<PAGE>
As filed with the Securities and Exchange Commission on October 27, 1995
1933 Act Registration No. 2-11357
1940 Act Registration No. 811-582
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. _71_ [_X_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_X_]
Amendment No. _28_ [_X_]
(Check appropriate box or boxes)
NEUBERGER & BERMAN EQUITY FUNDS
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger & Berman Equity Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036-5891
(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)
_x__ on November 1, 1995 pursuant to paragraph (b)
____ 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)
Registrant has filed a declaration pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended, and filed the notice
required by such rule for its 1995 fiscal year on October 24, 1995.
Neuberger & Berman Equity Funds is a "master/feeder fund." This
Post-Effective Amendment No. 71 includes a signature page for the master
fund, Global Managers Trust, and appropriate officers and trustees
thereof.
Page ______ of ______
Exhibit Index Begins on
Page _______
<PAGE>
NEUBERGER & BERMAN EQUITY FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 71 ON FORM N-1A
This post-effective amendment consists of the following papers
and documents.
Cover Sheet
Contents of Post-Effective Amendment No. 71 on Form N-1A
Cross Reference Sheet
Neuberger & Berman International Fund
-------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
No change is intended to be made by this Post-Effective Amendment
No. 71 to the prospectus or statement of additional information for
Neuberger & Berman Focus Fund, Neuberger & Berman Genesis Fund, Neuberger
& Berman Guardian Fund, Neuberger & Berman Manhattan Fund, Neuberger &
Berman Partners Fund and Neuberger & Berman Socially Responsive Fund.
<PAGE>
NEUBERGER & BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 71 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for
Neuberger & Berman International Fund
<TABLE>
<CAPTION>
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Information Financial Highlights; Performance Information
Item 4. General Description of Registrant Investment Program; Description of Investments;
Special Information Regarding Organization,
Capitalization, and Other Matters
Item 5. Management of the Fund Management and Administration; Back Cover Page
Item 6. Capital Stock and Other Securities Front Cover Page; Dividends, Other Distributions, and
Taxes; Special Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Being How to Buy Shares; Additional Information on Telephone
Offered Transactions; Shareholder Services; Share Prices and
Net Asset Value; Management and Administration
Item 8. Redemption or Repurchase How to Sell Shares; Additional Information on
Telephone Transactions; Shareholder Services; Share
Prices and Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
<S> <C> <C>
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Information; Certain Risk
Considerations
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Principal Holders Control Persons and Principal Holders of
of Securities Securities
Item 16. Investment Advisory and Other Investment Management and Administration Services;
Services Trustees and Officers; Distribution Arrangements;
Reports To Shareholders; Custodian and Transfer
Agent; Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Investment Information; Additional Redemption
Information; Dividends and Other Distributions
Item 19. Purchase and Redemption Additional Purchase Information; Additional
Exchange Information; Additional Redemption
Information; Distribution Arrangements
Item 20. Tax Status Dividends and Other Distributions; Additional Tax
Information
Item 21. Underwriters Investment Management and Administration Services;
Distribution Arrangements
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment
No. 71.
<PAGE>
Neuberger&Berman
International Fund ((SM))
[Logo]
PROSPECTUS
NOVEMBER 1, 1995
No Sales Charges
No Redemption Fees
No 12b-1 Fees
<PAGE>
NEUBERGER&BERMAN INTERNATIONAL FUND
A No-Load Equity Fund
Neuberger&Berman International Fund (the "Fund") seeks long-term capital
appreciation through a diversified portfolio consisting primarily of equity
securities of foreign issuers.
Minimum initial purchase $1,000 -- For further information call toll-free
800-877-9700.
THE FUND, A SERIES OF NEUBERGER&BERMAN EQUITY FUNDS (THE "TRUST"), INVESTS
ALL OF ITS NET INVESTABLE ASSETS IN THE INTERNATIONAL PORTFOLIO (THE
"PORTFOLIO") OF GLOBAL MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END
MANAGEMENT INVESTMENT COMPANY MANAGED BY NEUBERGER&BERMAN MANAGEMENT
INCORPORATED ("N&B MANAGEMENT"). THE PORTFOLIO INVESTS IN SECURITIES IN
ACCORDANCE WITH AN INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS IDENTICAL
TO THOSE OF THE FUND. THE INVESTMENT PERFORMANCE OF THE FUND DIRECTLY
CORRESPONDS WITH THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. THIS
"MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER
INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS
OF SECURITIES. FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD
CONSIDER, SEE "SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS" ON PAGE 10.
The Portfolio seeks to achieve its objective by investing primarily in a
diversified portfolio of equity securities of foreign issuers. For a
description of the investment policies and techniques of the Portfolio, see
"Investment Program" and "Description of Investments."
The Fund is a no-load mutual fund, so you pay no sales commissions or other
charges when you buy or redeem shares. The Fund does not pay "12b-1 fees" to
promote or distribute its shares.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated November 1, 1995, is on file with
the Securities and Exchange Commission. The SAI is incorporated herein by
reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management, the Fund's
distributor, at 800-877-9700.
Prospectus Dated November 1, 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
1
<PAGE>
TABLE OF CONTENTS
Summary 3
(bullet)The Fund and Portfolio; Risk Factors 3
(bullet)Management 3
Expense Information 4
(bullet)Shareholder Transaction
Expenses 4
(bullet)Annual Fund Operating Expenses 4
(bullet)Example 4
Financial Highlights 6
Investment Program 7
(bullet)Short-Term Trading;
Portfolio Turnover 8
(bullet)Borrowings 8
Performance Information 9
(bullet)Total Return Information 9
Special Information Regarding
Organization, Capitalization, and
Other Matters 10
(bullet)The Fund 10
(bullet) The Portfolio 10
How To Buy Shares 12
(bullet)By Mail 12
(bullet)By Wire 12
(bullet)By Telephone 12
(bullet)By Exchanging Shares 12
(bullet)Other Information 12
How To Sell Shares 14
(bullet)By Mail or Facsimile Transmission (Fax) 14
(bullet)By Telephone 14
(bullet)Other Information 15
(bullet)Additional Information on
Telephone Transactions 15
Shareholder Services 16
(bullet)Automatic Investing and Dollar
Cost Averaging 16
(bullet)Exchange Privilege 16
(bullet)Systematic Withdrawal Plan 17
(bullet)Retirement Plans 17
Share Prices and Net Asset Value 18
Dividends, Other Distributions,
and Taxes 19
(bullet)Distribution Options 19
(bullet)Taxes 19
Management and Administration 21
(bullet)Trustees and Officers 21
(bullet)Investment Manager, Administrator,
Distributor, and Sub-Adviser 21
(bullet)Expenses 22
(bullet)Transfer and Shareholder Servicing
Arrangements 22
Description of Investments 23
Directory & Funds Eligible for
Exchange 28
2
<PAGE>
SUMMARY
The Fund and Portfolio;
Risk Factors
The Fund is a series of the Trust and invests in the Portfolio that, in turn,
invests in securities in accordance with an investment objective, policies,
and limitations identical to those of the Fund. The trustees of the Trust
believe that this "master/feeder fund" structure may benefit shareholders.
The Portfolio seeks long-term capital appreciation by investing primarily in
a diversified portfolio of equity securities of issuers organized and doing
business principally outside the U.S. The strategy of the Portfolio's
investment manager, N&B Management, is to select attractive investment
opportunities outside the U.S., allocating the assets among economically
mature countries and emerging industrialized countries. The Portfolio invests
primarily in equity securities of medium-to-large capitalization companies
traded on foreign exchanges. The Portfolio may invest more heavily in certain
countries than in others. From time to time, the Portfolio may invest a
significant portion of its assets in Japan. Of course, there can be no
assurance that the Fund will meet its investment objective. Because the Fund,
through the Portfolio, invests primarily in foreign securities, it may be
subject to greater risks and higher expenses than equity funds that invest
primarily in securities of U.S. issuers. Such risks may be even greater in
emerging industrialized and less developed countries.
The risks of investing in foreign securities include, but are not limited to,
possible adverse political and economic developments in a particular country,
differences between foreign and U.S. regulatory systems, and foreign
securities markets that are smaller and less well regulated than those in the
U.S. There is often less information publicly available about foreign
issuers, and many foreign countries do not follow the financial accounting
standards used in the U.S. Most of the securities held by the Portfolio are
denominated in foreign currencies, and the value of these investments can be
adversely affected by fluctuations in foreign currency values. Some foreign
currencies can be volatile and may be subject to governmental controls or
intervention. The Portfolio may use techniques such as options, futures,
forward foreign currency exchange contracts, and short selling, for hedging
and in an attempt to realize income. The Portfolio may also use leverage to
facilitate transactions entered into by the Portfolio for hedging purposes.
The use of these strategies may entail special risks. See "Borrowings" on
page 8 and "Description of Investments," on page 23.
For more information about the organization of the Fund and the Portfolio,
including certain features of the master/feeder fund structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" on
page 10. For more details about the Portfolio, its investments and their
risks, see "Investment Program" on page 7, "Borrowings" on page 8, and
"Description of Investments" on page 23.
Investment Style. Broadly diversified medium-to- large-cap (in relation to
each national market) international equity fund.
Primary Characteristics. Invests in economically mature and emerging
industrialized markets. The portfolio manager seeks undervalued companies in
countries with strong potential for growth.
Management
N&B Management, with the assistance of Neuberger&Berman, L.P.
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio.
N&B Management also provides administrative services to the Portfolio and the
Fund and acts as distributor of Fund shares. See "Management and
Administration" on page 21. If you want to know how to buy and sell shares or
exchange them for shares of other Neuberger&Berman Fundssm, see "How to Buy
Shares" on page 12, "How to Sell Shares" on page 14, and "Shareholder
Services--Exchange Privilege" on page 16.
3
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund and
the Portfolio. See "Performance Information" for important facts about the
investment performance of the Fund, after taking expenses into account.
Shareholder Transaction Expenses
As shown by this table, you pay no transaction charges when you buy or sell
Fund shares.
Sales Charge Imposed on Purchases None
Sales Charge Imposed on Reinvested
Dividends None
Deferred Sales Charges None
Redemption Fees None
Exchange Fees None
If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $8.00) for each wire redemption.
Annual Fund Operating Expenses
(as a percentage of average net assets)
The following table shows Annual Operating Expenses, which are paid out of
the assets of the Fund and which include the Fund's pro rata portion of the
Operating Expenses of the Portfolio. These expenses are borne indirectly by
Fund shareholders. The Fund pays N&B Management a combined administration and
shareholder service fee, based on the Fund's net asset value. The Portfolio
pays N&B Management a management fee, based on the Portfolio's average daily
net assets. A pro rata portion of this fee is borne indirectly by the Fund.
Therefore, the table combines management and administration fees. The Fund
and the Portfolio also incur other expenses for things such as accounting and
legal fees, maintaining shareholder records, and furnishing shareholder
statements and Fund reports. "Operating Expenses" exclude interest, taxes,
brokerage commissions, and extraordinary expenses. The Fund's expenses are
factored into its share prices and dividends and are not charged directly to
Fund shareholders. For more information, see "Management and Administration"
and the SAI.
<TABLE>
<CAPTION>
Management
and Total
Administration 12b-1 Other Operating
Fees Fees Expenses Expenses
- -------------- --- ------- ---------
<S> <C> <C> <C>
0.00%* None 1.70%* 1.70%*
</TABLE>
*(Reflects expense reimbursement undertaking described below)
Annual Operating Expenses for the Fund have been restated based upon current
administration fees for the Fund and management fees for the Portfolio.
"Other Expenses" are based on the Fund's and Portfolio's expenses for the
past fiscal year. The trustees of the Trust believe that the aggregate per
share expenses of the Fund and the Portfolio will be approximately equal to
the expenses the Fund would incur if its assets were invested directly in the
type of securities held by the Portfolio. The trustees of the Trust also
believe that investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale which could reduce
expenses. Other feeder funds may invest in the Portfolio, and such other
funds' expenses and, correspondingly, their returns, may differ from those of
the Fund.
The above table reflects N&B Management's voluntary undertaking to reimburse
the Fund for its Operating Expenses (which include the Fund's pro rata share
of the Operating Expenses of the Portfolio) that, in the aggregate, exceed
1.70% per annum of the Fund's average daily net assets. Absent the
reimbursement, Management and Administration Fees, Other Expenses, and Total
Operating Expenses would be 0.31%, 2.19%, and 2.50%, respectively, of the
average daily net assets of the Fund. For more information about the current
expense reimbursement undertaking, see "Expenses" on page 22.
4
<PAGE>
Example
To illustrate the effect of Operating Expenses, let's assume that the Fund's
annual return is 5% and that it had annual Total Operating Expenses described
in the table above. For every $1,000 you invested in the Fund, you would have
paid the following amounts of total expenses if you closed your account at
the end of each of the following time periods:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- ------- ------- ------- ---------
<S> <C> <C> <C>
$17 $54 $92 $201
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the Securities and Exchange Commission applicable to all
mutual funds.
THE INFORMATION IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE
GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS
CHANGE.
5
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman International Fund
The following information has been audited by the Fund's independent auditors
Ernst & Young, LLP You may obtain further information about the performance
of the Fund in the Fund's annual report to shareholders, which may be
obtained, at no cost, by calling 800-877-9700. The annual report contains the
auditors' report. Also, see "Performance Information."
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income
and expenses including the Fund's proportionate share of its Portfolio's
income and expenses. It should be read in conjunction with the Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
Year Ended June 15, 1994((1))
August 31, to August 31,
1995 1994
------------ -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.46 $ 10.00
---------- ---------------
Income From Investment Operations
Net Investment Income .06 .01
Net Gains or Losses on Securities (both
realized and unrealized) .21 .45
---------- ---------------
Total From Investment Operations .27 .46
---------- ---------------
Less Distributions
Dividends (from net investment income) (.03) -
Net Asset Value, End of Period $10.70 $ 10.46
========== ===============
Total Return+ 2.60% 4.60%((2))
========== ===============
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $26.4 $ 6.2
========== ===============
Ratio of Expenses to Average Net
Assets((3)) 1.70% 1.70%((4))
========== ===============
Ratio of Net Income to Average Net
Assets((3)) .73% .57%((4))
========== ===============
</TABLE>
Notes:
(1) The date investment operations commenced. BNP-N&B Global Asset Management
L.P. ("BNP-N&B Global"), a joint venture of Neuberger&Berman and Banque
Nationale de Paris ("BNP"), served as investment adviser to the Portfolio
from its inception until November 1, 1995.
(2) Not annualized.
(3) After reimbursement of expenses by BNP-N&B Global and by N&B Management as
administrator of the Fund as described in Note B of Notes to Financial
Statements. Had the adviser and the administrator not undertaken such
action, the ratios of expenses and investment income (loss) to average
daily net assets would have been 2.50% and (.07%), respectively, for the
year ended August 31, 1995 and 2.50% and (.23%), respectively, for the
period ended August 31, 1994.
(4) Annualized.
(5) Because the Fund invests only in the Portfolio and the Portfolio (rather
than the Fund) engages in securities transactions, the Fund does not
calculate a portfolio turnover rate. The portfolio turnover rate for the
Portfolio for the year ended August 31, 1995 was 41% and for the period
ended August 31, 1994 was 5%.
(dagger) Total return based on per share net asset value reflects the effects
of changes in net asset value on the performance of the Fund during the
period, and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee
future results. Investment returns and principal may fluctuate and
shares when redeemed may be worth more or less than original cost.
Had the adviser and the administrator not absorbed certain expenses
of the Fund, total return would have been lower.
6
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund and the Portfolio are
identical. The Fund invests only in the Portfolio. Therefore, the following
shows you the kinds of securities in which the Portfolio invests. For an
explanation of some types of investments, see "Description of Investments,"
beginning on page 23.
Investment policies and limitations of the Fund and the Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI. While a
non-fundamental policy or limitation may be changed by the trustees of the
Trust or of Managers Trust without shareholder approval, the Fund intends to
notify shareholders before making any material change to such policies or
limitations. Fundamental policies and limitations may not be changed without
shareholder approval.
Additional investment techniques, features, and limitations of the
Portfolio's investment program are described in the SAI.
The investment objective of the Fund and the Portfolio is to seek long-term
capital appreciation by investing primarily in a diversified portfolio of
equity securities of foreign issuers. Foreign issuers are issuers organized
and doing business principally outside the U.S. and include non-U.S.
governments, their agencies, and instrumentalities. This investment objective
is non-fundamental. The Fund intends to notify shareholders 30 days in
advance of making any change to the investment objective.
There can be no assurance that the Fund and the Portfolio will achieve their
objective. By itself, the Fund does not represent a comprehensive investment
program.
The Portfolio invests primarily in equity securities of medium-to-large
capitalization companies, determined in relation to the size of each national
market, traded on foreign exchanges. The Portfolio normally invests in
issuers in at least three foreign countries. The strategy of the Portfolio's
investment manager, N&B Management, is to select attractive investment
opportunities outside the U.S., allocating the assets among investments in
economically mature countries and emerging industrialized countries. The
Portfolio may invest more heavily in certain countries than in others. From
time to time, the Portfolio may invest a significant portion of its assets in
Japan. At least 65% of the Portfolio's total assets normally is invested in
equity securities of foreign issuers. Because the Fund, through the
Portfolio, invests primarily in foreign securities, it may be subject to
greater risks and higher expenses than equity funds that invest primarily in
securities of U.S. issuers.
The Portfolio may also invest in foreign securities in the form of American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs), International Depositary Receipts (IDRs) or other
similar securities representing an interest in securities of foreign issuers.
In addition, the Portfolio may purchase and sell options on foreign
currencies, may buy and sell forward foreign currency exchange contracts and
contracts for the future delivery of foreign currencies, and may purchase and
sell options on such futures contracts, both for hedging purposes and in an
attempt to enhance income. The Portfolio may write and purchase options on
securities and securities indices and may purchase and sell futures contracts
and related options (1) in an effort to manage cash flow and remain fully
invested, instead of, or in addition to, buying and selling stocks, or (2) in
an effort to hedge against a decline in the value of securities owned by it
or an increase in the price of securities which it plans to purchase. The
Portfolio may also purchase securities on a when-issued or forward commitment
basis and engage in portfolio securities lending.
In addition, the Portfolio may purchase foreign corporate and government debt
securities. The Portfolio may also sell securities short for hedging purposes
or in an effort to realize gains. The Portfolio may enter
7
<PAGE>
into repurchase agreements with respect to any security in which it can
invest.
For temporary defensive purposes, the Portfolio may invest up to 100% of its
total assets in short-term foreign and U.S. investments such as cash or cash
equivalents, commercial paper, short-term bank obligations, government and
agency securities, and repurchase agreements. The Portfolio may also invest
in such instruments to increase liquidity or to provide collateral to be held
in segregated accounts.
For more details about the Portfolio's investments, see "Description of
Investments."
Short-Term Trading; Portfolio Turnover
Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio
securities when N&B Management believes that such action is advisable. The
annual turnover rate of the Portfolio is not expected to exceed 100%. The
portfolio turnover rate of the Portfolio can be found on page 6.
Borrowings
The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's
total assets (including the amount borrowed) less liabilities (other than
borrowings).
The Portfolio may borrow money from banks to facilitate transactions that it
enters into for hedging purposes, which is a form of leverage. This leverage
may exaggerate changes in the gains and losses on the Portfolio's investments
and the net asset value of the Fund's shares. Leverage also creates interest
expenses; if those expenses exceed the return on transactions that borrowings
facilitate, the Portfolio will be in a worse position than if it had not
borrowed. The use of derivatives in connection with leverage may create the
potential for significant losses. The Portfolio may pledge assets in
connection with permitted borrowings.
8
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as total return. Total
return is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total
return reflects income dividends, other distributions, and variations in
share prices from the beginning to the end of a period.
An average annualized total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return for the
period as if performance had been constant over the entire period. This
smooths out variations in performance. Past results do not, of course,
guarantee future performance. Share prices may vary, and your shares when
redeemed may be worth more or less than your original purchase price.
The following table shows the average annual total return for the period
ended August 31, 1995 (the most recent fiscal year end of the Fund) of a
1-year investment in the Fund and of an investment in the Fund since its
inception. Had BNP-N&B Global and N&B Management not absorbed certain
expenses, the total return would have been lower. Further information
regarding the Fund's performance is presented in the Fund's annual report to
shareholders, which is available without charge by calling 800-877-9700.
<TABLE>
<CAPTION>
Average Annual Total Return
For Periods Ended August 31, 1995
1 Year Since Inception Inception Date
------ --------------- -----------------
<S> <C> <C> <C>
Neuberger&Berman
International Fund +2.60% +6.02% 6/15/94*
</TABLE>
* BNP-N&B Global served as investment adviser to the Portfolio from its
inception until November 1, 1995. The same individuals have been responsible
for portfolio management both before and after that date.
Total Return Information
You can obtain current performance information about the Fund by calling N&B
Management at 800-877-9700.
9
<PAGE>
--------------------------------------------
SPECIAL INFORMATION REGARDING ORGANIZATION
CAPITALIZATION, AND OTHER MATTERS
--------------------------------------------
The Fund
The Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated December 23, 1992. The Trust
is registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company, commonly known as a
mutual fund. The Trust has seven separate series. The Fund invests all of its
net investable assets in the Portfolio, 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 the Fund only
and have identical voting, dividend, redemption, liquidation, and other
rights. All shares issued are fully paid and non-assessable, and shareholders
have no preemptive or other right to subscribe to any additional shares.
Shareholder Meetings. The trustees of the Trust do not intend to hold annual
meetings of shareholders of the Fund. The trustees will call special meetings
of shareholders of the Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
Certain Provisions of the 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 corporations. To guard against the risk
that Delaware law might not be applied in other states, the Trust Instrument
requires that every written obligation of the Trust or the Fund contain a
statement that such obligation may be enforced only against the assets of the
Trust or Fund and provides for indemnification out of Trust or Fund property
of any shareholder nevertheless held personally liable for Trust or Fund
obligations, respectively.
The Portfolio
The Portfolio is a separate series of Managers Trust, a New York common law
trust organized as of March 18, 1994. Managers Trust is registered under the
1940 Act as a diversified, open-end management investment company. Managers
Trust currently has only one portfolio. The assets of the Portfolio belong
only to the Portfolio, and the liabilities of the Portfolio are borne solely
by the Portfolio and no other.
Fund's Investment in the Portfolio. The Fund seeks to achieve its investment
objective by investing all of its net investable assets in the Portfolio,
which has the same investment objective, policies, and limitations as the
Fund. Accordingly, the Portfolio directly acquires its own securities and the
Fund acquires an indirect interest in those securities. Historically, N&B
Management, the administrator of the Fund and the investment manager of the
Portfolio, has sponsored, with Neuberger&Berman, traditionally structured
funds since 1950. However, it has operated 12 master funds and 20 feeder
funds since August 1993 and now operates 21 master funds and 30 feeder funds.
See "Summary," "Investment Program," "Description of Investments,"
"Management and Administration," and "Expense Information" for a description
of the Portfolio's investment objective, policies, limitations, management,
and expenses.
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 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
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of the Portfolio's expenses. Other investors in the Portfolio that might sell
shares to members of the general public would not be 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 may invest in the Portfolio in
the future will be available from N&B Management by calling 800-877-9700.
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 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. 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 would consider what action 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 the Fund
incurring financial loss 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.
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HOW TO BUY SHARES
You can buy shares of the Fund directly by mail, wire, or telephone, or
through an exchange of shares of other Neuberger&Berman Funds.((SM) (see
"Directory & Funds Eligible for Exchange"). Shares are purchased at the next
price calculated on a day the New York Stock Exchange ("NYSE") is open, after
your order is received and accepted. Prices for shares of the Fund are
usually calculated as of 4 p.m. Eastern time.
Minimum investment requirements are shown below. In addition, you can invest
as little as $50 each month under an automatic investing plan (see "Automatic
Investing and Dollar Cost Averaging").
N&B Management, in its discretion, may waive the minimum investment
requirements.
By Mail
Send your check or money order payable to "Neuberger&Berman Funds" by mail
to:
Neuberger&Berman Funds, Boston Service Center, P.O. Box 8403, Boston, MA
02266-8403
or by overnight courier, U.S. Express Mail, or registered or certified mail
to:
Neuberger&Berman Funds, c/o State Street Bank and Trust Company, 2 Heritage
Drive, North Quincy, MA 02171.
Be sure to specify the name of the Fund and, if this is your first purchase,
please send a minimum of $1,000 for shares of the Fund. For an additional
purchase, please send at least $100 for shares of the Fund. Unless your check
or money order is made payable on its face to Neuberger&Berman Funds, it may
not be accepted. Third party checks are not accepted.
By Wire
Call 800-877-9700 for instructions on how to wire money to buy shares. Your
wire goes to State Street Bank and Trust Company ("State Street") and must
include your name, the name of the Fund and your account number. The minimum
for a first purchase and for each additional purchase of shares of the Fund
by wire is $1,000.
By Telephone
Call 800-877-9700 to buy shares of the Fund. The minimum for a first purchase
and for each additional purchase of shares of the Fund by telephone is
$1,000. Your order may be canceled if your payment is not received by the
third business day after your order is placed; in that case you could be
liable for any resulting losses or fees the Fund or its agents have incurred.
To recover those losses or fees, the Fund has the right to redeem shares from
your account.
To meet the three day deadline, you can wire payment, send a check through
overnight mail, or call 800-877-9700 for information on how to make
electronic transfers through your bank. Please refer to "Additional
Information on Telephone Transactions."
By Exchanging Shares
Call 800-877-9700 for instructions on how to invest by exchanging shares of
another Neuberger &Berman Fund((SM) for shares of the Fund. To buy Fund
shares by an exchange, both fund accounts must be registered in the same
name, address, and taxpayer ID number. The minimum for a first purchase and
for each additional purchase of shares of the Fund is $1,000 worth of shares
of the other fund. For more details, see "Shareholder Services--Exchange
Privilege" and "Directory & Funds Eligible for Exchange."
Other Information
(bullet) You must pay for your shares in U.S. dollars by check or money order
(drawn on a U.S. bank), or by bank or federal funds wire transfer; cash
cannot be accepted.
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(bullet) The Fund has the right to suspend the offering of its shares for a
period of time.
(bullet) The Fund also has the right to accept or reject a purchase order in
its sole discretion, including certain purchase orders using the exchange
privilege. See "Shareholder Services--Exchange Privilege."
(bullet) If you paid by check and your check does not clear, or if you
ordered shares by telephone and fail to pay for them, your purchase will be
canceled and you could be liable for any resulting losses or fees the Fund or
its agents have incurred. To recover those losses or fees, the Fund has the
right to bill you or to redeem shares from your account.
(bullet) When you sign your application for a new Fund account, you will be
certifying that your Social Security or other taxpayer ID number is correct
and whether you are subject to backup withholding. If you violate certain
federal income tax provisions, the Internal Revenue Service can require the
Fund to withhold 31% of your taxable distributions and redemptions.
(bullet) You can also buy shares of the Fund indirectly through certain
stockbrokers, banks, and other financial institutions, some of which may
charge you a fee.
(bullet) The Fund will not issue a certificate for your shares unless you
write to State Street and request it. Most shareholders do not want
certificates, because you must present the certificate to sell or exchange
the shares it represents. This means that you would be able to sell or
exchange those shares only by mail, and not by telephone or facsimile
transmission. If you lose your certificate, you will have to pay the expense
of replacing it.
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<PAGE>
HOW TO SELL SHARES
You can sell (redeem) all or some of your shares at any time by mail,
facsimile, or telephone. However, if you have a certificate for your shares,
you can redeem those shares only by sending the certificate by mail. You can
also sell shares by exchanging them for shares of other Neuberger&Berman
Funds((SM)); see "Shareholder Services--Exchange Privilege" for details.
To sell shares held in a retirement account or by a trust, estate, guardian,
or business organization, please call 800-225-1596 for instructions.
Your shares are sold at the next price calculated on a day the NYSE is open,
after your sales order is received and accepted. Prices for shares of the
Fund are usually calculated as of 4 p.m. Eastern time.
Unless otherwise instructed, the Fund will mail a check for your sales
proceeds, payable to the owner(s) shown on your account ("record owner"), to
the address shown on your account ("record address"). You may designate in
your Fund application a bank account to which, at your request, State Street
will wire your sales proceeds. State Street currently charges a fee of $8.00
for each wire. Shareholders who have one or more accounts in the
Neuberger&Berman Funds((SM) aggregating $250,000 or more in value are not
charged for wire redemptions; the $8.00 fee will be paid by N&B Management.
By Mail or Facsimile Transmission (Fax)
Write a redemption request letter with your name and account number, the
Fund's name, and the dollar amount or number of shares of the Fund you want
to sell, together with any other instructions, and send it by mail to:
Neuberger&Berman Funds, Boston Service Center, P.O. Box 8403, Boston, MA
02266-8403
or by overnight courier, U.S. Express Mail, or registered or certified mail
to:
Neuberger&Berman Funds, c/o State Street Bank and Trust Company, 2 Heritage
Drive, North Quincy, MA 02171
or by fax, to redeem up to $50,000 worth of shares, to 212-476-8848. If
shares are issued in certificate form they are not eligible to be redeemed by
fax.
If you have changed the record address by telephone or fax, shares may not be
redeemed by fax for 15 days after receipt of the address change. Please call
800-877-9700 to confirm receipt and acceptance of your order submitted by
fax.
Be sure to have all owners sign the request exactly as their names appear on
the account and include the certificate for your shares if you have one.
To protect you and the Fund against fraud, your signature on a redemption
request must have a signature guarantee if (1) you want to sell more than
$50,000 worth of shares, or (2) you want the redemption check to be made out
to someone other than the record owner, or (3) you want the check to be
mailed somewhere other than to the record address, or (4) you want the
proceeds to be wired to a bank account not named in your application or in
your written instruction with a signature guarantee. You can obtain a
signature guarantee from most banks, stock brokers and dealers, credit
unions, and financial institutions, but not from a notary public.
For a redemption request sent by fax, limited to not more than $50,000, the
redemption check may be made out only to the record owner and mailed to the
record address or the proceeds wired to a bank account named in your
application or in a written instruction from the record owner with a
signature guarantee.
By Telephone
To sell shares worth at least $500, call 800- 877-9700, giving your name and
account number, the name of the Fund, and the dollar amount or number of
shares you want to sell.
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You can sell shares by telephone unless (1) you have declined this service
either in your application or later by writing or by submitting an
appropriate form to State Street, (2) you have a certificate for such shares,
or (3) you want to sell shares from a retirement account. In addition, if you
have changed the record address by telephone or fax, shares may not be
redeemed by telephone for 15 days after receipt of the address change.
Please refer to "Additional Information on Telephone Transactions."
Other Information
(bullet) Usually, redemption proceeds will be mailed to you on the next
business day, but in any case within three calendar days (under unusual
circumstances the Fund may take longer, as permitted by law). You may also
call 800-877-9700 for information on how to make and receive electronic
transfers through your bank.
(bullet) The Fund may delay paying for any redemption until it is reasonably
satisfied that the check used to buy shares has cleared, which may take up to
15 days after the purchase date. So if you plan to sell shares shortly after
buying them, you may want to pay for the purchase with a certified check or
money order or by wire transfer.
(bullet) The Fund may suspend redemptions or postpone payments on days when
the NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the Securities and Exchange Commission.
(bullet) If, because you sold shares, your account balance with the Fund
falls below $1,000, the Fund has the right to close your account after giving
you at least 60 days' written notice to reestablish the minimum balance. If
you do not do so, the Fund may redeem your remaining shares at their price on
the date of redemption and will send the redemption proceeds to you.
(bullet) If you purchased shares indirectly through certain stock brokers,
banks, or other financial institutions, you may sell those shares only
through those organizations, some of which may charge you a fee.
Additional Information on Telephone Transactions
The Fund at any time can limit the number of its shares you can buy by
telephone or can stop accepting telephone orders. You can sell or exchange
shares by telephone, unless (1) you have declined these services in your
application or by written notice to N&B Management or State Street, with your
signature guaranteed, or (2) you have a certificate for such shares. The Fund
or its agent follows reasonable procedures--requiring you to provide a form
of personal identification when you telephone, recording your telephone call,
and sending you a written confirmation of each telephone
transaction--designed to confirm that telephone instructions are genuine.
However, neither the Fund nor its agent is responsible for the authenticity
of telephone instructions or for any losses caused by fraudulent or
unauthorized telephone instructions if the Fund or its agent reasonably
believed that the instructions were genuine.
If you are unable to reach N&B Management by telephone (which might be the
case, for example, during periods of unusual market activity), consider
sending your transaction instructions by fax, overnight courier, or U.S.
Express Mail.
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SHAREHOLDER SERVICES
Several other services are available to assist you in making and managing
your investment in the Fund.
Automatic Investing and
Dollar Cost Averaging
If you want to invest regularly, you may participate in a plan that lets you
automatically buy a minimum of $50 worth of shares in the Fund each month
using dollar cost averaging. Under this plan, you buy a fixed dollar amount
of shares in the Fund at pre-set intervals. You may pay for the shares by
automatic transfers from your account in a Neuberger&Berman money market fund
or by pre-authorized checks drawn on your bank account. You buy more shares
when the Fund's share price is relatively low and fewer shares when the
Fund's share price is relatively high. Thus, under this plan your average
cost of shares over a period of time would generally be lower than if you buy
a fixed number of shares at the same intervals. To benefit from dollar cost
averaging, you should be financially prepared to continue your participation
for a long enough period to include times when Fund share prices are lower.
Of course, the plan does not guarantee a profit and will not protect you
against losses in a declining market. For further information, call
800-877-9700.
Exchange Privilege
To exchange your shares in the Fund for shares in another Neuberger&Berman
Fund((SM), call 800-877- 9700 between 8 a.m. and 4 p.m., Eastern time, on any
Monday through Friday (unless the NYSE is closed). See "Directory & Funds
Eligible for Exchange." You may also effect an exchange by sending a letter
to Neuberger&Berman Management Incorporated, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180, Attention: Neuberger&Berman International Fund, or by
faxing the letter to 212-476- 8848, giving your name and account number, the
name of the Fund, the dollar amount or number of shares you want to sell, and
the name of the fund whose shares you want to buy. You can use the telephone
exchange privilege unless (1) you have declined it in your application or by
later writing to N&B Management or State Street, or (2) you have a
certificate for such shares. If you have a certificate for your shares, you
can exchange them only by mailing the certificate with your letter requesting
the exchange. An exchange must be for at least $1,000 worth of shares, and if
the exchange is your first purchase in another mutual fund, it must be for at
least the minimum initial investment amount for that fund. Shares are
exchanged at the next price calculated on a day the NYSE is open, after your
exchange order is received and accepted.
Please note the following about the exchange privilege:
(bullet) You can exchange shares only between accounts registered in the same
name, address, and taxpayer ID number.
(bullet) A telephone exchange order cannot be modified or canceled.
(bullet) You can exchange only into a mutual fund whose shares are eligible
for sale in your state under applicable state securities laws.
(bullet) An exchange may have tax consequences for you.
(bullet) Because excessive trading (including short-term "market-timing"
trading) can hurt the Fund's performance, the Fund may refuse any
exchange orders (1) if they appear to be market-timing transactions
involving significant portions of the Fund's assets or (2) from any
shareholder account if the shareholder has been advised that previous
use of the exchange privilege was considered excessive. Accounts under
common ownership or control, including those with the same taxpayer
ID number, will be considered one account for this purpose.
(bullet) The Fund may impose other restrictions on the exchange privilege, or
modify or terminate the
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<PAGE>
privilege, but will try to give you advance notice whenever it can
reasonably do so.
Please refer to "Additional Information on Telephone Transactions."
Systematic Withdrawal Plan
If you own shares of the Fund worth at least $5,000, you can open a
Systematic Withdrawal Plan. Under the Plan, you arrange to withdraw a
specific amount (at least $50) on a monthly, quarterly, semi-annual, or
annual basis, or you can have your account completely paid out over a
specified period of time. You can also arrange for periodic cash withdrawals
from your Fund account to pay fees to your financial planner or investment
adviser. Because the price of shares of the Fund fluctuates, you may incur
capital gains or losses when you redeem shares of the Fund through a
Systematic Withdrawal Plan or by other methods. Call 800-877-9700 for more
information.
Retirement Plans
Retirement plans permit you to defer paying taxes on investment income and
capital gains. Contributions to these plans may also be tax deductible.
Please call 800-877-9700 for information on a variety of retirement plans,
including individual retirement accounts, simplified employee pension plans,
self-employed individual retirement plans (so-called "Keogh Plans"),
corporate profit-sharing and money purchase pension plans, section 401(k)
plans, and section 403(b)(7) accounts offered by N&B Management. The assets
of these plans may be invested in the Fund.
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<PAGE>
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and the Portfolio are
calculated by subtracting liabilities from total assets (in the case of the
Portfolio, the market value of the securities the Portfolio holds plus cash
and other assets; in the case of the Fund, its percentage interest in 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 the 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. Equity
securities are valued at the last sale price on the principal exchange or in
the principal over-the- counter market in which such securities are traded,
as of the close of business on the day the securities are being valued or, if
there are no sales, at the last available bid price. Debt obligations are
valued at the last available bid price for such securities or, if such prices
are not available, at prices for securities of comparable maturity, quality,
and type. Foreign securities are translated from the local currency into U.S.
dollars using current exchange rates. The Portfolio values all other types of
securities and assets, including restricted securities and securities for
which market quotations are not readily available, by a method that the
trustees of Managers Trust believe accurately reflects fair value.
The Portfolio's portfolio securities are listed primarily on foreign
exchanges which may trade on days when the NYSE is closed. As a result, the
NAV of the Fund may be significantly affected on days when shareholders have
no access to the Fund.
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<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES
The Fund distributes substantially all of its share of any net investment
income (net of the Fund's expenses), net realized capital gains and realized
gains from foreign currency transactions earned by the Portfolio, normally in
December. Investors who are considering the purchase of Fund shares in
December should take this into account because of the tax consequences of
such distributions.
Distribution Options
Reinvestment in Shares. All dividends and other distributions paid on Fund
shares are automatically reinvested in additional Fund shares, unless you
elect to receive them in cash. Dividends and other distributions are
reinvested at the Fund's per share NAV, usually as of the date the dividend
or other distribution is payable. For retirement accounts, all distributions
are automatically reinvested in shares; when you are at least 59-1/2 years
old, you can receive distributions in cash without incurring a premature
distribution penalty tax.
Dividends in Cash. You may elect to receive dividends in cash, with other
distributions being reinvested in additional Fund shares, by checking that
election box on your application.
All Distributions in Cash. You may elect to receive all dividends and other
distributions in cash, by checking that election box on your application.
Checks for cash distributions will be mailed no later than seven days after
the payable date. However, if you purchased your shares with a check,
distributions on those shares may not be paid in cash until the Fund is
reasonably satisfied that your check has cleared, which may take up to 15
days after the purchase date. You can change any distribution election by
writing to State Street, the Fund's shareholder servicing agent.
Taxes
The Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be
relieved of federal income tax on that part of its income and realized gains
that it distributes to its shareholders.
Your investment has certain tax consequences, depending on the type of your
account.
Taxes on Distributions. Distributions are subject to federal income tax and
may also be subject to state and local income taxes. Your distributions are
taxable when they are paid, whether in cash or by reinvestment in additional
Fund shares, except that distributions declared in December to shareholders
of record on a date in that month and paid in the following January are
taxable as if they were paid on December 31 of the year in which the
distributions were declared. If you have a retirement account, taxes are
deferred.
For federal income tax purposes, dividends and distributions of net
short-term capital gains and gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess
of net long-term capital gain over net short-term capital loss), when
designated as such, are generally taxed as long-term capital gain, no matter
how long you have owned your shares.
Every January the Fund will send you a statement showing the amount of
distributions paid to you in the previous year.
Taxes on Redemptions. Capital gains realized on redemptions of Fund shares,
including exchanges to other Neuberger&Berman Funds((SM), are subject to tax.
A capital gain (or loss) is the difference between the amount you paid for
shares (including the value of any dividends and other distributions that
were reinvested) and the amount you receive when you redeem them.
When you sell shares you will receive a confirmation statement showing the
number of shares you redeemed and the price. Every January you also will
receive a consolidated transaction statement for the previous year. Be sure
to keep your statements;
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<PAGE>
they will be useful to you and your tax preparer in determining the capital
gains and losses from your redemptions.
The foregoing is only a summary of some of the important federal tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or
foreign tax considerations applicable to a particular investor. Therefore,
you should consult your tax adviser.
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MANAGEMENT AND ADMINISTRATION
Trustees and Officers
The trustees of the Trust and the trustees of Managers Trust have overall
responsibility for the operations of the Fund and the Portfolio,
respectively. The SAI contains general background information about each
trustee and officer of the Trust and of Managers Trust. The trustees and
officers of the Trust and of Managers Trust who are officers and/or directors
of N&B Management and/or partners of Neuberger&Berman serve without
compensation from the Fund or the Portfolio. Each trustee of Managers Trust
is also a trustee of the Trust. The trustees of the Trust and of Managers
Trust, including a majority of those trustees who are not "interested
persons" (as defined in the 1940 Act) of the Fund, have adopted written
procedures reasonably appropriate to deal with potential conflicts of
interest between the Trust and Managers Trust.
Investment Manager, Administrator,
Distributor, and Sub-Adviser
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolio and other
mutual funds managed by N&B Management, also serves as investment adviser of
three investment companies. These funds had aggregate net assets of
approximately $10.9 billion as of August 31, 1995.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges.
Neuberger&Berman and its affiliates, including N&B Management, manage
securities accounts that had approximately $34.3 billion of assets as of June
30, 1995.
All of the voting stock of N&B Management is owned by individuals who are
general partners of Neuberger&Berman.
State Street Cayman Trust Company, Ltd. ("State Street Cayman"), located in
George Town, Grand Cayman, provides certain administrative, fund accounting
and transfer agency services for the Portfolio.
Felix Rovelli has been primarily responsible for the day- to-day management
of the Portfolio since its inception in June 1994. Mr. Rovelli is a Vice
President of N&B Management and was a Senior Vice President-Senior Equity
Portfolio Manager of BNP-N&B Global from May 1994 until October 1995. He
previously served as first vice president and portfolio manager of another
mutual fund that invested in international equity securities, from April 1990
to April 1994. Robert Cresci, is an Assistant Vice President of N&B
Management and was an Assistant Portfolio Manager of BNP-N&B Global from May
1994 until October 1995. He previously served as an assistant portfolio
manager of another mutual fund that invested in international equity
securities, from 1992 until May 1994.
Neuberger&Berman may act as broker for the Portfolio in the purchase and sale
of portfolio securities and in the purchase and sale of options, and for
those services would receive brokerage commissions. In effecting securities
transactions, the Portfolio seeks to obtain the best price and execution of
orders. For more information, see the SAI.
The partners and employees of Neuberger&Berman and officers and employees of
N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds.((SM))
To mitigate the possibility that the Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in
the personal accounts of
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portfolio managers and others who normally come into possession of
information on Portfolio transactions.
Expenses
N&B Management provides investment management services to the Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. N&B
Management provides administrative services to the Fund that include
furnishing similar facilities and personnel for the Fund and performing
certain shareholder, shareholder-related, and other services. For such
administrative services, the Fund pays N&B Management a fee at the annual
rate of 0.26% of the Fund's average daily net assets. With the Fund's
consent, N&B Management is authorized to subcontract to third parties some of
its responsibilities under its administration agreement with the Fund.
For investment management services, the Portfolio pays N&B Management a fee
at the annual rate of 0.85% of the first $250 million of the Portfolio's
average daily net assets; 0.825% of the next $250 million; 0.80% of the next
$250 million; 0.775% of the next $250 million; 0.75% of the next $500
million; and 0.725% of average daily net assets in excess of $1.5 billion.
The management fee paid by the Portfolio is higher than that of most domestic
equity funds, but is consistent with the average fee levels of other
international equity funds. During its 1995 fiscal year, the Fund accrued
management and administration fees, as an annualized percentage of its
average daily net assets, of 1.67%, all of which were waived by its adviser
and administrator.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include,
but are not limited to, for the Fund and the Portfolio, legal and accounting
fees, and compensation for trustees who are not affiliated with N&B
Management; for the Fund, transfer agent fees and costs of printing and
sending reports and proxy materials to shareholders; and for the Portfolio,
custodial fees for securities.
Commencing June 15, 1994 and ending December 31, 1996, N&B Management has
voluntarily undertaken to reimburse the Fund for its Operating Expenses
(which include the Fund's pro rata share of the Operating Expenses of the
Portfolio) that exceed 1.70% per annum of the Fund's average daily net assets
("Fund Expense Limitation"). The Fund has in turn agreed to repay N&B
Management through December 31, 1998, for the excess Operating Expenses N&B
Management previously reimbursed to the Fund, so long as the Fund's annual
Operating Expenses during that period do not exceed the Fund Expense
Limitation. The effect of any reimbursement of the Fund would be to reduce
the Fund's expenses and thereby increase its total return.
During its 1995 fiscal year, the Fund had Total Operating Expenses as an
annualized percentage of its average daily net assets, after taking into
consideration N&B Management's expense reimbursement, of 1.70%.
Transfer and Shareholder Servicing Arrangements
The Fund's shareholder servicing agent is State Street. State Street
administers purchases, redemptions, and transfers of Fund shares and the
payment of dividends and other distributions through its Boston Service
Center, P.O. Box 8403, Boston, MA 02266-8403. State Street Cayman provides
similar services to the Portfolio as the Portfolio's transfer agent. State
Street also acts as the custodian of the Portfolio's and the Fund's assets.
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<PAGE>
DESCRIPTION OF INVESTMENTS
The Portfolio may make the following investments, among others, individually
or in combination, although it may not necessarily buy all of the types of
securities or use all of the investment techniques that are described. For
additional information on the following investments and on other types of
investments the Portfolio may make, see the SAI.
Foreign Securities. The Portfolio invests in foreign securities. Foreign
securities are those of issuers organized and doing business principally
outside the U.S., including non-U.S. governments, their agencies, and
instrumentalities. The Portfolio may also 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 unsponsored ADRs
are not contractually obligated to disclose material information in the U.S.
and, therefore, the market value of the unsponsored ADR may not reflect the
impact 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.
Factors affecting investments in foreign securities include, but are not
limited to, varying custody, brokerage and settlement practices; difficulty
in pricing some foreign securities; less public information about issuers of
securities; less governmental regulation and supervision over issuance and
trading of securities; the unavailability of financial information or the
difficulty of interpreting financial information prepared under foreign
accounting standards; less liquidity and more volatility in foreign
securities markets; the possibility of expropriation; the imposition of
foreign withholding and other taxes; political, social, or diplomatic
developments; limitations on the movement of funds or other assets of the
Portfolio between different countries; difficulties in invoking legal process
abroad and enforcing contractual obligations; and the difficulty of assessing
economic trends in foreign countries. Investment in foreign securities also
involves higher brokerage and custodial expenses than does investment in
domestic securities.
In addition, investing in securities of foreign companies and governments may
involve other risks which are not ordinarily associated with investing in
domestic securities. These risks include changes in currency exchange rates
and currency exchange control regulations or other foreign or U.S. laws or
restrictions applicable to such investments or devaluations of foreign
currencies. A decline in the exchange rate between the U.S. dollar and
another currency would reduce the value of portfolio securities denominated
in that currency irrespective of the performance of the underlying
investment. In addition, the Portfolio may incur costs in connection with
conversion between various currencies. Investments in depositary receipts
(whether or not denominated in U.S. dollars) may be subject to exchange
controls and changes in rates of exchange with the U.S. dollar because the
underlying security is usually denominated in foreign currency. All of the
foregoing risks may be intensified in emerging industrialized and less
developed countries.
Japanese Investments. The Portfolio may invest a significant portion of its
assets in securities of Japanese issuers. The performance of the Fund may
therefore be significantly affected by events affecting the Japanese economy
and the exchange rate between the Japanese yen and the U.S. dollar. Japan has
experienced a severe recession, including a decline in real estate values and
other events that adversely affect the balance sheets of many financial
institutions and indicate that there may be structural weaknesses in the
Japanese financial system. The effects of this economic downturn may be felt
for a considerable period and are being exacerbated by
23
<PAGE>
the currency exchange rate. Japan is heavily dependent on foreign oil. Japan
is located in a seismically active area, and severe earthquakes may damage
important elements of the country's infrastructure. Japanese economic
prospects may be affected by the political and military situations of its
near neighbors, notably North and South Korea, China and Russia.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in the shares of other investment companies. Such investment may be
the most practical or only manner in which the Portfolio can participate in
certain foreign markets because of the expenses involved or because other
vehicles for investing in certain countries may not be available at the time
the Portfolio is ready to make an investment. As a shareholder in an
investment company, the Portfolio would bear its pro rata share of that
investment company's expenses. Investment in investment companies may involve
the payment of substantial premiums above the value of such issuers'
portfolio securities. The Portfolio does not intend to invest in such funds
unless, in the judgment of N&B Management, the potential benefits of such
investment justify the payment of any applicable premium or sales charge.
Foreign Currency Transactions. The Portfolio may enter into forward foreign
currency exchange contracts in order to protect against adverse changes in
future foreign currency exchange rates. The Portfolio may enter into
contracts to purchase foreign currencies to protect against an anticipated
rise in the U.S. dollar price of securities it intends to purchase. The
Portfolio may also enter into contracts to sell foreign currencies to protect
against a decline in value of its foreign currency denominated portfolio
securities. Contracts to sell foreign currency could limit any potential gain
which might be realized by the Portfolio if the value of the hedged currency
increased.
The Portfolio may also enter into forward foreign currency exchange contracts
for non-hedging purposes when the investment manager anticipates that the
foreign currency will appreciate or depreciate in value, but securities
denominated in that currency do not present attractive investment
opportunities and are not held in the Portfolio. The Portfolio may also
engage in cross-hedging by using forward contracts in one currency to hedge
against fluctuations in the value of securities denominated in a different
currency if the investment manager believes that there is a pattern of
correlation between the two currencies.
Put and Call Options on Foreign Currencies, Securities, and Securities
Indices. The Portfolio may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value
of foreign portfolio securities and against increases in the U.S. dollar cost
of foreign securities to be acquired. The Portfolio may also use options on
foreign currencies to cross-hedge. In addition, the Portfolio may purchase
call or put options on currencies for non-hedging purposes when the
investment manager expects that the currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not held in the Portfolio. Options on
foreign currencies to be written or purchased by the Portfolio may be traded
on U.S. or foreign exchanges or over-the-counter. Options on foreign
currencies which are traded in the over-the- counter market may be considered
illiquid and subject to the restriction on illiquid securities. (See
"Illiquid Securities," below.)
To realize greater income than would be realized on portfolio securities
transactions alone, the Portfolio may write call and put options on any
securities in which it may invest or options on any securities index based on
securities in which the Portfolio may invest. The Portfolio will not write a
call option on a security or currency unless it owns the underlying security
or currency or has the right to obtain it at no additional cost.
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<PAGE>
The writing and purchasing of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions including price volatility and a
high degree of leverage. The Portfolio pays brokerage commissions or spreads
in connection with its options transactions, as well as for purchases and
sales of underlying securities or currency. The writing of options could
result in significant increases in the Portfolio's turnover rate.
Futures Contracts and Options on Futures Contracts. The Portfolio may enter
into futures contracts and purchase and sell options on such contracts on
both U.S. and foreign exchanges for hedging and non-hedging purposes. The
Portfolio may (1) enter into futures contracts on debt securities, interest
rates, securities indices and currencies and (2) purchase and write options
on futures contracts.
General Risks of Options, Futures and Forward Contracts The primary risks in
using put and call options, futures contracts, options on futures contracts,
and foreign currency forward contracts ("Financial Instruments") are (1)
imperfect correlation or no correlation between changes in market value of
the securities held 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; and (4) the fact
that, although use of these 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. When the Portfolio uses Financial Instruments, the Portfolio
will place cash or high-grade, liquid debt securities in a segregated account
to the extent required by SEC staff policy. Another risk of
Financial Instruments is the possible inability of the Portfolio to purchase
or sell a security at a time that would otherwise be favorable for it to do
so, or the possible need for the Portfolio to sell a security at a
disadvantageous time, due to its need to maintain "cover" or to segregate
securities in connection with its use of Financial Instruments. Futures,
options and forward contracts are considered "derivatives." Losses that may
arise from certain futures transactions are potentially unlimited.
Short Selling. The Portfolio may attempt to limit exposure to a possible
market decline in the value of portfolio securities through short sales of
securities which N&B Management believes possess volatility characteristics
similar to those being hedged. The Portfolio also may use short sales in an
attempt to realize gain. To effect such a transaction, the Portfolio borrows
a security from a brokerage firm to make delivery to the buyer. The Portfolio
then is obligated to replace the borrowed security by purchasing it at the
market price at the time of replacement. Until the security is replaced, the
Portfolio is required to pay to the lender any accrued interest or dividends
and may be required to pay a premium.
The Portfolio will realize a gain if the security declines in price between
the date of the short sale and the date on which the Portfolio replaces the
borrowed security. The Portfolio will incur a loss if the price of the
security increases between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium
or interest the Portfolio may be required to pay in connection with a short
sale. The successful use of short selling may be adversely affected by
imperfect correlation between movements in the price of the security sold
short and the securities being hedged.
The Portfolio may also make short sales against-the- box, in which it sells
short securities it owns or has the right to obtain without payment of
additional con-
25
<PAGE>
sideration. Short selling against-the-box may defer recognition
of gains or losses to a later tax period.
Forward Commitments and When-Issued Securities. In a when-issued or forward
commitment transaction, the Portfolio commits to purchase securities at a
future date (generally within two months) and pays for them when they are
delivered. If the seller fails to complete the sale, the Portfolio may lose
the opportunity to obtain a favorable price and yield. When-issued securities
or securities subject to a forward commitment may decline or increase in
value during the period from the Portfolio's investment commitment to the
settlement of the purchase.
Indexed Securities. The Portfolio may invest in indexed securities whose
value is linked to currencies, interest rates, commodities, indices, or other
financial indicators. Most indexed securities are short-to-intermediate term
fixed-income securities whose values at maturity or interest rates rise or
fall according to the change in one or more specified underlying instruments.
Indexed securities may be positively or negatively indexed (i.e., their value
may increase or decrease if the underlying instrument appreciates), and may
have return characteristics similar to direct investments in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself.
Illiquid Securities. The Portfolio may invest up to 10% of its net assets in
illiquid securities, which are securities that cannot be expected to be sold
within seven days at approximately the price at which they are valued. Due to
the absence of an active trading market, the Portfolio may experience
difficulty in valuing or disposing of illiquid securities. N&B Management
determines the liquidity of the Portfolio's securities, under supervision of
the trustees of Managers Trust. Securities which are freely tradeable in
their country of origin or in their principal market are not considered
illiquid securities even if they are not registered for sale in the U.S.
Restricted Securities and Rule 144A Securities. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot
be sold to the public without registration under the Securities Act of 1933
("1933 Act"). Unless registered for sale, these securities can be sold only
in privately negotiated transactions or pursuant to an exemption from
registration. Restricted securities are generally considered illiquid. Rule
144A securities although not registered, may be resold only to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S
under the 1933 Act. The investment manager, acting pursuant to guidelines
established by the trustees of Managers Trust, may determine that some
restricted securities are liquid.
Foreign Corporate and Government Debt Securities. The Portfolio may invest up
to 5% of its net assets in U.S. dollar-denominated and non-U.S.
dollar-denominated corporate and government debt securities of foreign
issuers.
The Portfolio may invest in debt securities of any rating, including those
rated below investment grade and unrated securities. Securities rated below
investment grade are deemed by Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's ("S&P") (or foreign statistical rating organizations)
to be predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. Those in the lowest rating categories may
involve a substantial risk of default or may be in default. Changes in
economic conditions or developments regarding the individual issuer are more
likely to cause price volatility and weaken the capacity of the issuers of
such securities to make principal and interest payments than is the case for
higher grade debt securities. An economic downturn affecting the issuer may
result in an increased incidence of default. The market for lower-rated
securities may be thinner and less active than for higher-rated securities.
The Portfolio will
26
<PAGE>
invest in such securities only when N&B Management concludes that the
anticipated return to the Portfolio on such an investment warrants exposure
to the additional level of risk. A further description of Moody's and S&P's
ratings is included in the Appendix to the SAI.
The value of the fixed income securities in which the Portfolio may invest,
measured in the currency in which they are denominated, is likely to decline
in times of rising interest rates. Conversely, when rates fall, the value of
the Portfolio's fixed income investments may rise.
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. Many convertible securities are rated
below investment grade or are unrated.
Repurchase Agreements/Securities Loans. The Portfolio may enter into
repurchase agreements and lend securities from its portfolio. In a repurchase
agreement, the Portfolio buys a security from a Federal Reserve member bank,
foreign bank, U.S. branch or agency of a foreign bank, or a securities dealer
and simultaneously agrees to sell it back at a higher price, at a specified
date, usually less than a week later. The underlying securities must fall
within the Portfolio's investment policies and limitations. The Portfolio
also may lend portfolio securities to banks, brokerage firms, or
institutional investors to earn income. Costs, delays, or losses could result
if the selling party to a repurchase agreement or the borrower of portfolio
securities becomes bankrupt or otherwise defaults. N&B Management monitors
the creditworthiness of sellers and borrowers.
Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements. In such a transaction, the Portfolio sells a security
to a bank or securities dealer and simultaneously agrees to repurchase it at
an agreed upon price on a specific date. The Portfolio will maintain a
segregated account consisting of cash or high-grade, liquid debt obligations,
to cover its obligations under reverse repurchase agreements.
U.S. Government and Agency Securities. The Portfolio may purchase U.S.
Government and Agency Securities. 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 instrumentalities, other U.S. Government-sponsored
enterprises, such as the Government National Mortgage Association ("GNMA"),
Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation ("FHLMC"), Student Loan Marketing Association, Tennessee Valley
Authority, and various federally chartered or sponsored banks. Some U.S.
Government Agency Securities are backed by the full faith and credit of the
United States. Others are backed 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
certain mortgage-backed securities. The market prices of U.S. Government
securities are not guaranteed by the Government and generally fluctuate with
changing interest rates.
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<PAGE>
DIRECTORY & FUNDS ELIGIBLE FOR EXCHANGE
DIRECTORY
Investment Manager, Administrator and Distributor
Neuberger&Berman Management Inc.
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
Sub-Adviser
Neuberger&Berman, L.P.
605 Third Avenue
New York, NY 10158-3698
Custodian and Transfer Agent and
Shareholder Servicing Agent
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Address correspondence to:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
800-225-1596
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 M Street, NW
Washington, DC 20036-5891
FUNDS ELIGIBLE FOR EXCHANGE*
Equity Funds
Neuberger&Berman Focus Fund
Neuberger&Berman Genesis Fund
Neuberger&Berman Guardian Fund
Neuberger&Berman Manhattan Fund
Neuberger&Berman Partners Fund
Neuberger&Berman Socially Responsive Fund
Money Market Funds
Neuberger&Berman Cash Reserves
Neuberger&Berman Government Money Fund
Bond Funds
Neuberger&Berman Government Income Fund
Neuberger&Berman Limited Maturity Bond Fund
Neuberger&Berman Ultra Short Bond Fund
Municipal Funds
Neuberger&Berman Municipal Money Fund
Neuberger&Berman Municipal Securities Trust
Neuberger&Berman New York Insured
Intermediate Fund (available only to
residents of NY and FL)
* Neuberger&Berman Management Inc.,
Neuberger&Berman International Fund,
and the above-named funds are service marks of
Neuberger&Berman Management Inc.
(C) 1995 Neuberger&Berman Management Inc.
NBINFPRO1195 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND
OTHER MATTERS |ap
28
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_________________________________________________________________
NEUBERGER & BERMAN INTERNATIONAL FUND AND INTERNATIONAL PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
Dated November 1, 1995
A No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
_________________________________________________________________
NEUBERGER & BERMAN INTERNATIONAL FUND ("FUND"), A SERIES
OF NEUBERGER & BERMAN EQUITY FUNDS ("TRUST"), IS A NO-LOAD MUTUAL FUND
THAT OFFERS SHARES PURSUANT TO A PROSPECTUS DATED NOVEMBER 1, 1995. THE
FUND INVESTS ALL OF ITS NET INVESTABLE ASSETS IN THE INTERNATIONAL
PORTFOLIO ("PORTFOLIO") OF GLOBAL MANAGERS TRUST.
The Fund's Prospectus provides the basic information that
an investor ought to know before investing. A copy of the Prospectus may
be obtained, without charge, from Neuberger & Berman Management
Incorporated ("N&B Management"), located at 605 Third Avenue, 2nd Floor,
New York, NY 10158-0180, or by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a
prospectus and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or
to make any representations not contained in the Prospectus or in this SAI
in connection with the offering made by the Prospectus, and, if given or
made, such information or representations must not be relied upon as
having been authorized by the Fund or its distributor. The Prospectus and
this SAI do not constitute an offering by the Fund or its distributor in
any jurisdiction in which such offering may not lawfully be made.
<PAGE>
Table of Contents
-----------------
Page
----
INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1
Investment Policies and Limitations . . . . . . . . . . . . 1
International Investing . . . . . . . . . . . . . . . . . . 5
An Interview with Felix Rovelli, Portfolio Manager of the
Portfolio . . . . . . . . . . . . . . . . . . . . . 6
Timely Opportunity for Investors Looking for
International Bargains . . . . . . . . . . . . . . . 9
Additional Investment Information . . . . . . . . . . . . . 10
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 33
Total Return Computations . . . . . . . . . . . . . . . . . 34
Comparative Information . . . . . . . . . . . . . . . . . . 34
Other Performance Information . . . . . . . . . . . . . . . 35
CERTAIN RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 36
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . 36
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES . . . . . . . . . . 45
Investment Manager and Administrator . . . . . . . . . . . . 45
Sub-Adviser . . . . . . . . . . . . . . . . . . . . . . . . 48
Investment Companies Advised . . . . . . . . . . . . . . . . 49
Management and Control of N&B Management . . . . . . . . . . 52
DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 53
ADDITIONAL PURCHASE INFORMATION . . . . . . . . . . . . . . . . . . . 53
Automatic Investing and Dollar Cost Averaging . . . . . . . 53
ADDITIONAL EXCHANGE INFORMATION . . . . . . . . . . . . . . . . . . . 54
ADDITIONAL REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . 58
Suspension of Redemptions . . . . . . . . . . . . . . . . . 58
Redemptions in Kind . . . . . . . . . . . . . . . . . . . . 58
DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 59
ADDITIONAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . 59
Taxation of the Fund . . . . . . . . . . . . . . . . . . . . 59
Taxation of the Portfolio . . . . . . . . . . . . . . . . . 61
Taxation of the Fund's Shareholders . . . . . . . . . . . . 64
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 64
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . 68
REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 69
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . 69
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . 69
(B)
<PAGE>
Page
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . 69
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 70
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 70
Appendix A
RATINGS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . 1
(B)
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company. The Fund
seeks its investment objective by investing all of its net investable
assets in the Portfolio, which is a portfolio of Global Managers Trust
("Managers Trust") that has an investment objective identical to that of
the Fund. The Portfolio, in turn, invests in accordance with an invest-
ment objective, policies and limitations identical to those of the Fund.
(The Trust and Managers Trust, which is an open-end management investment
company managed by N&B Management, are together referred to below as the
"Trusts.")
The following information supplements the discussion in
the Prospectus of the investment objective, policies, and limitations of
the Fund and the Portfolio. The investment objective and, unless
otherwise specified, the investment policies and limitations of the Fund
and the Portfolio are not fundamental. However, although any investment
policy or limitation that is not fundamental may be changed by the
trustees of the Trust ("Fund Trustees") or of Managers Trust ("Portfolio
Trustees") without shareholder approval, the Fund intends to notify its
shareholders before changing its investment objective or implementing any
material change in any non-fundamental policy or limitation. Pursuant to
an undertaking made to a state securities commission, no changes may be
made in the non-fundamental policies numbered 3, 7 and 8 below, except
upon 30 days' notice to the Fund's shareholders. The fundamental policies
and limitations of the Fund or the Portfolio may not be changed without
the approval of the lesser of (1) 67% of the total units of beneficial
interest ("shares") of the Fund or Portfolio represented at a meeting at
which more than 50% of the outstanding Fund or Portfolio shares are
represented or (2) a majority of the outstanding shares of the Fund or
Portfolio. This vote is required by the Investment Company Act of 1940
("1940 Act") and is 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
thereon 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 net investable assets in
an open-end management investment company having substan-
tially 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 and the Portfolio are identical. Therefore, although the
<PAGE>
following discusses the investment policies and limitations of the
Portfolio, it applies equally to the Fund. Because the Fund invests all
of its net investable assets in the Portfolio, however, the Portfolio's
investment policies and limitations govern the type of investments in
which the Fund has an indirect interest.
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 is
exceeded immediately after, and because of, a transaction by the
Portfolio.
The Portfolio's fundamental investment policies and
limitations are as follows:
1. Borrowing. The Portfolio may not borrow money,
except that the Portfolio may (i) borrow money from banks for temporary or
emergency purposes and 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, options
(including options on futures contracts, but excluding options or futures
contracts on physical commodities), foreign currencies or forward
contracts, 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 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. This limitation does not apply to
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
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, 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
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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 invest any
part of its total assets in real estate or interests in real estate unless
acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit the Portfolio from purchasing readily
marketable 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, as amended ("1933 Act").
The following non-fundamental investment policies and
limitations apply to the Portfolio:
1. Investments in Any One Issuer. At the close of
each quarter of the Portfolio's tax year, (i) no more than 25% of its
total assets may be invested in the securities of a single issuer, and
(ii) with regard to 50% of its total assets, no more than 5% of total
assets may be invested in the securities of a single issuer. These
limitations do not apply to U.S. Government securities, as defined for tax
purposes.
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. Investments in Other Investment Companies. The
Portfolio may not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act and in the open market at
no more than customary brokerage commission rates. This limitation does
not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of a reorganization, consolidation, or merger.
4. 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.
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<PAGE>
5. Short Sales. The Portfolio may not engage in a
short sale (except a short sale against-the-box), if, as a result, the
dollar amount of all short sales would exceed 25% of its net assets, or
if, as a result, the value of securities of any one issuer in which the
Portfolio would be short would exceed 2.0% of the value of the Portfolio's
net assets or 2.0% of the securities of any class of any issuer.
Transactions in forward foreign currency contracts, futures contracts and
options are not considered short sales.
6. Ownership of Portfolio Securities by Officers and
Trustees. The Portfolio may not purchase or retain the securities of any
issuer if, to the knowledge of N&B Management, those officers and trustees
of the Trusts and officers and directors of N&B Management who each owns
individually more than 1/2 of 1% of the outstanding securities of such
issuer, together own more than 5% of such securities.
7. Unseasoned Issuers. The Portfolio may not
purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of the Portfolio's total assets
would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of
continuous operation.
8. Illiquid Securities. The Portfolio may not
purchase any security if, as a result, more than 10% 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.
9. Restricted Securities. The Portfolio may not
purchase a security restricted as to resale if, as a result thereof, more
than 10% of the Portfolio's total assets would be invested in restricted
securities. Securities that can be sold freely in the principal market in
which they are traded are not considered restricted, even if they cannot
be sold in the U.S.
10. Warrants. The Portfolio may not invest more than 5%
of its net assets in warrants, whether or not such warrants are listed on
the New York Stock Exchange ("NYSE") or the American Stock Exchange
("AmEx"), or more than 2% of its net assets in unlisted warrants. For
purposes of this limitation, warrants are valued at the lower of cost or
market value and warrants acquired by the Portfolio in units or attached
to securities are deemed to be without value, even if the warrants are
later separated from the unit.
11. Oil and Gas Programs. The Portfolio may not
invest in participations or other direct interests in oil, gas, or other
mineral leases or exploration or development programs, but the Portfolio
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may purchase securities of companies that own interests in any of the
foregoing.
12. Real Estate. The Portfolio may not invest in
real estate limited partnerships.
International Investing
-----------------------
Equity portfolios consisting solely of domestic
investments generally have not enjoyed the higher returns foreign
opportunities can offer. For more than thirty years, for example, the
growth rate of many foreign economies has outpaced that of the U.S. While
the U.S. accounted for almost 66% of the world's total securities market
capitalization in 1970, it accounted for less than 37% of that total at
the end of 1994 - or less than half of the dollar value of world's
available stocks and bonds today (source: Morgan Stanley Capital
International).
Over time, a number of international equity markets have
outperformed their U.S. counterparts. Although there are no guarantees,
foreign markets could continue to provide attractive investment
opportunities.
In addition, according to Morgan Stanley Capital
International, the leading companies in any given sector are not always
U.S.-based. For example, 22 of the largest 25 automobile companies are
based outside the U.S. as are 20 of the top 25 banks.
A principal advantage of investing overseas is diversi-
fication. A diversified portfolio gives investors the opportunity to
pursue increased overall return while reducing risk. It is prudent to
diversify by taking advantage of investment opportunities in more than one
country's stock or bond market. By investing in several countries through
a worldwide portfolio, investors can lower their exposure and
vulnerability to weakness in any one market. Investors should be aware,
however, that international investing is not a guarantee against market
risk and may be affected by economic factors described in the Prospectus,
such as the prospects of individual companies, and other risks such as
currency fluctuations or controls, expropriation, nationalization and
confiscatory taxation.
Furthermore, for the individual investor, buying foreign
stocks and bonds can be difficult, involving many decisions. Accessing
international markets is complicated; few individuals have the time or
resources to evaluate thoroughly foreign companies and markets, or the
ability to incur the high transaction costs of direct investment in such
markets. A mutual fund investing in foreign securities offers an investor
broad diversification at a relatively low cost.
The Portfolio invests primarily in equity securities of
companies located in developed foreign economies, as well as in "emerging
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markets." In all cases the investment process of N&B Management includes a
combination of "top-down country allocation" and "bottom-up security
selection."
Top-down approach to regional and country diversification
N&B Management uses extensive economic research to
identify countries that offer attractive investment opportunities, by
analyzing factors such as gross domestic product growth rates, interest
rate trends, and currency exchange rates. Market valuations, combined
with correlation and volatility comparisons, provide N&B Management with a
target allocation across 20 or more countries.
Bottom-up approach to security selection
N&B Management's value-driven style seeks out
attractively priced issues, by concentrating on criteria such as a low
price-to-earnings ratio relative to earnings growth rate, balance sheet
strength, low price to cash flow, and management quality. Typically, over
100 individual issues will comprise the portfolio. The portfolio will be
comprised of medium- to large-capitalization companies in relation to each
individual national market.
Currency Risk Management
Exchange rate movements and volatility are important
factors in international investing. The portfolio manager believes in
actively managing the Portfolio's currency exposure, in an effort to
capitalize on foreign currency trends and to reduce overall portfolio
volatility. Currency risk management is performed separately from equity
analysis. The portfolio manager intends to use a combination of economic
analysis to guide the Portfolio's longer-term posture and quantitative
trend analysis to assist in timing decisions with respect to whether (or
when) to invest in instruments denominated in a particular foreign
currency, or whether (or when) to hedge particular foreign currencies in
which liquid foreign exchange markets exist.
An Interview with Felix Rovelli, Portfolio Manager of the Portfolio
-------------------------------------------------------------------
Q: Why should investors allocate a portion of their assets
to international markets?
A: First, an investor who does not invest internationally
misses out on more than two-thirds of the world's potential investment
opportunities. The U.S. stock market today represents less than one-half
of the world's stock market capitalization, and the U.S. portion continues
to shrink as other countries around the world introduce or expand the size
of their equity markets. Privatizations of government-owned corporations,
initial public offerings, and the occasional creation of official stock
exchanges in emerging economies continuously present new opportunities for
capital in an expanding global market.
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<PAGE>
Second, many foreign economies are in earlier stages of
development than ours and are growing fast. Economic growth can often
mean potential for investment growth.
Finally, international investing helps an investor
increase diversification and can reduce risk. Domestic and foreign
markets generally do not all move in the same direction, so gains in one
market may offset losses in another.
Q: Does international investing involve special risks?
A: Currency risk is one important risk presented by
international investing. Fluctuations in exchange rates can either add to
or reduce an investor's returns, a fact that anyone who invests in foreign
markets should keep in mind.
Other risks include, but are not limited to, greater
market volatility, less government supervision and availability of public
information and the possibility of adverse economic or political
developments. The special risks of foreign investing are discussed in
greater detail in the Prospectus.
Q: What are some of the advantages of investing in an
international fund?
A: An international mutual fund can be a convenient way to
invest internationally and diversify assets among several markets to
reduce risk.
Additionally, the considerable burden of obtaining
timely, accurate and comprehensive information about foreign economies and
securities is left to seasoned professional managers.
OVER THE PAST DECADE, ONE OF THE MAJOR INDICES OF
INTERNATIONAL STOCKS OUTPERFORMED THE S&P 500 INDEX, WHICH REPRESENTS AN
AVERAGE OF THE PRICES OF CERTAIN MAJOR U.S. STOCKS.
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If you had invested $10,000 in the international and U.S.
stocks comprising both indices ten years ago, here's what your investments
would have been worth (as of June 30, 1995):1/
1/ Source: Ibbotson Associates. For the period ended June 30,
1995. International stocks are represented by the Morgan Stanley Capital
International European, Australia, Far East (EAFE) Index, an unmanaged
index of non-U.S. equity performance. Domestic stocks are represented by
the Standard & Poor's 500 Index, an unmanaged index of U.S. equity
performance. Indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Average annualized total
returns are measured in U.S. dollars and include changes in share price,
dividends paid and the gross effect of reinvesting dividends.
Value of Avg. annualized
investment total return
International stocks (EAFE) $45,587 16.38%
Domestic stocks (S&P 500) $39,131 14.62%
Of course, these historical results may not continue in
the future and cannot predict or reflect the performance of Neuberger &
Berman International Fund. In addition, investors should keep in mind the
added risks inherent in foreign markets, such as currency exchange
fluctuations, interest rates, and economic and political conditions, all
of which can lead to a greater degree of volatility than funds that invest
primarily in U.S. stocks.
Q: What is your investment approach?
A: We seek to capitalize on investments in countries where
we believe that positive economic and political factors are likely to
produce above-average returns. Studies have shown that the allocation of
assets among countries is typically the most important factor contributing
to portfolio performance. We believe that in the long term, a nation's
economic growth and the performance of its equity market are highly
correlated. Therefore, we will continuously evaluate the global economic
outlook as well as individual country data to guide country allocation.
Our process also leads to diversification across many countries, typically
20 or more, in an effort to limit total portfolio risk.
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<PAGE>
We strive to invest in companies within the selected
countries that are in the best position to capitalize on such positive
developments or companies that are most attractively valued. We will
usually include in the Portfolio's investments the securities of large-
capitalization companies, determined in relation to the size of each
individual national market, as well as securities of faster-growing,
medium-sized companies that offer potentially higher returns but are often
associated with higher risk.
The criteria for security selection focuses on companies
with leadership in specific markets or niches within specific industries,
which appear to exhibit positive fundamentals and seem undervalued
relative to their earnings potential or the worth of their assets.
Typically, in emerging markets, we will invest in relatively large,
established companies which N&B Management believes possess the
managerial, financial, and marketing strength to exploit successfully the
growth of a dynamic economy. In more developed markets, such as Europe
and Japan, the Portfolio may invest to a higher degree in medium-sized
companies. Medium-sized companies can often provide above-average growth,
and are less followed by market analysts, a fact that sometimes leads to
inefficient valuation.
Finally, we will strive to limit total portfolio
volatility and protect the value of portfolio securities by selectively
hedging the Portfolio's foreign currency exposure in times when we expect
the U.S. dollar to strengthen.
Q: How do you perceive the current outlook?
A: There is still an abundance of exciting investment
opportunities around the world. Many equity markets still have not
reached the maturity stage of the U.S. market and have much more room to
grow. There are new markets opening up to foreign investment and many
changes are occurring in markets where equity investments have
traditionally commanded less attention than fixed income securities.
In addition, it appears that both Europe and Japan
recently passed the bottom of their economic cycles. In many economies,
the current recession has been the most severe of all recessions in the
last five decades. With global inflation still in check, many economies
should continue to have lower interest rates, which, coupled with a
forecast of recovery in profits, could positively impact stock market
returns.
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<PAGE>
Timely Opportunity for Investors Looking for International Bargains
-------------------------------------------------------------------
"IF YOU HAVE MOST OF YOUR MONEY IN U.S. STOCKS, NOW MAY
BE A GOOD TIME TO SHIFT PART OF YOUR PORTFOLIO ABROAD." THE WALL STREET
JOURNAL, JULY 25, 1995.
While the U.S. stock market has been reaching new highs
in recent months, you may be able to find more bargains in international
stocks than you may locate on Wall Street. "Today, we are finding a large
supply of what we believe to be excellent companies whose stocks are
priced at very low levels," explains Felix Rovelli, portfolio manager for
Neuberger & Berman International Portfolio, a fund that invests in the
stocks of companies outside the United States.
"For the past year," Rovelli continues, "the economies of
many countries have been growing, and the fundamentals of many selected
individual company stocks have looked strong. Yet because of concerns --
over Mexico and the falling U.S. dollar, among other things --
international stock prices have lagged. That is, until recently."
AFTER FACING SETBACKS IN 1994 AND EARLIER THIS YEAR,
PLENTY OF REGIONS OUTSIDE THE U.S. HAVE BEGUN TO BOUNCE BACK.
In its June 1995 quarterly report on mutual funds, THE
WALL STREET JOURNAL reported that stock markets in both emerging areas and
developed European countries rebounded strongly from April 1st to June
30th.1/
What is causing this apparent turnaround? France, Italy,
and other European countries have been recovering from recessions. In
developing countries like Thailand and Malaysia, the economies have been
moving ahead at impressive growth rates of 6% to 10% annually -- over
twice the U.S. rate.
NEUBERGER & BERMAN INTERNATIONAL PORTFOLIO SEARCHES FAR
AND WIDE FOR THE BEST BARGAINS OUTSIDE THE U.S.
1/ July 7, 1995. Drawn from data supplied by Lipper Analytical
Services.
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<PAGE>
Without restrictions as to regions, portfolio manager
Felix Rovelli can exploit investment opportunities wherever and whenever
they arise -- in both developed and emerging economies. He invests in the
stocks of companies with solid fundamentals that he believes to be
undervalued and to have above average potential for capital appreciation.
Additional Investment Information
---------------------------------
The Portfolio may make the following investments, among
others. It may not buy all of the types of securities, or use all of the
investment techniques, that are described.
Repurchase Agreements. Repurchase agreements are
agreements under which the Portfolio purchases securities from a bank that
is a member of the Federal Reserve System, a foreign bank, a U.S. branch
or agency of a foreign bank or 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. The Portfolio will not enter
into a repurchase agreement with a maturity of more than seven days if, as
a result, more than 10% of the value of its net assets would then be
invested in such repurchase agreements and other illiquid securities. The
Portfolio will enter into a repurchase agreement only if (1) the
underlying securities are of the 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 value of the repurchase agreement, 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
the custodian or a bank acting as the Portfolio's agent. If the Portfolio
enters into a repurchase agreement subject to foreign law and the counter-
party defaults, the Portfolio may not enjoy protections comparable to
those provided to certain repurchase agreements under U.S. bankruptcy law,
and may suffer delays and losses in disposing of the collateral as a
result.
Securities Loans. In order to realize income, the
Portfolio may lend portfolio securities with a value not exceeding 33-1/3%
of its total assets to banks, brokerage firms, or institutional investors
judged creditworthy by N&B Management. Borrowers are required
continuously to secure their obligations to return securities on loan from
the Portfolio by depositing collateral, which will be marked to market
daily, in a form determined to be satisfactory by the Portfolio Trustees
and equal to at least 100% of the market value of the loaned securities,
which will also be marked to market daily. N&B Management believes the
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<PAGE>
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.
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 or, if they are unregistered, 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 markets 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 further 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 regis-
tering 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 have the effect of increasing the level of
the Portfolio's illiquidity. N&B Management, acting under guidelines
established by the Portfolio Trustees, may determine that certain
securities qualified for trading under Rule 144A are liquid. Foreign
securities that can be freely sold in the markets in which they are
principally traded are not considered by the Portfolio to be restricted.
Regulation S under the 1933 Act permits the sale abroad of securities that
are not registered for sale in the U.S.
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. To the extent privately
placed securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 10% limit on investments in
illiquid securities. Restricted securities for which no market exists are
priced at fair value as determined in accordance with procedures approved
and periodically reviewed by the Portfolio Trustees.
Reverse Repurchase Agreements. A reverse repurchase
agreement involves the Portfolio's sale of portfolio securities subject to
its agreement to repurchase the securities at a later date for a fixed
price reflecting a market rate of interest; these agreements are
considered borrowings for purposes of the Portfolio's investment
limitations and policies concerning borrowings. While a reverse
repurchase agreement is outstanding, the Portfolio will maintain with its
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<PAGE>
custodian in a segregated account cash or liquid, high-grade debt
securities, marked to market daily, in an amount at least equal to the
Portfolio's obligations under the agreement. There is a risk that the
counter-party will be unable or unwilling to complete the transaction as
scheduled, which may result in losses to the Portfolio.
Leverage. The Portfolio may make investments when
borrowings are outstanding. Leveraging the Portfolio creates an
opportunity for increased net income but, at the same time, creates
special risk considerations. For example, leveraging may exaggerate
changes in the Portfolio's and Fund's net asset values and in their
yields. Although the principal of such borrowings will be fixed, the
Portfolio's assets may change in value during the time the borrowing is
outstanding. Leveraging will create interest expenses for the Portfolio
which can exceed the income from the assets obtained. To the extent the
income derived from securities purchased with borrowed funds exceeds the
interest the Portfolio will have to pay, the Portfolio's net income will
be greater than it would be if leveraging were not used. Conversely, if
the income from the assets obtained with borrowed funds is not sufficient
to cover the cost of leveraging, the net income of the Portfolio will be
less than it would be if leveraging were not used, and therefore the
amount available for distribution to stockholders as dividends will be
reduced. Reverse repurchase agreements create leverage, a speculative
factor, and are considered borrowings for purposes of the Portfolio's
investment limitations.
Generally, the Portfolio does not intend to use leverage
for investment purposes. It may, however, use leverage to purchase
securities needed to close out short sales entered into for hedging
purposes and to facilitate other hedging transactions.
Foreign Securities. Investments in foreign securities
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 develop-
ments (including political instability) and the potentially adverse
effects of unavailability of public information regarding issuers, less
governmental supervision of financial markets, reduced liquidity of
certain financial markets, and the lack of uniform accounting, auditing,
and financial standards or the application of standards that are different
or less stringent than those applied in the U.S.
The Portfolio may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including, but not limited to, (1) common and preferred
stocks, (2) convertible securities, (3) warrants (subject to non-
fundamental limitation number 10), (4) bank certificates of deposit
("CDs"), commercial paper, fixed-time deposits, and bankers' acceptances
issued by foreign banks, (5) obligations of other corporations, and
(6) obligations of foreign governments, or their subdivisions, agencies,
and instrumentalities, international agencies, and supranational entities.
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<PAGE>
Investing in these securities includes the special risks associated with
investing in non-U.S. issuers described in the preceding paragraph and the
additional risks of (1) nationalization, expropriation, or confiscatory
taxation, (2) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the
U.S.), and (3) expropriation or nationalization of foreign portfolio
companies. Additionally, dividends and interest payable on foreign
securities may be subject to foreign taxes, including taxes withheld from
those payments. Commissions on foreign securities exchanges are often at
fixed rates and are generally higher than negotiated commissions on U.S.
exchanges, although the Portfolio endeavors to achieve the most favorable
net results on portfolio transactions. There is generally less government
supervision and regulation of securities exchanges, brokers, dealers and
listed companies than in the U.S. Mail service between the U.S. and
foreign countries may be slower or less reliable than within the U.S.,
thus increasing the risk of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities.
Prices of foreign securities and exchange rates for
foreign currencies may be affected by the interest rates prevailing in
other countries. The interest rates in other countries are often affected
by 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.
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 custodial arrangements, and the transaction costs of foreign
currency conversions. Changes in foreign exchange rates also will affect
the value of securities denominated or quoted in currencies other than the
U.S. dollar.
Foreign markets also have different clearance and
settlement procedures, and, 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. Such
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 either in losses to the
Portfolio due to subsequent declines in value of the portfolio securities,
or, if the Portfolio has entered into a contract to sell the securities,
could result in possible liability to the purchaser. Moreover, 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.
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<PAGE>
The Portfolio may invest in U.S. dollar-denominated
securities issued by foreign issuers (including banks, governments and
quasi-governments) and foreign branches of U.S. banks, including
negotiable CDs, bankers' acceptances and commercial paper, subject to the
Portfolio's quality standards.
Forward Commitments and When-Issued Securities. The
Portfolio may purchase securities on a when-issued basis or may purchase
or sell securities on a forward commitment basis. These transactions
involve a commitment by the Portfolio to purchase or sell securities at a
future date (ordinarily one or two months later). The price of the
underlying securities (usually expressed in terms of yield) and the date
when the securities will be delivered and paid for (the settlement date)
are fixed at the time the transaction is negotiated. When-issued
purchases and forward commitment transactions are negotiated directly with
the other party, and such commitments are not traded on exchanges.
When-issued purchases and forward commitment transactions
enable the Portfolio to "lock in" what N&B Management believes to be an
attractive price or yield on a particular security for a period of time,
regardless of future changes in interest rates. For instance, in periods
of rising interest rates and falling prices, the Portfolio might sell
securities it owns on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising prices,
the Portfolio might purchase a security on a when-issued or forward
commitment basis and sell a similar security to settle such purchase,
thereby obtaining the benefit of currently higher yields.
The value of securities purchased on a when-issued or
forward commitment basis and any subsequent fluctuations in their value
are reflected in the computation of the Portfolio's net asset value
starting on the date of the agreement to purchase the securities. The
Portfolio does not earn interest on the securities it has committed to
purchase until they are paid for and delivered on the settlement date.
When the Portfolio makes a forward commitment to sell securities it owns,
the proceeds to be received upon settlement are included in the
Portfolio's assets. Fluctuations in the market value of the underlying
securities are not reflected in the Portfolio's daily net asset value
("NAV") as long as the commitment to sell remains in effect. Settlement
of when-issued purchases and forward commitment transactions generally
takes place within two months after the date of the transaction, but the
Portfolio may agree to a longer settlement period.
The Portfolio will purchase securities on a when-issued
basis or purchase or sell securities on a forward commitment basis only
with the intention of completing the transaction and actually purchasing
or selling the securities. If deemed advisable as a matter of investment
strategy, however, the Portfolio may dispose of or renegotiate a
commitment after it has been entered into. The Portfolio also may sell
securities it has committed to purchase before those securities are
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delivered to the Portfolio on the settlement date. The Portfolio may
realize a capital gain or loss in connection with these transactions.
When the Portfolio purchases securities on a when-issued
or forward commitment basis, the Portfolio's custodian bank will maintain
in a segregated account securities having a value (determined daily) at
least equal to the amount of the Portfolio's purchase commitments. In the
case of a forward commitment to sell portfolio securities, the custodian
will hold the portfolio securities themselves in a segregated account
while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio will maintain sufficient assets at all times to
cover its obligations under when-issued purchases and forward commitments.
Put and Call Options on Individual Securities. The
Portfolio may write call options and purchase put options on securities in
order to hedge (i.e., write or purchase options to reduce the effect of
price fluctuations of securities held by the Portfolio on the Portfolio's
and Fund's NAVs). The Portfolio may also purchase or write put options,
purchase call options and write covered call options in an attempt to
enhance income.
The obligation under any option terminates upon
expiration of the option or, at an earlier time, when the writer 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, the Portfolio will lose the entire amount of the
premium paid.
The Portfolio will receive a premium for writing a put
option, which will obligate the Portfolio to acquire a certain security at
a certain price at any time until a certain date if the purchaser of the
option decides to sell such security. The Portfolio may be obligated to
purchase the security at more than its current value.
When the Portfolio purchases a put option, it pays a
premium to the writer for the right to sell a security to the writer for a
specified amount at any time until a certain date. The Portfolio would
purchase a put option in order to protect itself against a decline in the
market value of a security it owns.
When the Portfolio writes a call option, it is obligated
to sell a security to a purchaser at a specified price at any time the
purchaser requests, until a certain date, and 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 thereby giving up any additional gain on the
security. The Portfolio intends to write only "covered" call options on
securities it owns.
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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. The Portfolio would purchase a
call option in order to protect against an increase in the price of the
securities it intends to purchase or to offset a previously written call
option.
Portfolio securities on which call and put options may be
written and purchased by the Portfolio are purchased solely on the basis
of investment considerations consistent with the Portfolio's investment
objective. The writing of covered call options is a conservative
investment technique that is believed to involve relatively little risk
(in contrast to the writing of "naked" or uncovered call options, which
the Portfolio will not do) 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. When writing a put option, the Portfolio, in return for the
premium, takes the risk that it must purchase the underlying security at
the exercise price, which may be higher than the current market price of
the security. If a call or put option that the Portfolio has written
expires unexercised, the Portfolio will realize a gain in the amount of
the premium; however, in the case of a call option, 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.
Securities options are traded both on 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 its 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
different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its option position
and the associated cover. N&B Management monitors the creditworthiness of
dealers with which the Portfolio may engage in OTC options, and limits the
Portfolio's counter-parties in such transactions to dealers with a net
worth of at least $20 million as reported in their latest financial
statements.
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The assets used as cover (or held in a segregated
account) for OTC options written by the Portfolio will be considered
illiquid unless the OTC options are sold to qualified dealers who agree
that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement.
The cover for an OTC call option written subject to this procedure will be
considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
The premium received (or paid) by the Portfolio when it
writes (or purchases) a call or put option is the amount at which the
option is currently traded on the applicable exchange, less (or plus) a
commission. 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 general interest rate environment. The
premium received by the Portfolio for writing a covered call or put 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, which is the sales price on the option's last reported trade
on that day before the time the Portfolio's NAV is computed or, in the
absence of any trades thereof on that day, the mean between the closing
bid and ask prices.
Closing transactions are effected in order to realize a
profit 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 in the underlying security with either a
different exercise price or expiration date or both. If the Portfolio
desires to sell a particular security on which it has written a call
option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security. 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 subject to market risk on
the security.
Options normally have expiration dates between three and
nine months from the date written. The Portfolio may purchase both
European-style options and American-style options. European-style options
are only exercisable immediately prior to their expiration. American-
style options, in contrast, are exercisable at any time prior to their
expiration date. The exercise price of an option may be below, equal to,
or above the current market value of the underlying security at the time
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the option is written. From time to time, the Portfolio may purchase an
underlying security for delivery in accordance with an exercise notice of
a call option assigned to it, rather than delivering the security from its
portfolio. In those cases, additional brokerage commissions are incurred.
The 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.
However, 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.
Put and Call Options on Securities Indices. The
Portfolio may write or purchase put and call options on securities indices
for the purpose of hedging against the risk of unfavorable price movements
adversely affecting the value of the Portfolio's securities or securities
the Portfolio intends to buy. However, the Portfolio currently does not
expect to invest a substantial portion of its assets in securities index
options. 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 (i) the difference between the exercise price
of the option and the value of the underlying securities index on the
exercise date multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market
values of the securities included in the index. Options on stock indexes
are currently traded on the Chicago Board Options Exchange, the NYSE, the
AmEx, and other U.S. and foreign exchanges.
The Portfolio may purchase put options in order to hedge
against an anticipated decline in securities market prices that might
adversely affect the value of the Portfolio's portfolio securities. If
the Portfolio purchases a put option on a securities index, the amount of
the payment it would receive upon exercising the option would depend on
the extent of any decline in the level of the securities index below the
exercise price. Such payments would tend to offset a decline in the value
of the Portfolio's portfolio securities. However, if the level of the
securities index increases and remains above the exercise price while the
put option is outstanding, the Portfolio will not be able to exercise the
option profitably and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in
the value of the Portfolio's portfolio securities.
The Portfolio may purchase call options on securities
indices in order to participate in an anticipated increase in securities
market prices. If the Portfolio purchases a call option on a securities
index, the amount of the payment it receives upon exercising the option
depends on the extent of any increase in the level of the securities index
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above the exercise price. Such payments would, in effect, allow the
Portfolio to benefit from securities market appreciation even though it
may not have had sufficient cash to purchase the underlying securities.
Such payments may also offset increases in the price of securities that
the Portfolio intends to purchase. If, however, the level of the
securities index declines and remains below the exercise price while the
call option is outstanding, the Portfolio will not be able to exercise the
option profitably and will lose the amount of the premium and transaction
costs. Such loss may be partially offset by a reduction in the price the
Portfolio pays to buy additional securities for its portfolio.
The Portfolio may write securities index options in order
to close out positions in securities index options which it has purchased.
These closing sale transactions enable the Portfolio immediately to
realize gains or minimize losses on its options positions. If the
Portfolio is unable to effect a closing sale transaction with respect to
options that it has purchased, it would have to exercise the options in
order to realize any profit and may incur transaction costs.
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.
The effectiveness of hedging through the purchase of
securities index options will depend upon the extent to which price
movements in the portion of the securities portfolio being hedged
correlate with price movements in the selected securities index. Perfect
correlation is not possible because the securities held or to be acquired
by the Portfolio will not exactly match the composition of the securities
indices on which options are available. In addition, the purchase of
securities index options involves the risk that the premium and
transaction cost paid by the Portfolio in purchasing an option will be
lost as a result of unanticipated movements in prices of the securities
comprising the securities index on which the option is based.
All securities index options purchased by the Portfolio will be
listed and traded on an exchange.
Other Risks of Options Transactions. The Portfolio may
purchase and sell options that are traded on both U.S. and foreign
exchanges. There is no assurance that a liquid secondary market on a
domestic or foreign options exchange will exist for any particular
exchange-traded option or at any particular time, and for some options no
secondary market on an exchange may exist. If the Portfolio is unable to
effect a closing purchase transaction with respect to covered call options
it has written, it will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or
are exercised.
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<PAGE>
Reasons for the absence of a liquid secondary market on
an exchange include the following: (i) there may be insufficient interest
in trading certain options; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or its
clearing organization may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which
event the secondary market on that exchange (or in that class or series of
options) would cease to exist, although outstanding options on that
exchange that had been issued by the clearing organization as a result of
trades on that exchange would continue to be exercisable in accordance
with their terms.
The writing and purchase of options is a highly
specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. The writing of options on securities involves a risk that
the Portfolio will be required to sell or purchase such securities at a
price less favorable than the current market price and will lose the
benefit of appreciation or depreciation in the market price of such
securities.
The Portfolio would incur brokerage commissions or
spreads in connection with its options transactions as well as for
purchases and sales of underlying securities. Brokerage commissions from
options transactions may be higher or lower than for portfolio securities
transactions. The writing of options could result in a significant
increase in the Portfolio's turnover rate.
Futures Contracts. The Portfolio may enter into futures
contracts for the purchase or sale of individual securities and futures
contracts on securities indices which are traded on exchanges licensed and
regulated by the Commodity Futures Trading Commission ("CFTC") or on
foreign exchanges. Trading on foreign exchanges is subject to the legal
requirements of the jurisdiction in which the exchange is located and the
rules of such foreign exchange. The Portfolio may purchase and sell
futures for bona fide hedging purposes and non-hedging purposes (i.e., in
an effort to enhance income) as defined in regulations of the CFTC.
A futures contract on a security is a binding contractual
commitment which, if held to maturity, will result in an obligation to
make or accept delivery of securities having a standardized face value and
rate of return during a particular month. By purchasing futures on
securities, the Portfolio will legally obligate itself to accept delivery
of the underlying security and to pay the agreed price. By selling
futures on securities, the Portfolio will legally obligate itself to make
delivery of the security and receive payment of the agreed price.
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<PAGE>
Open futures positions on securities are valued at the
most recent settlement price, unless such price does not reflect the fair
value of the contract, in which case the position will be valued by or
under the direction of the Portfolio Trustees.
Futures contracts on securities are not normally held to
maturity but are instead liquidated through offsetting transactions which
may result in a profit or loss. While futures contracts on securities
entered into by the Portfolio will usually be liquidated in this manner,
the Portfolio may instead make or take delivery of the underlying
securities whenever it appears economically advantageous for it to do so.
A clearing corporation associated with the exchange on which futures on
securities are traded assumes responsibility for closing out and
guarantees that, if still open, the sale or purchase of securities will be
performed on the settlement date.
A securities index futures contract does not require the
physical delivery of securities, but merely provides for profits and
losses resulting from changes in the market value of the contract to be
credited or debited at the close of each trading day to the respective
accounts of the parties to the contract. On the contract's expiration
date, a final cash settlement occurs and the futures positions are simply
closed out. Changes in the market value of a particular securities index
futures contract reflect changes in the specified index of the securities
on which the futures contract is based.
The Portfolio sells futures contracts in order to offset
a possible decline in the value of its securities. When a futures
contract is sold by the Portfolio, the value of the contract will tend to
rise when the value of the Portfolio's securities declines and will tend
to fall when the value of such securities increases. The Portfolio
purchases futures contracts in order to fix what is believed to be a
favorable price for securities the Portfolio intends to purchase. If a
futures contract is purchased by the Portfolio, the value of the contract
will tend to change together with changes in the value of such securities.
The Portfolio may also purchase put and call options on
futures contracts for bona fide hedging and non-hedging purposes. A put
option purchased by the Portfolio would give it the right to assume a
position as the seller of a futures contract (assume a "short position").
A call option purchased by the Portfolio would give it the right to assume
a position as the purchaser of a futures contract (assume a "long
position"). The purchase of an option on a futures contract requires the
Portfolio to pay a premium. In exchange for the premium, the Portfolio
becomes entitled to exercise the option, but is not required to do so. If
the option cannot be profitably exercised before it expires, the
Portfolio's loss will be limited to the amount of the premium and any
transaction costs.
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<PAGE>
In addition, the Portfolio may write (sell) put and call
options on futures contracts for bona fide hedging and non-hedging
purposes. The writing of a put option on a futures contract generates a
premium, which may partially offset an increase in the price of securities
that the Portfolio intends to purchase. However, the Portfolio becomes
obligated to purchase a futures contract, which may have a value lower
than the exercise price. Conversely, the writing of a call option on a
futures contract generates a premium which may partially offset a decline
in the value of the Portfolio assets. By writing a call option, the
Portfolio becomes obligated, in exchange for the premium, to sell a
futures contract, which may have a value higher than the exercise price.
The Portfolio may enter into closing purchase or sale
transactions in order to terminate a futures contract. The Portfolio may
close out an option which it has purchased or written by selling or
purchasing an offsetting option of the same series. There is no guarantee
that such closing transactions can be effected. The Portfolio's ability
to enter into closing transactions depends on the development and
maintenance of a liquid market, which may not exist at all times.
Although futures and options transactions are intended to
enable the Portfolio to manage interest rate or stock market risks,
unanticipated changes in interest rates or market prices could result in
poorer performance than if the Portfolio had not entered into these
transactions. Even if N&B Management correctly predicts interest rate or
market price movements, a hedge could be unsuccessful if changes in the
value of the Portfolio's futures position do not correspond to changes in
the value of its investments. This lack of correlation between the
Portfolio's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Portfolio's futures position and the securities
held by or to be purchased for the Portfolio. N&B Management will attempt
to minimize these risks through careful selection and monitoring of the
Portfolio's futures and options positions. The ability to predict the
direction of the securities markets and interest rates involves skills
different from those used in selecting securities.
The prices of futures contracts depend primarily on the
value or level of the securities or indices on which they are based.
Because there are a limited number of types of futures contracts, it is
likely that the standardized futures contracts available to the Portfolio
will not exactly match the securities the Portfolio wishes to hedge or
intends to purchase, and consequently will not provide a perfect hedge
against all price fluctuation. To compensate for differences in
historical volatility between positions the Portfolio wishes to hedge and
the standardized futures contracts available to it, the Portfolio may
purchase or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase.
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Foreign Currency Transactions. The Portfolio may engage
in foreign currency exchange transactions. Foreign currency exchange
transactions will be conducted either on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market, or through
entering into forward contracts to purchase or sell foreign currencies
("forward contracts"). The Portfolio may enter into forward contracts in
order to protect against uncertainty in the level of future foreign
currency exchange rates and may also enter forward contracts for non-
hedging purposes. A forward contract involves an obligation to purchase
or sell a specific currency at a future date, which may be any fixed
number of days (usually less than one year) from the date of the contract
agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market directly between
traders (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. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the
difference (the spread) between the price at which they are buying and
selling various currencies.
When the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may
wish to "lock in" the U.S. dollar price of the security. By entering into
a forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying
security transactions, the Portfolio will be able to protect itself
against a possible loss. Such loss would result from an adverse change in
the relationship between the U.S. dollar and the foreign currency during
the period between the date on which the security is purchased or sold and
the date on which payment is made or received.
When N&B Management believes that the currency of a
particular foreign country may suffer a substantial decline against the
U.S. dollar, it may also enter into a forward contract to sell the amount
of foreign currency for a fixed amount of dollars which approximates the
value of some or all of the portfolio securities denominated in such
foreign currency. The precise matching of the forward contract amounts
and the value of the securities involved will not generally be possible,
since the future value of such securities denominated in foreign
currencies will change as a consequence of market movements in the value
of those securities between the date the forward contract is entered into
and the date it matures.
The Portfolio may also engage in cross-hedging by using
forward contracts in one currency to hedge against fluctuations in the
value of securities denominated in a different currency, when N&B
Management believes that there is a pattern of correlation between the two
currencies. The Portfolio may also purchase and sell forward contracts
for non-hedging purposes when N&B Management anticipates that the foreign
currency will appreciate or depreciate in value, but securities in that
currency do not present attractive investment opportunities and are not
held in the Portfolio's investment portfolio.
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<PAGE>
When the Portfolio engages in forward contracts for
hedging purposes, it will not enter into forward contracts to sell
currency or maintain a net exposure to such contracts if their
consummation would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's portfolio securities or
other assets denominated in that currency. At the consummation of the
forward contract, the Portfolio may either make delivery of the foreign
currency or terminate its contractual obligation to deliver by purchasing
an offsetting contract obligating it to purchase the same amount of such
foreign currency at the same maturity date. 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 trader who is a party
to the original forward contract.
The Portfolio is not required to enter into such
transactions and will not do so unless deemed appropriate by N&B
Management.
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 underlying prices of the securities. It
simply establishes a rate of exchange which can be achieved at some future
point in time. The precise projection of short-term currency market
movements is not possible, and short-term hedging provides a means of
fixing the dollar value of only a portion of the Portfolio's foreign
assets.
While the Portfolio may enter into forward contracts to
reduce currency exchange rate risks, transactions in such contracts
involve certain other risks. Thus, while the Portfolio may benefit from
such transactions, unanticipated changes in currency prices may result in
a poorer overall performance for the Portfolio than if it had not engaged
in any such transactions. Moreover, there may be imperfect correlation
between the Portfolio's holdings of securities denominated in a particular
currency and forward contracts entered into by the Portfolio. Such
imperfect correlation may cause the Portfolio to sustain losses or prevent
the Portfolio from achieving a complete hedge. The Portfolio may
experience delays in the settlement of its foreign currency transactions.
An issuer of fixed income securities purchased by the
Portfolio may be domiciled in a country other than the country in whose
currency the instrument is denominated. The Portfolio may also invest in
debt securities denominated in the European Currency Unit ("ECU"), which
is a "basket" consisting of a specified amount of the currencies of
certain of the member states of the European Union. The specific amounts
of currencies comprising the ECU may be adjusted by the Council of
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Ministers of the European Union from time to time to reflect changes in
relative values of the underlying currencies. In addition, the Portfolio
may invest in securities denominated in other currency baskets. The
market for ECUs may become illiquid at times of uncertainty or rapid
change in the European currency markets, limiting the Portfolio's ability
to prevent potential losses.
Currency Futures and Related Options. The Portfolio may
enter into currency futures contracts and options on such futures
contracts in domestic and foreign markets and may do so for hedging
purposes or non-hedging purposes (i.e., in an effort to enhance income) as
defined in CFTC regulations. The Portfolio may sell a currency futures
contract or a call option, or it may purchase a put option on such futures
contract, if N&B Management anticipates that exchange rates for a
particular currency will fall. Such a transaction will be used as a hedge
(or, in the case of a sale of a call option, a partial hedge) against a
decrease in the value of the Portfolio's securities denominated in such
currency. If N&B Management anticipates that a particular currency will
rise, the Portfolio may purchase a currency futures contract or a call
option to protect against an increase in the price of securities which are
denominated in a particular currency and which the Portfolio intends to
purchase. The Portfolio may also purchase a currency futures contract, or
a call option thereon, for non-hedging purposes when N&B Management
anticipates that a particular currency will appreciate in value, but
securities denominated in that currency do not present an attractive
investment and are not included in the Portfolio's portfolio.
The sale of a currency futures contract creates an
obligation by the Portfolio, as seller, to deliver the amount of currency
called for in the contract at a specified future time for a specified
price. The purchase of a currency futures contract creates an obligation
by the Portfolio, as purchaser, to take delivery of an amount of currency
at a specified future time at a specified price. Although the terms of
currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without
the making or taking of delivery of the currency. Closing out of a
currency futures contract is effected by entering into an offsetting
purchase or sale transaction. To close out a currency futures contract
sold by the Portfolio, the Portfolio may purchase a currency futures
contract for the same aggregate amount of currency and same delivery date.
If the price in the sale exceeds the price in the offsetting purchase, the
Portfolio is immediately paid the difference. Similarly, to close out a
currency futures contract purchased by the Portfolio, the Portfolio sells
a currency futures contract. If the offsetting sale price exceeds the
purchase price, the Portfolio realizes a gain. Likewise, if the
offsetting sale price is less than the purchase price, the Portfolio
realizes a loss.
Unlike a currency futures contract, which requires the
parties to buy and sell currency on a set date, an option on a futures
contract entitles its holder to decide on or before a future date whether
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to enter into such a contract. If the holder decides not to enter into
the contract, the premium paid for the option is lost. For the holder of
an option, there are no daily payments of cash for "variation" or
"maintenance" margin to reflect the change in the value of the underlying
contract as there are by a purchaser or seller of a currency futures
contract.
A risk in employing currency futures contracts to protect
against price volatility of portfolio securities which are denominated in
a particular currency is that the prices of such securities subject to
currency futures contracts may not completely correlate with the behavior
of the cash prices of the Portfolio's securities. The correlation may be
distorted by the fact that 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 approached maturity. Another risk is that N&B
Management could be incorrect in its expectation as to the direction or
extent of various exchange rate movements or the time span within which
the movements take place. When the Portfolio engages in the purchase of
currency futures contracts, an amount of securities, cash, or cash
equivalents equal to the market value of the currency futures contract
(minus any required margin) will be deposited in a segregated account to
collateralize the position and thereby limit the use of such futures
contracts.
Put and call options on currency futures have
characteristics similar to those of other options. In addition to the
risks associated with investing in options on securities, however, there
are particular risks associated with transactions in options on currency
futures. In particular, the ability to establish and close out positions
on such options will be subject to the development and maintenance of a
liquid secondary market for such options.
Options on Foreign Currencies. The Portfolio may
purchase options on foreign currencies for hedging purposes in a manner
similar to currency futures contracts or forward contracts. For example,
a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant.
In order to protect against such decreases in the value of portfolio
securities, the Portfolio may purchase put options on the foreign
currency. If the value of the currency declines, the Portfolio will have
the right to sell such currency for a fixed amount of dollars which
exceeds the market value of such currency. This would result in a gain
that may offset, in whole or in part, the negative effect of currency
depreciation on the value of the Portfolio's securities denominated in
that currency.
- 27 -
<PAGE>
Conversely, if a rise in the dollar value of a currency
is projected for securities to be acquired by the Portfolio, thereby
increasing the cost of such securities, the Portfolio may purchase call
options on such currency. If the value of such currency increases, the
purchase of such call options would enable the Portfolio to purchase
currency for a fixed amount of dollars which is less than the market value
of such currency. Such a purchase would result in a gain that may offset,
at least partially, the effect of any currency-related increase in the
price of securities the Portfolio intends to acquire. As in the case of
other types of options transactions, however, the benefit the Portfolio
derives from purchasing foreign currency options will be reduced by the
amount of the premium and related transaction costs. In addition, if
currency exchange rates do not move in the direction or to the extent
anticipated, the Portfolio could sustain losses on transactions in foreign
currency options which would deprive it of a portion or all of the
benefits of advantageous changes in such rates.
The Portfolio may also write options on foreign
currencies for hedging purposes. For example, if the Portfolio
anticipated a decline in the dollar value of foreign currency denominated
securities because of declining exchange rates, it could, instead of
purchasing a put option, write a call option on the relevant currency. If
the expected decline occurs, the option will most likely not be exercised,
and the decrease in value of portfolio securities will be offset, at least
partially, by the amount of the premium received by the Portfolio.
Similarly, the Portfolio could write a put option on the
relevant currency, instead of purchasing a call option, to hedge against
an anticipated increase in the dollar cost of securities to be acquired.
If exchange rates move in the manner projected, the put option will expire
unexercised and allow the Portfolio to offset such increased cost up to
the amount of the premium. However, as in the case of other types of
options transactions, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only
if rates move in the expected direction. If unanticipated exchange rate
fluctuations occur, the option may be exercised and the Portfolio would be
required to purchase or sell the underlying currency at a loss which may
not be fully offset by the amount of the premium. As a result of writing
options on foreign currencies, the Portfolio also may be required to
forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in currency exchange rates.
The Portfolio may purchase call options on currency for
non-hedging purposes when N&B Management anticipates that the currency
will appreciate in value, but securities denominated in that currency do
not present attractive investment opportunities and are not included in
the Portfolio's portfolio. The Portfolio may write (sell) put and covered
call options on any currency in order to realize greater income than would
be realized on portfolio securities alone. However, in writing covered
call options for income, the Portfolio may forego the opportunity to
profit from an increase in the market value of the underlying currency.
- 28 -
<PAGE>
Also, when writing put options, the Portfolio accepts, in return for the
option premium, the risk that it may be required to purchase the
underlying currency at a price in excess of the currency's market value at
the time of purchase.
The Portfolio would normally purchase call options for
non-hedging purposes in anticipation of an increase in the market value of
a currency. The Portfolio would ordinarily realize a gain if, during the
option period, the value of such currency exceeded the sum of the exercise
price, the premium paid and transaction costs. Otherwise the Portfolio
would realize either no gain or a loss on the purchase of the call option.
Put options may be purchased by the Portfolio for the purpose of
benefiting from a decline in the value of currencies which it does not
own. The Portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying currency decreased below the exercise
price sufficiently to more than cover the premium and transaction costs.
Otherwise the Portfolio would realize either no gain or a loss on the
purchase of the put option.
A call option on foreign currency written by the
Portfolio is "covered" if the Portfolio owns the underlying foreign
currency subject to the call, or if it has an absolute and immediate right
to acquire that foreign currency without additional cash consideration.
This also would apply to additional cash consideration held in a
segregated account by its custodian, upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if
the Portfolio holds a call on the same foreign currency for the same
principal amount as the call written where the exercise price of the call
held is (1) equal to or less than the exercise price of the call written
or (2) greater than the exercise price of the call written if the amount
of the difference is maintained by the Portfolio in cash or liquid, high-
grade debt securities in a segregated account with its custodian.
Limitations on Options, Futures Contracts and Foreign
Currency Transactions. The Portfolio is required to maintain margin
deposits with, or for the benefit of, futures commission merchants through
which it effects futures transactions, and must deposit "initial margin"
each time it enters into a futures contract. Such initial margin is
usually equal to a percentage of the contract's value. In addition, daily
variation margin payments in cash are required to reflect gains and losses
on open futures contracts. As a result, the Portfolio may be required to
make additional margin payments during the term of a futures contract.
The Portfolio may not purchase or sell futures contracts (including
currency futures contracts) or related options on foreign or U.S.
exchanges if immediately thereafter the sum of the amounts of initial
margin deposits on the Portfolio's existing futures contracts and premiums
paid for options on futures (excluding futures contracts and options on
futures entered into for bona fide hedging purposes and net of the amount
the positions are "in the money") would exceed 5% of the market value of
the Portfolio's total assets. In instances involving the purchase of
futures contracts or the writing of put options thereon by the Portfolio,
- 29 -
<PAGE>
the Portfolio will deposit an amount of cash, cash equivalents or
securities denominated in the appropriate currency equal to the market
value of the futures contracts and options (less any related margin
deposits) in a segregated account with its custodian to collateralize the
position, thereby limiting the use of such futures contracts. Pursuant to
an undertaking made to a state securities administrator, the Portfolio
will not invest more than 5% of its total assets in instruments commonly
known as options, financial futures, or stock index futures, other than
hedging positions or positions that are covered by cash or securities.
Also, the Portfolio has undertaken that it will not invest more than 5% of
its total assets in puts, calls, straddles, spreads, or any combination
thereof.
When the Portfolio engages in forward contracts for the
sale or purchase of currencies, the Portfolio will either cover its
position or establish a segregated account. The Portfolio will consider
its position covered if it has securities in the currency subject to the
forward contract, or otherwise has the right to obtain that currency at no
additional cost. In the alternative, the Portfolio will place cash which
is not available for investment, liquid, high-grade debt securities or
other securities (denominated in the foreign currency subject to the
forward contract) in a segregated account. The amounts in such segregated
account will equal the value of the Portfolio's assets which are committed
to the consummation of foreign currency exchange contracts. If the value
of the securities placed in the segregated account declines, the Portfolio
will place additional cash or securities in the account on a daily basis
so that the value of the account will equal the amount of the Portfolio's
commitments with respect to such contracts. The Portfolio generally will
not enter into a forward contract with a term of greater than one year.
The extent to which the Portfolio may enter into futures
and option transactions may be limited by the requirements of federal
income tax law applicable to the Fund for qualification as a regulated
investment company. See "Additional Tax Information."
Short Sales. The Portfolio may enter into short sales of
securities to the extent permitted by the Portfolio's non-fundamental
investment policies and limitations. Under applicable guidelines of the
staff of the SEC, if the Portfolio engages in a short sale (other than a
short sale against-the-box), it must put in a segregated account (not with
the broker) an amount of cash or U.S. Government securities equal to the
difference between (1) the market value of the securities sold short at
the time they were sold short and (2) any cash or U.S. Government
securities required to be deposited as collateral with the broker in
connection with the short sale (not including the proceeds from the short
sale). In addition, until the Portfolio replaces the borrowed security,
it must daily maintain the segregated account at such a level that (1) the
amount deposited in it plus the amount deposited with the broker as
collateral will equal the current market value of the securities sold
- 30 -
<PAGE>
short, and (2) the amount deposited in it plus the amount deposited with
the broker as collateral will not be less than the market value of the
securities at the time they were sold short.
The effect on the Portfolio of short selling is similar
to the effect of leverage. Short selling may exaggerate changes in the
Portfolio's and the Fund's NAVs and yields. Short selling may also
produce higher than normal portfolio turnover, which may result in
increased transaction costs to the Portfolio and may result in gains from
the sale of securities deemed to have been held for less than three
months. Such gains must be limited in order for the Fund to continue to
qualify as a regulated investment company. See "Additional Tax
Information."
Foreign Corporate and Government Debt Securities. While
the emphasis of the Portfolio's investment program is on common stocks and
other equity securities, it may invest in foreign corporate bonds and
debentures and sovereign debt instruments issued or guaranteed by foreign
governments, their agencies or instrumentalities. The Portfolio may
invest in debt securities of any rating, including those rated below
investment grade and unrated securities.
Foreign debt securities are subject to risks similar to
those of other foreign securities. In addition, foreign debt securities
are subject to the risk of an issuer's inability to meet principal and
interest payments on the 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 general market
liquidity ("market risk"). Lower-rated securities are more likely to
react to developments affecting market and credit risk than are more
highly rated securities, which react primarily to movements in the general
level of interest rates. Debt securities in the lowest rating categories
may involve a substantial risk of default or may be in default. Changes
in economic conditions or developments regarding the individual issuer are
more likely to cause price volatility and weaken the capacity of the
issuers of such securities to make principal and interest payments than is
the case for higher grade debt securities. An economic downturn affecting
the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-
rated securities. Pricing of thinly traded securities requires greater
judgment than pricing of securities for which market transactions are
regularly reported. N&B Management will invest in such securities only
when it concludes that the anticipated return to the Portfolio and the
Fund on such an investment warrants exposure to the additional level of
risk. A further description of the ratings used by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's ("S&P") is included in the
Appendix to the SAI. Subsequent to its purchase by the Portfolio, an
issue of securities may cease to be rated or its rating may be reduced.
In such a case, N&B Management will make a determination as to whether the
Portfolio should dispose of the downgraded securities.
- 31 -
<PAGE>
The ratings of a nationally recognized statistical rating
organization represent its opinion as to the quality of securities it
undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may
have different yields.
Commercial Paper. Commercial paper is a short-term debt
security issued by a corporation or bank for purposes such as financing
current operations. The Portfolio may invest only in commercial paper
receiving the highest rating from S&P (A-1) or Moody's (P-1), or deemed by
N&B Management to be of equivalent quality. It may invest in such
commercial paper as a defensive measure, to increase liquidity or as
needed for segregated accounts.
The Portfolio may invest in commercial paper that cannot
be resold to the public without an effective registration statement under
the 1933 Act. While such restricted securities are normally deemed
illiquid, N&B Management may in certain cases determine that such paper is
liquid, pursuant to guidelines established by the Portfolio Trustees.
Convertible Securities. A convertible security entitles
the holder to receive 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, convertible
securities ordinarily provide a stream of income with generally higher
yields than those of 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 with 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.
Convertible securities are typically issued by smaller
capitalized companies whose stock prices may be volatile. The price of a
convertible security often reflects such variations in the price of the
underlying common stock in a way that non-convertible debt does not. 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.
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, although preferred
- 32 -
<PAGE>
shareholders may have certain rights if dividends are not paid.
Shareholders may suffer a loss of value if dividends are not paid, and
generally have no legal recourse against the issuer. 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
earnings 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
The average annual total return smooths out year-to-year variations and,
in that respect, differs from actual year-to-year results.
The average annual total returns for the Fund for the
one-year period ended August 31, 1995, and for the period from June 15,
1994 (commencement of operations) to August 31, 1995 were 2.60% and 6.02%,
respectively. During those periods, the Portfolio's then investment
adviser and the Fund's administrator reimbursed certain expenses of the
Portfolio and the Fund, respectively. Such action has the effect of
increasing total return. If an investor had invested $10,000 in the
Fund's shares on June 15, 1994, the NAV of that investor's holdings would
have been $10,732 on August 31, 1995.
BNP-N&B Global Asset Management L.P. ("BNP-N&B Global"),
a joint venture of Banque Nationale de Paris ("BNP") and Neuberger &
Berman, L.P. ("Neuberger & Berman"), served as the investment adviser to
the Portfolio from its inception until November 1, 1995. On that date,
N&B Management became the Portfolio's investment manager; there has been
no change in the personnel responsible for daily management of the
Portfolio.
Comparative Information
-----------------------
From time to time the Fund's performance may be compared
with:
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<PAGE>
(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.
("Lipper"), C.D.A. Investment Technologies, Inc.
("C.D.A."), Wiesenberger Investment Companies Service
("Wiesenberger"), Investment Company Data Inc., Morn-
ingstar, Inc. ("Morningstar"), 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, New York
Times, Kiplingers Personal Finance, and Barron's News-
paper, 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 ("S&P 600"), S&P Mid Cap 400
("S&P 400"), Russell 2000 Stock Index, Dow Jones
Industrial Average ("DJIA"), Wilshire 1750, Nasdaq
Composite Index, Value Line Index, U.S. Department of
Labor Consumer Price Index ("Consumer Price Index"),
College Board Survey of Colleges Annual Increases of
College Costs, Kanon Bloch's Family Performance Index,
the Barra Growth Index, the Barra Value Index, the
EAFE(REGISTERED MARK) 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 includes
stocks that range in market value from $27 million to
$880 million, with an average of $302 million. The S&P
400 measures mid-sized companies with an average market
capitalization of $1.2 billion. The EAFE(REGISTERED
MARK) Index is an unmanaged index of common stock prices
of more than 900 companies from Europe, Australia, 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 these indices.
Evaluations of the Fund's performance and its total
return and comparisons may be used in advertisements and in information
furnished to current and prospective shareholders (collectively,
"Advertisements"). The Fund may also be compared to individual asset
classes such as common stocks, small-cap stocks, or Treasury bonds, based
on information supplied by Ibbotson and Sinquefield.
- 34 -
<PAGE>
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, for example, 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.
The cost of a college education is rapidly approaching the cost
of the average family home. Four years' tuition, room and board at a top
private institution can already cost over $80,000. If college expenses
continue to increase at current rates, by the time today's pre-schooler
enters the "ivy-covered halls" in 2009, four years at a private college
may easily cost $200,000. (Source: College Board, 1994, 1995 Annual
Survey of Colleges, Princeton, NJ, assuming an average 6% increase in
annual expenses.)
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 such 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 automatic invest-
ment, systematic withdrawal plans, 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, diversification does not eliminate all risk.
There can, of course, be no assurance that the Portfolio will achieve its
investment objective, and an investment in the Fund involves certain risks
that are described in the sections entitled "Investment Program" and
"Description of Investments" in the Prospectus and "Investment
Information" in this SAI.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the
trustees and officers of the Trusts, including their addresses and
principal business experience during the past five years. Some persons
named as trustees and officers also serve in similar capacities for other
funds, and (where applicable) their corresponding portfolios, advised by
N&B Management and Neuberger & Berman.
- 35 -
<PAGE>
<TABLE>
<CAPTION>
Name, Age, and Address(1) Positions Held with Managers Trust Principal Occupation(s)(2)
------------------------- ---------------------------------- --------------------------
<S> <C> <C>
Stanley Egener* (61) Chairman of the Board, Chief (See below)
Executive Officer, and Trustee
Howard A. Mileaf (57) Trustee (See below)
Wheeling Pittsburgh Corporation
110 East 59th Street
New York, NY 10022
John T. Patterson, Jr. (67) Trustee (See below)
90 Riverside Drive, Apartment 1B
New York, NY 10024
John P. Rosenthal (62) Trustee (See below)
Burnham Securities Inc.
Burnham Asset Management Corp.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Lawrence Zicklin* (59) President (See below)
Daniel J. Sullivan (55) Vice President (See below)
Michael J. Weiner (48) Vice President and Principal (See below)
Financial Officer
Richard Russell (48) Treasurer and Principal Accounting (See below)
Officer
Claudia A. Brandon (38) Secretary (See below)
Stacy Cooper-Shugrue (32) Assistant Secretary (See below)
C. Carl Randolph (57) Assistant Secretary (See below)
Jacqueline Henning (53) Assistant Treasurer Managing Director, State Street Cayman
Trust Co., Ltd.; Assistant Director, Morgan
Grenfell, 1993-94; Bank of Nova Scotia
Trust Co. (Cayman) Ltd., Managing Director,
1988-93.
Lenore Joan McCabe (34) Assistant Secretary Operations Supervisor, State Street Cayman
Trust Co., Ltd.; Project Manager, State
Street Canada, Inc., 1992-94; employee,
Boston Financial Data Services, 1984-92.
- 36 -
<PAGE>
Name, Age, and Address(1) Positions Held with the Trust Principal Occupation(s)(2)
------------------------- ----------------------------- --------------------------
Faith Colish (59) Trustee Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (72) Trustee Retired. Formerly Senior Vice President
435 East 52nd Street and Director of Exxon Corporation; Director
New York, NY 10022 of Emigrant Savings Bank.
Stanley Egener* (61) Chairman of the Board, Chief Partner of Neuberger & Berman; President
Executive Officer, and Trustee and Director of N&B Management; Chairman of
the Board, Chief Executive Officer and
Trustee of Managers Trust; Chairman of the
Board, Chief Executive Officer, and Trustee
of eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Alan R. Gruber (67) Trustee Chairman and Chief Executive Officer of
Orion Capital Corporation Orion Capital Corporation (property and
600 Fifth Avenue, 24th Floor casualty insurance); Director of Trenwick
New York, NY 10020 Group, Inc. (property and casualty
reinsurance); Chairman of the Board and
Director of Guaranty National Corporation
(property and casualty insurance); formerly
Director of Ketema, Inc. (diversified
manufacturer).
Howard A. Mileaf (57) Trustee Vice President and Special Counsel to
Wheeling Pittsburgh Corporation Wheeling Pittsburgh Corporation (holding
110 East 59th Street company) since 1992; formerly Vice Presi-
New York, NY 10022 dent and General Counsel of Keene
Corporation (manufacturer of industrial
products); Director of Kevlin Corporation
(manufacturer of microwave and other
products).
Edward I. O'Brien* (66) Trustee Until 1993, President of the Securities
12 Woods Lane Industry Association ("SIA") (securities
Scarsdale, NY 10583 industry's representative in government
relations and regulatory matters at the
federal and state levels); until November
1993, employee of the SIA; Director of Legg
Mason, Inc.
- 37 -
<PAGE>
Name, Age, and Address(1) Positions Held with the Trust Principal Occupation(s)(2)
------------------------- ----------------------------- --------------------------
John T. Patterson, Jr. (67) Trustee President of SOBRO (South Bronx Overall
90 Riverside Drive, Apartment 1B Economic Development Corporation).
New York, NY 10024
John P. Rosenthal (62) Trustee Senior Vice President of Burnham Securities
Burnham Securities Inc. Inc. (a registered broker-dealer) since
Burnham Asset Management Corp. 1991; formerly Partner of Silberberg,
1325 Avenue of the Americas Rosenthal & Co. (member of National Asso-
17th Floor ciation of Securities Dealers, Inc.);
New York, NY 10019 Director, Cancer Treatment Holdings, Inc.
Cornelius T. Ryan (63) Trustee General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture capital
315 Post Road West partnerships) and President of Oxford
Westport, CT 06880 Venture Corporation; Director of Capital
Cash Management Trust (money market fund);
Cognitive Systems, Inc. (case-based
reasoning); and Micro General Corporation
(manufacturer of electronic parcel and
postage shipping systems).
Gustave H. Shubert (66) Trustee Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard Advisory Trustee of Rand (a non-profit
Pacific Palisades, CA 90272 public interest research institution) since
1989; 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* (59) President and Trustee Partner of Neuberger & Berman; Director of
N&B Management; President of Managers
Trust; President and Trustee of five other
mutual funds for which N&B Management acts
as investment manager or administrator.
- 38 -
<PAGE>
Name, Age, and Address(1) Positions Held with the Trust Principal Occupation(s)(2)
------------------------- ----------------------------- --------------------------
Daniel J. Sullivan (55) Vice President Senior Vice President of N&B Management
since 1992; prior thereto, Vice President
of N&B Management; Vice President of nine
other mutual funds for which N&B Management
acts as investment manager or
administrator.
Michael J. Weiner (48) Vice President and Principal Senior Vice President and Treasurer of N&B
Financial Officer Management since 1992; prior thereto, Vice
President and Treasurer of N&B Management
and Treasurer of other mutual funds for
which N&B management acts or acted as
investment adviser, manager, or
administrator; Vice President and Principal
Financial Officer of nine other mutual
funds for which N&B Management acts as
investment manager or administrator.
Claudia A. Brandon (38) Secretary Vice President of N&B Management; Secretary
of nine other mutual funds for which N&B
Management acts as investment manager or
administrator.
Richard Russell (48) Treasurer and Principal Accounting Vice President of N&B Management since
Officer 1993; prior thereto, Assistant Vice
President of N&B Management; Treasurer and
Principal Accounting Officer of nine other
mutual funds for which N&B Management acts
as investment manager or administrator.
- 39 -
<PAGE>
Name, Age, and Address(1) Positions Held with the Trust Principal Occupation(s)(2)
------------------------- ----------------------------- --------------------------
Stacy Cooper-Shugrue (32) Assistant Secretary Assistant Vice President of N&B Management
since 1993; employee of N&B Management
since August 1989; Assistant Secretary of
nine other mutual funds for which N&B
Management acts as investment manager or
administrator.
C. Carl Randolph (57) Assistant Secretary Partner of Neuberger & Berman since 1992;
employee thereof since 1971; Assistant
Secretary of nine other mutual funds for
which N&B 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 an "interested person" within the meaning of the 1940
Act. Messrs. Egener and Zicklin are interested persons of each Trust by
virtue of the fact that they are officers and/or directors of N&B
Management and partners of Neuberger & Berman. Mr. O'Brien is an
interested person of the Trust 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
N&B Management serves as investment manager.
For the fiscal year ended August 31, 1995, trustees' fees
and expenses aggregating $33,528 were paid by the Fund and the Portfolio
to Fund and Portfolio Trustees who were not affiliated with N&B Management
or Neuberger & Berman.
The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the
Neuberger & Berman Funds(SERVICEMARK) has any retirement plan for its
trustees or officers.
- 40 -
<PAGE>
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/95
------------------------------
Aggregate Compensation Total Compensation from the Neuberger & Berman
Name and Position with the Trust from the Trust Fund Complex Paid to Trustees
------------------------------- ---------------------- ----------------------------------------------
<S> <C> <C>`
Faith Colish $ 14,140 $ 39,000
Trustee (5 other investment
companies)
Donald M. Cox $ 14,140 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief Executive (9 other investment
Officer, and Trustee companies)
Alan R. Gruber $ 14,140 $ 31,000
Trustee (3 other investment
companies)
Howard A. Mileaf $ 15,571 $ 36,500
Trustee (4 other investment
companies)
- 41 -
<PAGE>
Aggregate Compensation Total Compensation from the Neuberger & Berman
Name and Position with the Trust from the Trust Fund Complex Paid to Trustees
------------------------------- ---------------------- ----------------------------------------------
Edward I. O'Brien $ 14,587 $ 31,500
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 14,604 $ 34,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 13,916 $ 33,000
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 15,571 $ 33,500
Trustee (3 other investment
companies)
Gustave H. Shubert $ 13,916 $ 30,000
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
</TABLE>
The Trust's Trust Instrument and Managers Trust's
Declaration of Trust each provides that it 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
- 42 -
<PAGE>
offices with the Trust, unless it is adjudicated that they engaged in bad
faith, willful misfeasance, gross negligence, or reckless disregard of the
duties involved in their offices. 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, or 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.
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.
N&B Management serves as the Portfolio's investment manager pursuant to a
management agreement with Managers Trust, on behalf of the Portfolio,
dated as of November 1, 1995 ("Management Agreement"), that was approved
by the holders of the interests in the Portfolio on October 25, 1995 and
the Fund's shareholders on October 24, 1995.
The Management Agreement provides in substance that N&B
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 N&B Management
to effect securities transactions on behalf of the Portfolio through
associated persons of N&B Management. The Management Agreement also
specifically permits N&B Management to compensate, through higher
commissions, brokers and dealers who provide investment research and
analysis to the Portfolio, although N&B Management has no current plans to
do so.
N&B Management provides to the Portfolio, without
separate cost, office space, equipment, and facilities and personnel
necessary to perform executive, administrative, and clerical functions.
N&B Management pays all salaries, expenses, and fees of the officers,
trustees, and employees of Managers Trust who are officers, directors, or
employees of N&B Management. Two directors of N&B Management (who also
are partners of Neuberger & Berman), one of whom also serves as an officer
of N&B Management, presently serve as trustees and officers of the Trust
and as trustees and/or officers of Managers Trust. See "Trustees and
Officers." N&B Management provides similar facilities, services and
personnel to the Fund and also assists the Fund's shareholder servicing
agent pursuant to an administration agreement dated November 1, 1995
("Administration Agreement"). The Fund was authorized to become subject
to the Administration Agreement by vote of the Fund Trustees on August 11,
1995, and became subject to it on November 1, 1995. Prior to November 1,
- 43 -
<PAGE>
1995, N&B Management provided such services to the Fund pursuant to an
administration agreement dated June 15, 1994 and amended May 1, 1995
("Fund Administration Agreement").
Managers Trust has entered into an Administrative
Services Agreement with State Street Cayman Trust Company Ltd. ("State
Street Cayman"), Elizabethan Square, P.O. Box 1984, George Town, Grand
Cayman, Cayman Islands, effective August 31, 1994. Under the
Administrative Services Agreement, State Street Cayman provides sufficient
personnel and suitable facilities for the principal offices of Managers
Trust, and provides Managers Trust with certain administrative, fund
accounting and transfer agency services with respect to the Portfolio.
The Administrative Services Agreement terminates if assigned by State
Street Cayman; however, State Street Cayman is permitted to, and does,
employ an affiliate, State Street Canada, Inc., to perform certain
accounting functions.
From the commencement of operations until November 1,
1995, the Portfolio was advised by BNP-N&B Global pursuant to an
investment advisory agreement dated June 15, 1994 ("Investment Advisory
Agreement"). During that period, BNP-N&B Global voluntarily reimbursed
the Portfolio to the extent that its operating expenses (excluding
interest, taxes, brokerage commissions, and extraordinary expenses)
exceeded 0.70% per annum of the Portfolio's average daily net assets.
Prior to November 1, 1995, N&B Management provided the Portfolio with
administrative services pursuant to a separate administration agreement
dated June 15, 1994 ("Portfolio Administration Agreement").
For the fiscal year ended August 31, 1995 and for the
period from June 15, 1994 (commencement of operations) through August 31,
1994, the Portfolio paid to BNP-N&B Global a fee of $94,422 and $4,167,
respectively, under the Investment Advisory Agreement. During those same
periods, BNP-N&B Global reimbursed the Portfolio for $290,362 and $70,114,
respectively, in expenses.
For the fiscal year ended August 31, 1995 and for the
period from June 15, 1994 (commencement of operations) through August 31,
1994, the Portfolio paid to N&B Management a fee of $100,000 and $21,370,
respectively, under the Portfolio Administration Agreement.
For the fiscal year ended August 31, 1995 and for the
period from June 15, 1994 (commencement of operations) through August 31,
1994, the Fund paid to N&B Management a fee of $122,725 and $5,390,
respectively, under the Fund Administration Agreement. During those same
periods, N&B Management reimbursed the Fund for $116,746 and $24,132,
respectively, in expenses.
Prior to May 1, 1995, shareholder services were provided
pursuant to a separate agreement between the Trust and N&B Management. As
- 44 -
<PAGE>
compensation for these services, the Fund paid N&B Management a monthly
fee calculated at the annual rate of 0.04% of the Fund's average daily net
assets. For the period from September 1, 1995 to April 30, 1995 and for
the period from June 15, 1994 (commencement of operations) to August 31,
1994, the Fund paid N&B Management $4,178 and $342, respectively, for
these services.
The Management Agreement continues as to the Portfolio
for a period of two years after the date the Portfolio became subject
thereto. 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 N&B Management or Managers Trust
("Independent Portfolio Trustees"), cast in person at a meeting called for
the purpose of voting on such approval, and (2) by the vote of a majority
of the Portfolio Trustees or by a 1940 Act majority vote of the
outstanding shares in the Portfolio.
The Administration Agreement continues as to the Fund for
a period of two years after the date the Fund became subject thereto.
After the first two years, 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 N&B Management or the Trust
("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of
the Fund Trustees or by a 1940 Act majority vote of the outstanding shares
in the Fund.
The Management Agreement is terminable with respect to
the Portfolio without penalty on 60 days' written notice either by
Managers Trust or by N&B Management. The Administration Agreement is
terminable with respect to the Fund without penalty on 60 days' written
notice either by N&B Management or by the Trust if authorized by the Fund
Trustees, including a majority of the Independent Fund Trustees. All of
the agreements discussed above will terminate automatically if they are
assigned.
In addition to the voluntary expense reimbursement
described in the Prospectus under "Management and Administration -
Expenses," N&B Management has agreed in the Management Agreement to
reimburse the Fund's expenses as follows. If, in any fiscal year, the
Fund's Aggregate Operating Expenses (as defined below) exceed the most
restrictive expense limitation imposed under the securities laws of the
states in which the Fund's shares are qualified for sale ("State Expense
Limitation"), then N&B Management will pay the Fund the amount of that
excess, less the amount of any reduction of the administration fee payable
by the Fund under a similar State Expense Limitation contained in its
Administration Agreement. N&B Management will have no obligation to pay
the Fund, however, for any expenses that exceed the pro rata portion of
the advisory fees attributable to the Fund's interest in the Portfolio.
- 45 -
<PAGE>
At the date of this SAI, the most restrictive State Expense Limitation to
which the Fund expects to be subject is 2 1/2% of the first $30 million of
average net assets, 2% of the next $70 million of average net assets, and
1 1/2% of average net assets over $100 million.
For purposes of the State Expense Limitation, the term
"Aggregate Operating Expenses" means the Fund's operating expenses plus
its pro rata portion of the Portfolio's operating expenses (including any
fees or expense reimbursements payable to N&B Management and any
compensation payable thereto pursuant to (1) the Administration Agreement
or (2) any other agreement or arrangement with Manager's Trust with
respect to the Fund, but excluding (with respect to both the Fund and the
Portfolio) interest, taxes, brokerage commissions, litigation and
indemnification expenses, and other extraordinary expenses not incurred in
the ordinary course of business).
Sub-Adviser
-----------
N&B Management retains Neuberger & Berman, 605 Third
Avenue, New York, NY 10158, as sub-adviser with respect to the Portfolio
pursuant to a sub-advisory agreement dated November 1, 1995 ("Sub-Advisory
Agreement"). The Sub-Advisory Agreement was authorized by the holders of
the interests in the Portfolio on October 25, 1995 and the Fund
shareholders on October 24, 1995.
The Sub-Advisory Agreement provides in substance that
Neuberger & Berman will furnish to N&B Management, upon reasonable
request, the same type of investment recommendations and research that
Neuberger & Berman, from time to time, provides to its partners and
employees for use in managing client accounts. In this manner, N&B
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 approximately fourteen
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 N&B Management. The Sub-Advisory
Agreement provides that the services rendered by Neuberger & Berman will
be paid for by N&B Management on the basis of the direct and indirect
costs to Neuberger & Berman in connection with those services. Neuberger
& Berman also serves as a sub-adviser for all of the other mutual funds
advised by N&B Management.
The Sub-Advisory Agreement continues for a period of two
years after the date the Portfolio became subject thereto, unless sooner
terminated, 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, by a 1940 Act majority
- 46 -
<PAGE>
vote of the outstanding Portfolio shares, by N&B 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 N&B Management employ experienced professionals that work in a
competitive environment.
Investment Companies Advised
----------------------------
N&B Management currently serves as investment manager of
the following investment companies. At August 31, 1995, these companies
had aggregate net assets of approximately $10.9 billion, as shown in the
following list:
Approximate
Net Assets at
Name August 31, 1995
---- ---------------
Neuberger & Berman Cash Reserves Portfolio . . . . . . . . $ 361,965,341
(investment portfolio for
Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Income Portfolio . . . . . . $ 11,631,394
(investment portfolio for
Neuberger & Berman Government Income
Fund and Neuberger & Berman Government
Income Trust)
Neuberger & Berman Government Money Portfolio . . . . . . $ 364,913,921
(investment portfolio for
Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio . . . . $ 308,819,349
(investment portfolio for
Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman
Limited Maturity Bond Trust)
- 47 -
<PAGE>
Neuberger & Berman Ultra Short Bond Portfolio . . . . . . . $ 88,615,663
(investment portfolio for
Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short
Bond Trust)
Neuberger & Berman Municipal Money Portfolio . . . . . . . $ 143,863,704
(investment portfolio for
Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio . . . . . $ 44,684,231
(investment portfolio for
Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured . . . . . . . . . . . . . $ 10,385,605
Intermediate Portfolio (investment
portfolio for Neuberger & Berman New York
Insured Intermediate Fund)
Neuberger & Berman Genesis Portfolio . . . . . . . . . . . . $142,160,800
(investment portfolio for Neuberger
& Berman Genesis Fund and Neuberger
& Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio . . . . . . . . . . $ 4,613,229,543
(investment portfolio for Neuberger
& Berman Guardian Fund and Neuberger
& Berman Guardian Trust)
- 48 -
<PAGE>
Approximate
Net Assets at
Name August 31, 1995
---- ---------------
Neuberger & Berman Manhattan Portfolio . . . . . . . . . $ 645,405,268
(investment portfolio for Neuberger
& Berman Manhattan Fund and Neuberger
& Berman Manhattan Trust)
Neuberger & Berman Partners Portfolio . . . . . . . . . . $ 1,623,580,624
(investment portfolio for Neuberger
& Berman Partners Fund and Neuberger
& Berman Partners Trust)
Neuberger & Berman Focus Portfolio . . . . . . . . . . . $ 969,186,733
(investment portfolio for
Neuberger & Berman Focus Fund
and Neuberger & Berman Focus
Trust)
Neuberger & Berman Socially Responsive Portfolio . . . . $ 96,747,071
(investment portfolio for
Neuberger & Berman Socially Responsive
Fund, Neuberger & Berman Socially
Responsive Trust, and Neuberger &
Berman NYCDC Socially Responsive Trust)
Neuberger & Berman Advisers Managers
Trust (six series) . . . . . . . . . . . . . . . . $ 1,231,999,335
Neuberger & Berman serves as investment adviser to three
investment companies, Plan Investment Fund, Inc., AHA Investment Fund,
Inc., and AHA Full Maturity, with assets of $87,870,957, $113,922,485, and
$21,300,990, respectively, at August 31, 1995.
The investment decisions concerning the Portfolio and the
other funds and portfolios referred to above (collectively, "Other N&B
Funds") have been and will continue to be made independently of one
another. In terms of their investment objectives, all of the Other N&B
Funds differ from the Portfolio.
There may be occasions when the Portfolio and one or more
of the Other N&B Funds or other accounts managed by Neuberger & Berman
will be contemporaneously engaged in purchasing or selling the same
securities from or to third parties. When this occurs, the transactions
- 49 -
<PAGE>
will be averaged as to price and allocated as to amounts in accordance
with a formula considered to be equitable to the funds involved. Although
in some cases this arrangement could 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 transac-
tions may produce better executions. In any case, it is the judgment of
the Portfolio Trustees that the desirability of the Portfolio's having its
advisory arrangements with N&B Management outweighs any disadvantages that
may result from contemporaneous transactions. The investment results
achieved by all of the funds advised by N&B Management have varied from
one another in the past and are likely to vary in the future.
Management and Control of N&B Management
----------------------------------------
The directors and officers of N&B Management, all of whom
have offices at the same address as N&B Management, are Richard A. Cantor,
Chairman of the Board and director; Stanley Egener, President and
director; Theresa A. Havell, Vice President and director; Irwin Lainoff,
director; Marvin C. Schwartz, director; Lawrence Zicklin, director; Daniel
J. Sullivan, Senior Vice President; Michael J. Weiner, Senior Vice
President and Treasurer; Claudia A. Brandon, Vice President; Clara Del
Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce
Haboucha, Vice President; Michael M. Kassen, Vice President; Michael
Lamberti, Vice President; Josephine P. Mahaney, Vice President; Lawrence
Marx III, Vice President; Ellen Metzger, Vice President and Secretary;
Janet W. Prindle, Vice President; Felix Rovelli, Vice President; Richard
Russell, Vice President; Kent C. Simons, Vice President; Frederick B.
Soule, Vice President; Judith M. Vale, Vice President; Margaret Didi
Weinblatt, Vice President; Stephen A. White, Vice President; Andrea
Trachtenberg, Vice President of Marketing; Patrick T. Byrne, Assistant
Vice President; Robert Conti, Assistant Vice President; Stacy Cooper-
Shugrue, Assistant Vice President; Robert Cresci, Assistant Vice
President; Barbara DiGiorgio, Assistant Vice President; Roberta D'Orio,
Assistant Vice President; Robert Gendelman, Assistant Vice President;
Leslie Holliday-Soto, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Paul Metzger, Assistant Vice President; Susan
Switzer, Assistant Vice President; Susan Walsh, Assistant Vice President;
and Celeste Wischerth, Assistant Vice President. Messrs. Cantor, Egener,
Lainoff, Schwartz, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes.
Havell and Prindle are general partners of Neuberger & Berman.
Mr. Egener is a trustee and officer of each Trust; Mr. Zicklin is
a trustee of the Trust and an officer of each Trust. Messrs. Sullivan,
Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue are officers of
each Trust. C. Carl Randolph, a general partner of Neuberger & Berman,
also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also general partners of Neuberger & Berman.
- 50 -
<PAGE>
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor")
in connection with the offering of the Fund's shares on a no-load basis.
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 either personally, through the mails, or by electronic
means. The Distributor is the Fund's "principal underwriter" within the
meaning of the 1940 Act and, as such, acts as agent in arranging for the
sale of the Fund's shares without sales commission or other compensation
and bears all advertising and promotion expenses incurred in the sale of
the Fund's shares.
The Trust, on behalf of the Fund, and the Distributor are
parties to a Distribution Agreement dated June 15, 1994, that continues
until August 2, 1996. The Distribution Agreement may be renewed annually
thereafter 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
automatically terminate on its assignment, in the same manner as the
Management Agreement.
The Distributor or one of its affiliates may from time to
time deem it desirable to offer to the Fund's shareholders, through use of
its shareholder list, the shares of other mutual funds for which the
Distributor acts as distributor or other products or services. Any such
use of the Fund's shareholder lists, however, will be made subject to
terms and conditions, if any, approved by a majority of the Independent
Fund Trustees. These lists will not be used to offer the Fund's
shareholders any investment products or services other than those managed
or distributed by N&B Management or Neuberger & Berman.
ADDITIONAL PURCHASE INFORMATION
Automatic Investing and Dollar Cost Averaging
---------------------------------------------
Shareholders may arrange to have a fixed amount automa-
tically invested in Fund shares each month. To do so, a shareholder must
complete an application, available from the Distributor, electing to have
automatic investments funded either through (1) redemptions from his or
her account in a money market fund for which N&B Management serves as
investment manager (subject to a minimum monthly investment of $100) or
(2) withdrawals from the shareholder's checking account (in which case the
minimum monthly investment is $50). A shareholder who elects to parti-
- 51 -
<PAGE>
cipate in automatic investing through his or her checking account must
include a voided check with the completed application.
Automatic investing enables a shareholder to take advan-
tage of "dollar cost averaging." As a result of dollar cost averaging, a
shareholder's average cost of Fund shares generally would be lower than it
would be if the shareholder purchased a fixed number of shares at pre-set
intervals. Additional information on dollar cost averaging may be
obtained from the Distributor.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus
entitled "Shareholder Services -- Exchange Privilege," shareholders may
redeem at least $1,000 worth of Fund shares and invest the proceeds in
shares of one or more of the Other N&B Funds that are briefly described
below, provided that the minimum investment requirements of the other
fund(s) are met.
<TABLE>
<CAPTION>
EQUITY FUNDS
------------
<S> <C>
Neuberger & Berman Seeks capital appreciation through investments primarily in common
Genesis Fund stocks of companies with small market capitalization, up to $750
million. The fund uses a value-oriented approach to the selection of
individual securities.
Neuberger & Berman Seeks capital appreciation through investments generally in a large
Guardian Fund number of common stocks of long-established, high quality companies that
N&B Management believes are well-managed. The fund uses a value-
oriented approach to the selection of individual securities. Current
income is a secondary objective. The fund has paid its shareholders an
income dividend every quarter, and a capital gain distribution every
year, since its inception in 1950, although there can be no assurance
that it will be able to continue to do so.
- 52 -
<PAGE>
EQUITY FUNDS
------------
Neuberger & Berman Seeks capital appreciation, without regard to income, through
Manhattan Fund investments principally in securities that N&B Management believes offer
a potential for long-term capital appreciation. The fund's policy of
investing, through its corresponding portfolio, in securities believed
to have a maximum potential for growth means that its assets generally
will be subject to greater risk than may be involved in investing in
securities that do not have those growth characteristics.
Neuberger & Berman Seeks capital growth through an investment approach that is designed to
Partners Fund increase capital with reasonable risk. Through its corresponding
portfolio, the fund seeks securities believed to be undervalued based on
strong fundamentals such as low price-to-earnings ratios, consistent
cash flow and support from asset values. It is a conservative growth
fund which uses the value-oriented investment approach.
Neuberger & Berman Seeks long-term capital appreciation through investments primarily in
Focus Fund common stocks selected from 13 economic sectors. N&B Management
identifies and focuses the corresponding portfolio's investments in a
limited number of these sectors by using a value-oriented approach to
the selection of individual stocks. Through this approach, 90% or more
of its investments are normally made in common stocks selected from not
more than six sectors.
Neuberger & Berman Seeks long-term capital appreciation through investments primarily in
Socially Responsive securities of companies that meet both financial and social criteria.
Fund
INCOME FUNDS
------------
- 53 -
<PAGE>
EQUITY FUNDS
------------
Neuberger & Berman A U.S. Government securities money market fund seeking maximum safety
Government Money Fund and liquidity and the highest available current income. The fund,
through its corresponding portfolio, invests only in U.S. Treasury obli-
gations and other money market instruments backed by the full faith and
credit of the United States. It seeks to maintain a constant purchase
and redemption price of $1.00.
Neuberger & Berman A money market fund seeking the highest current income consistent with
Cash Reserves safety and liquidity. The fund, through its corresponding portfolio,
invests in a diversified portfolio of high quality money market instru-
ments. It seeks to maintain a constant purchase and redemption price of
$1.00.
Neuberger & Berman Seeks a higher total return than is available from money market funds,
Ultra Short Bond Fund with minimal risk to principal and liquidity. The fund, through its
corresponding portfolio, invests in a diversified portfolio consisting
of high quality money market instruments and short-term debt securities.
Neuberger & Berman Seeks the highest current income consistent with low risk to principal
Limited Maturity Bond Fund and liquidity and, secondarily, total return. The fund, through its
corresponding portfolio, invests in a diversified portfolio of short- to
intermediate-term debt securities of at least investment grade.
Neuberger & Berman Government Seeks a high level of current income and total return, consistent with
Income Fund safety of principal. At least 65% of the corresponding portfolio's
investments are in U.S. Government securities that are issued or
guaranteed as to principal and interest by the U.S. Government or its
agencies, including U.S. Government mortgage-backed securities; at least
25% of its investments are in mortgage-backed and asset-backed securi-
ties.
- 54 -
<PAGE>
EQUITY FUNDS
------------
MUNICIPAL FUNDS
---------------
Neuberger & Berman A money market fund seeking the maximum current income exempt from
Municipal Money Fund federal income tax consistent with safety and liquidity. The fund,
through its corresponding portfolio, invests in high quality, short-term
tax-exempt municipal securities. It seeks to maintain a constant
purchase and redemption price of $1.00.
Neuberger & Berman A short- to intermediate-term bond fund seeking high current tax-exempt
Municipal Securities Trust income with low risk to principal, limited price fluctuation, and
liquidity and, secondarily, total return. The fund, through its
corresponding portfolio, invests in municipal securities rated A or
better.
Neuberger & Berman An intermediate-term bond fund which seeks a high level of current
New York Insured income exempt from federal income tax and New York State and New York
Intermediate Fund City personal income taxes, consistent with preservation of capital.
</TABLE>
The Fund and any of the Other N&B Funds may terminate or
modify their exchange privilege in the future.
Fund shareholders who are considering exchanging shares
into one of the funds listed above should note that (1) the Income and
Municipal Funds listed above are series of a Delaware business trust
(named "Neuberger & Berman Income Funds") that is registered with the SEC
as an open-end management investment company, (2) like the Fund, the
Equity Funds listed above are series of the Trust, (3) each series of
Neuberger & Berman Income Funds invests all its net investable assets in a
portfolio of Income Managers Trust, an open-end management investment
company managed by N&B Management, and (4) each such other series of the
Trust invests all of its net investable assets in a portfolio of Equity
Managers Trust, also an open-end management investment company managed by
N&B Management. Each such portfolio has an investment objective identical
to that of its corresponding fund and invests in accordance with invest-
ment policies identical to those of that fund.
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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. In this regard, it should be noted that
the Income and Municipal Funds share a prospectus, except for the
Neuberger & Berman New York Insured Intermediate Fund which has its own
prospectus; and the Equity Funds share a prospectus. An exchange is
treated as a sale for federal income tax purposes and, depending on the
circumstances, a short- or long-term capital gain or loss may be realized.
There can be no assurance that Neuberger & Berman Govern-
ment Money Fund, Neuberger & Berman Cash Reserves, or Neuberger & Berman
Municipal Money Fund, each of which is a money market fund that seeks to
maintain a constant purchase and redemption price of $1.00, will be able
to maintain that price. An investment in any of those funds, or in any
other mutual fund, is neither insured nor guaranteed by the U.S.
Government.
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
(other than weekend and holiday closings), (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; provided that applicable SEC rules and regulations shall
govern as to 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, totalling $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 "Account and Share
Information -- Share Prices and Net Asset Value" in the Prospectus. If
payment is made in securities, a shareholder generally will incur
brokerage expenses in converting those securities into cash and will be
subject to fluctuations in the market price 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 determine that it would be in the
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best interests of the Fund's shareholders as a whole. Redemptions in kind
will be made with readily marketable securities to the extent possible.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders amounts equal to
substantially all of its proportionate share of the Portfolio's net
investment income (after deducting expenses incurred directly by the Fund)
and net capital gains (both long-term and short-term), if any, and gains
from foreign currency transactions, if any. 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).
The Portfolio's net investment income consists of all
income accrued on portfolio assets less accrued expenses. 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. Realized gains
and losses are not included in net investment income. Dividends from net
investment income and distributions of net realized capital and foreign
currency gains, if any, normally are paid once annually, in December.
Dividends and/or other distributions, if any, are
automatically reinvested in additional shares of the Fund, unless and
until the shareholder elects to receive them in cash ("cash election").
Shareholders may make a cash election on the original account application
or at a later date by writing to State Street Bank and Trust Company
("State Street"), c/o Boston Service Center, P.O. Box 8403, Boston, MA
02266-8403. 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 remains in effect until the shareholder
notifies State Street in writing to discontinue the election. If it is
determined, however, that the U.S. Postal Service cannot properly deliver
Fund mailings to the shareholder, the Fund will terminate the
shareholder's cash election. Thereafter, the shareholder's dividends and
other distributions will be automatically reinvested in additional Fund
shares until the shareholder notifies State Street or the Fund in writing
of his or her correct address and requests in writing that the cash
election be reinstated.
ADDITIONAL TAX INFORMATION
Taxation of the Fund
--------------------
In order to continue to qualify for treatment as a regu-
lated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended ("Code"), the Fund must distribute to its shareholders for each
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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 require-
ments. 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 options, futures and forward contracts
(collectively, "Financial Instruments")) derived with respect to its
business of investing in securities or those currencies ("Income Require-
ment"); (2) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of securities, or any of
the following, that were held for less than three months -- Financial
Instruments (other than those on foreign currencies), or foreign
currencies (or Financial Instruments thereon) that are not directly
related to the Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short-Short Limitation"); and
(3) 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, 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 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) of any one issuer.
Certain funds, including the other series of the Trust
(except Neuberger & Berman Socially Responsive Fund), that invest in
portfolios of Equity Managers Trust and Income Managers Trust --
investment companies that are managed by N&B Management and are similar to
Managers Trust -- have received rulings from the Internal Revenue Service
("Service") that each such fund, as an investor in a portfolio with an
identical investment objective, 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, N&B Management believes that the reasoning thereof, and hence this
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 ending on October 31 of
that year, plus certain other amounts.
See the next section for a discussion of the tax conse-
quences to the Fund of distributions to it from the Portfolio, investments
in certain securities and hedging transactions engaged in by the
Portfolio.
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<PAGE>
Taxation of the Portfolio
-------------------------
Certain portfolios of Equity Managers Trust and Income
Managers Trust have received rulings from the Service to the effect that,
among other things, each such portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as
precedent by the Portfolio, N&B Management believes the reasoning thereof,
and hence this conclusion, apply to the Portfolio as well. As a result,
the Portfolio is not subject to federal income tax; instead, each investor
in the Portfolio, such as the Fund, is required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses, deductions, credits, and tax preference items,
without regard to whether it has received any cash distributions from the
Portfolio. The Portfolio also is not subject to Delaware or New York
income or franchise tax.
Because the Fund is deemed to own a proportionate share
of the Portfolio's assets and income for purposes of determining whether
the Fund satisfies the requirements to qualify as a RIC, the Portfolio
intends to continue to conduct its operations so that the Fund will be
able to continue to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result
in the Fund's recognition of any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent any cash
that is distributed exceeds the Fund's basis for its interest in the
Portfolio before the distribution, (2) income or gain will be recognized
if the distribution is in liquidation of the Fund's entire interest in the
Portfolio and includes a disproportionate share of any unrealized
receivables held by the Portfolio, and (3) loss will be recognized if a
liquidation distribution consists solely of cash and/or unrealized
receivables. The Fund's basis for its interest in the Portfolio generally
will equal the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's
net income and gains and decreased by (a) the amount of cash and the basis
of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.
Dividends and interest received by the Portfolio may be
subject to income, withholding, or other taxes imposed by foreign
countries and U.S. possessions that would reduce the yield on its
securities. Tax conventions 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. If more than 50% of the value of the
Fund's total assets (including its share of the Portfolio's total assets)
at the close of its taxable year consists of securities of foreign corpo-
rations, the Fund will be eligible to, and may, file an election with the
Service that will enable its shareholders, in effect, to receive the
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benefit of the foreign tax credit with respect to any foreign and U.S.
possessions income taxes paid by the Portfolio that are treated as paid by
the Fund. Pursuant to the election, the Fund will treat those taxes as
dividends paid to its shareholders and each shareholder will be required
to (1) include in gross income, and treat as paid by such taxpayer, his or
her proportionate share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents income
from foreign or U.S. possessions sources as his or her own income from
those sources and (3) either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his or her
federal income tax. The Fund will report to its shareholders shortly
after each taxable year their respective shares of the income from sources
within, and taxes paid to, foreign countries and U.S. possessions if it
makes this election.
The Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation that, in
general, meets either of the following tests: (1) at least 75% of its
gross income is passive or (2) an average of at least 50% of its assets
produce, or are held for the production of, passive income. Under certain
circumstances, if the Portfolio holds stock of a PFIC, the Fund
(indirectly through its interest in the Portfolio) will be subject to
federal income tax on a portion of any "excess distribution" received on
the stock or of any gain on disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in the Fund's 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," 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 pro rata share of the
Portfolio's pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which most likely would
have to be distributed by the Fund to satisfy the Distribution Requirement
and to avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Portfolio. In most instances it will be
very difficult, if not impossible, to make this election because of
certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as
the Fund, would be entitled to elect to mark to market their stock in
certain PFICs. Marking to market, in this context, means recognizing as
gain for each taxable year the excess, as of the end of that year, of the
fair market value of each such PFIC's stock over the adjusted basis in
that stock (including mark to market gain for each prior year for which an
election was in effect).
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<PAGE>
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 character and timing of recognition
of the gains and losses it realizes in connection therewith. Income from
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in 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. However, income from the dispo-
sition by the Portfolio of Financial Instruments (other than those on
foreign currencies) will be subject to the Short-Short Limitation for the
Fund if they are held for less than three months. Income from the
disposition of foreign currencies, and Financial Instruments thereon, that
are not directly related to the Portfolio's principal business of
investing in securities (or options and futures with respect thereto) also
will be subject to the Short-Short Limitation for the Fund if they are
held for less than three months.
If the Portfolio satisfies certain requirements, any
increase in value of a position that is part of a "designated hedge" will
be offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of the hedge for purposes of
determining whether the Fund satisfies the Short-Short Limitation. Thus,
only the net gain (if any) from the designated hedge will be included in
gross income for purposes of that limitation. The Portfolio will consider
whether it should seek to qualify for this treatment for its hedging
transactions. To the extent the Portfolio does not so qualify, it may be
forced to defer the closing out of certain Financial Instruments beyond
the time when it otherwise would be advantageous to do so, in order for
the Fund to continue to qualify as a RIC.
Exchange-traded futures contracts and listed options
thereon ("Section 1256 contracts") are required to be marked to market
(that is, treated as having been sold at market value) at the end of the
Portfolio's taxable year. Sixty percent of any 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.
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. Investors also should be aware that if Fund
shares are purchased shortly before the record date for a dividend or
other distribution, the purchaser will receive some portion of the
purchase price back as a taxable distribution.
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The Fund is required to withhold 31% of all dividends,
capital gain distributions, and redemption proceeds payable to any
individuals and certain other non-corporate shareholders who do not
provide the Fund with a correct taxpayer identification number.
Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to
backup withholding.
As described under "How to Sell Shares" in the
Prospectus, the Fund may close a shareholder's account with the Fund and
redeem the remaining shares if the account balance falls below the
specified minimum and the shareholder fails to reestablish the minimum
balance after being given the opportunity to do so. If an account that is
closed pursuant to the foregoing was maintained for an individual
retirement account or a qualified retirement plan (including a simplified
employee pension plan, self-employed individual retirement plan (so-called
"Keogh plan"), corporate profit-sharing and money purchase pension plan,
Code section 401(k) plan, and Code section 403(b)(7) account), the Fund's
payment of the redemption proceeds to the accountholder may result in
adverse tax consequences for the accountholder. The accountholder should
consult his or her tax adviser regarding any such consequences.
PORTFOLIO TRANSACTIONS
Neuberger & Berman and BNP-International Financial
Services Corporation ("BNP-International"), a wholly-owned subsidiary of
BNP and an affiliate of an affiliate of Neuberger & Berman, may act as the
Portfolio's broker in the purchase and sale of portfolio securities and
the purchase and sale of options on its securities. Neuberger & Berman
acts as the principal broker in the purchase and sale of the portfolio
securities of other portfolios managed by N&B Management. Transactions in
portfolio securities for which Neuberger & Berman, BNP-International, or
any other affiliate serves as broker will be effected in accordance with
Rule 17e-1 under the 1940 Act.
For the fiscal year ended August 31, 1995 and for the
period June 15, 1994 (commencement of operations) through August 31, 1994,
the Portfolio paid brokerage commissions of $128,324 and $24,554,
respectively. During those periods, the Portfolio paid commissions of
$4,110 and $330, respectively, to Neuberger & Berman and $0 and $0,
respectively, to BNP-International. During the fiscal year ended August
31, 1995, transactions in which the Portfolio used Neuberger & Berman as
broker comprised 5.22% of the aggregate dollar amount of transactions
involving the payment of commissions, and 3.20% of the aggregate brokerage
commissions. During the fiscal year ended August 31, 1995, transactions in
which the Portfolio used BNP-International as broker comprised 0% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 0% of the aggregate brokerage commissions. Of the
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$124,214 paid to other brokers by the Portfolio during the fiscal year
ended August 31, 1995, $99,897 (representing commissions on transactions
involving approximately $24,688,049) was directed to those brokers because
of research services they provided. During that period, the Portfolio
acquired securities of the following of its "regular brokers or dealers"
(as defined in the 1940 Act) ("Regular B/Ds"): HSBC Securities, Inc.,
Nomura Securities International, and Kleinwort Benson North America Inc.;
as of August 31, 1995, the Portfolio held the securities of its Regular
B/Ds with an aggregate value as follows: HSBC Securities, Inc., $150,471.
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. That order exempts such
transactions from certain provisions of the 1940 Act which would otherwise
prohibit such transactions, subject to certain conditions. Among the
conditions of the order, securities loans made by the Portfolio to
Neuberger & Berman must be fully secured by cash collateral. Under the
order, the portion of the income on cash collateral from securities loans
involving Neuberger & Berman which may be shared with that firm is
determined with reference to the concurrent arrangements between Neuberger
& Berman and other non-affiliated lenders with which it engages in similar
transactions. In addition, where Neuberger & Berman borrows securities
from the Portfolio in order to relend them to others, Neuberger & Berman
is required to pay over to the Portfolio, on a quarterly basis, certain
"excess earnings" that Neuberger & Berman otherwise has derived from the
relending of the borrowed securities. When Neuberger & Berman desires to
borrow a security which the Portfolio has indicated a willingness to lend,
Neuberger & Berman must borrow such security from the Portfolio, rather
than from an unaffiliated lender, unless an unaffiliated lender is willing
to lend such security on more favorable terms (as specified in the order)
than the Portfolio. If the Portfolio's expenses exceed its income in any
securities loan transaction with Neuberger & Berman, Neuberger & Berman
must reimburse the Portfolio for such loss.
During the period ended August 31, 1994 and the fiscal
year ended August 31, 1995, the Portfolio earned no interest income from
the collateralization of securities loans.
The Portfolio may also lend securities to unaffiliated
entities, including brokers or dealers, banks and other recognized
institutional borrowers of securities, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the securities
loaned, is continuously maintained by the borrower with the Portfolio.
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; the Portfolio may invest the cash collateral and earn income,
or it may receive an agreed upon amount of interest income from the
borrower who has delivered equivalent collateral. 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
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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.
A committee of Independent Portfolio Trustees has been
appointed to review from time to time, among other things, information
relating to securities loans by the Portfolio.
In effecting securities transactions, the Portfolio gen-
erally 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 may use Neuberger & Berman and BNP-
International as its brokers where, in the judgment of N&B Management
(which is an affiliate of the brokers), these firms are able to obtain a
price and execution at least as favorable as other qualified brokers. To
the Portfolio's knowledge, however, no affiliate of the Portfolio receives
give-ups or reciprocal business in connection with its securities
transactions.
The use of Neuberger & Berman or other affiliates as
brokers 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 in situations where they have the authorization of the persons
authorized to transact business for the account and comply with certain
annual reporting requirements. The Portfolio Trustees have expressly
authorized Neuberger & Berman and other affiliates to retain such
compensation, and Neuberger & Berman and other affiliates comply with the
reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to
Neuberger & Berman and BNP-International in connection with a purchase or
sale of securities offered on a securities exchange may not exceed the
usual and customary broker's commission. Accordingly, it is the
Portfolio's policy that the commissions to be paid to Neuberger & Berman
and BNP-International must, in N&B Management's judgment, be (1) at least
as favorable as those that would be charged by other brokers having
comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by Neuberger & Berman or BNP-
International, respectively, on comparable transactions for their most
favored unaffiliated customers, except for accounts for which Neuberger &
Berman or BNP-International acts as a clearing broker for another bro-
kerage 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
interest to solicit competitive bids for commissions on each transaction
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<PAGE>
effected by Neuberger & Berman or BNP-International. 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 or BNP-International from acting as principal in the
purchase or sale of securities for the Portfolio's account, 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.
The Portfolio expects that it will continue to execute
transactions through brokers other than Neuberger & Berman and BNP-
International Financial Services Corporation. In selecting those brokers,
N&B Management will consider the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider the research and other investment
information provided by, and sale of Fund shares effected through, those
brokers.
A committee comprised of officers of N&B Management and
partners of Neuberger & Berman who are portfolio managers of the Portfolio
and/or Other N&B Funds (collectively, "N&B 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 ranking 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 N&B 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 or research capabilities of particular
brokers, or in the execution or research needs of the N&B Funds and/or the
Managed Accounts; and (3) the aggregate amount of brokerage commissions
generated by transactions for the N&B Funds and the Managed Accounts may
change substantially from one semi-annual period to the next.
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The commissions charged by a broker other than Neuberger
& Berman or BNP-International Financial Services Corporation may be
greater than the amount another firm might charge if N&B 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. N&B Management believes that those research
services provide the Portfolio with benefits by supplementing the research
otherwise available to it. That research may be used by N&B Management in
servicing Other N&B Funds and, in some cases, by Neuberger & Berman in
servicing the Managed Accounts. On the other hand, research information
received by N&B Management from brokers effecting portfolio transactions
on behalf of Other N&B Funds and by Neuberger & Berman from brokers
effecting portfolio transactions on behalf of the Managed Accounts may be
used for the Portfolio's benefit.
Felix Rovelli, a Vice President of N&B Management, is the
person primarily responsible for making decisions as to specific action to
be taken with respect to the Portfolio. He has full authority to take
action with respect to portfolio transactions and may or may not consult
with other personnel of N&B Management prior to taking such action. If
Mr. Rovelli is unavailable to perform his responsibilities, Robert Cresci,
who is an Assistant Vice President of N&B Management, will assume
responsibility for the International Portfolio.
Portfolio Turnover
------------------
The portfolio turnover rate is the lesser of the cost of
the securities purchased or the value of the securities sold, excluding
all securities, including options, whose maturity or expiration date at
the time of acquisition was one year or less, divided by the average
monthly value of such securities owned during the year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual
financial statements and audited year-end financial statements certified
by the Fund's independent auditors. 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.
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
their securities and cash. All correspondence should be mailed to
Neuberger & Berman Funds, c/o Boston Service Center, P.O. Box 8403,
Boston, MA 02266-8403. That company also serves as the Fund's transfer
agent and shareholder servicing agent, administering purchases,
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redemptions, and transfers of Fund shares and the payment of dividends and
other distributions through its Boston Service Center. State Street
Cayman Trust Company serves as transfer agent to the Portfolio.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected Ernst & Young LLP,
200 Clarendon Street, Boston, Massachusetts, and Ernst & Young, Shedden
Road, George Town, Grand Cayman, Cayman Islands, respectively, as the
independent auditors who will audit their financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick &
Lockhart LLP, 1800 M Street, N.W., Washington, D.C. 20036, as their legal
counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and
percentage of ownership of each person who owned of record, or who was
known by the Fund to own beneficially or of record, 5% or more of the
Fund's outstanding shares at October 13, 1995:
Name and Address Percentage Ownership
--------------- --------------------
Town of Cheshire Retirement Plan 14.92%
Town of Cheshire
84 South Main St.
Cheshire, CT 06410-3108
Attn: Director of Finance
Neuberger & Berman* 7.55%
605 Third Avenue
New York, NY 10158-3698
Charles Schwab & Co., Inc.* 7.79%
101 Montgomery Street
San Francisco, CA 94104-4122
* Charles Schwab & Co., Inc. and Neuberger & Berman hold these
shares of record for the accounts of certain of their clients and
have informed the Funds of their policy to maintain the
- 67 -
<PAGE>
confidentiality of holdings in their client accounts unless
disclosure is expressly required by law.
At September 30, 1995, the trustees and officers of the
Trusts, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the Fund.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the infor-
mation included in the Trust's registration statement filed with the SEC
under the 1933 Act with respect to the securities offered by the
Prospectus. Certain portions of the registration statement have been
omitted pursuant to SEC rules and regulations. 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, and in each instance reference is made to the copy
of the contract or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.
FINANCIAL STATEMENTS
The following financial statements and related documents
are incorporated herein by reference from the Fund's Annual Report to
Shareholders for the fiscal year ended August 31, 1995: the audited
financial statements of the Fund and Portfolio and notes thereto for the
fiscal year ended August 31, 1995, and the reports of Ernst & Young LLP
and Ernst & Young, independent auditors for the Fund and Portfolio,
respectively, with respect to such audited financial statements.
- 68 -
<PAGE>
Appendix A
RATINGS OF SECURITIES
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 categories.
Moody's corporate bond ratings:
------------------------------
Aaa - Bonds rated Aaa are judged to be of the best qual-
ity. 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
A-1
<PAGE>
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 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
A-2
<PAGE>
modifier 3 indicates that the issuer ranks in the lower end of its generic
rating category.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with a plus
sign (+).
Moody's commercial paper ratings
Issuers rated Prime-1 (or related supporting
institutions), also known as P-1, have a superior capacity for repayment
of short-term promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
- Well-established access to a range of financial
markets and assured sources of alternate
liquidity.
A-3
<PAGE>
NEUBERGER & BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 71 ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
------- ---------------------------------
(a) Financial Statements:
The audited financial statements contained in the Annual Report
to Shareholders of Neuberger & Berman International Fund for the
fiscal year ended August 31, 1995, with respect to Neuberger &
Berman International Fund and the International Portfolio of
Global Managers Trust, and the reports of the independent
auditors are incorporated into the Statement of Additional
Information by reference.
Included in Part A of this Post-Effective Amendment:
FINANCIAL HIGHLIGHTS for Neuberger &
Berman International Fund for the
periods indicated therein.
(b) Exhibits:
Exhibit
Number Description
------- -----------
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-
582, Edgar Accession No. 0000898342-95-
000314.
(b) Trust Instrument of Neuberger & Berman
Equity Funds. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582. Edgar
Accession No. 0000898342-95-000314.
(c) Schedule A - Current Series of Neuberger
& Berman Equity Funds. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-
C-1
<PAGE>
582, Edgar Accession No. 0000898342-95-
000314.
(2) By-laws of Neuberger & Berman Equity
Funds. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898342-95-000314.
(3) Voting Trust Agreement. None.
(4) Specimen Share Certificate.
Incorporated by Reference to Post-
Effective Amendment No. 66 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(5) (a) (i) Management Agreement Between
Equity Managers Trust and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective
Amendment No. 70 to Registrant's
Registration Statement, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898342-95-
000314.
(ii) Schedule A - Series of Equity
Managers Trust Currently Subject
to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(iii) Schedule B - Schedule of
Compensation Under the
Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(b) (i) Sub-Advisory Agreement Between
Neuberger & Berman Management
Incorporated and Neuberger &
C-2
<PAGE>
Berman, L.P. with Respect to
Equity Managers Trust.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(ii) Schedule A - Series of Equity
Managers Trust Currently Subject
to the Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(c) (i) Form of Management Agreement
Between Global Managers Trust
and Neuberger & Berman
Management Incorporated. Filed
herewith.
(ii) Form of Schedule A - Series of
Global Managers Trust Subject to
the Management Agreement. Filed
herewith.
(iii) Form of Schedule B - Schedule of
Compensation Under the
Management Agreement. Filed
herewith.
(d) (i) Form of Sub-Advisory Agreement
Between Neuberger & Berman
Management Incorporated and
Neuberger & Berman, L.P. with
Respect to Global Managers
Trust. Filed herewith.
(ii) Form of Schedule A - Series of
Global Managers Trust Subject to
the Sub-Advisory Agreement.
Filed herewith.
(6) (a) Distribution Agreement Between Neuberger
& Berman Equity Funds and Neuberger &
Berman Management Incorporated.
Incorporated by Reference to Post-
Effective Amendment No. 70 to
C-3
<PAGE>
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898342-95-000314.
(b) Schedule A - Series of Neuberger &
Berman Equity Funds Currently Subject to
the Distribution Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898342-95-000314.
(7) Bonus, Profit Sharing or Pension Plans.
None.
(8) (a) Custodian Contract Between Neuberger &
Berman Equity Funds and State Street
Bank and Trust Company. Filed herewith.
(b) Form of Schedule A - Approved Foreign
Banking Institutions and Securities
Depositories Under the Custodian
Contract. Filed herewith.
(c) Schedule B - Approved Foreign Banking
Institutions and Securities Depositories
under the Custodian Contract with
Respect to Neuberger & Berman
International Fund. To be filed by
Amendment.
(9) (a) (i) Transfer Agency Agreement
Between Neuberger & Berman
Equity Funds and State Street
Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(ii) Agreement Between Neuberger &
Berman Equity Funds and State
Street Bank and Trust Company
Adding Neuberger & Berman
International Fund as a
Portfolio Governed by the
Transfer Agency Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70
C-4
<PAGE>
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(iii) First Amendment to Transfer
Agency and Service Agreement
Between Neuberger & Berman
Equity Funds and State Street
Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(b) (i) Administration Agreement Between
Neuberger & Berman Equity Funds
and Neuberger & Berman
Management Incorporated.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(ii) Schedule A - Series of Neuberger
& Berman Equity Funds Subject to
the Administration Agreement.
Filed herewith.
(iii) Schedule B - Schedule of
Compensation Under the
Administration Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70
to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898342-95-000314.
(10) Opinion and Consent of Kirkpatrick &
Lockhart LLP on Securities Matters.
Incorporated by Reference to Post-
Effective Amendment No. 66 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(11) (a) Consent of Ernst & Young LLP,
Independent Auditors. Filed herewith.
C-5
<PAGE>
(b) Consent of Ernst & Young, Independent
Auditors. Filed herewith.
(12) Financial Statements Omitted from
Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance
Quotations. Incorporated by Reference
to Post-Effective Amendments Nos. 61 and
67 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-
582.
(17) Financial Data Schedule. Filed
herewith.
(18) Plan Pursuant to Rule 18f-3. None.
C-6
<PAGE>
Item 25. Persons Controlled By or Under Common Control with
Registrant.
------- ---------------------------------------------------
No person is controlled by or under common control with
the Registrant. (Registrant is organized in a master fund/feeder fund
structure, and technically may be considered to control the master fund in
which it invests, Global Managers Trust.)
Item 26. Number of Holders of Securities.
------- -------------------------------
The following information is given as of September 29,
1995.
Number of
Title of Class Record Holders
-------------- --------------
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Focus Fund 33,513
Neuberger & Berman Genesis Fund 7,035
Neuberger & Berman Guardian Fund 115,607
Neuberger & Berman International Fund 1,995
Neuberger & Berman Manhattan Fund 45,995
Neuberger & Berman Partners Fund 54,265
Neuberger & Berman Socially Responsive Fund 627
Item 27. 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 in
connection with any claim, action, suit or proceeding ("Action") in which
he becomes involved as a party or otherwise by virtue of his being or
having been a Covered Person and against amounts paid or incurred by him
in 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 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
C-7
<PAGE>
("Independent Trustees"), nor 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
being or having been a shareholder and not because of his acts or
omissions or for some other reason, the present or former shareholder (or
his heirs, executors, administrators or other legal representatives or in
the case of any entity, its general successor) shall be entitled out of
the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The
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 Agreement between Global
Managers Trust ("Managers Trust") and Neuberger & Berman Management
Incorporated ("N&B Management") provides that neither N&B Management nor
any director, officer or employee of N&B Management performing services
for the series of Managers Trust at the direction or request of N&B
Management in connection with N&B Management's discharge of its
obligations under the Agreement 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 Agreement relates; provided, that nothing in the
Agreement shall be construed (i) to protect N&B Management against any
liability to Managers Trust or any series thereof or its interest holders
to which N&B 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 N&B Management's reckless disregard of its
obligations and duties under the Agreement, or (ii) to protect any
director, officer or employee of N&B Management who is or was a trustee or
officer of Managers Trust against any liability to Managers Trust or any
series thereof or its 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 Managers Trust.
Section 1 of the Sub-Advisory Agreement between N&B
Management and Neuberger & Berman, L.P. ("Neuberger & Berman") with
respect to Managers Trust 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
Agreement, Neuberger & Berman will not be subject to any liability for any
act or omission or any loss suffered by any series of Managers Trust or
its interest holders in connection with the matter to which the Agreement
relates.
Section 12 of the Administration Agreement between the
Registrant and N&B Management provides that N&B Management will not be
C-8
<PAGE>
liable to the Registrant for any action taken or omitted to be taken by
N&B Management or its employees, agents or contractors in carrying out the
provisions of the Agreement if such action was taken or omitted in good
faith and without negligence or misconduct on the part of N&B Management,
or its employees, agents or contractors. Section 13 of the Administration
Agreement provides that the Registrant shall indemnify N&B Management and
hold it harmless from and against any and all losses, damages and
expenses, including reasonable attorneys' fees and expenses, incurred by
N&B Management that result from: (i) any claim, action, suit or
proceeding in connection with N&B Management's entry into or performance
of the Agreement; or (ii) any action taken or omission to act committed by
N&B Management in the performance of its obligations under the Agreement;
or (iii) any action of N&B Management upon instructions believed in good
faith by it to have been executed by a duly authorized officer or
representative of a Series; provided, that N&B Management will not be
entitled to such indemnification in respect of actions or omissions
constituting negligence or misconduct on the part of N&B Management, or
its employees, agents or contractors. Amounts payable by the Registrant
under this provision shall be payable solely out of assets belonging to
that Series, and not from assets belonging to any other Series of the
Registrant. Section 14 of the Administration Agreement provides that N&B
Management will indemnify the Registrant and hold it harmless from and
against any and all losses, damages and expenses, including reasonable
attorneys' fees and expenses, incurred by the Registrant that result from:
(i) N&B Management's failure to comply with the terms of the Agreement; or
(ii) N&B Management's lack of good faith in performing its obligations
under the Agreement; or (iii) the negligence or misconduct of N&B
Management, or its employees, agents or contractors in connection with the
Agreement. The Registrant shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or misconduct
on the part of the Registrant or its employees, agents or contractors
other than N&B Management, unless such negligence or misconduct results
from or is accompanied by negligence or misconduct on the part of N&B
Management, any affiliated person of N&B Management, or any affiliated
person of an affiliated person of N&B Management.
Section 11 of the Distribution Agreement between the
Registrant and N&B Management provides that N&B 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 1933 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
C-9
<PAGE>
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 28. 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 N&B Management and each partner 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.
C-10
<PAGE>
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
------------------ -------------------------------------------------------
<S> <C>
Claudia A. Brandon Secretary, Neuberger & Berman Advisers Management Trust
Vice President, N&B (Delaware business trust); Secretary, Advisers Managers
Management Trust; Secretary, Neuberger & Berman Advisers Management
Trust (Massachusetts business trust) (1); Secretary,
Neuberger & Berman Income Funds; Secretary, Neuberger &
Berman Income Trust; Secretary, Neuberger & Berman Equity
Funds; Secretary, Neuberger & Berman Equity Trust;
Secretary, Income Managers Trust; Secretary, Equity
Managers Trust; Secretary, Global Managers Trust;
Secretary, Neuberger & Berman Equity Assets.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust); Assistant
N&B Management Secretary, Advisers Managers Trust; Assistant Secretary,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); 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.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global Asset
Assistant Vice President, Management L.P. (joint venture of Neuberger & Berman and
N&B Management Banque Nationale de Paris) (2); Assistant Portfolio
Manager, Vontobel (Swiss Bank) (3).
Stanley Egener Chairman of the Board and Trustee, Neuberger & Berman
President and Director, Advisers Management Trust (Delaware business trust);
N&B Management; General Partner, Chairman of the Board and Trustee, Advisers Managers
Neuberger & Berman Trust; Chairman of the Board and Trustee, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); Chairman of the Board and Trustee,
Neuberger & Berman Income Funds; Chairman of the Board
and Trustee, Neuberger & Berman Income Trust; Chairman of
the Board and Trustee, Neuberger & Berman Equity Funds;
Chairman of the Board and Trustee, Neuberger & Berman
Equity Trust; Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and Trustee, Equity
Managers Trust; Chairman of the Board and Trustee, Global
Managers Trust; Chairman of the Board and Trustee,
Neuberger & Berman Equity Assets.
C-11
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
------------------ -------------------------------------------------------
<S> <C>
Robert I. Gendelman Senior Portfolio Manager, Harpel Advisors (4).
Assistant Vice President,
N&B Management
Theodore P. Giuliano Vice President, Neuberger & Berman Advisers Management
Vice President, N&B Trust (Massachusetts business trust) (6); Executive Vice
Management (5); General Partner, President and Trustee, Neuberger & Berman Income Funds
Neuberger & Berman (7); Executive Vice President and Trustee, Neuberger &
Berman Income Trust (7); Executive Vice President and
Trustee, Income Managers Trust (7).
Mark R. Goldstein Vice President, Neuberger & Berman Advisers Management
Vice President, N&B Trust (Massachusetts business trust) (6).
Management; General Partner,
Neuberger & Berman
Theresa A. Havell Vice President, Neuberger & Berman Advisers Management
Vice President and Trust (Massachusetts business trust) (6); President and
Director, N&B Management; Trustee, Neuberger & Berman Income Funds; President and
General Partner, Neuberger & Berman Trustee, Neuberger & Berman Income Trust; President and
Trustee, Income Managers Trust
Josephine Mahaney Assistant Vice President, Neuberger & Berman Advisers
Assistant Vice President (5), Management Trust (Massachusetts business trust) (6).
Vice President, N&B Management
C. Carl Randolph Assistant Secretary, Neuberger & Berman Advisers
General Partner, Neuberger & Berman Management Trust (Delaware business trust); Assistant
Secretary, Advisers Managers Trust; Assistant Secretary,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); 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.
Felix Rovelli Senior Vice President-Senior Equity Portfolio Manager,
Vice President, BNP-N&B Global Asset Management L.P. (joint venture of
N&B Management Neuberger & Berman and Banque Nationale de Paris) (2);
Portfolio Manager, Vontobel (Swiss Bank) (8).
C-12
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
------------------ -------------------------------------------------------
<S> <C>
Richard Russell Treasurer, Neuberger & Berman Advisers Management Trust
Vice President, (Delaware business trust); Treasurer, Advisers Managers
N&B Management Trust; Assistant Treasurer (6), Treasurer, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); 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.
Susan Switzer Portfolio Manager, Mitchell Hutchins Asset Management
Assistant Vice President, Inc. (9).
N&B Management
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers Management
Senior Vice President, N&B Management Trust (Delaware business trust); Vice President, Advisers
Managers Trust; Vice President, Neuberger & Berman
Advisers Management Trust (Massachusetts business trust)
(1); 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.
Michael J. Weiner Vice President, Neuberger & Berman Advisers Management
Senior Vice President and Trust (Delaware business trust); Vice President, Advisers
Treasurer, N&B Management Managers Trust; Treasurer (6), Vice President,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); 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.
C-13
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
------------------ -------------------------------------------------------
<S> <C>
Lawrence Zicklin President and Trustee, Neuberger & Berman Advisers
Director, N&B Management; Management Trust (Delaware business trust); President and
General Partner, Neuberger & Berman Trustee, Advisers Managers Trust; President and Trustee,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); President and
Trustee, Neuberger & Berman Equity Funds; President and
Trustee, Neuberger & Berman Equity Trust; President and
Trustee, Equity Managers Trust; President, Global
Managers Trust; President and Trustee, Neuberger & Berman
Equity Assets
</TABLE>
The principal address of N&B Management, Neuberger & Berman, BNP-
N&B Global Asset Management L.P. and of each of the investment companies
named above, is 605 Third Avenue, New York, New York 10158. Other
addresses to be provided by amendment.
_________________
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until May 1994.
(4) Until 1993.
(5) Until November 4, 1994.
(6) Until December 2, 1993.
(7) Until June 22, 1994.
(8) Until April 1994.
(9) Until 1994.
Item 29. Principal Underwriters.
------- ----------------------
(a) N&B 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 Assets
Neuberger & Berman Equity Trust
Neuberger & Berman Income Funds
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the
master funds in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors
and officers of the Registrant's principal underwriter. The principal
business address of each of the persons listed is 605 Third Avenue, New
C-14
<PAGE>
York, New York 10158-0180, which is also the address of the Registrant's
principal underwriter.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- --------------------- -------------------------
<S> <C> <C>
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Assistant Vice President None
Richard A. Cantor Chairman of the Board and None
Director
Robert Conti Assistant Vice President None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert Cresci Assistant Vice President None
Barbara DiGiorgio Assistant Vice President None
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the Board of
Trustees
(Chief Executive Officer)
Robert I. Gendelman Assistant Vice President None
Mark R. Goldstein Vice President None
Farha-Joyce Haboucha Vice President None
Theresa A. Havell Vice President and Director None
Leslie Holliday-Soto Assistant Vice President None
Michael M. Kassen Vice President None
Irwin Lainoff Director None
Michael Lamberti Vice President None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Lawrence Marx III Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Assistant Vice President None
Janet W. Prindle Vice President None
Felix Rovelli Vice President None
C-15
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- --------------------- -------------------------
<S> <C> <C>
Richard Russell Vice President Treasurer (Principal
Accounting Officer)
Marvin C. Schwartz Director None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Susan Switzer Assistant Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Clara Del Villar Vice President None
Susan Walsh Assistant Vice President None
Margaret Didi Weinblatt Vice President None
Michael J. Weiner Senior Vice President and Vice President
Treasurer (Principal Financial Officer)
Stephen A. White Vice President None
Celeste Wischerth Assistant Vice President None
Lawrence Zicklin Director Trustee and President
</TABLE>
Item 30. 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 Global Managers Trust are
maintained at the offices of State Street Cayman Trust Company, Ltd.,
C-16
<PAGE>
Elizabethan Square, P.O. Box 1984, George Town, Grand Cayman, Cayman
Islands, BWI.
Item 31. Management Services
------- -------------------
Other than as set forth in Parts A and B of this Post-
Effective Amendment, the Registrant is not a party to any management-
related service contract.
Item 32. Undertakings
------- ------------
Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report
to shareholders, upon request and without charge.
C-17
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN
EQUITY FUNDS certifies that it meets all of the requirements for
effectiveness of this Post-Effective Amendment No. 71 to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment 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 27th day of October, 1995.
NEUBERGER & BERMAN EQUITY FUNDS
By:/s/ Lawrence Zicklin
-----------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 71 has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- -----
/s/ Faith Colish Trustee October 27, 1995
---------------------
Faith Colish
/s/ Donald M. Cox Trustee October 27, 1995
-------------------------
Donald M. Cox
/s/ Stanley Egener Chairman of the Board October 27, 1995
-------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf Trustee October 27, 1995
--------------------------
Howard A. Mileaf
/s/ Edward I. O'Brien Trustee October 27, 1995
--------------------------
Edward I. O'Brien
/s/ John T. Patterson, Jr. Trustee October 27, 1995
--------------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee October 27, 1995
--------------------------
John P. Rosenthal
<PAGE>
Signature Title Date
--------- ----- -----
/s/ Cornelius T. Ryan Trustee October 27, 1995
--------------------------
Cornelius T. Ryan
/s/ Gustave H. Shubert Trustee October 27, 1995
--------------------------
Gustave H. Shubert
/s/ Alan R. Gruber Trustee October 27, 1995
--------------------------
Alan R. Gruber
/s/ Lawrence Zicklin President and Trustee October 27, 1995
--------------------------
Lawrence Zicklin
/s/ Michael J. Weiner Vice President October 27, 1995
-------------------------- (Principal
Michael J. Weiner Financial Officer)
/s/ Richard Russell Treasurer (Principal October 27, 1995
-------------------------- Accounting Officer)
Richard Russell
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, GLOBAL MANAGERS TRUST certifies that
it meets all of the requirements for effectiveness of Post-Effective
Amendment No. 71 to the Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, at Paradise Island, the Bahamas, on
the 27th day of October, 1995.
GLOBAL MANAGERS TRUST
/s/ Stanley Egener
By:------------------
Stanley Egener
Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, Post-
Effective Amendment No. 71 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Stanley Egener Chairman of the Board October 27, 1995
-------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf Trustee October 27, 1995
--------------------------
Howard A. Mileaf
/s/ John T. Patterson, Jr. Trustee October 27, 1995
--------------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee October 27, 1995
---------------------------
John P. Rosenthal
/s/ Michael J. Weiner Vice President October 27, 1995
--------------------------- (Principal Financial
Michael J. Weiner Officer)
Treasurer (Principal
--------------------------- Accounting Officer)
Richard Russell
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, GLOBAL MANAGERS TRUST certifies that
it meets all of the requirements for effectiveness of Post-Effective
Amendment No. 71 to the Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, at Paget, Bermuda, on the 27th day
of October, 1995.
GLOBAL MANAGERS TRUST
/s/ Stanley Egener
By:------------------
Stanley Egener
Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, Post-
Effective Amendment No. 71 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Stanley Egener Chairman of the Board October 27, 1995
-------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf Trustee October 27, 1995
--------------------------
Howard A. Mileaf
/s/ John T. Patterson, Jr. Trustee October 27, 1995
--------------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee October 27, 1995
---------------------------
John P. Rosenthal
--------------------------- Vice President
Michael J. Weiner (Principal Financial
Officer)
/s/ Richard Russell Treasurer (Principal October 27, 1995
--------------------------- Accounting Officer)
Richard Russell
<PAGE>
NEUBERGER & BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 71 ON FORM N-1A
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ---------------------------------------------- -----------
<S> <C> <C>
(1) (a) Certificate of Trust. Incorporated by Reference to Post- N.A.
Effective Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar Accession No.
0000898342-95-000314.
(b) Trust Instrument of Neuberger & Berman Equity Funds. N.A.
Incorporated by Reference to Post-Effective Amendment No. 70
to Registrant's Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898342-95-000314.
(c) Schedule A - Current Series of Neuberger & Berman Equity N.A.
Funds. Incorporated by Reference to Post-Effective Amendment
No. 70 to Registrant's Registration Statement, File Nos. 2-
11357 and 811-582, Edgar Accession No. 0000898342-95-000314.
(2) By-laws of Neuberger & Berman Equity Funds. Incorporated by Reference N.A.
to Post-Effective Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar Accession No.
0000898342-95-000314.
(3) Voting Trust Agreement. None. N.A.
(4) Specimen Share Certificate. Incorporated by Reference to Post- N.A.
Effective Amendment No. 66 to Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(5) (a) (i) Management Agreement Between Equity Managers Trust N.A.
and Neuberger & Berman Management Incorporated.
Incorporated by Reference to Post-Effective Amendment
No. 70 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession No.
0000898342-95-000314.
(ii) Schedule A - Series of Equity Managers Trust N.A.
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective Amendment
No. 70 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession No.
0000898342-95-000314.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
------- ---------------------------------------------- -----------
<S> <C> <C>
(iii) Schedule B - Schedule of Compensation Under the N.A.
Management Agreement. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-
582, Edgar Accession No. 0000898342-95-000314.
(b) (i) Sub-Advisory Agreement Between Neuberger & Berman N.A.
Management Incorporated and Neuberger & Berman, L.P.
with Respect to Equity Managers Trust. Incorporated
by Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos. 2-
11357 and 811-582, Edgar Accession No. 0000898342-95-
000314.
(ii) Schedule A - Series of Equity Managers Trust N.A.
Currently Subject to the Sub-Advisory Agreement.
Incorporated by Reference to Post-Effective Amendment
No. 70 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession No.
0000898342-95-000314.
(c) (i) Form of Management Agreement Between Global Managers ____
Trust and Neuberger & Berman Management Incorporated.
Filed herewith.
(ii) Form of Schedule A - Series of Global Managers Trust ____
Subject to the Management Agreement. Filed herewith.
(iii) Form of Schedule B - Schedule of Compensation Under ____
the Management Agreement. Filed herewith.
(d) (i) Form of Sub-Advisory Agreement Between Neuberger & ____
Berman Management Incorporated and Neuberger &
Berman, L.P. with respect to Global Managers Trust.
Filed herewith.
(ii) Form of Schedule A - Series of Global Managers Trust ____
Subject to Sub-Advisory Agreement. Filed herewith.
(6) (a) Distribution Agreement Between Neuberger & Berman Equity Funds N.A.
and Neuberger & Berman Management Incorporated. Incorporated
by Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898342-95-000314.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
------- ---------------------------------------------- -----------
<S> <C> <C>
(b) Schedule A - Series of Neuberger & Berman Equity Funds N.A.
Currently Subject to the Distribution Agreement. Incorporated
by Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898342-95-000314.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Neuberger & Berman Equity Funds and ____
State Street Bank and Trust Company. Filed herewith.
(b) Form of Schedule A - Approved Foreign Banking Institutions and
Securities Depositories Under the Custodian Contract. Filed ____
herewith.
(c) Schedule B - Approved Foreign Banking Institutions and N.A.
Securities Depositories under the Custodian Contract with
Respect to Neuberger & Berman International Fund. To be filed
by Amendment.
(9) (a) (i) Transfer Agency Agreement Between Neuberger & Berman N.A.
Equity Funds and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective Amendment
No. 70 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession No.
0000898342-95-000314.
(ii) Agreement Between Neuberger & Berman Equity Funds and N.A.
State Street Bank and Trust Company Adding Neuberger
& Berman International Fund as a Portfolio Governed
by the Transfer Agency Agreement. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos. 2-
11357 and 811-582, Edgar Accession No. 0000898342-95-
000314.
(iii) First Amendment to Transfer Agency and Service N.A.
Agreement Between Neuberger & Berman Equity Funds and
State Street Bank and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos. 2-
11357 and 811-582, Edgar Accession No. 0000898342-95-
000314.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
------- ---------------------------------------------- -----------
<S> <C> <C>
(b) (i) Administration Agreement Between Neuberger & Berman N.A.
Equity Funds and Neuberger & Berman Management
Incorporated. Incorporated by Reference to Post-
Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-
582, Edgar Accession No. 0000898342-95-000314.
(ii) Schedule A - Series of Neuberger & Berman Equity ____
Funds Subject to the Administration Agreement. Filed
herewith.
(iii) Schedule B - Schedule of Compensation Under the N.A.
Administration Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-
582, Edgar Accession No. 0000898342-95-000314.
(10) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP on N.A.
Securities Matters. Incorporated by Reference to Post-
Effective Amendment No. 66 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(11) (a) Consent of Ernst & Young LLP, Independent Auditors. Filed ____
herewith.
(b) Consent of Ernst & Young, Independent Auditors. Filed ____
herewith.
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance Quotations. Incorporated by N.A.
Reference to Post-Effective Amendment Nos. 61 and 67 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(17) Financial Data Schedule. Filed herewith. ____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
<PAGE>
</TABLE>
MANAGEMENT AGREEMENT
This Agreement is made as of November 1, 1995, between Global
Managers Trust, a New York common law trust ("Managers Trust"), and
Neuberger & Berman Management Incorporated, a New York corporation
("Manager").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Managers Trust is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end, diversified
management investment company and has established a series of shares known
as International Portfolio and has the authority to establish additional
series in the future (each a "Series"), with each Series having its own
assets and investment policies; and
WHEREAS, Managers Trust desires to retain the Manager as
investment adviser to furnish investment advisory and portfolio management
services to each Series listed in Schedule A attached hereto and to such
other Series of Managers 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 Managers Trust on behalf of the Series), and the Manager is
willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. Services of the Manager.
1.1 Investment Management Services. The Manager shall act as
the investment adviser to the Series and, as such, shall (i) obtain and
evaluate such information relating to the economy, industries, businesses,
securities markets and securities as it may deem necessary or useful in
discharging its responsibilities hereunder, (ii) formulate a continuing
program for the investment of the assets of the Series in a manner
consistent with its investment objectives, policies and restrictions, and
(iii) determine from time to time securities to be purchased, sold,
retained or lent by the Series, and implement those decisions, including
the selection of entities with or through which such purchases, sales or
loans are to be effected; provided, that the Manager will place orders
pursuant to its investment determinations either directly with the issuer
or with a broker or dealer, and if with a broker or dealer, (a) will
attempt to obtain the best net price and most favorable execution of its
orders, and (b) may nevertheless in its discretion purchase and sell
portfolio securities from and to brokers and dealers who provide the
Manager with research, analysis, advice and similar services and pay such
- 1 -
<PAGE>
brokers and dealers in return a higher commission or spread than may be
charged by other brokers or dealers.
The Series hereby authorizes any entity or person associated with
the Manager which is a member of a national securities exchange to effect
any transaction on the exchange for the account of the Series which is
permitted by Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-2(T) thereunder, and the Series hereby consents to the retention of
compensation for such transactions in accordance with said Section 11(a)
or Rule 11a2-2(T)(a)(iv).
The Series hereby authorizes the Manager, to the extent permitted
by the 1940 Act or any rule, regulation, order or Securities and Exchange
Commission staff interpretation thereunder, to purchase for the Series any
security for which any one or more of the following is acting as an
underwriter, dealer, member of a syndicate, or syndicate manager: the
Manager, its affiliates, the affiliates of any holders of interests in the
Series (any such holder of interests in the Series to be referred to
hereinafter as an "Interestholder"), the principal underwriter of any
Interestholder, or any affiliate of any of the foregoing.
The Manager shall carry out its duties with respect to the
Series' investments in accordance with applicable law and the investment
objectives, policies and restrictions of the Series adopted by the
trustees of Managers Trust ("Trustees"), and subject to such further
limitations as the Series may from time to time impose by written notice
to the Manager.
1.2 Administrative Services. The Manager shall supervise the
Series' business and affairs and shall provide such services required for
effective administration of the Series as are not provided by employees or
other agents engaged by the Series; provided, that the Manager shall not
have any obligation to provide under this Agreement any direct or indirect
services to Interestholders, any services related to the sale of interests
in the Series, or any other services which are the subject of a separate
agreement or arrangement between the Series and the Manager. Subject to
the foregoing, in providing administrative services hereunder, the Manager
shall:
1.2.1 Office Space, Equipment and Facilities. Furnish without
cost to the Series, or pay the cost of, such office space, office
equipment and office facilities as are adequate for the Series' needs.
1.2.2 Personnel. Provide, without remuneration from or other
cost to Managers Trust or the Series, the services of individuals
competent to perform all of the Series' executive, administrative and
clerical functions which are not performed by employees or other agents
engaged by the Series or by the Manager acting in some other capacity
pursuant to a separate agreement or arrangement with the Series.
1.2.3 Agents. Assist the Series in selecting and coordinating
the activities of the other agents engaged by the Series, including the
Series' custodian, independent auditors and legal counsel.
<PAGE>
1.2.4 Trustees and Officers. Authorize and permit the Manager's
directors, officers and employees who may be elected or appointed as
trustees or officers of Managers Trust to serve in such capacities,
without remuneration from or other cost to Managers Trust or the Series.
1.2.5 Books and Records. Assure that all financial, accounting
and other records required to be maintained and preserved by Managers
Trust and/or the Series are maintained and preserved by it or on its
behalf in accordance with applicable laws and regulations.
1.2.6 Reports and Filings. Assist in the preparation of (but
not pay for) all periodic reports by Managers Trust or the Series to
Interestholders of the Series and all reports and filings required to
maintain the registration and qualification of the Series, or to meet
other regulatory or tax requirements applicable to the Series, under
federal and state securities and tax laws.
2. Expenses of the Series.
2.1 Expenses to be Paid by the Manager. The Manager shall pay
all salaries, expenses and fees of the officers, trustees and employees of
the Managers Trust who are officers, directors or employees of the
Manager.
In the event that the Manager pays or assumes any expenses of
Managers Trust or a Series not required to be paid or assumed by the
Manager under this Agreement, the Manager shall not be obligated hereby to
pay or assume the same or any similar expense in the future; provided,
that nothing herein contained shall be deemed to relieve the Manager of
any obligation to Managers 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
Manager under this Agreement or under any separate agreement between a
Series and the Manager. Expenses to be borne by a Series shall include
both expenses directly attributable to the operation of the Series and the
placement of interests therein, as well as the portion of any expenses of
Managers Trust that is properly allocable to the Series in a manner
approved by the trustees of Managers Trust. Subject to any separate
agreement or arrangement between Managers Trust or a Series and the
Manager, the expenses hereby allocated to each Series, and not to the
Manager, 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 Interestholder Servicing. All expenses of maintaining and
servicing Interestholder accounts, including but not limited to the
charges of any Interestholder servicing agent, dividend disbursing agent
or other agent engaged by a Series to service Interestholder accounts.
- 3 -
<PAGE>
2.2.3 Interestholder Reports. All expenses of preparing,
setting in type, printing and distributing reports and other
communications to Interestholders of a Series.
2.2.4 Pricing and Portfolio Valuation. All expenses of
computing a Series' net asset value per share, including any equipment or
services obtained for the purpose of pricing shares or valuing the Series'
investment portfolio.
2.2.5 Communications. All charges for equipment or services
used for communications between the Manager or the Series and any
custodian, Interestholder servicing agent, portfolio accounting services
agent, or other agent engaged by a Series.
2.2.6 Legal and Accounting Fees. All charges for services and
expenses of a Series' legal counsel and independent auditors.
2.2.7 Trustees' Fees and Expenses. With respect to each Series,
all compensation of Trustees other than those affiliated with the Manager,
all expenses incurred in connection with such unaffiliated Trustees'
services as Trustees, and all other expenses of meetings of the Trustees
or committees thereof.
2.2.8 Interestholder Meetings. All expenses incidental to
holding meetings of Interestholders, including the printing of notices and
proxy materials, and proxy solicitation therefor.
2.2.9 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.
2.2.10 Brokerage Commissions. All brokers' commissions and
other charges incident to the purchase, sale or lending of a Series'
portfolio securities.
2.2.11 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.
2.2.12 Trade Association Fees. All fees, dues and other
expenses incurred in connection with a Series' membership in any trade
association or other investment organization.
2.2.13 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 Managers Trust's officers, Trustees and agents.
- 4 -
<PAGE>
2.2.14 Organizational Expenses. Any and all organizational
expenses of a Series paid by the Manager shall be reimbursed by such
Series at such time or times agreed by such Series and the Manager.
3. Advisory Fee.
3.1 Fee. As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Manager under this Agreement,
each Series shall pay the Manager an annual fee as set out in Schedule B
to this Agreement.
3.2 Computation and Payment of Fee. The advisory 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 shall be computed by multiplying the fraction of one divided by
the number of days in the calendar year by the applicable annual advisory
fee rate (as set forth in Schedule B hereto), and multiplying this product
by the net assets of the Series, determined in the manner established by
the Trustees, as of the close of business on the last preceding business
day on which the Series' net asset value was determined.
3.3 State Expense Limitation. If in any fiscal year the
operating expenses of any Interestholder in a Series plus such
Interestholder's pro rata portion of the Series' operating expenses in
such fiscal year ("Aggregate Operating Expenses", which includes any fees
or expense reimbursements payable to the Manager pursuant to this
Agreement and any compensation payable to the Manager pursuant to (i) the
Administration Agreement between such Interestholder and the Manager or
(ii) any other Agreement or arrangement with Managers Trust with respect
to that Interestholder, but excludes interest, taxes, brokerage
commissions, litigation and indemnification expenses, and other
extraordinary expenses not incurred in the ordinary course of business)
exceed the lowest applicable percentage expense limitation imposed under
the securities law and regulations of any state in which such
Interestholder's shares are qualified for sale (the "State Expense
Limitation"), then the Manager shall pay such Interestholder the amount of
such excess, less the amount of any reduction of the administration fee
referred to below; provided, that the Manager shall have no obligation
hereunder to pay such Interestholder for any such expenses which exceed
the pro rata portion of such advisory fee attributable to such
Interestholder's interest in that Series.
No payment shall be made to such Interestholder hereunder unless
and until the administration fee payable by such Interestholder under a
similar State Expense Limitation of its Administration Agreement with the
Manager has been reduced to zero. Any payment to an interestholder
hereunder shall be made monthly, by annualizing the Aggregate Operating
Expenses 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 fiscal
year do not exceed the State Expense Limitation or if for such fiscal year
there is no applicable State Expense Limitation.
- 5 -
<PAGE>
4. Ownership of Records.
All records required to be maintained and preserved by the Series
pursuant to the provisions or rules or regulations of the Securities and
Exchange Commission under Section 31(a) of the 1940 Act and maintained and
preserved by the Manager on behalf of the Series are the property of the
Series and shall be surrendered by the Manager promptly on request by the
Series; provided, that the Manager may at its own expense make and retain
copies of any such records.
5. Reports to Manager.
The Series shall furnish or otherwise make available to the
Manager such copies of that Series' financial statements, proxy
statements, reports, and other information relating to its business and
affairs as the Manager may, at any time or from time to time, reasonably
require in order to discharge its obligations under this Agreement.
6. Reports to the Series.
The Manager shall prepare and furnish to the Series such reports,
statistical data and other information in such form and at such intervals
as the Series may reasonably request.
7. Retention of Sub-Adviser.
Subject to a Series obtaining the initial and periodic approvals
required under Section 15 of the 1940 Act, the Manager may retain a
sub-adviser, at the Manager's own cost and expense, for the purpose of
making investment recommendations and research information available to
the Manager. Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of the Manager under this Agreement and
the Manager shall be responsible to Managers Trust and the Series for all
acts or omissions of the sub-adviser in connection with the performance of
the Manager's duties hereunder.
8. Services to Other Clients.
Nothing herein contained shall limit the freedom of the Manager
or any affiliated person of the Manager to render investment management
and administrative services to other investment companies, to act as
investment adviser or investment counselor to other persons, firms or
corporations, or to engage in other business activities.
9. Limitation of Liability of Manager and its Personnel.
Neither the Manager nor any director, officer or employee of the
Manager performing services for the Series at the direction or request of
the Manager in connection with the Manager's discharge of its obligations
hereunder 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
this Agreement relates; provided, that nothing herein contained shall be
- 6 -
<PAGE>
construed (i) to protect the Manager against any liability to Managers
Trust or a Series or its Interestholders to which the Manager would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Manager's duties, or by reason of the
Manager's reckless disregard of its obligations and duties under this
Agreement, or (ii) to protect any director, officer or employee of the
Manager who is or was a Trustee or officer of Managers Trust against any
liability to Managers Trust or a Series or its Interestholders 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 Managers Trust.
10. No Liability of Other Series.
This Agreement is made by Managers Trust on behalf of each Series
pursuant to authority granted by the Trustees, and the obligations created
hereby bind only the property of that Series and are not binding on any of
the Trustees or Interestholders of the Series individually or on any other
Series.
11. Effect of Agreement.
Nothing herein contained shall be deemed to require the Series to
take any action contrary to the Declaration of Trust or By-Laws of
Managers Trust, any actions of the Trustees binding upon the Series, or
any applicable law, regulation or order to which the Series 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 Managers Trust.
12. Term of Agreement.
The term of this Agreement shall begin on the date first above
written with respect to each Series listed in Schedule A on the date
hereof and, unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect through November 1, 1997. With respect
to each Series added by execution of an Addendum to Schedule A, the term
of this Agreement shall begin on the date of such execution and, unless
sooner terminated as hereinafter provided, this Agreement shall remain in
effect to the date two years after such execution. Thereafter, in each
case 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 (1) a vote or written consent of
the holders of a majority of the outstanding voting securities of such
Series, or by a vote of the Trustees, and (2) by a majority of the
Trustees who are not interested persons of either party hereto
("Disinterested Trustees"); and provided further, that the Manager 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 Manager shall furnish any Series, promptly upon its
- 7 -
<PAGE>
request, such information as may reasonably be necessary to evaluate the
terms of this Agreement or any extension, renewal or amendment thereof.
13. 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 Trustees who
are not parties to this Agreement or interested persons of either party
hereto, and (ii) by vote of a majority of the outstanding voting
securities of the Series. This Agreement shall terminate automatically
and immediately in the event of its assignment.
14. Termination of Agreement.
This Agreement may be terminated at any time by either party
hereto, without the payment of any penalty, upon sixty (60) 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 a
majority of Trustees who are not parties to this Agreement or interested
persons of either party hereto, or (ii) by vote of a majority of the
outstanding voting securities of the Series.
15. Name of the Series.
Each Series hereby agrees that if the Manager shall at any time
for any reason cease to serve as investment adviser to a Series, the
Series shall, if and when requested by the Manager, eliminate from the
Series' name the name "Neuberger & Berman" and thereafter refrain from
using the name "Neuberger & Berman" or the initials "N&B" in connection
with its business or activities, and the foregoing agreement of a Series
shall survive any termination of this Agreement and any extension or
renewal thereof.
16. 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 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the
United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities and Exchange
Commission 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 Securities and Exchange
Commission, whether of special or of general application, such provision
- 8 -
<PAGE>
shall be deemed to incorporate the effect of such rule, regulation or
order.
17. Choice of Law
This Agreement is made and to be principally performed in the
State of New York, and except insofar as the 1940 Act or other federal
laws and regulations may be controlling, this Agreement shall be governed
by, and construed and enforced in accordance with, the internal laws of
the State of New York.
18. 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.
19. 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.
GLOBAL MANAGERS TRUST
Attest: By ___________________________
_______________________ ___________________________
Secretary Title
NEUBERGER & BERMAN
MANAGEMENT INCORPORATED
Attest: By ___________________________
_______________________ ___________________________
Secretary Title
- 9 -
<PAGE>
GLOBAL MANAGERS TRUST
MANAGEMENT AGREEMENT
SCHEDULE A
The Series of Global Managers Trust currently subject to this
Agreement are as follows:
Initial Series
International Portfolio
Dated: November 1, 1995
<PAGE>
GLOBAL MANAGERS TRUST
MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Paragraph 3 of the Global Managers Trust
Management Agreement shall be calculated in accordance with the following
schedules:
International Portfolio
0.85% of the first $250 million of average daily net assets
0.825% of the next $250 million of average daily net assets
0.80% of the next $250 million of average daily net assets
0.775% of the next $250 million of average daily net assets
0.75% of the next $500 million of average daily net assets
0.725% of average daily net assets in excess of $1.5 billion
Dated: November 1, 1995
<PAGE>
SUB-ADVISORY AGREEMENT
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
605 Third Avenue
New York, New York 10158
November 1, 1995
Neuberger & Berman, L.P.
605 Third Avenue
New York, New York 10158
Dear Sirs:
We have entered into a Management Agreement with Global
Managers Trust ("Managers Trust"), with respect to its series ("Series"),
as set forth in Schedule A hereto, pursuant to which we are to act as
investment adviser to such Series. We hereby agree with you as follows:
1. You agree for the duration of this Agreement to furnish
us with such investment recommendations and research information, of the
same type as that which you from time to time provide to your partners and
employees for use in managing client accounts, all as we shall reasonably
request. In the absence of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or of reckless disregard of
your duties and obligations hereunder, you shall not be subject to
liability for any act or omission or any loss suffered by any Series or
its security holders in connection with the matters to which this
Agreement relates.
2. In consideration of your agreements set forth in
paragraph 1 above, we agree to pay you on the basis of direct and indirect
costs to you of performing such agreements. Indirect costs shall be
allocated on a basis mutually satisfactory to you and us.
3. As used in this Agreement, the terms "assignment" and
"vote of a majority of the outstanding voting securities" shall have the
meanings given to them by Section 2(a)(4) and 2(a)(42), respectively, of
the Investment Company Act of 1940, as amended.
This Agreement shall terminate automatically in the event
of its assignment, or upon termination of the Management Agreement between
Managers Trust and the undersigned.
This Agreement may be terminated at any time, without the
payment of any penalty, (a) with respect to any Series by the Trustees of
Managers Trust or by vote of a majority of the outstanding voting
securities of such Series or by the undersigned on not less than thirty
nor more than sixty days' written notice addressed to you at your
principal place of business; and (b) by you, without the payment of any
penalty, on not less than thirty nor more than sixty days' written notice
<PAGE>
addressed to Managers Trust and the undersigned at Managers Trust's
principal place of business.
This Agreement shall remain in full force and effect with
respect to each Series listed in Schedule A on the date hereof through
November 1, 1997 (unless sooner terminated as provided above) and from
year to year thereafter only so long as its continuance is approved in the
manner required by the Investment Company Act of 1940, as from time to
time amended.
Schedule A to this Agreement may be modified from time to
time to reflect the addition or deletion of a Series from the terms of
this Agreement. With respect to each Series added by execution of an
addendum to Schedule A, the term of this Agreement shall begin on the date
of such execution and, unless sooner terminated as provided above, this
Agreement shall remain in effect to the date two years after such
execution and from year to year thereafter only so long as its continuance
is approved in the manner required by the Investment Company Act of 1940,
as from time to time amended.
If you are in agreement with the foregoing, please sign
the form of acceptance on the enclosed counterpart hereof and return the
same to us.
Very truly yours,
NEUBERGER & BERMAN
MANAGEMENT INCORPORATED
By: _____________________________
President
The foregoing agreement is
hereby accepted as of the date
first above written.
NEUBERGER & BERMAN, L.P.
By: _________________________
- 2 -
<PAGE>
NEUBERGER & BERMAN MANAGEMENT INCORPORATED
SUB-ADVISORY AGREEMENT
SCHEDULE A
The Series of Global Managers Trust currently subject to this
Agreement are as follows:
Initial Series
International Portfolio
Dated: November 1, 1995
<PAGE>
CUSTODIAN CONTRACT
Between
NEUBERGER & BERMAN EQUITY FUNDS
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 . . . . . . . . . . . 5
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . 6
2.7 Payment of Fund Monies . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . 8
2.9 Appointment of Agents . . . . . . . . . . . . . . 8
2.10 Deposit of Fund Assets in Securities
System . . . . . . . . . . . . . . . . . . . . . 8
2.11 Fund Assets Held in the Custodian's
Direct Paper System . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . 11
2.14 Proxies . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Portfolio
Securities . . . . . . . . . . . . . . . . . . 11
3. Duties of the Custodian with Respect to Property of the
Fund Held Outside of the United States . . . . . . . . . 12
3.1 Appointment of Foreign Sub-Custodians . . . . . 12
3.2 Assets to be Held . . . . . . . . . . . . . . . 12
3.3 Foreign Securities Depositories . . . . . . . . 12
3.4 Agreements with Foreign Banking
Institutions . . . . . . . . . . . . . . . . . 12
3.5 Access of Independent Accountants of the
Fund . . . . . . . . . . . . . . . . . . . . . 13
3.6 Reports by Custodian . . . . . . . . . . . . . 13
3.7 Transactions in Foreign Custody Account . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . 14
3.9 Liability of custodian . . . . . . . . . . . . 14
3.10 Reimbursement for Advances . . . . . . . . . . 15
3.11 Monitoring Responsibilities . . . . . . . . . . 16
3.12 Branches of U.S. Banks . . . . . . . . . . . . 16
3.13 Foreign Exchange Transactions . . . . . . . . . 17
3.13 Tax Law . . . . . . . . . . . . . . . . . . . . 17
4. Payments for Sales or Repurchase or Redemptions of Shares
of the Fund . . . . . . . . . . . . . . . . . . . . . . 18
5. Proper Instructions . . . . . . . . . . . . . . . . . . 19
6. Actions Permitted Without Express Authority . . . . . . . 19
<PAGE>
7. Evidence of Authority . . . . . . . . . . . . . . . . . 20
8. Duties of Custodian With Respect to the Books
of Account and Calculations of Net Asset Value and
Net Income . . . . . . . . . . . . . . . . . . . . . . . 20
9. Records . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Opinion of Fund's Independent Accountants . . . . . . . . 21
11. Reports to Fund by Independent Public Accountants . . . . 21
12. Compensation of Custodian . . . . . . . . . . . . . . . 21
13. Responsibility of Custodian . . . . . . . . . . . . . . 22
14. Effective Period, Termination and Amendment . . . . . . . 23
15. Successor Custodian . . . . . . . . . . . . . . . . . . 24
16. Interpretive and Additional Provisions . . . . . . . . . 24
17. Additional Funds . . . . . . . . . . . . . . . . . . . . 25
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . 25
19. Limitation of Trustee, Officer and Shareholder
Liability . . . . . . . . . . . . . . . . . . . . . . . 25
20. No Liability of Other Portfolios . . . . . . . . . . . . 26
21. Confidentiality . . . . . . . . . . . . . . . . . . . . 26
22. Assignment . . . . . . . . . . . . . . . . . . . . . . . 26
23. Severability . . . . . . . . . . . . . . . . . . . . . . 26
24. Prior Contracts . . . . . . . . . . . . . . . . . . . . 26
25. Shareholder Communications Election . . . . . . . . . . . 26
<PAGE>
CUSTODIAN CONTRACT
This Contract between Neuberger & Berman Equity Funds, 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 six
series, Neuberger & Berman Genesis Fund, Neuberger & Berman Guardian Fund,
Neuberger & Berman Partners Fund, Neuberger & Berman Manhattan Fund, and
Neuberger & Berman Selected Sectors Fund (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
<PAGE>
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.
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
2
<PAGE>
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 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
3
<PAGE>
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 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.
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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 Custodian in the amount of checks
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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
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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;
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.
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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:
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
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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
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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 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
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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.
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)
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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.
(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.
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(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
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may arise from its or its nominee's own 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
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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 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
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<PAGE>
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 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
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<PAGE>
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.
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
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<PAGE>
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
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<PAGE>
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, 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
21
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 Genesis Fund, Neuberger & Berman
Guardian Fund, Neuberger & Berman Partners Fund, Neuberger & Berman
Manhattan Fund, and Neuberger & Berman Selected Sectors Fund 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.
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.
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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.
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
25
<PAGE>
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 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 [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
26
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the
day of , 199 .
ATTEST NEUBERGER & BERMAN EQUITY FUNDS
_______________ By_____________________
ATTEST STATE STREET BANK AND TRUST COMPANY
_______________ By_____________________
Executive Vice
President
27
<PAGE>
Schedule A
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Trustees of Neuberger &
Berman Equity Funds for use as sub-custodians for the Fund's securities
and other assets:
(Insert banks and securities depositories)
Certified:
____________________________
Fund's Authorized Officer
Date: ______________________
28
<PAGE>
SCHEDULE A
EQUITY MANAGERS TRUST
NEUBERGER & BERMAN EQUITY FUNDS
NEUBERBER & BERMAN EQUITY TRUST
(Focus, Genesis, Guardian, Manhattan, Partners,
and Socially Responsive Series)
The following foreign banking institutions and foreign securities
depositories have been approved by the boards of trustees of the above-
mentioned trusts for use by the indicated series of the trust as sub-
custodians for the securities and other assets:
Westpac Banking Corp. (Austraclear Ltd. and Reserve Bank Information and
Transfer System) (Australia)
GiroCredit Bank Aktiengesellschaft der Sparkassen (OEKB)
(Austria)
Generale Bank (Banque Nationale de Belgique) (C.I.K.) (Belgium)
Canada Trustco Mortgage Company (CDS) (Canada)
Den Danske Bank (VP-Centralen) (Denmark)
Merita Bank Limited (Central Share Register) (Finland)
Banque Paribas (Banque de France) (SICOVAM) (France)
BHF-Bank Aktiengesellschaft (Kassenverein) (Germany)
Standard Chartered Bank Hong Kong (CCASS) (Hong Kong)
Bank of Ireland (The Gilt Settlement Office) (Ireland)
Morgan Guaranty Trust Company (Banca d'Italia and Monte Titoli S.p.A.)
(Italy)
Daiwa Bank, Limited, and Sumitomo Trust & Banking Company, Limited
(JASDEC/Bank of Japan) (Japan)
Standard Chartered Bank Malaysia Berhad (MCD) (Malaysia)
Citibank, S.A.-Mexico (Banco de Mexico and INDEVAL) (Mexico)
MeesPierson N.V. (NECIGEF) (The Netherlands)
ANZ Banking Group (NZ) Ltd. (Austraclear N.Z.) (New Zealand)
Christiania Bank Og Kreditkasse (VPS) (Norway)
Banco Comercial Portugues (Central de Valores Mobiliarios) (Portugal)
<PAGE>
The Development Bank of Singapore, Ltd. (CDP) (Singapore)
Banco Santander, S.A. (SCLU/Banco de Espana) (Spain)
Skandinaviska Enskilda Banken (VPC) (Sweden)
Union Bank of Switzerland (SEGA) (Switzerland)
State Street Bank and Trust Co., and State Street London Limited (The
Central Gilts Office and The Central Moneymarkets Office) (United Kingdom)
Euroclear
EQUITY MANAGERS TRUST
NEUBERGER & BERMAN EQUITY FUNDS
NEUBERGER & BERMAN EQUITY TRUST
-------------------------------
Name:
Dated as of ___________________
A-2
<PAGE>
NEUBERGER & BERMAN EQUITY FUNDS
ADMINISTRATION AGREEMENT
SCHEDULE A
The Series of Neuberger & Berman Equity Funds currently subject
to this Agreement are as follows:
INITIAL SERIES
Neuberger & Berman Genesis Fund
Neuberger & Berman Guardian Fund
Neuberger & Berman Manhattan Fund
Neuberger & Berman Partners Fund
Neuberger & Berman Focus Fund
Neuberger & Berman Socially Responsive Fund
ADDITIONAL SERIES
Neuberger & Berman International Fund
Dated: November 1, 1995
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "Reports to Shareholders,"
"Independent Auditors" and "Financial Statements" in the Statement of
Additional Information in Post-Effective Amendment Number 71 to the
Registration Statement (Form N-1A No. 2-11357) of Neuberger & Berman
International Fund (a separate series of Neuberger & Berman Equity Funds)
and to the incorporation by reference of our report dated October 6, 1995
on the Neuberger & Berman International Fund included in the 1995 Annual
Report to Shareholders of Neuberger & Berman International Fund.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
October 25, 1995
<PAGE>
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "Independent Auditors" and
"Financial Statements" in the Statement of Additional Information in Post-
Effective Amendment Number 71 to the Registration Statement (Form N-1A No.
2-11357) of Neuberger & Berman International Fund (a separate series of
Neuberger & Berman Equity Funds) and to the incorporation by reference of
our report dated October 6, 1995 on the International Portfolio (a
separate series of Global Managers Trust) included in the 1995 Annual
Report to Shareholders of Neuberger & Berman International Fund.
/s/ Ernst & Young
ERNST & YOUNG
Grand Cayman,
Cayman Islands
October 25, 1995
<PAGE>
[ARTICLE] 6
[LEGEND]
This schedule contains summary financial information extracted from the
Neuberger & Berman International Fund Annual Report and is qualified in
its entirety by reference to such document.
[/LEGEND]
[CIK] 0000044402
[NAME] NEUBERGER & BERMAN EQUITY FUNDS
[SERIES]
[NUMBER] 07
[NAME] NEUBERGER & BERMAN INTERNATIONAL FUND
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] AUG-31-1995
[PERIOD-END] AUG-31-1995
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 26,406
[RECEIVABLES] 27
[ASSETS-OTHER] 76
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 26,509
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 73
[TOTAL-LIABILITIES] 73
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 24,910
[SHARES-COMMON-STOCK] 2,471
[SHARES-COMMON-PRIOR] 591
[ACCUMULATED-NII-CURRENT] 99
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,253)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2,680
[NET-ASSETS] 26,436
[DIVIDEND-INCOME] 295
[INTEREST-INCOME] 166
[OTHER-INCOME] 0
[EXPENSES-NET] (323)
[NET-INVESTMENT-INCOME] 138
[REALIZED-GAINS-CURRENT] (1,230)
[APPREC-INCREASE-CURRENT] 2,468
[NET-CHANGE-FROM-OPS] 1,376
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (53)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,705
[NUMBER-OF-SHARES-REDEEMED] (830)
[SHARES-REINVESTED] 5
[NET-CHANGE-IN-ASSETS] 20,256
[ACCUMULATED-NII-PRIOR] 5
<PAGE>
[ACCUMULATED-GAINS-PRIOR] (14)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 439
[AVERAGE-NET-ASSETS] 18,941
[PER-SHARE-NAV-BEGIN] 10.46
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] .21
[PER-SHARE-DIVIDEND] (.03)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.70
[EXPENSE-RATIO] 1.70
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
