As filed with the Securities and Exchange Commission on June 25, 1999
1933 Act Registration No. 333-66137
1940 Act Registration No. 811-09011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
-----
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ 2 ] [ ]
----- -----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 2 ] [ ]
(Check appropriate box or boxes)
NEUBERGER BERMAN EQUITY SERIES
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Neuberger Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
___ pursuant to paragraph (b)
_X__ 60 days after filing pursuant to paragraph (a)(1)
___ on pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on ________________ pursuant to paragraph (a)(2)
Neuberger Berman Equity Series is a "master/feeder fund." This
Post-Effective Amendment No. 2 includes a signature page for the master fund,
Equity Managers Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
NEUBERGER BERMAN GENESIS INSTITUTIONAL
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 2 ON FORM N-1A
This registration statement consists of the following papers and
documents:
Cover Sheet
Contents of Registration Statement on Form N-1A
NEUBERGER BERMAN GENESIS INSTITUTIONAL
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
2
<PAGE>
<PAGE>
[PHOTO] NEUBERGER BERMAN
NEUBERGER BERMAN
GENESIS INSTITUTIONAL-SM-
- --------------------------------------------------------------------------------
PROSPECTUS JUNE 28, 1999
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
<PAGE>
CONTENTS
- -----------------
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY SERIES
PAGE 2 ...... Genesis Institutional
YOUR INVESTMENT
7 ...... Maintaining Your Account
9 ...... Share Prices
10 ...... Distributions and Taxes
12 ...... Fund Structure
</TABLE>
The "Neuberger Berman" name and logo are service
marks of Neuberger Berman, LLC. "Neuberger Berman
Management Inc." and the fund name in this
prospectus are either service marks or registered
trademarks of Neuberger Berman Management Inc.
-C-1999 Neuberger Berman Management Inc.
<PAGE>
- ------------------------------------------------------------
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction
with Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than
$54.6 billion in total assets (as of March 31, 1999) and continue an asset
management history that began in 1939.
RISK INFORMATION
This prospectus discusses principal risks of investment in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - ALSO OFFERS THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH A FUND THAT
INVESTS USING A VALUE APPROACH
- - USES A MASTER/FEEDER STRUCTURE IN ITS PORTFOLIO; SEE PAGE 12 FOR INFORMATION
ON HOW IT WORKS
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF FUND
SHARES ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GENESIS INSTITUTIONAL
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS ROBERT W. D'ALELIO AND
JUDITH M. VALE
"WE SEEK OUT SMALL COMPANIES THAT ARE LITTLE-KNOWN AND OFTEN ARE IN LESS
GLAMOROUS INDUSTRIES. FUTURE GROWTH IS ONE AREA WE FOCUS ON, BUT EQUALLY
IMPORTANT TO US IS EVIDENCE OF SOLID PERFORMANCE
AND A PROVEN MANAGEMENT TEAM. AND AS VALUE INVESTORS, WE LOOK
FOR STOCKS THAT ARE SELLING AT ATTRACTIVE PRICES."
2
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[ICON]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total
market value of no more than $1.5 billion at the time the fund first invests in
them. The fund may continue to hold or add to a position in a stock after it has
grown beyond $1.5 billion. The fund seeks to reduce risk by diversifying among
many companies and industries.
The managers look for undervalued companies whose current product lines and
balance sheets are strong. Factors in identifying these firms may include:
- - above-average returns
- - an established market niche
- - circumstances that would make it difficult for new competitors to enter the
market
- - the ability to finance their own growth
- - sound future business prospects
This approach is designed to let the fund benefit from potential increases in
stock prices while limiting the risks typically associated with small-cap
stocks.
At times, the managers may emphasize certain industries that they believe will
benefit from market or economic trends.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Genesis Institutional 3
<PAGE>
MAIN RISKS
- ------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
[ICON] Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Stock prices of many smaller companies are based on future expectations. The
portfolio managers tend to focus on companies whose financial strength is
largely based on existing business lines rather than projected growth. While
this can help reduce risk, the fund is still subject to many of the risks of
small-cap investing. These include the risk that the fund's holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of a given sector that the managers
decided to focus on
With a value approach, there is also the risk that stocks may remain
undervalued during a given period. This may happen because value stocks as a
category lose favor with investors compared to growth stocks or because the
managers failed to anticipate which stocks or industries would benefit from
changing market or economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ICON] The bar chart below shows how
performance has varied from year to year. The table below the chart shows what
the returns would equal if you averaged out actual performance over
various lengths of time. This information is based on past performance; it's not
a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1989 17.25
'90 -16.24
'91 41.55
'92 15.62
'93 13.89
'94 -1.82
'95 27.31
'96 29.86
'97 34.89
'98 -6.95
BEST QUARTER: Q1 '91, up 25.05%
WORST QUARTER: Q3 '90, down 21.81%
Year-to-date performance as of 3/31/99: down
9.42%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/98*
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- ----------------------------------------------------------------
GENESIS FUND -6.95 15.30 14.07
Russell 2000 Index -2.55 11.87 12.92
</TABLE>
The Russell 2000 is an unmanaged index of U.S. small-cap stocks.
* WHEN THIS PROSPECTUS WAS WRITTEN, THE FUND WAS NEW AND HAD NO PERFORMANCE
RECORD OF ITS OWN. PERFORMANCE RESULTS SHOWN ARE ACTUALLY THOSE OF ANOTHER
NEUBERGER BERMAN FUND THAT BEGAN OPERATIONS IN 1988, AND INVESTS IN THE SAME
PORTFOLIO OF SECURITIES. BECAUSE GENESIS INSTITUTIONAL HAS LOWER EXPENSES, ITS
PERFORMANCE WOULD HAVE BEEN BETTER THAN THE OLDER FUND HAD. THAT OLDER FUND IS
NOT OFFERED IN THIS PROSPECTUS.
Genesis Institutional 5
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------
MANAGEMENT
JUDITH M. VALE and ROBERT W. D'ALELIO are Vice Presidents of Neuberger Berman
Management and principals of Neuberger Berman, LLC. Vale and D'Alelio have been
senior members of the Small Cap Group since 1992 and 1996, respectively. Vale
has co-managed the fund's assets since 1994. D'Alelio joined the firm in 1996
and has co-managed the fund's assets since 1997. From 1988 to 1996, he was a
senior portfolio manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For investment management services, the fund
will pay Neuberger Berman Management a fee at the annual rate of 0.85% of the
first $250 million of average 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
net assets in excess of $1 billion.
[ICON] The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management fees 0.88
PLUS: Distribution (12b-1) fees None
Other expenses** 0.13
....
EQUALS: Total annual operating expenses 1.01
MINUS: Expense reimbursement* 0.16
....
EQUALS: Net expenses 0.85
</TABLE>
* NEUBERGER BERMAN MANAGEMENT HAS AGREED TO REIMBURSE CERTAIN EXPENSES OF THE
FUND THROUGH 12/31/02, SO THAT THE TOTAL ANNUAL OPERATING EXPENSES OF THE
FUND ARE LIMITED TO 0.85% OF AVERAGE NET ASSETS. THIS ARRANGEMENT DOES NOT
COVER INTEREST, TAXES, BROKERAGE COMMISSIONS, AND EXTRAORDINARY EXPENSES. THE
TABLE INCLUDES COSTS PAID BY THE FUND AND ITS SHARE OF MASTER PORTFOLIO
COSTS. FOR MORE INFORMATION ON MASTER/FEEDER FUNDS, SEE "FUND STRUCTURE" ON
PAGE 12.
** OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- --------------------------------------
Expenses $87 $271
</TABLE>
6 Neuberger Berman
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- ------------------------------------------------------------
YOUR INVESTMENT PLAN
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment plan. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment plan may charge fees,
which are generally in addition to those described in this prospectus.
Shares of the fund are available to you for investment through retirement
savings programs such as pension and profit sharing plans and employee benefit
trusts. The minimum initial investment is $5 million. Neuberger Berman
Management reserves the right to waive this minimum investment for certain
investment plans.
To buy or sell shares of the fund described in this prospectus, contact your
investment plan. All investments must be made in U.S. dollars, and investment
checks must be drawn on a U.S. bank. The fund does not issue certificates for
shares.
Most investment plans allow you to take advantage of the Neuberger Berman fund
exchange program, which is designed for moving money from one Neuberger Berman
fund to another through an exchange of shares. However, this privilege can be
withdrawn from any investor that we believe is trying to "time the market" or is
otherwise making exchanges that we judge to be excessive. Frequent exchanges can
interfere with fund management and affect costs and performance for other
shareholders.
Neuberger Berman 7
<PAGE>
MAINTAINING YOUR
ACCOUNT CONTINUED
- -------------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected
in its share price until the fund makes a distribution. At that time, the amount
of the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before the fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry;
generally, there are no tax consequences to you in this case.
Under certain circumstances, the fund reserves the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
8 Your Investment
<PAGE>
SHARE PRICES
- ------------------------------------------------------------
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of the fund's
securities changes every business
day, the share price usually changes as well.
When valuing portfolio securities, the fund uses market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. The fund may also use these methods to
value certain types of illiquid securities.
Because the fund does not have a sales charge, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because the fund
does not charge any fee for selling shares, the fund pays you the full share
price when you sell shares. Remember that your investment plan may charge fees
for its services.
The fund is open for business every day the New York Stock Exchange is open. In
general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment plan to find out by what time your order must be received in order to
be processed the same day. The fund calculates its share price as of the end of
regular trading on the Exchange on business days, usually 4:00 p.m. eastern
time. Depending on when your investment plan accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by the fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
Neuberger Berman 9
<PAGE>
DISTRIBUTIONS
AND TAXES
- ------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, and whether
you owe alternative minimum tax.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment plan
sends you every January. It details the distributions you received during the
past year and shows their tax status. A separate statement covers your
transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund makes any distributions once a year in
December.
Consult your investment plan about whether your income and capital gains
distributions from the fund will be reinvested in the fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them. Fund distributions to Roth IRAs,
other individual retirement accounts and qualified retirement plans generally
are tax-free. Eventual withdrawals from a Roth IRA of those amounts also may be
tax-free, while withdrawals from other retirement accounts and plans generally
are subject to tax.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as long-term capital gains. The tax treatment of capital gain
distributions depends on how long the fund held the securities it sold, not when
you bought your shares of the fund or whether you reinvested your distributions.
10 Your Investment
<PAGE>
- ------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the fund could be affected by problems relating to the
conversion of European currencies into the Euro, occurring in steps between now
and 7/1/02, and the ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the fund's portfolio will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize
a gain or loss. These transactions, which include exchanges between funds,
usually have tax implications. The exception, once again, is tax-advantaged
retirement accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
Neuberger Berman 11
<PAGE>
FUND STRUCTURE
- ------------------------------------------------------------
The fund uses a "master/feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds. In
this prospectus we have used the word "fund" to mean the feeder fund and its
master portfolio.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself. The fund is not currently contemplating such a move.
12 Your Investment
<PAGE>
- ------------------------------------------------------------
OBTAINING INFORMATION
You can obtain a shareholder report, SAI, and other information from your
investment plan, or from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
212-476-8800
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
NEUBERGER BERMAN GENESIS INSTITUTIONAL
- - No load
- - No sales charges
- - No 12b-1 fees
If you'd like further details about this fund, you can request a free copy of
the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio managers about strategies and market conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information about this fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about the fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
Investment manager:
NEUBERGER BERMAN MANAGEMENT INC.
Sub-adviser:
NEUBERGER BERMAN, LLC
[LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue
New York, NY 10158-0180
SEC file number: 811-09011
- --------------------------------------------------------------------------------
NEUBERGER BERMAN GENESIS INSTITUTIONAL AND GENESIS PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED June 28, 1999
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger Berman GENESIS Institutional ("Fund"), a series of Neuberger
Berman Equity Series ("Trust"), is a no-load mutual fund that offers shares
pursuant to a Prospectus dated June 28, 1999. The Fund invests all of its net
investable assets in Neuberger Berman GENESIS Portfolio ("Portfolio").
SHARES OF THE FUND ARE AVAILABLE TO YOU FOR INVESTMENT THROUGH RETIREMENT
SAVINGS PROGRAMS SUCH AS PENSION AND PROFIT SHARING PLANS AND EMPLOYEE BENEFIT
TRUSTS. THE MINIMUM INITIAL INVESTMENT IS $5 MILLION.
The Fund's Prospectus provides basic information that an investor should
know before investing. A copy of the Prospectus may be obtained, without charge,
from Neuberger Berman Management Inc. ("NB Management"), Institutional Services,
605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or by calling
800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus and
should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
The "Neuberger Berman" name and logo are service marks of Neuberger
Berman, LLC. "Neuberger Berman Management Inc." and the fund and portfolio names
in this SAI are either service marks or registered trademarks of Neuberger
Berman Management Inc. (C)1999 Neuberger Berman Management Inc.
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................3
Neuberger Berman GENESIS Portfolio...............................4
Neuberger Berman GENESIS Institutional...........................6
Additional Investment Information................................7
PERFORMANCE INFORMATION.....................................................20
Total Return Computations.............................................20
Comparative Information...............................................21
Other Performance Information.........................................22
CERTAIN RISK CONSIDERATIONS.................................................22
TRUSTEES AND OFFICERS.......................................................22
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................28
Investment Manager and Administrator..................................28
Management and Administration Fees....................................28
Sub-Adviser...........................................................29
Investment Companies Managed..........................................30
Management and Control of NB Management...............................33
DISTRIBUTION ARRANGEMENTS...................................................33
ADDITIONAL PURCHASE INFORMATION.............................................34
Share Prices and Net Asset Value......................................34
ADDITIONAL EXCHANGE INFORMATION.............................................34
ADDITIONAL REDEMPTION INFORMATION...........................................35
Suspension of Redemptions.............................................35
Redemptions in Kind...................................................35
i
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................35
ADDITIONAL TAX INFORMATION..................................................36
Taxation of the Fund..................................................36
Taxation of the Portfolio.............................................37
Taxation of the Fund's Shareholders...................................39
PORTFOLIO TRANSACTIONS......................................................39
Portfolio Turnover....................................................42
REPORTS TO SHAREHOLDERS.....................................................43
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................43
CUSTODIAN AND TRANSFER AGENT................................................45
INDEPENDENT AUDITORS/ACCOUNTANTS............................................45
LEGAL COUNSEL...............................................................46
REGISTRATION STATEMENT......................................................46
FINANCIAL STATEMENTS........................................................46
LEGAL COUNSEL...............................................................46
Appendix A.................................................................A-1
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
ii
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware business
trust that is registered with the Securities and Exchange Commission ("SEC") as
a diversified open-end management investment company. The Fund seeks its
investment objective by investing all of its net investable assets in the
Portfolio, a series of Equity Managers Trust that has an investment objective
identical to, and a name similar to, that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. Equity Managers Trust is an open-end
management investment company managed by NB Management.
The following information supplements the discussion in the Prospectus of
the investment objective, policies, and limitations of the Fund and Portfolio.
The investment objective and, unless otherwise specified, the investment
policies and limitations of the Fund and Portfolio are not fundamental. Any
investment objective, policy or limitation that is not fundamental may be
changed by the trustees of the Trust ("Fund Trustees") or of Equity Managers
Trust ("Portfolio Trustees") without shareholder approval. The fundamental
investment policies and limitations of the Fund or Portfolio may not be changed
without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of the Fund
or Portfolio represented at a meeting at which more than 50% of the outstanding
Fund or Portfolio shares are represented, or
(2) a majority of the outstanding shares of the Fund or Portfolio.
These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
Investment Policies and Limitations
- -----------------------------------
The Fund has the following fundamental investment policy, to enable it to
invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
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The following investment policies and limitations are fundamental:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that the Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolio does not
consider foreign currencies or forward contracts to be physical commodities.
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The following investment policies and limitations are non-fundamental:
1. BORROWING. The Portfolio may not purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of
the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any security if,
as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
6. PLEDGING. The Portfolio may not pledge or hypothecate any of its
assets, except that (i) the Portfolio may pledge or hypothecate up to 15% of its
total assets to collateralize a borrowing permitted under fundamental policy 1
above or a letter of credit issued for a purpose set forth in that policy and
(ii) the Portfolio may pledge or hypothecate up to 5% of its total assets in
connection with its entry into any agreement or arrangement pursuant to which a
bank furnishes a letter of credit to collateralize a capital commitment made by
the Portfolio to a mutual insurance company of which the Portfolio is a member.
Although the Portfolio does not have policies limiting its investment in
warrants, it currently does not intend to invest in warrants unless acquired in
units or attached to securities.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, the
Portfolio may invest up to 100% of its total assets in cash and cash
equivalents, U.S. Government and Agency Securities, commercial paper and certain
other money market instruments, as well as repurchase agreements collateralized
by the foregoing.
Investment Insight
- ------------------
Neuberger Berman's commitment to its asset management approach is
reflected in the more than $125 million the organization's principals, employees
and their families have invested in the Neuberger Berman mutual funds.
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Neuberger Berman GENESIS Portfolio
----------------------------------
Dedicated primarily to small-capitalization stocks (companies with total
market value of outstanding common stock of up to $1.5 billion at the time the
Portfolio invests), Neuberger Berman GENESIS Portfolio is devoted to the same
value principles as most of the other equity funds managed by NB Management. The
Portfolio is comprised of small-cap stocks with solid earnings today, not just
promises for tomorrow.
Many people think that small-capitalization stock funds are predominantly
invested in high-risk companies. That is not necessarily the case. The Portfolio
looks for the same fundamentals in small-capitalization stocks as other
portfolios look for in stocks of larger companies. The portfolio co-managers
stick to the areas they understand. They look for the most persistent earnings
growth at the lowest multiple, as well as for well-established companies with
entrepreneurial management and sound finances. Also considered are catalysts to
exposing value, such as management changes and new product lines. Often, these
are firms that have suffered temporary setbacks or undergone a restructuring.
The Portfolio's motto is "boring is beautiful." Instead of investing in
trendy, high-priced stocks that tend to hurt shareholders on the downside, the
Portfolio looks for little-known, solid, growing companies whose stocks the
managers believe are wonderful bargains.
AN INTERVIEW WITH THE PORTFOLIO CO-MANAGER
Q: If I already own a large-cap stock fund, why should I consider
investing in a small-cap fund as well?
A: Look at how fast a sapling grows compared to, say, a mature tree.
Much of the same can be true about companies. It's possible for a smaller
company to grow 50% faster than an IBM or a Coca-Cola.
So, many small-cap stocks offer superior growth potential. Consider the
cereal you eat, the detergent you use, the coffee you drink -- and imagine if
you had invested in these products BEFORE they became household names. If you
had invested only in the blue-chip companies of the day, you would have missed
out on these opportunities.
Of course, we're not advocating that an investor's portfolio consist only
of small-cap stock funds. It pays to diversify. Let's look back about 25 years.
While past performance cannot indicate future performance, small-cap stocks
outperformed larger-cap stocks 15 of the years from 1974 to 1998, which means
larger-cap stocks did better the rest of the time.1/
- ---------------------------
1/ Results are on a total return basis and include reinvestment of all dividends
and other distributions. Small-cap stocks are represented by the fifth
capitalization quintile of stocks on the NYSE from 1974 to 1981 and performance
of the Dimensional Fund Advisors (DFA) Small Company Fund from 1982 to 1998.
Larger-cap stocks are represented by the S&P 500 Index, an unmanaged group of
stocks. Please note that indices do not take into account any fees or expenses
of investing in the individual securities that they track. Data about these
indices are prepared or obtained by NB Management. The Portfolio may invest in
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Q: Neuberger Berman GENESIS Institutional is classified as a "small-cap
value fund." To many people, "small-cap value" is an oxymoron.
Can you clarify the Portfolio's investment approach?
A: We understand the confusion. After all, a lot of people equate
"small-cap" with "growth." They also equate "value" with "cheap." At Neuberger
Berman GENESIS Portfolio, we're 100% behind finding GROWING small-cap companies
- -- what we believe are highly profitable companies with solid records and
promising futures. So where do we part company with managers who follow a
"growth-oriented" investment style? It comes down to how much growth and at what
price investors are willing to pay a premium for. We focus on securities we
believe are undervalued in the marketplace, based on future growth prospects,
and purchase them at significant discounts. They may be found in mundane,
perhaps even boring, industries. Remember, the same glamorous appeal that
attracts so many growth investors also attracts competitors.
In that respect, we're "value" managers. Yet we'd like to make this point
clear: Low price-to-earnings multiples, in and of themselves, cannot justify a
"buy" decision. When we search for growing, high-quality small-cap companies
selling at what we feel are bargain prices, we ask ourselves: Is the company
cheap for a good reason? Or, does it have the financial muscle and the
management talent to make it into the big leagues?
Q: Let's turn to specifics. What criteria are used to decide which
small-cap companies make the cut -- and which ones don't?
A: Over the years, we've seen hundreds of small-cap companies that
flourished and just as many that failed to deliver on their early promises. What
made the difference? While every case is unique, here are a few important traits
of the winners.
First of all, a successful small-cap company normally produces high
returns. In practice, this means the business has a number of barriers to entry.
Perhaps the company has a technology that's hard to duplicate. Or maybe it can
make a product at a substantially lower cost than anyone else. Unlike most
businesses, it has an advantage that allows it to continue earning above-market
returns.
In addition to having a competitive edge, a successful small-cap company
should generate healthy cash flow. With excess cash, a company has the ability
to finance its own growth without diluting the ownership stake of existing
stockholders by issuing more shares.
No small-cap company can grow without having the right people on board.
That's why we spend so much time meeting the CEOs and CFOs of small-cap
companies. While we question the managers about future plans and strategies, we
spend as much time evaluating them as people. Do they seem honest and capable?
Making portfolio decisions is a lot about making character judgments -- who has
the stuff to manage a growing company, and who doesn't.
(..continued)
many securities not included in the above-described indices. Source: STOCKS,
BONDS, BILLS AND INFLATION 1998 YEARBOOKTM, Ibbotson Associates, Chicago
(annually updates work by Roger G. Ibbotson and Rex A. Sinquefield). Used with
permission. All rights reserved.
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THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS
PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE
PROSPECTUS.
* * * * *
The Portfolio invests in a wide array of stocks, and no single stock makes
up more than a small fraction of the Portfolio's total assets. Of course, the
Portfolio's holdings are subject to change.
GENESIS INVESTORS CAN EXPECT:
o A small-cap value bias
o A philosophy that is independent of popular investment trends
o Small companies, which the managers believe have potentially big
opportunities
A SMALL-CAP VALUE BIAS
The portfolio co-managers employ a value bias in their stock selection process.
They comb the universe of small-cap stocks specifically looking for those they
consider cheap compared to the market as a whole. Depending on current market
conditions, they sometimes find stocks that are cheap on an absolute basis as
well. They primarily choose from a universe of small-cap companies whose total
market valuation is less than $1.5 billion at the time of initial investment.
The characteristics they look for may include above average returns, established
market niches, high barriers to entry, strong capital bases, and sound future
business prospects.
A PHILOSOPHY THAT IS INDEPENDENT OF POPULAR INVESTMENT TRENDS
The portfolio co-managers focus on strong companies in industry niches that are
often overlooked by investors because they lack an exciting new product or
innovation. They aren't interested in buying experimental or cutting-edge
technology names that often trade on high future expectations but have no
established record of earnings. The rationale behind their approach is that
companies in what may be considered "unexciting" industries by some, such as
utilities and oil services, are a safer point of entry into the small-cap
universe because, as they put it, "if there's not a lot of expectation built
into a company, then it tends not to disappoint."
SMALL COMPANIES, WHICH THE MANAGERS BELIEVE HAVE POTENTIALLY BIG OPPORTUNITIES
The portfolio co-managers favor the small-cap arena because they think it
abounds with opportunities for the long-term investor, specifically small-caps'
potential ability to grow earnings dramatically over time. According to them,
unlike large-cap stocks, small-cap companies are starting from a very low base
and therefore may have the ability to grow dramatically.
NEUBERGER BERMAN GENESIS INSTITUTIONAL
- --------------------------------------
FUND SUMMARY
o Primary Investments: US small-cap stocks
o Benchmark: Russell 2000 Index
o Investing style: Value
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DISCIPLINED INVESTMENT PROCESS
- ------------------------------
o Qualitative characteristics
o Low price-to-earnings
o Low price-to-cashflow
o Strong balance sheet
o History of financial returns
o One-on-One Company Meetings
o 500 face-to-face meetings per year
o Phone contact with management
o Meet with company managers, their competitors, customers, and
suppliers
o Focus on
o Barriers to Entry
o Free cash flow
o Above-average, sustainable growth prospects
o Competent, prudent management
o Recurring revenue streams
o Best Ideas
o Small-cap
o Value
o Low volatility
o Superior performance
Additional Investment Information
---------------------------------
The Portfolio may make the following investments, among others, although
it may not buy all of the types of securities or use all of the investment
techniques that are described.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
expected to be sold within seven days at approximately the price at which they
are valued. These may include unregistered or other restricted securities and
repurchase agreements maturing in greater than seven days. Illiquid securities
may also include commercial paper under section 4(2) of the 1933 Act, as
amended, and Rule 144A securities (restricted securities that may be traded
freely among qualified institutional buyers pursuant to an exemption from the
registration requirements of the securities laws); these securities are
considered illiquid unless NB Management, acting pursuant to guidelines
established by the trustees of Equity Managers Trust, determines they are
liquid. Generally, foreign securities freely tradable in their principal market
are not considered restricted or illiquid. Illiquid securities may be difficult
for the Portfolio to value or dispose of due to the absence of an active trading
market. The sale of some illiquid securities by the Portfolio may be subject to
legal restrictions which could be costly to the Portfolio.
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<PAGE>
POLICIES AND LIMITATIONS. The Portfolio may invest up to 15% of its
net assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio purchases
securities from a bank that is a member of the Federal Reserve System or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. Costs, delays, or losses
could result if the selling party to a repurchase agreement becomes bankrupt or
otherwise defaults. NB Management monitors the creditworthiness of sellers.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. The Portfolio may not
enter into a repurchase agreement with a maturity of more than seven days if, as
a result, more than 15% of the value of its net assets would then be invested in
such repurchase agreements and other illiquid securities. The Portfolio may
enter into a repurchase agreement only if (1) the underlying securities are of a
type that the Portfolio's investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities, including
accrued interest, at all times equals or exceeds the repurchase price, and (3)
payment for the underlying securities is made only upon satisfactory evidence
that the securities are being held for the Portfolio's account by its custodian
or a bank acting as the Portfolio's agent.
SECURITIES LOANS. The Portfolio may lend securities to banks, brokerage
firms, and other institutional investors judged creditworthy by NB Management,
provided that cash or equivalent collateral, equal to at least 100% of the
market value of the loaned securities, is continuously maintained by the
borrower with the Portfolio. The Portfolio may invest the cash collateral and
earn income, or it may receive an agreed upon amount of interest income from a
borrower who has delivered equivalent collateral. During the time securities are
on loan, the borrower will pay the Portfolio an amount equivalent to any
dividends or interest paid on such securities. These loans are subject to
termination at the option of the Portfolio or the borrower. The Portfolio may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Portfolio does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
NB Management believes the risk of loss on these transactions is slight because,
if a borrower were to default for any reason, the collateral should satisfy the
obligation. However, as with other extensions of secured credit, loans of
portfolio securities involve some risk of loss of rights in the collateral
should the borrower fail financially.
POLICIES AND LIMITATIONS. The Portfolio may lend portfolio securities with
a value not exceeding 33-1/3% of its total assets to banks, brokerage firms, or
other institutional investors judged creditworthy by NB Management. Borrowers
are required continuously to secure their obligations to return securities on
loan from the Portfolio by depositing collateral in a form determined to be
satisfactory by the Portfolio Trustees. The collateral, which must be marked to
market daily, must be equal to at least 100% of the market value of the loaned
securities, which will also be marked to market daily.
8
<PAGE>
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest
in restricted securities, which are securities that may not be sold to the
public without an effective registration statement under the 1933 Act. Before
they are registered, such securities may be sold only in a privately negotiated
transaction or pursuant to an exemption from registration. In recognition of the
increased size and liquidity of the institutional market for unregistered
securities and the importance of institutional investors in the formation of
capital, the SEC has adopted Rule 144A under the 1933 Act. Rule 144A is designed
to facilitate efficient trading among institutional investors by permitting the
sale of certain unregistered securities to qualified institutional buyers. To
the extent privately placed securities held by the Portfolio qualify under Rule
144A and an institutional market develops for those securities, the Portfolio
likely will be able to dispose of the securities without registering them under
the 1933 Act. To the extent that institutional buyers become, for a time,
uninterested in purchasing these securities, investing in Rule 144A securities
could increase the level of the Portfolio's illiquidity. NB Management, acting
under guidelines established by the Portfolio Trustees, may determine that
certain securities qualified for trading under Rule 144A are liquid. Regulation
S under the 1933 Act permits the sale abroad of securities that are not
registered for sale in the United States.
Where registration is required, the Portfolio may be obligated to pay all
or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
for which no market exists are priced by a method that the Portfolio Trustees
believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities, including
Rule 144A securities, are illiquid, purchases thereof will be subject to the
Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of the Portfolio's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, the
Portfolio will deposit in a segregated account with its custodian cash or
appropriate liquid securities, marked to market daily, in an amount at least
equal to the Portfolio's obligations under the agreement.
FOREIGN SECURITIES. The Portfolio may invest in U.S. dollar-denominated
securities of foreign issuers (including banks, governments, and
quasi-governmental organizations) and foreign branches of U.S. banks, including
negotiable certificates of deposit ("CDs"), bankers' acceptances and commercial
paper. While investments in foreign securities are intended to reduce risk by
providing further diversification, such investments involve sovereign and other
risks, in addition to the credit and market risks normally associated with
domestic securities. These additional risks include the possibility of adverse
political and economic developments (including political instability,
9
<PAGE>
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
The Portfolio also may invest in equity, debt, or other income-producing
securities that are denominated in or indexed to foreign currencies, including
(1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits,
and bankers' acceptances issued by foreign banks, (3) obligations of other
corporations, and (4) obligations of foreign governments and their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding paragraph, and the additional risks of (1) adverse changes in foreign
exchange rates, and (2) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the United
States). Additionally, dividends and interest payable on foreign securities (and
gains realized on disposition thereof) may be subject to foreign taxes,
including taxes withheld from those payments. Commissions on foreign securities
exchanges are often at fixed rates and are generally higher than negotiated
commissions on U.S. exchanges, although the Portfolio endeavors to achieve the
most favorable net results on portfolio transactions.
Foreign securities often trade with less frequency and in less volume than
domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement procedures.
In certain markets, there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when a portion of the assets of the Portfolio are uninvested and no
return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
The Portfolio may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or
unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers of
the securities underlying sponsored ADRs, but not unsponsored ADRs, are
10
<PAGE>
contractually obligated to disclose material information in the United States.
Therefore, the market value of unsponsored ADRs may not reflect the effect of
such information. EDRs and IDRs are receipts typically issued by a European bank
or trust company evidencing its ownership of the underlying foreign securities.
GDRs are receipts issued by either a U.S. or non-U.S. banking institution
evidencing its ownership of the underlying foreign securities and are often
denominated in U.S. dollars.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, the Portfolio may not
purchase any such security if, as a result, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within those limitations, however, the Portfolio is not restricted
in the amount it may invest in securities denominated in any one foreign
currency.
Investments in securities of foreign issuers are subject to the
Portfolio's quality standards. The Portfolio may invest only in securities of
issuers in countries whose governments are considered stable by NB Management.
FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES AND INDICES, FORWARD
CONTRACTS, AND OPTIONS ON FOREIGN CURRENCIES (COLLECTIVELY,
"FINANCIAL INSTRUMENTS")
STOCK INDEX FUTURES CONTRACTS AND OPTIONS THEREON. For purposes of
managing cash flow, the Portfolio may purchase and sell stock index futures
contracts, and may purchase and sell options thereon. The managers may use such
futures and options to increase the Portfolio's exposure to the performance of a
recognized securities index, such as the S&P 500 Index.
A "sale" of a futures contract (or a "short" futures position)
entails the assumption of a contractual obligation to deliver the securities or
currency underlying the contract at a specified price at a specified future
time. A "purchase" of a futures contract (or a "long" futures position) entails
the assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded
on exchanges that have been designated as "contract markets" by the CFTC;
futures transactions must be executed through a futures commission merchant that
is a member of the relevant contract market. In both U.S. and foreign markets,
an exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
While futures contracts entered into by the Portfolio will usually be liquidated
in this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
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<PAGE>
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing their
NAVs, the Portfolios mark to market the value of their open futures positions.
The Portfolio also must make margin deposits with respect to options on futures
that it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts
will benefit it, if NB Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
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beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell stock
index futures contracts, and may purchase and sell options thereon. For purposes
of managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P 500 Index.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered call options
and may purchase call options in related closing transactions. The purpose of
writing call options is to hedge (i.e., to reduce, at least in part, the effect
of price fluctuations of securities held by the Portfolio on the Portfolio's and
the Fund's NAVs) or to earn premium income. Portfolio securities on which call
options may be written and purchased by the Portfolio are purchased solely on
the basis of investment considerations consistent with the Portfolio's
investment objective.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk but is capable of enhancing
the Portfolio's total return. When writing a covered call option, the Portfolio,
in return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but conversely
retains the risk of loss should the price of the security decline.
If a call option that the Portfolio has written expires unexercised, the
Portfolio will realize a gain in the amount of the premium; however, that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
When the Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date.
POLICIES AND LIMITATIONS. The Portfolio may write covered call options and
may purchase call options in related closing transactions. The Portfolio writes
only "covered" call options on securities it owns (in contrast to the writing of
"naked" or uncovered call options, which the Portfolio will not do).
The Portfolio would purchase a call option to offset a previously written
call option.
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PUT AND CALL OPTIONS ON SECURITIES INDICES. For purposes of managing cash
flow, the Portfolio may purchase put and call options on securities indices to
increase the Portfolio's exposure to the performance of a recognized securities
index, such as the S&P 500 Index.
Unlike a securities option, which gives the holder the right to
purchase or sell a specified security at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (1) the difference between the exercise price of the
option and the value of the underlying securities index on the exercise date (2)
multiplied by a fixed "index multiplier." A securities index fluctuates with
changes in the market values of the securities included in the index. Options on
stock indices are currently traded on the Chicago Board Options Exchange, the
New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S.
and foreign exchanges.
Securities index options have characteristics and risks similar to those
of securities options, as discussed herein.
POLICIES AND LIMITATIONS. For purposes of managing cash flow, the
Portfolio may purchase put and call options on securities indices to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P 500 Index . All securities index options purchased by the
Portfolio will be listed and traded on an exchange.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
obligation under any option written by the Portfolio terminates upon expiration
of the option or, at an earlier time, when the Portfolio offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by the Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on U.S. national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options are issued by a
clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. NB Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
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<PAGE>
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets.
POLICIES AND LIMITATIONS. The Portfolio may use American-style options.
The assets used as cover (or held in a segregated account) for OTC options
written by the Portfolio will be considered illiquid unless the OTC options are
sold to qualified dealers who agree that the Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set forth in
the option agreement. The cover for an OTC call option written subject to this
procedure will be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into contracts for
the purchase or sale of a specific currency at a future date (usually less than
one year from the date of the contract) at a fixed price ("forward contracts").
The Portfolio also may engage in foreign currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market.
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<PAGE>
The Portfolio enters into forward contracts in an attempt to hedge against
changes in prevailing currency exchange rates. The Portfolio does not engage in
transactions in forward contracts for speculation; it views investments in
forward contracts as a means of establishing more definitely the effective
return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the Portfolio
may either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract. If the Portfolio
chooses to make delivery of the foreign currency, it may be required to obtain
such currency through the sale of portfolio securities denominated in such
currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate risks
perfectly, and, if NB Management is incorrect in its judgment of future exchange
rate relationships, the Portfolio could be in a less advantageous position than
if such a hedge had not been established. If the Portfolio uses proxy-hedging,
it may experience losses on both the currency in which it has invested and the
currency used for hedging if the two currencies do not vary with the expected
degree of correlation. Using forward contracts to protect the value of the
Portfolio's securities against a decline in the value of a currency does not
eliminate fluctuations in the prices of the underlying securities. Because
forward contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid. The Portfolio may experience delays in the settlement
of its foreign currency transactions.
POLICIES AND LIMITATIONS. The Portfolio may enter into forward contracts
for the purpose of hedging and not for speculation.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies.
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<PAGE>
Currency options have characteristics and risks similar to those of
securities options, as discussed herein. Certain options on foreign currencies
are traded on the OTC market and involve liquidity and credit risks that may not
be present in the case of exchange-traded currency options.
POLICIES AND LIMITATIONS. The Portfolio would use options on foreign
currencies to protect against declines in the U.S. dollar value of portfolio
securities or increases in the U.S. dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends, interest, or other payments
on those securities.
REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent the
Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.
COVER FOR FINANCIAL INSTRUMENTS. Securities held in a segregated account
cannot be sold while the futures, options, or forward strategy covered by those
securities is outstanding, unless they are replaced with other suitable assets.
As a result, segregation of a large percentage of the Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable to promptly dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio will comply with SEC guidelines
regarding "cover" for Financial Instruments and, if the guidelines so require,
set aside in a segregated account with its custodian the prescribed amount of
cash or appropriate liquid securities.
GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using
Financial Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of Financial Instruments; (2) possible lack of a
liquid secondary market for Financial Instruments and the resulting inability to
close out Financial Instruments when desired; (3) the fact that the skills
needed to use Financial Instruments are different from those needed to select
the Portfolio's securities; (4) the fact that, although use of Financial
Instruments for hedging purposes can reduce the risk of loss, they also can
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments; and (5) the possible inability
of the Portfolio to purchase or sell a portfolio security at a time that would
otherwise be favorable for it to do so, or the possible need for the Portfolio
to sell a portfolio security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of
Financial Instruments. There can be no assurance that the Portfolio's use of
Financial Instruments will be successful.
The Portfolio's use of Financial Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to qualify as a regulated investment company
("RIC"). See "Additional Tax Information." Financial Instruments may not be
available with respect to some currencies, especially those of so-called
emerging market countries.
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POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Financial Instruments whose behavior
is expected to resemble or offset that of the Portfolio's underlying securities
or currency. NB Management intends to reduce the risk that the Portfolio will be
unable to close out Financial Instruments by entering into such transactions
only if NB Management believes there will be an active and liquid secondary
market.
OTHER INVESTMENT COMPANIES. The Portfolio at times may invest in
instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P 500 Index.
As a shareholder in an investment company, the Portfolio would bear its
pro rata share of that investment company's expenses. Investment in other funds
may involve the payment of substantial premiums above the value of such issuer's
portfolio securities. The Portfolio does not intend to invest in such funds
unless, in the judgment of NB Management, the potential benefits of such
investment justify the payment of any applicable premium or sales charge.
POLICIES AND LIMITATIONS. The Portfolio's investment in such securities is
limited to (i) 3% of the total voting stock of any one investment company, (ii)
5% of the Portfolio's total assets with respect to any one investment company
and (iii) 10% of the Portfolio's total assets in the aggregate.
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's investment
program is on common stocks and other equity securities, the Portfolio may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in investment grade
corporate bonds and debentures.
U.S. Government Securities are obligations of the U.S. Treasury backed by
the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (also known as Federal National Mortgage
Association), Freddie Mac (also known as Federal Home Loan Mortgage
Corporation), Student Loan Marketing Association (commonly known as "Sallie
Mae"), and the Tennessee Valley Authority. Some U.S. Government Agency
Securities are supported by the full faith and credit of the United States,
while others may by supported by the issuer's ability to borrow from the U.S.
Treasury, subject to the Treasury's discretion in certain cases, or only by the
credit of the issuer. U.S. Government Agency Securities include U.S. Government
Agency mortgage-backed securities. The market prices of U.S. Government and
Agency Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed by NB Management to be comparable
to such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest rating category (Baa) or Comparable Unrated
Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
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<PAGE>
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's inability
to meet principal and interest payments on its obligations ("credit risk") and
are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of fixed income securities in which the
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of the Portfolio's fixed income
investments is likely to rise. Foreign debt securities are subject to risks
similar to those of other foreign securities.
POLICIES AND LIMITATIONS. The Portfolio normally may invest up to 35%
of its total assets in investment grade debt securities.
Subsequent to its purchase by the Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by the Portfolio. In such a case, the
Portfolio will engage in an orderly disposition of the downgraded securities to
the extent necessary to ensure that the Portfolio's holdings of securities rated
below investment grade and Comparable Unrated Securities will not exceed 5% of
its net assets.
COMMERCIAL PAPER. Commercial paper is a short-term debt security issued by
a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, NB Management may
in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolio may invest in commercial paper
only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities. A convertible security
entitles the holder to receive the interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks of
the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier
non-convertible securities but rank senior to common stock in a corporation's
capital structure. The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
quality that do not have a conversion privilege and (2) its worth if converted
into the underlying common stock.
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The price of a convertible security often reflects variations in the price
of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objective.
POLICIES AND LIMITATIONS. Convertible debt securities are subject to the
Portfolio's investment policies and limitations concerning fixed income
securities.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and are not
intended to indicate future performance. The share price and total return of the
Fund will vary, and an investment in the Fund, when redeemed, may be worth more
or less than an investor's original cost.
Total Return Computations
- -------------------------
The Fund may advertise certain total return information. An average annual
compounded rate of return ("T") may be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of time ("n") according to the formula:
n
P(1+T) = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
Because the Fund is new, it does not have any performance history. However, the
Fund's investment objective, policies, and limitations are the same as those of
another mutual fund that is a series of Neuberger Berman Equity Funds and that
has a name similar to the Fund's and invests in the same Portfolio ("Sister
Fund"). The following total return data is for the Sister Fund for periods prior
to the Fund's inception. The total returns for periods prior to the Fund's
inception would have been lower had they reflected the higher fees of the Fund,
as compared to those of the Sister Fund.
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Average Annual Total Returns
Fund Periods Ended 8/31/1998
One Year Five Years Ten Years Period from Inception
-------- ---------- --------- ---------------------
GENESIS -18.82% +12.25% N/A +12.50%
NB Management currently reimburses the Fund for a portion of its expenses.
Such action has the effect of increasing total return. Actual reimbursements and
waivers are described in the Prospectus and in "Investment Management and
Administration Services" below.
Comparative Information
- -----------------------
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters,
and financial periodicals) that monitor the performance of mutual funds,
such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
U.S. News & World Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P 500 Composite
Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index ("S&P 600
Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000 Stock
Index, Russell Midcap(TM) Index, Dow Jones Industrial Average ("DJIA"),
Wilshire 1750 Index, Nasdaq Composite Index, Montgomery Securities Growth
Stock Index, Value Line Index, U.S. Department of Labor Consumer Price
Index ("Consumer Price Index"), College Board Annual Survey of Colleges,
Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra
Value Index, the EAFE(R) Index, the Financial Times World XUS Index, and
various other domestic, international, and global indices. The S&P 500
Index is a broad index of common stock prices, while the DJIA represents a
narrower segment of industrial companies. The S&P 600 Index includes
stocks that range in market value from $35 million to $3.2 billion, with
an average of $514 million. The S&P 400 Index measures mid-sized companies
that have an average market capitalization of $2.1 billion. The EAFE(R)
Index is an unmanaged index of common stock prices of more than 1,000
companies from Europe, Australasia, and the Far East translated into U.S.
dollars. The Financial Times World XUS Index is an index of 24
international markets, excluding the U.S. market. Each assumes
reinvestment of distributions and is calculated without regard to tax
consequences or the costs of investing. The Portfolio may invest in
different types of securities from those included in some of the above
indices.
Evaluations of the Fund's performance, its total return, and comparisons
may be used in advertisements and in information furnished to current and
prospective shareholders (collectively, "Advertisements"). The Fund may also be
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<PAGE>
compared to individual asset classes such as common stocks, small-cap stocks, or
Treasury bonds, based on information supplied by Ibbotson and Sinquefield.
Other Performance Information
- -----------------------------
From time to time, information about the Portfolio's portfolio allocation
and holdings as of a particular date may be included in Advertisements. This
information may include the Portfolio's portfolio diversification by asset type.
Information used in Advertisements may include statements or illustrations
relating to the appropriateness of types of securities and/or mutual funds that
may be employed to meet specific financial goals, such as (1) funding
retirement, (2) paying for children's education, and (3) financially supporting
aging parents.
NB Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Information relating to inflation and its effects on the dollar also may
be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information regarding the effects of investing at market highs and/or
lows, and investing early versus late for retirement plans also may be included
in Advertisements, if appropriate.
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a diversified
portfolio of securities, diversification does not eliminate all risk. There can,
of course, be no assurance that the Portfolio will achieve its investment
objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trust and Equity Managers Trust, including their addresses and
principal business experience during the past five years. Some persons named as
trustees and officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
22
<PAGE>
The Trust and Equity Managers Trust:
- -----------------------------------
<TABLE>
<CAPTION>
Positions Held
Name, Age, and With the Trust and
Address(1) Equity Managers Principal Occupation(s)(2)
---------- --------------- --------------------------
Trust
-----
<S> <C> <C>
Faith Colish (63) Trustee of the Attorney at Law, Faith Colish,
63 Wall Street Trust and Equity A Professional Corporation.
24th Floor Managers Trust
New York, NY 10005
Stanley Egener* (65) Chairman of the Principal of Neuberger Berman;
Board, Chief President and Director of NB
Executive Officer, Management; Chairman of the
and Trustee of the Board, Chief Executive Officer
Trust and Equity and Trustee of ten other
Managers Trust mutual funds for which NB
Management acts as investment
manager or administrator.
Howard A. Mileaf (62) Trustee of the Vice President and Special
WHX Corporation Trust and Equity Counsel to WHX Corporation
110 East 59th Street Managers Trust (holding company) since 1992;
30th Floor Director of Kevlin Corporation
New York, NY 10022 (manufacturer of microwave and
other products).
Edward I. O'Brien* (70) Trustee of the Until 1993, President of the
12 Woods Lane Trust and Equity Securities Industry
Scarsdale, NY 10583 Managers Trust Association ("SIA")
(securities industry's
representative in government
relations and regulatory
matters at the federal and
state levels); until November
1993, employee of the SIA;
Director of Legg Mason, Inc.
John T. Patterson, Jr. (71) Trustee of the Retired. Formerly,
7082 Siena Court Trust and Equity President of SOBRO (South
Boca Raton, FL 33433 Managers Trust Bronx Overall Economic
Development Corporation).
John P. Rosenthal (66) Trustee of the Senior Vice President of
Burnham Securities Inc. Trust and Equity Burnham Securities Inc. (a
Burnham Asset Management Corp. Managers Trust registered broker-dealer)
1325 Avenue of the Americas since 1991; Director, Cancer
17th Floor Treatment Holdings, Inc.
New York, NY 10019
23
<PAGE>
Positions Held
Name, Age, and With the Trust and
Address(1) Equity Managers Principal Occupation(s)(2)
---------- --------------- --------------------------
Trust
-----
Cornelius T. Ryan (67) Trustee of the General Partner of Oxford
Oxford Bioscience Trust and Equity Partners and Oxford Bioscience
Partners Managers Trust Partners (venture capital
315 Post Road West partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money
market fund) and Prime Cash
Fund.
Gustave H. Shubert (70) Trustee of the Senior Fellow/Corporate
13838 Sunset Boulevard Trust and Equity Advisor and Advisory Trustee
Pacific Palisades, CA 90272 Managers Trust of Rand (a non-profit public
interest research institution);
Honorary Member of the Board of
Overseers of the Institute for
Civil Justice, the Policy
Advisory Committee of the
Clinical Scholars Program at
the University of California,
the American Association for
the Advancement of Science, the
Counsel on Foreign Relations,
and the Institute for Strategic
Studies (London); advisor to
the Program Evaluation and
Methodology Division of the U.S.
General Accounting Office;
formerly Senior Vice President
and Trustee of Rand.
Lawrence Zicklin* (63) President and Principal of Neuberger Berman;
Trustee of the Director of NB Management;
Trust and Equity President and/or Trustee of
Managers Trust seven other mutual funds for
which NB Management acts as
investment manager or
administrator.
Daniel J. Sullivan (59) Vice President of Senior Vice President of NB
the Trust and Management; Vice President of
Equity Managers ten other mutual funds for
Trust which NB Management acts as
investment manager or
administrator.
24
<PAGE>
Positions Held
Name, Age, and With the Trust and
Address(1) Equity Managers Principal Occupation(s)(2)
---------- --------------- --------------------------
Trust
-----
Michael J. Weiner (52) Vice President and Principal of Neuberger Berman
Principal since 1998; Senior Vice
Financial Officer President of NB Management;
of the Trust and Treasurer of NB Management
Equity Managers from 1992 to 1996; Vice
Trust President and Principal
Financial Officer of ten
other mutual funds for which
NB Management acts as
investment manager or
administrator.
Claudia A. Brandon (42) Secretary of the Director, Corporate
Trust and Equity Secretarial, of Neuberger
Managers Trust Berman since 1999; formerly
Vice President of NB
Management; Secretary of ten
other mutual funds for which
NB Management acts as
investment manager or
administrator.
Richard Russell (52) Treasurer and Vice President of NB
Principal Management; Treasurer and
Accounting Officer Principal Accounting Officer
of the Trust and of ten other mutual funds for
Equity Managers which NB Management acts as
Trust investment manager or
administrator.
Stacy Cooper-Shugrue (36) Assistant Assistant Director, Corporate
Secretary of the Secretarial, of Neuberger
Trust and Equity Berman since 1999; formerly
Managers Trust Assistant Vice President of NB
Management; Assistant
Secretary of ten other mutual
funds for which NB Management
acts as investment manager or
administrator.
C. Carl Randolph (61) Assistant Principal of Neuberger Berman;
Secretary of the Assistant Secretary of ten
Trust and Equity other mutual funds for which
Managers Trust NB Management acts as
investment manager or
administrator.
25
<PAGE>
Positions Held
Name, Age, and With the Trust and
Address(1) Equity Managers Principal Occupation(s)(2)
---------- --------------- --------------------------
Trust
-----
Barbara DiGiorgio (40) Assistant Assistant Vice President of NB
Treasurer of the Management; Assistant
Trust and Equity Treasurer since 1996 of ten
Managers Trust other mutual funds for which
NB Management acts as
investment manager or
administrator.
Celeste Wischerth (38) Assistant Assistant Vice President of NB
Treasurer of the Management; Assistant
Trust and Equity Treasurer since 1996 of ten
Managers Trust other mutual funds for which
NB Management acts as
investment manager or
administrator.
</TABLE>
(1) Unless otherwise indicated, the business address of each listed
person is 605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the
positions shown for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust and
Managers Trust within the meaning of the 1940 Act. Messrs. Egener and Zicklin
are interested persons by virtue of the fact that they are officers and/or
directors of NB Management and principals of Neuberger Berman. Mr. O'Brien is an
interested person by virtue of the fact that he is a director of Legg Mason,
Inc., a wholly owned subsidiary of which, from time to time, serves as a broker
or dealer to the Portfolio and other funds for which NB Management serves as
investment manager.
The Trust's Trust Instruments and Equity Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the compensation of
the trustees of each Trust. None of the Neuberger Berman Funds has any
retirement plan for its trustees.
26
<PAGE>
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/98
-----------------------------
Total Compensation from Investment Companies in the
Name and Position Aggregate Compensation from Neuberger Berman Fund
with the Trust the Trust* Complex Paid to Trustees**
- -------------- --------- ------------------------
<S> <C> <C>
Faith Colish $163 $84,500
Trustee (5 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive Officer, companies)
and Trustee
Howard A. Mileaf $163 $52,000
Trustee (4 other investment
companies)
Edward I. O'Brien $168 $51,750
Trustee (3 other investment
companies)
John T. Patterson, Jr. $168 $55,750
Trustee (4 other investment
companies)
John P. Rosenthal $163 $47,750
Trustee (4 other investment
companies)
Cornelius T. Ryan $163 $48,750
Trustee (3 other investment
companies)
Gustave H. Shubert $163 $48,250
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
</TABLE>
* Estimated for the period of 6/28/99 to 8/31/99 (commencement of operations
until the end of the first fiscal year).
** Does not include estimated amounts of aggregate compensation from the
Trust.
27
<PAGE>
At June 1, 1999 the trustees and officers of the Trust and Equity Managers
Trust, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager and Administrator
- ------------------------------------
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. NB Management serves as
the investment manager to the Portfolio pursuant to a management agreement with
Equity Managers Trust, dated as of August 2, 1993 ("Management Agreement").
The Management Agreement was approved by the holders of the interests in
the Portfolio on August 2, 1993. The Management Agreement provides, in
substance, that NB Management will make and implement investment decisions for
the Portfolio in its discretion and will continuously develop an investment
program for the Portfolio's assets. The Management Agreement permits NB
Management to effect securities transactions on behalf of the Portfolio through
associated persons of NB Management. The Management Agreement also specifically
permits NB Management to compensate, through higher commissions, brokers and
dealers who provide investment research and analysis to the Portfolio, although
NB Management has no current plans to pay a material amount of such
compensation.
NB Management provides to the Portfolio, without separate cost, office
space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of Equity
Managers Trust who are officers, directors, or employees of NB Management. Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
officers of the Trust and of Equity Managers Trust. See "Trustees and Officers."
The Portfolio pays NB Management a management fee based on the Portfolio's
average daily net assets, as described below.
NB Management provides facilities, services and personnel, as well as
accounting, recordkeeping, and other services, to the Fund pursuant to an
administration agreement with the Trust, dated June 28, 1999 ("Administration
Agreement"). The Fund was authorized to become subject to the Administration
Agreement by vote of the Fund trustees on April 28, 1999.
Management and Administration Fees
- ----------------------------------
The Portfolio pays NB Management a fee for investment management services
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.
For administrative services, the Fund pays NB Management a fee at the
annual rate of 0.15% of that Fund's average daily net assets, plus out-of pocket
expenses for technology items used in shareholder servicing. In most years,
these out-of-pocket expenses are expected to be a fraction of a basis point.
28
<PAGE>
NB Management has contractually undertaken to reimburse the Fund for its
total operating expenses (other than taxes, brokerage commissions and
extraordinary expenses) which exceed, in the aggregate, 0.85% of the Fund's
average daily net assets. This undertaking lasts until December 31, 2002.
The Management Agreement continues until August 2, 1999. The Management
Agreement is renewable thereafter from year to year with respect to the
Portfolio, so long as its continuance is approved at least annually (1) by the
vote of a majority of the Portfolio Trustees who are not "interested persons" of
NB Management or Equity Managers Trust ("Independent Portfolio Trustees"), cast
in person at a meeting called for the purpose of voting on such approval, and
(2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in that Portfolio. The Administration
Agreement continues until August 2, 1999. The Administration Agreement is
renewable from year to year with respect to the Fund, so long as its continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of NB Management or the respective Trust
("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of the
Fund Trustees or by a 1940 Act majority vote of the outstanding shares in that
Fund.
The Management Agreement is terminable, without penalty, with respect to
the Portfolio on 60 days' written notice either by Equity Managers Trust or by
NB Management. The Administration Agreement is terminable, without penalty, with
respect to the Fund on 60 days' written notice either by NB Management or by the
Trust. Each Agreement terminates automatically if it is assigned.
Sub-Adviser
- -----------
NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY
10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement").
The Sub-Advisory Agreement was approved by the holders of the interests in
the Portfolio on August 2, 1993.
The Sub-Advisory Agreement ("Sub-Advisory Agreement") provides in
substance that Neuberger Berman will furnish to NB Management, upon reasonable
request, the same type of investment recommendations and research that Neuberger
Berman, from time to time, provides to its principals and employees for use in
managing client accounts. In this manner, NB Management expects to have
available to it, in addition to research from other professional sources, the
capability of the research staff of Neuberger Berman. This staff consists of
numerous investment analysts, each of whom specializes in studying one or more
industries, under the supervision of the Director of Research, who is also
available for consultation with NB Management. The Sub-Advisory Agreement
provides that NB Management will pay for the services rendered by Neuberger
Berman based on the direct and indirect costs to Neuberger Berman in connection
with those services. Neuberger Berman also serves as sub-adviser for all of the
other mutual funds managed by NB Management.
29
<PAGE>
The Sub-Advisory Agreement continues until August 2, 1999 and is renewable
from year to year, subject to approval of its continuance in the same manner as
the Management Agreement. The Sub-Advisory Agreement is subject to termination,
without penalty, with respect to the Portfolio by the Portfolio Trustees or a
1940 Act majority vote of the outstanding interests in that Portfolio, by NB
Management, or by Neuberger Berman on not less than 30 nor more than 60 days'
written notice. The Sub-Advisory Agreement also terminates automatically with
respect to the Portfolio if it is assigned or if the Management Agreement
terminates with respect to the Portfolio.
Most money managers that come to the Neuberger Berman organization have at
least fifteen years experience. Neuberger Berman and NB Management employ
experienced professionals that work in a competitive environment.
Investment Companies Managed
- ----------------------------
As of March 31, 1999, the investment companies managed by NB Management
had aggregate net assets of approximately $19.4 billion. NB Management currently
serves as investment manager of the following investment companies:
<TABLE>
<CAPTION>
Approximate Net
Assets at
Name March 31, 1999
---- ----------------------------
<S> <C> <C>
Neuberger Berman Cash Reserves Portfolio $1,072,658,569
(investment portfolio for Neuberger Berman Cash
Reserves)
Neuberger Berman Government Money Portfolio $676,709,830
(investment portfolio for Neuberger Berman
Government Money Fund)
Neuberger Berman High Yield Bond Portfolio $26,206,698
(investment portfolio for Neuberger Berman High
Yield Bond Fund)
Neuberger Berman Limited Maturity Bond Portfolio $327,757,663
(investment portfolio for Neuberger Berman
Limited Maturity Bond Fund and Neuberger Berman
Limited Maturity Bond Trust)
30
<PAGE>
Approximate Net
Assets at
Name March 31, 1999
---- ----------------------------
Neuberger Berman Municipal Securities Portfolio $39,438,060
(investment portfolio for Neuberger Berman
Municipal Securities Trust)
Neuberger Berman Municipal Money Portfolio $215,374,856
(investment portfolio for Neuberger Berman
Municipal Money Fund)
Neuberger Berman Focus Portfolio $1,662,517,815
(investment portfolio for Neuberger Berman
Focus Fund, Neuberger Berman Focus Trust and
Neuberger Berman Focus Assets)
Neuberger Berman Genesis Portfolio $1,614,791,480
(investment portfolio for Neuberger Berman
Genesis Fund, Neuberger Berman Genesis Trust
and Neuberger Berman Genesis Assets)
Neuberger Berman Guardian Portfolio $5,431,637,047
(investment portfolio for Neuberger Berman
Guardian Fund, Neuberger Berman Guardian Trust
and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio $121,120,636
(investment portfolio for Neuberger Berman
International Fund and Neuberger Berman
International Trust)
Neuberger Berman Manhattan Portfolio $635,833,975
(investment portfolio for Neuberger Berman
Manhattan Fund, Neuberger Berman Manhattan
Trust and Neuberger Berman Manhattan Assets)
Neuberger Berman Millennium Portfolio $30,289,813
(investment portfolio for Neuberger
Berman Millennium Fund and
Neuberger Berman Millennium Trust)
Neuberger Berman Partners Portfolio $3,973,621,156
(investment portfolio for Neuberger Berman
Partners Fund, Neuberger Berman Partners Trust
and Neuberger Berman Partners Assets)
31
<PAGE>
Approximate Net
Assets at
Name March 31, 1999
---- ----------------------------
Neuberger Berman Socially Responsive Portfolio $362,264,160
(investment portfolio for Neuberger Berman
Socially Responsive Fund, Neuberger Berman
Socially Responsive Trust, Neuberger Berman
NYCDC Socially Responsive Trust and Neuberger
Berman Socially Responsible Assets)
Advisers Managers Trust $2,524,184,209
(eight series)
</TABLE>
The investment decisions concerning the Portfolio and the other mutual
funds managed by NB Management (collectively, "Other NB Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolio to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when the Portfolio and one or more of the Other NB
Funds or other accounts managed by Neuberger Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to the Portfolio, in other
cases it is believed that the Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolio having
its advisory arrangements with NB Management outweighs any disadvantages that
may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all advisory
clients of Neuberger Berman (including the Portfolio, the Other NB Funds, and
other managed accounts) and personnel of Neuberger Berman and its affiliates.
These include, for example, limits that may be imposed in certain industries or
by certain companies, and policies of Neuberger Berman that limit the aggregate
32
<PAGE>
purchases, by all accounts under management, of the outstanding shares of public
companies.
Management and Control of NB Management
- ---------------------------------------
The directors and officers of NB Management, all of whom have offices at
the same address as NB Management, are Richard A. Cantor, Chairman of the Board
and director; Stanley Egener, President and director; Theodore P. Giuliano, Vice
President and director; Michael M. Kassen, Vice President and director; Irwin
Lainoff, director; Lawrence Zicklin, director; Daniel J. Sullivan, Senior Vice
President; Peter E. Sundman, Senior Vice President; Andrea Trachtenberg, Senior
Vice President; Michael J. Weiner, Senior Vice President; Patrick T. Byrne, Vice
President; Valerie Chang, Vice President; Brooke A. Cobb, Vice President; Robert
W. D'Alelio, Vice President; Clara Del Villar, Vice President; Brian J. Gaffney,
Vice President; Joseph G. Galli, Vice President; Robert I. Gendelman, Vice
President; Josephine P. Mahaney, Vice President; Michael F. Malouf, Vice
President; S. Basu Mullick, Vice President; Janet W. Prindle, Vice President;
Kevin L. Risen, Vice President; Richard Russell, Vice President; Jennifer K.
Silver, Vice President; Kent C. Simons, Vice President; Frederic B. Soule, Vice
President; Susan Stang, Vice President; Judith M. Vale, Vice President; Susan
Walsh, Vice President; Catherine Waterworth, Vice President; Allan R. White III,
Vice President; Robert Conti, Treasurer; Ellen Metzger, Secretary; Ramesh Babu,
Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Robert L.
Ladd, Assistant Vice President; Carmen G. Martinez, Assistant Vice President;
Joseph S. Quirk, Assistant Vice President; Ingrid Saukaitis, Assistant Vice
President; Benjamin E. Segal, Assistant Vice President; Josephine Velez,
Assistant Vice President; Celeste Wischerth, Assistant Vice President. Messrs.
Cantor, D'Alelio, Egener, Gendelman, Giuliano, Kassen, Lainoff, Risen, Simons,
Sundman, Weiner, White and Zicklin and Mmes. Prindle, Silver and Vale are
principals of Neuberger Berman.
Mr. Egener is a trustee and officer of the Trust and Equity Managers
Trust. Mr. Zicklin is a trustee and officer of the Trust and Equity Managers
Trust. Messrs. Russell, Sullivan and Weiner and Mmes. DiGiorgio and Wischerth
are officers of the Trust and Equity Managers Trust. C. Carl Randolph, a
principal of Neuberger Berman, also is an officer of the Trust and Equity
Managers Trust.
All of the outstanding voting stock in NB Management is owned by persons
who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in connection with
the offering of the Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, the Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
33
<PAGE>
arranging for the sale of the Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
From time to time, NB Management may enter into arrangements pursuant to
which it compensates a registered broker-dealer or other third party for
services in connection with the distribution of Fund shares.
The Trust, on behalf of the Fund, and the Distributor are parties to a
Distribution Agreement that continues until August 2, 1999. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL PURCHASE INFORMATION
Share Prices and Net Asset Value
- --------------------------------
The Fund's shares are bought or sold at a price that is the Fund's NAV per
share. The NAVs for the Fund and the Portfolio are calculated by subtracting
total liabilities from total assets (in the case of the Portfolio, the market
value of the securities the Portfolio holds plus cash and other assets; in the
case of the Fund, its percentage interest in the Portfolio, multiplied by the
Portfolio's NAV, plus any other assets). The Fund's per share NAV is calculated
by dividing its NAV by the number of Fund shares outstanding and rounding the
result to the nearest full cent. The Fund and Portfolio calculate their NAVs as
of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on
each day the NYSE is open.
The Portfolio values securities (including options) listed on the NYSE,
the American Stock Exchange or other national securities exchanges or quoted on
The Nasdaq Stock Market, and other securities for which market quotations are
readily available, at the last reported sale price on the day the securities are
being valued. If there is no reported sale of such a security on that day, the
security is valued at the mean between its closing bid and asked prices on that
day. The Portfolio values all other securities and assets, including restricted
securities, by a method that the trustees of Equity Managers Trust believe
accurately reflects fair value.
If NB Management believes that the price of a security obtained under the
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Equity Managers Trust believe accurately reflects fair value.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Maintaining Your Account," an Institution may exchange shares of the Fund for
shares of one or more of the other Neuberger Berman Funds, if made available
34
<PAGE>
through that Institution. The Fund may terminate or modify its exchange
privilege in the future. Before effecting an exchange, Fund shareholders must
obtain and should review a currently effective prospectus of the fund into which
the exchange is to be made. An exchange is treated as a sale for federal income
tax purposes and, depending on the circumstances, a capital gain or loss may be
realized.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of the
redemption price postponed (1) when the NYSE is closed, (2) when trading on the
NYSE is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for the Portfolio to dispose of securities it owns or
fairly to determine the value of its net assets, or (4) for such other period as
the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
Redemptions in Kind
- -------------------
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" above. If payment is made in
securities, an Institution generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of its share of
any net investment income (after deducting expenses incurred directly by the
Fund), any net realized capital gains, and any net realized gains from foreign
currency transactions earned or realized by the Portfolio. The Portfolio's net
investment income consists of all income accrued on portfolio assets less
accrued expenses, but does not include capital and foreign currency gains and
losses. Net investment income and realized gains and losses are reflected in the
Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. The
Fund calculates its net investment income and NAV per share as of the close of
regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern
time).
35
<PAGE>
Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the Institution elects to
receive them in cash ("cash election"). To the extent dividends and other
distributions are subject to federal, state, or local income taxation, they are
taxable to the shareholders whether received in cash or reinvested in Fund
shares. A cash election with respect to the Fund remains in effect until the
Institution notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
Taxation of the Fund
- --------------------
To qualify for treatment as a RIC under the Code, the Fund must distribute
to its shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short-term
capital gain, and net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements. With
respect to the Fund, these requirements include the following: (1) the Fund must
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including gains from Financial Instruments) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
and(2) at the close of each quarter of the Fund's taxable year, (i) at least 50%
of the value of its total assets must be represented by cash and cash items,
U.S. Government securities, securities of other RICs, and other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities, and (ii) not more than 25% of the
value of its total assets may be invested in securities (other than U.S.
Government securities or securities of other RICs) of any one issuer. If the
fund failed to qualify as a RIC for any taxable year, it would be taxed on the
full amount of its taxable income for that year without being able to deduct the
distributions it makes to its shareholders and the shareholders would treat all
those distributions, including distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), as dividends (that
is, ordinary income) to the extent of the Fund's earnings and profits.
Certain funds that invest in portfolios managed by NB Management,
including most of the Sister Funds have received rulings from the Internal
Revenue Service ("Service") that each such fund, as an investor in its
corresponding portfolio, will be deemed to own a proportionate share of the
portfolio's assets and income for purposes of determining whether the fund
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied on as precedent by the Fund, NB Management
believes that the reasoning thereof and, hence, their conclusion apply to the
Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
36
<PAGE>
See the next section for a discussion of the tax consequences to the Fund
of distributions to them from the Portfolio, investments by the Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.
Taxation of the Portfolio
- -------------------------
Certain portfolios managed by NB Management, including the Portfolio, have
received rulings from the Service to the effect that, among other things, each
such portfolio will be treated as a separate partnership for federal income tax
purposes and will not be a "publicly traded partnership." As a result, the
Portfolio is not subject to federal income tax; instead, each investor in the
Portfolio, such as the Fund, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any cash
distributions from the Portfolio. The Portfolio also is not subject to Delaware
or New York income or franchise tax.
Because the Fund is deemed to own a proportionate share of the Portfolio's
assets and income for purposes of determining whether the Fund satisfies the
requirements to qualify as a RIC, the Portfolio intends to conduct its
operations so that the Fund will be able to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. A Fund's basis for its interest in the Portfolio
generally equals the amount of cash the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (1) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (2) the Fund's share of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains realized by
the Portfolio, may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions ("foreign taxes") that would reduce the
yield and/or total return on its securities. Tax treaties between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder -- that, in
general, meets either of the following tests: (1) at least 75% of its gross
37
<PAGE>
income is passive or (2) an average of at least 50% of its assets produce, or
are held for the production of, passive income. Under certain circumstances, if
the Portfolio holds stock of a PFIC, the Fund (indirectly through its interest
in the Portfolio) will be subject to federal income tax on its share of a
portion of any "excess distribution" received by the Portfolio on the stock or
of any gain on the Portfolio's disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes its share of the
PFIC income as a taxable dividend to its shareholders. The balance of the Fund's
share of the PFIC income will be included in its investment company taxable
income and, accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which the Fund most likely would have to
distribute to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax -- even if the Portfolio did not receive those earnings and gain from
the QEF. In most instances it will be very difficult, if not impossible, to make
this election because of certain requirements thereof.
A holder of stock in any PFIC may elect to include in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over the
adjusted basis therein as of the end of that year. Pursuant to the election, a
deduction (as an ordinary, not capital, loss) also would be allowed for the
excess, if any, of the holder's adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income for prior
taxable years. The adjusted basis in each PFIC's stock subject to the election
would be adjusted to reflect the amounts of income included and deductions taken
thereunder (and under regulations proposed in 1992 that provided a similar
election with respect to the stock of certain PFICs).
The Portfolio's use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward contracts,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses the Portfolio
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from Financial Instruments derived by the Portfolio with respect to
its business of investing in securities or foreign currencies, will qualify as
permissible income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts, and listed
options thereon subject to section 1256 of the Code ("Section 1256 contracts")
are required to be marked to market (that is, treated as having been sold at
market value) for federal income tax purposes at the end of the Portfolio's
taxable year. Sixty percent of any net gain or loss recognized as a result of
these "deemed sales," and 60% of any net realized gain or loss from any actual
sales, of Section 1256 contracts are treated as long-term capital gain or loss;
the remainder is treated as short-term capital gain or loss. Section 1256
contracts also may be marked-to-market for purposes of the Excise Tax. These
rules may operate to increase the amount that the Fund must distribute to
satisfy the Distribution Requirement, which will be taxable to the shareholders
as ordinary income, and to increase the net capital gain recognized by the Fund,
without in either case increasing the cash available to the Fund. The Fund may
38
<PAGE>
elect to exclude certain transactions from the operation of section 1256,
although doing so may have the effect of increasing the relative proportion of
net short-term capital gain (taxable as ordinary income) and/or increasing the
amount of dividends that must be distributed to meet the Distribution
Requirement and avoid imposition of the Excise Tax.
If the Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the same or
substantially similar property, the Fund will be treated as having made an
actual sale thereof, with the result that gain will be recognized at that time.
A constructive sale generally consists of a short sale, an offsetting notional
principal contract, or a futures or forward contract entered into by the Fund or
a related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale. The foregoing will not apply,
however, to any transaction during any taxable year that otherwise would be
treated as a constructive sale if the transaction is closed within 30 days after
the end of that year and the Fund holds the appreciated financial position
unhedged for 60 days after that closing (I.E., at no time during that 60-day
period is the Fund's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially similar or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale, or granting an option to buy substantially identical
stock or securities).
Taxation of the Fund's Shareholders
- -----------------------------------
If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as principal broker for the Portfolio in the
purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market) and in connection with the purchase and sale of
options on its securities. A substantial portion of the portfolio transactions
of the Portfolio involves securities traded on the OTC market; that Portfolio
purchases and sells OTC securities in principal transactions with dealers who
are the principal market makers for such securities.
During the fiscal year ended August 31, 1996, the Portfolio paid brokerage
commissions of $206,150, of which $95,999 was paid to Neuberger Berman. During
the fiscal year ended August 31, 1997, the Portfolio paid brokerage commissions
of $860,097, of which $516,040 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, the Portfolio paid brokerage
commissions of $2,419,159, of which $1,159,143 was paid to Neuberger Berman.
Transactions in which the Portfolio used Neuberger Berman as broker comprised
51.15% of the aggregate dollar amount of transactions involving the payment of
39
<PAGE>
commissions, and 47.92% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1998. 96.67% of the
$1,260,016 paid to other brokers by the Portfolio during that fiscal year
(representing commissions on transactions involving approximately $606,971,828)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 1998, the Portfolio acquired securities of the
following of its Regular B/Ds: General Electric Capital Corp. and State Street
Bank and Trust Company; at that date, the Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$81,900,000.
Portfolio securities are, from time to time, loaned by the Portfolio to
Neuberger Berman in accordance with the terms and conditions of an order issued
by the SEC. The order exempts such transactions from provisions of the 1940 Act
that would otherwise prohibit such transactions, subject to certain conditions.
In accordance with the order, securities loans made by the Portfolio to
Neuberger Berman are fully secured by cash collateral. The portion of the income
on the cash collateral which may be shared with Neuberger Berman is to be
determined by reference to concurrent arrangements between Neuberger Berman and
non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger Berman borrows securities from the Portfolio in order
to re-lend them to others, Neuberger Berman may be required to pay that
Portfolio, on a quarterly basis, certain of the earnings that Neuberger Berman
otherwise has derived from the re-lending of the borrowed securities. When
Neuberger Berman desires to borrow a security that the Portfolio has indicated a
willingness to lend, Neuberger Berman must borrow such security from that
Portfolio, rather than from an unaffiliated lender, unless the unaffiliated
lender is willing to lend such security on more favorable terms (as specified in
the order) than that Portfolio. If, in any month, the Portfolio's expenses
exceed its income in any securities loan transaction with Neuberger Berman,
Neuberger Berman must reimburse that Portfolio for such loss.
A committee of Independent Portfolio Trustees from time to time reviews,
among other things, information relating to securities loans by the Portfolio.
The following information reflects interest income earned by the Portfolio from
the cash collateralization of securities loans during the fiscal years ended
1998, 1997, and 1996. As reflected below, Neuberger Berman received a portion of
the interest income from the cash collateral.
<TABLE>
<CAPTION>
Interest Income from
Collateralization of Amount Paid to
Name of Portfolio Fiscal Year End Securities Loans Neuberger Berman
- ----------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Neuberger Berman 8/31/98 $ 285,737 $ 152,375
GENESIS Portfolio 8/31/97 $ 168,552 $ 69,948
8/31/96 $ 0 $ 0
- ----------------------------------------------------------------------------------------
</TABLE>
In effecting securities transactions, the Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
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<PAGE>
execution at least as favorable as other qualified brokers. To the Portfolio's
knowledge, no affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its securities transactions.
The use of Neuberger Berman as a broker for the Portfolio is subject to
the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. Managers Trust and NB Management have expressly
authorized Neuberger Berman to retain such compensation, and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to Neuberger Berman
in connection with a purchase or sale of securities on a securities exchange may
not exceed the usual and customary broker's commission. Accordingly, it is the
Portfolio's policy that the commissions paid to Neuberger Berman must, in NB
Management's judgment, be (1) at least as favorable as those charged by other
brokers having comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by Neuberger Berman on comparable
transactions for its most favored unaffiliated customers, except for accounts
for which Neuberger Berman acts as a clearing broker for another brokerage firm
and customers of Neuberger Berman considered by a majority of the Independent
Portfolio Trustees not to be comparable to the Portfolio. The Portfolio does not
deem it practicable and in its best interests to solicit competitive bids for
commissions on each transaction effected by Neuberger Berman. However,
consideration regularly is given to information concerning the prevailing level
of commissions charged by other brokers on comparable transactions during
comparable periods of time. The 1940 Act generally prohibits Neuberger Berman
from acting as principal in the purchase of portfolio securities from, or the
sale of portfolio securities to, the Portfolio unless an appropriate exemption
is available.
A committee of Independent Portfolio Trustees from time to time reviews,
among other things, information relating to the commissions charged by Neuberger
Berman to the Portfolio and to its other customers and information concerning
the prevailing level of commissions charged by other brokers having comparable
execution capability. In addition, the procedures pursuant to which Neuberger
Berman effects brokerage transactions for the Portfolio must be reviewed and
approved no less often than annually by a majority of the Independent Portfolio
Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
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<PAGE>
The Portfolio expects that it will continue to execute a portion of its
transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of NB Management and principals of
Neuberger Berman who are portfolio managers of some of the portfolios and Other
NB Funds (collectively, "NB Funds") and some of Neuberger Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may be higher
than the amount another firm might charge if NB Management determines in good
faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting
portfolio transactions on behalf of the Managed Accounts may be used for the
Portfolio's benefit.
Judith M. Vale and Robert W. D'Alelio, each of whom is a Vice President of
NB Management and a principal of Neuberger Berman, are the persons primarily
responsible for making decisions as to specific action to be taken with respect
to the investment portfolio of the Portfolio. Each of them has full authority to
take action with respect to portfolio transactions and may or may not consult
with other personnel of NB Management prior to taking such action.
Portfolio Turnover
- ------------------
The Portfolio's portfolio turnover rate is calculated by dividing (1) the
lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
42
<PAGE>
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and the Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
The Fund
- --------
The Fund is a separate ongoing series of Equity Series, a Delaware
business trust organized pursuant to a Trust Instrument dated as of September
22, 1998. The Trust is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company, commonly known as a mutual
fund. Equity Series has two series. The Fund invests all of net investable
assets in the Portfolio, in each case receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of each series belong
only to that series, and the liabilities of each series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
the Fund represent equal proportionate interests in the assets of that Fund only
and have identical voting, dividend, redemption, liquidation, and other rights.
All shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to
hold annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of that Trust or Fund
and provides for indemnification out of Trust or Fund property of any
shareholder nevertheless held personally liable for Trust or Fund obligations,
respectively.
OTHER. Because Fund shares can be bought, owned and sold only
through an account with an Institution, a client of an Institution may be unable
to purchase additional shares and/or may be required to redeem shares (and
possibly incur a tax liability) if the client no longer has a relationship with
43
<PAGE>
the Institution or if the Institution no longer has a contract with NB
Management to perform services. Depending on the policies of the Institution
involved, an investor may be able to transfer an account from one Institution to
another.
The Portfolio
- -------------
The Portfolio is a separate operating series of Equity Managers
Trust, a New York common law trust organized as of December 1, 1992. Equity
Managers Trust is registered under the 1940 Act as a diversified, open-end
management investment company and has eight separate portfolios. The assets of
each portfolio belong only to that portfolio, and the liabilities of a portfolio
are borne solely by that portfolio and no other.
Prior to November 9, 1998, the name of the Portfolio was Neuberger &
Berman Genesis Portfolio.
FUND'S INVESTMENTS IN PORTFOLIO. The Fund is a "feeder fund" that
seeks to achieve its investment objective by investing all of its net investable
assets in the Portfolio, which is a "master fund." The Portfolio, which has the
same investment objective, policies, and limitations as the Fund, in turn
invests in securities; the Fund thus acquires an indirect interest in those
securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. The Sister Funds that are series of
Neuberger Berman Equity Funds(R) ("Equity Funds") and the other mutual funds
that are series of other trusts invest all of their respective net assets in
corresponding portfolios of Equity Managers Trust. The shares of each series of
Equity Funds are available for purchase by members of the general public. The
Trust does not sell its shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or
other institutional investors to invest in the Portfolio. All investors will
invest in the Portfolio on the same terms and conditions as the Fund and will
pay a proportionate share of the Portfolio's expenses. Other investors in the
Portfolio are not required to sell their shares at the same public offering
price as the Fund, could have a different administration fee and expenses than
the Fund, and might charge a sales commission. Therefore, Fund shareholders may
have different returns than shareholders in another investment company that
invests exclusively in the Portfolio. Information regarding any fund that
invests in the Portfolio is available from NB Management by calling
800-877-9700.
The trustees of the Trust believe that investment in the Portfolio
by a series of Equity Funds, Equity Trust or Equity Assets by other potential
investors in addition to the Fund may enable the Portfolio to realize economies
of scale that could reduce its operating expenses, thereby producing higher
returns and benefiting all shareholders. However, the Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a large investor in the Portfolio (other than
the Fund) redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at
any time, if the trustees of the Trust determine that it is in the best
interests of the Fund and its shareholders to do so. The Fund might withdraw,
for example, if there were other investors in the Portfolio with power to, and
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<PAGE>
who did by a vote of all investors (including the Fund), change the investment
objective, policies, or limitations of the Portfolio in a manner not acceptable
to the trustees of the Trust. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio to the Fund. That distribution could result in a less diversified
portfolio of investments for the Fund and could affect adversely the liquidity
of the Fund's investment portfolio. If the Fund decided to convert those
securities to cash, it usually would incur brokerage fees or other transaction
costs. If the Fund withdrew its investment from the Portfolio, the trustees of
the Trust would consider what actions might be taken, including the investment
of all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in the
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the
Fund, will be liable for all obligations of the Portfolio. However, the risk of
an investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust Company,
225 Franklin Street, Boston, MA 02110, as custodian for its securities and cash.
State Street also serves as the Fund's transfer agent, administering purchases,
redemptions, and transfers of Fund shares with respect to Institutions and the
payment of dividends and other distributions to Institutions. All correspondence
should be mailed to Neuberger Berman Funds, Institutional Services, 605 Third
Avenue, 2nd Floor, New York, NY 10158-0180. In addition, State Street serves as
transfer agent for the Portfolio.
INDEPENDENT AUDITORS/ACCOUNTANTS
The Fund and Portfolio have selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors who will audit their
financial statements.
45
<PAGE>
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as their
legal counsel.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration statement,
including the exhibits filed therewith, may be examined at the SEC's offices in
Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the contents
of any contract or other document referred to are not necessarily complete. In
each instance where reference is made to the copy of any contract or other
document filed as an exhibit to a registration statement, each such statement is
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements are incorporated herein by reference
from Neuberger&Berman Equity Funds' Annual Report to Shareholders for the year
ended August 31, 1998, and for Neuberger Berman Equity Funds' Semi-Annual Report
to Shareholders for the period ended February 28, 1999:
The audited financial statements of Neuberger&Berman Genesis Portfolio
and the notes thereto for the year ended August 31, 1998.
The unaudited financial statements of Neuberger Berman Genesis Portfolio
and the notes thereto for the period ended February 28, 1999.
46
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
- -----------------------------------------------
S&P corporate bond ratings:
- --------------------------
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-) - The ratings above may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
Moody's corporate bond ratings:
- ------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin,
and principal is secure. Although the various protective elements are likely to
change, the changes that can be visualized are most unlikely to impair the
fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as "high-grade
bonds." They are rated lower than the best bonds because margins of protection
A-1
<PAGE>
may not be as large as in Aaa-rated securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations that are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
MODIFIERS--Moody's may apply numerical modifiers 1, 2, and 3 in each generic
rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+).
Moody's commercial paper ratings
A-2
<PAGE>
Issuers rated Prime-1 (or related supporting institutions), also known as P-1,
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
- - Leading market positions in well-established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- - Well-established access to a range of financial markets and assured
sources of alternate liquidity.
A-3
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
NEUBERGER BERMAN GENESIS INSTITUTIONAL
POST-EFFECTIVE AMENDMENT NO. 2 ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements: Audited financial statements for Neuberger & Berman
Genesis Portfolio, a series of Equity Managers Trust, are incorporated into the
SAI by reference to the Annual Report to Shareholders of Neuberger & Berman
Equity Funds for the year ended August 31, 1998. Unaudited financial statements
for Neuberger Berman Genesis Portfolio, a series of Equity Managers Trust, are
incorporated into the SAI by reference to the Semi-Annual Report to Shareholders
of Neuberger Berman Equity Funds for the period ended February 28, 1999.
(b) Exhibits:
Exhibit
Number Description
------ -----------
(a) (1) Certificate of Trust. Incorporated by
Reference to Registrant's Registration
Statement, File Nos. 33-66137 and 811-09011,
EDGAR Accession No. 0000898432-98-000699.
(2) Trust Instrument of Neuberger Berman Equity
Series. Incorporated by Reference to
Registrant's Registration Statement, File Nos.
33-66137 and 811-09011, EDGAR Accession No.
0000898432-98-000699.
(3) Schedule A - Current Series of Neuberger Berman
Equity Series. Filed Herewith.
(b) By-laws of Neuberger Berman Equity Series.
Incorporated by Reference to Registrant's
Registration Statement, File Nos. 33-66137 and
811-09011, EDGAR Accession No. 0000898432-98-000699.
(c) Declaration of Trust filed under (a) and By-laws filed
under (b).
(d) (1) (i) Management Agreement Between Equity
Managers Trust and Neuberger Berman
Management Inc. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File
Nos. 2-11357 and 811-582, EDGAR Accession
No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the Management
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 84 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-99-000547.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No. 84
to Registrant's Registration Statement, File
3
<PAGE>
Exhibit
Number Description
------ -----------
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-99-000547.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, LLC with Respect to Equity
Managers Trust. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger
Berman Equity Funds, File Nos. 2-11357
and 811-582, EDGAR Accession No.
0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment No.
84 to Registrant's Registration
Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-99-000547.
(iii) Substitution Agreement Among Neuberger
Berman Management Inc., Equity Managers
Trust, Neuberger Berman, L.P., and Neuberger
Berman, LLC. Incorporated by Reference to
Amendment No. 7 to Registration Statement of
Equity Managers Trust, File No. 811-7910,
EDGAR Accession No. 0000898432-96-000557.
(e) (1) Distribution Agreement Between Neuberger
Berman Equity Series and Neuberger Berman
Management Inc. Incorporated by Reference to
Pre-Effective Amendment No. 1 to
Registrant's Registration Statement, File
Nos. 333-66137 and 811-09011, EDGAR
Accession No. 0000898432-98-000864.
(2) Schedule A - Series of Neuberger Berman Equity
Series Currently Subject to the Distribution
Agreement. Filed Herewith.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) Custodian Contract Between Neuberger Berman Equity
Series and State Street Bank and Trust Company.
Filed Herewith.
(h) (1) Transfer Agency and Service Agreement Between
Neuberger Berman Equity Series and State Street
Bank and Trust Company. Filed Herewith.
(2) (i) Form of Administration Agreement Between
Neuberger Berman Equity Series and
Neuberger Berman Management Inc. with
respect to Neuberger Berman Genesis
Institutional. Filed Herewith.
(ii) Schedule A - Series of Neuberger Berman
Equity Series Currently Subject to the
Administration Agreement. Filed Herewith.
(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement. Filed
Herewith.
(i) (a) Opinion of Counsel. Filed Herewith.
(j) Consent of Independent Auditors. Filed Herewith.
4
<PAGE>
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedule. Filed Herewith.
(o) Plan Pursuant to Rule 18f-3. None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is controlled by or under common control with the
Registrant.
ITEM 25. INDEMNIFICATION.
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger and Berman
Management Incorporated ("NB Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
referred to as the "Managers Trusts") provide that neither NB Management nor any
director, officer or employee of NB Management performing services for the
series of the Managers Trusts at the direction or request of NB Management in
connection with NB Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relate; provided, that nothing in the Agreements shall be construed
(i) to protect NB Management against any liability to the Managers Trusts or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
5
<PAGE>
disregard of its obligations and duties under the Agreements, or (ii) to protect
any director, officer or employee of NB Management who is or was a trustee or
officer of the Managers Trusts against any liability to the Managers Trusts or
any series thereof or their interest holders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office with the Managers Trusts.
Section 1 of the Sub-Advisory Agreements between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Managers Trusts
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreements, Neuberger Berman will not be
subject to any liability for any act or omission or any loss suffered by any
series of the Managers Trusts or their interest holders in connection with the
matters to which the Agreements relate.
Section 11 of the Distribution Agreement between the Registrant and NB
Management provides that NB Management shall look only to the assets of a Series
for the Registrant's performance of the Agreement by the Registrant on behalf of
such Series, and neither the Trustees nor any of the Registrant's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF ADVISER AND SUB-ADVISER.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of NB Management and each principal of Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, International Investors. Senior
NB Management Vice President and Senior
Portfolio Manager, Putnam
Investments.1
Barbara DiGiorgio, Assistant Treasurer, Neuberger Berman
Assistant Vice Advisers Management Trust; Assistant
President, Treasurer, Advisers Managers Trust;
NB Management Assistant Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman Equity
Series.
- ---------------------
1 Until 1997.
6
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Stanley Egener Chairman of the Board and Trustee, Neuberger
President and Director, Berman Advisers Management Trust; Chairman
NB Management; of the Board and Trustee, Advisers Managers
Principal, Neuberger Trust; Chairman of the Board and Trustee,
Berman Neuberger Berman Income Funds; Chairman of
the Board and Trustee, Neuberger Berman
Income Trust; Chairman of the Board and
Trustee, Neuberger Berman Equity Funds;
Chairman of the Board and Trustee, Neuberger
Berman Equity Trust; Chairman of the Board
and Trustee, Income Managers Trust; Chairman
of the Board and Trustee, Equity Managers
Trust; Chairman of the Board and Trustee,
Global Managers Trust; Chairman of the Board
and Trustee, Neuberger Berman Equity Assets;
Chairman of the Board and Trustee, Neuberger
Berman Equity Series.
Theodore P. Giuliano President and Trustee, Neuberger
Vice President and Berman Income Funds; President
Director, NB Management; and Trustee, Neuberger Berman
Principal, Neuberger Income Trust; President and
Berman Trustee, Income Managers Trust.
Michael F. Malouf Portfolio Manager, Dresdner RCM
Vice President Global Investors.2
NB Management
S. Basu Mullick Portfolio Manager, Ark Asset
Vice President Management.3
NB Management
C. Carl Randolph Assistant Secretary, Neuberger Berman
Principal Advisers Management Trust; Assistant
Neuberger Berman Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger Berman Income
Funds; Assistant Secretary, Neuberger Berman
Income Trust; Assistant Secretary, Neuberger
Berman Equity Funds; Assistant Secretary,
Neuberger Berman Equity Trust; Assistant
Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant
Secretary, Global Managers Trust; Assistant
Secretary, Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman Equity
Series.
- -------------------
2 Until 1998.
3 Until 1998.
7
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Richard Russell Treasurer, Neuberger Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
NB Management Managers Trust; Treasurer, Neuberger Berman
Income Funds; Treasurer, Neuberger Berman
Income Trust; Treasurer, Neuberger Berman
Equity Funds; Treasurer, Neuberger Berman
Equity Trust; Treasurer, Income Managers
Trust; Treasurer, Equity Managers Trust;
Treasurer, Global Managers Trust; Treasurer,
Neuberger Berman Equity Assets; Treasurer,
Neuberger Berman Equity Series.
Ingrid Saukaitis Project Director, Council on
Assistant Vice Economic Priorities.4
President, NB Management
Jennifer K. Silver Portfolio Manager and Director,
Vice President, NB Putnum Investments.5
Management, Principal
Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President Management Trust; Vice President, Advisers
NB Management Managers Trust; Vice President, Neuberger
Berman Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
- ------------------
4 Until 1997.
5 Until 1997.
8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Michael J. Weiner Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
NB Management; Managers Trust; Vice President, Neuberger
Principal, Neuberger Berman Income Funds; Vice President,
Berman Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity Funds;
Vice President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger Berman
Equity Assets; Vice President, Neuberger
Berman Equity Series.
Allan R. White Portfolio Manager, Salomon Asset
Vice President, NB Management.6
Management; Principal,
Neuberger Berman
Celeste Wischerth, Assistant Treasurer, Neuberger Berman
Assistant Vice Advisers Management Trust; Assistant
President, Treasurer, Advisers Managers Trust;
NB Management Assistant Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer, Neuberger Berman
Income Trust; Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity Assets;
Assistant Treasurer, Neuberger Berman Equity
Series.
Lawrence Zicklin President and Trustee, Neuberger Berman
Director, NB Management; Advisers Management Trust; President and
Principal, Neuberger Trustee, Advisers Managers Trust; President
Berman and Trustee, Neuberger Berman Equity Funds;
President and Trustee, Neuberger Berman
Equity Trust; President and Trustee, Equity
Managers Trust; President, Global Managers
Trust; President and Trustee, Neuberger
Berman Equity Assets; President and Trustee,
Neuberger Berman Equity Series.
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) NB Management, the principal underwriter distributing securities of
the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Funds
Neuberger Berman Equity Assets
Neuberger Berman Equity Trust
Neuberger Berman Income Funds
Neuberger Berman Income Trust
NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.
- -----------------------
6 Until 1998.
9
<PAGE>
(b) Set forth below is information concerning the directors and officers
of the Registrant's principal underwriter. The principal business address of
each of the persons listed is 605 Third Avenue, New York, New York 10158-0180,
which is also the address of the Registrant's principal underwriter.
NAME POSITIONS AND OFFICES POSITIONS AND
WITH UNDERWRITER OFFICES
---- --------------------- WITH REGISTRANT
---------------------
Ramesh Babu Assistant Vice None
President
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice Assistant Treasurer
President
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
Brian J. Gaffney Vice President None
Joseph G. Galli Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and None
Director
Michael M. Kassen Vice President and None
Director
Robert L. Ladd Assistant Vice None
President
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Carmen G. Martinez Assistant Vice None
President
Ellen Metzger Secretary None
Paul Metzger Vice President None
S. Basu Mullick Vice President None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice None
President
Kevin L. Risen Vice President None
Richard Russell Vice President Treasurer and
Principal
Accounting Officer
Ingrid Saukaitis Assistant Vice None
President
10
<PAGE>
Benjamin Segal Assistant Vice None
President
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Susan Stang Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Senior Vice President None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice None
President
Susan Walsh Vice President None
Catherine Waterworth Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal
Financial Officer
Allan R. White, III Vice President None
Celeste Wischerth Assistant Vice Assistant Treasurer
President
Lawrence Zicklin Director Trustee and
President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Equity Managers Trust's Declaration of Trust and By-laws, minutes
of meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Global Managers Trust are maintained at the offices of State
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
11
<PAGE>
ITEM 29. MANAGEMENT SERVICES.
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
ITEM 30. UNDERTAKINGS.
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER BERMAN EQUITY SERIES
has duly caused this Post-Effective Amendment No. 2 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 24th day of June, 1999.
NEUBERGER BERMAN EQUITY SERIES
By: /s/ Lawrence Zicklin
-----------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 2 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Faith Colish Trustee June 24, 1999
- --------------------------
Faith Colish
/s/ Stanley Egener Chairman of the Board June 24, 1999
- -------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Howard A. Mileaf Trustee June 24, 1999
- --------------------------
Howard A. Mileaf
/s/ Edward I. O'Brien Trustee June 24, 1999
- --------------------------
Edward I. O'Brien
/s/ John T. Patterson, Jr. Trustee June 24, 1999
- --------------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee June 24, 1999
- -------------------------
John P. Rosenthal
/s/ Cornelius T. Ryan Trustee June 24, 1999
- -------------------------
Cornelius T. Ryan
/s/ Gustave H. Shubert Trustee June 24, 1999
- -------------------------
Gustave H. Shubert
/s/ Lawrence Zicklin President and Trustee June 24, 1999
- -------------------------
Lawrence Zicklin
/s/ Michael J. Weiner Vice President (Principal June 24, 1999
- ------------------------- Financial Officer)
Michael J. Weiner
/s/ Richard Russell Treasurer (Principal June 24, 1999
- ------------------------- Accounting Officer)
Richard Russell
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST has duly caused this
Post-Effective Amendment No. 2 to the Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City and State of New
York on the 24th day of June, 1999.
EQUITY MANAGERS TRUST
By: /s/ Lawrence Zicklin
-----------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 2 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Faith Colish Trustee June 24, 1999
- --------------------------
Faith Colish
/s/ Stanley Egener Chairman of the Board June 24, 1999
- -------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf Trustee June 24, 1999
- --------------------------
Howard A. Mileaf
/s/ Edward I. O'Brien Trustee June 24, 1999
- --------------------------
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
Signature Title Date
--------- ----- ----
/s/ John T. Patterson, Jr. Trustee June 24, 1999
- --------------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee June 24, 1999
- -------------------------
John P. Rosenthal
/s/ Cornelius T. Ryan Trustee June 24, 1999
- -------------------------
Cornelius T. Ryan
/s/ Gustave H. Shubert Trustee June 24, 1999
- -------------------------
Gustave H. Shubert
/s/ Lawrence Zicklin President and Trustee June 24, 1999
- -------------------------
Lawrence Zicklin
/s/ Michael J. Weiner Vice President (Principal June 24, 1999
- ------------------------- Financial Officer)
Michael J. Weiner
/s/ Richard Russell Treasurer (Principal June 24, 1999
- ------------------------- Accounting Officer)
Richard Russell
12
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
NEUBERGER BERMAN GENESIS INSTITUTIONAL
POST-EFFECTIVE AMENDMENT NO. 2 ON FORM N-1A
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
(a) (1) Certificate of Trust. Incorporated by
Reference to Registrant's Registration
Statement, File Nos. 33-66137 and 811-09011,
EDGAR Accession No. 0000898432-98-000699.
(2) Trust Instrument of Neuberger Berman Equity
Series. Incorporated by Reference to
Registrant's Registration Statement, File Nos.
33-66137 and 811-09011, EDGAR Accession No.
0000898432-98-000699.
(3) Schedule A - Current Series of Neuberger Berman
Equity Series. Filed Herewith.
(b) By-laws of Neuberger Berman Equity Series.
Incorporated by Reference to Registrant's
Registration Statement, File Nos. 33-66137 and
811-09011, EDGAR Accession No. 0000898432-98-000699.
(c) Declaration of Trust filed under (a) and By-laws filed
under (b).
(d) (1) (i) Management Agreement Between Equity
Managers Trust and Neuberger Berman
Management Inc. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File
Nos. 2-11357 and 811-582, EDGAR Accession
No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the Management
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 84 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR
Accession No. 0000898432-99-000547.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No. 84
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, EDGAR Accession
No. 0000898432-99-000547.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, LLC with Respect to Equity
Managers Trust. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger
Berman Equity Funds, File Nos. 2-11357
and 811-582, EDGAR Accession No.
0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment No.
84 to Registrant's Registration
Statement, File Nos. 33-64368 and
811-7784, EDGAR Accession No.
0000898432-99-000547.
13
<PAGE>
Exhibit
Number Description
------ -----------
(iii) Substitution Agreement Among Neuberger
Berman Management Inc., Equity Managers
Trust, Neuberger Berman, L.P., and Neuberger
Berman, LLC. Incorporated by Reference to
Amendment No. 7 to Registration Statement of
Equity Managers Trust, File No. 811-7910,
EDGAR Accession No. 0000898432-96-000557.
(e) (1) Distribution Agreement Between Neuberger
Berman Equity Series and Neuberger Berman
Management Inc. Incorporated by Reference to
Pre-Effective Amendment No. 1 to
Registrant's Registration Statement, File
Nos. 333-66137 and 811-09011, EDGAR
Accession No. 0000898432-98-000864.
(2) Schedule A - Series of Neuberger Berman Equity
Series Currently Subject to the Distribution
Agreement. Filed Herewith.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) Custodian Contract Between Neuberger Berman Equity
Series and State Street Bank and Trust Company.
Filed Herewith.
(h) (1) Transfer Agency and Service Agreement Between
Neuberger Berman Equity Series and State Street
Bank and Trust Company. Filed Herewith.
(2) (i) Form of Administration Agreement Between
Neuberger Berman Equity Series and
Neuberger Berman Management Inc. with
respect to Neuberger Berman Genesis
Institutional. Filed Herewith.
(ii) Schedule A - Series of Neuberger Berman
Equity Series Currently Subject to the
Administration Agreement. Filed Herewith.
(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement. Filed
Herewith.
(i) (a) Opinion of Counsel. Filed Herewith.
(j) Consent of Independent Auditors. Filed Herewith.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedule. Filed Herewith.
(o) Plan Pursuant to Rule 18f-3. None.
14
NEUBERGER BERMAN EQUITY SERIES
TRUST INSTRUMENT
SCHEDULE A
The Series of Neuberger Berman Equity Series currently subject to this
Agreement are as follows:
Date Made Party
Series To Agreement
------ ---------------
Socially Responsive Assets December 30, 1998
Genesis Institutional June 28, 1999
NEUBERGER BERMAN EQUITY SERIES
DISTRIBUTION AGREEMENT
SCHEDULE A
The Series of Neuberger Berman Equity Series currently subject to this
Agreement are as follows:
SERIES DATE MADE PARTY
------ TO AGREEMENT
------------
Socially Responsive Assets December 30, 1998
Genesis Institutional June 28, 1999
CUSTODIAN CONTRACT
Between
NEUBERGER BERMAN EQUITY SERIES
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
======================================================
TABLE OF CONTENTS
Page
======================================================
1. Employment of Custodian and Property
to be Held By It......................1
======================================================
2. Duties of the Custodian with Respect to
Property of the Fund Held by the
Custodian in the United States...........2
======================================================
2.1 Holding Securities...................2
2.2 Delivery of Securities...............2
2.3 Registration of Securities...........4
2.4 Bank Accounts........................4
2.5 Availability of Federal Funds........4
2.6 Collection of Income.................4
2.7 Payment of Fund Monies...............5
2.8 Liability for Payment in Advance
of Receipt of Securities
Purchased................................6
2.9 Appointment of Agents................6
2.10 Deposit of Fund Assets in
Securities System........................6
2.11 Fund Assets Held in the
Custodian's Direct Paper
System...................................7
2.12 Segregated Account..................8
2.13 Ownership Certificates for
Tax Purposes.............................9
2.14 Proxies.............................9
2.15 Communications Relating to
Portfolio Securities.....................9
======================================================
3. Duties of the Custodian with Respect
to Property of the Fund Held Outside
of the United States..................9
======================================================
3.1 Appointment of Foreign
Sub-Custodians...........................9
3.2 Assets to be Held...................10
3.3 Foreign Securities
Depositories............................10
3.4 Agreements with Foreign
Banking Institutions....................10
3.5 Access of Independent
Accountants of the Fund.................10
3.6 Reports by Custodian................10
3.7 Transactions in Foreign
Custody Account.........................10
3.8 Liability of Foreign
Sub-Custodians..........................11
3.9 Liability of Custodian..............11
3.10 Reimbursement for Advances.........11
3.11 Monitoring Responsibilities........12
3.12 Branches of U.S. Banks.............13
3.13 Foreign Exchange Transactions......13
<PAGE>
======================================================
3.13 Tax Law............................13
======================================================
4. Payments for Sales or Repurchase or
Redemptions of Shares of the Fund.......14
======================================================
5. Proper Instructions..................14
======================================================
6. Actions Permitted Without Express
Authority...............................15
======================================================
7. Evidence of Authority................15
======================================================
8. Duties of Custodian With Respect to
the Books of Account and Calculations
of Net Asset Value and Net Income....15
======================================================
9. Records..............................16
======================================================
10. Opinion of Fund's Independent
Accountants.............................16
======================================================
11. Reports to Fund by Independent Public
Accountants.............................16
======================================================
12. Compensation of Custodian...........16
======================================================
13. Responsibility of Custodian.........17
======================================================
14. Effective Period, Termination and
Amendment...............................17
======================================================
15. Successor Custodian.................18
======================================================
16. Interpretive and Additional
Provisions..........................19
======================================================
17. Additional Funds....................19
======================================================
18. Massachusetts Law to Apply..........19
======================================================
19. Limitation of Trustee, Officer and
Shareholder Liability ..................19
======================================================
20. No Liability of Other Portfolios....20
======================================================
21. Confidentiality.....................20
======================================================
22. Assignment..........................20
======================================================
23. Severability........................20
======================================================
24. Prior Contracts.....................20
======================================================
25. Shareholder Communications Election.20
======================================================
<PAGE>
CUSTODIAN CONTRACT
This Contract between Neuberger Berman Equity Series, a business trust
organized and existing under the laws of Delaware, having its principal place of
business at 605 Third Avenue, New York, New York 10158 hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in one series,
Neuberger Berman Socially Responsive Assets (such series together with all other
series subsequently established by the Fund and made subject to this Contract in
accordance with paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
each Portfolio, including securities which the Fund, on behalf of the applicable
Portfolio desires to be held in places within the United States ("domestic
securities") and securities it desires to be held outside the United States
("foreign securities") pursuant to the provisions of the Trust Instrument. The
Fund on behalf of each Portfolio agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of income, payments of
principal or capital distributions received by it with respect to all securities
owned by the Portfolio(s) from time to time, and the cash consideration received
by it for such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be issued or sold
from time to time. The Custodian shall not be responsible for any property of a
Portfolio held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
<PAGE>
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian pursuant to Section
2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
2
<PAGE>
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of
the Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in the
book-entry system authorized by the U.S. Department of the Treasury,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, BUT ONLY against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for a Portfolio, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind, as
may be described from time to time in the currently effective
3
<PAGE>
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of requests
by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund which shall contain only property held by the Custodian as
custodian for that Portfolio, subject only to draft or order by the
Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Portfolio, other than cash
maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for a Portfolio may be deposited by it to its credit
as Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust company shall
be qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
4
<PAGE>
Custodian in the amount of checks received in payment for Shares of such
Portfolio which are deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which
each Portfolio shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian
or its agent and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder.
Collection of income due each Portfolio on securities loaned pursuant to
the provisions of Section 2.2 (10) shall be the responsibility of the
Custodian so long as the securities are registered and remain in the name
of the Fund, the Custodian, or its nominee, or in the Depository Trust
Company account of the Custodian, but otherwise shall be the
responsibility of the Fund and the Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to
act as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Portfolio or
in the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of repurchase
agreements entered into between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund as
defined in Article 5;
5
<PAGE>
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment is to
be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund on behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, and its rules or regulations to act as a custodian, as
its agent to carry out such of the provisions of this Article 2 as the
Custodian may from time to time direct; PROVIDED, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
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1) The Custodian may keep securities of the Portfolio in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the Portfolio.
Copies of all advices from the Securities System of transfers of
securities for the account of the Portfolio shall identify the
Portfolio, be maintained for the Portfolio by the Custodian and be
provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Portfolio confirmation of
each transfer to or from the account of the Portfolio in the form of
a written advice or notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account of the
Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian (or by any agent appointed by the
Custodian pursuant to Section 2.9) on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the certificate required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall be entitled
to be subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which the
Custodian may have as a consequence of any such loss or damage if
and to the extent that the Portfolio has not been made whole for any
such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
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1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on the Custodian's system of internal accounting control
as the Fund may reasonably request from time to time.
2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
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Exchange Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers
of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Portfolio shall when reasonably
possible notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for each Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of a
Portfolio's assets.
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3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect a Portfolio's foreign securities transactions. The
Custodian shall identify on its books as belonging to each Portfolio, the
foreign securities of the Portfolio held by each foreign sub-custodian.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of each Portfolio shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set forth
in Exhibit 1 hereto and shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of each Portfolio held by the foreign sub-custodian will be subject
only to the instructions of the Custodian or its agents.
3.5 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.6 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other assets of each Portfolio held by foreign sub-custodians, including
but not limited to an identification of entities having possession of each
Portfolio's securities and other assets and advices or notifications of
any transfers of securities to or from each custodial account maintained
by a foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession of such
securities.
3.7 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Except as otherwise provided
in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and
2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
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(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be effected in accordance with the
customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any
such nominee harmless from any liability as a holder of record of such
securities.
3.8 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian
shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and the Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth
with respect to sub-custodians generally in this Contract and, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian shall not be liable
for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the sub-custodian has otherwise exercised
reasonable care. Notwithstanding the foregoing provisions of this
paragraph 3.9, in delegating custody duties to State Street London Ltd.,
the Custodian shall not be relieved of any responsibility to the Fund for
any loss due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization, insurrection,
civil strife or armed hostilities) or (b) other losses (excluding a
bankruptcy or insolvency of State Street London Ltd. not caused by
political risk) due to Acts of God, nuclear incident or the like, in each
case under circumstances where the Custodian and State Street London Ltd.
have exercised reasonable care.
3.10 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to advance
cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange ("Advance"), or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of
this Contract, except such as may arise from its or its nominee's own
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negligent action, negligent failure to act or willful misconduct
("Liability") then in such event property equal in value to not more than
125% of such Advance and accrued interest on the Advance or the
anticipated amount of such Liability, held at any time for the account of
the appropriate Portfolio by the Custodian or sub-custodian may be held as
security for such Liability or for such Advance and accrued interest on
the Advance. The Custodian shall designate the security or securities
constituting security for an Advance or Liability (the "Designated
Securities") by notice in writing to the Fund (which may be sent by tested
telefax or telex). In the event the value of the Designated Securities
shall decline to less than 110% of the amount of such Advance and accrued
interest on the Advance or the anticipated amount of such Liability, then
the Custodian may designate in the same manner an additional security for
such obligation ("Additional Securities"), but the aggregate value of the
Designated Securities and Additional Securities shall not be in excess of
125% of the amount of such Advance and the accrued interest on the Advance
or the anticipated amount of such Liability. At the request of the Fund,
on behalf of a Portfolio, the Custodian shall agree to substitution of a
security or securities which have a value equal to the value of the
Designated or Additional Securities which the Fund desires be released
from their status as security, and such release from status as security
shall be effective upon the Custodian and the Fund agreeing in writing as
to the identity of the substituted security or securities, which shall
thereupon become Designated Securities.
Notwithstanding the above, the Custodian shall, at the request of the
Fund, on behalf of a Portfolio, immediately release from their status as
security any or all of the Designated Securities or Additional Securities
upon the Custodian's receipt from such of Portfolio cash or cash
equivalents in an amount equal to 100% of the value of the Designated
Securities or Additional Securities that the Fund desires to be released
from their status as security pursuant to this Section. The applicable
Portfolio shall reimburse or indemnify the Custodian in respect of a
Liability and shall pay any Advances upon demand; provided, however, that
the Custodian first notified the Fund on behalf of the Portfolio of such
demand for repayment, reimbursement or indemnification. If, upon
notification, the Portfolio shall fail to pay such Advance or interest
when due or shall fail to reimburse or indemnify the Custodian promptly in
respect of a Liability, the Custodian shall be entitled to dispose of the
Designated Securities and Additional Securities to the extent necessary to
obtain repayment, reimbursement or indemnification. Interest, dividends
and other distributions paid or received on the Designated Securities and
Additional Securities, other than payments of principal or payments upon
retirement, redemption or repurchase, shall remain the property of the
Portfolio, and shall not be subject to this Section. To the extent that
the disposition of the Portfolio's property, designated as security for
such Advance or Liability, results in an amount less than necessary to
obtain repayment, reimbursement or indemnification, the Portfolio shall
continue to be liable to the Custodian for the differences between the
proceeds of the disposition of the Portfolio's property, designated as
security for such Advance or Liability, and the amount of the repayment,
reimbursement or indemnification due to the Custodian and the Custodian
shall have the right to designate in the same manner described above an
additional security for such obligation which shall constitute Additional
Securities hereunder.
3.11 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection with
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the initial approval of this Contract. In addition, the Custodian will
promptly inform the Fund in the event that the Custodian learns of a
material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally accepted
U.S. accounting principles).
3.12 BRANCHES OF U.S. BANKS. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of a
Portfolio's assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 FOREIGN EXCHANGE TRANSACTIONS. (a) Upon receipt of Proper Instructions,
the Custodian shall settle foreign exchange contracts or options to
purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of a Portfolio with such brokers, banks or
trust companies other than the Custodian ("Currency Brokers") as the Fund
may determine and direct pursuant to Proper Instructions or as the
Custodian may select ("Transactions Other Than As Principal").
(b) The Custodian shall not be obligated to enter into foreign exchange
transactions as principal ("Transactions As Principal"). However, if the
Custodian has made available to the Fund its services as a principal in
foreign exchange transactions and subject to any separate agreement
between the parties relating to such transactions, the Custodian shall
enter into foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf of and for the
account of a Portfolio, with the Custodian as principal.
(c) If, in a Transaction Other Than As Principal, a Currency Broker is
selected by the Fund, on behalf of a Portfolio, the Custodian shall have
no duty with respect to the selection of the Currency Broker, or, so long
as the Custodian acts in accordance with Proper Instructions, for the
failure of such Currency Broker to comply with the terms of any contract
or option. If, in a Transaction Other Than As Principal, the Currency
Broker is selected by the Custodian or if the Custodian enters into a
Transaction As Principal, the Custodian shall be responsible for the
selection of the Currency Broker and the failure of such Currency Broker
to comply with the terms of nay contract or option.
(d) In Transactions Other Than As Principal and Transactions As Principal,
the Custodian shall be responsible for any transfer of cash, the
transmission of instructions to and from a Currency Broker, if any, the
safekeeping of all certificates and other documents and agreements
evidencing or relating to such foreign exchange transactions and the
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maintenance of proper records as set forth in Section 9 of this Contract.
3.14 TAX LAW. Except to the extent that imposition of any tax liability arises
from State Street's failure to perform in accordance with the terms of
this Section 3.14 or from the failure of any sub-custodian to perform in
accordance with the terms of the applicable subcustody agreement, State
Street shall have no responsibility or liability for any obligations now
or hereafter imposed on each Portfolio by the tax law of the domicile of
each Portfolio or of any jurisdiction in which each Portfolio is invested
or any political subdivision thereof. It shall be the responsibility of
State Street to use due care to perform such steps as are required to
collect any tax refund, to ascertain the appropriate rate of tax
withholding and to provide such information and documents as may be
required to enable each Portfolio to receive appropriate tax treatment
under applicable tax laws and any applicable treaty provisions. Unless
otherwise informed by each Portfolio, State Street, in performance of its
duties under this Section, shall be entitled to apply categorical
treatment of each Portfolio according to the nationality of each
Portfolio, the particulars of its organization and other relevant details
that shall be supplied by each Portfolio. State Street shall be entitled
to rely on any information supplied by each Portfolio. State Street may
engage reasonable professional advisors disclosed to each Portfolio by
State Street, which may include attorneys, accountants or financial
institutions in the regular business of investment administration and may
rely upon advice received therefrom. It shall be the duty of each
Portfolio to inform State Street of any change in the organization,
domicile or other relevant fact concerning tax treatment of each Portfolio
and further to inform State Street if each Portfolio is or becomes the
beneficiary of any special ruling or treatment not applicable to the
general nationality and category of entity of which each Portfolio is a
part under general laws and treaty provisions.
4. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Trust Instrument and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
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5. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Contract means a writing
signed or initialled by two or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Fund and the
Custodian are satisfied that such procedures afford adequate safeguards for the
Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three party
agreement which requires a segregated asset account in accordance with Section
2.12.
6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Trust Instrument as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
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<PAGE>
8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
If, and to the extent requested by the Fund, the Custodian shall cooperate
with and supply necessary information to the entity or entities appointed by the
Board of Trustees of the Fund to keep the books of account of each Portfolio
and/or compute the net asset value per share of the outstanding shares of each
Portfolio or, if directed in writing to do so by the Fund on behalf of the
Portfolio, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Portfolio as described in the Fund's currently effective
prospectus related to such Portfolio and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various components.
The calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time in the
Fund's currently effective prospectus related to such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each Portfolio at such
times as the Fund may reasonably require, with reports by independent public
accountants on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
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<PAGE>
relating to the services provided by the Custodian under this Contract; such
reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
As a condition to the indemnification provided for in this Section 13, if
in any case the indemnifying party is asked to indemnify and hold the
indemnified party harmless, the indemnified party shall fully and promptly
advise the indemnifying party of all pertinent facts concerning the situation in
question, and shall use all reasonable care to identify, and promptly notify the
indemnifying party of, any situation which presents or appears likely to present
the probability of such a claim for indemnification against the indemnifying
party. The indemnifying party shall be entitled, at its own expense, to
participate in the investigation and to be consulted as to the defense of any
such claim, and in such event, the indemnified party shall keep the indemnifying
party fully and currently informed of all developments relating to such
investigation or defense. At any time, the indemnifying party shall be entitled
at its own expense to conduct the defense of any such claim, provided that the
indemnifying party: (a) reasonably demonstrates to the other party its ability
to pay the full amount of potential liability in connection with such claim and
(b) first admits in writing to the other party that such claim is one in respect
of which the indemnifying party is obligated to indemnify the other party
hereunder. Upon satisfaction of the foregoing conditions, the indemnifying party
shall take over complete defense of the claim, and the indemnified party shall
initiate no further legal or other expenses for which it shall seek
indemnification. The indemnified party shall in no case confess any claim or
make any compromise in any case in which the indemnifying party may be asked to
indemnify the indemnified party, except with the indemnifying party's prior
written consent.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
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<PAGE>
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue
in full force and effect with respect to each Portfolio until terminated as
hereinafter provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination to
take effect not sooner than thirty (30) days after the date of such delivery or
mailing; PROVIDED, however that the Custodian shall not with respect to a
Portfolio act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees of the Fund has approved the use of a particular Securities System by
such Portfolio as required by Rule 17f-4 under the Investment Company Act of
1940, as amended and that the Custodian shall not with respect to a Portfolio
act under Section 2.11 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has reviewed the use by such
Portfolio of the Direct Paper System; PROVIDED FURTHER, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Trust Instrument, and
further provided, that the Fund on behalf of one or more of the Portfolios may
at any time by action of its Board of Trustees (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements. Termination of the Contract with respect to
one Portfolio (but less than all of the Portfolios) will not constitute
termination of the Contract, and the terms of the Contract continue to apply to
the other Portfolios.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
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<PAGE>
securities, funds and other properties in accordance with such vote. In the
event that no written order designating a successor custodian or certified copy
of a vote of the Board of Trustees shall have been delivered to the Custodian on
or before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the Investment Company Act of 1940, doing business in
Boston, Massachusetts, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,000,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held by the
Custodian relative thereto and all other property held by it under this Contract
on behalf of each applicable Portfolio and to transfer to an account of such
successor custodian all of the securities of each such Portfolio held in any
Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Trust Instrument of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to Neuberger Berman Socially Responsive Assets with respect to which it
desires to have the Custodian render services as custodian under the terms
hereof, it shall so notify the Custodian in writing, and if the Custodian agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
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<PAGE>
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. LIMITATION OF TRUSTEE, OFFICER AND SHAREHOLDER LIABILITY
It is expressly agreed that the obligations of the Fund and each Portfolio
hereunder shall not be binding upon any of the Trustees, officers, agents or
employees of the Fund or upon the shareholders of any Portfolio personally, but
shall only bind the assets and property of the Fund, as provided in its Trust
Instrument. The execution and delivery of this Contract have been authorized by
the Trustees of the Fund, and this Contract has been executed and delivered by
an authorized officer of the Fund acting as such; neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Fund, as
provided in its Trust Instrument.
20. NO LIABILITY OF OTHER PORTFOLIOS
Notwithstanding any other provision of this Contract, the parties agree
that the assets and liabilities of each Portfolio are separate and distinct from
the assets and liabilities of each other Portfolio and that no Portfolio shall
be liable or shall be charged for any debt, obligation or liability of any other
Portfolio, whether arising under this Contract or otherwise.
21. CONFIDENTIALITY
The Custodian agrees that all books, records, information and data
pertaining to the business of the Fund which are exchanged or received pursuant
to the negotiation or carrying out of this Contract shall remain confidential,
shall not be voluntarily disclosed to any other person, except as may be
required by law, and shall not be used by the Custodian for any purpose not
directly related to the business of the Fund, except with the Fund's written
consent.
22. ASSIGNMENT
Neither the Fund nor the Custodian shall have the right to assign any of
its rights or obligations under this Contract without the prior written consent
of the other party.
23. SEVERABILITY
If any provision of this Contract is held to be unenforceable as a matter
of law, the other terms and provisions hereof shall not be affected thereby and
shall remain in full force and effect.
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<PAGE>
24. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios, or any
predecessor(s) thereto, and the Custodian relating to the custody of the Fund's
assets.
25. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
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<PAGE>
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [x] The Custodian is not authorized to release the Fund's
name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 30th day of December, 1998.
ATTEST NEUBERGER BERMAN EQUITY SERIES
/s/ Claudia A. Brandon /s/ Stanley Egener
- ----------------------- --------------------------------
By: Stanley Egener
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Marc L. Parsons /s/ Ronald E. Logue
- ----------------------- --------------------------------
By: Ronald E. Logue
Title: Executive Vice President
22
TRANSFER AGENCY AND SERVICE AGREEMENT
between
NEUBERGER BERMAN EQUITY SERIES
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Terms of Appointment; Duties of the Bank....................... 1
2. Fees and Expenses.............................................. 3
3. Representations and Warranties of the Bank..................... 4
4. Representations and Warranties of the Fund..................... 4
5. Data Access and Proprietary Information........................ 4
6. Indemnification................................................ 5
7. Covenants of the Fund and the Bank............................. 7
8. Termination of Agreement....................................... 7
9. Additional Funds................................................ 8
10. Assignment...................................................... 8
11. Amendment....................................................... 8
12. Massachusetts Law to Apply...................................... 8
13. Force Majeure................................................... 8
14. Consequential Damages........................................... 9
15. Merger of Agreement............................................. 9
16. Limitations of Liability of the Trustees and Shareholders,
Officers,Employees and Agent.................................... 9
17. Counterparts.................................................... 9
18. Notices......................................................... 9
2
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 30th day of December, 1998, by and between NEUBERGER
BERMAN EQUITY SERIES, a Delaware business trust, having its principal office and
place of business at 605 Third Avenue, New York, New York 10158 (the "Fund"),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having
its principal office and place of business at 225 Franklin Street, Boston,
Massachusetts 02110 (the "Bank").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, Neuberger
Berman Socially Responsive Assets (such series, together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Article 9, being herein referred to as a "Portfolio", and
collectively as the "Portfolios");
WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its
transfer agent, dividend disbursing agent, custodian of certain retirement plans
and agent in connection with certain other activities, and the Bank desires to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund,
on behalf of the Portfolios, hereby employs and appoints the Bank to act
as, and the Bank agrees to act as its transfer agent for the Fund's
authorized and issued shares of beneficial interest of the Fund
representing interests in each of the respective Portfolios ("Shares"),
dividend disbursing agent, custodian of certain retirement plans and agent
in connection with any accumulation, open-account or similar plans
provided to the shareholders of each of the respective Portfolios of the
Fund ("Shareholders") and set out in the currently effective prospectus
and statement of additional information ("prospectus") of the Fund on
behalf of the applicable Portfolio, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund on behalf of each of the Portfolios, as
applicable and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Trust Instrument of the Fund
(the "Custodian");
<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any
redemption, pay over or cause to be paid over in the
appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit (or credit the appropriate
shareholder account) payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory to
the Bank and protecting the Bank and the Fund, and the
Bank at its option, may issue replacement certificates
in place of mutilated stock certificates upon
presentation thereof and without such indemnity;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
(ix) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. The Bank shall also provide the Fund on a
regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no
obligation, when recording the issuance of shares, to
monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), the Bank shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, custodian of certain retirement plans and, as
relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing
Shareholder reports and prospectuses to current Shareholders,
2
<PAGE>
withholding taxes on U.S. resident and non-resident alien accounts,
preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each
State.
(c) In addition, the Fund shall (i) identify to the Bank in writing
those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State. The
responsibility of the Bank for the Fund's blue sky State
registration status is solely limited to the initial establishment
of transactions subject to blue sky compliance by the Fund and the
reporting of such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these services in
Section 1 may be established from time to time by agreement between
the Fund on behalf of each Portfolio and the Bank per the attached
service responsibility schedule. The Bank may at times perform only
a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(e) The Bank shall provide additional services on behalf of the Fund
(i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
2. FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Fund, on
behalf of each Portfolio agrees to pay the Bank an annual maintenance fee
for each Shareholder account as set out in the initial fee schedule
attached hereto. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Fund, on behalf
of the applicable Portfolio, agrees to reimburse the Bank for
out-of-pocket expenses, including but not limited to confirmation
production, postage, forms, telephone, microfilm, microfiche, tabulating
proxies, records storage, or advances incurred by the Bank for the items
set out in the fee schedule attached hereto. In addition, any other
expenses incurred by the Bank at the request or with the consent of the
Fund, will be reimbursed by the Fund on behalf of the applicable
Portfolio.
2.3 The Fund, on behalf of the applicable Portfolio, agrees to pay all fees
and reimbursable expenses within five days following the mailing of the
respective billing notice. Postage for mailing of dividends, proxies, Fund
reports and other mailings to all Shareholder accounts shall be advanced
to the Bank by the Fund at least seven (7) days prior to the mailing date
of such materials.
3
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Bank that:
4.1 It is a business trust duly organized and existing and in good standing
under the laws of Delaware.
4.2 It is empowered under applicable laws and by its Trust Instrument and
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings required by said Trust Instrument and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
4.4 It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended on
behalf of each of the Portfolios is currently effective and will remain
effective, and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale.
5. DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Fund acknowledges that the computer programs, screen formats, report
formats (except such screen formats and report formats as may be necessary
to respond to shareholder problems or inquiries), interactive design
techniques, and documentation manuals furnished to the Fund by the Bank as
part of the Fund's ability to access certain Fund-related data ("Customer
Data") maintained by the Bank on data bases under the control and
ownership of the Bank or other third party ("Data Access Services")
constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Bank
4
<PAGE>
or other third party. In no event shall Proprietary Information be deemed
Customer Data. The Fund agrees to treat all Proprietary Information as
proprietary to the Bank and further agrees that it shall not divulge any
Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Fund agrees for
itself and its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by the Bank and solely in accordance with the Bank's
applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with the Bank's instructions;
(d) to honor all reasonable written requests made by the Bank to protect
at the Bank's expense the rights of the Bank in Proprietary
Information at common law, under federal copyright law and under
other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 5. The obligations of this Section shall
survive any earlier termination of this Agreement.
5.2 If the Fund notifies the Bank that any of the Data Access Services do not
operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely
manner to correct such failure. Organizations from which the Bank may
obtain certain data included in the Data Access Services are solely
responsible for the contents of such data and the Fund agrees to make no
claim against the Bank arising out of the contents of such third-party
data, including, but not limited to, the accuracy thereof. DATA ACCESS
SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN
CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE
BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED
HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.3 If the transactions available to the Fund include the ability to originate
electronic instructions to the Bank in order to (i) effect the transfer or
movement of cash or Shares or (ii) transmit Shareholder information or
other information (such transactions constituting a "COEFI"), then in such
event the Bank shall be entitled to rely on the validity and authenticity
of such instruction without undertaking any further inquiry as long as
such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
6. INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the
applicable Portfolio indemnify and hold the Bank harmless from and
5
<PAGE>
against, any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or subcontractors
of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or any other
person or firm on behalf of the Fund including but not limited to
any previous transfer agent or registrar.
(d) The reasonable reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund
on behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
6.2 The Bank shall indemnify and hold the Fund and each Portfolio thereof
harmless from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or
attributed to any action or failure or omission to act by the Bank as a
result of the Bank's lack of good faith, negligence or willful misconduct.
6.3 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Bank
under this Agreement, and the Bank and its agents or subcontractors shall
not be liable and shall be indemnified by the Fund on behalf of the
applicable Portfolio for any action taken or omitted by it in reasonable
reliance upon such instructions or upon the opinion of such counsel. The
Bank, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data, records or
documents provided the Bank or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority
of any person, until receipt of written notice thereof from the Fund. The
Bank, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers
of the Fund, and the proper countersignature of any former transfer agent
or former registrar, or of a co-transfer agent or co-registrar.
6
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6.4 In order that the indemnification provisions contained in this Section 6
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the Fund of such assertion, and shall keep the other party
advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with
the party seeking indemnification in the defense of such claim or to
defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any
claim or make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior written
consent.
7. COVENANTS OF THE FUND AND THE BANK
7.1 The Fund shall on behalf of each Portfolio promptly furnish to the Bank
the following:
(a) A certified copy of the resolution of the Trustees of the Fund
authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Trust Instrument and By-Laws of the Fund and all
amendments thereto.
7.2 The Bank hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of stock certificates,
check forms and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such certificates,
forms and devices.
7.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared
or maintained by the Bank relating to the services to be performed by the
Bank hereunder are the property of the Fund and will be preserved,
maintained and made available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with its
request.
7.4 The Bank and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential, and shall not be voluntarily disclosed to any
other person, except as may be required by law.
7.5 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, the Bank will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel
that it may be held liable for the failure to exhibit the Shareholder
records to such person.
7.6 Notwithstanding any other provision of this Agreement, the parties agree
that the assets and liabilities of each Portfolio of the Fund are separate
and distinct from the assets and liabilities of each other Portfolio and
that no Portfolio shall be liable or shall be charged for any debt,
obligation or liability of any other Portfolio, whether arising under the
Agreement or otherwise.
7
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8. TERMINATION OF AGREEMENT
8.1 This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other.
8.2 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
borne by the Fund on behalf of the applicable Portfolio(s). Additionally,
the Bank reserves the right to charge for any other reasonable expenses
associated with such termination.
9. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to Neuberger Berman Socially Responsive Assets, with respect to
which it desires to have the Bank render services as transfer agent under
the terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
10. ASSIGNMENT
10.1 Except as provided in Section 10.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
10.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3 The Bank may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) Boston Financial Data Services, Inc.,
a Massachusetts corporation ("BFDS") which is duly registered as a
transfer agent pursuant to Section 17A(c)(l) of the Securities Exchange
Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly
registered as a transfer agent pursuant to Section 17A(c)(l) or (iii) a
BFDS affiliate; provided, however, that the Bank shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as
it is for its own acts and omissions.
11. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties and authorized or approved by a resolution of the Trustees
of the Fund.
12. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the Commonwealth of
Massachusetts.
13. FORCE MAJEURE
8
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In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to
perform or otherwise from such causes.
14. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement.
15. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
16. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS, OFFICERS,
EMPLOYEES AND AGENT
A copy of the Trust Instrument of the Fund is on file with the Secretary
of the State Of Delaware. The parties agree that neither the Shareholders,
Trustees, officers, employees nor any agent of the Fund shall be liable
hereunder and that the parties to this Agreement other than the Fund shall
look solely to the Fund property for the performance of this Agreement or
payment of any claim under this Agreement.
17. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
18. NOTICES
All notices, requests, consents and other communications hereunder
(collectively "communications") shall be in writing and shall be
personally delivered or mailed, first class postage prepaid,
9
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(a) if to the Fund, to
Neuberger Berman Equity Series
605 Third Avenue
New York, NY 10158
Attention: Michael J. Weiner
Vice President
(b) if to the Bank, to
Boston Financial Data Services, Inc.
Two Heritage Drive
North Quincy, MA 02171
Attn: Paul Alsama
or such other address as either party shall have furnished to the other in
writing; provided that any communication may be sent by "tested" telex or
any other form of electronic transmission capable of producing a permanent
record and agreed upon by the parties in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
NEUBERGER BERMAN EQUITY SERIES
BY: /s/ Stanley Egener
--------------------------------
Stanley Egener
ATTEST:
/s/ Claudia A. Brandon
- -----------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
--------------------------------
Executive Vice President
ATTEST:
/s/ Marc L. Parsons
- ----------------------
10
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
Bank Fund
---- ----
1. Receives orders X X
for the purchase (if in (if by
of Shares. writing) phone)
2. Issue Shares and X
hold Shares in
Shareholders
accounts.
3. Receive X X
redemption (if in (if by
requests. writing) phone)
4. Effect X
transactions 1-3 (2 is
above directly always
with BFDS)
broker-dealers.
5. Pay over monies X
to redeeming
Shareholders.
6. Effect transfers X
of Shares.
7. Prepare and X
transmit
dividends and
distributions.
8. Issue X
Replacement
Certificates.
9. Reporting of X
abandoned
property.
10. Maintain records X
of account.
11. Maintain and keep X
a current and
accurate control
book for each
issue of securities.
11
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Service Performed Responsibility
12. Mail proxies. X
13. Mail Shareholder X
reports.
14. Mail X
prospectuses to
current
Shareholders.
15. Withhold taxes X
on U.S. resident
and non-resident
alien accounts.
16. Prepare and file X
U.S. Treasury
Department forms.
17. Prepare and mail X
account and
confirmation
statements for
Shareholders.
18. Provide X
Shareholder
account
information.
19. Blue Sky X
reporting.
o Such services are more fully described in Section 1.2 (a), (b) and (c) of the
Agreement.
12
<PAGE>
NEUBERGER BERMAN EQUITY SERIES
BY: /s/ Stanley Egener
--------------------------------
Stanley Egener
ATTEST:
/s/ Claudia A. Brandon
- -----------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Ronald E. Logue
--------------------------------
Executive Vice President
ATTEST:
/s/ Marc L. Parsons
- ---------------------
13
FORM OF
ADMINISTRATION AGREEMENT
This Agreement is made as of June 28, 1999, between Neuberger Berman
Equity Series, a Delaware business trust ("Trust"), and Neuberger Berman
Management Inc., a New York corporation ("Administrator").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end, diversified management investment
company and may establish several separate series of shares ("Series"), with
each Series having its own assets and investment policies; and
WHEREAS, the Trust desires to retain the Administrator to furnish
administrative services, including shareholder accounting, recordkeeping, and
other services to shareholders, to each Series listed in Schedule A attached
hereto, and to such other Series of the Trust hereinafter established as agreed
to from time to time by the parties, evidenced by an addendum to Schedule A
(hereinafter "Series" shall refer to each Series which is subject to this
Agreement and all agreements and actions described herein to be made or taken by
a Series shall be made or taken by the Trust on behalf of the Series), and the
Administrator is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. SERVICES OF THE ADMINISTRATOR.
1.1 ADMINISTRATIVE SERVICES. The Administrator shall supervise each
Series's business and affairs and shall provide such services required for
effective administration of such Series as are not provided by employees or
other agents engaged by such Series; PROVIDED, that the Administrator shall not
have any obligation to provide under this Agreement any direct or indirect
services to a Series's shareholders, any services related to the distribution of
a Series's shares, or any other services that are the subject of a separate
<PAGE>
agreement or arrangement between a Series and the Administrator. Subject to the
foregoing, in providing administrative services hereunder, the Administrator
shall:
1.1.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without
cost to each Series, or pay the cost of, such office space, office equipment and
office facilities as are adequate for the Series's needs;
1.1.2 PERSONNEL. Provide, without remuneration from or other
cost to each Series, the services of individuals competent to perform all of the
Series's executive, administrative and clerical functions that are not performed
by employees or other agents engaged by the Series or by the Administrator
acting in some other capacity pursuant to a separate agreement or arrangement
with the Series;
1.1.3 AGENTS. Assist each Series in selecting and coordinating
the activities of the other agents engaged by the Series, including the Series's
shareholder servicing agent, custodian, independent auditors and legal counsel;
1.1.4 TRUSTEES AND OFFICERS. Authorize and permit the
Administrator's directors, officers or employees who may be elected or appointed
as trustees or officers of the Trust to serve in such capacities, without
remuneration from or other cost to the Trust or any Series;
1.1.5 BOOKS AND RECORDS. Assure that all financial, accounting
and other records required to be maintained and preserved by each Series are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations; and
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1.1.6 REPORTS AND FILINGS. Assist in the preparation of (but
not pay for) all periodic reports by each Series to shareholders of such Series
and all reports and filings required to maintain the registration and
qualification of the Series and the Series's shares, or to meet other regulatory
or tax requirements applicable to the Series, under federal and state securities
and tax laws.
1.2 SHAREHOLDER AND RELATED SERVICES. The Administrator shall
provide each of the following services as may be required by any Series, its
shareholders (each of which must be either a broker-dealer, pension plan
administrator, or other institution that provides certain accounting,
recordkeeping and other services to its accounts (each, an "Institution")):
1.2.1 PURCHASE ORDERS. Receive for acceptance, as agent for
the Series, orders from Institutions for the purchase of Series shares
transmitted or delivered to the office of the Administrator, note the time and
date of each order when received, promptly deliver payment for such purchases to
the Series' custodian ("Custodian"), and coordinate with the Series or its
designees for the issuance of the appropriate number of shares so purchased to
the appropriate Institution;
1.2.2 RECORDS. Maintain records of the number of shares of
each Series attributable to each Institution (including name, address and
taxpayer identification number), record all changes to such shares held by each
Institution on a daily basis, and furnish to each Series each business day the
total number of shares of such Series attributable to all shareholders;
1.2.3 REDEMPTION REQUESTS. Receive for acceptance requests and
directions from Institutions for the redemption of Series shares transmitted or
delivered to the office of the Administrator, note the time and date of each
request when received, process such requests and directions in accordance with
the redemption procedures set forth in the then current Prospectus and Statement
of Additional Information ("SAI") of the Series, and deliver the appropriate
documentation to the Custodian;
3
<PAGE>
1.2.4 WIRE TRANSFERS. Coordinate and implement bank-to-bank
wire transfers in connection with Series share purchases and redemptions by
Institutions;
1.2.5 REDEMPTION PAYMENTS. Upon receipt of monies paid to it
by the Custodian with respect to any redemption of Series shares, pay or cause
such monies to be paid pursuant to instructions by the appropriate Institution.
1.2.6 EXCHANGES. Receive and execute orders from Institutions
to exchange shares by concurrent purchases and redemptions of shares of a Series
and shares of other Series or of other investment companies or series thereof
pursuant to each Series's then current Prospectus and SAI;
1.2.7 DIVIDENDS. Based upon information received from a Series
regarding dividends or other distributions on Series shares, calculate the
dividend or distribution attributable to each Institution; if such dividend or
distribution is payable in shares or by reinvestment in shares, calculate such
shares for each Institution and record same in the share records for each
Institution, and if such dividend or distribution is payable in cash, upon
receipt of monies therefor from the Custodian, pay or cause such monies to be
paid to the appropriate Institution or as such Institution may direct;
1.2.8 INQUIRIES. Respond to telephonic, mail, and in-person
inquiries from Institutions or their representatives requesting information
regarding matters such as shareholder account or transaction status, net asset
value ("NAV") of Series shares, Series performance, Series services, plans and
options, Series investment policies, Series portfolio holdings, and Series
distributions and taxation thereof;
1.2.9 COMPLAINTS. Deal with complaints and correspondence of
Institutions directed to or brought to the attention of the Administrator;
4
<PAGE>
1.2.10 REPORTS; PROXIES. Distribute as appropriate to all
shareholders all Series reports, dividend and distribution notices, and proxy
material relating to any meeting of Series shareholders, and soliciting,
processing and tabulating proxies for such meetings;
1.2.11 SPECIAL REPORTS. Generate or develop and distribute
special data, notices, reports, programs and literature required by Institutions
generally in light of developments, such as changes in tax laws; and
1.2.12 AGENTS. Assist any institutional servicing agent
("Agent") engaged by the Series in the development, implementation and
maintenance of the following special programs and systems to enhance each
Series's capability to service its shareholders:
(a) Training programs for personnel of such Agent;
(b) Joint programs with such Agent for the development of systems
software, shareholder information reports, and other special reports;
(c) Automatic data exchange facilities with shareholders and such
Agent;
(d) Automated clearing house transfer procedures between
shareholders and such Agent; and
(e) Touch-tone telephone information and transaction systems for
shareholders.
2. EXPENSES OF EACH SERIES.
2.1 EXPENSES TO BE PAID BY THE ADMINISTRATOR. The Administrator
shall pay all salaries, expenses and fees of the officers, trustees, or
employees of the Trust who are officers, directors or employees of the
Administrator. If the Administrator pays or assumes any expenses of the Trust or
a Series not required to be paid or assumed by the Administrator under this
Agreement, the Administrator shall not be obligated hereby to pay or assume the
5
<PAGE>
same or any similar expense in the future; PROVIDED, that nothing herein
contained shall be deemed to relieve the Administrator of any obligation to the
Trust or to a Series under any separate agreement or arrangement between the
parties.
2.2 EXPENSES TO BE PAID BY THE SERIES. Each Series shall bear all
expenses of its operation, except those specifically allocated to the
Administrator under this Agreement or under any separate agreement between such
Series and the Administrator. Expenses to be borne by such Series shall include
both expenses directly attributable to the operation of that Series and the
offering of its shares, as well as the portion of any expenses of the Trust that
is properly allocable to such Series in a manner approved by the trustees of the
Trust ("Trustees"). Subject to any separate agreement or arrangement between the
Trust or a Series and the Administrator, the expenses hereby allocated to each
Series, and not to the Administrator, include, but are not limited to:
2.2.1 CUSTODY. All charges of depositories, custodians, and
other agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property;
2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent (other
than the Administrator hereunder) engaged by a Series to service shareholder
accounts;
2.2.3 SHAREHOLDER REPORTS. All expenses of preparing, setting
in type, printing and distributing reports and other communications to
shareholders of a Series;
2.2.4 PROSPECTUSES. All expenses of preparing, setting in
type, printing and mailing annual or more frequent revisions of a Series's
Prospectus and SAI and any supplements thereto and of supplying them to
shareholders of the Series;
6
<PAGE>
2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of
computing a Series's net asset value ("NAV") per share, including any equipment
or services obtained for the purpose of pricing shares or valuing the Series's
investment portfolio;
2.2.6 COMMUNICATIONS. All charges for equipment or services
used for communications between the Administrator or the Series and any
custodian, shareholder servicing agent, portfolio accounting services agent, or
other agent engaged by a Series; 2.2.7 LEGAL AND ACCOUNTING FEES. All charges
for services and expenses of a Series's legal counsel and independent auditors;
2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of
Trustees other than those affiliated with the Administrator, all expenses
incurred in connection with such unaffiliated Trustees' services as Trustees,
and all other expenses of meetings of the Trustees or committees thereof;
2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to holding
meetings of shareholders, including the printing of notices and proxy materials,
and proxy solicitation therefor;
2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust and each Series under
the 1940 Act and the registration of each Series's shares under the Securities
Act of 1933 (the "1933 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing, and filing of any
Registration Statement, Prospectus and SAI under the 1933 Act or the 1940 Act,
and any amendments or supplements that may be made from time to time;
2.2.11 STATE REGISTRATION FEES. All fees and expenses of
qualifying and maintaining the qualification of the Trust and each Series and of
each Series's shares for sale under securities laws of various states or
7
<PAGE>
jurisdictions, and of registration and qualification of each Series under all
other laws applicable to a Series or its business activities (including
registering the Series as a broker-dealer, or any officer of the Series or any
person as agent or salesman of the Series in any state);
2.2.12 SHARE CERTIFICATES. All expenses of preparing and
transmitting a Series's share certificates, if any;
2.2.13 CONFIRMATIONS. All expenses incurred in connection with
the issue and transfer of a Series's shares, including the expenses of
confirming all share transactions;
2.2.14 BONDING AND INSURANCE. All expenses of bond, liability,
and other insurance coverage required by law or regulation or deemed advisable
by the Trustees, including, without limitation, such bond, liability and other
insurance expense that may from time to time be allocated to the Series in a
manner approved by the Trustees;
2.2.15 BROKERAGE COMMISSIONS. All brokers' commissions and
other charges incident to the purchase, sale or lending of a Series's portfolio
securities;
2.2.16 TAXES. All taxes or governmental fees payable by or
with respect to a Series to federal, state or other governmental agencies,
domestic or foreign, including stamp or other transfer taxes;
2.2.17 TRADE ASSOCIATION FEES. All fees, dues and other
expenses incurred in connection with a Series's membership in any trade
association or other investment organization;
2.2.18 NONRECURRING AND EXTRAORDINARY EXPENSES. Such
nonrecurring and extraordinary expenses as may arise, including the costs of
actions, suits, or proceedings to which the Series is a party and the expenses a
Series may incur as a result of its legal obligation to provide indemnification
to the Trust's officers, Trustees and agents;
8
<PAGE>
2.2.19 ORGANIZATIONAL EXPENSES. All organizational expenses of
each Series paid or assessed by the Administrator, which such Series shall
reimburse to the Administrator at such time or times and subject to such
condition or conditions as shall be specified in the Prospectus and SAI pursuant
to which such Series makes the initial public offering of its shares; and
2.2.20 INVESTMENT ADVISORY SERVICES. Any fees and expenses for
investment advisory services that may be incurred or contracted for by a Series.
3. ADMINISTRATION FEE.
3.1 FEE. As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Administrator to or for each Series
under this Agreement, such Series shall pay the Administrator an annual fee as
set out in Schedule B to this Agreement.
3.2 COMPUTATION AND PAYMENT OF FEE. The administration fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accruals for each
Series shall be computed by multiplying the fraction of one divided by the
number of days in the calendar year by the applicable annual administration fee
rate (as set forth in Schedule B hereto), and multiplying this product by the
NAV of such Series, determined in the manner set forth in such Series's
then-current Prospectus, as of the close of business on the last preceding
business day on which such Series's NAV was determined.
3.3 STATE EXPENSE LIMITATION. If in any fiscal year a Series's
operating expenses plus such Series's pro rata portion of the operating expenses
of any portfolio of Equity Managers Trust in which such Series invests all or
substantially all of its assets ("Aggregate Operating Expenses"), which includes
any fees or expense reimbursements payable to the Administrator pursuant to this
Agreement and any compensation payable to the Administrator pursuant to (i) the
Management Agreement between such portfolio and the Administrator, or (ii) any
other agreement or arrangement with respect to such Series, but excluding
9
<PAGE>
interest, taxes, brokerage commissions, litigation and indemnification expenses,
and other extraordinary expenses not incurred in the ordinary course of such
Series's business) exceed the lowest applicable percentage expense limitation
imposed under the securities law and regulations of any state in which such
Series's shares are qualified for sale (the "State Expense Limitation"), then
the administration fee payable to the Administrator under this Agreement by such
Series shall be reduced by the amount of such excess; PROVIDED, that the
Administrator shall have no obligation hereunder to reimburse the Series for any
such expenses which exceed such administration fee.
Any reduction in the administration fee shall be made monthly, by
annualizing the Aggregate Operating Expenses of such Series for each month as of
the last day of such month. An adjustment shall be made on or before the last
day of the first month of the next succeeding fiscal year if Aggregate Operating
Expenses for such Series's fiscal year do not exceed the State Expense
Limitation or if for such fiscal year there is no applicable State Expense
Limitation.
4. OWNERSHIP OF RECORDS. All records required to be maintained and
preserved by each Series pursuant to the provisions or rules or regulations of
the Securities and Exchange Commission ("SEC") under Section 31(a) of the 1940
Act and maintained and preserved by the Administrator on behalf of such Series
are the property of such Series and shall be surrendered by the Administrator
promptly on request by the Series; PROVIDED, that the Administrator may at its
own expense make and retain copies of any such records.
5. REPORTS TO ADMINISTRATOR. Each Series shall furnish or otherwise make
available to the Administrator such copies of that Series's Prospectus, SAI,
financial statements, proxy statements, reports, and other information relating
to its business and affairs as the Administrator may, at any time or from time
to time, reasonably require in order to discharge its obligations under this
Agreement.
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<PAGE>
6. REPORTS TO EACH SERIES. The Administrator shall prepare and furnish to
each Series such reports, statistical data and other information in such form
and at such intervals as such Series may reasonably request.
7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS. All computer programs,
written procedures and similar items developed or acquired and used by the
Administrator in performing its obligations under this Agreement shall be the
property of the Administrator, and no Series will acquire any ownership interest
therein or property rights with respect thereto.
8. CONFIDENTIALITY. The Administrator agrees, on its own behalf and on
behalf of its employees, agents and contractors, to keep confidential any and
all records maintained and other information obtained hereunder which relates to
any Series or to any of a Series's former, current or prospective shareholders,
EXCEPT that the Administrator may deliver records or divulge information (a)
when requested to do so by duly constituted authorities after prior notification
to and approval in writing by such Series (which approval will not be
unreasonably withheld and may not be withheld by such Series where the
Administrator advises such Series that it may be exposed to civil or criminal
contempt proceedings or other penalties for failure to comply with such request)
or (b) whenever requested in writing to do so by such Series.
9. THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON SERIES' INSTRUCTIONS, LEGAL
OPINIONS, ETC.; SERIES' COMPLIANCE WITH LAWS.
9.1 The Administrator may at any time apply to an officer of the
Trust for instructions, and may consult with legal counsel for a Series or with
the Administrator's own legal counsel, in respect of any matter arising in
connection with this Agreement; and the Administrator shall not be liable for
any action taken or omitted to be taken in good faith in and with due care in
accordance with such instructions or with the advice or opinion of such legal
counsel. The Administrator shall be protected in acting upon any such
11
<PAGE>
instructions, advice or opinion and upon any other paper or document delivered
by a Series or such legal counsel which the Administrator believes to be genuine
and to have been signed by the proper person or persons, and the Administrator
shall not be held to have notice of any change of status or authority of any
officer or representative of the Trust, until receipt of written notice thereof
from the Series.
9.2 Except as otherwise provided in this Agreement or in any
separate agreement between the parties and except for the accuracy of
information furnished to each Series by the Administrator, each Series assumes
full responsibility for the preparation, contents, filing and distribution of
its Prospectus and SAI, and full responsibility for other documents or actions
required for compliance with all applicable requirements of the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act, and any other applicable laws,
rules and regulations of governmental authorities having jurisdiction over such
Series.
10. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the
freedom of the Administrator or any affiliated person of the Administrator to
render administrative or shareholder services to other investment companies, to
act as administrator to other persons, firms, or corporations, or to engage in
other business activities.
11. LIMITATION OF LIABILITY REGARDING THE TRUST. The Administrator shall
look only to the assets of each Series for performance of this Agreement by the
Trust on behalf of such Series, and neither the Trustees of the Trust
("Trustees") nor any of the Trust's officers, employees or agents, whether past,
present or future shall be personally liable therefor.
12. INDEMNIFICATION BY SERIES. Each Series shall indemnify the
Administrator and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by the
Administrator that result from: (i) any claim, action, suit or proceeding in
12
<PAGE>
connection with the Administrator's entry into or performance of this Agreement
with respect to such Series; or (ii) any action taken or omission to act
committed by the Administrator in the performance of its obligations hereunder
with respect to such Series; or (iii) any action of the Administrator upon
instructions believed in good faith by it to have been executed by a duly
authorized officer or representative of the Trust with respect to such Series;
PROVIDED, that the Administrator shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or misconduct on the
part of the Administrator or its employees, agents or contractors. Before
confessing any claim against it which may be subject to indemnification by a
Series hereunder, the Administrator shall give such Series reasonable
opportunity to defend against such claim in its own name or in the name of the
Administrator.
13. INDEMNIFICATION BY THE ADMINISTRATOR. The Administrator shall
indemnify each Series and hold it harmless from and against any and all losses,
damages and expenses, including reasonable attorneys' fees and expenses,
incurred by such Series which result from: (i) the Administrator's failure to
comply with the terms of this Agreement with respect to such Series; or (ii) the
Administrator's lack of good faith in performing its obligations hereunder with
respect to such Series; or (iii) the Administrator's negligence or misconduct or
that of its employees, agents or contractors in connection herewith with respect
to such Series. A Series shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of that Series or its employees, agents or contractors other than the
Administrator unless such negligence or misconduct results from or is
accompanied by negligence or misconduct on the part of the Administrator, any
affiliated person of the Administrator, or any affiliated person of an
affiliated person of the Administrator. Before confessing any claim against it
which may be subject to indemnification hereunder, a Series shall give the
Administrator reasonable opportunity to defend against such claim in its own
name or in the name of the Trust on behalf of such Series.
13
<PAGE>
14. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to
require the Trust or any Series to take any action contrary to the Trust
Instrument or By-laws of the Trust or any applicable law, regulation or order to
which it is subject or by which it is bound, or to relieve or deprive the
Trustees of their responsibility for and control of the conduct of the business
and affairs of the Series or Trust.
15. TERM OF AGREEMENT. The term of this Agreement shall begin on June 28,
1999 with respect to each Series and, unless sooner terminated as hereinafter
provided, this Agreement shall remain in effect through August 2, 2000.
Thereafter, this Agreement shall continue in effect with respect to each Series
from year to year, subject to the termination provisions and all other terms and
conditions hereof; PROVIDED, such continuance with respect to a Series is
approved at least annually by vote or written consent of the Trustees, including
a majority of the Trustees who are not interested persons of either party hereto
("Disinterested Trustees"); and PROVIDED FURTHER, that the Administrator shall
not have notified a Series in writing at least sixty days prior to the first
expiration date hereof or at least sixty days prior to any expiration date in
any year thereafter that it does not desire such continuation. The Administrator
shall furnish any Series, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment thereof.
16. AMENDMENT OR ASSIGNMENT OF AGREEMENT. Any amendment to this Agreement
shall be in writing signed by the parties hereto; PROVIDED, that no such
amendment shall be effective unless authorized on behalf of any Series (i) by
resolution of the Trustees, including the vote or written consent of a majority
of the Disinterested Trustees, or (ii) by vote of a majority of the outstanding
voting securities of such Series. This Agreement shall terminate automatically
and immediately in the event of its assignment; provided, that with the consent
of a Series, the Administrator may subcontract to another person any of its
14
<PAGE>
responsibilities with respect to such Series and may obtain any of the services
required of it hereunder from its affiliate, Neuberger Berman, LLC.
17. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time
by either party hereto, without the payment of any penalty, upon at least sixty
days' prior written notice to the other party; PROVIDED, that in the case of
termination by any Series, such action shall have been authorized (i) by
resolution of the Trustees, including the vote or written consent of the
Disinterested Trustees, or (ii) by vote of a majority of the outstanding voting
securities of such Series.
18. NAME OF A SERIES. Each Series hereby agrees that if the Administrator
shall at any time for any reason cease to serve as administrator to a Series,
such Series shall, if and when requested by the Administrator, eliminate from
such Series's name the name "Neuberger Berman" and thereafter refrain from using
the name "Neuberger Berman" or the initials "NB" in connection with its business
or activities, and the foregoing agreement of each Series shall survive any
termination of this Agreement and any extension or renewal thereof.
19. INTERPRETATION AND DEFINITION OF TERMS. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by reference to
such term or provision of the 1940 Act and to interpretation thereof, if any, by
the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC validly issued pursuant
to the 1940 Act. Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested persons," "assignment" and "affiliated person,"
as used in this Agreement shall have the meanings assigned to them by Section
2(a) of the 1940 Act. In addition, when the effect of a requirement of the 1940
Act reflected in any provision of this Agreement is modified, interpreted or
relaxed by a rule, regulation or order of the SEC, whether of special or of
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
15
<PAGE>
20. CHOICE OF LAW. This Agreement is made and to be principally performed
in the State of New York, and except insofar as the Act or other federal laws
and regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York.
21. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
22. EXECUTION IN COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
NEUBERGER BERMAN EQUITY SERIES
By:
-----------------------------------------
Title:
----------------------------------------
NEUBERGER BERMAN
MANAGEMENT, INC.
By:
-----------------------------------------
Title:
-----------------------------------------
16
NEUBERGER BERMAN EQUITY SERIES
ADMINISTRATION AGREEMENT
SCHEDULE A
The Series of Neuberger Berman Equity Series currently subject to this
Agreement is as follows:
SERIES DATE MADE PARTY
------ TO AGREEMENT
------------
Genesis Institutional June 28, 1999
NEUBERGER BERMAN EQUITY SERIES
ADMINISTRATION AGREEMENT
SCHEDULE B
Compensation pursuant to Paragraph 3 of Neuberger Berman Equity
Series Administration Agreement shall be 0.15% per annum of the average daily
net assets of the Series.
Dated: June 28, 1999
June 24, 1999
Neuberger Berman Equity Series
605 Third Avenue, Second Floor
New York, New York 10158-0180
Ladies and Gentlemen:
Neuberger Berman Equity Series ("Trust") is a business trust organized
under the laws of the State of Delaware and governed by a Trust Instrument dated
September 22, 1998. You have requested our opinion regarding certain matters in
connection with the Trust's issuance of shares of beneficial interest, par value
$0.001 per share ("Shares"), in its series, Neuberger Berman Genesis
Institutional ("Fund").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine, of the Trust Instrument and the By-laws of the
Trust, the minutes of meetings of its board of trustees and other documents
relating to its organization and operation, and we are generally familiar with
its business affairs. Based upon the foregoing, it is our opinion that the
Shares of the Fund may be legally and validly issued in accordance with the
Trust's Trust Instrument and By-laws and subject to compliance with the
Securities Act of 1933, the Investment Company Act of 1940 and applicable state
laws regulating the offer and sale of securities; and when so issued, the Shares
will be legally issued, fully paid and non-assessable by the Trust.
The Trust is a business trust established pursuant to the Delaware
Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the Trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent
that the Trust or any of its shareholders becomes subject to the jurisdiction of
courts in states which do not have statutory or other authority limiting the
liability of business trust shareholders, such courts might not apply the
Delaware Act and could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument: (i) requires that
every written obligation of the Trust contain a statement that such obligation
may be enforced only against the assets of the Trust; however, the omission of
such a disclaimer will not operate to create personal liability for any
<PAGE>
Neuberger Berman Equity Series
June 24, 1999
Page 2
shareholder; and (ii) provides for indemnification out of Trust property of any
shareholder held personally liable, solely by reason of being a shareholder, for
the obligations of the Trust. Thus, the risk of a Trust shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which: (i) a court refuses to apply Delaware law;
(ii) no contractual limitation of liability is in effect; and (iii) the Trust
itself is unable to meet its obligations.
We express no opinion as to compliance with the Securities Act of 1933,
the Investment Company Act of 1940, or applicable state securities laws in
connection with the sale of Shares.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 2 to the Trust's Registration Statement on Form
N-1A (File Nos. 333-66137 and 811-09011) to be filed with the Securities and
Exchange Commission. We also consent to the reference to our firm in the
Statement of Additional Information filed as part of the Registration Statement.
Sincerely,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur C. Delibert
----------------------------
Arthur C. Delibert
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Auditors/Accountants" in the Statement of Additional Information in
Post-Effective Amendment Number 2 to the Registration Statement (Form N-1A No.
333-66137) of Neuberger Berman Equity Series, and to the incorporation by
reference of our report dated October 5, 1998 on Neuberger&Berman Genesis
Portfolio, one of the series comprising Equity Managers Trust, included in the
1998 Annual Report to Shareholders of Neuberger&Berman Equity Funds.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Boston, Massachusetts
June 24, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger Berman Genesis Portfolio Semi Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 03
<NAME> NEUBERGER BERMAN GENESIS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 1,762,881
<INVESTMENTS-AT-VALUE> 1,707,760
<RECEIVABLES> 23,686
<ASSETS-OTHER> 47
<OTHER-ITEMS-ASSETS> 4
<TOTAL-ASSETS> 1,731,497
<PAYABLE-FOR-SECURITIES> 12,641
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,594
<TOTAL-LIABILITIES> 49,235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,737,383
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (55,121)
<NET-ASSETS> 1,682,262
<DIVIDEND-INCOME> 16,992
<INTEREST-INCOME> 3,155
<OTHER-INCOME> 0
<EXPENSES-NET> (7,232)
<NET-INVESTMENT-INCOME> 12,915
<REALIZED-GAINS-CURRENT> (83,399)
<APPREC-INCREASE-CURRENT> 217,640
<NET-CHANGE-FROM-OPS> 147,156
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (130,093)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,961
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,232
<AVERAGE-NET-ASSETS> 1,967,250
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .74<F1>
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<FN>
<F1>Annualized.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Genesis Portfolio Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> NEUBERGER&BERMAN GENESIS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 2,127,106
<INVESTMENTS-AT-VALUE> 1,854,345
<RECEIVABLES> 9,331
<ASSETS-OTHER> 7
<OTHER-ITEMS-ASSETS> 15
<TOTAL-ASSETS> 1,863,698
<PAYABLE-FOR-SECURITIES> 5,017
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,326
<TOTAL-LIABILITIES> 51,343
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,085,116
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (272,761)
<NET-ASSETS> 1,812,355
<DIVIDEND-INCOME> 28,983
<INTEREST-INCOME> 9,353
<OTHER-INCOME> 0
<EXPENSES-NET> (14,898)
<NET-INVESTMENT-INCOME> 23,438
<REALIZED-GAINS-CURRENT> 35,406
<APPREC-INCREASE-CURRENT> (545,041)
<NET-CHANGE-FROM-OPS> (486,197)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 728,704
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,323
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,898
<AVERAGE-NET-ASSETS> 2,080,911
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
