opportunity for
gain,  or even result in losses,  by  offsetting  favorable  price  movements in
hedged investments;  and (5) the possible inability of the Portfolio to purchase
or sell a portfolio  security at a time that would otherwise be favorable for it
to do so, or the possible need for the Portfolio to sell a portfolio security at
a  disadvantageous  time,  due to its need to  maintain  cover  or to  segregate
securities in connection  with its use of Hedging  Instruments.  There can be no
assurance that the Portfolio's use of Hedging Instruments will be successful.

      The  Portfolio's  use  of  Hedging  Instruments  may  be  limited  by  the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to  continue to qualify as a regulated  investment
company ("RIC").  See "Additional Tax Information."  Hedging Instruments may not
be available  with  respect to some  currencies,  especially  those of so-called
emerging market countries.

      POLICIES  AND  LIMITATIONS.  NB  Management  intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of the Portfolio's  underlying securities or
currency.  NB Management  intends to reduce the risk that the Portfolio  will be
unable to close out Hedging  Instruments by entering into such transactions only
if NB Management believes there will be an active and liquid secondary market.

      FIXED INCOME SECURITIES.  While the emphasis of the Portfolio's investment
program is on common stocks and other equity  securities,  it may also invest in
money market instruments, U.S. Government and Agency Securities, and other fixed
income securities.  The Portfolio may invest in investment grade corporate bonds
and debentures.

      U.S. Government  Securities are obligations of the U.S. Treasury backed by
the  full  faith  and  credit  of the  United  States.  U.S.  Government  Agency
Securities  are  issued  or  guaranteed  by  U.S.   Government  agencies  or  by
instrumentalities  of the  U.S.  Government,  such  as the  Government  National
Mortgage   Association,   Fannie  Mae  (formerly,   Federal  National   Mortgage
Association),  Freddie Mac (formerly,  Federal Home Loan Mortgage  Corporation),
Student Loan Marketing  Association  (commonly  known as "Sallie Mae"),  and the
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may by supported
by the  issuer's  ability  to  borrow  from the U.S.  Treasury,  subject  to the
Treasury's  discretion  in certain  cases,  or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed


                                       20
<PAGE>



securities.  The market prices of U.S.  Government and Agency Securities are not
guaranteed by the Government.

      "Investment  grade" debt  securities  are those  receiving one of the four
highest ratings from Moody's  Investor  Service,  Inc.  ("Moody's"),  Standard &
Poor's   ("S&P"),   or  another   nationally   recognized   statistical   rating
organizations  ("NRSRO")  or, if unrated by any NRSRO,  deemed by NB  Management
comparable  to  such  rated  securities   ("Comparable   Unrated   Securities").
Securities  rated by Moody's  in its fourth  highest  rating  category  (Baa) or
Comparable Unrated Securities may be deemed to have speculative characteristics.

      The  ratings  of an NRSRO  represent  its  opinion  as to the  quality  of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently,  securities  with the same maturity,  coupon,  and rating may have
different  yields.  Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.

      Fixed income  securities are subject to the risk of an issuer's  inability
to meet principal and interest  payments on its obligations  ("credit risk") and
are  subject  to  price   volatility  due  to  such  factors  as  interest  rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of the fixed income securities in which the
Portfolio  may invest is likely to decline  in times of rising  market  interest
rates.  Conversely,  when rates fall, the value of the Portfolio's  fixed income
investments  is likely to rise.  Foreign  debt  securities  are subject to risks
similar to those of other foreign securities.

      Lower-rated  securities are more likely to react to developments affecting
market  and credit  risk than are more  highly  rated  securities,  which  react
primarily to movements in the general level of interest  rates.  Debt securities
in the lowest rating categories may involve a substantial risk of default or may
be in default.  Changes in economic  conditions  or  developments  regarding the
individual  issuer  are more  likely to cause  price  volatility  and weaken the
capacity  of the  issuer  of such  securities  to make  principal  and  interest
payments than is the case for higher-grade debt securities. An economic downturn
affecting the issuer may result in an increased incidence of default. The market
for lower-rated  securities may be thinner and less active than for higher-rated
securities.  Pricing of thinly traded securities  requires greater judgment than
pricing of securities for which market transactions are regularly reported.

      POLICIES AND LIMITATIONS.  The Portfolio  normally may invest up to 35% of
its  total  assets  in  debt  securities.  Subsequent  to  its  purchase  by the
Portfolio,  an issue of debt  securities may cease to be rated or its rating may
be reduced,  so that the securities  would no longer be eligible for purchase by
the  Portfolio.  In  such a  case,  the  Portfolio  will  engage  in an  orderly
disposition of the downgraded securities.

      COMMERCIAL PAPER. Commercial paper is a short-term debt security issued by
a  corporation  or  bank,   usually  for  purposes  such  as  financing  current
operations.  The Portfolio may invest in commercial  paper that cannot be resold
to the public without an effective  registration  statement  under the 1933 Act.


                                       21
<PAGE>



While restricted commercial paper normally is deemed illiquid, NB Management may
in certain  cases  determine  that such paper is liquid,  pursuant to guidelines
established by the Portfolio Trustees.

      POLICIES AND  LIMITATIONS.  The Portfolio  may invest in commercial  paper
only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality.

      ZERO  COUPON   SECURITIES.   The  Portfolio  may  invest  in  zero  coupon
securities,  which are debt  obligations  that do not  entitle the holder to any
periodic  payment of interest  prior to  maturity or that  specify a future date
when the securities begin to pay current  interest.  Zero coupon  securities are
issued  and  traded at a discount  from  their  face  amount or par value.  This
discount varies depending on prevailing interest rates, the time remaining until
cash payments  begin,  the liquidity of the security,  and the perceived  credit
quality of the issuer.

      The discount on zero coupon securities ("original issue discount") must be
taken into account  ratably by the Portfolio  prior to the receipt of any actual
payments.  Because the Fund must distribute  substantially all of its net income
(including its share of the  Portfolio's  accrued  original  issue  discount) to
shareholders  each year for income and excise tax  purposes,  the  Portfolio may
have to dispose of portfolio securities under  disadvantageous  circumstances to
generate cash, or may be required to borrow, to satisfy the Fund's  distribution
requirements. See "Additional Tax Information."

      The market  prices of zero coupon  securities  generally are more volatile
than the  prices of  securities  that pay  interest  periodically.  Zero  coupon
securities  are likely to respond  to  changes  in  interest  rates to a greater
degree than other types of debt securities  having a similar maturity and credit
quality.

      CONVERTIBLE   SECURITIES.   The  Portfolio   may  invest  in   convertible
securities. A convertible security is a bond, debenture,  note, preferred stock,
or other  security  that may be  converted  into or  exchanged  for a prescribed
amount of common  stock of the same or a different  issuer  within a  particular
period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities.  A convertible security
entitles  the  holder to  receive  the  interest  paid or accrued on debt or the
dividend paid on preferred  stock until the convertible  security  matures or is
redeemed,  converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with  generally  higher  yields than common stocks of
the same or similar issuers,  but lower than the yield on non-convertible  debt.
Convertible    securities   are   usually    subordinated   to   comparable-tier
non-convertible  securities  but rank senior to common stock in a  corporation's
capital structure.  The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
quality that do not have a conversion  privilege  and (2) its worth if converted
into the underlying common stock.

      The price of a convertible security often reflects variations in the price
of the  underlying  common  stock  in a way that  non-convertible  debt may not.
Convertible securities are typically issued by smaller capitalization  companies
whose stock prices may be  volatile.  A  convertible  security may be subject to
redemption at the option of the issuer at a price  established in the security's


                                       22
<PAGE>



governing instrument.  If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common  stock,  sell it to a third  party or permit  the  issuer  to redeem  the
security.  Any of these actions could have an adverse effect on the  Portfolio's
and the Fund's ability to achieve their investment objectives.

      POLICIES AND  LIMITATIONS.  The  Portfolio may invest up to 20% of its net
assets in convertible securities.  The Portfolio does not intend to purchase any
convertible   securities  that  are  not  investment  grade.   Convertible  debt
securities are subject to the  Portfolio's  investment  policies and limitations
concerning fixed income securities.

      PREFERRED  STOCK.  The  Portfolio  may invest in preferred  stock.  Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable  at the  discretion  of  the  issuer's  board  of  directors.  Preferred
shareholders  may have certain  rights if dividends  are not paid but  generally
have no legal  recourse  against the issuer.  Shareholders  may suffer a loss of
value if  dividends  are not paid.  The market  prices of  preferred  stocks are
generally  more sensitive to changes in the issuer's  creditworthiness  than are
the prices of debt securities.

                             PERFORMANCE INFORMATION

      The Fund's performance figures are based on historical results and are not
intended to indicate future performance. The share price and total return of the
Fund will vary, and an investment in the Fund, when redeemed,  may be worth more
or less than an investor's original cost.

TOTAL RETURN COMPUTATIONS

      The Fund may advertise certain total return information. An average annual
compounded rate of return ("T") may be computed by using the redeemable value at
the end of a specified  period ("ERV") of a hypothetical  initial  investment of
$1,000 ("P") over a period of time ("n") according to the formula:

                                  P(1+T)n = ERV

      Average  annual  total  return  smoothes out  year-to-year  variations  in
performance and, in that respect, differs from actual year-to-year results.

COMPARATIVE INFORMATION

      From time to time the Fund's performance may be compared with:

            (1) data (that may be expressed as rankings or ratings) published by
      independent services or publications  (including newspapers,  newsletters,
      and financial  periodicals)  that monitor the performance of mutual funds,
      such as Lipper Analytical Services,  Inc., C.D.A. Investment Technologies,
      Inc., Wiesenberger  Investment Companies Service,  Investment Company Data
      Inc., Morningstar,  Inc., Micropal Incorporated, and quarterly mutual fund
      rankings by Money, Fortune,  Forbes, Business Week, Personal Investor, and


                                       23
<PAGE>



      U.S. News & World Report magazines,  The Wall Street Journal, The New York
      Times, Kiplinger's Personal Finance, and Barron's Newspaper, or

            (2)  recognized  stock  and  other  indices,  such as the S&P  "500"
      Composite  Stock Price Index  ("S&P 500  Index"),  S&P Small Cap 600 Index
      ("S&P 600 Index"),  S&P Mid Cap 400 Index ("S&P 400 Index"),  Russell 2000
      Stock Index,  Russell Midcap Growth Index,  Dow Jones  Industrial  Average
      ("DJIA"),   Wilshire  1750  Index,  Nasdaq  Composite  Index,   Montgomery
      Securities Growth Stock Index, Value Line Index, U.S.  Department of Labor
      Consumer Price Index ("Consumer Price Index"), College Board Annual Survey
      of Colleges,  Kanon Bloch's  Family  Performance  Index,  the Barra Growth
      Index, the Barra Value Index,  and various other domestic,  international,
      and global  indices.  The S&P 500 Index is a broad  index of common  stock
      prices,  while  the DJIA  represents  a  narrower  segment  of  industrial
      companies.  The S&P 600 Index  includes  stocks that range in market value
      from $39 million to $2.3 billion, with an average of $451 million. The S&P
      400  Index  measures  mid-sized  companies  that  have an  average  market
      capitalization of $1.6 billion. Each assumes reinvestment of distributions
      and is  calculated  without  regard  to tax  consequences  or the costs of
      investing.  The Portfolio may invest in different types of securities from
      those included in some of the above indices.

      The Fund's performance may also be compared to various socially responsive
indices.  These include The Domini Social Index and the indices developed by the
quantitative  department of  Prudential  Securities,  such as that  department's
Large and Mid-Cap  portfolio  indices for various  breakdowns ("Sin" Stock Free,
Cigarette-Stock Free, S&P Composite, etc.).

      Evaluations of the Fund's  performance,  its total return and  comparisons
may be used in  advertisements  and in  information  furnished  to  current  and
prospective shareholders (collectively,  "Advertisements"). The Fund may also be
compared to individual asset classes such as common stocks, small-cap stocks, or
Treasury bonds, based on information supplied by Ibbotson and Sinquefield.

OTHER PERFORMANCE INFORMATION

      From time to time,  information about the Portfolio's portfolio allocation
and holdings as of a  particular  date may be included in  Advertisements.  This
information may include the Portfolio's portfolio  diversification by asset type
or by the  social  characteristics  of  companies  owned.  Information  used  in
Advertisements  may  include   statements  or  illustrations   relating  to  the
appropriateness  of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents.

      NB  Management  believes  that  many  of its  common  stock  funds  may be
attractive investment vehicles for conservative  investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example,  individuals (1) planning for
or  facing   retirement,   (2)  receiving  or  expecting  to  receive   lump-sum
distributions  from  individual  retirement  accounts  ("IRAs"),   self-employed



                                       24
<PAGE>


individual  retirement  plans ("Keogh plans"),  or other  retirement  plans, (3)
anticipating  rollovers of CDs or IRAs, Keogh plans, or other retirement  plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.

      Investors  who may find the Fund to be an  attractive  investment  vehicle
also  include  parents  saving to meet  college  costs for their  children.  For
instance, the cost of a college education is rapidly approaching the cost of the
average family home. Estimates of total four-year costs (including tuition, room
and board,  books and other expenses) for students  starting  college in various
years may be  included in  Advertisements,  based on the  College  Board  Annual
Survey of Colleges.

      Information  relating to inflation  and its effects on the dollar also may
be included in  Advertisements.  For example,  after ten years,  the  purchasing
power of  $25,000  would  shrink to  $16,621,  $14,968,  $13,465,  and  $12,100,
respectively,  if the annual rates of inflation  during that period were 4%, 5%,
6%, and 7%,  respectively.  (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)

      Information  regarding  the effects of  investing  at market  highs and/or
lows, and investing early versus late for retirement  plans also may be included
in Advertisements, if appropriate.

                           CERTAIN RISK CONSIDERATIONS

      Although the Portfolio  seeks to reduce risk by investing in a diversified
portfolio of securities, diversification does not eliminate all risk. There can,
of course,  be no  assurance  that the  Portfolio  will  achieve its  investment
objective.

                            TRUSTEES AND OFFICERS

      The following  table sets forth  information  concerning  the trustees and
officers  of the  Trusts,  including  their  addresses  and  principal  business
experience  during the past five  years.  Some  persons  named as  trustees  and
officers   also  serve  in  similar   capacities   for  other  funds  and  their
corresponding  portfolios administered or managed by NB Management and Neuberger
Berman.
<TABLE>
<CAPTION>


                              Positions Held with the 
Name, Age, And Address(1)     Trusts                        Principal Occupation(s)(2)
- -------------------------     ------                        --------------------------

<S>                           <C>                           <C>   
Faith Colish (63)             Trustee of each Trust         Attorney at Law, Faith Colish, A 
63 Wall Street                                              Professional Corporation.
24th Floor
New York, NY  10005



                                       25
<PAGE>


                              Positions Held with the 
Name, Age, And Address(1)     Trusts                        Principal Occupation(s)(2)
- -------------------------     ------                        --------------------------

Stanley Egener* (64)          Chairman of the Board,        Principal of Neuberger Berman;
                              Chief Executive Officer,      President and Director of NB
                              and Trustee of each Trust     Management; Chairman of the Board, 
                                                            Chief Executive Officer and Trustee of
                                                            nine other mutual funds for which NB
                                                            Management acts as investment
                                                            manager or administrator.

Howard A. Mileaf (61)         Trustee of each Trust         Vice President and Special Counsel to
WHX Corporation                                             WHX Corporation (holding company)
110 East 59th Street                                        since 1992; Director of Kevlin
30th Floor                                                  Corporation (manufacturer of 
New York, NY 10022                                          microwave and other products).

Edward I. O'Brien* (70)       Trustee of each Trust         Until 1993, President of the Securities 
12 Woods Lane                                               Industry Association ("SIA") (securities 
Scarsdale, NY 10583                                         industry's representative in government
                                                            relations and regulatory matters at the
                                                            federal and state levels); until
                                                            November 1993, employee of the SIA; 
                                                            Director of Legg Mason, Inc.

John T. Patterson, Jr. (70)   Trustee of each Trust         Retired.  Formerly, President of
7082 Siena Court                                            SOBRO (South Bronx Overall
Boca Raton, FL 33433                                        Economic Development Corporation).

John P. Rosenthal (66)        Trustee of each Trust         Senior Vice President of Burnham
Burnahm Securities                                          Securities Inc. (a registered broker-
Inc.                                                        dealer) since 1991; Director, Cancer
Burnham Asset Management                                    Treatment Holdings, Inc.
Corp.                                               
1325 Avenue of the
Americas
17th Floor
New York, NY  10019


                                       26
<PAGE>


                              Positions Held with the 
Name, Age, And Address(1)     Trusts                        Principal Occupation(s)(2)
- -------------------------     ------                        --------------------------

Cornelius T. Ryan (67)        Trustee of each Trust         General Partner of Oxford Partners and
Oxford Bioscience Partners                                  Oxford Bioscience Partners (venture
315 Post Road West                                          capital partnerships) and President of
Westport, CT  06880                                         Oxford Venture Corporation; Director
                                                            of Capital Cash Management Trust
                                                            (money market fund) and Prime Cash
                                                            Fund.

Gustave H. Shubert (69)       Trustee of each Trust         Senior Fellow/Corporate Advisor and 
13838 Sunset Boulevard                                      Advisory Trustee of Rand (a non-profit
Pacific Palisades, CA   90272                               public interest research institution)
                                                            since 1989; Honorary Member of the
                                                            Board of Overseers of the Institute for
                                                            Civil Justice, the Policy Advisory
                                                            Committee of the Clinical Scholars 
                                                            Program at the University of California,
                                                            the American Association for the 
                                                            Advancement of Science, the Counsel 
                                                            on Foreign Relations, and the Institute
                                                            for Strategic Studies (London); advisor 
                                                            to the Program Evaluation and
                                                            Methodology Division of the U.S.
                                                            General Accounting Office; formerly
                                                            Senior Vice President and Trustee of
                                                            Rand.

Lawrence Zicklin* (62)        President and Trustee of      Principal of Neuberger Berman;
                              each Trust                    Director of NB Management; President
                                                            and/or Trustee of six other mutual
                                                            funds for which NB Management acts
                                                            as investment manager or
                                                            administrator.

Daniel J. Sullivan (59)       Vice President of each        Senior Vice President of NB
                              Trust                         Management since 1992; Vice
                                                            President of nine other mutual funds for
                                                            which NB Management acts
                                                            as investment manager or administrator.
                                                            


                                       27
<PAGE>


                              Positions Held with the 
Name, Age, And Address(1)     Trusts                        Principal Occupation(s)(2)
- -------------------------     ------                        --------------------------

Michael J. Weiner (51)        Vice President and            Senior Vice President of NB Manage-
                              Principal Financial           ment since 1992; Treasurer of NB 
                              Officer of each Trust         Management from 1992 to 1996; Vice 
                                                            President and Principal Financial
                                                            Officer of nine other mutual funds for
                                                            which NB Management acts as invest-
                                                            ment manager oradministrator.

Claudia A. Brandon (42)       Secretary of each Trust       Vice President of NB Management;
                                                            Secretary of nine other mutual funds for
                                                            which NB Management acts as
                                                            investment manager or administrator.

Richard Russell (52)          Treasurer and Principal       Vice President of NB Management
                              Accounting Officer of         since 1993; prior thereto, Assistant
                              each Trust                    Vice President of NB Management;
                                                            Treasurer and Principal Accounting
                                                            Officer of nine other mutual funds for
                                                            which NB Management acts as invest-
                                                            ment manager or administrator.

Stacy Cooper-Shugrue (35)     Assistant Secretary of        Assistant Vice President of NB
                              each Trust                    Management since 1993; prior thereto,
                                                            employee of NB Management;
                                                            Assistant Secretary of nine other
                                                            mutual funds for which NB
                                                            Management acts as investment
                                                            manager or administrator.

C. Carl Randolph (61)         Assistant Secretary of        Principal of Neuberger Berman since
                              each Trust                    1992; Assistant Secretary of nine other
                                                            mutual funds for which NB
                                                            Management acts as investment
                                                            manager or administrator.



                                       28
<PAGE>

                              Positions Held with the 
Name, Age, And Address(1)     Trusts                        Principal Occupation(s)(2)
- -------------------------     ------                        --------------------------

Barbara DiGiorgio (40)        Assistant Treasurer of        Assistant Vice President of NB
                              each Trust                    Management since 1993; prior thereto,
                                                            employee of NB Management; 
                                                            Assistant Treasurer since 1996 of nine
                                                            other mutual funds for which NB
                                                            Management acts as investment
                                                            manager or administrator.

Celeste Wischerth (37)        Assistant Treasurer of        Assistant Vice President of NB
                              each Trust                    Management since 1994; prior thereto,
                                                            employee of NB Management;
                                                            Assistant Treasurer since 1996 of nine
                                                            other mutual funds for which NB
                                                            Management acts as investment
                                                            manager or administrator.
</TABLE>

- --------------------

(1) Unless  otherwise  indicated,  the business address of each listed person is
605 Third Avenue, New York, New York 10158.

(2) Except as otherwise indicated,  each individual has held the positions shown
for at least the last five years.

*  Indicates a trustee who is an  "interested  person" of each Trust  within the
meaning of the 1940 Act.  Messrs.  Egener and Zicklin are interested  persons by
virtue of the fact that they are officers and/or  directors of NB Management and
principals of Neuberger Berman. Mr. O'Brien is an interested person by virtue of
the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of
which,  from time to time,  serves as a broker  or dealer to the  Portfolio  and
other funds for which NB Management serves as investment manager.

      The Trust's Trust  Instrument  and Managers  Trust's  Declaration of Trust
provide that each such Trust will  indemnify  its trustees and officers  against
liabilities  and expenses  reasonably  incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated  that they (a)  engaged in bad  faith,  willful  misfeasance,  gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices,  or (b) did not act in good faith in the  reasonable  belief that their
action was in the best interest of the Trust.  In the case of  settlement,  such
indemnification  will not be provided  unless it has been determined (by a court
or other body  approving the settlement or other  disposition,  by a majority of
disinterested  trustees based upon a review of readily  available facts, or in a
written opinion of independent  counsel) that such officers or trustees have not
engaged in  willful  misfeasance,  bad  faith,  gross  negligence,  or  reckless
disregard of their duties.


                                       29
<PAGE>


      The following table sets forth information  concerning the compensation of
the  trustees  of the  Trust.  None of the  Neuberger  Berman  Funds(R)  has any
retirement plan for its trustees.


                                                 Total Compensation
                              Aggregate          from Investment Companies in
Name and Position with        Compensation       the Neuberger Berman Fund
The Trust                     From The Trust     Complex Paid To Trustees
- ---------                     --------------     ------------------------

Faith Colish                  $           0                $ ______
Trustee                                            (5 other investment
                                                       companies)

Stanley Egener                $           0                $ 0
Chairman of the Board, Chief                       (9 other investment
Executive Officer, and Trustee                         companies)


Howard A. Mileaf              $           0             $ ______
Trustee                                            (4 other investment
                                                       companies)

Edward I. O'Brien             $           0             $ ______
Trustee                                            (3 other investment
                                                       companies)

John T. Patterson, Jr.        $           0             $ ______
Trustee                                            (4 other investment
                                                       companies)

Cornelius T. Ryan             $           0             $ ______
Trustee                                            (3 other investment
                                                       companies)

Gustave H. Shubert            $           0             $ ______
Trustee                                            (3 other investment
                                                       companies)

Lawrence Zicklin              $           0                $ 0
President and Trustee                              (5 other investment
                                                        companies)


      At December 1, 1998, the trustees and officers of the Trusts,  as a group,
owned beneficially or of record no shares of the Fund.

                INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES

INVESTMENT MANAGER AND ADMINISTRATOR

      Because  all of the  Fund's net  investable  assets  are  invested  in the
Portfolio, the Fund does not need an investment manager. NB Management serves as
the investment manager to the Portfolio pursuant to a management  agreement with
Managers Trust, dated as of August 2, 1993 ("Management Agreement").


                                       30
<PAGE>


      The  Management  Agreement was approved by the holders of the interests in
the Portfolio on March 9, 1994.  The Portfolio was  authorized to become subject
to the  Management  Agreement by vote of the  Portfolio  Trustees on October 20,
1993, and became subject to it on March 14, 1994.

      The Management Agreement provides,  in substance,  that NB Management will
make and implement  investment decisions for the Portfolio in its discretion and
will continuously  develop an investment program for the Portfolio's assets. The
Management Agreement permits NB Management to effect securities  transactions on
behalf  of the  Portfolio  through  associated  persons  of NB  Management.  The
Management  Agreement  also  specifically  permits NB Management to  compensate,
through higher commissions,  brokers and dealers who provide investment research
and analysis to the  Portfolio,  although NB Management  has no current plans to
pay a material amount of such compensation.

      NB Management  provides to the Portfolio,  without  separate cost,  office
space,  equipment,  and  facilities  and  the  personnel  necessary  to  perform
executive,  administrative,  and  clerical  functions.  NB  Management  pays all
salaries,  expenses,  and  fees of the  officers,  trustees,  and  employees  of
Managers Trust who are officers,  directors, or employees of NB Management.  Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
officers of the Trusts.  See "Trustees  and  Officers."  The  Portfolio  pays NB
Management a management fee based on the  Portfolio's  average daily net assets,
as described in the Prospectus.

      NB Management provides  facilities,  services,  and personnel,  as well as
accounting,  recordkeeping,  and  other  services  to the  Fund  pursuant  to an
administration   agreement   with   the   Trust,   dated   December   __,   1998
("Administration Agreement"). For such administrative services, the Fund pays NB
Management a fee based on the Fund's  average daily net assets,  as described in
the Prospectus.

      Under the  Administration  Agreement,  NB Management  also provides to the
Fund and its shareholders  certain shareholder,  shareholder-related,  and other
services that are not furnished by the Fund's  shareholder  servicing  agent. NB
Management   provides  the  direct   shareholder   services   specified  in  the
Administration  Agreement,  assists  the  shareholder  servicing  agent  in  the
development  and  implementation  of  specified  programs and systems to enhance
overall  shareholder  servicing  capabilities,  solicits and gathers shareholder
proxies, performs services connected with the qualification of the Fund's shares
for sale in various states,  and furnishes other services the parties agree from
time to time should be provided under the Administration Agreement.

      From time to time, NB  Management or the Fund may enter into  arrangements
with registered  broker-dealers or other third parties pursuant to which it pays
the  broker-dealer  or  third  party  a per  account  fee  or a fee  based  on a
percentage  of the  aggregate  net asset value of Fund shares  purchased  by the
broker-dealer  or  third  party on  behalf  of its  customers,  in  payment  for
administrative and other services rendered to such customers.


                                       31
<PAGE>



MANAGEMENT AND ADMINISTRATION FEES

      For investment management services, the Portfolio pays NB Management a fee
at the annual rate of 0.55% of the first $250 million of the Portfolio's average
daily  net  assets,  0.525%  of the next  $250  million,  0.50% of the next $250
million,  0.475% of the next $250 million,  0.45% of the next $500 million,  and
0.425% of average daily net assets in excess of $1.5 billion.

      NB Management  provides  administrative  services to the Fund that include
furnishing  facilities  and  personnel for the Fund and  performing  accounting,
recordkeeping,  and other services.  For such administrative  services, the Fund
pays NB Management a fee at the annual rate of 0.40% of the Fund's average daily
net assets.  With the Fund's consent NB Management may  subcontract  some of its
responsibilities to the Fund under the Administration Agreement.

      NB  Management  has  voluntarily  undertaken to reimburse the Fund for its
total   operating   expenses   (other  than  interest,   taxes,   brokerage  and
extraordinary  expenses) which exceed, in the aggregate,  1.50% per annum of the
Fund's average daily net assets.

      The Management  Agreement  continues until August 2, 1999 and is renewable
thereafter  from year to year, so long as its  continuance  is approved at least
annually  (1) by the vote of a majority of the  Portfolio  Trustees  who are not
"interested persons" of NB Management or Managers Trust ("Independent  Portfolio
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval,  and (2) by the vote of a majority of the  Portfolio  Trustees or by a
1940 Act  majority  vote of the  outstanding  interests  in the  Portfolio.  The
Administration  Agreement  continues until December __, 1999. The Administration
Agreement  is renewable  from year to year with respect to the Fund,  so long as
its  continuance  is approved at least annually (1) by the vote of a majority of
the Fund Trustees who are not "interested persons" of NB Management or the Trust
("Independent  Fund  Trustees"),  cast in  person at a  meeting  called  for the
purpose of voting on such  approval,  and (2) by the vote of a  majority  of the
Fund  Trustees or by a 1940 Act majority vote of the  outstanding  shares in the
Fund.

      The Management Agreement is terminable,  without penalty,  with respect to
the  Portfolio  on 60 days'  written  notice  either by Managers  Trust or by NB
Management.  The Administration  Agreement is terminable,  without penalty, with
respect to the Fund on 60 days' written notice either by NB Management or by the
Trust. Each Agreement terminates automatically if it is assigned.

SUB-ADVISER

      NB Management  retains  Neuberger Berman,  605 Third Avenue,  New York, NY
10158-3698,  as  sub-adviser  with  respect  to  the  Portfolio  pursuant  to  a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement").

      The Sub-Advisory Agreement was approved by the holders of the interests in
the Portfolio on March 9, 1994.  The Portfolio was  authorized to become subject
to the Sub-Advisory  Agreement by vote of the Portfolio  Trustees on October 20,
1993, and became subject to it on March 14, 1994.


                                       32
<PAGE>



      The  Sub-Advisory  Agreement  provides in substance that Neuberger  Berman
will  furnish  to NB  Management,  upon  reasonable  request,  the same  type of
investment  recommendations  and research that  Neuberger  Berman,  from time to
time,  provides to its  principals  and  employees  for use in  managing  client
accounts.  In this manner,  NB  Management  expects to have  available to it, in
addition to research  from other  professional  sources,  the  capability of the
research staff of Neuberger Berman.  This staff consists of numerous  investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research,  who is also available for consultation
with NB Management.  The Sub-Advisory Agreement provides that NB Management will
pay for the  services  rendered  by  Neuberger  Berman  based on the  direct and
indirect costs to Neuberger Berman in connection with those services.  Neuberger
Berman also serves as  sub-adviser  for all of the other mutual funds managed by
NB Management.

      The Sub-Advisory  Agreement continues until August 2,1999 and is renewable
from year to year,  subject to approval of its continuance in the same manner as
the Management Agreement.  The Sub-Advisory Agreement is subject to termination,
without  penalty,  with respect to the Portfolio by the Portfolio  Trustees or a
1940 Act majority  vote of the  outstanding  interests in the  Portfolio,  by NB
Management,  or by  Neuberger  Berman on not less than 30 nor more than 60 days'
written notice.  The Sub-Advisory  Agreement also terminates  automatically with
respect  to the  Portfolio  if it is  assigned  or if the  Management  Agreement
terminates with respect to the Portfolio.

      Most money managers that come to the Neuberger Berman organization have at
least  fifteen  years  experience.  Neuberger  Berman and NB  Management  employ
experienced professionals that work in a competitive environment.

INVESTMENT COMPANIES MANAGED

      As  of  September  30,  1998,  the  investment  companies  managed  by  NB
Management had aggregate net assets of  approximately  $ billion.  NB Management
currently serves as investment manager of the following investment companies:

                                                            Approximate
                                                            Net Assets at
Name                                                        September 30, 1998
- ----                                                        ------------------

Neuberger Berman Cash Reserves Portfolio.........................$____________
      (investment portfolio for Neuberger Berman Cash Reserves)

Neuberger Berman Government Money Portfolio......................$____________
      (investment portfolio for Neuberger Berman Government Money Fund)

Neuberger Berman High Yield Bond Portfolio.......................$____________
      (investment portfolio for Neuberger Berman High Yield Bond Fund)



                                       33
<PAGE>


                                                            Approximate
                                                            Net Assets at
Name                                                        September 30, 1998
- ----                                                        ------------------

Neuberger Berman Limited Maturity Bond Portfolio.................$____________
      (investment portfolio for Neuberger Berman Limited Maturity
      Bond Fund and Neuberger Berman Limited Maturity Bond Trust)

Neuberger Berman Municipal Securities Portfolio..................$____________
      (investment portfolio for Neuberger Berman Municipal Securities Trust)

Neuberger Berman Municipal Money Portfolio.......................$____________
      (investment portfolio for Neuberger Berman Municipal Money Fund)

Neuberger Berman Focus Portfolio.................................$____________
      (investment portfolio for Neuberger Berman Focus Fund,
      Neuberger Berman Focus Trust and Neuberger Berman Focus Assets)

Neuberger Berman Genesis Portfolio...............................$____________
      (investment portfolio for Neuberger Berman Genesis Fund, Neuberger
      Berman
      Genesis Trust and Neuberger Berman Genesis Assets)

Neuberger Berman Guardian Portfolio............................  $____________
      (investment portfolio for Neuberger Berman Guardian Fund, Neuberger
      Berman Guardian Trust and Neuberger Berman Guardian Assets)

Neuberger Berman International Portfolio.........................$____________
      (investment portfolio for Neuberger Berman International Fund and
      Neuberger
      Berman International Trust)

Neuberger Berman Manhattan Portfolio.............................$____________
      (investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
      Berman Manhattan Trust and Neuberger Berman Manhattan Assets)

Neuberger Berman Millennium Portfolio............................$____________
      (investment portfolio for Neuberger Berman Millennium Fund and Neuberger
      Berman Millennium Trust)

Neuberger Berman Partners Portfolio..............................$____________
      (investment portfolio for Neuberger Berman Partners Fund, Neuberger
      Berman
      Partners Trust and Neuberger Berman Partners Assets)

Neuberger Berman Socially Responsive.............................$____________
      Portfolio  (investment portfolio for Neuberger Berman Socially
      Responsive Fund,
      Neuberger Berman Socially Responsive Trust and Neuberger Berman
      NYCDC Socially Responsive Trust)

Advisers Managers Trust..........................................$____________
      (seven series)

                                       34
<PAGE>



      The  investment  decisions  concerning  the Portfolio and the other mutual
funds  managed by NB Management  (collectively,  "Other NB Funds") have been and
will  continue  to be made  independently  of one  another.  In  terms  of their
investment  objectives,  most of the Other NB Funds  differ from the  Portfolio.
Even where the investment  objectives are similar,  however, the methods used by
the Other NB Funds and the Portfolio to achieve their objectives may differ. The
investment  results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.

      There may be occasions  when the Portfolio and one or more of the Other NB
Funds or other  accounts  managed  by  Neuberger  Berman  are  contemporaneously
engaged in purchasing or selling the same  securities  from or to third parties.
When this occurs,  the transactions  are averaged as to price and allocated,  in
terms of amount, in accordance with a formula  considered to be equitable to the
funds involved.  Although in some cases this  arrangement may have a detrimental
effect on the price or volume of the  securities as to the  Portfolio,  in other
cases it is  believed  that the  Portfolio's  ability to  participate  in volume
transactions  may  produce  better  executions  for it. In any  case,  it is the
judgment of the Portfolio  Trustees  that the  desirability  of the  Portfolio's
having its advisory  arrangements with NB Management outweighs any disadvantages
that may result from contemporaneous transactions.

      The  Portfolio is subject to certain  limitations  imposed on all advisory
clients of Neuberger  Berman  (including the Portfolio,  the Other NB Funds, and
other managed  accounts) and personnel of Neuberger  Berman and its  affiliates.
These include, for example,  limits that may be imposed in certain industries or
by certain companies,  and policies of Neuberger Berman that limit the aggregate
purchases, by all accounts under management, of the outstanding shares of public
companies.

MANAGEMENT AND CONTROL OF NB MANAGEMENT

      The directors and officers of NB  Management,  all of whom have offices at
the same address as NB Management,  are Richard A. Cantor, Chairman of the Board
and director; Stanley Egener, President and director; Theodore P. Giuliano, Vice
President and director;  Michael M. Kassen,  Vice President and director;  Irwin
Lainoff,  director;  Lawrence Zicklin, director; Daniel J. Sullivan, Senior Vice
President;  Peter E. Sundman,  Senior Vice President;  Michael J. Weiner, Senior
Vice  President;  Claudia A. Brandon,  Vice  President;  Patrick T. Byrne,  Vice
President;  Brooke A. Cobb, Vice President;  Robert W. D'Alelio, Vice President;
Roberta D'Orio,  Vice  President;  Clara Del Villar,  Vice  President;  Brian J.
Gaffney, Vice President;  Joseph G. Galli, Vice President;  Robert I. Gendelman,
Vice President;  Josephine P. Mahaney,  Vice President;  Michael F. Malouf, Vice
President;  Ellen  Metzger,  Vice President and  Secretary;  Paul Metzger,  Vice
President;  S. Basu Mullick,  Vice President;  Janet W. Prindle, Vice President;
Kevin L. Risen,  Vice President;  Richard Russell,  Vice President;  Jennifer K.
Silver, Vice President; Kent C. Simons, Vice President;  Frederic B. Soule, Vice
President; Judith M. Vale, Vice President; Susan Walsh, Vice President; Allan R.
White, III, Vice President;  Thomas Wolfe, Vice President;  Andrea Trachtenberg,
Vice President of Marketing;  Robert Conti,  Treasurer;  Ramesh Babu,  Assistant
Vice President;  Valerie Chang, Assistant Vice President;  Stacy Cooper-Shugrue,
Assistant Vice President;  Barbara DiGiorgio,  Assistant Vice President; Michael
J. Hanratty,  Assistant Vice  President;  Leslie  Holliday-Soto,  Assistant Vice


                                       35
<PAGE>


President;  Robert L.  Ladd,  Assistant  Vice  President;  Carmen  G.  Martinez,
Assistant Vice  President;  Joseph S. Quirk,  Assistant Vice  President;  Ingrid
Saukaitis,  Assistant Vice President; Josephine Velez, Assistant Vice President;
Celeste Wischerth,  Assistant Vice President;  and Loraine Olavarria,  Assistant
Secretary. Messrs. Cantor, Egener, Gendelman,  Giuliano, Kassen, Lainoff, Risen,
Simons, Sundman and Zicklin and Mmes. Prindle, Silver and Vale are principals of
Neuberger Berman.

      Messrs. Egener and Zicklin are trustees and officers, and Messrs. Russell,
Sullivan,  and  Weiner,  and  Mmes.  Brandon,  Cooper-Shugrue,   DiGiorgio,  and
Wischerth  are  officers,  of each  Trust.  C. Carl  Randolph,  a  principal  of
Neuberger Berman, also is an officer of each Trust.

      All of the  outstanding  voting stock in NB Management is owned by persons
who are also principals of Neuberger Berman.

                            DISTRIBUTION ARRANGEMENTS

DISTRIBUTOR

      NB Management serves as the distributor ("Distributor") in connection with
the offering of the Fund's  shares on a no-load basis to the Plan. In connection
with the sale of its shares,  the Fund has  authorized  the  Distributor to give
only the  information,  and to make  only the  statements  and  representations,
contained  in the  Prospectus  and this SAI or that  properly may be included in
sales  literature and  advertisements  in accordance with the 1933 Act, the 1940
Act, and applicable rules of  self-regulatory  organizations.  Sales may be made
only by the Prospectus, which may be delivered personally, through the mails, or
by electronic  means.  The  Distributor  is the Fund's  "principal  underwriter"
within the meaning of the 1940 Act and, as such,  acts as agent in arranging for
the sale of the Fund's  shares to the Plan  without  sales  commission  or other
compensation  and bears all advertising and promotion  expenses  incurred in the
sale of the Fund's shares.

      The Trust,  on behalf of the Fund,  and the  Distributor  are parties to a
Distribution  and Services  Agreement  dated  December  __, 1998  ("Distribution
Agreement").  The  Distribution  Agreement  was  approved by the Fund  Trustees,
including a majority of the  Independent  Fund  Trustees and a majority of those
Independent Fund Trustees who have no direct or indirect  financial  interest in
the Distribution  Agreement or the Trust's plan pursuant to Rule 12b-1 under the
1940 Act ("Plan") ("Rule 12b-1 Trustees"), on October 22, 1998. The Distribution
Agreement  continues  until August 2, 2000.  The  Distribution  Agreement may be
renewed  annually if specifically  approved by (1) the vote of a majority of the
Fund Trustees or a 1940 Act majority vote of the Fund's  outstanding  shares and
(2) the vote of a majority of the  Independent  Fund  Trustees and a majority of
the Rule 12b-1  Trustees,  cast in person at a meeting called for the purpose of
voting on such approval.  The Distribution Agreement may be terminated by either
party and will terminate automatically on its assignment,  in the same manner as
the Management Agreement.


                                       36
<PAGE>


RULE 12B-1 PLAN

      The Fund Trustees  adopted the Plan on October 22, 1998. The Plan provides
that the Fund  will  compensate  NB  Management  for  administrative  and  other
services  provided to the Fund, its activities and expenses  related to the sale
and distribution of Fund shares,  and ongoing services to investors in the Fund.
Under the Plan, NB Management receives from the Fund a fee at the annual rate of
0.25% of the Fund's  average daily net assts.  NB  Management  may pay up to the
full amount of this fee to  Institutions  that distribute or make available Fund
shares and/or provide services to the Fund and its shareholders. The fee paid to
an Institution is based on the level of such services provided. Institutions may
use the payments for, among other purposes,  compensating  employees  engaged in
sales and/or shareholder  servicing.  The amount of fees paid by the Fund during
any year may be more or less than the cost of  distribution  and other  services
provided  to the Fund.  NASD rules limit the amount of annual  distribution  and
service  fees  that may be paid by a mutual  fund and  impose a  ceiling  on the
cumulative distribution fees paid. The Trust's plan complies with these rules.

      The Plan provides that a written report  identifying the amounts  expended
by the Fund and the  purposes  for  which  such  expenditures  were made must be
provided to the Fund Trustees for their review at least quarterly.

      Prior to approving the Plan, the Fund Trustees  considered various factors
relating  to the  implementation  of the Plan  and  determined  that  there is a
reasonable  likelihood that the Plan will benefit the Fund and its shareholders.
The Fund Trustees noted that the purpose of the master/feeder  fund structure is
to permit access to a variety of markets. To the extent the Plan allows the Fund
to penetrate  markets to which it would not otherwise have access,  the Plan may
result in additional sales of Fund shares; this, in turn, may enable the Fund to
achieve  economies of scale that could  reduce  expenses.  In addition,  certain
on-going  shareholder  services may be provided more effectively by Institutions
with which shareholders have an existing relationship.

      The  Plan  continues  until  October  22,  1999.  The  Plan  is  renewable
thereafter  from  year  to  year  with  respect  to the  Fund,  so  long  as its
continuance  is approved at least  annually (1) by the vote of a majority of the
Fund Trustees and (2) by a vote of the majority of Rule 12b-1 Trustees,  cast in
person at a meeting called for the purpose of voting on such approval.  The Plan
may not be amended to  increase  materially  the amount of fees paid by the Fund
thereunder  unless such amendment is approved by a 1940 Act majority vote of the
outstanding  shares of the Fund and by the Fund Trustees in the manner described
above.  The Plan is terminable with respect to the Fund at any time by a vote of
a majority  of the Rule 12b-1  Trustees  or by a 1940 Act  majority  vote of the
outstanding shares of the Fund.

                       ADDITIONAL PURCHASE INFORMATION

SHARE PRICES AND NET ASSET VALUE

      The Fund's  shares  are  brought or sold at a price that is the Fund's NAV
per share. The NAVs for the Fund and its Portfolio are calculated by subtracting
liabilities from total assets (in the case of the Portfolio, the market value of
the  securities the Portfolio  holds plus cash and other assets;  in the case of
the  Fund,  its  percentage  interest  in  its  Portfolio,   multiplied  by  the
Portfolio's NAV, plus any other assets).  The Fund's per share NAV is calculated


                                       37
<PAGE>


by dividing  its NAV by the number of Fund shares  outstanding  and rounding the
result to the nearest full cent. The Fund and its Portfolio calculate their NAVs
as of the close of regular trading on the NYSE,  usually 4 p.m. Eastern time, on
each day the NYSE is open.

      The Portfolio values  securities  (including  options) listed on the NYSE,
the American Stock Exchange or other national  securities  exchange or quoted on
Nasdaq,  and other securities for which market quotations are readily available,
at the last sale price on the day the securities  are being valued.  If there is
no reported  sale of such a security on that day,  the security is valued at the
mean between its closing bid and asked prices on that day. The Portfolio  values
all other securities and assets,  including restricted  securities,  by a method
that the trustees of Equity  Managers  Trust  believe  accurately  reflects fair
value.

      If NB Management  believes that the price of a security obtained under the
Portfolio's  valuation  procedures  (as described  above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security,  the  Portfolio  will value the  security  based on a method  that the
trustees of Managers Trust believe accurately reflects fair value.

                         ADDITIONAL EXCHANGE INFORMATION

      As  more  fully  set  forth  in the  section  of the  Prospectus  entitled
"Maintaining  Your Account," an Institution  may exchange shares of the Fund for
shares  of one or  more  of the  other  Funds,  if made  available  through  the
Institution.  The Fund may  terminate  or modify its  exchange  privilege in the
future.

      Before  effecting an exchange,  Fund  shareholders  must obtain and should
review a currently  effective  Prospectus of the Fund into which the exchange is
to be made.  An exchange is treated as a sale for  federal  income tax  purposes
and, depending on the circumstances, a capital gain or loss may be realized.

                        ADDITIONAL REDEMPTION INFORMATION

SUSPENSION OF REDEMPTIONS

      The right to redeem the Fund's  shares may be  suspended or payment of the
redemption  price  postponed  (1) when the New York Stock  Exchange  ("NYSE") is
closed, (2) when trading on the NYSE is restricted, (3) when an emergency exists
as a result  of which it is not  reasonably  practicable  for the  Portfolio  to
dispose  of  securities  it owns or  fairly  to  determine  the value of its net
assets,  or (4) for such  other  period as the SEC may by order  permit  for the
protection  of the Fund's  shareholders.  Applicable  SEC rules and  regulations
shall govern whether the conditions prescribed in (2) or (3) exist. If the right
of redemption is suspended,  the Plan may withdraw its offers of redemption,  or
it will receive  payment at the NAV per share in effect at the close of business
on the first day the NYSE is open  ("Business  Day")  after  termination  of the
suspension.


                                       38
<PAGE>


REDEMPTIONS IN KIND

      The Fund  reserves  the  right,  under  certain  conditions,  to honor any
request for redemption (or a combination of requests from the Plan in any 90-day
period)  exceeding  $250,000 or 1% of the net assets of the Fund,  whichever  is
less, by making payment in whole or in part in securities valued as described in
"Share Prices and Net Asset Value," above. If payment is made in securities, the
Plan  generally  will incur  brokerage  expenses or other  transaction  costs in
converting  those securities into cash and will be subject to fluctuation in the
market prices of those  securities until they are sold. The Fund does not redeem
in kind  under  normal  circumstances,  but  would do so when the Fund  Trustees
determined  that it was in the best  interests of the Fund's  shareholders  as a
whole.

                        DIVIDENDS AND OTHER DISTRIBUTIONS

      The Fund distributes to the Plan substantially all of its share of any net
investment income (after deducting  expenses incurred directly by the Fund), any
net realized  capital gains,  and any net realized  gains from foreign  currency
transactions earned or realized by the Portfolio. The Portfolio's net investment
income consists of all income accrued on portfolio assets less accrued expenses,
but does not  include  capital  and  foreign  currency  gains  and  losses.  Net
investment income and realized gains and losses are reflected in the Portfolio's
NAV (and, hence, the Fund's NAV) until they are distributed. The Fund calculates
its net investment  income and NAV per share as of the close of regular  trading
on the NYSE on each Business Day (usually 4:00 p.m. Eastern time).

      Dividends from net  investment  income and  distributions  of net realized
capital and foreign currency gains, if any, normally are paid once annually,  in
December.

      Dividends  and  other   distributions  are  automatically   reinvested  in
additional shares of the Fund, unless the shareholder  elects to receive them in
cash ("cash  election").  To the extent  dividends and other  distributions  are
subject to federal,  state,  or local income  taxation,  they are taxable to the
shareholders  whether  received in cash or  reinvested  in Fund  shares.  A cash
election  with  respect  to the Fund  remains  in effect  until the  Institution
notifies the Fund in writing to discontinue the election.

                           ADDITIONAL TAX INFORMATION

TAXATION OF THE FUND

      In order to continue to qualify for treatment as a RIC under the Code, the
Fund  must  distribute  to the Plan for each  taxable  year at least  90% of its
investment  company  taxable  income  (consisting  generally  of net  investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions)  ("Distribution  Requirement")  and must meet  several  additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross  income each taxable  year from  dividends,  interest,
payments  with  respect to  securities  loans,  and gains from the sale or other
disposition  of securities  or foreign  currencies,  or other income  (including
gains  from  Hedging  Instruments)  derived  with  respect  to its  business  of
investing in securities or those currencies ("Income  Requirement");  and (2) at
the close of each quarter of the Fund's  taxable  year,  (i) at least 50% of the


                                       39
<PAGE>


value of its total  assets  must be  represented  by cash and cash  items,  U.S.
Government  securities,  securities of other RICs, and other securities limited,
in respect of any one issuer,  to an amount that does not exceed 5% of the value
of the  Fund's  total  assets and that does not  represent  more than 10% of the
issuer's outstanding voting securities,  and (ii) not more than 25% of the value
of its total assets may be invested in  securities  (other than U.S.  Government
securities or securities of other RICs) of any one issuer.

      Certain  funds that invest in  portfolios  managed by NB  Management  have
received  rulings from the Internal  Revenue Service  ("Service") that each such
fund,  as an investor in its  corresponding  portfolio,  will be deemed to own a
proportionate  share of the  portfolio's  assets  and  income  for  purposes  of
determining  whether the fund satisfies all the requirements  described above to
qualify as a RIC.  Although  these  rulings may not be relied on as precedent by
the Fund, NB Management  believes that the reasoning  thereof and, hence,  their
conclusion apply to the Fund as well.

      The Fund will be subject to a  nondeductible  4% excise tax ("Excise Tax")
to the  extent  it  fails  to  distribute  by  the  end  of  any  calendar  year
substantially  all of its  ordinary  income for that year and  capital  gain net
income for the one-year  period  ended on October 31 of that year,  plus certain
other amounts.

      See the next section for a discussion of the tax  consequences to the Fund
of  distributions  to it from the  Portfolio,  investments  by the  Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.

TAXATION OF THE PORTFOLIO

      Certain  portfolios   managed  by  NB  Management,   including  the  other
portfolios  of Managers  Trust,  have  received  rulings from the Service to the
effect  that,  among  other  things,  each such  portfolio  will be treated as a
separate partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as precedent by
the Portfolio,  NB Management  believes the reasoning thereof and, hence,  their
conclusion  apply to the  Portfolio as well.  As a result,  the Portfolio is not
subject to federal income tax; instead, each investor in the Portfolio,  such as
the Fund, is required to take into account in determining its federal income tax
liability its share of the Portfolio's income,  gains, losses,  deductions,  and
credits,  without regard to whether it has received any cash  distributions from
the Portfolio.  The Portfolio also is not subject to Delaware or New York income
or franchise tax.

      Because the Fund is deemed to own a proportionate share of the Portfolio's
assets and income for purposes of  determining  whether the Fund  satisfies  the
requirements  to qualify as a RIC, the Portfolio  intends to continue to conduct
its  operations  so that the Fund will be able to  continue to satisfy all those
requirements.

      Distributions  to the  Fund  from the  Portfolio  (whether  pursuant  to a
partial  or  complete  withdrawal  or  otherwise)  will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is  distributed  exceeds the
Fund's  basis for its interest in the  Portfolio  before the  distribution,  (2)


                                       40
<PAGE>




income or gain will be recognized if the  distribution  is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any  unrealized  receivables  held  by the  Portfolio,  and  (3)  loss  will  be
recognized  if  a  liquidation  distribution  consists  solely  of  cash  and/or
unrealized  receivables.  The Fund's  basis for its  interest  in the  Portfolio
generally  equals  the  amount  of cash and the basis of any  property  the Fund
invests in the Portfolio,  increased by the Fund's share of the  Portfolio's net
income and capital  gains and  decreased by (1) the amount of cash and the basis
of any property the Portfolio  distributes  to the Fund and (2) the Fund's share
of the Portfolio's losses.

      Dividends and interest  received by the  Portfolio,  and gains realized by
the Portfolio, may be subject to income,  withholding, or other taxes imposed by
foreign countries and U.S.  possessions  ("foreign taxes") that would reduce the
yield and/or  total  return on its  securities.  Tax  treaties  between  certain
countries and the United States may reduce or eliminate foreign taxes,  however,
and many foreign  countries  do not impose taxes on capital  gains in respect of
investments by foreign investors.

      The  Portfolio  may  invest in the stock of  "passive  foreign  investment
companies"  ("PFICs").  A  PFIC  is  a  foreign  corporation  --  other  than  a
"controlled  foreign  corporation" (I.E., a foreign corporation in which, on any
day during its  taxable  year,  more than 50% of the total  voting  power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly,  or constructively,  by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively,  at least 10% of
that voting  power) as to which the Portfolio is a U.S.  shareholder  (effective
for the taxable year  beginning  September 1, 1998) -- that,  in general,  meets
either of the following  tests:  (1) at least 75% of its gross income is passive
or (2) an  average of at least 50% of its  assets  produce,  or are held for the
production of, passive  income.  Under certain  circumstances,  if the Portfolio
holds  stock  of a PFIC,  the  Fund  (indirectly  through  its  interest  in the
Portfolio)  will be subject  to federal  income tax on its share of a portion of
any "excess distribution"  received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively,  "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable  dividend to its  shareholders.  The balance of the Fund's  share of the
PFIC  income  will be included in its  investment  company  taxable  income and,
accordingly,  will not be taxable to it to the extent that income is distributed
to its shareholders.

      If the  Portfolio  invests  in a PFIC and  elects  to treat  the PFIC as a
"qualified  electing  fund  ("QEF"),"  then in lieu of the Fund's  incurring the
foregoing tax and interest obligation,  the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net  short-term  capital  loss)  --  which  most  likely  would  have to be
distributed  by the Fund to  satisfy  the  Distribution  Requirement  and  avoid
imposition  of the  Excise  Tax -- even if  those  earnings  and  gain  were not
received  by the  Portfolio  from the  QEF.  In most  instances  it will be very
difficult,  if  not  impossible,  to  make  this  election  because  of  certain
requirements thereof.

      Effective for taxable years beginning after 1997, a holder of stock in any
PFIC may elect to include in ordinary  income each taxable  year the excess,  if
any, of the fair market value of the stock over the adjusted basis therein as of
the end of that year. Pursuant to the election, a deduction (as an ordinary, not
capital,  loss) also would be allowed  for the excess,  if any, of the  holder's
adjusted  basis in PFIC  stock  over the fair  market  value  thereof  as of the


                                       41
<PAGE>


taxable year-end,  but only to the extent of any net  mark-to-market  gains with
respect to that stock included in income for prior taxable  years.  The adjusted
basis in each PFIC's stock subject to the election  would be adjusted to reflect
the  amounts  of income  included  and  deductions  taken  thereunder.  Proposed
regulations  would  provide  a similar  election  with  respect  to the stock of
certain PFICs.

      The Portfolio's use of hedging  strategies,  such as writing (selling) and
purchasing  options and futures  contracts and entering into forward  contracts,
involves  complex rules that will  determine for income tax purposes the amount,
character  and  timing of  recognition  of the gains and  losses  the  Portfolio
realizes  in  connection  therewith.  Gains  from  the  disposition  of  foreign
currencies  (except  certain gains that may be excluded by future  regulations),
and gains from Hedging  Instruments derived by the Portfolio with respect to its
business of  investing  in  securities  or foreign  currencies,  will qualify as
permissible income for the Fund under the Income Requirement.

      Exchange-traded  futures  contracts,  certain forward contracts and listed
options thereon  ("Section 1256  contracts") are required to be marked to market
(that is,  treated as having been sold at market  value) for federal  income tax
purposes at the end of the  Portfolio's  taxable year.  Sixty percent of any net
gain or loss  recognized as a result of these "deemed sales," and 60% of any net
realized  gain or loss from any actual  sales,  of Section  1256  contracts  are
treated  as  long-term  capital  gain or  loss;  the  remainder  is  treated  as
short-term  capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net  capital  gain  enacted by the  Taxpayer  Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months --  instead of the 28% rate in effect  before  that
legislation,  which now applies to gain  recognized  on capital  assets held for
more  than one year but not more than 18  months.  However,  proposed  technical
corrections legislation would clarify that the 20% rate applies.

      The  Portfolio  may acquire  zero coupon  securities  or other  securities
issued with original issue discount  ("OID").  As a holder of those  securities,
the  Portfolio  (and,  through  it, the Fund) must take into income the OID that
accrues on the  securities  during the  taxable  year,  even if it  receives  no
corresponding  payment  on the  securities  during  the year.  Because  the Fund
annually must  distribute  substantially  all of its investment  company taxable
income  (including  its share of the  Portfolio's  accrued  OID) to satisfy  the
Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be
required  in a  particular  year to  distribute  as a dividend an amount that is
greater  than its  share of the  total  amount  of cash the  Portfolio  actually
receives.  Those distributions will be made from the Fund's (or its share of the
Portfolio's)  cash assets or, if  necessary,  from the  proceeds of sales of the
Portfolio's  securities.  The Portfolio may realize capital gains or losses from
those  sales,  which would  increase or decrease the Fund's  investment  company
taxable income and/or net capital gain.

TAXATION OF THE FUND'S SHAREHOLDERS

      If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term,  instead of  short-term,  capital loss to
the extent of any capital gain distributions received on those shares.

                                       42
<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>

                           
                  Total           Brokerage            % of all     
 Fiscal Year    Brokerage      Commissions Paid     Commission Trades      % of Commissions
   ending      Commissions       to Neuberger         Done Through              Paid to
 August 31,       Paid             Berman           Neuberger Berman       Neuberger Berman             
 ----------       ----             ------           ----------------       ----------------             
                                                                 
<S>             <C>             <C>                <C>                     <C>    
                                                   
    1996        $208,834        $124,879           ------%                      ------%
    1997         305,640         232,238            80.59                        75.98
    1998         -------        --------           -------                      -------  
                                                                      
</TABLE>

      _____% of the $______ paid to other  brokers by the  Portfolio  during the
1998  fiscal  year   (representing   commissions   on   transactions   involving
approximately  $__________)  was directed to those  brokers  because of research
services  they  provided.  During the fiscal  year ended  August 31,  1998,  the
Portfolio  acquired  securities  of the  following  of its  "regular  brokers or
dealers"  (as defined in the 1940 Act):  State  Street  Bank and Trust  Company,
N.A.; at that date,  that  Portfolio  held none of the securities of its regular
brokers or dealers.

      Prior to June 15,  1998,  portfolio  securities  were,  from time to time,
loaned by the  Portfolio to Neuberger  Berman in  accordance  with the terms and
conditions  of an order issued by the SEC. The order  exempts such  transactions
from provisions of the 1940 Act that would otherwise prohibit such transactions,
subject to certain conditions.

      The following information reflects interest income earned by the Portfolio
from the cash  collateralization  of  securities  loans  during the fiscal years
ended 1998,  1997, and 1996. As reflected  below,  Neuberger  Berman  received a
portion of the interest income from the cash collateral.

    Fiscal Year ending              Interest          Amount Paid to Neuberger
        August 31,                   Earned                  Berman
        ----------                   ------                  ------
        

           1996                     $     0                    $     0
           1997                     $80,484                    $51,639
           1998                     -------                    ------- 

      A committee of Independent  Portfolio  Trustees from time to time reviews,
among other things, information relating to securities loans by the Portfolio.

      In effecting  securities  transactions,  the Portfolio  generally seeks to
obtain  the best  price and  execution  of  orders.  Commission  rates,  being a


                                       43
<PAGE>


component  of price,  are  considered  along with other  relevant  factors.  The
Portfolio  plans to continue to use  Neuberger  Berman as its  principal  broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified  brokers.  To the Portfolio's
knowledge,  no  affiliate  of the  Portfolio  receives  give-ups  or  reciprocal
business in connection with its securities transactions.

      The use of  Neuberger  Berman as a broker for the  Portfolio is subject to
the  requirements  of  Section  11(a) of the  Securities  Exchange  Act of 1934.
Section 11(a) prohibits members of national securities  exchanges from retaining
compensation  for executing  exchange  transactions  for accounts  which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact  business for the account and comply with certain  annual
reporting  requirements.   Managers  Trust  and  NB  Management  have  expressly
authorized  Neuberger Berman to retain such  compensation,  and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).

      Under the 1940 Act,  commissions paid by the Portfolio to Neuberger Berman
in connection with a purchase or sale of securities on a securities exchange may
not exceed the usual and customary broker's commission.  Accordingly,  it is the
Portfolio's  policy that the  commissions  paid to Neuberger  Berman must, in NB
Management's  judgment,  be (1) at least as favorable as those  charged by other
brokers having comparable  execution capability and (2) at least as favorable as
commissions   contemporaneously   charged  by  Neuberger  Berman  on  comparable
transactions for its most favored  unaffiliated  customers,  except for accounts
for which Neuberger Berman acts as a clearing broker for another  brokerage firm
and customers of Neuberger  Berman  considered by a majority of the  Independent
Portfolio Trustees not to be comparable to the Portfolio. The Portfolio does not
deem it practicable  and in its best interests to solicit  competitive  bids for
commissions  on  each  transaction   effected  by  Neuberger  Berman.   However,
consideration  regularly is given to information concerning the prevailing level
of  commissions  charged by other  brokers  on  comparable  transactions  during
comparable  periods of time. The 1940 Act generally  prohibits  Neuberger Berman
from acting as principal in the purchase of portfolio  securities  from,  or the
sale of portfolio  securities to, the Portfolio unless an appropriate  exemption
is available.

      A committee of Independent  Portfolio  Trustees from time to time reviews,
among other things, information relating to the commissions charged by Neuberger
Berman to the Portfolio and to its other  customers and  information  concerning
the prevailing level of commissions  charged by other brokers having  comparable
execution  capability.  In addition,  the procedures pursuant to which Neuberger
Berman  effects  brokerage  transactions  for the Portfolio must be reviewed and
approved no less often than annually by a majority of the Independent  Portfolio
Trustees.

      To  ensure  that  accounts  of  all  investment  clients,   including  the
Portfolio,  are  treated  fairly in the event  that  Neuberger  Berman  receives
transaction  instructions  regarding  a  security  for more than one  investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients,  including advisory accounts in which affiliated persons have
an investment interest,  for the purpose of negotiating brokerage commissions or
obtaining a more favorable price.  Where  appropriate,  securities  purchased or


                                       44
<PAGE>



sold may be  allocated,  in  terms  of  amount,  to a  client  according  to the
proportion  that the  size of the  order  placed  by that  account  bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis  exceptions.  All  participating  accounts will pay or receive the
same price.

      The  Portfolio  expects that it will  continue to execute a portion of its
transactions  through  brokers other than Neuberger  Berman.  In selecting those
brokers,  NB  Management  considers  the quality and  reliability  of  brokerage
services,   including   execution   capability,   performance,   and   financial
responsibility,  and may  consider  research  and other  investment  information
provided by those brokers.

      A committee  comprised  of officers of NB  Management  and  principals  of
Neuberger  Berman who are portfolio  managers of the  Portfolio  and/or Other NB
Funds (collectively, "NB Funds") and some of Neuberger Berman's managed accounts
("Managed  Accounts")  evaluates  semi-annually  the nature  and  quality of the
brokerage  and  research  services  provided  by  other  brokers.  Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers  for use in  determining  the  relative  amounts  of  commissions  to be
allocated to those brokers.  Ordinarily,  the brokers on the list effect a large
portion of the brokerage  transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman.  However,  in any semi-annual period,
brokers  not on the list may be used,  and the  relative  amounts  of  brokerage
commissions  paid to the  brokers  on the list may vary  substantially  from the
projected  rankings.  These  variations  reflect the  following  factors,  among
others:  (1) brokers not on the list or ranking  below other brokers on the list
may be selected for  particular  transactions  because they provide better price
and/or execution,  which is the primary  consideration in allocating  brokerage;
(2)  adjustments  may be required  because of periodic  changes in the execution
capabilities of or research  provided by particular  brokers or in the execution
or  research  needs of the NB Funds  and/or the  Managed  Accounts;  and (3) the
aggregate amount of brokerage  commissions  generated by transactions for the NB
Funds and the Managed  Accounts may change  substantially  from one  semi-annual
period to the next.

      The commissions paid to a broker other than Neuberger Berman may be higher
than the amount  another firm might charge if NB  Management  determines in good
faith that the amount of those  commissions  is  reasonable  in  relation to the
value  of the  brokerage  and  research  services  provided  by the  broker.  NB
Management  believes  that those  research  services  benefit the  Portfolio  by
supplementing  the  information  otherwise  available  to  NB  Management.  That
research may be used by NB Management  in servicing  Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger  Berman from brokers  effecting
portfolio  transactions  on behalf of the Managed  Accounts  may be used for the
Portfolio's benefit.

      Janet W. Prindle,  a Vice  President of NB  Management  and a principal of
Neuberger Berman is the person primarily  responsible for making decisions as to
specific  action to be taken with  respect to the  investment  portfolio  of the
Portfolio.  She has full  authority  to take  action with  respect to  portfolio
transactions  and may or may not consult with other  personnel of NB  Management
prior to taking  such  action.  If Ms.  Prindle is  unavailable  to perform  her


                                       45
<PAGE>



responsibilities,  Robert  Ladd  and/or  Ingrid  Saukaitis,  each  of whom is an
Assistant Vice President of NB Management,  will assume  responsibility  for the
Portfolio.

PORTFOLIO TURNOVER

      The Portfolio's  portfolio turnover rate is calculated by dividing (1) the
lesser  of the  cost  of the  securities  purchased  or the  proceeds  from  the
securities sold by the Portfolio  during the fiscal year (other than securities,
including options,  whose maturity or expiration date at the time of acquisition
was one  year or  less)  by (2)  the  month-end  average  of the  value  of such
securities owned by the Portfolio during the fiscal year.

                             REPORTS TO SHAREHOLDERS

      Shareholders  of  the  Fund  receive   unaudited   semi-annual   financial
statements,  as well as year-end financial statements audited by the independent
accountants  for  the  Fund  and  Portfolio.  The  Fund's  statements  show  the
investments  owned by the Portfolio  and the market  values  thereof and provide
other  information  about  the Fund and its  operations,  including  the  Fund's
beneficial interest in the Portfolio.

                 ORGANIZATION, CAPITALIZATION AND OTHER MATTERS

THE FUND

      The Fund is a separate ongoing series of Equity Trust, a Delaware business
trust organized  pursuant to a Trust  Instrument dated as of September 22, 1998.
The  Trust  is  registered  under  the  Investment  Company  Act  of  1940  as a
diversified,  open-end management investment company, commonly known as a mutual
fund.  Equity  Trust has eight  separate  series.  The Fund  invests  all of net
investable assets in the Portfolio, in each case receiving a beneficial interest
in the Portfolio.  The trustees of the Trust may establish  additional series or
classes of shares without the approval of shareholders. The assets of the series
belong only to that series,  and the liabilities of each series are borne solely
by that series and no other.

      DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of  beneficial  interest  (par value $0.001 per share).  Shares of the
Fund represent equal proportionate  interests in the assets of the Fund only and
have identical voting, dividend, redemption,  liquidation, and other rights. All
shares  issued  are fully  paid and  non-assessable,  and  shareholders  have no
preemptive or other rights to subscribe to any additional shares.

      SHAREHOLDER  MEETINGS.  The  trustees  of the Trust do not  intend to hold
annual  meetings of  shareholders  of the Fund.  The trustees  will call special
meetings of  shareholders  of the Fund only if required under the 1940 Act or in
their  discretion  or upon the written  request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.

      CERTAIN   PROVISIONS  OF  TRUST   INSTRUMENT.   Under  Delaware  law,  the
shareholders  of the Fund will not be personally  liable for the  obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended  to  shareholders  of a  corporation.  To guard  against  the risk that
Delaware law might not be applied in other states, the Trust Instrument requires


                                       46
<PAGE>


that every written  obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for  indemnification  out of Trust or Fund property of any  shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.

      OTHER.  Because Fund shares can be bought,  owned and sold only through an
account with the Plan, a client of the Plan may be unable to purchase additional
shares  and/or  may be  required  to redeem  shares  (and  possibly  incur a tax
liability)  if the client no longer has a  relationship  with the Plan or if the
Plan no longer has a contract with NB Management to perform services.

THE PORTFOLIO

      The Portfolio is a separate  operating  series of Equity Managers Trust, a
New York common law trust organized as of December 1, 1992. The Manager Trust is
registered under the 1940 Act as a diversified,  open-end management  investment
company. Equity Managers Trust has seven separate Portfolios.  The assets of the
Portfolio belong only to the Portfolio, and the liabilities of the Portfolio are
borne solely by the Portfolio and no other.

      FUND INVESTMENTS IN THE PORTFOLIO.  The Fund is a "feeder fund" that seeks
to achieve its  investment  objective  by  investing  all of its net  investable
assets in the Portfolio,  which is a "master fund." The Portfolio, which has the
same  investment  objective,  policies,  and  limitations  as the Fund,  in turn
invests in  securities;  the Fund thus  acquires an  indirect  interest in those
securities.

      The   Fund's   investment   in  the   Portfolio   is  in  the  form  of  a
non-transferable  beneficial  interest.  Members of the  general  public may not
purchase a direct interest in the Portfolio. The Sister Funds that are series of
Neuberger  Berman Equity Funds ("Equity  Funds") and the other mutual funds that
are  series  of other  trusts  invest  all of their  respective  net  assets  in
corresponding  Portfolios of Equity Managers Trust. The shares of each series of
Equity Funds are  available for purchase by members of the general  public.  The
Trusts do not sell their shares directly to members of the general public.

      The  Portfolio  may also permit other  investment  companies  and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the  Portfolio  on the  same  terms  and  conditions  as the Fund and will pay a
proportionate  share  of  the  Portfolio's  expenses.  Other  investors  in  the
Portfolio  (including the series of Equity Funds) are not required to sell their
shares at the same  public  offering  price as the Fund,  could have a different
administration  fee and expenses than the Fund,  and (except Equity Funds) might
charge a sales  commission.  Therefore,  Fund  shareholders  may have  different
returns than shareholders in another investment company that invests exclusively
in the Portfolio.  Information  regarding the Funds that invest in the Portfolio
is available from NB Management by calling 800-877-9700.

      The trustees of the Trust  believe that  investment  in the Portfolio by a
series of Equity Funds or by other  potential  investors in addition to the Fund
may enable the  Portfolio  to realize  economies  of scale that could reduce its
operating  expenses,   thereby  producing  higher  returns  and  benefiting  all
shareholders.  However, the Fund's investment in its corresponding Portfolio may
be affected by the actions of other large  investors in the  Portfolio,  if any.


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For example, if a large investor in the Portfolio (other than the Fund) redeemed
its interest in the Portfolio,  the Portfolio's  remaining investors  (including
the Fund) might,  as a result,  experience  higher pro rata operating  expenses,
thereby producing lower returns.

      The  Fund may  withdraw  its  entire  investment  from  its  corresponding
Portfolio at any time, if the trustees of the respective Trust determine that it
is in the best  interests  of the Fund and its  shareholders  to do so. The Fund
might withdraw, for example, if there were other investors in the Portfolio with
power to, and who did by a vote of all investors  (including  the Fund),  change
the investment objective,  policies, or limitations of the Portfolio in a manner
not  acceptable  to the trustees of the  respective  Trust.  A withdrawal  could
result in a distribution  in kind of portfolio  securities (as opposed to a cash
distribution) by the Portfolio to the Fund. That distribution  could result in a
less  diversified  portfolio  of  investments  for the  Fund  and  could  affect
adversely the liquidity of the Fund's investment portfolio.  If the Fund decided
to convert those  securities to cash, it usually would incur  brokerage  fees or
other transaction costs. If the Fund withdrew its investment from the Portfolio,
the trustees of the respective Trust would consider what actions might be taken,
including the investment of all of the Fund's net  investable  assets in another
pooled investment entity having  substantially the same investment  objective as
the Fund or the  retention by the Fund of its own  investment  manager to manage
its  assets  in  accordance  with  its  investment  objective,   policies,   and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.

      INVESTOR  MEETINGS  AND  VOTING.  The  Portfolio  normally  will  not hold
meetings of investors  except as required by the 1940 Act.  Each investor in the
Portfolio  will be entitled to vote in  proportion  to its  relative  beneficial
interest in the Portfolio. On most issues subjected to a vote of investors,  the
Fund will solicit  proxies from its  shareholders  and will vote its interest in
the  Portfolio in proportion  to the votes cast by the Fund's  shareholders.  If
there are other  investors in the Portfolio,  there can be no assurance that any
issue  that  receives a majority  of the votes  cast by Fund  shareholders  will
receive a majority of votes cast by all Portfolio  investors;  indeed,  if other
investors  hold a majority  interest  in the  Portfolio,  they could have voting
control of the Portfolio.

      CERTAIN  PROVISIONS.  Each investor in the Portfolio,  including the Fund,
will be liable for all  obligations  of the Portfolio.  However,  the risk of an
investor  in the  Portfolio  incurring  financial  loss beyond the amount of its
investment on account of such  liability  would be limited to  circumstances  in
which  the  Portfolio  had  inadequate  insurance  and was  unable  to meet  its
obligations  out of its assets.  Upon  liquidation of the  Portfolio,  investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.

                          CUSTODIAN AND TRANSFER AGENT

      The Fund and Portfolio  have selected  State Street Bank and Trust Company
("State Street"),  225 Franklin Street,  Boston, MA 02110 as custodian for their
securities  and cash.  State  Street also serves as the Fund's  transfer  agent,
administering  purchases,  redemptions,  and  transfers  of Fund  shares and the
payment of dividends and other  distributions to the shareholders.  In addition,
State Street serves as transfer agent for the Portfolio.


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                             INDEPENDENT ACCOUNTANTS

      The Fund and Portfolio have selected  PriceWaterhouseCoopers  L.L.P.,  One
Post Office Square,  Boston,  MA 02109, as the independent  accountants who will
audit their financial statements.

                                  LEGAL COUNSEL

      The Fund and  Portfolio  have  selected  Kirkpatrick  & Lockhart LLP, 1800
Massachusetts  Avenue, N.W., 2nd Floor,  Washington,  D.C. 20036-1800,  as their
legal counsel.

               CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

      As of December 1, 1998, the Deferred  Compensation Plan of the City of New
York and Related Agencies and  Instrumentalities,  40 Rector Street,  3rd Floor,
New York, New York 10006,  owned 100% of the outstanding  shares of another fund
that owned ____% of the interests in the Portfolio.

                             REGISTRATION STATEMENT

      This SAI and the Prospectus do not contain all the information included in
the Trust's  registration  statement  filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration statement,
including the exhibits filed therewith,  may be examined at the SEC's offices in
Washington, D.C.

      Statements  contained in this SAI and in the Prospectus as to the contents
of any contract or other document referred to are not necessarily  complete.  In
each  instance  where  reference  is made to the copy of any  contract  or other
document filed as an exhibit to the registration statement,  each such statement
is qualified in all respects by such reference.

                              FINANCIAL STATEMENTS

                                  [To Be Filed]


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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

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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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