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NEUBERGER BERMAN
Neuberger Berman
EQUITY ASSETS -Registered Trademark-
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Focus Assets ANNUAL REPORT
Genesis Assets AUGUST 31, 1999
Guardian Assets
Manhattan Assets
Partners Assets
EQUITY SERIES -Registered Trademark-
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Socially Responsive Assets
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TABLE OF CONTENTS
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THE FUNDS
CHAIRMAN'S LETTER A-4
PORTFOLIO COMMENTARY
Focus Assets A-5
Genesis Assets A-8
Guardian Assets A-11
Manhattan Assets A-14
Partners Assets A-17
Socially Responsive Assets A-20
GROWTH OF A DOLLAR CHARTS
COMPARISON OF A
$10,000 INVESTMENT
Focus Assets B-1
Genesis Assets B-3
Guardian Assets B-5
Manhattan Assets B-7
Partners Assets B-9
Socially Responsive Assets B-11
FINANCIAL STATEMENTS B-12
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Focus Assets B-23
Genesis Assets B-24
Guardian Assets B-25
Manhattan Assets B-26
Partners Assets B-27
Socially Responsive Assets B-28
REPORT OF INDEPENDENT
ACCOUNTANTS/AUDITORS B-31
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
TOP TEN EQUITY
HOLDINGS
Focus Portfolio C-1
Genesis Portfolio C-3
Guardian Portfolio C-7
Manhattan Portfolio C-10
Partners Portfolio C-13
Socially Responsive
Portfolio C-16
FINANCIAL STATEMENTS C-20
FINANCIAL HIGHLIGHTS
Focus Portfolio C-35
Genesis Portfolio C-36
Guardian Portfolio C-37
Manhattan Portfolio C-38
Partners Portfolio C-39
Socially Responsive
Portfolio C-40
REPORT OF INDEPENDENT
ACCOUNTANTS/AUDITORS C-41
OTHER INFORMATION
Directory/Officers and
Trustees D-1
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The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the individual fund names in this report
are either service marks or registered trademarks of Neuberger Berman Management
Inc. -C-1999 Neuberger Berman Management Inc.
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CHAIRMAN'S LETTER October 1, 1999
Dear Fellow Shareholder,
In the summer of 1998, the sky appeared to be falling. Southeast Asian
economies had collapsed, Russia was imploding, and Latin America seemed to be on
the brink of financial disaster. Many investors feared that even the mighty U.S.
economy would falter, and they began dumping stocks indiscriminately.
At Neuberger Berman, we urged patience. We worked hard to assess the potential
consequences of overseas economic troubles on our own economy. We came to the
conclusion that things were not as bad as they seemed and opined that the drop
in the U.S. stocks should be viewed as a long-term buying opportunity. In my
letter in last year's Annual Report, I asked the rhetorical question, "Is this
the time to abandon equities?" and answered, "We think not." This turned out to
be good advice, as stocks rallied through most of fiscal 1999.
Where do we go from here? Over the near term, we can't predict. A positive
outlook for the U.S. and global economy must be tempered by concern that
domestic equities valuations are quite high by historical yardsticks. We believe
the only predictable thing in the financial markets is that vigorous investment
research and disciplined portfolio management can enhance long-term returns.
Sadly, this will be my last letter to you as Chairman of Neuberger Berman
Equity Funds. After thirty-nine years in the investment business, the last
twenty-five at Neuberger Berman, I am retiring. Although I will continue to
serve as a consultant to the company, I will miss the daily contact with all my
colleagues at Neuberger Berman and the opportunity to share my thoughts with
you. I leave with pride and confidence, however, that the Neuberger Berman
legacy lives on. Your assets remain in the hands of wise and experienced
managers.
Sincerely,
/s/ Stanley Egener
Stanley Egener
Chairman of the Board
Neuberger Berman Equity Assets
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PORTFOLIO COMMENTARY
Neuberger Berman
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Focus Assets
For the six and twelve month periods ending August 31, 1999, the total return
for the Focus Assets was 1.00% and 43.15%. During the same period of time the
Russell 1000 Value Index was up 6.16% and 30.08%. The S&P 500 advanced 7.29% and
39.82% over the corresponding six and twelve month periods. These results are
gratifying because we achieved them during a 12 month period that tested our
discipline, our resolve and at times our patience. Ultimately, adhering to our
long-held value discipline proved rewarding. (See page B-1 for comparison of
$10,000 investment and average annual total returns as of August 31, 1999).*
It is important to remember that, as its name implies, the Focus portfolio is
by design a concentrated portfolio investing at least 90% of net assets in no
more than six sectors. Since we believe that truly attractive valuations are
unlikely to be evenly distributed throughout the entire market at any given
point in time, this focused approach enables us to invest in those few areas
where we believe real value resides. We usually do this by investing in
industries that we think are temporarily out of favor, and we select what we
believe are the best companies in those industries. We believe this creates a
meaningful distinction between the Focus portfolio and other value portfolios:
We seek higher quality companies and we look for equities that have historically
had a significantly higher earnings growth rate than those found in the average
value fund.
For example, two years ago difficulties in Asia led to the semiconductor and
semiconductor equipment industries falling into extreme disfavor. We initiated
or added to our positions in what we consider the best companies in those areas:
Applied Materials, KLA-Tencor, Novellus and Texas Instruments. Their substantial
appreciation helped the fund considerably this year. Their valuations have
recently reached such high levels that we eliminated the first three positions
from our portfolio, and pared back Texas Instruments.
Similarly, a year ago the global financial panic sparked by financial problems
in Russia led to an indiscriminate sell-off of all financial stocks.
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Focus Assets (Cont'd)
We took advantage of this by building up substantial positions in what we
consider the best investment bank (Morgan Stanley Dean Witter); the best money
center bank (Chase Manhattan); the best credit card company (Capital One
Financial); and the best financial services company (CITIGROUP). All of these
contributed noticeably to the fund's performance this year, and all remain
important positions in the fund.
It seems that investors' time horizons have grown increasingly short term,
which in turn has led to higher levels of market volatility. While this can be
disconcerting, it also provides opportunities. Earlier this year, for example,
the stock market became pre-occupied, if not obsessed, with the potential impact
of modifying the nation's computers to handle the transition from 1999 to 2000.
Many investors feared this so-called Y2K problem would require so much spending
that a virtual freeze in software spending would occur. As a result, companies
that rarely show up as real values began coming across our radar screens. While
we recognized that some disruption in typical software spending patterns could
occur, many Y2K issues would be addressed shortly after January 1, 2000. Since
we were willing to endure the discomfort of some short-term volatility, we made
some investments in Oracle, Platinum Technology, BMC Software and Compuware that
have performed well.
As I mentioned at the outset, this has been a year that has tested our
discipline and patience. Our basic discipline, buying the best company in an out
of favor industry at a discount valuation with above average earnings growth,
led both to the successful investments mentioned above, and to two of our most
frustrating investments: Countrywide Credit and Furniture Brands.
Countrywide Credit is the nation's leading mortgage company. While the
company's earnings growth rate has been steady and superior over the last five
years, the stock has significantly underperformed the market over the last year
to the point at which its price-to-earnings ratio is only 25% of the S&P 500's.
The conventional wisdom to explain this unusually low valuation is that the
company's earnings will be pressured by the recent rise in interest rates. We
think this will not be
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Focus Assets (Cont'd)
the case: Countrywide's earnings have increased in each of the last four
quarters, despite a 100 basis point rise in interest rates. We believe our
patience will be rewarded; in the meantime it is being tested.
Furniture Brands is the leading furniture manufacturer in the country. Its
earnings growth over the past five years has averaged 34% a year, far superior
to the overall market. Similar to Countrywide, Furniture Brands' stock also sold
at 25% of the market multiple and its earnings record has been virtually
ignored. The management of Furniture Brands is doing all that an investor could
ask, and we feel that in time the facts of superior earnings growth will, as is
usually the case, overwhelm the market's negative bias.
Looking forward, we are bothered by how narrow the market has become. A
relatively small number of stocks, selling at very high valuations, are
performing far better than the majority of stocks. Still, the price-to-earnings
ratios of the Focus portfolio's holdings seem very attractive given the
prospects of the companies they represent. Adhering to our value discipline
required fortitude last year, but our patience was rewarded. We think the
rewards will continue to accumulate in the future.
Sincerely,
/s/ Kent Simons
Kent Simons
PORTFOLIO MANAGER
*For index definitions, refer to page A-23, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change.
While the value-oriented approach is intended to limit risks, the Portfolio --
with its concentration in sectors -- may be more greatly affected by any single
economic, political or regulatory development than a more diversified mutual
fund.
Past performance is no guarantee of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Genesis Assets
For the six and twelve month periods concluding August 31, 1999, Genesis
Assets gained 10.78% and 18.75%, respectively, compared to the Russell 2000's
9.91% and 28.36% returns over the same time periods (See page B-3 for comparison
of a $10,000 investment and average annual total returns as of August 31,
1999).*
We are pleased with the fund's solid gains in fiscal 1999 following a very
disappointing fiscal 1998. The fund's 12-month returns relative to its Russell
2000 benchmark, however, continue to reflect the large performance gap between
small-cap growth and small-cap value stocks. Indeed, for the fiscal year, the
Russell 2000 Growth Index gained 43.31% compared to the Russell 2000 Value
Index's 14.08% return.
We don't expect the wide performance gulf between growth and value stocks in
the small-cap arena to continue forever. Small-cap value stocks made up some
ground relative to small-cap growth stocks from April through July 1999 as
investor sentiment, especially in Internet stocks, seemed to turn from greed to
fear. We note that the flood of Internet IPOs (Initial Public Offerings) has
slowed to a trickle and that the majority of 1999's Internet IPOs are now
trading below their initial offering prices. We suspect that once-burned,
twice-shy small-cap investors may continue to rotate away from speculative
Internet stocks and into more reasonably valued small companies with operating
track records and positive cash flow and earnings.
At this juncture, however, the investing public is still shying away from
small-cap value stocks. Corporate acquirers, on the other hand, are bargain
hunting, as evidenced by accelerating takeover activity in this market sector.
More than a dozen of our holdings were taken over during this fiscal year and we
suspect more of our portfolio bargains will become targets in the year ahead. We
are also seeing corporate managements aggressively buying their own deeply
discounted stocks. The number of small-cap company share repurchase programs is
approaching the totals seen following the 1987 market crash. This gives us hope
that the investing public will soon become more enthusiastic.
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Genesis Assets (Cont'd)
In the Genesis portfolio during fiscal 1999, our energy investments, primarily
small oil services companies, posted impressive gains. They were among the
portfolio's poorest performers last year, but we added to our positions in the
energy sector, believing that as the global economy recovered, oil prices and
oil service company profits would rebound strongly. Oil has surged to $23 per
barrel, up from around $10 at the 1998 bottom, and we expect oil services
company earning to follow suit.
The portfolio's technology holdings also contributed to returns. On a relative
performance basis, our focus on what we believed were reasonably valued
technology stocks capable of consistent, if not spectacular, earnings growth
worked against us through most of first half fiscal 1999, when the Internet
stocks were sizzling. This strategy worked to our advantage in the second half,
when the "dot-com" stocks flamed out.
Portfolio disappointments include financial stocks, most notably small savings
and loans institutions, whose earnings were restrained by rising interest rates
and the flat yield curve. We believe modestly higher interest rates are already
baked into current valuations. Should interest rates stabilize around current
levels or drop, the financials could regain momentum. Separately, despite
recording decent operating results, our healthcare investments also languished.
This group remains under a cloud of uncertainty regarding changes in federal
insurance reimbursement programs; it also suffers from a general lack of
interest from small-cap investors focused on the hot technology sector. Going
forward, if our healthcare positions meet earnings expectations, we believe they
will receive a better diagnosis from investors.
Let us give you an example of a current portfolio holding that demonstrates
our value-oriented discipline. Bear in mind this is not a recommendation and we
may sell this stock without notice if circumstances change. Methode Electronics
has two businesses. The first, auto electronics components, has been a "steady
as she goes" growth business benefiting from the secular growth of electronic
systems in automobiles. Methode's second business, electronic components that
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Genesis Assets (Cont'd)
expand the bandwidth of telecommunications companies' networks, is considerably
more exciting. The Internet requires faster, higher capacity digital
transmission systems, so the demand for greater bandwidth is exploding. Methode
already has several leading telecommunications equipment companies on its
customer list. Yet, despite a promising start in this fast growth business, at
the close of this reporting period, Methode was trading at around 14 times next
calendar year's earnings estimates. We believe our 20% annual earnings growth
rate projections for Methode could prove conservative if the company's bandwidth
enhancing electronics business lives up to its potential. Even if it takes
longer to develop, we believe the stock is supported at current levels by its
stable auto electronics business.
In closing, the Genesis portfolio delivered solid returns in fiscal 1999. We
stuck with our discipline during a very difficult period for small-cap value
stocks. We see excellent value in our portfolio and remain confident these
bargains will attract more investor attention in the year ahead.
Sincerely,
/s/ Judith Vale /s/ Robert D'Alelio
Judith Vale and Robert D'Alelio
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-23, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Genesis Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY
IN COMPANIES WITH SMALL MARKET CAPITALIZATIONS ARE SET FORTH IN THE PROSPECTUS.
Past performance is no guarantee of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Guardian Assets
For the six and twelve month periods concluding August 31, 1999, the Guardian
Assets returned 0.89% and 25.25%, respectively, versus the Russell 1000 Value
Index's 6.16% and 30.08% gains over the same time periods. The S&P 500 advanced
7.29% and 39.82% over the corresponding six and twelve month periods (see
page B-5 for comparison of $10,000 investment and average annual total returns
as of August 31, 1999).*
Technology was a big story in our portfolio in fiscal 1999. In mid-year 1998,
as Wall Street underestimated demand for technology industries, we were able to
buy some solid tech companies at very attractive prices. Then, driven by the
cyclical recovery in semiconductors and semiconductor capital equipment, and
enormous investment in digital communications and Internet infrastructure,
technology companies' operating results began coming in well ahead of
expectations. Analysts' estimates were revised upward through the year and
technology companies kept beating projections. This provided a strong tailwind
for tech stocks, and we saw substantial gains in our technology holdings.
Today, the outlook for technology stocks is somewhat uncertain. Business
conditions continue to be strong, but valuations are high and leave little room
for disappointing earnings. Y2K issues also add a degree of uncertainty about
the future. Although at the end of this reporting period we still have about 15%
of assets in technology, we will likely continue to take profits in this sector.
Our energy investments also delivered strong returns. Oil prices surged and
our positions in the major integrated oil companies took off. As demand trends
continued to improve, we augmented our positions in the integrated oils with
investments in oil services and drilling companies.
Our communications service holdings also closed fiscal 1999 with strong gains.
These stocks have retreated recently due to concern over competitive pricing,
particularly in the long distance business. We
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Guardian Assets (Cont'd)
believe this will prove to be a passing cloud, however, and that our portfolio
companies have the scale, brand identity, and global assets to allow them to
prosper over the long term.
We would say the same about our financial company investments -- among the
portfolio's more disappointing performers this year. Most of these stocks did
well through February, and then began retreating when bond yields trended higher
and the Federal Reserve reversed course and started tightening. We believe
interest rates will stabilize or perhaps rise modestly above current levels and
that financial companies can continue to deliver favorable earnings. We own the
stocks of strong franchises in the banking, insurance, credit card, and
brokerage/asset management industries. Even if we are wrong about interest
rates, we believe these stocks are supported by very attractive valuations
relative to long-term business prospects.
Our capital goods holdings were a drag on performance, particularly our
investments in waste management, which fell short of expectations. We thought
that consolidation in this fragmented industry would improve margins and
earnings. It didn't happen and it's looking like it won't happen in the
foreseeable future. Consequently, we have substantially reduced our exposure to
this group.
Wellpoint Health Network is an example of our investment philosophy at work.
This is not a recommendation, and if fundamentals deteriorate or the stock runs
up out of our value range, we may sell without notice. Formerly named Blue
Cross, Blue Shield of California, Wellpoint is now a national managed healthcare
company. It has all the things we like: favorable operating characteristics; a
strong balance sheet; a history of superior financial returns; terrific
management; and an attractive valuation. We think management's strategy of
offering a wide variety of plan options to a public which demands choice will
pay off. Wellpoint also has very little Medicare business, and therefore is
subject to less federal government regulatory risk than its peers. We are
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Guardian Assets (Cont'd)
projecting 15% average annual earnings growth for the company, and at the end of
this reporting period, the stock was trading at just 15 times next year's
earnings projections.
In closing, a few brief comments on the value versus growth issue. Although
value investors are generally loath to admit it, there have been legitimate
reasons for the superior performance of growth stocks in recent years. Economic
trends -- an extended period of modest economic growth and declining interest
rates -- have favored growth companies. This may be changing. We are in the
midst of a more vigorous economic expansion, which unless choked off by the Fed,
appears to have legs. We expect this to lengthen the earnings cycle for cyclical
stocks. Also, interest rates are no longer declining. This means growth stock
multiples aren't likely to expand, and may contract. Finally, by historical
valuation yardsticks, growth is very expensive and value remains attractive. Our
conclusion is that value investing should provide more competitive and, perhaps,
superior returns in the years ahead.
Sincerely,
/s/ Kevin Risen /s/ Rick White
Kevin Risen and Rick White
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-23, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Guardian Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-13
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PORTFOLIO COMMENTARY
Neuberger Berman
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Manhattan Assets
For the six and twelve month periods ending August 31, 1999, the Manhattan
Assets gained 7.39% and 36.09%, respectively, compared to the Russell Midcap
Growth Index's 11.68% and 48.83% returns over the same time periods (see page
B-7 for comparison of a $10,000 investment and average annual total returns as
of August 31, 1999).*
Our returns were quite healthy this year, although we did lag our benchmark
Russell Midcap Growth Index. We attribute this shortfall to the smaller average
capitalization of our portfolio compared to the benchmark's. Early in the year,
larger stocks materially outperformed smaller ones. We have adjusted our
holdings and the portfolio's weighted average market cap now closely
approximates the benchmark index. We also had a few unpleasant
surprises -- portfolio companies reported earnings below consensus expectations.
The last three months of this reporting period have brought better news,
however, and our fund materially outperformed its benchmark in June, July, and
August.
Our new fiscal year is off to a solid start as well. The corporate earnings
report season that ended in August brought news that 65% of our portfolio
holdings exceeded Wall Street's consensus earnings expectations. These
companies' earnings growth, which had been projected at about 36%, came in
closer to 50%. We believe this will produce some performance momentum as we head
into fiscal 2000.
In fiscal 1999, our technology investments performed exceptionally well. We
took a balanced approach to this sector, allocating assets among software,
semiconductor, telecommunications equipment, and Internet companies. As always,
we had winners and losers, but on average, we earned excellent returns from each
of these tech sectors. Our Internet strategy--favoring companies that provide
essential products and services to a wide range of Internet companies, rather
than putting all our money on narrowly focused companies that may or may not
succeed--served us well, and we believe our strategy will continue to mitigate
risk in this volatile group. While our allocation to Internet stocks remained
fairly constant throughout the fiscal year, we took profits in stocks whose
valuations had soared and redirected that money
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Manhattan Assets (Cont'd)
to more reasonably priced opportunities. This helped us avoid some of the
Internet stocks that collapsed under the weight of excessive valuations in the
second half of the year.
The portfolio's energy holdings also boosted returns. We modestly overweighted
energy in expectation that rising natural gas prices would produce very
favorable earnings surprises in this out-of-favor group. Indeed, our energy
stock earnings came in well above consensus expectations. Our healthcare
investments, however, were a mixed bag. The portfolio's biotechnology holdings
excelled, but our healthcare services stocks took sick. In some instances, it
was a simple case of investor anxiety over prospective changes in federal
insurance reimbursement programs. In other cases it was more
serious -- disappointing earnings. True to our discipline, we removed companies
in the latter situation from our portfolio.
The performance of our telecommunications services investments, primarily
Competitive Local Exchange Carriers (CLECs), disappointed us despite the fact
that earnings met expectations. We call situations like these "performance in
the warehouse." In other words, the earnings growth and value is effectively
sitting on a shelf in the portfolio. We think it is just a matter of time until
this inventory gets marked up.
We continually monitor the Manhattan portfolio's fundamental characteristics
to make sure they are in line with our investment parameters. At the close of
this reporting period, the portfolio was on target. Based on consensus earnings
estimates from First Call, (an independent research firm that compiles and
distributes Wall Street earnings estimates), the portfolio has a 3-5 year
projected annual earnings growth rate of 29.23% compared to 26.65% for the
Russell Midcap Growth Index. Its price/earnings ratio (consensus calendar 2000
earnings estimates) was 33.79 compared to the benchmark's 29.68.
In closing, it's interesting to note that the Russell Midcap Growth Index
handily beat the S&P 500 in fiscal 1999. This was quite a reversal in fortune
considering the whipping the mid-cap index took in fiscal 1998. Does this
foreshadow another good year for mid-cap growth
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Manhattan Assets (Cont'd)
stocks versus the large-cap market darlings that have been on top for so long?
We don't know. But judging from the declining average capitalization of some of
the leading large-cap growth funds, it appears portfolio managers are beginning
to move down the capitalization ladder in search of opportunities. We welcome
them to the mid-cap arena and hope all their buying power will provide a
tailwind for the mid-cap stocks in our portfolio.
Sincerely,
/s/ Jennifer Silver /s/ Brooke Cobb
Jennifer Silver and Brooke Cobb
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-23, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Manhattan Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and/or investment styles as the Portfolio. You should be aware that
the Portfolio is likely to differ from the other mutual funds in size, cash
flow pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Partners Assets
For the six and twelve month periods concluding August 31, 1999, the Partners
Assets returned 4.58% and 25.51%, respectively, versus the Russell 1000 Value
Index's 6.16% and 30.08% gains over the same time periods. The S&P 500 advanced
7.29% and 39.82% over the corresponding six and twelve month periods (see page
B-9 for comparison of $10,000 investment and average annual total returns as of
August 31, 1999).*
We are pleased to report solid results in fiscal 1999. Growth stocks
materially out-performed value stocks again this year, but investors appear to
be questioning growth stock valuations and reawakening to opportunities in the
value sector. Value stocks in industries such as basic materials, energy,
capital goods, and industrial cyclicals performed quite well in the second half,
while some of the most popular growth stocks retreated. Although the Internet
bubble didn't burst, it lost quite a bit of air. We aren't predicting value will
outpace growth in the year ahead, but we believe the race will be much closer.
Technology stocks made the greatest contribution to our portfolio's returns in
fiscal 1999. For those who question the presence of technology stocks in a value
portfolio, we point out that our gains came from established companies such as
Teradyne, Texas Instruments, Hewlett Packard, and IBM, all of which we bought at
below market average multiples. Technology is not incompatible with value when
high quality companies are available at discounted valuations.
Our basic materials investments performed quite well after a dismal fiscal
1998. The global economy is recovering and revenues for basic materials
companies are exceeding consensus estimates. We believe earnings should begin
reflecting these stronger than anticipated revenue gains. Basic materials
companies still have very little pricing flexibility. But this could change if
demand continues to increase. We believe our basic materials holdings are good
values today, and could become even better ones tomorrow, if some pricing
flexibility returns to their markets in the year ahead.
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Partners Assets (Cont'd)
Our consumer staples and communications services holdings also boosted our
portfolio performance, with strong performers including Anheuser Busch, Nabisco,
and MCI WorldCom. Rounding out our list of winners is energy. We bought
positions in energy companies because we were confident that as the global
economy stabilized, the price of oil would rebound from its low of $10 per
barrel in 1998. We were delighted to watch it more than double in 1999,
producing excellent gains for our energy holdings.
Financial stocks were among our biggest portfolio disappointments this year,
due in part to the poor performance of our property and casualty insurance
holdings. In our opinion, Ace Ltd. and XL Capital Limited are the premier
underwriters in the business. To their credit, they have refused to participate
in the pricing war that has plagued the industry. But it has cost them revenues
and restrained their earnings. We see a light at the end of the tunnel however,
largely thanks to the declining bond market. Property and casualty insurers have
had huge gains in their bond portfolios in recent years, encouraging them to
pursue business at any price. The losses they are likely to sustain as a result
of under-priced policies, we believe, will eventually eliminate some of the
competition in this business. If we are right, we believe our investments in Ace
and XL Capital Limited could be quite rewarding.
We always provide an example of our investment strategy at work. Please be
advised this not a recommendation, and that we may sell our position without
notice if circumstances warrant it. CIGNA is in the process of overcoming its
identity crisis. It has completed the sale of its property and casualty
insurance assets and is now a pure employee benefits company. Its managed
healthcare business is doing quite well. CIGNA's price-to-earnings multiple has
already expanded from about 12 times earnings (the kind of multiple accorded
property casualty insurers) to around 15. That's only about half-way to the
level of price-to-earnings multiple currently enjoyed by high quality employee
benefits companies. In addition, after a $1 billion share buyback, the company
still has $3.5 billion in cash left from the sale of its insurance
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Partners Assets (Cont'd)
business. We can't be sure what management will do with this money. However, we
think additional share repurchases or some other effective strategy to enhance
shareholder value is a distinct possibility.
In closing, we are pleased to have rewarded loyal shareholders with solid
returns in fiscal 1999. Although the market continued to favor growth stocks
this year, we believe the tide is turning and that value investing will produce
more competitive returns in the year ahead. Over the long term, we remain
confident that investing in quality companies at opportunistic prices will be an
effective way to grow the assets you have entrusted to us.
Sincerely,
/s/ Robert Gendelman /s/ Michael Kassen /s/S. Basu Mullick
Robert Gendelman, Michael Kassen, and S. Basu Mullick
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-23, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Partners Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-19
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Socially Responsive Assets
For the six and twelve month periods concluding August 31, 1999, the Socially
Responsive Assets gained 9.66% and 36.80%, respectively, compared to the
Standard & Poor's 500 Index's 7.29% and 39.82% returns over the same time
periods (see page B-11 for comparison of a $10,000 investment and average annual
total returns as of August 31, 1999).*
Value reasserted itself in the second half of fiscal 1999, boosting the
performance of our portfolio to levels competitive with the growth-stock
dominated S&P 500. Beginning in April, value-oriented sectors including basic
materials, energy, capital goods, and industrial and consumer cyclicals rallied
strongly from severely depressed levels. Concurrently, high priced growth
sectors such as branded consumer goods, pharmaceutical companies, and some of
the technology high flyers began to fade.
Is this the beginning of a true value renaissance or only a temporary change
in the growth stock dominance of recent years? Investor behavior is impossible
to predict. However, based on historical valuation benchmarks, value stocks are
still fundamentally cheap and growth stocks are still rather richly priced.
Perhaps more importantly, if the U.S. economy keeps growing at a decent pace and
the rest of the world regains some momentum, we expect economically sensitive
companies in the value camp to continue to enjoy very favorable earnings
comparisons. We are not suggesting growth stock investing won't continue to be
rewarding. However, we do anticipate a broader market in which value stocks will
provide much more competitive returns.
We enjoyed generous returns from our technology holdings in fiscal 1999. This
was not accomplished by owning market darlings with high price-to-earnings
ratios, but rather from our positions in more reasonably priced technology
stocks including Unisys, Intel, and Hewlett Packard. Our success in these stocks
reaffirms our belief that we can generate attractive returns in the technology
sector without sacrificing our value principles. Biotechnology investments
Biogen and Alza also performed quite well.
A-20
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Assets (Cont'd)
Our energy holdings, most notably, oil service company Cooper Cameron,
contributed to portfolio returns, as energy prices rebounded from 1998 lows.
Tyco International, a diversified industrial company with a terrific acquisition
record, and consumer electronics retailer Circuit City made our Top Ten
performance list this year (based on contribution to overall return).
Our two primary sector disappointments were financial stocks and
utilities -- both interest rate sensitive groups that sold off as interest rates
trended higher this summer. If rates continue to rise, financial stocks may come
under more selling pressure. However, if interest rates stabilize around current
levels, we expect financial company earnings to remain relatively strong. With
high quality financial companies now trading at just about half the S&P 500's
price-to-earnings ratio, we view them as outstanding long term investment
bargains. We are less optimistic regarding the prospects for utilities and
consequently, have eliminated them from the portfolio.
As is our custom, we will highlight two socially responsive portfolio
companies we believe have excellent investment potential: Valassis
Communications and Hewlett Packard. Please be advised these are examples of our
investment philosophy at work, not recommendations and we may sell these stocks
without notice if circumstances change. Valassis Communications produces the
coupons accompanying your Sunday newspaper. It's a niche business with only one
major competitor (NewsCorp). We bought Valassis when it was trading at about 12
times earnings and even after an excellent year, it is still trading at 18.5
times next year's estimates -- a discount to the S&P 500's multiple. Named by
Fortune Magazine as one of the 100 best places to work, Valassis' commitment to
the well being of its employees is clearly demonstrated by the fact the company
highlights its progressive workplace policies in its standard presentations to
Wall Street analysts. Good company, good investment value, good corporate
citizen. That's our trifecta.
A-21
<PAGE>
Via an upcoming spin-off, Hewlett Packard is separating its measurement
instrument division from its computer and imaging businesses. We believe this
will help investors focus on HP's strengths, most notably its computer printer
business, which boasts a dominant market share. We believe when the spin-off is
completed, investors will value the sum of the parts higher than the current
price of the whole. Despite excellent performance this year, Hewlett Packard
still trades at a modest price-to-earnings discount to the market. In addition,
HP is a socially responsive role model for corporate America. It is one of the
largest companies led by a woman CEO. In addition to the progressive work-place
policies that earned HP's designation as one of the 100 Best Places to Work, the
company also gets good corporate citizenship grades for its environmentally
friendly product recycling programs.
In closing, although we are stock-specific investors, we also monitor overall
portfolio characteristics to ensure that we are well within the bounds of our
value discipline. The analysis at the close of this reporting period reveals
that the portfolio's price-to-earnings, price-to-cash flow, and price-to-book
value ratios are all below the S&P 500's.
Sincerely,
/s/ Janet Prindle
Janet Prindle
PORTFOLIO MANAGER
*For index definitions, refer to page A-23, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the index listed.
The composition, industries and holdings of the Portfolio are subject to
change. Socially Responsive Portfolio is invested in a wide array of stocks and
no single holding makes up more than a small fraction of the Portfolio's total
assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-22
<PAGE>
GLOSSARY OF INDICES
<TABLE>
<S> <C>
S&P 500 INDEX: An unmanaged index generally considered
to be representative of stock market
activity.
RUSSELL 1000-REGISTERED TRADEMARK-INDEX: Measures the performance of the 1,000
largest companies in the Russell
3000-Registered Trademark- Index (which
measures the performance of the 3,000
largest U.S. companies based on total
market capitalization). The Russell
1000 Index represents approximately 92%
of the total market capitalization of
the Russell 3000 Index.
RUSSELL 1000-REGISTERED TRADEMARK-VALUE Measures the performance of those
INDEX: Russell 1000 companies with lower
price-to-book ratios and lower
forecasted growth values.
RUSSELL 2000-REGISTERED TRADEMARK-INDEX: An unmanaged index consisting of
securities of the 2,000 issuers having
the smallest capitalization in the
Russell 3000-Registered Trademark-
Index, representing approximately 8% of
the Russell 3000 total market
capitalization. The smallest company's
market capitalization is roughly $178
million.
RUSSELL 2000-REGISTERED TRADEMARK-GROWTH Measures the performance of those
INDEX: Russell 2000-Registered Trademark-
Index companies with higher
price-to-book ratios and higher
forecasted growth values.
RUSSELL 2000-REGISTERED TRADEMARK-VALUE Measures the performance of those
INDEX: Russell 2000-Registered Trademark-
Index companies with lower
price-to-book ratios and lower
forecasted growth values.
RUSSELL 3000-REGISTERED TRADEMARK-INDEX: Measures the performance of the 3,000
largest U.S. companies based on total
market capitalization.
EAFE-REGISTERED TRADEMARK-INDEX: Also known as the Morgan Stanley
Capital International Europe,
Australasia, Far East Index. An
unmanaged index of over 1,000 foreign
stock prices. The index is translated
into U.S. dollars and includes
reinvestment of all dividends and
capital gain distributions.
RUSSELL MIDCAP-TRADEMARK- INDEX: Measures the performance of the 800
smallest companies in the Russell
1000-Registered Trademark- Index, that
represents approximately 26% of the
total market capitalization of the
Russell 1000 Index (which in turn,
consists of the 1,000 largest US
companies, based on market
capitalization).
RUSSELL MIDCAP-TRADEMARK- GROWTH INDEX: An unmanaged index that measures the
performance of those Russell Midcap
Index companies with higher
price-to-book ratios and higher
forecasted growth values.
RUSSELL MIDCAP-TRADEMARK- VALUE INDEX: An unmanaged index that measures the
performance of those Russell Midcap-
Trademark- Index companies with lower
price-to-book ratios and lower
forecasted growth values.
</TABLE>
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of these indices
are prepared or obtained by Neuberger Berman Management Inc. and include
reinvestment of all dividends and capital gain distributions.
A-23
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Focus Assets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
FOCUS S&P 500(2)
1 YEAR +43.15% +39.82%
5 YEAR +17.39% +25.11%
10 YEAR +14.69% +17.09%
Focus Assets S&P 500
1989 $10,000 $10,000
1990 $9,627 $9,488
1991 $11,164 $12,048
1992 $12,482 $13,004
1993 $16,007 $14,980
1994 $17,665 $15,806
1995 $22,517 $19,192
1996 $23,350 $22,780
1997 $33,436 $32,057
1998 $27,509 $34,647
1999 $39,379 $48,444
</TABLE>
The performance information for Neuberger Berman Focus Assets is as of
August 31, 1999. Neuberger Berman Focus Assets started operating on
September 4, 1996. It has identical investment objectives and policies, and
invests in the same Portfolio as Neuberger Berman Focus Fund ("Sister Fund"),
which is also managed by Neuberger Berman Management Inc. ("Management"). The
performance information shown in the above chart for the period before
September 4, 1996, is for the Sister Fund. Management has agreed to bear certain
operating expenses of Focus Assets which, in the aggregate, exceed 1.50% per
annum of Focus Assets' average daily net assets, until December 31, 2008. Absent
such arrangement, the average annual total returns of Focus Assets would have
been less. The total returns for the periods prior to Focus Assets' commencement
of operations would have been lower had they reflected the higher expense ratios
of Focus Assets as compared to those of its Sister Fund.
Prior to November 1, 1991, the investment policies of the Sister Fund
required that a substantial percentage of its assets be invested in the energy
field; accordingly, performance results prior to that time do not necessarily
reflect the level of performance that may be expected under the Assets' current
investment policies. While the Assets' value-oriented approach is intended to
limit risks, the Portfolio, with its concentration in sectors, may be more
greatly affected by any single economic, political or regulatory development
than a more diversified mutual fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Focus Assets and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
B-1
<PAGE>
2. The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Management and
include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
index.
B-2
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Genesis Assets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
GENESIS RUSSELL 2000-R- INDEX(2)
1 YEAR +18.75% +28.36%
5 YEAR +15.07% +12.31%
10 YEAR +11.35% +10.97%
Genesis Assets Russell 2000
1989 $10,000 $10,000
1990 $7,847 $8,019
1991 $10,621 $10,525
1992 $11,163 $11,294
1993 $13,865 $14,967
1994 $14,526 $15,846
1995 $17,386 $19,146
1996 $21,093 $21,218
1997 $30,463 $27,362
1998 $24,678 $22,055
1999 $29,305 $28,309
</TABLE>
The performance information for Neuberger Berman Genesis Assets is as of
August 31, 1999. Neuberger Berman Genesis Assets started operating on April 2,
1997. It has identical investment objectives and policies, and invests in the
same Portfolio as Neuberger Berman Genesis Fund ("Sister Fund"), which is also
managed by Neuberger Berman Management Inc. ("Management"). The performance
information shown in the above chart for the period before April 2, 1997, is for
the Sister Fund. Management has agreed to bear certain operating expenses of
Genesis Assets which, in the aggregate, exceed 1.50% per annum of Genesis
Assets' average daily net assets, until December 31, 2008. Management previously
agreed to waive a portion of the management fee borne directly by Neuberger
Berman Genesis Portfolio and indirectly by Genesis Assets. Absent such
arrangements, the average annual total returns of Genesis Assets would have been
less. The total returns for the periods prior to Genesis Assets' commencement of
operations would have been lower had they reflected the higher expense ratios of
Genesis Assets as compared to those of its Sister Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Genesis Assets and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The Russell 2000 Index is an unmanaged index that measures the performance of
the 2,000 issuers having the smallest capitalization in the Russell
3000-Registered Trademark- Index, representing approximately 8% of the Russell
3000
B-3
<PAGE>
total market capitalization. The smallest company's market capitalization is
roughly $178 million. Please note that indices do not take into account any fees
and expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
this index are prepared or obtained by Management and include reinvestment of
all dividends and capital gain distributions. The Portfolio may invest in many
securities not included in the above-described index.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN
COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS.
B-4
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Guardian Assets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average Annual Total Return(1)
Guardian Russell 1000-registered trademark- value(2) S&P 500(2)
1 Year +25.25% +30.08% +39.82%
5 Year +12.28% +21.44% +25.11%
10 Year +12.16% +15.25% +17.09%
Guardian Assets Russell 1000 Value S&P 500
1989 $10,000 $10,000 $10,000
1990 $8,751 $8,819 $9,488
1991 $11,418 $10,897 $12,048
1992 $13,004 $11,991 $13,004
1993 $16,181 $15,212 $14,980
1994 $17,657 $15,647 $15,806
1995 $21,905 $18,648 $19,192
1996 $23,059 $21,919 $22,780
1997 $31,980 $30,585 $32,057
1998 $25,154 $31,775 $34,647
1999 $31,506 $41,333 $48,444
</TABLE>
The performance information for Neuberger Berman Guardian Assets is as of
August 31, 1999. Neuberger Berman Guardian Assets started operating on
September 4, 1996. It has identical investment objectives and policies, and
invests in the same Portfolio as Neuberger Berman Guardian Fund ("Sister Fund"),
which is also managed by Neuberger Berman Management Inc. ("Management"). The
performance information shown in the above chart for the period before
September 4, 1996, is for the Sister Fund. Management has agreed to bear certain
operating expenses of Guardian Assets which, in the aggregate, exceed 1.50% per
annum of Guardian Assets' average daily net assets, until December 31, 2008.
Absent such arrangement, the average annual total returns of Guardian Assets
would have been less. The total returns for the periods prior to Guardian
Assets' commencement of operations would have been lower had they reflected the
higher expense ratios of Guardian Assets as compared to those of its Sister
Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Guardian Assets and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The Russell 1000-Registered Trademark- Index measures the performance of the
1,000 largest companies in the Russell 3000-Registered Trademark- Index (which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization). The Russell 1000 Index represents approximately 92% of
the total market capitalization of the Russell 3000 Index. The Russell 1000
Value Index measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The S&P 500 Index is an
unmanaged index generally considered to be representative of stock market
activity. Please note that indices
B-5
<PAGE>
do not take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of these indices are prepared or obtained by
Management and include reinvestment of all dividends and capital gain
distributions. The Portfolio may invest in many securities not included in the
above-described indices.
B-6
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Manhattan Assets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
RUSSELL MIDCAP-TM-
MANHATTAN GROWTH INDEX(2) S&P 500(2)
1 YEAR +36.09% +48.83% +39.82%
5 YEAR +15.31% +19.25% +25.11%
10 YEAR +12.04% +15.22% +17.09%
Manhattan Assets Russell Midcap Growth S&P 500
1989 $10,000 $10,000 $10,000
1990 $8,754 $9,009 $9,488
1991 $11,044 $12,520 $12,048
1992 $11,568 $13,366 $13,004
1993 $14,779 $16,228 $14,980
1994 $15,295 $17,102 $15,806
1995 $19,270 $21,335 $19,192
1996 $18,710 $23,857 $22,780
1997 $25,829 $31,308 $32,057
1998 $22,913 $27,715 $34,647
1999 $31,182 $41,250 $48,444
</TABLE>
The performance information for Neuberger Berman Manhattan Assets is as of
August 31, 1999. Neuberger Berman Manhattan Assets started operating on
September 4, 1996. It has identical investment objectives and policies, and
invests in the same Portfolio as Neuberger Berman Manhattan Fund ("Sister
Fund"), which is also managed by Neuberger Berman Management Inc.
("Management"). The performance information shown in the above chart for the
period before September 4, 1996, is for the Sister Fund. Management has agreed
to bear certain operating expenses of Manhattan Assets which, in the aggregate,
exceed 1.50% per annum of Manhattan Assets' average daily net assets, until
December 31, 2008. Absent such arrangement, the average annual total returns of
Manhattan Assets would have been less. The total returns for the periods prior
to Manhattan Assets' commencement of operations would have been lower had they
reflected the higher expense ratios of Manhattan Assets as compared to those of
its Sister Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Manhattan Assets and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The Russell Midcap Growth Index measures the performance of those Russell
Midcap-Trademark- Index companies with higher price-to-book ratios and higher
forecasted growth values. The Russell Midcap Index measures the performance of
the 800 smallest companies in the Russell 1000-Registered Trademark-Index, which
represents approximately 26% of the total market capitalization of the Russell
1000 Index (which, in turn, consists of the 1,000 largest U.S. companies, based
on market capitalization). The S&P 500 Index is an unmanaged
B-7
<PAGE>
index generally considered to be representative of overall stock market
activity. Please note that indices do not take into account any fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
these indices are prepared or obtained by Management and include reinvestment of
all dividends and capital gain distributions. The Portfolio may invest in many
securities not included in the above-described indices.
B-8
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Partners Assets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average Annual Total Return(1)
Partners Russell 1000-R-Value(2) S&P 500(2)
1 Year +25.51% +30.08% +39.82%
5 Year +17.81% +21.44% +25.11%
10 Year +13.86% +15.25% +17.09%
Partners Assets Russell 1000 Value S&P 500
1989 $10,000 $10,000 $10,000
1990 $9,318 $8,819 $9,488
1991 $10,998 $10,897 $12,048
1992 $11,933 $11,991 $13,004
1993 $15,291 $15,212 $14,980
1994 $16,141 $15,647 $15,806
1995 $19,616 $18,648 $19,192
1996 $22,338 $21,919 $22,780
1997 $32,672 $30,585 $32,057
1998 $29,180 $31,775 $34,647
1999 $36,626 $41,333 $48,444
</TABLE>
The performance information for Neuberger Berman Partners Assets is as of
August 31, 1999. Neuberger Berman Partners Assets started operating on
August 19, 1996. It has identical investment objectives and policies, and
invests in the same Portfolio as Neuberger Berman Partners Fund ("Sister Fund"),
which is also managed by Neuberger Berman Management Inc. ("Management"). The
performance information shown in the above chart for the period before
August 19, 1996, is for the Sister Fund. Management has agreed to bear certain
operating expenses of Partners Assets which, in the aggregate, exceed 1.50% per
annum of Partners Assets' average daily net assets, until December 31, 2008.
Absent such arrangement, the average annual total returns of Partners Assets
would have been less. The total returns for the periods prior to Partners
Assets' commencement of operations would have been lower had they reflected the
higher expense ratios of Partners Assets as compared to those of its Sister
Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Partners Assets and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The Russell 1000-Registered Trademark- Index measures the performance of the
1,000 largest companies in the Russell 3000-Registered Trademark- Index (which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization). The Russell 1000 Index represents approximately 92% of
the total market capitalization of the Russell 3000 Index. The Russell 1000
Value Index measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The S&P 500 Index is an
unmanaged index generally considered to be representative of stock market
activity. Please note that indices
B-9
<PAGE>
do not take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of these indices are prepared or obtained by
Management and include reinvestment of all dividends and capital gain
distributions. The Portfolio may invest in many securities not included in the
above-described indices.
B-10
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Socially Responsive Assets
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
SOCIALLY RESPONSIVE ASSETS S&P 500(2)
1 YEAR +36.80% +39.82%
5 YEAR +19.16% +25.11%
LIFE OF FUND +17.55% +23.39%
Socially Responsive Assets S&P 500
3/16/94 $10,000 $10,000
8/31/94 $10,070 $10,279
1995 $11,865 $12,481
1996 $14,261 $14,814
1997 $18,818 $20,848
1998 $17,686 $22,533
1999 $24,194 $31,505
</TABLE>
The performance information for Neuberger Berman Socially Responsive Assets
is as of August 31, 1999. Neuberger Berman Socially Responsive Assets started
operating on June 9, 1999. It has identical investment objectives and policies,
and invests in the same Portfolio as Neuberger Berman Socially Responsive Fund
("Sister Fund"), which is also managed by Neuberger Berman Management Inc.
("Management"). The performance information shown in the above chart for the
period before June 9, 1999, is for the Sister Fund. Management has agreed to
bear certain operating expenses of Socially Responsive Assets which, in the
aggregate, exceed 1.50% per annum of Socially Responsive Assets' average daily
net assets, until December 31, 2001. Absent such arrangement, the average annual
total returns of Socially Responsive Assets would have been less. The total
returns for the periods prior to Socially Responsive Assets' commencement of
operations would have been lower had they reflected the higher expense ratios of
Socially Responsive Assets as compared to those of its Sister Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Socially Responsive Assets and the return
on the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
2. The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Management and
include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
index.
B-11
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS
-------------------------------
FOCUS GENESIS
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) ASSETS ASSETS
-------------------------------
<S> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 1,888 $ 81,781
Deferred organization costs (Note A) 24 31
Receivable for Trust shares sold 3 156
Receivable from administrator -- net
(Note B) 5 --
-------------------------------
1,920 81,968
-------------------------------
LIABILITIES
Payable for Trust shares redeemed -- 86
Payable to administrator -- net (Note B) -- 25
Accrued expenses 21 52
-------------------------------
21 163
-------------------------------
NET ASSETS at value $ 1,899 $ 81,805
-------------------------------
NET ASSETS consist of:
Par value $ -- $ 6
Paid-in capital in excess of par value 1,362 80,941
Accumulated undistributed net investment
income -- 19
Accumulated net realized gains (losses) on
investment 195 (1,608)
Net unrealized appreciation (depreciation)
in value of investment 342 2,447
-------------------------------
NET ASSETS at value $ 1,899 $ 81,805
-------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 117 6,473
-------------------------------
NET ASSET VALUE, offering and redemption price per
share $16.18 $12.64
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-12
<PAGE>
August 31, 1999
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY SERIES
EQUITY ASSETS --------------
------------------------------------------------ SOCIALLY
GUARDIAN MANHATTAN PARTNERS RESPONSIVE
ASSETS ASSETS ASSETS ASSETS
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 24,856 $ 1,717 $ 62,399 $ 117
Deferred organization costs (Note A) 23 23 23 --
Receivable for Trust shares sold 12 -- 71 --
Receivable from administrator -- net
(Note B) -- 3 -- 14
-----------------------------------------------------------------
24,891 1,743 62,493 131
-----------------------------------------------------------------
LIABILITIES
Payable for Trust shares redeemed -- -- -- --
Payable to administrator -- net (Note B) 35 -- 35 --
Accrued expenses 27 26 26 22
-----------------------------------------------------------------
62 26 61 22
-----------------------------------------------------------------
NET ASSETS at value $ 24,829 $ 1,717 $ 62,432 $ 109
-----------------------------------------------------------------
NET ASSETS consist of:
Par value $ 2 $ -- $ 4 $ --
Paid-in capital in excess of par value 23,900 1,653 55,230 111
Accumulated undistributed net investment
income 6 -- 9 --
Accumulated net realized gains (losses) on
investment 225 (7) 3,288 (1)
Net unrealized appreciation (depreciation)
in value of investment 696 71 3,901 (1)
-----------------------------------------------------------------
NET ASSETS at value $ 24,829 $ 1,717 $ 62,432 $ 109
-----------------------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 1,834 118 3,967 11
-----------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per
share $13.54 $14.54 $15.74 $9.85
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-13
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS
---------------------------
FOCUS GENESIS
ASSETS ASSETS
For the For the
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1999 1999
---------------------------
<S> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 14 $ 956
---------------------------
Expenses:
Administration fee (Note B) 6 230
Amortization of deferred organization and
initial offering expenses (Note A) 12 12
Auditing fees 5 5
Custodian fees 10 10
Distribution fees (Note B) 3 141
Legal fees 10 11
Registration and filing fees 23 41
Shareholder reports 14 36
Shareholder servicing agent fees 17 17
Trustees' fees and expenses -- 1
Miscellaneous 1 2
Expenses from corresponding Portfolio
(Notes A & B) 8 430
---------------------------
Total expenses 109 936
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (86) (73)
---------------------------
Total net expenses 23 863
---------------------------
Net investment income (loss) (9) 93
---------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities 216 (1,746)
Net realized gain on option contracts -- --
Net realized gain on financial futures
contracts -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts 435 8,646
---------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) 651 6,900
---------------------------
Net increase (decrease) in net assets
resulting from operations $ 642 $ 6,993
---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-14
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS EQUITY SERIES
------------------------------------------------ --------------
SOCIALLY
RESPONSIVE
ASSETS
GUARDIAN MANHATTAN PARTNERS For the
ASSETS ASSETS ASSETS Period from
June 9, 1999
For the For the For the (Commencement
Year Year Year of Operations)
Ended Ended Ended to
August 31, August 31, August 31, August 31,
1999 1999 1999 1999
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 365 $ 3 $ 1,042 $ --
-----------------------------------------------------------------
Expenses:
Administration fee (Note B) 95 2 243 --
Amortization of deferred organization and
initial offering expenses (Note A) 12 12 12 --
Auditing fees 5 7 5 4
Custodian fees 10 10 10 2
Distribution fees (Note B) 60 1 151 --
Legal fees 11 10 10 55
Registration and filing fees 29 22 36 46
Shareholder reports 22 19 21 20
Shareholder servicing agent fees 16 17 17 --
Trustees' fees and expenses -- -- 1 --
Miscellaneous 2 1 2 --
Expenses from corresponding Portfolio
(Notes A & B) 110 3 285 --
-----------------------------------------------------------------
Total expenses 372 104 793 127
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (13) (96) -- (127)
-----------------------------------------------------------------
Total net expenses 359 8 793 --
-----------------------------------------------------------------
Net investment income (loss) 6 (5) 249 --
-----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities (685) (16) 3,694 (1)
Net realized gain on option contracts 32 -- -- --
Net realized gain on financial futures
contracts 489 -- -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts 4,816 99 8,416 (1)
-----------------------------------------------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) 4,652 83 12,110 (2)
-----------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 4,658 $ 78 $ 12,359 $ (2)
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS
FOCUS GENESIS
ASSETS ASSETS
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (9) $ (1) $ 93 $ 49
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 216 (13) (1,746) (133)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 435 (132) 8,646 (6,253)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 642 (146) 6,993 (6,337)
-------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (113) --
Net realized gain on investments (1) (6) -- (3)
-------------------------------------------------------------
Total distributions to shareholders (1) (6) (113) (3)
-------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial
capitalization of the Fund
(Note A) -- -- -- --
Proceeds from shares sold to the
public 2,252 551 69,021 33,602
Proceeds from reinvestment of
dividends and distributions 1 6 58 3
Payments for shares redeemed (1,471) (72) (18,620) (3,529)
-------------------------------------------------------------
Net increase from Trust share
transactions 782 485 50,459 30,076
-------------------------------------------------------------
NET INCREASE IN NET ASSETS 1,423 333 57,339 23,736
NET ASSETS:
Beginning of year 476 143 24,466 730
-------------------------------------------------------------
End of year $ 1,899 $ 476 $ 81,805 $ 24,466
-------------------------------------------------------------
Accumulated undistributed net
investment income at end of year $ -- $ -- $ 19 $ 48
-------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of
the Fund (Note A) -- -- -- --
Sold to the public 176 37 5,696 2,503
Issued on reinvestment of dividends
and distributions -- -- 5 --
Redeemed (101) (5) (1,521) (265)
-------------------------------------------------------------
Net increase in shares outstanding 75 32 4,180 2,238
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-16
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS
GUARDIAN MANHATTAN PARTNERS
ASSETS ASSETS ASSETS
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1999 1998 1999 1998 1999 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 6 $ (27) $ (5) $ (2) $ 249 $ 24
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) (164) (322) (16) 2 3,694 (705)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 4,816 (4,845) 99 (46) 8,416 (4,836)
----------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 4,658 (5,194) 78 (46) 12,359 (5,517)
----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- (257) (8)
Net realized gain on investments -- (133) (1) (23) -- (250)
----------------------------------------------------------------------------------------
Total distributions to shareholders -- (133) (1) (23) (257) (258)
----------------------------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial
capitalization of the Fund
(Note A) -- -- -- -- -- --
Proceeds from shares sold to the
public 5,961 14,285 1,649 143 41,194 31,554
Proceeds from reinvestment of
dividends and distributions -- 134 1 23 238 258
Payments for shares redeemed (3,339) (850) (218) (28) (20,381) (2,577)
----------------------------------------------------------------------------------------
Net increase from Trust share
transactions 2,622 13,569 1,432 138 21,051 29,235
----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 7,280 8,242 1,509 69 33,153 23,460
NET ASSETS:
Beginning of year 17,549 9,307 208 139 29,279 5,819
----------------------------------------------------------------------------------------
End of year $ 24,829 $ 17,549 $ 1,717 $ 208 $ 62,432 $ 29,279
----------------------------------------------------------------------------------------
Accumulated undistributed net
investment income at end of year $ 6 $ -- $ -- $ -- $ 9 $ 17
----------------------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of
the Fund (Note A) -- -- -- -- -- --
Sold to the public 452 1,004 114 9 2,928 2,072
Issued on reinvestment of dividends
and distributions -- 10 -- 2 15 18
Redeemed (241) (61) (15) (2) (1,301) (169)
----------------------------------------------------------------------------------------
Net increase in shares outstanding 211 953 99 9 1,642 1,921
----------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
Neuberger Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY SERIES
SOCIALLY
RESPONSIVE
ASSETS
Period from
June 9, 1999
(Commencement
of
Operations)
to
August 31,
(000'S OMITTED) 1999
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ --
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) (1)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) (1)
-------------
Net increase (decrease) in net
assets resulting from operations (2)
-------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gain on investments --
-------------
Total distributions to shareholders --
-------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial
capitalization of the Fund
(Note A) 100
Proceeds from shares sold to the
public 11
Proceeds from reinvestment of
dividends and distributions --
Payments for shares redeemed --
-------------
Net increase from Trust share
transactions 111
-------------
NET INCREASE IN NET ASSETS 109
NET ASSETS:
Beginning of year --
-------------
End of year $ 109
-------------
Accumulated undistributed net
investment income at end of year $ --
-------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of
the Fund (Note A) 10
Sold to the public 1
Issued on reinvestment of dividends
and distributions --
Redeemed --
-------------
Net increase in shares outstanding 11
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Equity Assets and Equity Series
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Assets ("Focus" ), Neuberger Berman Genesis
Assets ("Genesis"), Neuberger Berman Guardian Assets ("Guardian"), Neuberger
Berman Manhattan Assets ("Manhattan"), and Neuberger Berman Partners Assets
("Partners") are separate operating series of Neuberger Berman Equity Assets
("Equity Assets"), a Delaware business trust organized pursuant to a Trust
Instrument dated October 18, 1993. Neuberger Berman Socially Responsive
Assets ("Socially Responsive") is a separate operating series of Neuberger
Berman Equity Series ("Equity Series"), a Delaware business trust organized
pursuant to a Trust Instrument dated September 22, 1998. These six
aforementioned series are collectively referred to as the "Funds." Equity
Assets and Equity Series (collectively, the "Trusts") are registered as
diversified, open-end management investment companies under the Investment
Company Act of 1940, as amended (the "1940 Act"), and their shares are
registered under the Securities Act of 1933, as amended (the "1933 Act").
Socially Responsive had no operations until June 9, 1999, other than matters
relating to its organization and registration as a diversified, open-end
management investment company under the 1940 Act and registration of its
shares under the 1933 Act, and the sale and issuance of 10,000 shares to
Neuberger Berman Management Inc. ("Management") on December 24, 1998. The
trustees of the Trusts may establish additional series or classes of shares
without the approval of shareholders.
The assets of each Fund belong only to that Fund, and the liabilities of
each Fund are borne solely by that Fund and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding portfolio of Equity Managers
Trust (each a "Portfolio") having the same investment objective and policies
as the Fund. The value of each Fund's investment in its corresponding
Portfolio reflects that Fund's proportionate interest in the net assets of
that Portfolio (0.13%, 4.67%, 0.53%, 0.28%, 1.66%, and 0.03%, for Focus,
Genesis, Guardian, Manhattan, Partners, and Socially Responsive,
respectively, at August 31, 1999). 63.74% of Neuberger Berman Socially
Responsive Portfolio is held by another regulated investment company, which
has decided to redeem its interest in the Portfolio subsequent to August 31,
1999. Management is endeavoring to carry out this transaction in a way that
would minimize the effect on the Portfolio. The performance of each Fund is
directly affected by the performance of its corresponding Portfolio. The
B-19
<PAGE>
financial statements of each Portfolio, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the corresponding Fund's financial statements.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
as indicated in the notes following the Portfolios' Schedule of Investments.
3) TAXES: The Funds are treated as separate entities for U.S. Federal income tax
purposes. It is the policy of Focus, Genesis, Guardian, Manhattan, and
Partners to continue to and the intention of Socially Responsive to qualify
as regulated investment companies by complying with the provisions available
to certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of investment company
taxable income and net capital gains (after reduction for any amounts
available for U.S. Federal income tax purposes as capital loss carryforwards)
sufficient to relieve it from all, or substantially all, U.S. Federal income
taxes. Accordingly, each Fund paid no U.S. Federal income taxes and no
provision for U.S. Federal income taxes was required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net of
Portfolio expenses, daily on its investment in its corresponding Portfolio.
Income dividends and distributions from net realized capital gains, if any,
are normally distributed in December. Guardian generally distributes
substantially all of its net investment income, if any, at the end of each
calendar quarter. Income dividends and capital gain distributions to
shareholders are recorded on the ex-dividend date. To the extent each Fund's
net realized capital gains, if any, can be offset by capital loss
carryforwards ($25,405 and $240 expiring in 2007 for Genesis and Socially
Responsive, respectively, determined as of August 31, 1999), it is the policy
of each Fund not to distribute such gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) ORGANIZATION EXPENSES: Expenses incurred by Focus, Genesis, Guardian,
Manhattan, and Partners in connection with their organization are being
amortized by such Fund on a straight-line basis over a five-year period. At
August 31, 1999, the unamortized balance of such expenses amounted to
$23,502, $31,458, $23,501, $23,446, and $22,658, for Focus, Genesis,
Guardian, Manhattan, and Partners, respectively.
B-20
<PAGE>
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trusts with respect to any two or more funds are allocated in
proportion to the net assets of such funds, except where a more appropriate
allocation of expenses to each fund can otherwise be made fairly. Expenses
directly attributable to a fund are charged to that fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Management as its administrator under an Administration
Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an
administration fee at the annual rate of 0.40% of that Fund's average daily net
assets. Each Fund indirectly pays for investment management services through its
investment in its corresponding Portfolio (see Note B of Notes to Financial
Statements of the Portfolios).
Management acts as agent in arranging for the sale of Fund shares without
commission and bears advertising and promotion expenses. The trustees of the
Trusts have adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"). The Plan provides that, as compensation for administrative and other
services provided to the Funds, Management's activities and expenses related to
the sale and distribution of Fund shares, and ongoing services provided to
investors in the Funds, Management receives from each Fund a fee at the annual
rate of 0.25% of that Fund's average daily net assets. Management pays this
amount to institutions that distribute Fund shares and provide services to the
Funds and their shareholders. Those institutions may use the payments for, among
other purposes, compensating employees engaged in sales and/or shareholder
servicing. The amount of fees paid by each Fund during any year may be more or
less than the cost of distribution and other services provided to that Fund.
NASD rules limit the amount of annual distribution fees that may be paid by a
mutual fund and impose a ceiling on the cumulative distribution fees paid. The
Trusts' Plan complies with those rules.
Management has undertaken to reimburse Focus, Genesis, Guardian, Manhattan,
and Partners until December 31, 2008, and Socially Responsive until December 31,
2001, for their operating expenses plus their pro rata portion of their
corresponding Portfolio's operating expenses (including the fees payable to
Management but excluding interest, taxes, brokerage commissions, and
extraordinary expenses) ("Operating Expenses") which exceed, in the aggregate,
1.50% per annum of each Fund's average daily net assets (each an "Expense
Limitation"). For the year ended August 31, 1999, such excess expenses amounted
to $85,679, $73,117, $13,221, $96,084, and $127,061, for Focus, Genesis,
Guardian, Manhattan, and Socially Responsive, respectively. For the year ended
August 31, 1999, there was no reimbursement of expenses
B-21
<PAGE>
by Management to Partners. Socially Responsive has agreed to repay Management
through December 31, 2004, for its excess Operating Expenses previously
reimbursed by Management, so long as its annual Operating Expenses during that
period do not exceed its Expense Limitation, and the repayments are made within
three years after the year in which Management issued the reimbursement. For the
period ended August 31, 1999, Socially Responsive has not reimbursed Management.
Since inception of Socially Responsive, Management has voluntarily undertaken
to pay certain expenses of the Fund as an advance. These expenses will be repaid
by the Fund to Management in the future.
As of August 31, 1999, all of the capital stock of Management is owned by
individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a
member firm of The New York Stock Exchange and sub-adviser to each Portfolio.
Several individuals who are officers and/or trustees of the Trust are also
principals of Neuberger and/or officers and/or directors of Management.
Each Fund also has a distribution agreement with Management. Management
receives no commissions for sales or redemptions of shares of beneficial
interest of each Fund, but receives fees under the Plan, as described above.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between each Portfolio and Morgan Stanley & Co. Incorporated
("Morgan"), Morgan had agreed to reimburse each Portfolio for transaction costs
incurred on security lending transactions charged by the custodian through May
31, 1999. The impact of these arrangements, respectively, reflected in the
Statements of Operations under the caption Expenses from corresponding
Portfolio, was a reduction of $1.13 and $2.26, $21.83 and $146.55, $11.00 and
$7.48, $0.82 and $3.80, $43.59 and $33.13, and $.01 and $.00, for Focus,
Genesis, Guardian, Manhattan, Partners, and Socially Responsive, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended August 31, 1999, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- -------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 2,202,000 $ 1,457,000
GENESIS 52,720,000 2,734,000
GUARDIAN 5,601,000 3,199,000
MANHATTAN 1,613,000 204,000
PARTNERS 35,025,000 14,589,000
SOCIALLY RESPONSIVE 119,000 1,000
</TABLE>
B-22
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Assets(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
September 4, 1996(2) to
Year Ended August 31, August 31,
1999 1998 1997
<S> <C> <C> <C>
-------------------------------------------------------
Net Asset Value, Beginning of Year $11.31 $14.34 $10.00
-------------------------------------------------------
Income From Investment Operations
Net Investment Loss (.08) (.03) (.05)
Net Gains or Losses on Securities (both realized and
unrealized) 4.96 (2.42) 4.39
-------------------------------------------------------
Total From Investment Operations 4.88 (2.45) 4.34
-------------------------------------------------------
Less Distributions
Distributions (from net capital gains) (.01) (.58) --
-------------------------------------------------------
Net Asset Value, End of Year $16.18 $11.31 $14.34
-------------------------------------------------------
Total Return(3) +43.15% -17.73% +43.40%(4)
-------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 1.9 $ 0.5 $ 0.1
-------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50%(6)
-------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50%(6)
-------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (.58%) (.36%) (.43%)(6)
-------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-23
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Assets(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
April 2, 1997(2) to
Year Ended August 31, August 31,
1999 1998 1997
<S> <C> <C> <C>
---------------------------------------------------
Net Asset Value, Beginning of Year $10.67 $13.21 $10.00
---------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) .01 .02 (.01)
Net Gains or Losses on Securities (both realized and
unrealized) 1.99 (2.52) 3.22
---------------------------------------------------
Total From Investment Operations 2.00 (2.50) 3.21
---------------------------------------------------
Less Distributions
Dividends (from net investment income) (.03) -- --
Distributions (from net capital gains) -- (.04) --
---------------------------------------------------
Total Distributions (.03) (.04) --
---------------------------------------------------
Net Asset Value, End of Year $12.64 $10.67 $13.21
---------------------------------------------------
Total Return(3) +18.75% -18.99% +32.10%(4)
---------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 81.8 $ 24.5 $ 0.7
---------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50%(6)
---------------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50%(6)
---------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net
Assets .16% .60% (.36%)(6)
---------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-24
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Assets(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
September 4, 1996(2) to
Year Ended August 31, August 31,
1999 1998 1997
<S> <C> <C> <C>
-------------------------------------------------------
Net Asset Value, Beginning of Year $10.81 $13.88 $10.00
-------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) -- (.02) .01
Net Gains or Losses on Securities (both realized and
unrealized) 2.73 (2.92) 3.88
-------------------------------------------------------
Total From Investment Operations 2.73 (2.94) 3.89
-------------------------------------------------------
Less Distributions
Dividends (from net investment income) -- -- (.01)
Distributions (from net capital gains) -- (.13) --
-------------------------------------------------------
Total Distributions -- (.13) (.01)
-------------------------------------------------------
Net Asset Value, End of Year $13.54 $10.81 $13.88
-------------------------------------------------------
Total Return(3) +25.25% -21.34% +38.92%(4)
-------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 24.8 $ 17.5 $ 9.3
-------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50%(6)
-------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50%(6)
-------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net
Assets .03% (.16%) (.12%)(6)
-------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-25
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Assets(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
September 4, 1996(2) to
Year Ended August 31, August 31,
1999 1998 1997
<S> <C> <C> <C>
-------------------------------------------------------
Net Asset Value, Beginning of Year $10.76 $13.75 $10.00
-------------------------------------------------------
Income From Investment Operations
Net Investment Loss (.04) (.11) (.08)
Net Gains or Losses on Securities (both realized and
unrealized) 3.92 (1.22) 3.94
-------------------------------------------------------
Total From Investment Operations 3.88 (1.33) 3.86
-------------------------------------------------------
Less Distributions
Distributions (from net capital gains) (.10) (1.66) (.11)
-------------------------------------------------------
Net Asset Value, End of Year $14.54 $10.76 $13.75
-------------------------------------------------------
Total Return(3) +36.09% -11.29% +38.86%(4)
-------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 1.7 $ 0.2 $ 0.1
-------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.50% 1.50% 1.50%(6)
-------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.50% 1.50% 1.50%(6)
-------------------------------------------------------
Ratio of Net Investment Loss to Average Net Assets (1.00%) (.98%) (.70%)(6)
-------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-26
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Assets(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 19, 1996(2) to
Year Ended August 31, August 31,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
----------------------------------------------------------------------
Net Asset Value, Beginning of Year $12.59 $14.42 $ 9.91 $10.00
----------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .06 .01 .01 --
Net Gains or Losses on Securities (both realized and
unrealized) 3.15 (1.51) 4.56 (.09)
----------------------------------------------------------------------
Total From Investment Operations 3.21 (1.50) 4.57 (.09)
----------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.06) (.01) (.01) --
Distributions (from net capital gains) -- (.32) (.05) --
----------------------------------------------------------------------
Total Distributions (.06) (.33) (.06) --
----------------------------------------------------------------------
Net Asset Value, End of Year $15.74 $12.59 $14.42 $ 9.91
----------------------------------------------------------------------
Total Return(3) +25.51% -10.69% +46.26% -0.90%(4)
----------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 62.4 $ 29.3 $ 5.8 $ 0.1
----------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.31% 1.50% 1.50% 1.50%(6)
----------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets 1.31% 1.50%(7) 1.50%(7) 1.50%(6)(7)
----------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets .41% .12% .08% 2.38%(6)
----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-27
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Assets(1)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
June 9, 1999(2) to
August 31,
1999
<S> <C>
------------------
Net Asset Value, Beginning of Period $10.00
------------------
Income From Investment Operations
Net Investment Loss (.01)
Net Gains or Losses on Securities (both realized and
unrealized) (.14)
------------------
Total From Investment Operations (.15)
------------------
Net Asset Value, End of Period $ 9.85
------------------
Total Return(3)(4) -1.50%
------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 0.1
------------------
Ratio of Gross Expenses to Average Net Assets(5)(6) 1.50%
------------------
Ratio of Net Expenses to Average Net Assets(6)(7) 1.50%
------------------
Ratio of Net Investment Loss to Average Net Assets(6) (.56%)
------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-28
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Equity Assets and Equity Series
1) The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
income and expenses.
2) The date investment operations commenced.
3) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return would
have been lower if Management had not reimbursed certain expenses. In
addition, for Genesis, total return would have been lower if the investment
manager had not waived a portion of the management fee.
4) Not annualized.
5) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
6) Annualized.
7) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
Period from
September 4, 1996 to
Year Ended August 31, August 31,
FOCUS 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 7.08% 28.01% 76.74%
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
September 4, 1996 to
Year Ended August 31, August 31,
GUARDIAN 1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.56% 1.63% 5.65%
------------------------------------------------------
</TABLE>
B-29
<PAGE>
<TABLE>
<CAPTION>
Period from
September 4, 1996 to
Year Ended August 31, August 31,
MANHATTAN 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 19.99% 42.53% 77.83%
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
August 19, 1996 to
Year Ended August 31, August 31,
PARTNERS 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.56% 8.74% 11,685.89%
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
June 9, 1999 to
August 31,
SOCIALLY RESPONSIVE 1999
- ------------------------------------------------------------------------------------------
<S> <C>
Net Expenses 507.01%
------------------------
</TABLE>
After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements and/or the waiver of a portion of the management fee by
the investment manager as described in Note B of Notes to Financial Statements
of Neuberger Berman Genesis Portfolio. Had Management not undertaken such action
the annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
Period from
April 2, 1997 to
Year Ended August 31, August 31,
GENESIS 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.63% 2.40% 25.91%
------------------------------------------------------
</TABLE>
B-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Trustees of Neuberger Berman Equity Assets and
Neuberger Berman Equity Series and Shareholders of
Neuberger Berman Manhattan Assets and
Neuberger Berman Socially Responsive Assets
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Neuberger Berman Manhattan Assets and Neuberger Berman Socially Responsive
Assets (collectively, the "Funds") at August 31, 1999, and the results of their
operations, the changes in their net assets, and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 1999
B-31
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger Berman Equity Assets and
Shareholders of:
Neuberger Berman Focus Assets
Neuberger Berman Genesis Assets
Neuberger Berman Guardian Assets and
Neuberger Berman Partners Assets
We have audited the accompanying statements of assets and liabilities of the
Neuberger Berman Focus Assets, Neuberger Berman Genesis Assets, Neuberger Berman
Guardian Assets, and Neuberger Berman Partners Assets, four of the series
constituting the Neuberger Berman Equity Assets (the "Trust"), as of August 31,
1999, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of the Neuberger Berman Equity Assets at August
31, 1999, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and
their financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 1, 1999
B-32
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Citigroup Inc. 9.1%
2. Chase Manhattan 7.3%
3. Capital One Financial 6.8%
4. Morgan Stanley Dean Witter 5.7%
5. Compuware Corp. 5.1%
6. Countrywide Credit Industries 4.9%
7. Wellpoint Health Networks 4.9%
8. BankBoston Corp. 3.3%
9. Rational Software 3.1%
10. Atmel Corp. 3.1%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (96.6%)
AUTOMOTIVE (3.0%)
705,000 General Motors $ 46,618
----------
FINANCIAL SERVICES (47.1%)
833,000 Bank One 33,424
1,090,000 BankBoston Corp. 50,617
2,767,500 Capital One Financial 104,473
1,355,000 Chase Manhattan 113,397
3,183,375 Citigroup Inc. 141,461
2,381,000 Countrywide Credit Industries 76,490
560,000 Hartford Financial Services Group 25,445
1,025,000 Morgan Stanley Dean Witter 87,958
568,700 Nationwide Financial Services 20,758
390,000 Providian Financial 30,274
1,243,000 Travelers Property Casualty 44,126
----------
728,423
----------
HEALTH CARE (6.4%)
1,865,990 Foundation Health Systems $ 23,791(2)
1,040,000 Wellpoint Health Networks 75,790(2)
----------
99,581
----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
RETAIL (10.8%)
1,800,000 Furniture Brands International 36,113(2)
1,638,400 Jones Apparel Group 42,496(2)
1,048,700 Kmart Corp. 13,174(2)
345,000 Payless ShoeSource 17,207(2)
995,000 Promus Hotel 28,917(2)
1,525,000 Sterling Commerce 29,166(2)
----------
167,073
----------
TECHNOLOGY (29.3%)
1,380,000 3Com Corp. 34,241(2)
1,200,000 Atmel Corp. 47,175(2)
504,000 Autodesk, Inc. 11,592
657,000 BMC Software 35,355(2)
1,185,000 Compaq Computer 27,477(3)
2,594,800 Compuware Corp. 78,331(2)
175,000 Lattice Semiconductor 10,784(2)
605,000 Microchip Technology 33,124(2)
1,150,000 Oracle Corp. 41,975(2)
1,302,500 Photronics, Inc. 31,097(2)(4)
1,795,000 Rational Software 48,577(2)
495,000 Tech Data 18,346(2)
420,000 Texas Instruments 34,466
----------
452,540
----------
TOTAL COMMON STOCKS (COST $987,085) 1,494,235
----------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ----------
<C> <S> <C>
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Focus Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.5%)
$22,890,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $22,893,338, Collateralized by
$22,645,000 U.S. Treasury Bonds, 8.25%,
due 5/15/05 (Collateral Value
$23,579,106) (COST $22,890) $ 22,890(5)
----------
SHORT-TERM INVESTMENTS (0.5%)
7,114,402 N&B Securities Lending Quality Fund, LLC
(COST $7,114) 7,114(5)
----------
TOTAL INVESTMENTS (98.6%) (COST
$1,017,089) 1,524,239(6)
Cash, receivables and other assets, less
liabilities (1.4%) 22,159
----------
TOTAL NET ASSETS (100.0%) $1,546,398
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-2
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Alliant Techsystems 2.8%
2. Dallas Semiconductor 2.7%
3. Newport News Shipbuilding 2.4%
4. Zebra Technologies 2.2%
5. AAR Corp. 2.2%
6. AptarGroup Inc. 2.1%
7. Trigon Healthcare 2.0%
8. Webster Financial 1.8%
9. United Stationers 1.7%
10. Cordant Technologies 1.6%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (96.5%)
AEROSPACE (6.7%)
1,771,350 AAR Corp. $ 37,863(4)
1,219,500 Aviall Inc. 13,567(2)(4)
658,700 Cordant Technologies 27,254
478,300 DONCASTERS PLC ADR 6,636(2)(4)
299,850 Ducommun Inc. 3,598(2)
205,400 Howmet International 3,672(2)
425,000 Ladish Co. 2,975(2)
344,700 Moog, Inc. Class A 11,289(2)
471,500 Orbital Sciences 10,461(2)
----------
117,315
----------
AUTOMOTIVE (0.7%)
607,200 Donaldson Co. 11,916
----------
BANKING & FINANCIAL (7.2%)
534,200 Bank United 18,330
573,100 Community First Bankshares 11,766
667,600 Cullen/Frost Bankers 17,441
331,400 Highland Bancorp 6,172(4)
291,000 Ocean Financial $ 5,202
1,008,300 Peoples Heritage Financial Group 16,952
116,212 Queens County Bancorp 3,196
726,675 Sterling Bancshares 8,720
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
300,350 Texas Regional Bancshares 7,678
1,163,400 Webster Financial 31,339
----------
126,796
----------
BASIC MATERIALS (0.5%)
230,200 Lone Star Industries 7,913
----------
BUILDING, CONSTRUCTION & FURNISHING (1.1%)
294,800 Lincoln Electric Holdings 5,970
273,600 Simpson Manufacturing 14,090(2)
----------
20,060
----------
BUSINESS SERVICES (3.0%)
1,075,600 Davox Corp. 14,991(2)(4)
343,500 Fair, Isaac & Co. 9,704
418,300 Navigant Consulting 18,353(2)
209,000 Valassis Communications 9,144(2)
----------
52,192
----------
CONSUMER CYCLICALS (0.4%)
417,600 Coachmen Industries 6,603
----------
CONSUMER PRODUCTS & SERVICES (5.7%)
801,000 Alberto-Culver Class A 17,272
530,637 Block Drug 21,325
101,800 Bush Boake Allen 2,653(2)
521,300 Church & Dwight 24,241
349,800 Matthews International 9,488
1,086,800 Ruddick Corp. 20,174
462,000 The First Years 4,995
----------
100,148
----------
DEFENSE (6.1%)
663,200 Alliant Techsystems $ 48,414(2)(4)
1,309,100 Newport News Shipbuilding 41,155
800,400 Primex Technologies 16,708(4)
----------
106,277
----------
DIAGNOSTIC EQUIPMENT (0.3%)
906,500 ADAC Laboratories 5,326
----------
ELECTRONICS (4.9%)
456,900 Benchmark Electronics 16,820(2)
951,900 Dallas Semiconductor 48,071
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
289,800 Etec Systems 12,751(2)
172,100 SCI Systems 8,573(2)
----------
86,215
----------
ENERGY (1.8%)
692,300 Cabot Oil & Gas 13,197
150,000 Cross Timbers Oil 1,856
808,290 Swift Energy 10,205(2)
875,800 Unit Corp. 6,733(2)
----------
31,991
----------
HEALTH CARE (9.8%)
977,800 Acuson Corp. 15,400(2)
174,600 Arrow International 5,063
275,400 CONMED Corp. 7,711(2)
709,000 DENTSPLY International 17,592
1,207,900 Haemonetics Corp. 23,630(2)
885,300 Mentor Corp. 20,694
389,950 Patterson Dental 15,988(2)
275,000 Respironics, Inc. 2,733(2)
503,700 STAAR Surgical 5,981(2)
940,700 Trigon Healthcare 34,159(2)
679,600 Universal Health Services Class B 22,682(2)
----------
171,633
----------
INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (7.2%)
356,300 BMC Industries $ 4,387
474,900 Brady Corp. 14,247
282,000 Dionex Corp. 11,227(2)
1,261,300 Hussmann International 21,442
369,700 IDEX Corp. 10,929
770,200 Kaydon Corp. 23,636
183,100 Roper Industries 6,557
814,400 SOS Staffing Services 4,835(2)(4)
1,247,400 Wallace Computer Services 26,663
203,750 Woodhead Industries 2,248
----------
126,171
----------
INSURANCE (3.5%)
910,200 Annuity and Life Re 20,138
660,800 FBL Financial Group 13,092
857,900 Scottish Annuity & Life Holdings 8,365
858,700 W. R. Berkley 19,535
----------
61,130
----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
LODGING (0.5%)
846,000 Prime Hospitality 7,878
----------
MACHINERY & EQUIPMENT (0.8%)
686,600 Gardner Denver Machinery 13,174(2)
----------
OFFICE EQUIPMENT (1.7%)
1,350,900 United Stationers 30,564(2)
----------
OIL SERVICES (9.5%)
390,700 Cal Dive International 14,700(2)
748,600 Friede Goldman International 9,170(2)
1,018,800 Global Industries 11,398(2)
938,100 IRI International 4,397(2)
619,500 Nabors Industries 16,843(2)
1,538,712 National-Oilwell 26,158(2)
793,400 Oceaneering International 15,918(2)
781,600 Offshore Logistics $ 9,135(2)
777,300 Pride International 11,562(2)
579,400 Smith International 27,051(2)
636,000 Tuboscope Inc. 9,262(2)
513,200 UTI Energy 10,264(2)
----------
165,858
----------
PACKING & CONTAINERS (2.1%)
1,450,100 AptarGroup Inc. 37,340
----------
PUBLISHING & BROADCASTING (2.2%)
155,239 Hearst-Argyle Television 3,929(2)
329,300 Houghton Mifflin 15,724
467,100 Meredith Corp. 16,203
78,866 Pulitzer Inc. 3,455
----------
39,311
----------
RESTAURANTS (1.2%)
890,050 Brinker International 21,361(2)
----------
RETAILING (2.7%)
527,968 99 Cents Only Stores 19,007(2)
471,600 Claire's Stores 8,872
340,000 ShopKo Stores 9,732(2)
273,800 Whole Foods Market 9,840(2)
----------
47,451
----------
TECHNOLOGY (8.0%)
798,700 Analysts International 10,683
242,000 Black Box 11,102(2)
</TABLE>
C-4
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
543,600 CACI International 12,231(2)
2,201,600 Inprise Corp. 9,288(2)
322,400 Jack Henry & Associates 10,478
250,000 Keane, Inc. 5,422(2)
1,507,500 Methode Electronics Class A $ 27,135
1,009,900 Wind River Systems 16,095(2)
812,500 Zebra Technologies 38,187(2)
----------
140,621
----------
TRANSPORTATION, SHIPPING & FREIGHT (0.7%)
232,900 Air Express International 5,692
190,900 Circle International Group 4,725
213,600 Maritrans Inc. 1,081
----------
11,498
----------
UTILITIES, ELECTRIC & GAS (8.2%)
834,700 AGL Resources 15,077
326,000 Atmos Energy 8,170
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
282,500 Central Hudson Gas & Electric 11,936
190,200 Connecticut Energy 7,109
144,300 Eastern Enterprises 6,484
855,200 Montana Power 26,458
173,000 National Fuel Gas 8,142
180,300 NICOR Inc. 6,975
345,900 NUI Corp. 8,864
283,100 ONEOK, Inc. 8,794
213,500 Otter Tail Power 8,500
766,784 Sierra Pacific Resources 18,690
290,000 Washington Gas Light 7,739
----------
142,938
----------
TOTAL COMMON STOCKS (COST $1,548,759) 1,689,680
----------
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.5%)
$26,740,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $26,743,900, Collateralized by
$27,405,000 U.S. Treasury Notes,
5.875%, due 2/15/00 (Collateral Value
$27,543,505) (COST $26,740) $ 26,740(5)
----------
SHORT-TERM INVESTMENTS (3.6%)
10,000,000 American Express Credit Corp., 5.13%,
due 9/3/99 9,997
10,000,000 General Electric Capital Corp., 5.23%,
due 9/8/99 9,990
42,524,723 N&B Securities Lending Quality Fund, LLC 42,525
----------
TOTAL SHORT-TERM INVESTMENTS (COST
$62,512) 62,512(5)
----------
TOTAL INVESTMENTS (101.6%) (COST
$1,638,011) 1,778,932(6)
Liabilities, less cash, receivables and
other assets [(1.6%)] (27,828)
----------
TOTAL NET ASSETS (100.0%) $1,751,104
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-6
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Wellpoint Health Networks 4.0%
2. MCI WorldCom 3.1%
3. Aetna Inc. 3.0%
4. Chase Manhattan 2.8%
5. Capital One Financial 2.8%
6. Wells Fargo 2.7%
7. Conseco, Inc. 2.6%
8. IBM 2.2%
9. Xerox Corp. 2.1%
10. Kimberly-Clark 2.1%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (86.0%)
BANKING & FINANCIAL (7.9%)
792,400 Bank of America $ 47,940
1,400,800 BankBoston Corp. 65,049
1,576,100 Chase Manhattan 131,900
3,174,500 Wells Fargo 126,385
----------
371,274
----------
BASIC MATERIALS (3.5%)
2,996,000 Cabot Corp. 69,095
367,500 International Paper 17,295
1,340,200 Lyondell Chemical 19,517
2,603,600 Millennium Chemicals 59,883
----------
165,790
----------
CAPITAL GOODS (2.8%)
425,700 Emerson Electric 26,659
4,176,800 Republic Services 45,423(2)
1,227,900 SCI Systems 61,165(2)
----------
133,247
----------
COMMUNICATION SERVICES (6.4%)
1,818,000 AT&T Corp. 81,810
1,214,700 Bell Atlantic 74,401
1,957,100 MCI WorldCom 148,250(2)
----------
304,461
----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
CONSUMER CYCLICALS (7.3%)
479,100 Carnival Corp. $ 21,410
4,123,100 Cendant Corp. 73,958
525,000 Federated Department Stores 24,150(2)
976,400 General Motors 64,564
2,077,600 Lear Corp. 83,494(2)
893,200 Lowe's Cos. 40,417
3,545,300 Office Depot 37,004(2)
----------
344,997
----------
CONSUMER STAPLES (5.7%)
1,106,300 AMFM Inc. 54,485(2)
1,715,500 Kimberly-Clark 97,676
1,378,600 McDonald's Corp. 57,040(3)
1,620,000 Philip Morris 60,649
----------
269,850
----------
ENERGY (9.0%)
868,500 Amerada Hess 53,901
356,400 Chevron Corp. 32,878
602,400 Diamond Offshore Drilling 23,042
1,070,400 Halliburton Co. 49,640
680,100 Mobil Corp. 69,625
390,500 Royal Dutch Petroleum -- NY Shares 24,162
441,400 Schlumberger Ltd. 29,464
787,400 Texaco Inc. 50,000
627,700 Transocean Offshore 21,342
3,843,700 Union Pacific Resources Group 68,946
----------
423,000
----------
FINANCIAL SERVICES (15.6%)
270,000 American International Group 25,026
1,327,300 Associates First Capital 45,543
3,470,800 Capital One Financial 131,023
1,913,300 Citigroup Inc. 85,022
5,175,900 Conseco, Inc. 124,222
1,162,900 Countrywide Credit Industries 37,358
1,658,200 Hartford Financial Services Group $ 75,344
3,067,100 IndyMac Mortgage Holdings 41,214
579,500 Morgan Stanley Dean Witter 49,728
502,100 Progressive Corp. 51,214
1,576,000 SLM Holding 69,640
----------
735,334
----------
HEALTH CARE (9.3%)
1,801,200 Aetna Inc. 140,043
2,249,200 American Home Products 93,342
</TABLE>
C-7
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
98,064 PacifiCare Health Systems 5,884(2)
200,000 Warner-Lambert 13,250
2,582,996 Wellpoint Health Networks 188,236(2)(3)
----------
440,755
----------
TECHNOLOGY (15.8%)
230,000 Apple Computer 15,008(2)
1,160,200 Computer Associates 65,551
975,000 Compuware Corp. 29,433(2)
381,200 Gateway Inc. 36,953(2)
678,300 Hewlett-Packard 71,476
829,000 IBM 103,262
734,100 Micron Technology 54,736(2)
560,000 Nortel Networks 22,995
1,728,700 Rational Software 46,783(2)
1,366,700 Seagate Technology 45,357(2)
699,700 Sun Microsystems 55,626(2)
469,500 Teradyne, Inc. 31,955(2)(3)
832,400 Texas Instruments 68,309(3)
2,097,800 Xerox Corp. 100,170
----------
747,614
----------
TRANSPORTATION (2.7%)
962,200 AMR Corp. $ 56,409(2)
1,031,600 Burlington Northern Santa Fe 29,916
1,005,000 Continental Airlines Class B 41,017(2)
----------
127,342
----------
TOTAL COMMON
STOCKS (COST
$3,473,802) 4,063,664
----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
PREFERRED STOCKS (1.6%)
2,878,900 News Corp. ADR (COST $76,136) 76,111
----------
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
U.S. TREASURY SECURITIES (1.0%)
$50,000,000 U.S. Treasury Bills, 4.60%,
due 11/18/99 (COST $49,502) 49,502(5)
----------
U.S. GOVERNMENT AGENCY SECURITIES (1.1%)
50,000,000 Federal Home Loan Bank, Discount Notes,
5.40%, due 9/1/99 (COST $50,000) 50,000(5)
----------
</TABLE>
C-8
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (2.4%)
$50,000,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $50,007,292, Collateralized by
$47,855,000 U.S. Treasury Bonds,
7.875%, due 11/15/07 (Collateral Value
$51,503,944) $ 50,000
50,000,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $50,007,292, Collateralized by
$45,880,000 U.S. Treasury Bonds, 7.50%,
due 11/15/16 (Collateral Value
$51,500,300) 50,000
11,170,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $11,171,629, Collateralized by
$11,270,000 U.S. Treasury Notes,
7.750%, due 12/31/99 (Collateral Value
$11,506,963) 11,170
----------
TOTAL REPURCHASE AGREEMENTS (COST
$111,170) 111,170(5)
----------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.2%)
$50,000,000 American Express Credit Corp., 5.23%,
due 9/2/99 $ 49,993
50,000,000 General Electric Capital Corp., 5.10%,
due 9/3/99 49,986
50,000,000 Merck & Co., Inc., 5.30%, due 9/3/99 49,985
50,000,000 Ford Motor Credit Co., 5.28%,
due 9/8/99 49,949
50,000,000 Novartis Finance Corp., 5.25%,
due 9/13/99 49,912
19,057,000 Abbott Laboratories, 5.23%, due 9/23/99 18,996
24,436,603 N&B Securities Lending Quality Fund, LLC 24,437
----------
TOTAL SHORT-TERM INVESTMENTS (COST
$293,258) 293,258(5)
----------
TOTAL INVESTMENTS (98.3%) (COST
$4,053,868) 4,643,705(6)
Cash, receivables and other assets, less
liabilities (1.7%) 80,015
----------
TOTAL NET ASSETS (100.0%) $4,723,720
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-9
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Citrix Systems 3.0%
2. Sanmina Corp. 2.5%
3. Biogen, Inc. 2.3%
4. TJX Cos. 2.3%
5. NTL Inc. 2.2%
6. Best Buy 2.1%
7. JDS Uniphase 1.9%
8. PMC-Sierra 1.9%
9. Adaptec, Inc. 1.9%
10. VERITAS Software 1.9%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (93.3%)
BUSINESS SERVICES (4.1%)
257,400 Avis Rent A Car $ 5,663(2)
148,800 Navigant Consulting 6,528(2)
206,500 USWeb Corp. 4,027(2)
202,150 Valassis Communications 8,844
---------
25,062
---------
CAPITAL GOODS (1.4%)
128,900 Waters Corp. 8,499(2)
---------
COMMUNICATIONS (9.2%)
126,400 Comverse Technology 9,859(2)
95,700 E-Tek Dynamics 5,425(2)
315,100 Intermedia Communications 8,193(2)
111,900 JDS Uniphase 11,868(2)
245,400 Metromedia Fiber Network 7,224(2)
58,500 RSL Communications 1,196(2)
76,100 VoiceStream Wireless $ 3,139(2)
184,600 WinStar Communications 9,380(2)
---------
56,284
---------
CONSUMER CYCLICALS (11.1%)
80,000 Adelphia Communications 4,960(2)
212,495 AMFM Inc. 10,465(2)
390,000 Cendant Corp. 6,996
178,700 Fortune Brands 6,701
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ---------
<C> <S> <C>
132,400 Harley-Davidson 7,216
106,000 Jones Intercable Class A 4,651(2)
138,900 NTL Inc. 13,638(2)
237,450 SFX Entertainment 9,780(2)
156,700 Starwood Hotels & Resorts Worldwide 3,731
---------
68,138
---------
CONSUMER STAPLES (0.9%)
116,500 Estee Lauder 5,352
---------
ELECTRICAL EQUIPMENT (9.7%)
230,000 Altera Corp. 9,689(2)
27,700 Broadcom Corp. 3,566(2)
93,000 Conexant Systems 6,684(2)
102,600 Maxim Integrated Products 6,906(2)
98,300 Micron Technology 7,330
126,600 PMC-Sierra 11,774(2)
81,000 Vitesse Semiconductor 5,508(2)
119,100 Xilinx Inc. 8,330(2)
---------
59,787
---------
ENERGY (3.9%)
211,000 Coastal Corp. 9,139
250,700 Enron Oil & Gas 5,985
477,600 Union Pacific Resources Group 8,567
---------
23,691
---------
FINANCIAL SERVICES (4.9%)
179,300 Capital One Financial $ 6,769
118,600 Donaldson, Lufkin & Jenrette 5,671
171,900 E*TRADE Group 4,297(2)
95,600 Lehman Brothers Holdings 5,139
105,500 Providian Financial 8,189
---------
30,065
---------
HARDWARE (5.5%)
298,700 Adaptec, Inc. 11,649(2)
106,500 Network Appliance 6,996(2)
202,300 Sanmina Corp. 15,173(2)
---------
33,818
---------
HEALTH CARE (11.7%)
185,400 Biogen, Inc. 14,229(2)
33,700 C. R. Bard 1,571
</TABLE>
C-10
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ---------
<C> <S> <C>
301,100 Elan Corp. ADR 9,654(2)
151,400 Immunex Corp. 10,191(2)
41,750 MedImmune, Inc. 4,308
75,600 MiniMed Inc. 6,875(2)
80,700 PE Corp.-PE Biosystems Group 5,553
98,600 Sepracor Inc. 7,383(2)
201,900 The Laser Center 6,032(2)
78,500 Wellpoint Health Networks 5,721(2)
---------
71,517
---------
INTERNET (8.4%)
47,200 BroadVision, Inc. 4,699(2)
284,000 CheckFree Holdings 8,307(2)
75,900 Digex, Inc. 2,524(2)
33,600 DoubleClick Inc. 3,356(2)
41,200 Exodus Communications 3,311(2)
22,800 Inktomi Corp. 2,585(2)
124,200 Intuit Inc. $ 11,124(2)
105,000 Lycos, Inc. 4,266(2)
130,200 PSINet Inc. 6,233(2)
79,300 Safeguard Scientifics 5,333(2)
---------
51,738
---------
RETAIL (11.9%)
202,900 Abercrombie & Fitch 7,076(2)
176,100 Ann Taylor Stores 5,833(2)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ---------
<C> <S> <C>
180,700 Best Buy 12,694(2)
75,100 Brinker International 1,803(2)
107,200 Circuit City Stores 4,610
197,400 Furniture Brands International 3,960(2)
68,800 Limited, Inc. 2,606
197,500 Linens 'n Things 6,764(2)
324,600 Staples, Inc. 7,060(2)
136,000 Tandy Corp. 6,426
486,200 TJX Cos. 14,039
---------
72,871
---------
SOFTWARE (9.2%)
317,400 Citrix Systems 18,092(2)
129,800 Gemstar International Group 8,956(2)
330,000 Novell, Inc. 7,817(2)
145,300 Siebel Systems 9,980
194,400 VERITAS Software 11,518(2)
---------
56,363
---------
UTILITIES (1.4%)
280,400 Montana Power 8,675
---------
TOTAL COMMON STOCKS (COST $449,526) 571,860
---------
</TABLE>
C-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ---------
<C> <S> <C>
U.S. GOVERNMENT AGENCY SECURITIES (0.4%)
$ 2,750,000 Federal Home Loan Bank, Discount Notes,
5.15%, due 9/2/99 (COST $2,750) $ 2,750(5)
---------
REPURCHASE AGREEMENTS (2.0%)
12,240,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $12,241,785, Collateralized by
$12,445,000 U.S. Treasury Notes,
5.875%, due 6/30/00 (Collateral Value
$12,609,013) (COST $12,240) 12,240(5)
---------
SHORT-TERM INVESTMENTS (22.2%)
11,000,000 Ford Motor Credit Co., 5.14% & 5.20%,
due 9/2/99 & 9/7/99 10,996
3,000,000 AT&T Corp., 5.18%, due 9/7/99 2,998
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ---------
<C> <S> <C>
$ 3,000,000 Emerson Electric Co., 5.30%,
due 9/10/99 $ 2,996
118,910,279 N&B Securities Lending Quality Fund, LLC 118,910
---------
TOTAL SHORT-TERM INVESTMENTS (COST
$135,900) 135,900(5)
---------
TOTAL INVESTMENTS (117.9%) (COST
$600,416) 722,750(6)
Liabilities, less cash, receivables and
other assets [(17.9%)] (109,891)
---------
TOTAL NET ASSETS (100.0%) $612,859
---------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-12
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. CIGNA Corp. 3.6%
2. Chase Manhattan 3.5%
3. MCI WorldCom 3.1%
4. Computer Associates 2.9%
5. Xerox Corp. 2.6%
6. The Williams Cos. 2.3%
7. General Motors 2.3%
8. IBM 2.2%
9. News Corp. ADR 2.2%
10. General Motors Class H 2.2%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (92.1%)
AEROSPACE (1.1%)
600,000 Raytheon Co. Class A $ 40,275
----------
AIRLINES (1.9%)
330,900 AMR Corp. 19,399(2)
1,280,000 Continental Airlines Class B 52,240(2)
----------
71,639
----------
AUTOMOBILE MANUFACTURING (2.3%)
1,315,800 General Motors 87,007
----------
AUTO/TRUCK REPLACEMENT PARTS (1.3%)
1,180,000 Lear Corp. 47,421(2)
----------
BANKING & FINANCIAL (11.3%)
1,305,000 Bank of America 78,953
1,945,000 Bank One 78,043
1,143,800 BankBoston Corp. 53,115
1,560,000 Chase Manhattan 130,553
1,337,000 Countrywide Credit Industries 42,951
1,140,000 Household International 43,035
----------
426,650
----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ----------
<C> <S> <C>
CHEMICALS (1.5%)
765,000 duPont $ 48,482
620,000 Lyondell Chemical 9,029
----------
57,511
----------
COMMUNICATIONS (4.0%)
600,000 Bell Atlantic 36,750
1,520,000 MCI WorldCom 115,140(2)
----------
151,890
----------
DIVERSIFIED (1.8%)
1,658,500 Monsanto Co. 68,102
----------
ELECTRONICS (1.1%)
353,900 Emerson Electric 22,163
275,000 Teradyne, Inc. 18,717(2)
----------
40,880
----------
ENERGY (0.8%)
1,314,600 McDermott International 29,661
----------
FINANCIAL SERVICES (3.0%)
1,070,000 Ceridian Corp. 29,960(2)
330,000 Morgan Stanley Dean Witter 28,318
1,240,000 SLM Holding 54,793
----------
113,071
----------
FOOD & TOBACCO (3.4%)
1,040,000 Anheuser-Busch 80,080
1,209,500 Nabisco Holdings 47,549
----------
127,629
----------
FOOD PRODUCTS (1.7%)
526,100 ConAgra, Inc. 12,889
1,195,800 Diageo PLC ADR 49,551
----------
62,440
----------
GAS (1.7%)
1,347,400 Praxair, Inc. 63,328
----------
HEALTH CARE (12.9%)
475,000 ALZA Corp. 23,928(2)
1,579,500 American Home Products 65,549
870,000 Baxter International 58,345
1,602,100 Becton, Dickinson & Co. $ 45,059
1,230,000 Centocor, Inc. 73,646(2)
1,498,800 CIGNA Corp. 134,611
</TABLE>
C-13
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ----------
<C> <S> <C>
669,800 Merck & Co. 45,002
540,000 Wellpoint Health Networks 39,353(2)
----------
485,493
----------
INDUSTRIAL GOODS & SERVICES (2.9%)
845,800 Fort James 27,277
1,055,700 General Dynamics 66,509
637,300 Owens-Illinois 15,773(2)
----------
109,559
----------
INSURANCE (2.8%)
1,599,200 Ace, Ltd. 34,283
370,000 American International Group 34,294
743,494 XL Capital 37,407
----------
105,984
----------
OIL & GAS (6.5%)
304,000 Chevron Corp. 28,044
840,000 Texaco Inc. 53,340
2,042,200 Tosco Corp. 52,076
1,400,200 Transocean Offshore 47,607
2,077,500 USX-Marathon Group 64,662(2)
----------
245,729
----------
RAILROADS (1.1%)
1,461,800 Burlington Northern Santa Fe 42,392
----------
RETAILING (3.4%)
1,620,000 Consolidated Stores 26,123(2)
990,300 Harcourt General 43,388
243,100 Office Depot 2,537(2)
3,052,600 Rite Aid 56,473
----------
128,521
----------
STEEL (0.9%)
1,639,400 AK Steel Holding $ 34,427
----------
TECHNOLOGY (18.1%)
2,427,500 Cadence Design Systems 33,075(2)
861,300 Compaq Computer 19,971
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ----------
<C> <S> <C>
1,940,000 Computer Associates 109,610
1,592,400 General Motors Class H 82,009(2)
440,000 Hewlett-Packard 46,365
680,000 IBM 84,702
1,840,000 L.M. Ericsson Telephone, B Shares ADR 59,915
1,592,600 Nortel Networks 65,396
2,865,000 Parametric Technology 40,110(2)
537,000 Texas Instruments 44,068
2,038,900 Xerox Corp. 97,357
----------
682,578
----------
TELECOMMUNICATIONS (2.4%)
1,540,000 AT&T Corp. -- Liberty Media Group
Class A 49,280(2)
600,000 GTE Corp. 41,175
----------
90,455
----------
UTILITIES (3.3%)
2,130,000 The Williams Cos. 87,863
952,400 Unicom Corp. 36,786
----------
124,649
----------
WASTE MANAGEMENT (0.9%)
2,598,200 Allied Waste Industries 33,127(2)
----------
TOTAL COMMON STOCKS (COST $3,107,009) 3,470,418
----------
PREFERRED STOCKS (2.2%)
3,123,800 News Corp. ADR (COST $86,104) 82,586
----------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ----------
<C> <S> <C>
</TABLE>
C-14
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.7%)
$50,000,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $50,007,292, Collateralized by
$40,915,000 U.S. Treasury Bonds,
8.875%, due 8/15/17 (Collateral Value
$51,506,216) $ 50,000
13,300,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $13,301,940, Collateralized by
$13,635,000 U.S. Treasury Notes,
5.875%, due 2/15/00 (Collateral Value
$13,703,911) 13,300
----------
TOTAL REPURCHASE AGREEMENTS (COST
$63,300) 63,300(5)
----------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.9%)
$50,000,000 Ford Motor Credit Co., 5.21%,
due 9/2/99 $ 49,993
20,200,000 Novartis Finance Corp., 5.27%,
due 9/7/99 20,182
50,000,000 American Express Credit Corp., 5.31%,
due 9/8/99 49,948
139,642,039 N&B Securities Lending Quality Fund, LLC 139,642
----------
TOTAL SHORT-TERM INVESTMENTS (COST
$259,765) 259,765(5)
----------
TOTAL INVESTMENTS (102.9%) (COST
$3,516,178) 3,876,069(6)
Liabilities, less cash, receivables and
other assets [(2.9%)] (107,329)
----------
TOTAL NET ASSETS (100.0%) $3,768,740
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-15
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Intel Corp. 3.3%
2. Biogen, Inc. 3.3%
3. Unisys Corp. 3.2%
4. Hewlett-Packard 3.2%
5. Citigroup Inc. 3.1%
6. Tyco International 3.1%
7. MCI WorldCom 2.9%
8. ALZA Corp. 2.8%
9. True North Communications 2.7%
10. Circuit City Stores 2.7%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (93.9%)
ADVERTISING (2.7%)
330,000 True North Communications $ 10,869
---------
AUTOMOTIVE (1.6%)
137,200 Borg-Warner Automotive 6,500
---------
CHEMICALS (1.3%)
100,000 Minerals Technologies 4,950
---------
CONSUMER GOODS & SERVICES (2.2%)
150,000 Kimberly-Clark 8,541
---------
DIVERSIFIED (3.1%)
120,000 Tyco International 12,157
---------
ENERGY (2.3%)
100,000 Chevron Corp. 9,225
---------
ENTERTAINMENT (2.0%)
350,000 Fox Entertainment Group 8,072(2)
---------
FINANCIAL SERVICES (9.8%)
150,000 Ambac Financial Group 7,922
276,750 Citigroup Inc. 12,298
275,000 Conseco, Inc. 6,600
200,000 Dun & Bradstreet 5,238
100,000 Fannie Mae $ 6,212
9,300 Goldman Sachs 556
---------
38,826
---------
FURNISHINGS (2.2%)
400,000 Leggett & Platt 8,850
---------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- ---------
<C> <S> <C>
HEALTH CARE (15.8%)
220,000 ALZA Corp. 11,082(2)
170,000 Biogen, Inc. 13,047(2)
260,000 Invacare Corp. 4,859
90,000 Johnson & Johnson 9,203
220,000 McKesson HBOC 6,848
135,000 Warner-Lambert 8,944
118,000 Wellpoint Health Networks 8,599(2)
---------
62,582
---------
HOSPITAL SUPPLIES (2.4%)
200,000 C. R. Bard 9,325
---------
INSURANCE (3.7%)
380,000 ESG Re 5,130
210,000 ReliaStar Financial 9,463
---------
14,593
---------
OIL & GAS (4.3%)
220,000 Anadarko Petroleum 7,480
230,000 Cooper Cameron 9,574(2)
---------
17,054
---------
PAPER & FOREST PRODUCTS (2.2%)
238,000 Mead Corp. 8,880
---------
PUBLISHING & BROADCASTING (2.5%)
225,000 Valassis Communications 9,844
---------
RECYCLING (0.7%)
187,500 IMCO Recycling 2,941
---------
RETAIL GROCERY (1.7%)
140,000 Albertson's Inc. 6,711
---------
RETAIL STORES (6.1%)
250,000 Circuit City Stores 10,750
120,000 Dayton Hudson 6,960
145,000 Federated Department Stores 6,670(2)
---------
24,380
---------
RETAILING (2.0%)
179,000 Wal-Mart Stores 7,932
---------
TECHNOLOGY (17.9%)
374,000 Compaq Computer $ 8,672
150,000 Electronic Data Systems 8,419
120,000 Hewlett-Packard 12,645
160,000 Intel Corp. 13,150
400,000 Quantum Corp. -- DLT & Storage Systems 7,325(2)
200,000 Quantum Corp. -- Hard Disk Drive 1,425(2)
</TABLE>
C-16
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Socially Responsive Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- ---------
<C> <S> <C>
300,000 Unisys Corp. 12,900(2)
140,000 Xerox Corp. 6,685
---------
71,221
---------
TELECOMMUNICATIONS (3.7%)
150,000 MCI WorldCom 11,363(2)
503,200 Metromedia International Group 3,176
---------
14,539
---------
TRANSPORTATION (2.1%)
140,000 AMR Corp. 8,208(2)
---------
WASTE MANAGEMENT (1.6%)
350,000 Azurix Corp. 6,497(2)
---------
TOTAL COMMON STOCKS (COST $274,738) 372,697
---------
<CAPTION>
Principal
Amount
- ---------
<C> <S> <C>
U.S. GOVERNMENT AGENCY SECURITIES (2.3%)
$4,000,000 Fannie Mae, Discount Notes, 5.15%,
due 9/3/99 3,999
5,000,000 Freddie Mac, Discount Notes, 5.18% &
5.23%, due 9/9/99 & 9/10/99 4,994
---------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
(COST $8,993) 8,993(5)
---------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- --------- ---------
<C> <S> <C>
REPURCHASE AGREEMENTS (2.1%)
$8,370,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $8,371,221, Collateralized by
$8,495,000 U.S. Treasury Notes, 5.625%,
due 5/15/01 (Collateral Value
$8,621,966) (COST $8,370) $ 8,370(5)
---------
SHORT-TERM INVESTMENTS (0.6%)
100,000 Community Capital Bank, 4.05%,
due 9/29/99 100
100,000 Self Help Credit Union, 4.71%,
due 11/24/99 100
2,340,353 N&B Securities Lending Quality Fund, LLC 2,340
---------
TOTAL SHORT-TERM INVESTMENTS (COST
$2,540) 2,540(5)
---------
TOTAL INVESTMENTS (98.9%) (COST
$294,641) 392,600(6)
Cash, receivables and other assets, less
liabilities (1.1%) 4,513
---------
TOTAL NET ASSETS (100.0%) $ 397,113
---------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-17
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust
1) Investment securities of each Portfolio are valued at the latest sales price;
securities for which no sales were reported, unless otherwise noted, are
valued at the mean between the closing bid and asked prices. The Portfolios
value all other securities by a method the trustees of Equity Managers Trust
believe accurately reflects fair value. Foreign security prices are furnished
by independent quotation services expressed in local currency values. Foreign
security prices are translated from the local currency into U.S. dollars
using current exchange rates. Short-term debt securities with less than 60
days until maturity may be valued at cost which, when combined with interest
earned, approximates market value.
2) Non-income producing security.
3) The following securities were held in escrow at August 31, 1999, to cover
outstanding call options written:
<TABLE>
<CAPTION>
MARKET VALUE MARKET
SECURITIES AND OF PREMIUM ON VALUE
NEUBERGER BERMAN SHARES OPTIONS SECURITIES OPTIONS OF OPTIONS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOCUS PORTFOLIO 300,000 Compaq Computer $ 6,956,000 $ 441,000 $ 244,000
Corp.
October 1999 @ 25
GUARDIAN PORTFOLIO 1,025,000 McDonald's Corp. 42,409,000 3,379,000 2,563,000
December 1999 @ 42.50
450,000 Teradyne Inc. 30,628,000 5,073,000 2,137,000
October 1999 @ 70
400,000 Texas Instruments 32,825,000 4,009,000 6,375,000
October 1999 @
67.50
500,000 Wellpoint Health 36,438,000 2,985,000 1,781,000
Networks
October 1999 @ 75
</TABLE>
4) Affiliated issuer (see Note E of Notes to Financial Statements).
5) At cost, which approximates market value.
C-18
<PAGE>
6) At August 31, 1999, selected Portfolio information on a U.S. Federal income
tax basis was as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
NEUBERGER BERMAN COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS PORTFOLIO $1,022,500,000 $548,009,000 $ 46,270,000 $501,739,000
GENESIS PORTFOLIO 1,638,468,000 249,706,000 109,242,000 140,464,000
GUARDIAN PORTFOLIO 4,064,568,000 890,616,000 311,479,000 579,137,000
MANHATTAN PORTFOLIO 601,413,000 147,595,000 26,258,000 121,337,000
PARTNERS PORTFOLIO 3,530,723,000 499,471,000 154,125,000 345,346,000
SOCIALLY RESPONSIVE PORTFOLIO 294,682,000 115,095,000 17,177,000 97,918,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-19
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) PORTFOLIO PORTFOLIO
-------------------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 1,493,142 $ 1,629,745
Non-controlled affiliated issuers 31,097 149,187
-------------------------------
1,524,239 1,778,932
Cash 304 8
Dividends and interest receivable 1,570 3,940
Prepaid expenses and other assets 34 57
Receivable for securities sold 34,235 16,148
-------------------------------
1,560,382 1,799,085
-------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) 244 --
Payable for collateral on securities loaned
(Note A) 7,114 42,525
Payable for securities purchased 4,813 2,023
Payable for variation margin (Note A) -- --
Payable to investment manager (Note B) 670 1,103
Accrued expenses and other payables 1,143 2,330
-------------------------------
13,984 47,981
-------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 1,546,398 $ 1,751,104
-------------------------------
NET ASSETS consist of:
Paid-in capital $ 1,039,051 $ 1,610,183
Net unrealized appreciation in value of
investment securities, financial futures
contracts, and option contracts 507,347 140,921
-------------------------------
NET ASSETS $ 1,546,398 $ 1,751,104
-------------------------------
*Cost of investments:
Unaffiliated issuers $ 993,477 $ 1,490,335
Non-controlled affiliated issuers 23,612 147,676
-------------------------------
Total cost of investments $ 1,017,089 $ 1,638,011
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-20
<PAGE>
August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
GUARDIAN MANHATTAN PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 4,643,705 $ 722,750 $ 3,876,069 $ 392,600
Non-controlled affiliated issuers -- -- -- --
-----------------------------------------------------------------
4,643,705 722,750 3,876,069 392,600
Cash 8 2 36 --
Dividends and interest receivable 8,995 5,002 9,703 758
Prepaid expenses and other assets 158 56 106 10
Receivable for securities sold 115,060 11,968 92,109 6,779
-----------------------------------------------------------------
4,767,926 739,778 3,978,023 400,147
-----------------------------------------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) 12,856 -- -- --
Payable for collateral on securities loaned
(Note A) 24,437 118,910 139,642 2,340
Payable for securities purchased -- 2,773 62,299 --
Payable for variation margin (Note A) 1,930 -- -- --
Payable to investment manager (Note B) 1,881 274 1,486 185
Accrued expenses and other payables 3,102 4,962 5,856 509
-----------------------------------------------------------------
44,206 126,919 209,283 3,034
-----------------------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 4,723,720 $ 612,859 $ 3,768,740 $ 397,113
-----------------------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 4,142,799 $ 490,525 $ 3,408,849 $ 299,154
Net unrealized appreciation in value of
investment securities, financial futures
contracts, and option contracts 580,921 122,334 359,891 97,959
-----------------------------------------------------------------
NET ASSETS $ 4,723,720 $ 612,859 $ 3,768,740 $ 397,113
-----------------------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 4,053,868 $ 600,416 $ 3,516,178 $ 294,641
Non-controlled affiliated issuers -- -- -- --
-----------------------------------------------------------------
Total cost of investments $ 4,053,868 $ 600,416 $ 3,516,178 $ 294,641
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-21
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) PORTFOLIO PORTFOLIO
---------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 13,017 $ 25,981
Dividend income -- non-controlled affiliated
issuers -- 1,078
Interest income 1,237 5,441
Foreign taxes withheld (Note A) (37) --
---------------------------
Total income 14,217 32,500
---------------------------
Expenses:
Investment management fee (Note B) 7,855 13,245
Accounting fees 10 10
Amortization of deferred organization and
initial offering expenses (Note A) -- --
Auditing fees 45 46
Custodian fees (Note B) 273 342
Insurance expense 19 26
Legal fees 25 27
Trustees' fees and expenses 23 25
Miscellaneous -- 45
---------------------------
Total expenses 8,250 13,766
Expenses reduced by custodian fee expense
offset arrangement (Note B) (4) (5)
---------------------------
Total net expenses 8,246 13,761
---------------------------
Net investment income (loss) 5,971 18,739
---------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold in unaffiliated issuers 203,017 (111,789)
Net realized gain on investment securities
sold in non-controlled affiliated issuers 36 1,399
Net realized gain on option contracts
(Note A) 54 --
Net realized gain on financial futures
contracts (Note A) -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts (Note A) 283,206 413,682
---------------------------
Net gain on investments 486,313 303,292
---------------------------
Net increase in net assets resulting from
operations $ 492,284 $ 322,031
---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-22
<PAGE>
For the Year Ended August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
GUARDIAN MANHATTAN PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 58,766 $ 1,091 $ 66,443 $ 3,639
Dividend income -- non-controlled affiliated
issuers -- -- -- --
Interest income 28,189 1,979 4,684 775
Foreign taxes withheld (Note A) (800) -- (209) --
-----------------------------------------------------------------
Total income 86,155 3,070 70,918 4,414
-----------------------------------------------------------------
Expenses:
Investment management fee (Note B) 25,003 3,282 18,165 1,956
Accounting fees 10 10 10 10
Amortization of deferred organization and
initial offering expenses (Note A) -- -- -- 4
Auditing fees 48 54 47 34
Custodian fees (Note B) 826 177 617 109
Insurance expense 88 8 48 4
Legal fees 28 20 18 18
Trustees' fees and expenses 69 12 50 9
Miscellaneous -- 15 -- --
-----------------------------------------------------------------
Total expenses 26,072 3,578 18,955 2,144
Expenses reduced by custodian fee expense
offset arrangement (Note B) (4) (6) (5) (1)
-----------------------------------------------------------------
Total net expenses 26,068 3,572 18,950 2,143
-----------------------------------------------------------------
Net investment income (loss) 60,087 (502) 51,968 2,271
-----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold in unaffiliated issuers 853,341 57,698 353,820 22,484
Net realized gain on investment securities
sold in non-controlled affiliated issuers -- -- -- --
Net realized gain on option contracts
(Note A) 7,672 -- -- --
Net realized gain on financial futures
contracts (Note A) 130,832 -- -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts (Note A) 406,548 135,208 531,136 81,446
-----------------------------------------------------------------
Net gain on investments 1,398,393 192,906 884,956 103,930
-----------------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,458,480 $ 192,404 $ 936,924 $ 106,201
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-23
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
Year Year
FOCUS GENESIS
Ended Ended
August 31, August 31,
PORTFOLIO PORTFOLIO
(000'S OMITTED) 1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 5,971 $ 10,123 $ 18,739 $ 23,438
Net realized gain (loss) on
investments 203,107 74,686 (110,390) 35,406
Change in net unrealized
appreciation (depreciation) of
investments 283,206 (360,086) 413,682 (545,041)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 492,284 (275,277) 322,031 (486,197)
-------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 50,568 178,065 528,302 1,557,053
Reductions (313,932) (158,751) (911,584) (342,152)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (263,364) 19,314 (383,282) 1,214,901
-------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 228,920 (255,963) (61,251) 728,704
NET ASSETS:
Beginning of year 1,317,478 1,573,441 1,812,355 1,083,651
-------------------------------------------------------------
End of year $ 1,546,398 $ 1,317,478 $ 1,751,104 $ 1,812,355
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-24
<PAGE>
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
Year Year Year
GUARDIAN MANHATTAN PARTNERS
Ended Ended Ended
August 31, August 31, August 31,
PORTFOLIO PORTFOLIO PORTFOLIO
1999 1998 1999 1998 1999 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 60,087 $ 78,026 $ (502) $ (343) $ 51,968 $ 46,344
Net realized gain (loss) on
investments 991,845 893,833 57,698 45,585 353,820 408,784
Change in net unrealized
appreciation (depreciation)
of investments 406,548 (2,420,985) 135,208 (106,156) 531,136 (872,798)
-------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 1,458,480 (1,449,126) 192,404 (60,914) 936,924 (417,670)
-------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTERESTS:
Additions 164,857 391,142 47,432 53,069 230,354 743,583
Reductions (2,687,422) (1,912,418) (150,336) (90,539) (979,875) (320,149)
-------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
transactions in investors'
beneficial interests (2,522,565) (1,521,276) (102,904) (37,470) (749,521) 423,434
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS (1,064,085) (2,970,402) 89,500 (98,384) 187,403 5,764
NET ASSETS:
Beginning of year 5,787,805 8,758,207 523,359 621,743 3,581,337 3,575,573
-------------------------------------------------------------------------------
End of year $4,723,720 $5,787,805 $ 612,859 $ 523,359 $3,768,740 $3,581,337
-------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-25
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
Year
RESPONSIVE
Ended
August 31,
PORTFOLIO
(000'S OMITTED) 1999 1998
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 2,271 $ 2,863
Net realized gain (loss) on
investments 22,484 26,331
Change in net unrealized
appreciation (depreciation) of
investments 81,446 (50,773)
-----------------------------
Net increase (decrease) in net
assets resulting from operations 106,201 (21,579)
-----------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 53,231 71,633
Reductions (45,169) (23,485)
-----------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests 8,062 48,148
-----------------------------
NET INCREASE (DECREASE) IN NET ASSETS 114,263 26,569
NET ASSETS:
Beginning of year 282,850 256,281
-----------------------------
End of year $ 397,113 $ 282,850
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Portfolio ("Focus"), Neuberger Berman Genesis
Portfolio ("Genesis"), Neuberger Berman Guardian Portfolio ("Guardian"),
Neuberger Berman Manhattan Portfolio ("Manhattan"), Neuberger Berman Partners
Portfolio ("Partners"), and Neuberger Berman Socially Responsive Portfolio
("Socially Responsive") (collectively, the "Portfolios") are separate
operating series of Equity Managers Trust ("Managers Trust"), a New York
common law trust organized as of December 1, 1992. Managers Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended. Other regulated investment
companies sponsored by Neuberger Berman Management Inc. ("Management"), whose
financial statements are not presented herein, also invest in Managers Trust.
The assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio and no
other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolios' Schedule of Investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange of such currency against the U.S.
dollar to determine the value of investments, other assets and liabilities.
Purchase and sale prices of securities, and income and expenses are
translated into U.S. dollars at the prevailing rate of exchange on the
respective dates of such transactions.
4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date or, for certain foreign dividends, as soon as the Portfolio
becomes aware of the dividends. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, including accretion of original issue discount,
where applicable, and accretion of discount on short-term investments, is
recorded on the accrual basis. Realized gains and losses from securities
transactions and foreign currency transactions are recorded on the basis of
identified cost.
5) TAXES: Managers Trust intends to comply with the requirements of the Internal
Revenue Code. Each Portfolio of Managers Trust also intends to conduct its
operations so that each of its investors will be able to qualify as a
regulated
C-27
<PAGE>
investment company. Each Portfolio will be treated as a partnership for U.S.
Federal income tax purposes and is therefore not subject to U.S. Federal
income tax.
6) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign
tax authorities, net of refunds recoverable.
7) ORGANIZATION EXPENSES: Organization expenses incurred by Socially Responsive
were fully amortized as of August 31, 1999.
8) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by Managers Trust with respect to any two or more
portfolios are allocated in proportion to the net assets of such portfolios,
except where a more appropriate allocation of expenses to each portfolio can
otherwise be made fairly. Expenses directly attributable to a portfolio are
charged to that portfolio.
9) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered call
option are recorded in the liability section of each Portfolio's Statement of
Assets and Liabilities and are subsequently adjusted to the current market
value. When an option is exercised, closed, or expired, the Portfolio
realizes a gain or loss and the liability is eliminated. A Portfolio bears
the risk of a decline in the price of the security during the period,
although any potential loss during the period would be reduced by the amount
of the option premium received. In general, written covered call options may
serve as a partial hedge against decreases in value in the underlying
securities to the extent of the premium received. All securities covering
outstanding options are held in escrow by the custodian bank.
Summary of option transactions for the year ended August 31, 1999:
<TABLE>
<CAPTION>
VALUE
WHEN
FOCUS NUMBER WRITTEN
- -----------------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/98 0 $ 0
CONTRACTS WRITTEN 13,180 3,866,000
CONTRACTS EXPIRED (1,880) (920,000)
CONTRACTS EXERCISED (3,525) (870,000)
CONTRACTS CLOSED (4,775) (1,635,000)
---------------------
CONTRACTS OUTSTANDING 8/31/99 3,000 $ 441,000
---------------------
</TABLE>
C-28
<PAGE>
<TABLE>
<CAPTION>
VALUE
WHEN
GUARDIAN NUMBER WRITTEN
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/98 7,018 $ 3,498,000
CONTRACTS WRITTEN 87,950 45,460,000
CONTRACTS EXPIRED (12,518) (5,082,000)
CONTRACTS EXERCISED (20,000) (10,046,000)
CONTRACTS CLOSED (38,700) (18,384,000)
-----------------------
CONTRACTS OUTSTANDING 8/31/99 23,750 $ 15,446,000
-----------------------
</TABLE>
10) FINANCIAL FUTURES CONTRACTS: Socially Responsive may buy and sell financial
futures contracts to hedge against a possible decline in the value of their
portfolio securities. Also, Focus and Guardian may each buy and sell stock
index futures contracts for purposes of managing cash flow. At the time a
Portfolio enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or liquid securities,
known as "initial margin," ranging upward from 1.1% of the value of the
financial futures contract being traded. Each day, the futures contract is
valued at the official settlement price of the board of trade or U.S.
commodity exchange on which such futures contract is traded. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this "mark to
market," are recorded by the Portfolios as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of
matching financial futures contracts. When the contracts are closed, a
Portfolio recognizes a gain or loss. Risks of entering into futures
contracts include the possibility there may be an illiquid market and/or a
change in the value of the contract may not correlate with changes in the
value of the underlying securities.
For U.S. Federal income tax purposes, the futures transactions undertaken
by a Portfolio may cause that Portfolio to recognize gains or losses from
marking to market even though its positions have not been sold or
terminated, may affect the character of the gains or losses recognized as
long-term or short-term, and may affect the timing of some capital gains and
losses realized by the Portfolios. Also, a Portfolio's losses on
transactions involving futures contracts may be deferred rather than being
taken into account currently in calculating such Portfolio's taxable income.
During the year ended August 31, 1999, Focus and Socially Responsive did
not enter into any financial futures contracts.
C-29
<PAGE>
At August 31, 1999, open positions in financial futures contracts for
Guardian were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1999 1,245 S&P 500 Futures Long $11,506,000
</TABLE>
At August 31, 1999, Guardian had the following securities deposited in a
segregated account to cover margin requirements on open financial futures
contracts:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY
<C> <S>
- ------------------------------------------------------------------
$34,200,000 U.S. Treasury Bills, 4.60%, due 11/18/1999
</TABLE>
11) SECURITY LENDING: Securities loans involve certain risks in the event a
borrower should fail financially, including delays or inability to recover
the lent securities or foreclose against the collateral. The investment
manager, under the general supervision of Managers Trust's Board of
Trustees, monitors the creditworthiness of the parties to whom the
Portfolios make security loans. The Portfolios will not lend securities on
which covered call options have been written, or lend securities on terms
which would prevent each of their investors from qualifying as a regulated
investment company. The Portfolios entered into a Securities Lending
Agreement with Morgan Stanley & Co. Incorporated ("Morgan"). The Portfolios
receive cash collateral equal to at least 100% of the current market value
of the loaned securities. The Portfolios invest the cash collateral in the
N&B Securities Lending Quality Fund, LLC ("investment vehicle"), which is
managed by State Street Bank and Trust Company ("State Street") pursuant to
guidelines approved by Managers Trust's investment manager. Income earned on
the investment vehicle is paid to Morgan monthly. The Portfolios receive a
fee, payable monthly, negotiated by the Portfolios and Morgan, based on the
number and duration of the lending transactions. At August 31, 1999, the
value of the securities loaned and the value of the collateral were as
follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
- -------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 6,975,000 $ 7,114,000
GENESIS 41,691,000 42,525,000
GUARDIAN 23,957,000 24,437,000
MANHATTAN 116,579,000 118,910,000
PARTNERS 136,904,000 139,642,000
SOCIALLY RESPONSIVE 2,294,000 2,340,000
</TABLE>
C-30
<PAGE>
12) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
with institutions that the Portfolio's investment manager has determined are
creditworthy. Each repurchase agreement is recorded at cost. A Portfolio
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable a Portfolio to
obtain those securities in the event of a default under the repurchase
agreement. A Portfolio monitors, on a daily basis, the value of the
securities transferred to ensure that their value, including accrued
interest, is greater than amounts owed to a Portfolio under each such
repurchase agreement.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
(except Genesis) pays Management a fee at the annual rate of 0.55% of the first
$250 million of that 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. Genesis pays Management a fee for investment management
services at the annual rate of 0.85% of the first $250 million of that
Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75% of
the next $250 million, 0.70% of the next $250 million, and 0.65% of average
daily net assets in excess of $1 billion. Prior to December 15, 1997, Management
had voluntarily agreed to waive a portion of the management fee borne directly
by Genesis and indirectly by any entity that invested in Genesis to reduce the
annual fee by 0.10% per annum of average daily net assets of Genesis. Effective
December 15, 1997, the above waiver was terminated.
As of August 31, 1999, all of the capital stock of Management is owned by
individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a
member firm of The New York Stock Exchange and sub-adviser to each Portfolio.
Neuberger is retained by Management to furnish it with investment
recommendations and research information without added cost to each Portfolio.
Several individuals who are officers and/or trustees of Managers Trust are also
principals of Neuberger and/or officers and/or directors of Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between each Portfolio and Morgan, Morgan had agreed to reimburse each
Portfolio for transaction costs incurred on security lending transactions
charged by the custodian through May 31, 1999. The impact of these arrangements,
respectively, reflected in the Statements of Operations under the caption
Custodian fees, was a reduction of $1,177 and $2,359, $699 and $4,592, $2,599
and $1,768, $978 and $4,544, $2,894 and $2,200, and $200 and $448, for Focus,
Genesis, Guardian, Manhattan, Partners, and Socially Responsive, respectively.
C-31
<PAGE>
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended August 31, 1999, there were purchase and sale
transactions (excluding short-term securities, financial futures contracts, and
option contracts) as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- --------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 898,828,000 $1,171,958,000
GENESIS 573,691,000 868,673,000
GUARDIAN 3,678,666,000 6,448,039,000
MANHATTAN 677,511,000 795,813,000
PARTNERS 5,124,066,000 5,825,740,000
SOCIALLY RESPONSIVE 186,150,000 182,832,000
</TABLE>
During the year ended August 31, 1999, there were brokerage commissions on
securities paid to Neuberger and other brokers as follows:
<TABLE>
<CAPTION>
OTHER
NEUBERGER BROKERS TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOCUS $ 984,000 $ 988,000 $ 1,972,000
GENESIS 1,035,000 1,115,000 2,150,000
GUARDIAN 3,975,000 6,818,000 10,793,000
MANHATTAN 495,000 660,000 1,155,000
PARTNERS 7,694,000 6,523,000 14,217,000
SOCIALLY RESPONSIVE 330,000 155,000 485,000
</TABLE>
NOTE D -- LINE OF CREDIT:
At August 31, 1999, Genesis and Manhattan were two of the holders of a single
committed, unsecured $100,000,000 line of credit with State Street, to be used
only for temporary or emergency purposes. Interest is charged on borrowings
under this agreement at the overnight Federal Funds Rate plus 0.75% per annum. A
facility fee of 0.07% (0.09% effective September 1, 1999) per annum of the
available line of credit is charged, of which Genesis and Manhattan each has
agreed to pay its pro rata share, based on the ratio of its individual net
assets to the net assets of all the participants at the time the fee is due and
payable. The fee is paid quarterly in arrears. No compensating balance is
required. Other investment companies managed by Management also participate in
this line of credit on the same terms. Because several investment companies
participate, there is no assurance that an individual Portfolio will have access
to the entire $100,000,000 at any particular time. Genesis and Manhattan had no
loans outstanding pursuant to this line of credit at August 31, 1999. During the
year ended August 31, 1999, Genesis and Manhattan did not utilize this line of
credit.
C-32
<PAGE>
NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
<TABLE>
<CAPTION>
FOCUS
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVANTA Corp.
Class A** 948,694 0 948,694 0 $ 0
ADVANTA Corp.
Class B** 910,000 0 910,000 0 0
Photronics Inc. 940,000 447,500 85,000 1,302,500 31,097,000
Sierra Health
Services** 1,360,000 0 1,360,000 0 0
</TABLE>
<TABLE>
<CAPTION>
GENESIS
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAR Corp. 1,748,650 60,900 38,200 1,771,350 $37,863,000
ADAC Laboratories** 1,003,100 42,200 138,800 906,500 5,326,000
Alliant Techsystems 648,500 110,900 96,200 663,200 48,414,000
Aviall Inc. 1,194,100 50,400 25,000 1,219,500 13,567,000
Davox Corp. 0 1,075,600 0 1,075,600 14,991,000
DONCASTERS PLC ADR 468,300 10,000 0 478,300 6,636,000
Eltron
International** 420,000 0 420,000 0 0
Highland Bancorp 0 331,400 0 331,400 6,172,000
Inprise Corp.** 2,606,300 0 404,700 2,201,600 9,288,000
Pameco Corp.** 281,800 0 281,800 0 0
Primex Technologies 235,000 565,400 0 800,400 16,708,000
SOS Staffing Services 641,900 172,500 0 814,400 4,835,000
</TABLE>
C-33
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cabot Corp.** 3,841,000 0 845,000 2,996,000 $ 69,095,000
Capital One
Financial** 3,087,900 2,599,100 2,216,200 3,470,800 131,023,000
Coltec Industries** 4,863,900 0 4,863,900 0 0
Countrywide Credit
Industries** 6,590,000 0 5,427,100 1,162,900 37,358,000
Foundation Health
Systems** 9,939,900 0 9,939,900 0 0
Mark IV Industries** 2,942,081 0 2,942,081 0 0
PacifiCare Health
Systems Class B** 1,988,564 7,000 1,995,564 0 0
UCAR International** 2,176,200 0 2,176,200 0 0
Wellpoint Health
Networks** 3,674,996 25,000 1,117,000 2,582,996 188,236,000
</TABLE>
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE
PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES.
**AT AUGUST 31, 1999, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED
WITH THE PORTFOLIO.
C-34
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .51% .51% .53% .54% --
--------------------------------------------------------------------
Net Expenses .51% .51% .53% .54% .57%
--------------------------------------------------------------------
Net Investment Income .37% .59% .54% 1.04% 1.05%
--------------------------------------------------------------------
Portfolio Turnover Rate 57% 64% 63% 39% 36%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $1,546.4 $1,317.5 $1,573.4 $1,122.4 $969.2
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-35
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .75% .72% .77% .85% --
-------------------------------------------------------------
Net Expenses .75% .72%(2) .77%(2) .85%(2) .94%(2)
-------------------------------------------------------------
Net Investment Income 1.02% 1.13% .32% .27% .25%
-------------------------------------------------------------
Portfolio Turnover Rate 33% 18% 18% 21% 37%
-------------------------------------------------------------
Net Assets, End of Year (in millions) $1,751.1 $1,812.4 $1,083.7 $259.9 $142.2
-------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Had the investment manager not waived a portion of the management fee, the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses .74% .87% .95% .97%
</TABLE>
C-36
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .46% .46% .46% .46% --
--------------------------------------------------------------------
Net Expenses .46% .46% .46% .46% .48%
--------------------------------------------------------------------
Net Investment Income 1.06% .92% .89% 1.72% 1.72%
--------------------------------------------------------------------
Portfolio Turnover Rate 73% 60% 50% 37% 26%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $4,723.7 $5,787.8 $8,758.2 $6,232.5 $4,613.2
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-37
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .58% .57% .59% .58% --
--------------------------------------------------------------------
Net Expenses .58% .57% .59% .58% .59%
--------------------------------------------------------------------
Net Investment Income (Loss) (.08%) (.05%) .20% .13% .42%
--------------------------------------------------------------------
Portfolio Turnover Rate 115% 90% 89% 53% 44%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $612.9 $523.4 $621.7 $567.4 $645.4
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-38
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .47% .47% .48% .51% --
--------------------------------------------------------------------
Net Expenses .47% .47% .48% .51% .53%
--------------------------------------------------------------------
Net Investment Income 1.29% 1.11% 1.05% 1.26% 1.13%
--------------------------------------------------------------------
Portfolio Turnover Rate 132% 109% 77% 96% 98%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $3,768.7 $3,581.3 $3,575.6 $1,999.6 $1,623.5
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-39
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .59% .60% .63% .65% --
--------------------------------------------------------------------
Net Expenses .59% .60% .63% .65% .68%
--------------------------------------------------------------------
Net Investment Income .63% .92% 1.08% 1.02% 1.18%
--------------------------------------------------------------------
Portfolio Turnover Rate 53% 47% 51% 53% 58%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $397.1 $282.9 $256.3 $158.5 $96.7
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Manhattan Portfolio and
Neuberger Berman Socially Responsive Portfolio
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Neuberger Berman Manhattan
Portfolio and Neuberger Berman Socially Responsive Portfolio (collectively the
"Portfolios") at August 31, 1999, and the results of their operations, the
changes in their net assets, and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolios' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 1999
C-41
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Focus Portfolio
Neuberger Berman Genesis Portfolio
Neuberger Berman Guardian Portfolio and
Neuberger Berman Partners Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger Berman Focus Portfolio,
Neuberger Berman Genesis Portfolio, Neuberger Berman Guardian Portfolio, and
Neuberger Berman Partners Portfolio, four of the series constituting Equity
Managers Trust (the "Trust"), as of August 31, 1999, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999, by correspondence with the custodian and
brokers or other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Equity Managers Trust at August 31, 1999, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 1, 1999
C-42
<PAGE>
OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Institutional Services 800.366.6264
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger Berman Funds
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT ACCOUNTANTS/AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Lawrence Zicklin
PRESIDENT AND TRUSTEE
Faith Colish
TRUSTEE
Howard A. Mileaf
TRUSTEE
Edward I. O'Brien
TRUSTEE
John T. Patterson, Jr.
TRUSTEE
John P. Rosenthal
TRUSTEE
Cornelius T. Ryan
TRUSTEE
Gustave H. Shubert
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
- -C- 1999 Neuberger Berman Management Inc.
D-1
<PAGE>
Statistics and projections in this report are derived from sources
deemed to be reliable but cannot be regarded as a representation of
future results of the Funds. This report is prepared for the
general information of shareholders and is not an offer of shares
of the Funds. Shares are sold only through the currently
effective prospectus, which must precede or accompany this report.
NEUBERGER BERMAN
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
WWW.NBFUNDS.COM
[LOGO] PRINTED ON RECYCLED PAPER NMAAR9650899
<PAGE>
<PAGE>
NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY SERIES-registered trademark-
- -----------------------------------------------------------
GENESIS INSTITUTIONAL ANNUAL REPORT
AUGUST 31, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUND
CHAIRMAN'S LETTER A-4
PORTFOLIO COMMENTARY A-5
GROWTH OF A DOLLAR
CHART B-1
COMPARISON OF A
$10,000 INVESTMENT
FINANCIAL STATEMENTS B-2
FINANCIAL HIGHLIGHTS B-8
PER SHARE DATA
REPORT OF INDEPENDENT
AUDITORS B-10
THE PORTFOLIO
SCHEDULE OF INVESTMENTS C-1
TOP TEN EQUITY
HOLDINGS
FINANCIAL STATEMENTS C-6
FINANCIAL HIGHLIGHTS C-13
REPORT OF INDEPENDENT
AUDITORS C-14
DIRECTORY D-1
OFFICERS AND TRUSTEES D-2
</TABLE>
The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the fund name in this report are either
service marks or registered trademarks of Neuberger Berman Management Inc.
- -C-1999 Neuberger Berman Management Inc.
A-3
<PAGE>
CHAIRMAN'S LETTER October 1, 1999
Dear Fellow Shareholder,
In the summer of 1998, the sky appeared to be falling. Southeast Asian
economies had collapsed, Russia was imploding, and Latin America seemed to be on
the brink of financial disaster. Many investors feared that even the mighty U.S.
economy would falter, and they began dumping stocks indiscriminately.
At Neuberger Berman, we urged patience. We worked hard to assess the potential
consequences of overseas economic troubles on our own economy. We came to the
conclusion that things were not as bad as they seemed and opined that the drop
in the U.S. stocks should be viewed as a long-term buying opportunity. In my
letter in last year's Annual Report, I asked the rhetorical question, "Is this
the time to abandon equities?" and answered, "We think not." This turned out to
be good advice, as stocks rallied through most of fiscal 1999.
Where do we go from here? Over the near term, we can't predict. A positive
outlook for the U.S. and global economy must be tempered by concern that
domestic equities valuations are quite high by historical yardsticks. We believe
the only predictable thing in the financial markets is that vigorous investment
research and disciplined portfolio management can enhance long-term returns.
Sadly, this will be my last letter to you as Chairman of Neuberger Berman
Equity Funds. After thirty-nine years in the investment business, the last
twenty-five at Neuberger Berman, I am retiring. Although I will continue to
serve as a consultant to the company, I will miss the daily contact with all my
colleagues at Neuberger Berman and the opportunity to share my thoughts with
you. I leave with pride and confidence, however, that the Neuberger Berman
legacy lives on. Your assets remain in the hands of wise and experienced
managers.
Sincerely,
/s/ Stanley Egener
Stanley Egener
Chairman of the Board
Neuberger Berman Equity Assets
A-4
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Institutional
For the six and twelve month periods concluding August 31, 1999, Genesis
Institutional gained 11.12% and 19.30%, respectively, compared to the Russell
2000's 9.91% and 28.36% returns over the same time periods (See page B-1 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1999).*
We are pleased with the fund's solid gains in fiscal 1999 following a very
disappointing fiscal 1998. The fund's 12-month returns relative to its Russell
2000 benchmark, however, continue to reflect the large performance gap between
small-cap growth and small-cap value stocks. Indeed, for the fiscal year, the
Russell 2000 Growth Index gained 43.31% compared to the Russell 2000 Value
Index's 14.08% return.
We don't expect the wide performance gulf between growth and value stocks in
the small-cap arena to continue forever. Small-cap value stocks made up some
ground relative to small-cap growth stocks from April through July 1999 as
investor sentiment, especially in Internet stocks, seemed to turn from greed to
fear. We note that the flood of Internet IPOs (Initial Public Offerings) has
slowed to a trickle and that the majority of 1999's Internet IPOs are now
trading below their initial offering prices. We suspect that once-burned,
twice-shy small-cap investors may continue to rotate away from speculative
Internet stocks and into more reasonably valued small companies with operating
track records and positive cash flow and earnings.
At this juncture, however, the investing public is still shying away from
small-cap value stocks. Corporate acquirers, on the other hand, are bargain
hunting, as evidenced by accelerating takeover activity in this market sector.
More than a dozen of our holdings were taken over during this fiscal year and we
suspect more of our portfolio bargains will become targets in the year ahead. We
are also seeing corporate managements aggressively buying their own deeply
discounted stocks. The number of small-cap company share repurchase programs is
approaching the totals seen following the 1987 market crash. This gives us hope
that the investing public will soon become more enthusiastic.
A-5
<PAGE>
- ----------------------------------------------------------------------
Genesis Institutional (Cont'd)
In the Genesis portfolio during fiscal 1999, our energy investments, primarily
small oil services companies, posted impressive gains. They were among the
portfolio's poorest performers last year, but we added to our positions in the
energy sector, believing that as the global economy recovered, oil prices and
oil service company profits would rebound strongly. Oil has surged to $23 per
barrel, up from around $10 at the 1998 bottom, and we expect oil services
company earning to follow suit.
The portfolio's technology holdings also contributed to returns. On a relative
performance basis, our focus on what we believed were reasonably valued
technology stocks capable of consistent, if not spectacular, earnings growth
worked against us through most of first half fiscal 1999, when the Internet
stocks were sizzling. This strategy worked to our advantage in the second half,
when the "dot-com" stocks flamed out.
Portfolio disappointments include financial stocks, most notably small savings
and loans institutions, whose earnings were restrained by rising interest rates
and the flat yield curve. We believe modestly higher interest rates are already
baked into current valuations. Should interest rates stabilize around current
levels or drop, the financials could regain momentum. Separately, despite
recording decent operating results, our healthcare investments also languished.
This group remains under a cloud of uncertainty regarding changes in federal
insurance reimbursement programs; it also suffers from a general lack of
interest from small-cap investors focused on the hot technology sector. Going
forward, if our healthcare positions meet earnings expectations, we believe they
will receive a better diagnosis from investors.
Let us give you an example of a current portfolio holding that demonstrates
our value-oriented discipline. Bear in mind this is not a recommendation and we
may sell this stock without notice if circumstances change. Methode Electronics
has two businesses. The first, auto electronics components, has been a "steady
as she goes" growth business benefiting from the secular growth of electronic
systems in automobiles. Methode's second business, electronic components that
A-6
<PAGE>
- ----------------------------------------------------------------------
Genesis Institutional (Cont'd)
expand the bandwidth of telecommunications companies' networks, is considerably
more exciting. The Internet requires faster, higher capacity digital
transmission systems, so the demand for greater bandwidth is exploding. Methode
already has several leading telecommunications equipment companies on its
customer list. Yet, despite a promising start in this fast growth business, at
the close of this reporting period, Methode was trading at around 14 times next
calendar year's earnings estimates. We believe our 20% annual earnings growth
rate projections for Methode could prove conservative if the company's bandwidth
enhancing electronics business lives up to its potential. Even if it takes
longer to develop, we believe the stock is supported at current levels by its
stable auto electronics business.
In closing, the Genesis portfolio delivered solid returns in fiscal 1999. We
stuck with our discipline during a very difficult period for small-cap value
stocks. We see excellent value in our portfolio and remain confident these
bargains will attract more investor attention in the year ahead.
Sincerely,
/s/ Judith Vale /s/ Robert D'Alelio
Judith Vale and Robert D'Alelio
PORTFOLIO CO-MANAGERS
*The Russell 2000-Registered Trademark- Index is an unmanaged index consisting
of securities of the 2,000 issuers having the smallest capitalization in the
Russell 3000-Registered Trademark- Index, representing approximately 8% of the
Russell 3000 total market capitalization. The smallest company's market
capitalization is roughly $178 million. The Russell 2000-Registered Trademark-
Growth Index measures the performance of those Russell 2000-Registered
Trademark- Index companies with higher price-to-book ratios and higher
forecasted growth values. The Russell 2000-Registered Trademark- Value Index
measures the performance of those Russell 2000-Registered Trademark- Index
companies with lower price-to-book ratios and lower forecasted growth values.
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of these
indices are prepared or obtained by Neuberger Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio invests in many securities not included in the above-described
indices.
A-7
<PAGE>
- ----------------------------------------------------------------------
Genesis Institutional (Cont'd)
The composition, industries and holdings of the Portfolio are subject to
change. Genesis Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY
IN COMPANIES WITH SMALL MARKET CAPITALIZATIONS ARE SET FORTH IN THE PROSPECTUS.
Past performance is no guarantee of future results.
A-8
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Genesis Institutional
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Genesis Russell 2000-Registered Trademark-(2)
1 Year +19.30% +28.36%
5 Year +15.21% +12.31%
10 Year +11.42% +10.97%
Genesis Institutional Russell 2000
1989 $10,000 $10,000
1990 $7,847 $8,019
1991 $10,621 $10,525
1992 $11,163 $11,294
1993 $13,865 $14,967
1994 $14,526 $15,846
1995 $17,386 $19,146
1996 $21,093 $21,218
1997 $30,440 $27,362
1998 $24,711 $22,055
1999 $29,479 $28,309
</TABLE>
The performance information for Neuberger Berman Genesis Institutional is as
of August 31, 1999. Neuberger Berman Genesis Institutional started operating on
July 1, 1999. It has identical investment objectives and policies, and invests
in the same Portfolio as Neuberger Berman Genesis Fund ("Sister Fund"), which is
also managed by Neuberger Berman Management Inc. ("Management"). The performance
information shown in the above chart for the period before July 1, 1999, is for
the Sister Fund. Management voluntarily bears certain operating expenses that
exceed, in the aggregate, 0.85% of average daily net assets per annum of Genesis
Institutional. Absent such arrangement, the average annual total returns of
Genesis Institutional would have been less.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in Genesis Institutional and the return on
the investment both will fluctuate, and redemption proceeds may be higher or
lower than an investor's original cost.
2. The Russell 2000 Index is an unmanaged index that measures the performance of
the 2,000 issuers having the smallest capitalization in the Russell
3000-Registered Trademark- Index, representing approximately 8% of the Russell
2000 total market capitalization. The smallest company's market capitalization
is roughly $178 million. Please note that indices do not take into account any
fees and expenses of investing in the individual securities that they track, and
that individuals cannot invest directly in any index. Data about the performance
of this index are prepared or obtained by Management and include reinvestment of
all dividends and capital gain distributions. The Portfolio may invest in many
securities not included in the above-described index.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN
COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS.
B-1
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Institutional
<TABLE>
August
31,
(000'S OMITTED EXCEPT PER SHARE AMOUNT) 1999
---------
<S> <C>
ASSETS
Investment in Portfolio, at value (Note A) $224,006
Receivable for Trust shares sold 725
Receivable from administrator -- net (Note B) 14
---------
224,745
---------
LIABILITIES
Payable for Trust shares redeemed 493
Accrued expenses and other payables 28
---------
521
---------
NET ASSETS at value $224,224
---------
NET ASSETS consist of:
Par value $ 11
Paid-in capital in excess of par value 232,531
Accumulated undistributed net investment income 190
Accumulated net realized gains on investment 199
Net unrealized depreciation in value of investment (8,707)
---------
NET ASSETS at value $224,224
---------
SHARES OUTSTANDING
($.001 par value; unlimited shares authorized) 11,058
---------
NET ASSET VALUE, offering and redemption price per share $20.28
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-2
<PAGE>
STATEMENT OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Institutional
<TABLE>
For the
Period from
July 1, 1999
(Commencement
of Operations)
to
August 31,
(000'S OMITTED) 1999
---------------
<S> <C>
INVESTMENT INCOME
Investment income from Portfolio (Note A) $ 527
---------------
Expenses:
Administration fee (Note B) 59
Registration and filing fees 37
Legal fees 36
Shareholder reports 19
Auditing fees 4
Shareholder servicing agent fees 3
Custodian fees 2
Trustees' fees and expenses 1
Expenses from Portfolio (Notes A & B) 295
---------------
Total expenses 456
Expenses reimbursed by administrator and reduced by
custodian fee expense offset arrangement (Note B) (119)
---------------
Total net expenses 337
---------------
Net investment income 190
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM
PORTFOLIO (NOTE A)
Net realized gain on investment securities 454
Net unrealized depreciation of investment securities (8,707)
---------------
Net loss on investments from Portfolio (Note A) (8,253)
---------------
Net decrease in net assets resulting from operations $(8,063)
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-3
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Institutional
<TABLE>
Period from
July 1, 1999
(Commencement
of Operations)
to
August 31,
(000'S OMITTED) 1999
---------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 190
Net realized gain on investments from Portfolio
(Note A) 454
Net unrealized depreciation of investments from
Portfolio (Note A) (8,707)
---------------
Net decrease in net assets resulting from operations (8,063)
---------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 241,112
Payments for shares redeemed (8,825)
---------------
Net increase from Trust share transactions 232,287
---------------
NET INCREASE IN NET ASSETS 224,224
NET ASSETS:
Beginning of period --
---------------
End of period $224,224
---------------
Accumulated undistributed net investment income at end
of period $ 190
---------------
NUMBER OF TRUST SHARES:
Sold 11,479
Redeemed (421)
---------------
Net increase in shares outstanding 11,058
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Equity Series
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Genesis Institutional (the "Fund") is a separate
operating series of Neuberger Berman Equity Series (the "Trust"), a Delaware
business trust organized pursuant to a Trust Instrument dated September 22,
1998. The Trust is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and its shares are registered under the Securities Act of 1933,
as amended (the "1933 Act"). The Fund had no operations until July 1, 1999,
other than matters relating to its organization and registration as a
diversified, open-end management investment company under the 1940 Act, and
registration of its shares under the 1933 Act. The trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
The Fund seeks to achieve its investment objective by investing all of its
net investable assets in the Neuberger Berman Genesis Portfolio of Equity
Managers Trust (the "Portfolio") having the same investment objective and
policies as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio
(12.79% at August 31, 1999). The performance of the Fund is directly affected
by the performance of the Portfolio. The financial statements of the
Portfolio, including the Schedule of Investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
2) PORTFOLIO VALUATION: The Fund records its investment in the Portfolio at
value. Investment securities held by the Portfolio are valued as indicated in
the notes following the Portfolio's Schedule of Investments.
3) TAXES: The Fund is treated as a separate entity for U.S. Federal income tax
purposes. It is the intention of the Fund to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of investment company taxable income
and net capital gains (after reduction for any amounts available for U.S.
Federal income tax purposes as capital loss carryforwards) sufficient to
relieve it from all, or substantially all, U.S. Federal income taxes.
Accordingly, the Fund paid no U.S. Federal income taxes and no provision for
U.S. Federal income taxes was required.
B-5
<PAGE>
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund earns income, net of
Portfolio expenses, daily on its investment in the Portfolio. Income
dividends and distributions from net realized capital gains, if any, are
normally distributed in December. Income dividends and capital gain
distributions to shareholders are recorded on the ex-dividend date. To the
extent the Fund's net realized capital gains, if any, can be offset by
capital loss carryforwards, it is the policy of the Fund not to distribute
such gains.
The Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) EXPENSE ALLOCATION: The Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more funds are allocated in
proportion to the net assets of such funds, except where a more appropriate
allocation of expenses to each fund can otherwise be made fairly. Expenses
directly attributable to a fund are charged to that fund.
6) OTHER: All net investment income and realized and unrealized capital gains
and losses of the Portfolio are allocated pro rata among its respective funds
and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
The Fund retains Neuberger Berman Management Inc. ("Management") as its
administrator under an Administration Agreement ("Agreement"). Pursuant to this
Agreement the Fund pays Management an administration fee at the annual rate of
0.15% of the Fund's average daily net assets. The Fund indirectly pays for
investment management services through its investment in the Portfolio (see Note
B of Notes to Financial Statements of the Portfolio).
Management has voluntarily undertaken to reimburse the Fund through
December 31, 2002, for its operating expenses plus its pro rata share of the
Portfolio's operating expenses (including the fees payable to Management but
excluding interest, taxes, brokerage commissions, and extraordinary expenses)
which exceed, in the aggregate, 0.85% per annum of the Fund's average daily net
assets. For the period ended August 31, 1999, such excess expenses amounted to
$118,939.
As of August 31, 1999, all of the capital stock of Management is owned by
individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a
member firm of The New York Stock Exchange and sub-adviser to the Portfolio.
Several individuals who are officers and/or trustees of the Trust are also
principals of Neuberger and/or officers and/or directors of Management.
B-6
<PAGE>
The Fund also has a distribution agreement with Management. Management
receives no compensation therefor and no commissions for sales or redemptions of
shares of beneficial interest of the Fund.
The Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statement
of Operations under the caption Expenses from Portfolio, was a reduction of $15.
NOTE C -- INVESTMENT TRANSACTIONS:
During the period ended August 31, 1999, additions and reductions in the
Fund's investment in the Portfolio amounted to $239,871,000 and $7,844,000,
respectively.
B-7
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Institutional(1)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. It should be read in conjunction with the Portfolio's Financial
Statements and notes thereto.
<TABLE>
Period from
July 1,
1999(2) to
August 31,
1999
--------------
<S> <C>
Net Asset Value, Beginning of Period $21.01
--------------
Income From Investment Operations
Net Investment Income .02
Net Gains or Losses on Securities (both realized and
unrealized) (.75)
--------------
Total From Investment Operations (.73)
--------------
Net Asset Value, End of Period $20.28
--------------
Total Return(3)(4) -3.47%
--------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $224.2
--------------
Ratio of Gross Expenses to Average Net Assets(5)(6) .85%
--------------
Ratio of Net Expenses to Average Net Assets(6)(7) .85%
--------------
Ratio of Net Investment Income to Average Net Assets(6) .48%
--------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-8
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Genesis Institutional
1) The per share amounts and ratios which are shown reflect income and expenses,
including the Fund's proportionate share of the Portfolio's income and
expenses.
2) The date investment operations commenced.
3) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during the fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return would
have been lower if Management had not reimbursed certain expenses.
4) Not annualized.
5) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
6) Annualized.
7) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
Period From
July 1, 1999 to
August 31,
1999
- ------------------------------------------------------------------------------
<S> <C>
Net Expenses 1.15%
----------------
</TABLE>
B-9
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees of Neuberger Berman Equity Series and
Shareholders of Neuberger Berman Genesis Institutional
We have audited the accompanying statement of assets and liabilities of
Neuberger Berman Genesis Institutional, one of the series constituting the
Neuberger Berman Equity Series (the "Trust"), as of August 31, 1999, and the
related statement of operations, the statement of changes in net assets, and the
financial highlights for the period from July 1, 1999 (commencement of
operations) to August 31, 1999. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Genesis Institutional of Neuberger Berman Equity Series at August 31, 1999, the
results of its operations, the changes in its net assets, and the financial
highlights for the period from July 1, 1999 (commencement of operations) to
August 31, 1999, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 1, 1999
B-10
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Alliant Techsystems 2.8%
2. Dallas Semiconductor 2.7%
3. Newport News Shipbuilding 2.4%
4. Zebra Technologies 2.2%
5. AAR Corp. 2.2%
6. AptarGroup Inc. 2.1%
7. Trigon Healthcare 2.0%
8. Webster Financial 1.8%
9. United Stationers 1.7%
10. Cordant Technologies 1.6%
<CAPTION>
Market
Number Value(1)
of (000's
Shares omitted)
- --- ----------
<C> <S> <C>
COMMON STOCKS (96.5%)
AEROSPACE (6.7%)
1,771,350 AAR Corp. $ 37,863(2)
1,219,500 Aviall Inc. 13,567(2)(3)
658,700 Cordant Technologies 27,254
478,300 DONCASTERS PLC ADR 6,636(2)(3)
299,850 Ducommun Inc. 3,598(3)
205,400 Howmet International 3,672(3)
425,000 Ladish Co. 2,975(3)
344,700 Moog, Inc. Class A 11,289(3)
471,500 Orbital Sciences 10,461(3)
----------
117,315
----------
AUTOMOTIVE (0.7%)
607,200 Donaldson Co. 11,916
----------
BANKING & FINANCIAL (7.2%)
534,200 Bank United 18,330
573,100 Community First Bankshares 11,766
667,600 Cullen/Frost Bankers 17,441
331,400 Highland Bancorp 6,172(2)
291,000 Ocean Financial $ 5,202
1,008,300 Peoples Heritage Financial Group 16,952
116,212 Queens County Bancorp 3,196
726,675 Sterling Bancshares 8,720
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
300,350 Texas Regional Bancshares 7,678
1,163,400 Webster Financial 31,339
----------
126,796
----------
BASIC MATERIALS (0.5%)
230,200 Lone Star Industries 7,913
----------
BUILDING, CONSTRUCTION & FURNISHING (1.1%)
294,800 Lincoln Electric Holdings 5,970
273,600 Simpson Manufacturing 14,090(3)
----------
20,060
----------
BUSINESS SERVICES (3.0%)
1,075,600 Davox Corp. 14,991(2)(3)
343,500 Fair, Isaac & Co. 9,704
418,300 Navigant Consulting 18,353(3)
209,000 Valassis Communications 9,144(3)
----------
52,192
----------
CONSUMER CYCLICALS (0.4%)
417,600 Coachmen Industries 6,603
----------
CONSUMER PRODUCTS & SERVICES (5.7%)
801,000 Alberto-Culver Class A 17,272
530,637 Block Drug 21,325
101,800 Bush Boake Allen 2,653(3)
521,300 Church & Dwight 24,241
349,800 Matthews International 9,488
1,086,800 Ruddick Corp. 20,174
462,000 The First Years 4,995
----------
100,148
----------
DEFENSE (6.1%)
663,200 Alliant Techsystems $ 48,414(2)(3)
1,309,100 Newport News Shipbuilding 41,155
800,400 Primex Technologies 16,708(2)
----------
106,277
----------
DIAGNOSTIC EQUIPMENT (0.3%)
906,500 ADAC Laboratories 5,326
----------
ELECTRONICS (4.9%)
456,900 Benchmark Electronics 16,820(3)
951,900 Dallas Semiconductor 48,071
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
289,800 Etec Systems 12,751(3)
172,100 SCI Systems 8,573(3)
----------
86,215
----------
ENERGY (1.8%)
692,300 Cabot Oil & Gas 13,197
150,000 Cross Timbers Oil 1,856
808,290 Swift Energy 10,205(3)
875,800 Unit Corp. 6,733(3)
----------
31,991
----------
HEALTH CARE (9.8%)
977,800 Acuson Corp. 15,400(3)
174,600 Arrow International 5,063
275,400 CONMED Corp. 7,711(3)
709,000 DENTSPLY International 17,592
1,207,900 Haemonetics Corp. 23,630(3)
885,300 Mentor Corp. 20,694
389,950 Patterson Dental 15,988(3)
275,000 Respironics, Inc. 2,733(3)
503,700 STAAR Surgical 5,981(3)
940,700 Trigon Healthcare 34,159(3)
679,600 Universal Health Services Class B 22,682(3)
----------
171,633
----------
INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (7.2%)
356,300 BMC Industries $ 4,387
474,900 Brady Corp. 14,247
282,000 Dionex Corp. 11,227(3)
1,261,300 Hussmann International 21,442
369,700 IDEX Corp. 10,929
770,200 Kaydon Corp. 23,636
183,100 Roper Industries 6,557
814,400 SOS Staffing Services 4,835(2)(3)
1,247,400 Wallace Computer Services 26,663
203,750 Woodhead Industries 2,248
----------
126,171
----------
INSURANCE (3.5%)
910,200 Annuity and Life Re 20,138
660,800 FBL Financial Group 13,092
857,900 Scottish Annuity & Life Holdings 8,365
858,700 W. R. Berkley 19,535
----------
61,130
----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
LODGING (0.5%)
846,000 Prime Hospitality 7,878
----------
MACHINERY & EQUIPMENT (0.8%)
686,600 Gardner Denver Machinery 13,174(3)
----------
OFFICE EQUIPMENT (1.7%)
1,350,900 United Stationers 30,564(3)
----------
OIL SERVICES (9.5%)
390,700 Cal Dive International 14,700(3)
748,600 Friede Goldman International 9,170(3)
1,018,800 Global Industries 11,398(3)
938,100 IRI International 4,397(3)
619,500 Nabors Industries 16,843(3)
1,538,712 National-Oilwell 26,158(3)
793,400 Oceaneering International 15,918(3)
781,600 Offshore Logistics $ 9,135(3)
777,300 Pride International 11,562(3)
579,400 Smith International 27,051(3)
636,000 Tuboscope Inc. 9,262(3)
513,200 UTI Energy 10,264(3)
----------
165,858
----------
PACKING & CONTAINERS (2.1%)
1,450,100 AptarGroup Inc. 37,340
----------
PUBLISHING & BROADCASTING (2.2%)
155,239 Hearst-Argyle Television 3,929(3)
329,300 Houghton Mifflin 15,724
467,100 Meredith Corp. 16,203
78,866 Pulitzer Inc. 3,455
----------
39,311
----------
RESTAURANTS (1.2%)
890,050 Brinker International 21,361(3)
----------
RETAILING (2.7%)
527,968 99 Cents Only Stores 19,007(3)
471,600 Claire's Stores 8,872
340,000 ShopKo Stores 9,732(3)
273,800 Whole Foods Market 9,840(3)
----------
47,451
----------
TECHNOLOGY (8.0%)
798,700 Analysts International 10,683
242,000 Black Box 11,102(3)
</TABLE>
C-2
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ----------
<C> <S> <C>
543,600 CACI International 12,231(3)
2,201,600 Inprise Corp. 9,288(3)
322,400 Jack Henry & Associates 10,478
250,000 Keane, Inc. 5,422(3)
1,507,500 Methode Electronics Class A $ 27,135
1,009,900 Wind River Systems 16,095(3)
812,500 Zebra Technologies 38,187(3)
----------
140,621
----------
TRANSPORTATION, SHIPPING & FREIGHT (0.7%)
232,900 Air Express International 5,692
190,900 Circle International Group 4,725
213,600 Maritrans Inc. 1,081
----------
11,498
----------
UTILITIES, ELECTRIC & GAS (8.2%)
834,700 AGL Resources 15,077
326,000 Atmos Energy 8,170
282,500 Central Hudson Gas & Electric 11,936
190,200 Connecticut Energy 7,109
144,300 Eastern Enterprises 6,484
855,200 Montana Power 26,458
173,000 National Fuel Gas 8,142
180,300 NICOR Inc. 6,975
345,900 NUI Corp. 8,864
283,100 ONEOK, Inc. 8,794
213,500 Otter Tail Power 8,500
766,784 Sierra Pacific Resources 18,690
290,000 Washington Gas Light 7,739
----------
142,938
----------
TOTAL COMMON STOCKS (COST $1,548,759) 1,689,680
----------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.5%)
$26,740,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99, Maturity
Value $26,743,900, Collateralized by
$27,405,000 U.S. Treasury Notes,
5.875%, due 2/15/00 (Collateral Value
$27,543,505) (COST $26,740) $ 26,740(4)
----------
SHORT-TERM INVESTMENTS (3.6%)
10,000,000 American Express Credit Corp., 5.13%,
due 9/3/99 9,997
10,000,000 General Electric Capital Corp., 5.23%,
due 9/8/99 9,990
42,524,723 N&B Securities Lending Quality Fund, LLC 42,525
----------
TOTAL SHORT-TERM INVESTMENTS (COST
$62,512) 62,512(4)
----------
TOTAL INVESTMENTS (101.6%) (COST
$1,638,011) 1,778,932(5)
Liabilities, less cash, receivables and
other assets [(1.6%)] (27,828)
----------
TOTAL NET ASSETS (100.0%) $1,751,104
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-3
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Genesis Portfolio
1) Investment securities of the Portfolio are valued at the latest sales price;
securities for which no sales were reported, unless otherwise noted, are
valued at the mean between the closing bid and asked prices. The Portfolio
values all other securities by a method the trustees of Equity Managers Trust
believe accurately reflects fair value. Foreign security prices are furnished
by independent quotation services expressed in local currency values. Foreign
security prices are translated from the local currency into U.S. dollars
using current exchange rates. Short-term debt securities with less than 60
days until maturity may be valued at cost which, when combined with interest
earned, approximates market value.
2) Affiliated issuer (see Note E of Notes to Financial Statements).
3) Non-income producing security.
4) At cost, which approximates market value.
5) The cost of investments for U.S. Federal income tax purposes was
$1,638,468,000. At August 31, 1999, gross unrealized appreciation of
investments was $249,706,000 and gross unrealized depreciation of investments
was $109,242,000, resulting in net unrealized appreciation of $140,464,000,
based on cost for U.S. Federal income tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS
C-5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Portfolio
<TABLE>
August 31,
(000'S OMITTED) 1999
----------
<S> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of Investments:
Unaffiliated issuers $1,629,745
Non-controlled affiliated issuers 149,187
----------
1,778,932
Cash 8
Receivable for securities sold 16,148
Dividends and interest receivable 3,940
Prepaid expenses and other assets 57
----------
1,799,085
----------
LIABILITIES
Payable for collateral on securities loaned (Note A) 42,525
Accrued expenses and other payables 2,330
Payable for securities purchased 2,023
Payable to investment manager (Note B) 1,103
----------
47,981
----------
NET ASSETS Applicable to Investors' Beneficial Interests $1,751,104
----------
NET ASSETS consist of:
Paid-in capital $1,610,183
Net unrealized appreciation in value of investment
securities 140,921
----------
NET ASSETS $1,751,104
----------
*Cost of investments:
Unaffiliated issuers $1,490,335
Non-controlled affiliated issuers 147,676
----------
Total cost of investments $1,638,011
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-6
<PAGE>
STATEMENT OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Portfolio
<TABLE>
For the
Year Ended
August 31,
(000'S OMITTED) 1999
----------
<S> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 25,981
Dividend income -- non-controlled affiliated issuers 1,078
Interest income 5,441
----------
Total income 32,500
----------
Expenses:
Investment management fee (Note B) 13,245
Custodian fees (Note B) 342
Auditing fees 46
Legal fees 27
Insurance expense 26
Trustees' fees and expenses 25
Accounting fees 10
Miscellaneous 45
----------
Total expenses 13,766
Expenses reduced by custodian fee expense offset
arrangement (Note B) (5)
----------
Total net expenses 13,761
----------
Net investment income 18,739
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment securities sold in
unaffiliated issuers (111,789)
Net realized gain on investment securities sold in
non-controlled affiliated issuers 1,399
Change in net unrealized appreciation (depreciation) of
investment securities 413,682
----------
Net gain on investments 303,292
----------
Net increase in net assets resulting from operations $ 322,031
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Genesis Portfolio
<TABLE>
Year
Ended
August 31,
(000'S OMITTED) 1999 1998
--------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 18,739 $ 23,438
Net realized gain (loss) on investments (110,390) 35,406
Change in net unrealized appreciation (depreciation)
of investments 413,682 (545,041)
--------------------------
Net increase (decrease) in net assets resulting from
operations 322,031 (486,197)
--------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 528,302 1,557,053
Reductions (911,584) (342,152)
--------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests (383,282) 1,214,901
--------------------------
NET INCREASE (DECREASE) IN NET ASSETS (61,251) 728,704
NET ASSETS:
Beginning of year 1,812,355 1,083,651
--------------------------
End of year $1,751,104 $1,812,355
--------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Genesis Portfolio (the "Portfolio") is a separate
operating series of Equity Managers Trust ("Managers Trust"), a New York
common law trust organized as of December 1, 1992. Managers Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). Other regulated
investment companies sponsored by Neuberger Berman Management Inc.
("Management"), whose financial statements are not presented herein, also
invest in the Portfolio and other portfolios of Managers Trust.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolio's Schedule of Investments.
3) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date or, for certain foreign dividends, as soon as the Portfolio
becomes aware of the dividends. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, including accretion of original issue discount,
where applicable, and accretion of discount on short-term investments, is
recorded on the accrual basis. Realized gains and losses from securities
transactions are recorded on the basis of identified cost.
4) TAXES: Managers Trust intends to comply with the requirements of the Internal
Revenue Code. Each portfolio of Managers Trust also intends to conduct its
operations so that each of its investors will be able to qualify as a
regulated investment company. Each portfolio will be treated as a partnership
for U.S. Federal income tax purposes and is therefore not subject to U.S.
Federal income tax.
5) EXPENSE ALLOCATION: The Portfolio bears all costs of its operations. Expenses
incurred by Managers Trust with respect to any two or more portfolios are
allocated in proportion to the net assets of such portfolios, except where a
more appropriate allocation of expenses to each portfolio can otherwise be
made fairly. Expenses directly attributable to a portfolio are charged to
that portfolio.
6) SECURITY LENDING: Securities loans involve certain risks in the event a
borrower should fail financially, including delays or inability to recover
the lent securities or
C-9
<PAGE>
foreclose against the collateral. The investment manager, under the general
supervision of Managers Trust's Board of Trustees, monitors the
creditworthiness of the parties to whom the Portfolio makes security loans.
The Portfolio will not lend securities on which covered call options have
been written, or lend securities on terms which would prevent each of its
investors from qualifying as a regulated investment company. Effective
June 1, 1998, the Portfolio entered into a Securities Lending Agreement with
Morgan Stanley & Co. Incorporated ("Morgan"). The Portfolio receives cash
collateral equal to at least 100% of the current market value of the loaned
securities. The Portfolio invests the cash collateral in the N&B Securities
Lending Quality Fund, LLC ("investment vehicle"), which is managed by State
Street Bank and Trust Company ("State Street") pursuant to guidelines
approved by Managers Trust's investment manager. Income earned on the
investment vehicle is paid to Morgan monthly. The Portfolio receives a fee,
payable monthly, negotiated by the Portfolio and Morgan, based on the number
and duration of the lending transactions. At August 31, 1999, the value of
the securities loaned and the value of the collateral were $41,691,000 and
$42,525,000, respectively.
7) REPURCHASE AGREEMENTS: The Portfolio may enter into repurchase agreements
with institutions that the Portfolio's investment manager has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Portfolio
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the Portfolio
to obtain those securities in the event of a default under the repurchase
agreement. The Portfolio monitors, on a daily basis, the value of the
securities transferred to ensure that their value, including accrued
interest, is greater than amounts owed to the Portfolio under each such
repurchase agreement.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
The Portfolio retains Management as its investment manager under a Management
Agreement. For such investment management services, the Portfolio pays
Management a fee at the annual rate of 0.85% of the first $250 million of the
Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75% of
the next $250 million, 0.70% of the next $250 million, and 0.65% of average
daily net assets in excess of $1 billion. Prior to December 15, 1997, Management
had voluntarily agreed to waive a portion of the management fee borne directly
by the Portfolio and indirectly by any entity that invested in the Portfolio to
reduce the annual fee by 0.10% per annum of average daily net assets of the
Portfolio. Effective December 15, 1997, the above waiver was terminated.
As of August 31, 1999, all of the capital stock of Management is owned by
individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a
member firm of The New York Stock Exchange and sub-adviser to the Portfolio.
C-10
<PAGE>
Neuberger is retained by Management to furnish it with investment
recommendations and research information without added cost to the Portfolio.
Several individuals who are officers and/or trustees of Managers Trust are also
principals of Neuberger and/or officers and/or directors of Management.
The Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between the Portfolio and Morgan, Morgan had agreed to reimburse the
Portfolio for transaction costs incurred on security lending transactions
charged by the custodian through May 31, 1999. The impact of these arrangements,
respectively, reflected in the Statement of Operations under the caption
Custodian fees, was a reduction of $699 and $4,592.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended August 31, 1999, there were purchase and sale
transactions (excluding short-term securities) of $573,691,000 and $868,673,000,
respectively.
During the year ended August 31, 1999, brokerage commissions on securities
transactions amounted to $2,150,000, of which Neuberger received $1,035,000, and
other brokers received $1,115,000.
NOTE D -- LINE OF CREDIT
At August 31, 1999, the Portfolio was a holder of a single committed,
unsecured $100,000,000 line of credit with State Street, to be used only for
temporary or emergency purposes. Interest is charged on borrowings under this
agreement at the overnight Federal Funds Rate plus 0.75% per annum. A facility
fee of 0.07% (0.09% effective September 1, 1999) per annum of the available line
of credit is charged, of which the Portfolio has agreed to pay its pro rata
share, based on the ratio of its individual net assets to the net assets of all
the participants at the time the fee is due and payable. The fee is paid
quarterly in arrears. No compensating balance is required. Other investment
companies managed by Management also participate in this line of credit on the
same terms. Because several investment companies participate, there is no
assurance that the Portfolio will have access to the entire $100,000,000 at any
particular time. The Portfolio had no loans outstanding pursuant to this line of
credit at August 31, 1999, nor had the Portfolio utilized this line of credit at
any time prior to that date.
C-11
<PAGE>
NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
<TABLE>
<CAPTION>
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
AAR Corp. 1,748,650 60,900 38,200 1,771,350 $37,863,000
ADAC Laboratories** 1,003,100 42,200 138,800 906,500 5,326,000
Alliant Techsystems 648,500 110,900 96,200 663,200 48,414,000
Aviall Inc. 1,194,100 50,400 25,000 1,219,500 13,567,000
Davox Corp. 0 1,075,600 0 1,075,600 14,991,000
DONCASTERS PLC ADR 468,300 10,000 0 478,300 6,636,000
Eltron International** 420,000 0 420,000 0 0
Highland Bancorp 0 331,400 0 331,400 6,172,000
Inprise Corp.** 2,606,300 0 404,700 2,201,600 9,288,000
Pameco Corp.** 281,800 0 281,800 0 0
Primex Technologies 235,000 565,400 0 800,400 16,708,000
SOS Staffing Services 641,900 172,500 0 814,400 4,835,000
</TABLE>
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE
PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES.
**AT AUGUST 31, 1999, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED
WITH THE PORTFOLIO.
C-12
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .75% .72% .77% .85% --
----------------------------------------------------
Net Expenses .75% .72%(2) .77%(2) .85%(2) .94%(2)
----------------------------------------------------
Net Investment Income 1.02% 1.13% .32% .27% .25%
----------------------------------------------------
Portfolio Turnover Rate 33% 18% 18% 21% 37%
----------------------------------------------------
Net Assets, End of Year (in
millions) $1,751.1 $1,812.4 $1,083.7 $259.9 $142.2
----------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Had the investment manager not waived a portion of the management fee, the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
- -------------------------------------------------------------
Net Expenses .74% .87% .95% .97%
</TABLE>
C-13
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees of
Equity Managers Trust and
Owners of Beneficial Interest of Neuberger Berman Genesis Portfolio
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Neuberger Berman Genesis Portfolio,
one of the series constituting Equity Managers Trust (the "Trust"), as of
August 31, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999, by correspondence with the custodian and
brokers or other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Genesis Portfolio of Equity Managers Trust at August 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 1, 1999
C-14
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700 or 212-476-8800
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger Berman Funds
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
- -C- 1999 Neuberger Berman Management Inc.
D-1
<PAGE>
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Lawrence Zicklin
PRESIDENT AND TRUSTEE
Faith Colish
TRUSTEE
Howard A. Mileaf
TRUSTEE
Edward I. O'Brien
TRUSTEE
John T. Patterson, Jr.
TRUSTEE
John P. Rosenthal
TRUSTEE
Cornelius T. Ryan
TRUSTEE
Gustave H. Shubert
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
D-2
<PAGE>
Statistics and projections in this report
are derived from sources deemed to be
reliable but cannot be regarded as a
representation of future results of the Funds.
This report is prepared for the general
information of shareholders and is not an offer
of shares of the Funds. Shares are sold only
through the currently effective prospectus,
which must precede or accompany this report.
NEUBERGER BERMAN
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
www.nbfunds.com
[LOGO]NMAAR9630899
