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ANNUAL REPORT
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August 31, 1997
NEUBERGER&BERMAN
EQUITY FUNDS-Registered Trademark-
Neuberger&Berman
FOCUS FUND
Neuberger&Berman
GENESIS FUND
Neuberger&Berman
GUARDIAN FUND
Neuberger&Berman
INTERNATIONAL FUND
Neuberger&Berman
MANHATTAN FUND
Neuberger&Berman
PARTNERS FUND
Neuberger&Berman
SOCIALLY RESPONSIVE FUND
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUNDS
CHAIRMAN'S LETTER A-4
PORTFOLIO COMMENTARY
Focus Fund A-6
Genesis Fund A-9
Guardian Fund A-12
International Fund A-15
Manhattan Fund A-18
Partners Fund A-21
Socially Responsive Fund A-24
GROWTH OF A DOLLAR CHARTS
COMPARISON OF A $10,000 INVESTMENT
Focus Fund B-2
Genesis Fund B-3
Guardian Fund B-4
International Fund B-5
Manhattan Fund B-6
Partners Fund B-8
Socially Responsive Fund B-9
FINANCIAL STATEMENTS B-10
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Focus Fund B-21
Genesis Fund B-22
Guardian Fund B-23
International Fund B-24
Manhattan Fund B-25
Partners Fund B-26
Socially Responsive Fund B-27
REPORT OF INDEPENDENT ACCOUNTANTS/AUDITORS B-31
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
TOP TEN EQUITY HOLDINGS
Focus Portfolio B-33
Genesis Portfolio B-35
Guardian Portfolio B-39
International Portfolio B-42
Manhattan Portfolio B-49
Partners Portfolio B-51
Socially Responsive Portfolio B-54
FINANCIAL STATEMENTS B-58
FINANCIAL HIGHLIGHTS B-74
REPORT OF INDEPENDENT ACCOUNTANTS/AUDITORS B-78
DIRECTORY C-1
OFFICERS AND TRUSTEES C-2
</TABLE>
A-3
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CHAIRMAN'S LETTER October 17, 1997
Dear Fellow Shareholder,
Despite sharp corrections in March, early April, and again in late
July-August, the stock market continued its historic advance with the Standard &
Poor's "500" Index returning 14.78% and 40.73%, respectively, for the six- and
twelve-month periods concluding August 31, 1997. In August, the blue chip growth
stocks, which outpaced virtually every other sector for the last two and a half
years, surrendered market leadership to large-cap value stocks, and small- and
mid-cap stocks in general.
Driven by the exceptional performance of a relative handful of the Index's
largest stocks, the S&P "500" has materially out-performed broader market
indices and most active equities managers in recent years. This changed rather
suddenly in August, with the S&P (and the Dow Jones Industrial
Average -- another rather narrow large-cap stock index) bearing the brunt of the
market correction. Is this dramatic change in market leadership a temporary
phenomena or a major shift in investor focus? We believe the answer lies in
valuations.
In an article titled "Cautionary Tale of Index Fund Dangers" published in the
July 23, 1997 edition of THE WALL STREET JOURNAL, our own Kent Simons,
co-manager of the Neuberger&Berman Guardian and Focus Portfolios, addressed the
valuation issue. Kent highlighted eight high-quality companies in the Guardian
Portfolio that could theoretically be purchased in their entirety for less than
the then $169.35 billion market capitalization of Coca-Cola. These eight
companies are projected to have combined 1997 earnings of $12.4 billion compared
to the $4.1 billion consensus earnings estimate for Coke. Although Coca-Cola was
growing earnings at a higher rate than the average of Kent's eight companies, at
its annual growth rate of 18%, it would take Coke nearly seven years to equal
these companies' current projected 1997 earnings. The moral of the story is that
while Coca-Cola is a terrific company, its valuation may have become excessive
relative to many other equally fine companies. We believe the same can be said
for a number of the other growth stock giants that have had such a
disproportionate influence on the performance of the capitalization-weighted
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S&P "500." Going forward, if investors are once again focusing on fundamentals,
active, value-oriented managers will be competing on a much more level playing
field with the indexers.
We are proud of Neuberger&Berman's value heritage. But, we have also made a
major commitment to growth stock investing. The recent addition of Jennifer
Silver and Brooke Cobb, who are leading Neuberger&Berman, LLC's new growth stock
group and serving as co-managers of the Manhattan Portfolio, is an important
step in enhancing our growth stock research and management capabilities.
Jennifer comes to us from Putnam Investments, Inc., where she co-managed the
$3.5 billion Putnam Vista Fund. Brooke is also a Putnam veteran and the former
Chief Investment Officer of Bainco International Investors. I urge you to read
the Manhattan shareholder letter (included in this Annual Report), in which
Jennifer and Brooke detail their innovative growth-oriented investment
discipline.
In closing, we thank you for your confidence in our investment skills. We
remain dedicated to helping you achieve your long-term financial objectives
through our diversified value and growth stock portfolios.
Sincerely,
/s/ Stanley Egener
Stanley Egener
Chairman of the Board
Neuberger&Berman Equity Funds
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Focus Fund
THE MANAGEMENT TEAM OF KENT SIMONS AND KEVIN RISEN EMPLOY A
SECTOR-SPECIFIC APPROACH TO SHAPING THE PORTFOLIO. FIRST, THEY IDENTIFY
SIX ECONOMIC SECTORS (OUT OF A POSSIBLE 13) THEY BELIEVE TO BE MOST
UNDERVALUED. THEY THEN FOCUS ON WELL MANAGED, FINANCIALLY SOUND INDUSTRY
LEADERS IN EACH CHOSEN ECONOMIC SECTOR. THE PORTFOLIO MANAGEMENT TEAM
FAVORS COMPANIES WITH ABOVE MARKET AVERAGE EARNINGS GROWTH POTENTIAL
TRADING AT BELOW MARKET AVERAGE PRICE/EARNINGS MULTIPLES.
For the fiscal six- and twelve-month periods ended August 31, 1997, Focus Fund
returned 17.96% and 43.92%, respectively, versus the Standard & Poor's "500"
Index's 14.78% and 40.73% gains over the same periods (see page B-2 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1997).*
Our portfolio holdings in the financial services sector (banking, finance,
insurance, and investment companies), performed well with Merrill Lynch and
Travelers Group at the top of the list. Our technology investments were also
productive with Applied Materials and Compaq the stars of the show. Investments
in heavy industry and media/ entertainment companies lagged. We have reduced our
exposure in the heavy industry sector and completely eliminated our positions in
media/entertainment to focus our assets in groups we believe have better
prospects in the fiscal year ahead.
One of the premises of value investing is that over the long term, the stock
market is a rational animal and that stock prices will ultimately reflect the
underlying economic value of companies. Over the short term, the market and
individual stock prices are influenced by investor emotion, fad, fashion and
momentum. Human nature being what it is, relatively few investors -- amateur or
professional -- rush out to buy stocks that have not been doing well. More
often, investors are inclined to do today what they should have done two years
ago. Which brings us to the subject of indexing.
The S&P "500" has been a very tough hurdle for active managers over the last
several years. S&P returns have been enhanced by the
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Focus Fund (Cont'd)
exceptional performance of a relative handful of the large-cap growth stocks
that heavily influence this capitalization weighted index. For example, in the
first six months of calendar 1997, the largest 30 companies in the S&P (just 6%
of the 500 stocks in the index), represented approximately 34% of the index's
weighting and contributed about 52% of its total performance. The better these
stocks do, the heavier their weighting in the index. Consequently, a greater
percentage of every dollar put in an S&P "500" index fund goes into these
stocks, creating a snowball effect. The end result are valuations that defy
economic reality.
In August, a degree of sanity reappeared. Following cautions of modest
earnings slowdowns from Coca-Cola and Gillette, there was a sharp correction in
many of the large-cap growth "darlings" that have been propelling S&P "500"
returns over the last several years.
Investors seemed to wake up and ask themselves if they really wanted to pay
30-40 times earnings for these stocks when they could buy other fine companies
with excellent earnings prospects for much lower multiples. This, of course, is
music to our ears. If we are entering a period in which fundamentals once again
matter, we believe the S&P "500" will be a much easier target for value-oriented
investors like ourselves.
We have had significant exposure to bank stocks for several years. The group
has performed well, raising the issue of whether we can still fairly categorize
the banks as an out-of-favor industry. We consider industries and individual
stocks to be out-of-favor when we believe valuations do not adequately reflect
superior earnings growth and return on equity prospects. Let's use CITICORP as
an example. CITICORP is the most global and diverse money center bank, and in
our opinion, the best positioned to produce consistently strong revenue gains.
Management has set a goal of increasing return on equity to 18%, well above the
market average. While we can't predict what management will do in the future,
net earnings could advance in the 10%-12% annual range if the company continues
to use excess cash flow to buy back stock (CITICORP has repurchased 70 million
shares for $5.8 billion since mid-1995). Yet, at the close of this reporting
period,
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Focus Fund (Cont'd)
CITICORP stock was trading at about 16 times trailing 12 month earnings and
about 15 times our 1997 earnings estimate. In CITICORP, we have a company with
above market average earnings growth and return on equity potential selling at a
below market average multiple. We don't fall in love with stocks forever, and if
CITICORP fails to live up to our fundamental expectations, or if we think it has
become fully valued, we will respond. However, today, we still think it is a
bargain.
In closing, we are pleased to have exceeded our S&P "500" benchmark in fiscal
1997 and even more delighted the market appears poised to more adequately
recognize fundamental value. We look forward to serving you in the year ahead.
Sincerely,
<TABLE>
<S> <C>
/s/ Kent Simons /s/ Kevin Risen
Kent Simons Kevin Risen
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. No single holding of Focus Fund makes up more than a small fraction of
the Portfolio's total assets. Prior to November 1, 1991, the investment
policies of Focus required that it invest a substantial portion of its assets
in the energy field. While the value-oriented approach is intended to limit
risks, the Portfolio -- with its concentration in sectors -- may be more
greatly affected by any single economic, political or regulatory development
than a more diversified mutual fund.
A-8
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Genesis Fund
PORTFOLIO CO-MANAGERS JUDITH VALE AND ROBERT D'ALELIO FOCUS ON
"EASY-TO-UNDERSTAND" COMPANIES IN THE LESS GLAMOROUS SECTORS OF THE SMALL
CAPITALIZATION STOCK UNIVERSE. BY AVOIDING THE CUTTING-EDGE TECHNOLOGY
COMPANIES THAT ATTRACT SO MUCH SPECULATIVE ATTENTION IN THE SMALL-CAP
MARKET, THE MANAGERS BELIEVE THEY ARE BETTER ABLE TO IDENTIFY
FUNDAMENTALLY UNDERVALUED STOCKS WITH EXCEPTIONAL GROWTH POTENTIAL. THIS
VALUE-ORIENTED APPROACH TO SMALL-CAP INVESTING HAS TRANSLATED INTO A
PORTFOLIO WITH FAVORABLE RISK/ REWARD CHARACTERISTICS.
For the fiscal six- and twelve-month periods ended August 31, 1997, Genesis
Fund returned 28.94% and 44.32%, respectively. This compares to the Russell
2000-Registered Trademark- Index's gains of 18.53% and 28.96%, respectively,
over the same time periods (see page B-3 for comparison of a $10,000 investment
and average annual total returns as of August 31, 1997).*
As the performance results reflect, we've had a terrific year. Our investments
in aerospace components, energy, oil services, and regional bank stocks were
among the leaders in the performance parade, but many other industry group
selections marched smartly ahead as well. Disappointments have come not from any
particular industry groups, but rather individual companies that have not lived
up to earnings expectations. NN Ball & Roller, a niche ball bearing manufacturer
with extensive business in the Pacific Rim, was a casualty of the economic
problems plaguing many of the Asian "Tiger" nations. Lawter International, a
specialty chemical company, suffered from slackening demand for its products and
an unanticipated earnings shortfall.
The Portfolio still has a significant weighting in the aerospace components
group -- the companies that supply parts to Boeing and the other major
commercial airplane builders. We believe we are only midway through an extended
commercial aerospace boom. Boeing has ramped up production and new orders remain
strong. Due to improving demand from Boeing and others, component suppliers are
experiencing significant volume growth, which should translate into expanding
profit margins and accelerating earnings.
The oil patch is still vibrant. Oil prices have stabilized, the much
ballyhooed natural gas bubble appears to have evaporated, and the percentage of
"shut-in" production -- reserves instantly accessible to
A-9
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Genesis Fund (Cont'd)
satisfy spikes in demand -- has declined from about 30% of production in the
late 1980's to just around 5% today. All this would indicate to us that energy
companies are likely to continue to be poking a lot of new holes to increase
production. Oil service companies, particularly drilling rig owners and
operators, are major beneficiaries of strong exploration and production
activity.
We believe the prospects for selected regional bank stocks are still
excellent. We are stock-pickers, not economists. However, our reading of the
economy is that interest rates should trend down over the next year. This should
provide a modest tailwind for bank stocks, which are generally perceived as
interest rate sensitive.
We are focusing on regional banks in geographic areas -- like the oil
patch -- we believe to have stronger than average economic growth prospects.
Generally, the stronger the regional economy has been, the greater the loan
demand, and the better the earnings prospects for local banks.
Finally, we are partial to regional banks with significant "goodwill" lawsuits
against the federal government. During the savings and loan crisis of the 1980s,
large, financially healthy S&Ls were encouraged to buy smaller ailing thrifts.
In the process, a lot of goodwill was added to the rescuers' balance sheets.
Bank regulators permitted this goodwill to be included in the banks' stated
capital. When the full magnitude of the savings and loan crisis became apparent
in the early 1990's, the government reversed its decision and required goodwill
to be removed as a capital asset. This damaged the "Good Samaritan" banks'
balance sheets, reducing lending capital and restraining earnings. Regional
banks are now suing the government for damages. Recently, the federal judge
overseeing the Golden State Bancorp versus Uncle Sam suit urged the government
to settle, publicly warning the government attorneys that if he were to decide
the case that day, he would be inclined to award Golden State every dollar it
was asking for. Four of our regional bank stock holdings have substantial
goodwill lawsuits against the government. These are profitable, well-managed
banks that we like based on their own fundamental merits. While each case will
be decided on its own facts, if they win their suits or get large settlements
from the government, these banks will receive cash windfalls representing a
significant portion of their current market capitalizations.
A-10
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Genesis Fund (Cont'd)
Our investment opinions on every stock in the portfolio can change on short
notice. However, in our reports to shareholders, we like to briefly discuss at
least one portfolio holding that we currently favor. Since we've already gone
into some detail on the regional banking group, let's fill in the blanks on Bank
United Corp., a Texas savings and loan. Bank United is a beneficiary of the
recovery in the Texas economy, spawned in part by strength in the oil patch. It
has a sizable Net Operating Loss carry forward, which will reduce its future tax
bills and enhance cash flow. Bank United also has a sizable goodwill lawsuit
pending against the government. In addition, we believe it will benefit from
recent state legislation, which for the first time, allows Texas banks to offer
home equity loans -- potentially a very profitable business. Bank United has
been gearing up to enter this new market, and we expect it to hit the street
running. We believe the bank has very good earnings growth potential going
forward. If the company wins or favorably settles its goodwill lawsuit with the
government, there would be a lot of icing on this already appetizing cake.
In closing, we are proud of the portfolio's strong returns this year and hope
to build on our performance record in the years ahead.
Sincerely,
<TABLE>
<S> <C>
/s/ Judith Vale /s/ Robert D'Alelio
Judith Vale Robert D'Alelio
</TABLE>
Portfolio Co-Managers
*The Russell 2000 Index is an unmanaged index generally considered to be
representative of small stock market activity. Please note that indices do not
take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The risks involved in seeking capital appreciation from investments principally
in companies with small market capitalization are set forth in the prospectus.
The composition, industries and holdings of the Fund are subject to change.
Genesis Portfolio is invested in a wide array of stocks and no single holding
makes up more than a small fraction of the Portfolio's total assets.
A-11
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Guardian Fund
PORTFOLIO CO-MANAGERS KENT SIMONS AND KEVIN RISEN FOCUS ON "FIRST-RATE"
COMPANIES IN INDUSTRIES THAT ARE CURRENTLY OUT OF FAVOR. RECOGNIZING THAT
"CHEAP" STOCKS ARE NOT NECESSARILY UNDERVALUED, THEY SEEK WELL MANAGED,
FINANCIALLY SOUND COMPANIES TRADING AT FUNDAMENTALLY ATTRACTIVE PRICES
RELATIVE TO THEIR LONG-TERM EARNINGS GROWTH POTENTIAL. BY CONCENTRATING
THE PORTFOLIO IN HIGH QUALITY WALL STREET "ORPHANS," THE PORTFOLIO
MANAGEMENT TEAM ATTEMPTS TO CONSISTENTLY TAKE ADVANTAGE OF OPPORTUNITIES
CREATED BY INVESTORS' OVER-REACTION TO REAL OR PERCEIVED PROBLEMS.
For the fiscal six- and twelve-month periods ended August 31, 1997, Guardian
Fund returned 16.12% and 39.69%, respectively, versus the Standard & Poor's
"500" 's 14.78% and 40.73% gains over the same periods (see page B-4 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1997).*
Our investments in the financial services industries (banking, finance,
insurance and brokerage/investment management) continued to perform well with
Signet Banking (bought by First Union Corp. later in the period), Travelers
Group, and Merrill Lynch near the top of the charts. Our electronics holdings
also did quite well, led by Teradyne. Selected technology holdings soared with
Applied Materials, KLA Tencor, and Texas Instruments more than doubling in
fiscal 1997. As a result, we have taken profits. Portfolio holdings in the
steel, energy, and media and entertainment industries disappointed. We have
eliminated our positions in steel companies and almost all of our holdings in
media and entertainment, re-allocating assets to other industry groups we
believe offer better value.
Investor emotion -- particularly fear -- has a powerful short-term influence
on the stock market. This was demonstrated in 1993, when investors stampeded out
of drug stocks as the Clintons and Ira Magaziner were threatening to radically
overhaul America's healthcare system. Investors were simply afraid to own some
absolutely terrific companies. Fear created opportunity that value investors
were able to take advantage of when the panic subsided and the drug group
rebounded strongly. In 1996 and the first half 1997, we saw a reverse
panic -- investors were afraid not to own the giant blue chip growth
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Guardian Fund (Cont'd)
stocks. S&P "500" indexers took much of the credit (or should that be blame) for
the rather incredible valuations given to the big-cap market "darlings." But,
index fund investors were not the only folks driving these stocks higher. Active
managers were throwing in the towel and almost regardless of their stated
discipline, loading up on Coca-Cola, Gillette, GE, Procter & Gamble and a
handful of the other favored few. This "if you can't beat them, join them"
response has also created opportunity. We believe investors who conquered the
fear of under-performing the S&P are well positioned to take advantage of a
market that is now more inclined to acknowledge fundamental values.
Another great danger created by euphoric markets is to buy "relative value."
The rationale is that if XYZ stock is growing earnings at 15% and trading at a
price/earnings ratio of 40, then PDQ stock, which is also growing earnings at
15% and "only" trading at 35 times earnings is a raging bargain. This is a trap
we strive to avoid. To us, cheap does not mean less expensive. We want to own
companies trading at a price/earnings and return on equity discounts to the
market, but valuations must be sensible on an absolute basis as well. In other
words, we would much rather be right than less wrong.
We would not describe investors' current attitude on the auto industry as a
panic. But, judging from the present valuations of the big three auto companies,
investors seem to fear the autos are as vulnerable to a slowing economy as they
were to the steeper economic downturns of the boom and bust cycles of the past.
We believe this is an over-reaction. The bear case on the auto companies is that
the economic expansion is long of tooth and the strength of the dollar against
the yen is making Japanese products much more competitive. These concerns are,
to a degree, justified. If the economy slows, a decline in vehicle demand is
possible. Retail incentives -- price discounting -- are up, partially in
response to Japanese competition. However, cost cutting in the industry and much
improved inventory management should help cushion a fall resulting from a
decelerating economy. Importantly, the domestic autos are in vastly better
financial shape than they were in the last cycle. Chrysler, for example, has a
cash horde of $8 billion to help see it through a period of weak demand and soft
pricing. Although we can't
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Guardian Fund (Cont'd)
predict what the company would do, some of this king's ransom could be used to
help buoy stock price through dividend increases and significant share
repurchases. Earnings could decline in calendar 1998, but through the cycle, we
think they will make a good showing. Our substantial position in Chrysler stock
is subject to change if we believe fundamentals warrant it. However, with the
stock currently trading around 7.5 times our calendar 1997 earnings estimate, we
think it is a long-term bargain.
This rising market has given us the opportunity to take profits in portfolio
holdings that became fairly, if not fully priced. We have also reduced or
eliminated positions in several industry groups with diminishing prospects. The
result is a somewhat more concentrated portfolio that we believe will enhance
return potential in the year ahead.
In closing, we are pleased with our competitive returns relative to the S&P
"500" benchmark. Going forward, we welcome the challenges presented by what we
believe is becoming a more selective and fundamentally disciplined market.
Sincerely,
<TABLE>
<S> <C>
/s/ Kent Simons /s/ Kevin Risen
Kent Simons Kevin Risen
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Fund are subject to change.
Guardian Portfolio is invested in a wide array of stocks and no single holding
makes up more than a small fraction of the Portfolio's total assets.
A-14
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PORTFOLIO MANAGER'S COMMENTARY
Neuberger&Berman
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International Fund
PORTFOLIO MANAGER VALERIE CHANG TAKES A VALUE APPROACH TO INTERNATIONAL
EQUITIES MARKETS. AFTER ANALYZING THE POLITICAL, SOCIAL, ECONOMIC, AND
STOCK MARKET ENVIRONMENTS OF COUNTRIES AROUND THE GLOBE, SHE SELECTS THOSE
INTERNATIONAL INVESTMENT ARENAS BELIEVED TO OFFER THE BEST FUNDAMENTAL
VALUE. THE STOCK SELECTION PROCESS IS RESEARCH INTENSIVE, FEATURING
FREQUENT MEETINGS WITH CORPORATE MANAGEMENTS AND THEIR COMPETITORS IN
ADDITION TO THE ANALYSIS OF INCOME STATEMENTS AND BALANCE SHEETS. THE GOAL
IS TO LOOK BEYOND "THE NUMBERS" TO FIND THOSE INTERNATIONAL COMPANIES WITH
THE BEST LONG-TERM INVESTMENT PROSPECTS.
For the fiscal six- and twelve-month periods ended August 31, 1997,
International Fund returned 6.46% and 24.71%, respectively, versus
EAFE-Registered Trademark- Index's 6.76% and 9.36% gains over the same periods
(see page B-5 for comparison of a $10,000 investment and average annual total
returns as of August 31, 1997).*
With developed European markets slowing, Japan still sluggish, and Southeast
Asia in the midst of a spiraling currency crisis, international investing has
been quite challenging. The portfolio has been buoyed by strong returns from
investments in Scandinavia (particularly Finland), Israel, and Latin America.
Although our exposure in Thailand, Indonesia, Malaysia and the Philippines was
relatively modest, portfolio holdings were hit hard in late summer as investors
reacted to slower than anticipated economic growth and disarray in the currency
markets.
Our Finnish investments have been primarily in companies doing a substantial
amount of business in Estonia, the Baltic states, and Russia. Through joint
venturing with local firms, these companies have modernized plants and
equipment, improved distribution systems, and invigorated markets. This
"back-door" play on former Soviet republics via the more mature and orderly
Finnish stock market has allowed us to participate in the explosive economic
growth in this region with less of the risks inherent in the new and in some
cases, still chaotic eastern European stock markets.
Valuations of Israeli companies are generally restrained by international
investors' concern over political risk. This has presented us with
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International Fund (Cont'd)
the opportunity to buy some terrific companies at quite reasonable prices. In
Israel, we have done quite well with our investments in a group of niche high
tech companies serving a broad range of industries.
Although they have performed quite well over the last year, we remain
comfortable with our investments in Latin America. We are partial to Mexico and
Argentina, where economic reform appears to be on target and corporate earnings
are coming through as, or even better than expected. We believe Latin American
markets in general should continue to benefit as governments privatize well run
companies in essential service sectors like telecommunications, utilities, and
transportation.
The emerging markets in Southeast Asia are more problematic. Investors have
been panicked by the currency crisis, which started with the Thai Baht and
quickly spread to the Philippine Peso, Malaysian Ringgit, and Singapore Dollar.
There is even some concern that the Hong Kong Dollar, by far the most stable
currency in the region, may be vulnerable. Peering through all the dust that has
been raised by the currency crisis, with the exception of Thailand, we see
economies that are in decent shape, albeit not meeting the overly optimistic
growth forecasts made during the speculative market peaks in 1993. We believe
equities valuations in general are reasonable and there are some excellent
investment opportunities. The issue at this stage is how long it will take to
restore international investor confidence. We think investors will wait for
currencies to stabilize and for concrete evidence these economies are regaining
some momentum before jumping back in. That will take some time.
The Japanese stock market has shown signs of life this year, but most of the
good gains have come from the big exporting companies commonly known as the
"Nifty Fifteen," "Sweet Sixteen," or "Seven Samurai." Recently, there has been
some evidence the Japanese market is broadening. One of our most productive
investments in Japan over the last year is Advantest, a mid-cap technology
company that makes memory chip testing equipment. It has introduced a new chip
tester that is approximately four times faster than anything on the market. The
company's competition is estimated to be eighteen months behind. We
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International Fund (Cont'd)
were able to buy Advantest stock at around 35 times earnings. That doesn't sound
cheap relative to U.S. stock valuations, but it was a deep discount to the
Nikkei 225's average price/earnings multiple of 55. The stock is up smartly and
is no longer selling at a bargain basement price. But, we think there is still
some upside left. Of course, as we do with all our portfolio companies, we will
be monitoring developments at Advantest closely and be prepared to respond to
any changes we see in its fundamental outlook.
Looking ahead, we do not anticipate any major changes in regional allocation.
We have been and will continue to consolidate the portfolio in response to the
increasingly challenging international investment environment.
In closing, we are pleased to have soundly beaten our performance benchmark in
fiscal 1997. There are challenges ahead. We believe our value-oriented asset
allocation and stock picking disciplines will continue to guide us in the right
direction in the international equities markets.
Sincerely,
/s/ Valerie Chang
Valerie Chang
Portfolio Manager
Investing in foreign securities involves greater risks than investing in
securities of U.S. issuers, including currency fluctuation. The composition,
industries and holdings of the Portfolio are subject to change. International
Portfolio is invested in a wide array of stocks and no single holding makes up
more than a small fraction of the Portfolio's total assets.
*The EAFE-Registered Trademark- Index is an unmanaged index of over 1,000
foreign stock prices, translated into U.S. dollars. Please note that indices do
not take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
A-17
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
- ----------------------------------------------------------------------
Manhattan Fund
PORTFOLIO CO-MANAGERS JENNIFER SILVER AND BROOKE COBB LOVE
SURPRISES -- POSITIVE EARNINGS SURPRISES THAT IS. THEIR EXTENSIVE RESEARCH
HAS REVEALED THAT THE STOCKS OF COMPANIES THAT CONSISTENTLY EXCEEDED
CONSENSUS EARNINGS ESTIMATES TENDED TO BE TERRIFIC PERFORMERS. THEY SCREEN
THE MID-CAP GROWTH STOCK UNIVERSE TO ISOLATE STOCKS WHOSE MOST RECENT
EARNINGS HAVE BEAT THE STREET'S EXPECTATIONS. THEY THEN ROLL UP THEIR
SLEEVES, AND THROUGH DILIGENT FUNDAMENTAL RESEARCH, STRIVE TO IDENTIFY
THOSE COMPANIES MOST LIKELY TO RECORD A STRING OF POSITIVE EARNINGS
SURPRISES. THEIR GOAL IS TO INVEST TODAY IN THE FAST GROWING MID-SIZED
COMPANIES THAT WILL COMPRISE TOMORROW'S FORTUNE 500.
For the fiscal six- and twelve-month periods ended August 31, 1997, Manhattan
Fund returned, 15.16% and 38.75%, respectively. This compares to the S&P "500"
Index's 14.78% and 40.73%, gains over the same periods (see page B-6 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1997).*
In fiscal 1997, the portfolio's financial services, technology, and health
care investments excelled. Although posting positive returns, investments in the
energy, communications, and consumer cyclical groups on average under-performed.
We are pleased by the portfolio's very competitive performance versus the S&P
"500", particularly because it was achieved during a period of transition as we
took over from Mark Goldstein and began rapidly reshaping the portfolio. The re-
engineering of the portfolio is now complete.
Since this is our first opportunity to directly address the shareholders, we
thought it important to describe our investment discipline in some detail. Let
us begin by saying we are growth stock investors in the purest sense of the
term. We want to own the stocks of companies that are growing earnings faster
than the average American business and ideally, faster than the competitors in
their respective industries. We are particularly biased towards companies that
have consistently beaten consensus earnings estimates. Our extensive research
has revealed that stocks whose earnings consistently exceeded expectations
offered greater potential for long-term capital appreciation.
We focus our research efforts on mid-cap stocks in new and/or rapidly evolving
industries. The mid-cap growth sector is less widely followed by Wall Street
analysts and therefore, less efficient than the
A-18
<PAGE>
- ----------------------------------------------------------------------
Manhattan Fund (Cont'd)
large-cap stock market. By operating in the mid-cap arena (stocks with market
capitalizations between $500 million and $8 billion), we believe we are likely
to identify more of our brand of growth stock opportunities. Considering the
currently high valuations of large-cap growth stocks relative to mid-cap stocks
with what we think is comparable or in many cases, better earnings growth
potential, we believe the portfolio is particularly well positioned in today's
market. Going forward, the portfolio will use the Russell Midcap-TM- Growth
Index* as its benchmark. Consistent with our clearly defined capitalization
parameters and our growth style, we believe this is a more appropriate benchmark
than the S&P "500."
Let us once again emphasize we are growth stock investors. But, there is a
value component to our discipline as well. We just define value differently. The
kind of fast-growth companies we favor generally do not trade at below market
average price/earnings ratios. However, they often trade at very reasonable
multiples relative to annual earnings growth rates. Given the choice between two
good companies with comparable earnings growth rates, we will select the one
trading at the lower multiple to earnings growth.
We are dispassionate sellers. If a stock does not live up to our earnings
expectations or if we believe its valuation has become excessive, we will sell
and direct the assets to another opportunity we find more attractive. We will
maintain a broadly diversified portfolio rather than heavily concentrating our
holdings in just a few of the fastest growing industry groups.
An examination of the portfolio's current characteristics provides a good
illustration of our discipline. As of August 31, 1997, the portfolio had 80
stocks in 11 different industry groups. The average weighted capitalization is
approximately $4 billion. The majority of the Portfolio's companies exceeded
consensus earnings estimates in the preceding quarter. Based on consensus
earnings estimates from First Call (an independent research firm that compiles
and distributes Wall Street earnings estimates), the Portfolio's earnings are
projected to grow 25% in calendar year 1998 and 21% annually over the next five
years. The Portfolio is trading at just less than one time its projected
five-year annual earnings growth rate.
A-19
<PAGE>
- ----------------------------------------------------------------------
Manhattan Fund (Cont'd)
To further demonstrate our approach, we will briefly discuss Staples,
currently one of our largest holdings. Staples virtually created an entire new
retail category, the office supply super store. It is a retailing concept that
works and could continue to expand nationwide and perhaps globally. Recently
reported earnings were 9% higher than consensus estimates. We expect additional
pleasant earnings surprises going forward. At the close of this reporting
period, Staples' stock traded at just 0.7 times our long-term earnings growth
rate projections. With the caveat that things can change in a hurry and we will
respond to those changes, we believe Staples will continue to be a very
rewarding investment.
In closing, we thank you for your patience as we have transformed the
Manhattan Portfolio into what we believe will be a more dynamic growth stock
vehicle. We look forward to serving you and to welcoming new shareholders as we
further demonstrate the effectiveness of our focused growth stock discipline.
Sincerely,
<TABLE>
<S> <C>
/s/Jennifer Silver /s/ Brooke Cobb
Jennifer Silver Brooke Cobb
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. The Russell Midcap-TM- Growth Index is
an unmanaged index which measures the performance of those Russell Midcap Index
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell Midcap-TM- Index measures the performance of the 800 smallest
companies in the Russell 1000-Registered Trademark- Index, which represents
approximately 35% of the total market capitalization of the Russell 1000 Index
(which in turn, consists of the 1,000 largest US companies, based on market
capitalization). Please note that indices do not take into account any fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
these indices are prepared or obtained by Neuberger&Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio invests in many securities not included in the above-described
indices.
The composition, industries and holdings of the Portfolio are subject to
change. Manhattan Fund's portfolio is invested in a wide array of stocks and no
single holding makes up more than a small fraction of the Portfolio's total
assets.
A-20
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
- ----------------------------------------------------------------------
Partners Fund
PORTFOLIO CO-MANAGERS MICHAEL KASSEN AND ROBERT GENDELMAN FOCUS ON
OUT-OF-FAVOR LARGE-CAP STOCKS AND MID-SIZED COMPANIES LESS WIDELY FOLLOWED
BY WALL STREET ANALYSTS. THEY ARE PARTICULARLY PARTIAL TO "FALLEN
ANGELS" -- GROWTH STOCKS THAT HAVE EXPERIENCED TEMPORARY SETBACKS, BUT
WHOSE LONGER TERM FUNDAMENTAL OUTLOOK REMAINS STRONG. THE PORTFOLIO
MANAGEMENT TEAM VIEWS STOCKS AS PIECES OF BUSINESSES THEY WOULD LIKE TO
OWN RATHER THAN PIECES OF PAPER TO TRADE BASED ON SHORT-TERM PRICE
FLUCTUATIONS. THE GOAL IS TO FIND QUALITY COMPANIES TRADING AT A DISCOUNT
TO THEIR INTRINSIC ECONOMIC VALUE.
For the fiscal six- and twelve-month periods ended August 31, 1997, Partners
Fund returned 19.07% and 47.11%, respectively, versus the S&P "500" Index's
14.78% and 40.73% gains over the same periods (see page B-8 for comparison of a
$10,000 investment and average annual total returns as of August 31, 1997).*
In fiscal 1997, our portfolio holdings in the paper and forest products,
technology, insurance, entertainment and retail sectors performed particularly
well. Once again, our healthcare holdings lagged well behind. The major
pharmaceutical companies, which we unfortunately had to pass on due to our value
discipline, forged ahead. Returns from HMO's and biotechnology stocks that
qualified as our kind of fundamental bargains were much less inspiring.
Value investors occasionally get opportunities to buy unblemished companies
that have somehow evaded Wall Street analysts' radar screens. More often, we are
investing in good companies with real and/or perceived problems. Sometimes our
timing is fortuitous and we buy right at the bottom. Generally, however, we are
buying on the way down and patiently waiting for portfolio companies to
demonstrate they have solved their problems or for perceptions to change. Our
recent experience with cable television stocks demonstrates that patience can
indeed be a virtue.
When we began investing in cable TV operators, we knew the industry's
problems. Cable operators were seeing cash flows decline due to stiffer
competition from satellite broadcasters at a time when they needed to step up
capital expenditures to modernize their systems. We
A-21
<PAGE>
- ----------------------------------------------------------------------
Partners Fund (Cont'd)
focused on the advantages of all those two-way wires connected to American
homes. We eliminated positions in the financially weaker cable operators, but we
believed the well-financed companies, which we held onto, would find the capital
needed to upgrade systems and that new interactive services such as
video-on-demand movies and internet connection through high speed cable modems
would generate significant incremental business. We thought cable stock prices
were fully discounting the industry's problems and not at all reflecting some of
the potentially profitable developments. We waited and then waited some more for
other investors to see the value in our cable holdings. Earlier this summer,
another investor did. Recognizing that cable television lines into the home
represented the best current transmission vehicle for internet connectivity,
Microsoft Chairman Bill Gates invested $1 billion in Comcast, one of our cable
television holdings. Investors took note and the entire cable television group
took off. The second half of fiscal 1997 returns from our cable television
holdings were spectacular. When our entire holding period is factored in, the
returns from our cable TV investments were merely good. That is generally good
enough for disciplined value investors.
Our financial service sector holdings have performed well for several years.
But, we are still finding selected values in the group. When we discuss
portfolio holdings to illustrate our investment discipline, one must be aware we
reserve the right to reduce or eliminate these positions if our perspective
changes. This caveat duly noted, we believe Countrywide Credit Industries
currently represents excellent value. Countrywide is the U.S.'s second largest
originator and servicer of home mortgages. There is a lot of room for the
company to increase its market share in both businesses in what is still a very
fragmented industry. On the mortgage service side, Countrywide is a low cost
provider, making it very attractive to the banks who are outsourcing mortgage
servicing operations. The bear case on the mortgage service business is that if
interest rates trend down, mortgages will be refinanced and Countrywide's
mortgage service bookings will decline. However, with a weighted average coupon
(WAC) currently approximating rates
A-22
<PAGE>
- ----------------------------------------------------------------------
Partners Fund (Cont'd)
on a new no-point mortgage, we believe interest rates would have to come down
substantially before costing Countrywide much servicing business.
If much lower rates do spawn another refinancing boom, Countrywide could
recapture lost revenue from servicing by originating new loans. In essence, any
money coming from the left pocket could easily find its way to the right one. In
addition, Countrywide is entering new related businesses like mortgage insurance
and home appraisals, which historically have been highly profitable. Countrywide
stock is currently trading at just 11 times our 1998 earnings estimate -- a deep
discount from the current market multiple and a very reasonable price to pay for
what we think is better than average earnings growth potential.
This is the close of a very good year for Partners' Portfolio. Our value style
was productive even in an environment that for the most part still favored
growth stock investing. If the pattern we witnessed in August
continues -- investors gravitating from large-cap growth stocks to the value and
smaller capitalization sectors -- we should have the opportunity to excel in the
year ahead.
Sincerely,
<TABLE>
<S> <C>
/s/ Michael Kassen /s/ Robert Gendelman
Michael Kassen Robert Gendelman
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. Partners Fund's portfolio is invested in a wide array of stocks and no
single holding makes up more than a small fraction of the Portfolio's total
assets.
A-23
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
Neuberger&Berman
- ----------------------------------------------------------------------
Socially Responsive Fund
PORTFOLIO MANAGER JANET PRINDLE BELIEVES DOING GOOD, IS GOOD BUSINESS AND
HAS THE POTENTIAL TO PRODUCE POSITIVE INVESTMENT RESULTS. SHE FOCUSES ON
COMPANIES THAT ARE AGENTS OF FAVORABLE CHANGE IN WORKPLACE POLICIES
(PARTICULARLY FOR WOMEN AND MINORITIES); ARE GOOD CORPORATE CITIZENS; AND
ARE RESPONSIVE TO ENVIRONMENTAL ISSUES. SHE DOES NOT INVEST IN TOBACCO,
ALCOHOL, GAMBLING, NUCLEAR POWER, OR WEAPONS COMPANIES. BUT, SOCIAL
RESPONSIBILITY ALONE DOES NOT QUALIFY A COMPANY AS A GOOD INVESTMENT. TRUE
TO NEUBERGER& BERMAN'S PRINCIPLES, PORTFOLIO CANDIDATES MUST FIRST BE
FOUND TO BE FUNDAMENTALLY ATTRACTIVE. THEN, AND ONLY THEN, ARE SOCIAL
SCREENS APPLIED. THE OBJECTIVE IS SIMPLE AND STRAIGHTFORWARD -- TO SERVE
BOTH SOCIETY AND SHAREHOLDERS.
For the six- and twelve-month periods ended August 31, 1997, Socially
Responsive Fund returned 14.33% and 31.96%, respectively, compared to the
Standard & Poor's "500" Index's 14.78% and 40.73% gains over the same periods
(see page B-9 for comparison of a $10,000 investment and average annual total
returns as of August 31, 1997).*
In fiscal 1997, our retail, insurance, banking, and technology investments
were, on average, stellar performers. Our telecommunications, food and beverage,
and energy investments disappointed.
Value investing requires patience. If you do your homework and find good
companies in out-of-favor industries, patience is generally rewarded. Retail
stocks were in Wall Street's "doghouse" in 1995-96. We had the opportunity to
buy two of the best, Costco and Nordstrom, at very reasonable prices. Our little
shopping spree didn't do much for the Portfolio last year, but it produced
strong positive returns in fiscal year 1997.
We are being similarly patient with our energy investments, which as a group
lagged this year. The economics in the industry have improved as worldwide
demand has continued to outpace new production. Exploration and production
activity recently has been vigorous -- a very good sign for oil service
companies. Political instability in
A-24
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Fund (Cont'd)
oil-producing nations, weather patterns, and short-term supply/demand imbalances
will cause oil and gas prices to fluctuate. However, we believe the long-term
prospects for energy pricing and energy stock earnings are favorable.
We continue to have significant exposure to the banking sector. Our portfolio
holdings in the group performed quite well in fiscal 1997. On a fundamental
basis, we believe the stocks are still very reasonably priced. The regional bank
stocks seem particularly appealing. Earnings have been progressing quite nicely
despite a back-up in interest rates. If rates trend down from here -- the spread
between interest rates and inflation is historically high -- regional banks
could attract more investor attention. Finally, we believe consolidation in the
industry could continue. The stocks should do well on fundamentals alone and we
may even get a windfall in the form of a takeover of one or more of our regional
bank holdings.
In our shareholder letter, we like to go into detail on at least one current
portfolio holding that illustrates our investment approach. Be advised, we can
change our minds on any stock in our portfolio if deteriorating fundamentals or
price appreciation warrants it. Technology giant Intel was one of our better
performing stocks in fiscal 1997. We think it will continue to do well. As the
leading designer and manufacturer of microprocessors, Intel holds the dominant
market share in a rapidly growing industry. Enormous research and development
spending, in addition to high capital expenditures, has allowed the company to
maintain and enhance its competitive position.
Intel is also one of America's better corporate citizens. The company has a
good environmental record. It has a diverse workforce, with women and minorities
well represented. It is employee friendly, with numerous family-oriented
programs in the workplace. Finally, the company is one of the largest charitable
givers in the American corporate community.
In closing, our mandate does present special challenges. We must find not only
good companies, but also companies that are good to their
A-25
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Fund (Cont'd)
employees and society in general. If we can do so successfully, we receive a
double reward -- the gratification all portfolio managers get from taking good
care of their shareholders, and the special feeling of accomplishment from doing
so in a socially responsive manner.
Sincerely,
/s/ Janet Prindle
Janet Prindle
Portfolio Manager
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. Socially Responsive Fund's portfolio is invested in a wide array of
stocks and no single holding makes up more than a small fraction of the
Portfolio's total assets.
A-26
<PAGE>
(This page has been left blank intentionally.)
B-1
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Focus Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Focus S&P"500"(2)
1 Year 43.92% 40.73%
5 Year 21.91% 19.78%
10 Year 14.38% 13.85%
Life of Fund 12.43% 11.60%
Focus Fund S&P"500"
1987 $10,000 $10,000
1988 $8,491 $8,201
1989 $11,408 $11,418
1990 $10,983 $10,833
1991 $12,736 $13,756
1992 $14,239 $14,848
1993 $18,261 $17,104
1994 $20,152 $18,046
1995 $25,688 $21,912
1996 $26,638 $26,009
1997 $38,337 $36,602
</TABLE>
The inception date of Neuberger&Berman Focus Fund-Registered Trademark- is
10/19/55.
The Fund's name prior to January 1, 1995 was Neuberger&Berman Selected
Sectors Fund. Prior to November 1, 1991, the investment policies of Neuberger&
Berman Focus Fund required that a substantial percentage of its assets be
invested in the energy field; accordingly, performance results prior to that
time do not necessarily reflect the level of performance that may be expected
under the Fund's current investment policies. While the Fund's value-oriented
approach is intended to limit risks, the Portfolio, with its concentration in
sectors, may be more greatly affected by any single economic, political or
regulatory development than a more diversified mutual fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc.-Registered Trademark- and include reinvestment of all dividends
and capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
B-2
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Genesis Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Genesis Russell 2000-R-(2)
1 Year +44.32% +28.96%
5 Year +22.22% +19.36%
Life of Fund +16.69% +14.57%
Genesis Fund Russell 2000-R-
9/27/88 $10,000 $10,000
1989 $13,045 $12,317
1990 $10,236 $9,877
1991 $13,856 $12,963
1992 $14,562 $13,910
1993 $18,087 $18,435
1994 $18,949 $19,516
1995 $22,680 $23,581
1996 $27,516 $26,134
1997 $39,710 $33,701
</TABLE>
The inception date of Neuberger&Berman Genesis Fund-Registered Trademark- is
9/27/88.
Effective May 1, 1995, Neuberger&Berman Management Inc.-Registered Trademark-
has voluntarily agreed to waive a portion of the management fee borne directly
by Neuberger& Berman Genesis Portfolio-SM- and indirectly by Neuberger&Berman
Genesis Fund to reduce that fee by 0.10% of the Portfolio's average daily net
assets per annum. Absent such waiver, the average annual total returns would
have been less.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell 2000 Index is an unmanaged index generally considered to be
representative of the 2,000 issuers having the smallest capitalization in the
Russell 3000-Registered Trademark- Index, representing approximately 10% of the
Russell 3000 total market capitalization. The smallest company's market
capitalization is roughly $13 million. The risks involved in seeking capital
appreciation from investments principally in companies with small market
capitalization are set forth in the prospectus. Please note that indices do not
take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
B-3
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Guardian Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Guardian S&P "500"(2)
1 Year +39.69% +40.73%
5 Year +19.89% +19.78%
10 Year +14.44% +13.85%
Life of Fund +13.43% +12.84%
Guardian Fund S&P "500"
1987 $10,000 $10,000
1988 $8,931 $8,201
1989 $11,958 $11,418
1990 $10,464 $10,833
1991 $13,654 $13,756
1992 $15,550 $14,848
1993 $19,350 $17,104
1994 $21,114 $18,046
1995 $26,194 $21,912
1996 $27,574 $26,009
1997 $38,517 $36,602
</TABLE>
The inception date of Neuberger&Berman Guardian Fund-SM- is 6/1/50.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-4
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
International Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
International EAFE-R- Index(2)
1 Year +24.71% +9.36%
Life of Fund +13.33% +6.82%
International Fund EAFE-R- Index
6/15/94 $10,000 $10,000
8/31/94 $10,460 $10,366
1995 $10,732 $10,449
1996 $11,991 $11,305
1997 $14,954 $12,363
</TABLE>
The inception date of Neuberger&Berman International
Fund-Registered Trademark- is 6/15/94.
Neuberger&Berman Management Inc. ("Management") has voluntarily undertaken to
reimburse International Fund for its operating expenses and its pro rata share
of its Portfolio's operating expenses which, in the aggregate, exceed 1.70% per
annum of International Fund's average daily net assets ("Expense Limitation"),
until December 31, 1997. International Fund has agreed to repay Management
through December 31, 1998 for its excess operating expenses previously
reimbursed by Management, so long as its annual operating expenses during that
period do not exceed the Expense Limitation. Absent such reimbursement and
repayment arrangements, the average annual total returns would have been lower
and higher, respectively.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The EAFE-Registered Trademark- Index, also known as the Morgan Stanley
Capital International Europe, Australia, Far East Index, is an unmanaged index
of over 1,000 foreign stock prices. The index is translated into U.S. dollars
and includes reinvestment of all dividends and capital gain distributions. The
risks involved in seeking capital appreciation from investments principally in
companies based outside the United States are set forth in the prospectus.
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of this index
are prepared or obtained by Management and include reinvestment of all dividends
and capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
B-5
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Manhattan Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average Annual Total Return(1)
Russell Midcap-TM-
Manhattan S&P "500"(2) Growth Index 2
1 Year +38.75% +40.73% +31.23%
5 Year +17.55% +19.78% +18.56%
10 Year +11.48% +13.85% +13.18%
Life of Fund +17.50% +17.10% N/A
Russell Midcap-TM-
Manhattan Fund S&P "500" Growth Index
1987 $10,000 $10,000 $10,000
1988 $8,021 $8,201 $8,052
1989 $11,423 $11,418 $11,014
1990 $10,000 $10,833 $9,923
1991 $12,616 $13,756 $13,789
1992 $13,214 $14,848 $14,722
1993 $16,882 $17,104 $17,874
1994 $17,471 $18,046 $18,837
1995 $22,013 $21,912 $23,499
1996 $21,373 $26,009 $26,276
1997 $29,655 $36,602 $34,483
</TABLE>
The inception date of Neuberger&Berman Manhattan Fund-Registered Trademark-
is 3/1/79 when Neuberger&Berman Management Inc. first became its investment
adviser.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. Before July 1997, Neuberger&Berman Manhattan Portfolio-SM- (the "Portfolio")
was managed using a "growth at a reasonable price" investment approach. Under
this blended value and growth approach, the Portfolio Manager purchased
securities of small-, medium-, and large-capitalization companies that he
believed offered greater potential for long-term capital appreciation, in most
cases at prices reflecting relatively higher multiples to measures of economic
value (such as earnings or cash flow) compared to securities purchased by other
Neuberger&Berman Portfolios.
In July 1997, growth-style Managers Jennifer Silver and Brooke Cobb joined
Neuberger&Berman Management Inc. and assumed responsibility for the Portfolio.
Ms. Silver now heads Neuberger&Berman, LLC's new Growth Equity Group in Boston.
The Portfolio is now managed using a growth-oriented investment approach. True
to this new approach, the Managers seek securities of companies that are growing
earnings faster than the average American business, and ideally, faster than
competitors in their respective industries. In return for this perceived higher
earnings growth potential, the Managers are willing to pay a higher absolute
multiple for these securities. They do so because they believe these stocks
offer greater potential for long-term capital appreciation. Moreover, while the
Portfolio can still invest in securities of small-, medium-, and large-cap
companies, the Portfolio Managers currently intend to focus on the securities of
medium-cap companies.
B-6
<PAGE>
The S&P "500" Index is an unmanaged index generally considered to be
representative of overall stock market activity. The Russell Midcap-TM- Index,
on the other hand, measures the performance of the 800 smallest companies in the
Russell 1000-Registered Trademark- Index, which represents approximately 35% of
the total market capitalization of the Russell 1000 Index, (which in turn,
consists of the 1,000 largest U.S. Companies, based on market capitalization).
The Russell Midcap Growth Index measures the performance of those Russell Midcap
Index companies with higher price-to-book ratios and higher forecasted growth
values.
Therefore, the Portfolio prior to July 1997 was appropriately compared to the
S&P "500" Index as a benchmark. However, with its focus on medium-cap growth
stocks, the current Portfolio is more appropriately compared to the Russell
Midcap Growth Index as a benchmark.
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of these indices
are prepared or obtained by Neuberger&Berman Management Inc. and include
reinvestment of all dividends and capital gain distributions. The Portfolio
invests in many securities not included in the above-described indices.
B-7
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Partners Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Partners S&P "500"(2)
1 Year +47.11% +40.73%
5 Year +22.46% +19.78%
10 Year +14.33% +13.85%
Life of Fund +18.67% +16.25%
Partners Fund S&P "500"
1987 $10,000 $10,000
1988 $8,820 $8,201
1989 $11,615 $11,418
1990 $10,823 $10,833
1991 $12,775 $13,756
1992 $13,860 $14,848
1993 $17,761 $17,104
1994 $18,748 $18,046
1995 $22,764 $21,912
1996 $25,942 $26,009
1997 $38,165 $36,602
</TABLE>
The inception date of Neuberger&Berman Partners Fund-Registered Trademark- is
1/20/75 when Neuberger&Berman Management Inc. first became its investment
adviser.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-8
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Socially Responsive Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Socially Responsive S&P "500"(2)
1 Year +31.96% +40.73%
Life of Fund +20.03% +23.65%
Socially Responsive Fund S&P "500"
3/16/94 $10,000 $10,000
8/31/94 $10,070 $10,279
1995 $11,865 $12,481
1996 $14,261 $14,814
1997 $18,818 $20,848
</TABLE>
The inception date of Neuberger&Berman Socially Responsive
Fund-Registered Trademark- is 3/16/94.
Neuberger&Berman Management Inc. ("Management") has voluntarily undertaken to
reimburse Socially Responsive Fund for its operating expenses and its pro rata
share of its Portfolio's operating expenses which, in the aggregate, exceed
1.50% per annum of Socially Responsive Fund's average daily net assets ("Expense
Limitation"), until December 31, 1997. Socially Responsive Fund has agreed to
repay Management through March 14, 1998 for its excess operating expenses
previously reimbursed by Management, so long as its annual operating expenses
during that period do not exceed the Expense Limitation. Absent such
reimbursement and repayment arrangements, the average annual total returns would
have been lower and higher, respectively.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Management and
include reinvestment of all dividends and capital gain distributions. The
Portfolio invests in many securities not included in the above-described index.
B-9
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND FUND FUND
--------------------------------
<S> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at value (Note A) $1,410,709 $705,004 $6,475,571
Deferred organization costs (Note A) -- -- --
Receivable for Trust shares sold 2,226 13,602 8,616
--------------------------------
1,412,935 718,606 6,484,187
--------------------------------
LIABILITIES
Payable for Trust shares redeemed 480 212 6,396
Payable to administrator (Note B) 317 146 1,451
Accrued expenses 228 140 1,204
--------------------------------
1,025 498 9,051
--------------------------------
NET ASSETS at value $1,411,910 $718,108 $6,475,136
--------------------------------
NET ASSETS consist of:
Par value $ 36 $ 46 $ 206
Paid-in capital in excess of par value 688,809 506,776 3,678,882
Accumulated undistributed net investment income (loss) 1,666 -- 6,443
Accumulated net realized gains on investment 172,000 13,525 723,639
Net unrealized appreciation in value of investment 549,399 197,761 2,065,966
--------------------------------
NET ASSETS at value $1,411,910 $718,108 $6,475,136
--------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares authorized) 36,307 46,180 206,153
--------------------------------
NET ASSET VALUE, offering and redemption price per share $38.89 $15.55 $31.41
--------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-10
<PAGE>
August 31, 1997
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
SOCIALLY
INTERNATIONAL MANHATTAN PARTNERS RESPONSIVE
FUND FUND FUND FUND
--------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at value (Note A) $115,264 $570,594 $3,099,619 $59,757
Deferred organization costs (Note A) 36 -- -- 24
Receivable for Trust shares sold 246 231 6,591 238
--------------------------------------------------
115,546 570,825 3,106,210 60,019
--------------------------------------------------
LIABILITIES
Payable for Trust shares redeemed 120 38 1,307 229
Payable to administrator (Note B) 1 127 687 18
Accrued expenses 49 211 488 32
--------------------------------------------------
170 376 2,482 279
--------------------------------------------------
NET ASSETS at value $115,376 $570,449 $3,103,728 $59,740
--------------------------------------------------
NET ASSETS consist of:
Par value $ 8 $ 39 $ 98 $ 3
Paid-in capital in excess of par value 90,847 338,372 1,991,065 45,044
Accumulated undistributed net investment income (loss) (153) -- 11,889 53
Accumulated net realized gains on investment 1,816 146,083 463,047 1,408
Net unrealized appreciation in value of investment 22,858 85,955 637,629 13,232
--------------------------------------------------
NET ASSETS at value $115,376 $570,449 $3,103,728 $59,740
--------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares authorized) 7,780 39,315 98,204 3,358
--------------------------------------------------
NET ASSET VALUE, offering and redemption price per share $14.83 $14.51 $31.60 $17.79
--------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-11
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger&Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
(000'S OMITTED) FUND FUND FUND
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio (Note A) $ 13,018 $ 4,199 $ 77,248
------------------------------------------
Expenses:
Administration fee (Note B) 3,189 1,011 14,911
Amortization of deferred organization and initial offering expenses
(Note A) -- -- --
Auditing fees 8 8 8
Custodian fees 15 13 12
Legal fees 14 14 14
Registration and filing fees 36 69 178
Reimbursement of expenses assumed by administrator (Note B) -- -- --
Shareholder reports 135 75 650
Shareholder servicing agent fees (Note B) 677 374 3,799
Trustees' fees and expenses 15 7 52
Miscellaneous 11 2 33
Expenses from corresponding Portfolio (Notes A & B) 6,460 2,971 26,198
------------------------------------------
Total expenses 10,560 4,544 45,855
Expenses reduced by custodian fee and shareholder servicing
arrangements (Note B) (63) (25) (218)
------------------------------------------
Total net expenses 10,497 4,519 45,637
------------------------------------------
Net investment income (loss) 2,521 (320) 31,611
------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING
PORTFOLIO (NOTE A)
Net realized gain on investment securities 173,131 14,252 734,434
Net realized loss on option contracts written (311) -- (6,335)
Net realized gain on financial futures contracts -- -- --
Net realized gain on foreign currency transactions -- -- --
Change in net unrealized appreciation of investment securities, option
contracts written, translation of assets and liabilities in foreign
currencies, and foreign currency contracts 265,410 148,087 1,139,234
Change in net unrealized depreciation of financial futures contracts -- -- --
------------------------------------------
Net gain on investments from corresponding Portfolio (Note A) 438,230 162,339 1,867,333
------------------------------------------
Net increase in net assets resulting from operations $ 440,751 $ 162,019 $ 1,898,944
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-12
<PAGE>
For the Year Ended August 31, 1997
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
SOCIALLY
INTERNATIONAL MANHATTAN PARTNERS RESPONSIVE
FUND FUND FUND FUND
------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio (Note A) $ 1,512 $ 4,220 $37,252 $ 808
------------------------------------------------
Expenses:
Administration fee (Note B) 234 1,395 6,344 123
Amortization of deferred organization and initial offering expenses
(Note A) 20 -- -- 16
Auditing fees 8 10 8 5
Custodian fees 11 11 13 10
Legal fees 23 14 14 13
Registration and filing fees 42 47 112 29
Reimbursement of expenses assumed by administrator (Note B) 14 -- -- 131
Shareholder reports 17 114 289 18
Shareholder servicing agent fees (Note B) 73 551 1,222 61
Trustees' fees and expenses 6 9 25 2
Miscellaneous 2 13 14 1
Expenses from corresponding Portfolio (Notes A & B) 1,087 3,155 11,808 296
------------------------------------------------
Total expenses 1,537 5,319 19,849 705
Expenses reduced by custodian fee and shareholder servicing
arrangements (Note B) (4) (47) (103 ) (4)
------------------------------------------------
Total net expenses 1,533 5,272 19,746 701
------------------------------------------------
Net investment income (loss) (21) (1,052) 17,506 107
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING
PORTFOLIO (NOTE A)
Net realized gain on investment securities 1,394 170,508 490,163 1,586
Net realized loss on option contracts written -- -- -- --
Net realized gain on financial futures contracts 51 -- -- --
Net realized gain on foreign currency transactions 923 -- -- --
Change in net unrealized appreciation of investment securities, option
contracts written, translation of assets and liabilities in foreign
currencies, and foreign currency contracts 17,007 5,870 417,398 11,253
Change in net unrealized depreciation of financial futures contracts (793) -- -- --
------------------------------------------------
Net gain on investments from corresponding Portfolio (Note A) 18,582 176,378 907,561 12,839
------------------------------------------------
Net increase in net assets resulting from operations $18,561 $175,326 $925,067 $12,946
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger&Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
FOCUS FUND GENESIS FUND
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1996 1997 1996
------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 2,521 $ 7,300 $ (320) $ (244)
Net realized gain on investments from corresponding Portfolio (Note A) 172,820 52,014 14,252 4,476
Change in net unrealized appreciation (depreciation) of investments
from corresponding Portfolio (Note A) 265,410 (22,215) 148,087 21,117
------------------------------------------
Net increase (decrease) in net assets resulting from operations 440,751 37,099 162,019 25,349
------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (8,010) (3,873) -- --
Net realized gain on investments (52,068) (47,524) (3,645) (6,609)
------------------------------------------
Total distributions to shareholders (60,078) (51,397) (3,645) (6,609)
------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 214,044 349,715 482,993 112,606
Proceeds from reinvestment of dividends and distributions 53,255 44,921 3,444 5,892
Payments for shares redeemed (307,442) (264,997) (122,082) (53,380)
------------------------------------------
Net increase (decrease) from Trust share transactions (40,143) 129,639 364,355 65,118
------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 340,530 115,341 522,729 83,858
NET ASSETS:
Beginning of year 1,071,380 956,039 195,379 111,521
------------------------------------------
End of year $1,411,910 $1,071,380 $718,108 $195,379
------------------------------------------
Accumulated undistributed net investment income (loss) at end of year $ 1,666 $ 7,155 $ -- $ --
------------------------------------------
NUMBER OF TRUST SHARES:
Sold 6,453 12,148 37,602 10,855
Issued on reinvestment of dividends and distributions 1,718 1,608 288 628
Redeemed (9,505) (9,219) (9,618) (5,295)
------------------------------------------
Net increase (decrease) in shares outstanding (1,334) 4,537 28,272 6,188
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-14
<PAGE>
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
GUARDIAN FUND INTERNATIONAL FUND MANHATTAN FUND
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1997 1996 1997 1996 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 31,611 $ 63,499 $ (21) $ 97 $ (1,052) $ (1,623)
Net realized gain on investments from corresponding
Portfolio (Note A) 728,099 283,379 2,368 609 170,508 57,804
Change in net unrealized appreciation (depreciation) of
investments from corresponding Portfolio (Note A) 1,139,234 (119,590) 16,214 3,964 5,870 (70,811)
------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,898,944 227,288 18,561 4,670 175,326 (14,630)
------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (49,597) (53,306) (111) (125) -- --
Net realized gain on investments (252,628) (139,952) -- -- (67,073) (43,799)
------------------------------------------------------------------
Total distributions to shareholders (302,225) (193,258) (111) (125) (67,073) (43,799)
------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 999,314 1,770,255 90,517 39,066 92,313 136,492
Proceeds from reinvestment of dividends and distributions 279,571 175,356 96 106 61,291 40,659
Payments for shares redeemed (1,305,637) (1,021,992) (50,675) (13,165) (207,647) (214,451)
------------------------------------------------------------------
Net increase (decrease) from Trust share transactions (26,752) 923,619 39,938 26,007 (54,043) (37,300)
------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 1,569,967 957,649 58,388 30,552 54,210 (95,729)
NET ASSETS:
Beginning of year 4,905,169 3,947,520 56,988 26,436 516,239 611,968
------------------------------------------------------------------
End of year $ 6,475,136 $ 4,905,169 $115,376 $ 56,988 $ 570,449 $ 516,239
------------------------------------------------------------------
Accumulated undistributed net investment income (loss) at
end of year $ 6,443 $ 24,429 $ (153) $ 26 $ -- $ --
------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 36,707 74,621 6,581 3,475 7,177 10,683
Issued on reinvestment of dividends and distributions 10,821 7,570 7 10 5,234 3,349
Redeemed (47,659) (43,128) (3,592) (1,172) (16,326) (16,906)
------------------------------------------------------------------
Net increase (decrease) in shares outstanding (131) 39,063 2,996 2,313 (3,915) (2,874)
------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
Neuberger&Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
SOCIALLY
PARTNERS FUND RESPONSIVE FUND
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1996 1997 1996
-----------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 17,506 $ 16,484 $ 107 $ 34
Net realized gain on investments from corresponding Portfolio (Note A) 490,163 232,938 1,586 1,075
Change in net unrealized appreciation (depreciation) of investments
from corresponding Portfolio (Note A) 417,398 (30,428) 11,253 962
-----------------------------------------
Net increase (decrease) in net assets resulting from operations 925,067 218,994 12,946 2,071
-----------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (17,551) (13,359) (82) (17)
Net realized gain on investments (208,212) (180,347) (1,152) (268)
-----------------------------------------
Total distributions to shareholders (225,763) (193,706) (1,234) (285)
-----------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 798,352 457,620 30,166 25,132
Proceeds from reinvestment of dividends and distributions 214,033 181,772 1,124 254
Payments for shares redeemed (479,905) (356,696) (16,186) (2,471)
-----------------------------------------
Net increase (decrease) from Trust share transactions 532,480 282,696 15,104 22,915
-----------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 1,231,784 307,984 26,816 24,701
NET ASSETS:
Beginning of year 1,871,944 1,563,960 32,924 8,223
-----------------------------------------
End of year $3,103,728 $1,871,944 $ 59,740 $32,924
-----------------------------------------
Accumulated undistributed net investment income (loss) at end of year $ 11,889 $ 11,934 $ 53 $ 28
-----------------------------------------
NUMBER OF TRUST SHARES:
Sold 29,056 19,230 1,925 1,843
Issued on reinvestment of dividends and distributions 8,450 8,210 74 19
Redeemed (17,682) (14,990) (1,013) (184)
-----------------------------------------
Net increase (decrease) in shares outstanding 19,824 12,450 986 1,678
-----------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Equity Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Focus Fund ("Focus"), Neuberger&Berman Genesis Fund
("Genesis"), Neuberger&Berman Guardian Fund ("Guardian"), Neuberger&Berman
International Fund ("International"), Neuberger&Berman Manhattan Fund
("Manhattan"), Neuberger&Berman Partners Fund ("Partners"), and
Neuberger&Berman Socially Responsive Fund ("Socially Responsive")
(collectively, the "Funds") are separate operating series of Neuberger&
Berman Equity Funds (the "Trust"), a Delaware business trust organized
pursuant to a Trust Instrument dated December 23, 1992. The Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended, and its shares are registered
under the Securities Act of 1933, as amended. 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.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding Portfolio of Equity Managers
Trust (Global Managers Trust with respect to International) (each a
"Portfolio") having the same investment objective and policies as the Fund.
The value of each Fund's investment in its corresponding Portfolio reflects
that Fund's proportionate interest in the net assets of that Portfolio
(89.66%, 65.06%, 73.94%, 100.00%, 91.77%, 86.69%, and 23.32%, for Focus,
Genesis, Guardian, International, Manhattan, Partners, and Socially
Responsive, respectively, at August 31, 1997). 73.67% of Neuberger&Berman
Socially Responsive Portfolio is held by another regulated investment
company, which has only a single shareholder and is sponsored by
Neuberger&Berman Management Incorporated ("Management"). The performance of
each Fund is directly affected by the performance of its corresponding
Portfolio. The financial statements of each Portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the corresponding Fund's financial statements.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
as indicated in the notes following the Portfolios' Schedule of Investments.
3) FEDERAL INCOME TAXES: Each series of the Trust is treated as a separate
entity for Federal income tax purposes. It is the policy of each Fund to
continue to qualify as a regulated investment company by complying with the
provisions available to
B-17
<PAGE>
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of investment company
taxable income and net capital gains (after reduction for any amounts
available for Federal income tax purposes as capital loss carryforwards)
sufficient to relieve it from all, or substantially all, Federal income
taxes. Accordingly, each Fund paid no Federal income taxes and no provision
for Federal income taxes was required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net of
Portfolio expenses, daily on its investment in its corresponding Portfolio.
Dividends and distributions from net realized capital gains, if any, are
normally distributed in December. Guardian generally distributes
substantially all of its net investment income, if any, at the end of each
calendar quarter. Income dividends and capital gain distributions to
shareholders are recorded on the ex-dividend date. To the extent each Fund's
net realized capital gains, if any, can be offset by capital loss
carryforwards, it is the policy of each Fund not to distribute such gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) ORGANIZATION EXPENSES: Expenses incurred by International and Socially
Responsive in connection with their organization are being amortized on a
straight-line basis over a five-year period. At August 31, 1997, the
unamortized balance of such expenses amounted to $35,803 and $24,032, for
International and Socially Responsive, respectively.
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more Funds are allocated in
proportion to the net assets of such Funds, except where a more appropriate
allocation of expenses to each Fund can otherwise be made fairly. Expenses
directly attributable to a Fund are charged to that Fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Management as its administrator under an Administration
Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an
administration fee at the annual rate of .26% (.67% for International prior to
November 1, 1995) of that Fund's average daily net assets. Each Fund indirectly
pays for investment management services through its investment in its
corresponding
B-18
<PAGE>
Portfolio (see Note B of Notes to Financial Statements of the Portfolios). The
Agreement provides that, if with respect to any fiscal year of each Fund, its
total operating expenses plus its pro rata portion of its corresponding
Portfolio's operating expenses (including the fees payable to Management but
excluding interest, taxes, brokerage commissions, and extraordinary expenses)
("Operating Expenses") exceed the most restrictive of the expense limitations
imposed by securities laws of the states in which such Fund's shares are
qualified for sale, the administration fees for that fiscal year will be reduced
by the amount of such excess, provided that Management has no obligation to
reimburse the Fund for any such expenses that exceed the administration fee.
Effective October 11, 1996, states may no longer impose expense limitations as a
condition to the sale of mutual fund shares. The most restrictive expense
limitation applicable prior to that date, to which each Fund was subject, was
2 1/2% of the first $30 million of average daily net assets, 2% of the next $70
million of average daily net assets, and 1 1/2% of any additional average daily
net assets. No reduction in the administration fee as a result of any state
expense limitation was required for the year ended August 31, 1997.
Management has voluntarily undertaken to reimburse each of International and
Socially Responsive for its Operating Expenses which exceed, in the aggregate,
1.70% and 1.50%, respectively, per annum of its average daily net assets (the
"Expense Limitation"). Each undertaking is subject to termination by Management
after December 31, 1997. International and Socially Responsive have each agreed
to repay Management through December 31, 1998 and March 14, 1998, respectively,
for its excess Operating Expenses previously reimbursed by Management, so long
as its annual Operating Expenses during that period do not exceed the Expense
Limitation. For the year ended August 31, 1997, International and Socially
Responsive reimbursed Management $13,955 and $131,041, respectively, under this
agreement. At August 31, 1997, International has a remaining contingent
liability to Management of $346,545 under the agreement. This contingent
liability expires on December 31, 1998 for any amount not repaid by that date.
Socially Responsive had repaid all of its excess Operating Expenses to
Management, at August 31, 1997.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger&Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Several individuals who are
officers and/or trustees of the Trust are also principals of Neuberger and/or
officers and/or directors of Management.
Each Fund also has a distribution agreement with Management. Management
receives no compensation therefor and no commissions for sales or redemptions of
shares of beneficial interest of each Fund.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations
B-19
<PAGE>
under the caption Expenses from corresponding Portfolio, was a reduction of
$5,409, $3,226, $2,562, $916, $775, $3,068, and $118, for Focus, Genesis,
Guardian, International, Manhattan, Partners, and Socially Responsive,
respectively, which is less than .01% of each Fund's average daily net assets.
Each Fund has an expense offset arrangement in connection with its
shareholder servicing agent contract. The impact of this arrangement, reflected
in the Statements of Operations under the caption Shareholder servicing agent
fees, was a reduction of $57,278, $22,056, $215,695, $3,539, $46,467, $100,291,
and $3,417, for Focus, Genesis, Guardian, International, Manhattan, Partners,
and Socially Responsive, respectively, which is less than .01% of each Fund's
average daily net assets.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended August 31, 1997, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 69,668,162 $ 171,953,565
GENESIS 356,863,963 10,104,307
GUARDIAN 157,889,700 498,630,741
INTERNATIONAL 61,547,865 22,273,556
MANHATTAN 29,996,715 154,060,173
PARTNERS 434,270,782 138,643,142
SOCIALLY RESPONSIVE 21,585,746 8,035,580
</TABLE>
At August 31, 1997, Neuberger&Berman International Portfolio's cost of
investments for U.S. Federal income tax purposes was $91,445,000. Gross
unrealized appreciation of investments was $27,140,000 and gross unrealized
depreciation of investments was $3,486,000, resulting in net unrealized
appreciation of $23,654,000, based on cost for U.S. Federal income tax purposes.
B-20
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Focus Fund(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
October 1, 1992
Year Ended August 31, to August 31, Year Ended September 30,
1997(2) 1996(2) 1995(2) 1994(2) 1993(2) 1992 1991 1990 1989 1988
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $ 28.46 $ 28.88 $24.42 $24.00 $19.31 $18.91 $16.66 $19.01 $16.60 $20.10
------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .08 .19 .17 .21 .23 .29 .38 .44 .46 .46
Net Gains or Losses on
Securities (both realized
and unrealized) 12.00 .85 5.97 2.16 4.65 2.62 2.96 (1.84) 4.83 (2.98)
------------------------------------------------------------------------------------------------
Total From Investment
Operations 12.08 1.04 6.14 2.37 4.88 2.91 3.34 (1.40) 5.29 (2.52)
------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.22) (.11) (.20) (.25) (.04) (.31) (.37) (.39) (.49) (.47)
Distributions (from
capital gains) (1.43) (1.35) (1.48) (1.70) (.15) (2.20) (.72) (.56) (2.39) (.51)
------------------------------------------------------------------------------------------------
Total Distributions (1.65) (1.46) (1.68) (1.95) (.19) (2.51) (1.09) (.95) (2.88) (.98)
------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 38.89 $ 28.46 $28.88 $24.42 $24.00 $19.31 $18.91 $16.66 $19.01 $16.60
------------------------------------------------------------------------------------------------
Total Return(3) +43.92% +3.70% +27.47% +10.35% +25.39%(4) +15.51% +20.20% -7.54% +32.23% -12.44%
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year
(in millions) $1,411.9 $1,071.4 $956.0 $643.9 $573.9 $439.2 $399.2 $368.6 $441.3 $375.2
------------------------------------------------------------------------------------------------
Ratio of Gross Expenses to
Average Net Assets(5) .86% .89% -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------
Ratio of Net Expenses to
Average Net Assets .86% .89% .87% .85% .92%(6) .91% .93% .92% .99% 1.01%
------------------------------------------------------------------------------------------------
Ratio of Net Investment
Income to Average Net
Assets .21% .69% .75% .89% 1.18%(6) 1.46% 2.01% 2.34% 2.39% 2.64%
------------------------------------------------------------------------------------------------
Portfolio Turnover Rate(7) -- -- -- -- 52% 77% 60% 66% 60% 66%
------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-21
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Genesis Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period
from
August Period From
1, 1993 September
to 27,
August 1988(10) to
Year Ended August 31, 31, Year Ended July 31, July 31,
1997(2) 1996(2) 1995(2) 1994(2) 1993(2) 1993 1992 1991 1990 1989
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $10.91 $9.52 $8.27 $8.62 $8.30 $7.10 $6.41 $5.78 $ 6.25 $5.00
--------------------------------------------------------------------------------------------------------
Income From
Investment
Operations
Net Investment
Income (Loss) (.01) (.01) -- (.01) -- .01 (.01) .03 .02 .02
Net Gains or
Losses on
Securities
(both realized
and unrealized) 4.80 1.95 1.56 .42 .32 1.19 .80 .64 (.35) 1.24
--------------------------------------------------------------------------------------------------------
Total From
Investment
Operations 4.79 1.94 1.56 .41 .32 1.20 .79 .67 (.33) 1.26
--------------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from
net investment
income) -- -- -- (.01) -- -- (.01) (.04) (.02) (.01)
Distributions
(from capital
gains) (.15) (.55) (.31) (.75) -- -- (.09) -- (.12) --
--------------------------------------------------------------------------------------------------------
Total
Distributions (.15) (.55) (.31) (.76) -- -- (.10) (.04) (.14) (.01)
--------------------------------------------------------------------------------------------------------
Net Asset Value, End
of Year $15.55 $10.91 $9.52 $8.27 $8.62 $8.30 $7.10 $6.41 $ 5.78 $6.25
--------------------------------------------------------------------------------------------------------
Total Return(3) +44.32% +21.32% +19.69% +4.77% +3.86%(4) +16.90% +12.38% +11.80% -5.33% +25.24%(4)
--------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End
of Year (in
millions) $718.1 $195.4 $111.5 $135.6 $118.5 $113.5 $72.2 $27.8 $ 20.8 $18.1
--------------------------------------------------------------------------------------------------------
Ratio of Gross
Expenses to
Average Net
Assets(5) 1.17% 1.28% -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------
Ratio of Net
Expenses to
Average Net
Assets 1.16%(8) 1.28%(8) 1.35%(8) 1.36% 1.51%(6) 1.65% 2.00%(8) 2.00%(8) 2.00%(8) 2.00%(6)(8)
--------------------------------------------------------------------------------------------------------
Ratio of Net
Investment
Income (Loss)
to Average Net
Assets (.08%)(8) (.18%)(8) (.16%)(8) (.20%) (.08%)(6) .15% (.14%)(8) .60%(8) .41%(8) .51%(6)(8)
--------------------------------------------------------------------------------------------------------
Portfolio
Turnover
Rate(7) -- -- -- -- -- 54% 23% 46% 37% 10%
--------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-22
<PAGE>
FINANCIAL HIGHLIGHTS(9)
Neuberger&Berman
- --------------------------------------------------------------------------------
Guardian Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period
from
November
1, 1989
to August Year Ended
Year Ended August 31, 31, October 31,
1997(2) 1996(2) 1995(2) 1994(2) 1993(2) 1992 1991 1990 1989 1988
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 23.78 $ 23.61 $ 19.52 $ 18.57 $ 15.73 $ 14.90 $ 11.90 $13.20 $ 12.31 $ 11.08
---------------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment
Income .15 .31 .27 .24 .30 .29 .32 .31 .35 .35
Net Gains or Losses
on Securities
(both realized and
unrealized) 8.96 .90 4.30 1.41 3.45 1.71 3.20 (1.36) 2.08 2.55
---------------------------------------------------------------------------------------------------------
Total From
Investment
Operations 9.11 1.21 4.57 1.65 3.75 2.00 3.52 (1.05) 2.43 2.90
---------------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.24) (.28) (.25) (.30) (.25) (.26) (.35) (.25) (.36) (.36)
Distributions (from
capital gains) (1.24) (.76) (.23) (.40) (.66) (.91) (.17) -- (1.18) (1.31)
---------------------------------------------------------------------------------------------------------
Total
Distributions (1.48) (1.04) (.48) (.70) (.91) (1.17) (.52) (.25) (1.54) (1.67)
---------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Year $ 31.41 $ 23.78 $ 23.61 $ 19.52 $ 18.57 $ 15.73 $ 14.90 $11.90 $ 13.20 $ 12.31
---------------------------------------------------------------------------------------------------------
Total Return(3) +39.69% +5.27% +24.06% +9.12% +24.43% +13.88% +30.48% -8.08%(4) +19.91% +26.79%
---------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Year (in millions) $6,475.1 $4,905.2 $3,947.5 $2,416.5 $1,787.0 $ 802.9 $ 628.6 $496.3 $ 569.3 $ 539.1
---------------------------------------------------------------------------------------------------------
Ratio of Gross
Expenses to
Average Net
Assets(5) .80% .82% -- -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------
Ratio of Net
Expenses to
Average Net Assets .80% .82% .80% .80% .81% .82% .84% .86%(6) .84% .84%
---------------------------------------------------------------------------------------------------------
Ratio of Net
Investment Income
to Average Net
Assets .55% 1.37% 1.40% 1.36% 2.01% 1.90% 2.46% 2.89%(6) 2.59% 2.80%
---------------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate(7) -- -- -- -- 27% 41% 59% 58% 52% 73%
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-23
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
International Fund
The following table includes selected data for a share outstanding throughout
each year 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 corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
June 15, 1994(10)
Year Ended August 31, to August 31,
1997 1996 1995 1994
-----------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.91 $10.70 $10.46 $10.00
-----------------------------------------
Income From Investment Operations
Net Investment Income -- .01 .06 .01
Net Gains or Losses on Securities (both realized and
unrealized) 2.94 1.24 .21 .45
-----------------------------------------
Total From Investment Operations 2.94 1.25 .27 .46
-----------------------------------------
Less Distributions
Dividends (from net investment income) (.02) (.04) (.03) --
-----------------------------------------
Net Asset Value, End of Year $14.83 $11.91 $10.70 $10.46
-----------------------------------------
Total Return(3) +24.71% +11.73% +2.60% +4.60%(4)
-----------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $115.4 $ 57.0 $ 26.4 $ 6.2
-----------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.70% 1.70% -- --
-----------------------------------------
Ratio of Net Expenses to Average Net Assets(8) 1.70% 1.70% 1.70% 1.70%(6)
-----------------------------------------
Ratio of Net Investment Income (Loss) to Average Net
Assets(8) (.02%) .24% .73% .57%(6)
-----------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-24
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Manhattan Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Year Ended
Year Ended August 31, December 31,
1997(2) 1996(2) 1995(2) 1994(2) 1993(2) 1992 1991 1990(11) 1989 1988
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $11.94 $13.27 $11.28 $12.94 $11.59 $ 11.55 $ 9.46 $10.44 $ 9.04 $ 7.81
-------------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income
(Loss) (.03) (.04) -- .02 .02 .06 .13 .10 .18 .17
Net Gains or Losses
on Securities (both
realized and
unrealized) 4.26 (.33) 2.70 .40 3.06 .49 2.27 (1.08) 2.45 1.26
-------------------------------------------------------------------------------------------------------
Total From
Investment
Operations 4.23 (.37) 2.70 .42 3.08 .55 2.40 (.98) 2.63 1.43
-------------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) -- -- (.01) (.02) (.05) (.11) (.16) -- (.18) (.16)
Distributions (from
capital gains) (1.66) (.96) (.70) (2.06) (1.68) (.40) (.15) -- (1.05) (.04)
-------------------------------------------------------------------------------------------------------
Total Distributions (1.66) (.96) (.71) (2.08) (1.73) (.51) (.31) -- (1.23) (.20)
-------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Year $14.51 $11.94 $13.27 $11.28 $12.94 $ 11.59 $ 11.55 $ 9.46 $ 10.44 $ 9.04
-------------------------------------------------------------------------------------------------------
Total Return(3) +38.75% -2.91% +26.00% +3.49% +27.76% +4.74% +26.17% -9.39%(4) +29.09% +18.31%
-------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Year (in millions) $570.4 $516.2 $612.0 $510.3 $537.6 $ 400.7 $ 429.0 $355.6 $ 404.7 $ 341.7
-------------------------------------------------------------------------------------------------------
Ratio of Gross
Expenses to Average
Net Assets(5) .99% .98% -- -- -- -- -- -- -- --
-------------------------------------------------------------------------------------------------------
Ratio of Net Expenses
to Average Net
Assets .98% .98% .98% .96% 1.04% 1.07% 1.09% 1.14%(6) 1.12% 1.18%
-------------------------------------------------------------------------------------------------------
Ratio of Net
Investment Income
(Loss) to Average
Net Assets (.20%) (.27%) .03% .16% .20% .57% 1.28% 1.44%(6) 1.60% 1.55%
-------------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate(7) -- -- -- -- 76%(6) 83% 78% 91%(6) 77% 70%
-------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-25
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Partners Fund
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
July 1, 1993
to August
Year Ended August 31, 31, Year Ended June 30,
1997(2) 1996(2) 1995(2) 1994(2) 1993(2) 1993 1992 1991 1990 1989 1988
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $ 23.88 $ 23.72 $ 21.32 $ 22.46 $ 20.98 $ 18.96 $17.80 $18.11 $19.04 $16.84 $20.83
------------------------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment
Income .19 .22 .17 .10 .02 .16 .23 .50 .83 .71 .55
Net Gains or Losses
on Securities
(both realized and
unrealized) 10.36 2.84 3.94 1.07 1.46 3.84 2.05 .27 .68 2.14 (1.05)
------------------------------------------------------------------------------------------------------
Total From
Investment
Operations 10.55 3.06 4.11 1.17 1.48 4.00 2.28 .77 1.51 2.85 (.50)
------------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.22) (.20) (.11) (.11) -- (.19) (.34) (.74) (.76) (.65) (.70)
Distributions (from
capital gains) (2.61) (2.70) (1.60) (2.20) -- (1.79) (.78) (.34) (1.68) -- (2.79)
------------------------------------------------------------------------------------------------------
Total
Distributions (2.83) (2.90) (1.71) (2.31) -- (1.98) (1.12) (1.08) (2.44) (.65) (3.49)
------------------------------------------------------------------------------------------------------
Net Asset Value, End of
Year $ 31.60 $ 23.88 $ 23.72 $ 21.32 $ 22.46 $ 20.98 $18.96 $17.80 $18.11 $19.04 $16.84
------------------------------------------------------------------------------------------------------
Total Return(3) +47.11% +13.86% +21.53% +5.56% +7.05%(4) +21.78% +13.23% +5.14% +8.11% +17.59% -2.73%
------------------------------------------------------------------------------------------------------
Ratios/Supplemental
Data
Net Assets, End of
Year (in millions) $3,103.7 $1,871.9 $1,564.0 $1,335.9 $1,185.1 $1,085.6 $852.9 $823.5 $793.8 $743.0 $718.8
------------------------------------------------------------------------------------------------------
Ratio of Gross
Expenses to
Average Net
Assets(5) .81% .84% -- -- -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------
Ratio of Net
Expenses to
Average Net Assets .81% .84% .83% .81% .84%(6) .86% .86% .88% .91% .97% .95%
------------------------------------------------------------------------------------------------------
Ratio of Net
Investment Income
to Average Net
Assets .72% .93% .83% .48% .59%(6) .83% 1.23% 2.84% 4.53% 3.96% 3.28%
------------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate(7) -- -- -- -- 6% 82% 97% 161% 136% 157% 210%
------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-26
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Socially Responsive Fund
The following table includes selected data for a share outstanding throughout
each year 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 corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 16, 1994(10)
Year Ended August 31, to August 31,
1997 1996 1995 1994
------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.88 $11.84 $10.07 $10.00
------------------------------------------
Income From Investment Operations
Net Investment Income .03 .02 .03 .01
Net Gains or Losses on Securities (both
realized and unrealized) 4.33 2.35 1.76 .06
------------------------------------------
Total From Investment Operations 4.36 2.37 1.79 .07
------------------------------------------
Less Distributions
Dividends (from net investment income) (.03) (.02) (.02) --
Distributions (from capital gains) (.42) (.31) -- --
------------------------------------------
Total Distributions (.45) (.33) (.02) --
------------------------------------------
Net Asset Value, End of Year $17.79 $13.88 $11.84 $10.07
------------------------------------------
Total Return(3) +31.96% +20.19% +17.82% +0.70%(4)
------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 59.7 $ 32.9 $ 8.2 $ 2.3
------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) 1.49% 1.50% -- --
------------------------------------------
Ratio of Net Expenses to Average Net Assets(8) 1.48% 1.50% 1.51% 1.50%(6)
------------------------------------------
Ratio of Net Investment Income to Average Net
Assets(8) .23% .19% .36% .50%(6)
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-27
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Equity Funds
1) Prior to January 1, 1995, its name was Neuberger&Berman Selected Sectors
Fund.
2) The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
income and expenses.
3) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. For International and
Socially Responsive, total return would have been lower if Management and/or
BNP-N&B Global Asset Management L.P. had not reimbursed certain expenses. For
Genesis, total return would have been lower if Management had not waived a
portion of the management fee.
4) Not annualized.
5) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without expense reductions related to expense
offset arrangements. For Genesis, International, and Socially Responsive,
these ratios include expense repayment arrangements or management fee waiver.
6) Annualized.
7) Each Fund (except International and Socially Responsive) transferred all of
its investment securities into its respective Portfolio on August 2, 1993.
After that date each Fund invested only in its corresponding Portfolio, and
that Portfolio, rather than the Fund, engaged in securities transactions.
Therefore, after that date no Fund had a portfolio turnover rate. Portfolio
turnover rates for periods ending after August 2, 1993 are included in the
Financial Highlights for each Portfolio, which appear elsewhere in this
report.
8) After reimbursement of expenses by Management. Had Management not undertaken
such action the annualized ratios to average daily net assets would have
been:
<TABLE>
<CAPTION>
Period From
Year Ended September 27, 1988
July 31, to July 31,
GENESIS 1991 1990 1989
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses 2.16% 2.40% 3.79%
-------------------------------------------
Net Investment Income (Loss) .44% .01% (1.28%)
-------------------------------------------
</TABLE>
B-28
<PAGE>
Had Genesis not reimbursed Management, the annualized ratios to average
daily net assets would have been:
<TABLE>
<CAPTION>
Year Ended
July 31,
1992
- ------------------------------------------------------------
<S> <C>
Expenses 1.65%
-----
Net Investment Income .21%
-----
</TABLE>
Had Management not waived a portion of the management fee borne directly
by Neuberger&Berman Genesis Portfolio (see Note B of Notes to Financial
Statements of the Portfolios) the annualized ratios to average daily net
assets would have been:
<TABLE>
<CAPTION>
Year Ended
August 31,
1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.26% 1.38% 1.38%
----------------------------
Net Investment Loss (.18%) (.28%) (.19%)
----------------------------
</TABLE>
After reimbursement of expenses by Management as described in Note B of
Notes to Financial Statements. Had Management not undertaken such action the
annualized ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
Year Ended June 15, 1994
August 31, to August 31,
INTERNATIONAL 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 2.28% 2.31% 2.50%
------------------------------------
Net Investment Income (Loss) (.34%) .12% (.23%)
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
Year Ended March 16, 1994
August 31, to August 31,
SOCIALLY RESPONSIVE 1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.69% 2.50% 2.50%
------------------------------------
Net Investment Income (Loss) .00% (.63%) (.50%)
------------------------------------
</TABLE>
Had International not reimbursed Management, the annualized ratios to
average daily net assets would have been:
<TABLE>
<CAPTION>
Year Ended
August 31,
1997
- ------------------------------------------------------------
<S> <C>
Net Expenses 1.69%
-----
Net Investment Loss (.01%)
-----
</TABLE>
B-29
<PAGE>
Had Socially Responsive not reimbursed Management, the annualized ratios
to average daily net assets would have been:
<TABLE>
<CAPTION>
Year Ended
August 31,
1997
- ------------------------------------------------------------
<S> <C>
Net Expenses 1.20%
-----
Net Investment Income .51%
-----
</TABLE>
9) Adjusted for a 200% stock dividend effective January 20, 1993.
10) The date investment operations commenced.
11) For the eight-month period ended August 31, 1990.
B-30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Neuberger&Berman Equity Funds and
Shareholders of Neuberger&Berman Manhattan Fund and
Neuberger&Berman Socially Responsive Fund
We have audited the accompanying statements of assets and liabilities of
Neuberger&Berman Manhattan Fund and Neuberger&Berman Socially Responsive Fund
(collectively the "Funds"), as of August 31, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger&Berman Manhattan Fund and Neuberger&Berman Socially Responsive Fund as
of August 31, 1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and the financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
B-31
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger&Berman Equity Funds and
Shareholders of:
Neuberger&Berman Focus Fund
Neuberger&Berman Genesis Fund
Neuberger&Berman Guardian Fund
Neuberger&Berman International Fund and
Neuberger&Berman Partners Fund
We have audited the accompanying statements of assets and liabilities of the
Neuberger&Berman Focus Fund, Neuberger&Berman Genesis Fund, Neuberger& Berman
Guardian Fund, Neuberger&Berman International Fund, and Neuberger& Berman
Partners Fund, five of the series comprising Neuberger&Berman Equity Funds (the
"Trust"), as of August 31, 1997, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Neuberger&Berman Equity Funds at August 31,
1997, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 3, 1997
B-32
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Compaq Computer 5.5%
2. 3Com Corp. 4.3%
3. Aetna Inc. 4.0%
4. General Motors 3.9%
5. CITICORP 3.8%
6. ADVANTA Corp. Class A 3.6%
7. Foundation Health Systems 3.5%
8. Travelers Group 3.3%
9. Countrywide Credit Industries 3.2%
10. Banc One 3.1%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (98.1%)
AUTOMOTIVE (7.0%)
1,370,000 Chrysler Corp. $ 48,121
981,000 General Motors 61,558
------------
109,679
------------
FINANCIAL SERVICES (38.5%)
380,000 ACE Ltd. 31,587
1,691,500 ADVANTA Corp. Class A 56,031 (2)
195,300 Associates First Capital 11,340
900,000 Banc One 48,263
365,200 BankBoston Corp. 30,357
940,000 Capital One Financial 36,190
466,200 CITICORP 59,499
1,515,000 Countrywide Credit Industries 51,037
986,000 Fannie Mae 43,384
1,225,000 Federal Home Loan Mortgage 39,889
242,000 Hartford Financial Services
Group 19,299
570,000 Merrill Lynch 35,055
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
569,300 Morgan Stanley, Dean Witter,
Discover $ 27,398
525,600 PartnerRe Ltd. 20,893
307,500 Providian Corp. 11,454
222,000 St. Paul Cos. 16,289
162,000 Transamerica Corp. 15,967
820,000 Travelers Group 52,070
------------
606,002
------------
HEALTH CARE (14.9%)
652,600 Aetna Inc. 62,283
1,743,000 Foundation Health Systems 55,449 (3)
230,000 PacifiCare Health Systems
Class B 15,726
934,500 Sierra Health Services 30,780 (2)(3)
519,300 United Healthcare 25,251
838,000 Wellpoint Health Networks 45,566 (3)
------------
235,055
------------
HEAVY INDUSTRY (9.1%)
1,285,000 AGCO Corp. 41,762
1,045,000 DT Industries 31,089 (2)
604,100 Harnischfeger Industries 24,240
297,500 Ispat International 7,977 (3)
804,600 UCAR International 37,967 (3)
------------
143,035
------------
RETAIL (8.3%)
600,000 Barnes & Noble 27,862 (3)
1,925,000 Furniture Brands International 33,928 (3)
1,298,000 Neiman-Marcus Group 40,076 (3)
434,800 Payless ShoeSource 27,882 (3)
------------
129,748
------------
TECHNOLOGY (18.8%)
1,340,000 3Com Corp. 66,916 (3)
200,000 Applied Materials 18,875 (3)
242,000 Arrow Electronics 14,868 (3)
</TABLE>
B-33
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Focus Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
585,000 Atmel Corp. $ 20,694(3)
976,000 Cabletron Systems 29,524(3)
1,312,500 Compaq Computer 85,969(3)(4)
449,000 Gateway 2000 17,567(3)
550,000 Rational Software 9,075(3)
950,000 Silicon Valley Group 32,063(3)
------------
295,551
------------
TRANSPORTATION (1.5%)
644,000 Continental Airlines Class B 23,586 (3)
------------
TOTAL COMMON STOCKS (COST
$955,133) 1,542,656
------------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES (2.9%)
$46,120,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $46,120) $ 46,120(5)
------------
TOTAL INVESTMENTS (101.0%)
(COST $1,001,253) 1,588,776(6)
Liabilities, less cash,
receivables and other assets
[(1.0%)] (15,335)
------------
TOTAL NET ASSETS (100.0%) $1,573,441
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-34
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Thiokol Corp. 2.9%
2. Pride International 2.8%
3. BMC Industries 2.2%
4. Bank United 2.1%
5. Texas Industries 2.0%
6. Data General 1.9%
7. AAR Corp. 1.9%
8. Dallas Semiconductor 1.8%
9. Webster Financial 1.6%
10. AptarGroup Inc. 1.6%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (93.7%)
AEROSPACE (10.4%)
617,600 AAR Corp. $ 20,728
140,800 Alliant Techsystems 9,090 (3)
947,000 Aviall Inc. 15,507
154,700 BE Aerospace 5,492 (3)
401,500 DONCASTERS PLC ADR 10,339 (3)
199,900 Ducommun Inc. 7,446 (3)
171,200 Hexcel Corp. 4,762 (3)
79,300 Moog, Inc. Class A 2,885 (3)
257,300 Orbital Sciences 5,580 (3)
390,100 Thiokol Corp. 31,062
------------
112,891
------------
AUTOMOTIVE (1.3%)
144,500 Donaldson Co. 6,448
67,800 Monaco Coach 1,678 (3)
135,900 Tower Automotive 6,099 (3)
------------
14,225
------------
BANKING & FINANCIAL (13.3%)
642,400 Bank United 23,207 (3)
112,250 Charter One Financial 6,103
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
90,400 Coast Savings Financial $ 4,164(3)
95,900 Colonial BancGroup 2,523
121,500 Community First Bankshares 4,951
185,000 Cullen/Frost Bankers 8,232
211,600 Dime Community Bancorp 4,153
166,700 First Commerce 8,898
583,000 Golden State Bancorp 16,834
119,600 Long Island Bancorp 4,769
78,300 North Fork Bancorp 1,953
112,700 Ocean Financial 3,789
65,377 ONBANCorp, Inc. 3,400
218,500 Peoples Heritage Financial
Group 8,139
89,450 Queens County Bancorp 4,819
202,600 Reliance Bancorp 6,243
458,450 Sterling Bancshares 8,252
264,750 Texas Regional Bancshares 6,751
325,800 Webster Financial 17,227
------------
144,407
------------
BUILDING, CONSTRUCTION & FURNISHINGS (3.6%)
656,100 Apogee Enterprises 14,352
73,000 Lincoln Electric Class A 2,847
659,600 Texas Industries 21,973
------------
39,172
------------
CHEMICALS (0.8%)
334,100 Lawter International 4,385
201,000 Lilly Industries 4,447
------------
8,832
------------
COMMUNICATIONS (0.6%)
175,100 Black Box 6,369 (3)
------------
CONSUMER PRODUCTS & SERVICES (5.2%)
120,073 Block Drug 5,703
124,100 Bush Boake Allen 3,863 (3)
</TABLE>
B-35
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
368,800 Coachmen Industries $ 6,823
427,400 First Brands 10,658
3,400 Marcus Corp. 84
579,500 Prime Hospitality 11,011(3)
645,000 Richfood Holdings 14,513
125,000 The First Years 3,156
------------
55,811
------------
DIAGNOSTIC EQUIPMENT (1.2%)
683,100 ADAC Laboratories 13,406
------------
ELECTRONICS (3.7%)
224,800 Continental Circuits 4,496 (3)
496,100 Dallas Semiconductor 19,007
79,400 Kent Electronics 2,973 (3)
70,000 Nu Horizons 551 (3)
84,943 Pioneer Standard Electronics 1,274
302,600 SCI Systems 11,896 (3)
------------
40,197
------------
ENERGY (4.4%)
286,400 Apache Corp. 11,367
157,300 Aquila Gas Pipeline 1,642
182,500 Cairn Energy USA 2,087 (3)
701,900 Coho Energy 6,844 (3)
121,800 Cross Timbers Oil 2,626
54,200 Ocean Energy 3,486
243,800 Offshore Energy Development 1,310 (3)
410,900 Swift Energy 10,658 (3)
564,400 Unit Corp. 7,584 (3)
------------
47,604
------------
HEALTH CARE (6.7%)
460,200 Ballard Medical Products 10,642
110,000 CONMED Corp. 2,049 (3)
168,000 Haemonetics Corp. 3,066 (3)
749,800 Kinetic Concepts 13,778
235,500 Patterson Dental 8,331 (3)
151,900 Sofamor Danek Group 7,282 (3)
90,000 STAAR Surgical 1,530 (3)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
266,500 Sullivan Dental Products $ 6,862
375,200 Trigon Healthcare 8,958(3)
232,500 Universal Health Services
Class B 10,186(3)
------------
72,684
------------
INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (7.8%)
115,000 Alamo Group 2,530
752,800 BMC Industries 23,431
108,500 Dionex Corp. 5,073 (3)
142,850 Holophane Corp. 3,321 (3)
228,400 Kaydon Corp. 13,490
134,100 Libbey Inc. 5,146
332,000 NN Ball & Roller 4,067
119,900 Pameco Corp. 2,308 (3)
107,000 Pentair, Inc. 3,812
81,600 Roper Industries 2,305
139,900 SOS Staffing Services 2,396 (3)
154,800 W.H. Brady 4,702
127,100 Wallace Computer Services 3,940
168,100 Wolverine Tube 5,400 (3)
155,750 Woodhead Industries 2,881
------------
84,802
------------
INSURANCE (2.0%)
94,400 Allied Group 4,177
210,300 FBL Financial Group 6,730 (3)
81,000 Orion Capital 3,443
178,000 Penn-America Group 3,248
109,400 Trenwick Group 3,979
------------
21,577
------------
MACHINERY & EQUIPMENT (1.6%)
119,800 Allied Products 4,231
536,700 Stewart & Stevenson Services 13,082
------------
17,313
------------
</TABLE>
B-36
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
OFFICE EQUIPMENT (0.0%)
14,960 DH Technology $ 254 (3)
------------
OIL SERVICES (16.6%)
208,200 Cal Dive International 7,079 (3)
178,800 Cliffs Drilling 8,527 (3)
138,800 Dawson Production Services 2,602 (3)
217,100 Dreco Energy Services 11,941 (3)
322,000 Falcon Drilling 10,143 (3)
145,000 Friede Goldman International 5,836 (3)
265,200 Global Industries 9,663 (3)
187,700 Hvide Marine 5,795 (3)
399,500 Nabors Industries 13,758 (3)
238,300 National-Oilwell 14,670 (3)
480,700 Oceaneering International 11,206 (3)
742,500 Offshore Logistics 13,551 (3)
940,500 Pride International 30,096
142,400 Smith International 10,360 (3)
224,400 Trico Marine Services 6,956 (3)
192,600 Tuboscope Inc. 5,369 (3)
108,400 UTI Energy 8,306 (3)
213,700 Willbros Group 3,686 (3)
------------
179,544
------------
PACKING & CONTAINERS (1.6%)
302,200 AptarGroup Inc. 16,999
------------
PUBLISHING & BROADCASTING (0.5%)
87,500 McClatchy Newspapers 2,636
45,666 Pulitzer Publishing 2,400
------------
5,036
------------
REAL ESTATE (2.8%)
197,100 CCA Prison Realty Trust 6,529 (3)
26,800 Crescent Operating 432
359,500 Crescent Real Estate Equities 11,369
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
470,100 Prime Retail $ 6,787
219,400 SL Green Realty 5,225(3)
------------
30,342
------------
RETAILING (0.9%)
228,900 99 Cents Only Stores 7,353 (3)
119,000 Schultz Sav-O Stores 2,901
------------
10,254
------------
TECHNOLOGY (7.8%)
176,600 Analysts International 6,049
935,900 Auspex Systems 10,295 (3)
1,378,700 Borland International 12,236 (3)
267,400 CACI International 4,512 (3)
134,700 Computer Data Systems 4,108
578,900 Data General 20,804 (3)
300,000 Methode Electronics Class A 7,125
706,700 Reynolds & Reynolds 14,222
159,000 Zebra Technologies 4,671 (3)
------------
84,022
------------
TEXTILES & APPAREL (0.5%)
124,300 St. John Knits 5,236
------------
TRANSPORTATION, SHIPPING & FREIGHT (0.4%)
78,375 Air Express International 2,381
213,600 Maritrans Inc. 1,775
------------
4,156
------------
TOTAL COMMON STOCKS (COST
$743,618) 1,015,133
------------
PREFERRED STOCKS (0.3%)
60,000 Hvide Capital Trust, Cv.,
6.50% (COST $3,000) 3,757 (7)
------------
</TABLE>
B-37
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ------------
<C> <S> <C>
U.S. TREASURY SECURITIES (6.6%)
$71,960,000 U.S. Treasury Bills, 5.00% &
5.04%, due 9/4/97 & 10/16/97
(COST $71,731) $ 71,739
------------
SHORT-TERM CORPORATE NOTES (3.7%)
40,000,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $40,000) 40,000 (5)
------------
TOTAL INVESTMENTS (104.3%)
(COST $858,349) 1,130,629 (6)
Liabilities, less cash,
receivables and other assets
[(4.3%)] (46,978 )
------------
TOTAL NET ASSETS (100.0%) $ 1,083,651
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-38
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Compaq Computer 5.0%
2. General Motors 4.1%
3. Aetna Inc. 4.0%
4. 3Com Corp. 4.0%
5. Foundation Health Systems 3.3%
6. Banc One 3.2%
7. CITICORP 3.0%
8. Chrysler Corp. 3.0%
9. Merrill Lynch 2.3%
10. Chase Manhattan 2.2%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (89.3%)
AGRICULTURE (4.8%)
4,737,400 AGCO Corp. $ 153,966 (2)
4,160,000 IMC Global 146,380
1,592,900 Potash Corp. of Saskatchewan 117,775
------------
418,121
------------
AUTOMOTIVE (11.4%)
2,662,300 Cabot Corp. 72,881
7,380,000 Chrysler Corp. 259,223
4,893,900 Coltec Industries 109,501 (2)(3)
5,760,500 General Motors 361,471
574,000 Lear Corp. 26,296 (3)
1,815,486 LucasVarity PLC ADR 57,528
809,800 Magna International Class A 53,649
2,130,081 Mark IV Industries 53,518
------------
994,067
------------
BANKING (11.3%)
5,174,963 Banc One 277,507
1,830,000 BankBoston Corp. 152,119
1,750,000 Chase Manhattan 194,578
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
2,060,000 CITICORP $ 262,908
504,000 First Tennessee National 26,838
904,400 First Union 43,468
140,000 Wells Fargo 35,595
------------
993,013
------------
DRUGS (0.4%)
361,100 Zeneca Group ADR 34,485
------------
ELECTRONICS (2.7%)
2,866,000 Atmel Corp. 101,385 (3)
2,350,000 Teradyne, Inc. 130,865 (3)
------------
232,250
------------
ENERGY (2.3%)
2,295,700 Enron Oil & Gas 55,384
1,670,000 Unocal Corp. 65,234
788,200 Vastar Resources 33,646
1,702,000 Zeigler Coal Holding 43,507 (2)
------------
197,771
------------
FINANCIAL SERVICES (14.0%)
3,955,000 ADVANTA Corp. Class B 125,571
220,814 Alleghany Corp. 52,995 (3)
4,445,000 Capital One Financial 171,133 (2)
5,445,000 Countrywide Credit Industries 183,428 (2)
4,100,000 Fannie Mae 180,400
3,210,000 Federal Home Loan Mortgage 104,526
3,280,000 Merrill Lynch 201,720
400,000 MGIC Investment 20,125 (4)
3,715,000 Morgan Stanley, Dean Witter,
Discover 178,784
510,000 Security Capital Industrial
Trust 10,774
------------
1,229,456
------------
</TABLE>
B-39
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
FOOD PRODUCTS (0.6%)
2,224,300 IBP, Inc. $ 51,020
------------
HEALTH CARE (11.6%)
3,673,500 Aetna Inc. 350,590
9,065,800 Foundation Health Systems 288,406 (2)(3)
4,240,400 Humana Inc. 99,914 (3)
1,960,300 Mid Atlantic Medical Services 30,262 (3)
1,327,790 PacifiCare Health Systems
Class B 90,788 (3)
800,000 United Healthcare 38,900
2,226,396 Wellpoint Health Networks 121,060 (3)
------------
1,019,920
------------
HEAVY INDUSTRY (3.3%)
1,010,000 Aluminum Co. of America 83,073
1,166,900 Harnischfeger Industries 46,822
3,404,400 UCAR International 160,645 (2)(3)
------------
290,540
------------
INDUSTRIAL GOODS & SERVICES (1.7%)
1,460,200 American Standard 68,630 (3)
1,885,000 USG Corp. 80,819 (3)
------------
149,449
------------
INSURANCE (4.9%)
626,250 American International Group 59,102
1,499,800 Hartford Financial Services
Group 119,609
460,500 St. Paul Cos. 33,789
451,050 Transatlantic Holdings 31,884
2,894,066 Travelers Group 183,773
------------
428,157
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
MEDIA & ENTERTAINMENT (0.6%)
1,050,700 Harcourt General $ 49,974
147,000 Jones Intercable Inc. Class A 1,654 (3)
------------
51,628
------------
REAL ESTATE INVESTMENT TRUSTS (1.0%)
2,173,700 INMC Mortgage Holdings 52,033
1,040,000 Spieker Properties 38,675
------------
90,708
------------
RETAIL (1.1%)
1,034,400 Barnes & Noble 48,035 (3)
1,300,000 Wal-Mart Stores 46,150
------------
94,185
------------
TECHNOLOGY (16.6%)
7,000,000 3Com Corp. 349,562 (3)
1,020,000 Applied Materials 96,262 (3)
1,475,000 Arrow Electronics 90,620 (3)
1,296,600 Avnet, Inc. 89,709
5,120,000 Cabletron Systems 154,880 (3)
6,724,000 Compaq Computer 440,422 (3)(4)
625,000 Gateway 2000 24,453 (3)
500,000 KLA-Tencor 35,438 (3)
552,000 Komag, Inc. 9,695 (3)
1,735,200 National Semiconductor 59,431 (3)
1,350,000 Seagate Technology 51,553 (3)
490,000 Texas Instruments 55,676 (4)
------------
1,457,701
------------
TRANSPORTATION (1.0%)
1,510,600 Continental Airlines Class B 55,326 (3)
550,000 Union Pacific 35,715
------------
91,041
------------
TOTAL COMMON STOCKS (COST
$5,217,000) 7,823,512
------------
</TABLE>
B-40
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
PREFERRED STOCKS (0.1%)
52,430 Aetna Inc., Ser. C, Cv., 6.25% $ 4,614
125,000 PacifiCare Health Systems,
Ser. C, Cv., $1.00 3,500
------------
TOTAL PREFERRED STOCKS (COST
$7,557) 8,114
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- -----------
<C> <S> <C>
CONVERTIBLE BONDS (0.2%)
$15,000,000 International CableTel Inc.,
Cv. Sub. Notes, 7.25%, due
4/15/05 (COST $14,997) 15,075(7)
------------
U.S. TREASURY SECURITIES (10.5%)
717,980,000 U.S. Treasury Bills, 4.79% -
5.325%, due 9/4/97 -
10/16/97 716,117
15,000,000 U.S. Treasury Notes, 8.00%,
due 5/15/01 15,895
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ------------
<C> <S> <C>
$100,000,000 U.S. Treasury Bonds, 6.25%,
due 8/15/23 $ 94,625
100,000,000 U.S. Treasury Bonds, 6.00%,
due 2/15/26 91,500
------------
TOTAL U.S. TREASURY SECURITIES
(COST $923,065) 918,137
SHORT-TERM CORPORATE NOTES (0.4%)
36,480,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $36,480) 36,480(5)
------------
TOTAL INVESTMENTS (100.5%)
(COST $6,199,099) 8,801,318(6)
Liabilities, less cash,
receivables and other assets
[(0.5%)] (43,111)
------------
TOTAL NET ASSETS (100.0%) $8,758,207
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-41
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
International Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------------------------------------------------
HOLDING COUNTRY INDUSTRY PERCENTAGE
<C> <S> <C> <C> <C>
1. Novartis AG Switzerland Pharmaceutical 1.4%
2. ASM Lithography Holding-New York Netherlands Electronics 1.2%
3. Orbotech, Ltd. Israel Electronics 1.2%
4. Datacraft Asia Singapore Telecommunications 1.2%
5. Vanda Systems & Communication Holdings Hong Kong Technology 1.2%
6. Dassault Systemes ADR France Technology 1.2%
7. Misys PLC United Kingdom Technology 1.1%
8. Hansabank Ltd. Finland Banking & Financial 1.1%
9. Lukoil Holding ADR Russia Oil & Gas 1.0%
10. CANTV ADR Venezuela Telecommunications 1.0%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
COMMON STOCKS (89.7%)
ARGENTINA (1.4%)
8,770 IRSA Inversiones y
Representaciones GDR $ 390
25,000 Perez Companc ADR 413
10,000 Telefonica de Argentina ADR 347
14,570 YPF SA ADR 474
-------------
1,624
-------------
AUSTRALIA (0.2%)
37,500 QBE Insurance Group 203
-------------
AUSTRIA (0.3%)
2,300 OMV AG 303
-------------
BELGIUM (1.1%)
3,000 Barco Industries 587
8,060 Telinfo SA 428
100 UCB SA 311
-------------
1,326
-------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
BRAZIL (0.7%)
7,000 Telecomunicacoes Brasileiras
ADR $ 826
-------------
CHILE (0.3%)
12,300 Compania de Telecomunicaciones
de Chile ADR 370
-------------
CZECH REPUBLIC (0.2%)
8,000 Czech Republic Fund 109
3,650 Komercni Banka GDR 74 (7)
-------------
183
-------------
DENMARK (2.6%)
15,000 Bang & Olufsen Holding, B
Shares 849
8,840 Carli Gry International 499
6,250 Falck AS 264
7,000 NeuroSearch AS 437 (3)
</TABLE>
B-42
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
5,000 Unidanmark AS, A Shares $ 292
20,000 VT Holding, B Shares 698(3)
-------------
3,039
-------------
FINLAND (4.6%)
16,400 Aamulehti Group II 519
77,600 Hansabank Ltd. 1,291
7,750 Hartwall AB 563
7,500 Orion Group, B Shares 241
19,800 Pohjola Insurance Group, B
Shares 586
7,500 Raision Tehtaat 786
46,000 Tamro AB 279
11,000 TT Tieto, B Shares 989
-------------
5,254
-------------
FRANCE (5.4%)
8,990 Chargeurs International 533
2,800 Compagnie Generale des Eaux 312
21,000 Dassault Systemes ADR 1,365
1,000 Elf Gabon 229
1,562 Europe 1 Communication 360
800 Gevelot SA 169
4,000 Grand Optical Photoservice 649
16,720 Lagardere SCA 447
6,300 Michelin, B Shares 354
2,190 Pathe SA 409
7,000 Scor SA ADR 288
5,800 Societe Generale 720
2,500 Unilog SA 339
-------------
6,174
-------------
GERMANY (3.2%)
10,000 Altana AG 750
8,000 Hoechst AG 317
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
9,000 Kiekert AG $ 374
1,600 Plettac AG 355
14,000 Rofin-Sinar Technologies 241(3)
8,400 SGL Carbon 1,042
900 Volkswagen AG 646
-------------
3,725
-------------
HONG KONG (4.2%)
822,000 ASM Pacific Technology 594
45,000 Cheung Kong Holdings 476
1,140,000 Founder Hong Kong 1,008
30,000 HSBC Holdings 914
34,000 Hutchison Whampoa 283
100,000 Kwong On Bank 148
2,410,000 Vanda Systems & Communication
Holdings 1,368
-------------
4,791
-------------
HUNGARY (1.0%)
3,260 EGIS Rt. EDR 152 (3)
15,850 OTP Bank GDR 475
1,950 Richter Gedeon GDR 186 (7)
3,500 Richter Gedeon GDR 334
-------------
1,147
-------------
INDIA (0.6%)
35,000 Videsh Sanchar Nigam GDR 517 (3)(7)
9,700 Videsh Sanchar Nigam GDR 144 (3)
-------------
661
-------------
INDONESIA (0.5%)
325,000 Fiskar Agung Perkasa 165
6,000 Indosat ADR 130
</TABLE>
B-43
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
507,500 Jakarta International Hotels &
Development $ 254
4,000 Telekomunikasi Indonesia ADR 79
-------------
628
-------------
IRELAND (0.8%)
30,000 Adare Printing Group 316
110,272 Greencore Group 563
-------------
879
-------------
ISRAEL (4.2%)
19,500 Formula Systems 432 (3)
20,000 Memco Software 388 (3)
20,000 NICE-Systems ADR 799
28,200 Orbotech, Ltd. 1,406 (3)
56,500 Orckit Communications 791 (3)
29,000 Tecnomatix Technologies 990 (3)
-------------
4,806
-------------
ITALY (1.9%)
75,000 BPM 400
50,000 ENI SpA 279
189,380 Finanziaria Autogrill 468
45,975 IFI Istituto Finanziario 522
3,000 Luxottica Group ADR 175
93,023 Telecom Italia 328
-------------
2,172
-------------
JAPAN (9.4%)
5,600 Acom Co. 264
11,700 Advantest Corp. 1,066
4,700 AFLAC, Inc. 259
15,000 Ariake Japan 535
18,000 Banyu Pharmaceutical 301
10,000 Circle K Japan 500
19,000 Fuji Photo Film 730
10,010 Fujimi, Inc. 559
15,000 Konami Co. 464
6,000 Kyocera Corp. 377
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
7,000 Micronics Japan $ 339
19,000 Mitsumi Electric 411
5,500 Nintendo Corp. 453
16,000 Noritsu Koki 652
13,000 Sankyo Co. 394
10,350 Shin-Etsu Chemical 264
375 Shinkawa 9
8,700 SMC Corp. 727
12,800 Sony Corp. 1,113
10,000 Taisho Pharmaceutical 244
25,000 Taiyo Yuden 292
22,000 Takeda Chemical Industries 585
15,000 Terumo Corp. 273
-------------
10,811
-------------
KOREA (0.1%)
1,718 Samsung Electronics 135 (3)
-------------
MALAYSIA (0.2%)
21,000 Malayan Banking 139
37,400 Malaysian Assurance Alliance 109
-------------
248
-------------
MEXICO (3.5%)
101,859 ALFA, SA, A Shares 780
65,000 Cemex SA, B Shares 358 (3)
16,000 Coca-Cola FEMSA ADR 764
14,645 Desc SA ADR 487
83,000 Fomento Economico Mexicano, B
Shares 576
81,600 Gruma SA, B Shares 364 (3)
23,000 Panamerican Beverages, A
Shares 691
-------------
4,020
-------------
NETHERLANDS (4.4%)
13,000 Aegon NV-New York 965
16,800 ASM Lithography Holding-New
York 1,428
20,148 Getronics NV 610
8,300 Gucci Group-New York 505
</TABLE>
B-44
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
12,000 Hunter Douglas $ 502
14,000 Koninklijke Nedlloyd Groep 415
6,500 Vendex International 326
14,000 VNU Verenigd Bezit 292
-------------
5,043
-------------
NEW ZEALAND (0.4%)
13,000 Telecom of New Zealand ADR 510
-------------
NORWAY (2.6%)
29,000 Merkantildata ASA 738
10,000 Petroleum Geo-Services ADR 607
40,000 Saevik Supply 533 (3)
21,800 Schibsted ASA 371
33,400 Tomra Systems 760
-------------
3,009
-------------
PERU (0.8%)
421,000 Telefonica del Peru, B Shares 984
-------------
PHILIPPINES (0.2%)
1,003,500 International Container
Terminal Services 213
-------------
RUSSIA (3.2%)
30,000 Gazprom ADR 581 (3)(7)
12,500 Lukoil Holding ADR 1,125
7,000 Tatneft ADR 886 (3)(7)
55,000 Trade House GUM ADR 440
18,700 Vimpel-Communications ADR 640 (3)
-------------
3,672
-------------
SINGAPORE (3.3%)
220,000 Amtek Engineering 294
424,000 Datacraft Asia 1,399
84,000 Elec & Eltek International 605
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
39,000 United Overseas Bank-Foreign $ 301
250,000 Venture Manufacturing 908
90,000 Want Want Holdings 279
18,000 Want Want Holdings, New 54(3)
-------------
3,840
-------------
SPAIN (2.5%)
21,900 Banco Bilbao Vizcaya 586
19,200 Banco Santander 533
17,200 Empresa Nacional de
Electricidad ADR 340
10,000 Tele Pizza 593 (3)
10,500 Telefonica de Espana ADR 816
-------------
2,868
-------------
SWEDEN (7.7%)
53,500 Atle AB 734
11,460 Autoliv, Inc. 448
37,500 Biacore International ADR 389 (3)
85,000 Bure Investment 1,025
30,000 Dahl International 566
18,400 Enator AB 301
17,000 Getinge Industrier, B Shares 268
7,000 Incentive AB, A Shares 645
12,200 Kinnevik AB, B Shares 367
22,600 L.M. Ericsson Telephone ADR 942 (3)
65,000 NK Cityfastigheter 462 (3)
20,000 Ortivus AB, B Shares 838 (3)
5,709 Pricer AB, B Shares 170 (3)
16,400 Skandia Forsakrings 635
24,000 Skandinaviska Enskilda Banken,
A Shares 258
</TABLE>
B-45
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
15,000 Tornet Fastighets $ 185
35,000 WM-Data, B Shares 589
-------------
8,822
-------------
SWITZERLAND (2.8%)
595 Ares-Serono Group, B Shares 928
125 Lindt & Spruengli 207
1,300 Logitech International 229
1,170 Novartis AG 1,657
1,100 Schweizerischer Bankverein 265
-------------
3,286
-------------
TAIWAN (0.9%)
14,400 ASE Test 1,051 (3)
-------------
THAILAND (0.5%)
6,200 Bangkok Bank-Foreign 31
55,900 K.R. Precision-Foreign 405
85,000 Thai Rung Union Car-Foreign 179
-------------
615
-------------
UNITED KINGDOM (13.0%)
55,000 Alliance & Leicester 559
49,000 Azlan Group 441
48,800 Barclays PLC 1,103
31,500 Biocompatibles International 592 (3)
32,300 Bodycote International 509
3,200 British Airways ADR 331
9,130 British Petroleum ADR 773
33,000 BTG PLC 372
68,125 Carlton Communications 542
49,600 Cobham PLC 615
30,000 EMAP PLC 399
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- --------- -------------
<C> <S> <C>
1,100,000 Freepages Group $ 669(3)
250,000 Harrisons & Crosfield 448
38,000 J.D. Wetherspoon 868
60,000 JBA Holdings 827
40,000 Johnson Matthey 407
50,800 Misys PLC 1,316
70,000 Norwich Union 385(3)
157,000 Orange PLC 553(3)
96,000 Rentokil Initial 336
40,000 Sage Group 462
15,000 SEMA Group 342
25,000 Serco Group 304
50,000 Stagecoach Holdings 553
40,900 United Utilities 457
100,000 WPP Group 449
4,000 Zeneca Group ADR 382
-------------
14,994
-------------
VENEZUELA (1.0%)
27,000 CANTV ADR 1,114
-------------
TOTAL COMMON STOCKS (COST
$80,502) 103,346
-------------
PREFERRED STOCKS (1.9%)
1,000 BMW, Germany 507
2,333 Fresenius AG, Germany 452
9,000 Nokia Corp. ADR, A Shares,
Finland 698
2,500 SAP AG, Germany 572
-------------
TOTAL PREFERRED STOCKS (COST
$1,421) 2,229
-------------
WARRANTS (0.0%)
2,800 Compagnie Generale des Eaux,
Expire 5/2/01, France (COST
$0) 2 (3)
-------------
</TABLE>
B-46
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- --------- -------------
<C> <S> <C>
U.S. TREASURY SECURITIES (8.3%)
$9,550,000 U.S. Treasury Bills, 4.79% -
5.33%, due 9/4/97 -
10/16/97 (COST $9,522) $ 9,522(5)
-------------
TOTAL INVESTMENTS (99.9%)
(COST $91,445) 115,099
Cash, receivables and other
assets, less liabilities
(0.1%) 165
-------------
TOTAL NET ASSETS (100.0%) $ 115,264
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-47
<PAGE>
SUMMARY SCHEDULE OF INVESTMENTS
BY INDUSTRY
Neuberger&Berman
- --------------------------------------------------------------------------------
International Portfolio
<TABLE>
<CAPTION>
Market
Value(1)
(000's Percentage
Industry omitted) of Net Assets
------------------------------ ------------- ---------------
<S> <C> <C>
Technology $ 14,274 12.4%
Electronics 12,318 10.7%
Telecommunications 11,364 9.9%
Banking & Financial 10,113 8.8%
U.S. Treasury Securities &
Other Assets-Net 9,687 8.4%
Pharmaceutical 7,633 6.6%
Food & Beverage 5,548 4.8%
Oil & Gas 5,487 4.8%
Diversified 4,901 4.2%
Retailing 3,976 3.4%
Insurance 3,430 3.0%
Publishing & Broadcasting 2,798 2.4%
Automotive 2,507 2.2%
Manufacturing 2,425 2.1%
Hospital Supplies 2,360 2.0%
Machinery & Equipment 2,031 1.8%
Restaurants 1,929 1.7%
Real Estate 1,766 1.5%
Industrial Goods & Services 1,683 1.5%
Textiles 1,441 1.2%
Utilities 1,111 1.0%
Transportation 967 0.8%
Communications 921 0.8%
Building Materials 861 0.7%
Chemical 581 0.5%
Building, Construction &
Furnishings 566 0.5%
Media & Entertainment 464 0.4%
Entertainment 453 0.4%
Advertising 449 0.4%
Airlines 331 0.3%
Energy 303 0.3%
Consumer Goods & Services 264 0.2%
Packing & Containers 213 0.2%
Investment Company 109 0.1%
------------- -----
TOTAL NET ASSETS $ 115,264 100.0%
------------- -----
</TABLE>
B-48
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. General Nutrition 2.3%
2. Staples Inc. 2.2%
3. CKE Restaurants 2.2%
4. CUC International 2.1%
5. ACE Ltd. 2.0%
6. Finova Group 1.9%
7. KLA-Tencor 1.9%
8. Dura Pharmaceuticals 1.8%
9. MBNA Corp. 1.8%
10. TJX Cos. 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (92.7%)
BASIC MATERIALS (2.0%)
108,100 Cytec Industries $ 5,277 (3)
145,000 UCAR International 6,842 (3)
-------------
12,119
-------------
CAPITAL GOODS (4.0%)
385,000 Corporate Express 6,569 (3)
278,000 Miller Industries 4,118 (3)
167,100 U.S. Filter 6,016 (3)
200,700 USA Waste Services 8,429 (3)
-------------
25,132
-------------
COMMUNICATIONS (0.2%)
66,400 NTL Inc. 1,469
-------------
CONSUMER CYCLICALS (19.4%)
390,000 Authentic Fitness 6,118
218,300 Costco Cos. 7,872 (3)
550,000 CUC International 12,925 (3)
169,900 Doubletree Corp. 8,495 (3)
220,100 GTECH Holdings 6,617 (3)
366,200 Harrah's Entertainment 8,217 (3)
133,400 Hayes Wheels 4,336 (3)
131,400 Mirage Resorts 3,523 (3)
194,500 Outdoor Systems 5,142 (3)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
200,000 Promus Hotel $ 7,762(3)
96,400 Robert Half International 5,627(3)
155,300 SABRE Group Holdings 4,775(3)
580,000 Staples Inc. 13,630(3)
146,300 Sylvan Learning Systems 5,468(3)
71,200 Tiffany & Co. 3,222
394,900 TJX Cos. 10,860
293,100 Viking Office Products 6,192(3)
-------------
120,781
-------------
CONSUMER STAPLES (14.1%)
117,600 Blyth Industries 4,344 (3)
567,600 Buffets Inc. 6,208 (3)
160,100 Cardinal Health 10,607
208,500 Cheesecake Factory 5,760 (3)
415,600 CKE Restaurants 13,403
420,900 Comcast Corp. Class A Special 9,865
151,700 Estee Lauder 7,206
207,700 Evergreen Media 9,944 (3)
507,800 General Nutrition 14,091 (3)
104,900 Luxottica Group ADR 6,123
-------------
87,551
-------------
ENERGY (6.4%)
120,600 BJ Services 8,713 (3)
280,000 Enron Oil & Gas 6,755
313,900 Noble Drilling 8,927 (3)
233,800 Oryx Energy 6,181 (3)
139,500 Seagull Energy 3,409 (3)
110,000 Tidewater Inc. 5,775
-------------
39,760
-------------
FINANCIAL SERVICES (15.6%)
150,900 ACE Ltd. 12,544
60,000 BankBoston Corp. 4,988
200,000 Bear Stearns 7,912
153,500 Equitable Cos. 6,677
160,000 EXEL Ltd. 8,780
</TABLE>
B-49
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
140,000 Finova Group $ 11,839
95,300 GreenPoint Financial 5,867
284,100 MBNA Corp. 10,920
178,800 Northern Trust 9,499
190,100 PennCorp Financial Group 6,095
129,100 Redwood Trust 4,954
140,100 State Street 6,987
-------------
97,062
-------------
HEALTH CARE (10.7%)
241,400 Acuson Corp. 6,503 (3)
316,200 Dura Pharmaceuticals 11,265 (3)
79,500 HBO & Co. 5,694
302,700 Omnicare, Inc. 8,759
100,400 Oxford Health Plans 7,342 (3)
30,700 Quintiles Transnational 2,394 (3)
72,600 Spine-Tech 3,412 (3)
175,000 Watson Pharmaceuticals 9,198 (3)
125,000 Wellpoint Health Networks 6,797 (3)
172,200 Zonagen, Inc. 5,446 (3)
-------------
66,810
-------------
TECHNOLOGY (17.6%)
130,400 Altera Corp. 6,944 (3)
90,000 Andrew Corp. 2,239 (3)
116,500 Ascend Communications 4,944 (3)
131,700 BMC Software 8,248 (3)
92,500 CBT Group ADR 6,013 (3)
100,200 CHS Electronics 3,870 (3)
114,700 Citrix Systems 5,792 (3)
270,000 ECI Telecommunications 8,049
135,900 EMC Corp. 6,973 (3)
335,200 Equifax, Inc. 9,868
163,700 KLA-Tencor 11,602 (3)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
241,400 LSI Logic $ 7,770(3)
150,300 McAfee Associates 8,511(3)
163,600 Micron Technology 7,290
163,800 NextLevel Systems 3,286(3)
35,000 SAP AG (Ordinary Shares) 7,718
-------------
109,117
-------------
TRANSPORTATION (1.0%)
210,200 Southwest Airlines 5,886
-------------
UTILITIES (1.7%)
288,600 AES Corp. 10,678 (3)
-------------
TOTAL COMMON STOCKS (COST
$483,085) 576,365
-------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C>
U.S. TREASURY SECURITIES (3.5%)
$21,490,000 U.S. Treasury Bills, 5.165% &
5.25%, due 9/18/97 (COST
$21,437) 21,439
-------------
SHORT-TERM CORPORATE NOTES (2.9%)
18,100,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $18,100) 18,100 (5)
-------------
TOTAL INVESTMENTS (99.1%)
(COST $522,622) 615,904 (6)
Cash, receivables and other
assets, less liabilities
(0.9%) 5,839
-------------
TOTAL NET ASSETS (100.0%) $ 621,743
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-50
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Costco Cos. 2.1%
2. Comcast Corp. Class A Special 2.0%
3. CITICORP 1.9%
4. EXEL Ltd. 1.9%
5. Burlington Northern Santa Fe 1.9%
6. McDonald's Corp. 1.9%
7. Gap, Inc. 1.7%
8. Host Marriott 1.7%
9. Allstate Corp. 1.7%
10. Micron Technology 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (94.4%)
AIRLINES (2.9%)
1,103,300 Continental Airlines Class B $ 40,408 (3)
150,700 Delta Air Lines 13,036
1,760,200 Southwest Airlines 49,286
------------
102,730
------------
AUTO/TRUCK REPLACEMENT PARTS (1.6%)
900,000 Goodyear Tire & Rubber 55,462
------------
AUTOMOTIVE (1.5%)
1,567,600 Chrysler Corp. 55,062
------------
BANKING & FINANCIAL SERVICES (6.0%)
1,157,000 Capital One Financial 44,544
464,600 Chase Manhattan 51,658
537,300 CITICORP 68,573
1,497,400 Countrywide Credit Industries 50,444
------------
215,219
------------
BUILDING, CONSTRUCTION & REFURNISHING (1.6%)
1,300,000 USG Corp. 55,737 (3)
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
CHEMICALS (3.9%)
900,000 duPont $ 56,081
1,267,200 Morton International 42,135
604,500 W.R. Grace 41,597
------------
139,813
------------
COMMUNICATIONS (1.5%)
1,636,000 Airtouch Communications 55,317 (3)
------------
CONSUMER GOODS & SERVICES (2.2%)
692,400 Nike, Inc. 36,957
1,198,400 Tupperware Corp. 40,221
------------
77,178
------------
DIVERSIFIED (1.6%)
1,171,600 Tenneco Inc. 56,896
------------
ELECTRONICS (2.0%)
1,633,500 Loral Space & Communications 28,586 (3)
462,900 Raychem Corp. 43,079
------------
71,665
------------
ENTERTAINMENT (4.1%)
900,000 Evergreen Media 43,087 (3)
1,848,900 Mirage Resorts 49,574 (3)
1,059,300 Time Warner 54,554
------------
147,215
------------
FOOD & TOBACCO (4.5%)
1,294,300 Anheuser-Busch 55,170
1,000,000 Philip Morris 43,625
400,000 RJR Nabisco Holdings 13,925
1,697,800 UST, Inc. 49,024
------------
161,744
------------
FOOD PRODUCTS (0.7%)
1,150,200 IBP, Inc. 26,383
------------
</TABLE>
B-51
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
HEALTH CARE (3.8%)
1,134,700 Biogen, Inc. $ 44,679 (3)
1,331,650 Columbia/HCA Healthcare 42,030
713,042 Novartis AG ADR 50,804
------------
137,513
------------
INDUSTRIAL GOODS & SERVICES (3.5%)
1,088,000 AK Steel Holding 49,232
837,200 Crown Cork & Seal 42,593
1,000,000 Owens-Illinois 34,812 (3)
------------
126,637
------------
INSURANCE (9.7%)
522,700 Aetna Inc. 49,885
815,900 Allstate Corp. 59,612 (3)
444,700 Equitable Cos. 19,344
1,245,800 EXEL Ltd. 68,363
1,283,550 Orion Capital 54,551
500,000 Progressive Corp. 49,500
729,000 Travelers Group 46,292
------------
347,547
------------
MEDIA (2.0%)
3,032,081 Comcast Corp. Class A Special 71,064
------------
OIL & GAS (8.7%)
1,333,400 Cabot Corp. 36,502
748,200 ENI ADR 41,525
1,109,200 Enron Corp. 42,773
2,957,500 Gulf Canada Resources 23,845 (3)
1,003,300 Noble Affiliates 46,528
820,950 Tejas Gas 38,995 (3)
1,487,755 Union Pacific Resources Group 37,194
1,353,800 YPF SA ADR 44,083
------------
311,445
------------
OIL SERVICES (0.9%)
597,000 Tidewater Inc. 31,343
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
PAPER & FOREST PRODUCTS (2.6%)
700,000 Mead Corp. $ 49,656
727,000 Weyerhaeuser Corp. 41,984
------------
91,640
------------
PUBLISHING & BROADCASTING (1.7%)
1,208,800 Hollinger International 15,563
900,000 Knight-Ridder 45,563
------------
61,126
------------
RAILROADS (1.9%)
738,800 Burlington Northern Santa Fe 67,739
------------
REAL ESTATE (2.8%)
3,072,100 Host Marriott 59,906 (3)
873,500 Security Capital Industrial
Trust 18,453
1,607,700 Security Capital U.S. Realty 23,151 (7)
------------
101,510
------------
RESTAURANTS (1.9%)
1,418,500 McDonald's Corp. 67,113
------------
RETAILING (3.6%)
605,000 CVS Corp. 34,107
984,200 Harcourt General 46,811
1,300,000 Wal-Mart Stores 46,150
------------
127,068
------------
RETAILING & APPAREL (3.8%)
2,100,000 Costco Cos. 75,731 (3)
1,350,000 Gap, Inc. 59,991
------------
135,722
------------
SPECIALTY CHEMICAL (1.4%)
979,300 Millipore Corp. 48,475
------------
TECHNOLOGY (11.1%)
1,243,000 Adobe Systems 48,943
1,300,000 Analog Devices 43,063 (3)
400,000 Autodesk, Inc. 17,500
1,300,000 Cabletron Systems 39,325 (3)
</TABLE>
B-52
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
1,460,600 Komag, Inc. $ 25,652(3)
1,325,000 Micron Technology 59,045
12,000 Netscape Communications 478
1,100,000 Seagate Technology 42,006(3)
467,600 Texas Instruments 53,131
660,300 Varian Associates 37,678
650,000 Western Digital 31,281(3)
------------
398,102
------------
UTILITIES (0.9%)
1,329,000 Unicom Corp. 31,398 (3)
------------
TOTAL COMMON STOCKS (COST
$2,675,602) 3,375,863
------------
PREFERRED STOCKS (0.4%)
566,700 Fresenius National Medical
Care, Class D 41
280,000 Loral Space & Communications
Cv., Ser. C, 6% 15,330 (7)
------------
TOTAL PREFERRED STOCKS (COST
$14,107) 15,371
------------
RIGHTS (0.0%)
873,500 Security Capital Industrial
Trust, Expire 9/9/97 (COST
$0) 14 (3)
------------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ------------
<C> <S> <C>
U.S. TREASURY SECURITIES (4.2%)
$150,000,000 U.S. Treasury Bills, 5.04% &
5.165%, due 9/18/97 &
10/16/97 (COST $149,249) $ 149,263
------------
SHORT-TERM CORPORATE NOTES (1.2%)
43,550,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $43,550) 43,550 (5)
------------
TOTAL INVESTMENTS (100.2%)
(COST $2,882,508) 3,584,061 (6)
Liabilities, less cash,
receivables and other assets
[(0.2%)] (8,488 )
------------
TOTAL NET ASSETS (100.0%) $ 3,575,573
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-53
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Intel Corp. 2.7%
2. Warner-Lambert 2.7%
3. ReliaStar Financial 2.3%
4. Johnson & Johnson 2.2%
5. Raychem Corp. 2.2%
6. A.G. Edwards 2.2%
7. CITICORP 2.1%
8. Dexter Corp. 2.1%
9. Wal-Mart Stores 2.1%
10. Mead Corp. 2.1%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (95.1%)
AUTOMOTIVE (1.8%)
90,000 Borg-Warner Automotive $ 4,691
-------------
BANKING (9.6%)
42,000 CITICORP 5,360
80,007 CoreStates Financial 4,920
230,000 Dime Bancorp 4,442
70,000 Mercantile Bancorporation 4,826
90,000 National City 5,085
-------------
24,633
-------------
BUSINESS SERVICES (1.9%)
170,000 Dun & Bradstreet 4,760
-------------
CHEMICALS (8.5%)
65,000 Air Products & Chemicals 5,302
140,300 Dexter Corp. 5,331
60,000 Minerals Technologies 2,385
150,000 Morton International 4,987
50,000 Perkin-Elmer 3,700
-------------
21,705
-------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
CONSUMER GOODS & SERVICES (2.7%)
90,000 Kimberly-Clark $ 4,270
20,000 Procter & Gamble 2,661
-------------
6,931
-------------
DIVERSIFIED (1.8%)
60,000 Tyco International 4,706
-------------
ENERGY (1.8%)
100,000 Noble Affiliates 4,638
-------------
FINANCIAL SERVICES (8.0%)
140,000 A.G. Edwards 5,565
120,000 ADVANTA Corp. Class A 3,975
64,000 ADVANTA Corp. Class B 2,032
100,000 Fannie Mae 4,400
70,000 Travelers Group 4,445
-------------
20,417
-------------
FOOD & BEVERAGE (1.6%)
85,200 McDonald's Corp. 4,031
-------------
FURNISHINGS (1.8%)
110,000 Leggett & Platt 4,730
-------------
HEALTH CARE (8.3%)
200,000 Invacare Corp. 4,200
100,000 Johnson & Johnson 5,669
100,000 SmithKline Beecham ADR 4,331
55,000 Warner-Lambert 6,988
-------------
21,188
-------------
INDUSTRIAL & COMMERCIAL PRODUCTS (2.2%)
60,000 Raychem Corp. 5,584
-------------
INSURANCE (5.9%)
60,000 Chubb Corp. 4,013
80,000 ReliaStar Financial 5,980
70,000 St. Paul Cos. 5,136
-------------
15,129
-------------
LODGING (1.6%)
75,000 HFS, Inc. 4,177 (3)
-------------
</TABLE>
B-54
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Socially Responsive Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
MACHINERY & EQUIPMENT (1.8%)
178,400 Cincinnati Milacron $ 4,594
-------------
OIL & GAS (2.6%)
200,000 Enserch Exploration 1,800 (3)
200,000 Seagull Energy 4,887 (3)
-------------
6,687
-------------
OIL SERVICES (3.7%)
100,000 Dresser Industries 4,175
100,000 Tidewater Inc. 5,250
-------------
9,425
-------------
PAPER & FOREST PRODUCTS (2.7%)
70,000 American Pad & Paper 1,610 (3)
75,000 Mead Corp. 5,320
-------------
6,930
-------------
PUBLISHING & BROADCASTING (2.9%)
120,700 CMP Media 3,229 (3)
140,000 Valassis Communications 4,252 (3)
-------------
7,481
-------------
RAILROADS (1.4%)
104,600 Illinois Central 3,511
-------------
RECYCLING (1.1%)
150,000 IMCO Recycling 2,878
-------------
RETAIL STORES (2.1%)
90,000 Nordstrom, Inc. 5,265
-------------
RETAILING (4.1%)
145,000 Costco Cos. 5,229 (3)
150,000 Wal-Mart Stores 5,325
-------------
10,554
-------------
TECHNOLOGY (8.0%)
100,000 AMP, Inc. 5,000
130,000 Cabletron Systems 3,933 (3)
76,000 Hewlett-Packard 4,660
76,000 Intel Corp. 7,001
-------------
20,594
-------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
TELECOMMUNICATIONS (5.8%)
300,000 Metromedia International Group $ 3,563 (3)
114,000 Southern New England
Telecommunications 4,360
50,000 Telephone & Data Systems 1,975
170,000 WorldCom Inc. 5,089 (3)
-------------
14,987
-------------
UTILITIES (1.4%)
115,000 Brooklyn Union Gas 3,472
-------------
TOTAL COMMON STOCKS (COST
$176,412) 243,698
-------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C>
U.S. TREASURY SECURITIES (4.7%)
$12,097,000 U.S. Treasury Bills, 4.90% -
5.34%, due 9/4/97 -
10/16/97 (COST $12,052) 12,052(5)
-------------
CERTIFICATES OF DEPOSIT (0.0%)
100,000 Self Help Credit Union, 5.33%,
due 11/25/97 (COST $100) 100 (5)
-------------
TOTAL INVESTMENTS (99.8%)
(COST $188,564) 255,850 (6)
Cash, receivables and other
assets, less liabilities
(0.2%) 431
-------------
TOTAL NET ASSETS (100.0%) $ 256,281
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-55
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
August 31, 1997
- ----------------------------------------------------------------------
Equity Managers Trust and Global Managers Trust
1) Investment securities of each Portfolio are valued at the latest sales price;
securities for which no sales were reported, unless otherwise noted, are
valued at the mean between the closing bid and asked prices, with the
exception of securities held by Neuberger&Berman International Portfolio,
which are valued at the last available bid price. The Portfolios value all
other securities by a method that the trustees of Equity Managers Trust and
Global Managers Trust believe accurately reflects fair value. Foreign
security prices are furnished by independent quotation services expressed in
local currency values. Foreign security prices are translated from the local
currency into U.S. dollars using current exchange rates. Short-term debt
securities with less than 60 days until maturity may be valued at cost which,
when combined with interest earned, approximates market value.
2) Affiliated Issuer (see Note E of Notes to Financial Statements).
3) Non-income producing security.
4) The following securities were held in escrow at August 31, 1997 to cover
outstanding call options written:
<TABLE>
<CAPTION>
SECURITIES AND MARKET VALUE PREMIUM ON MARKET VALUE
NEUBERGER&BERMAN SHARES OPTIONS OF SECURITIES OPTIONS OF OPTIONS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOCUS PORTFOLIO 162,500 Compaq Computer $ 10,643,750 $1,208,511 $3,087,500
October 1997 @ 48
150,000 Compaq Computer $ 9,825,000 $ 776,674 $2,193,750
October 1997 @ 52
GUARDIAN PORTFOLIO 250,000 Compaq Computer $ 16,375,000 $1,315,706 $3,656,250
October 1997 @ 52
249,250 Compaq Computer $ 16,325,875 $1,073,052 $3,364,875
October 1997 @ 54
250,000 Compaq Computer $ 16,375,000 $ 861,351 $2,843,750
October 1997 @ 56
400,000 MGIC Investment $ 20,125,000 $ 893,970 $2,225,000
September 1997 @ 45
100,000 Texas Instruments $ 11,362,500 $1,346,955 $ 262,500
September 1997 @ 120
</TABLE>
5) At cost, which approximates market value.
B-56
<PAGE>
6) At August 31, 1997, selected Portfolio information on a Federal income tax
basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
NEUBERGER&BERMAN COST APPRECIATION DEPRECIATION APPRECIATION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS PORTFOLIO $1,003,330,000 $ 591,929,000 $ 6,483,000 $ 585,446,000
GENESIS PORTFOLIO 858,349,000 276,077,000 3,797,000 272,280,000
GUARDIAN PORTFOLIO 6,199,356,000 2,675,595,000 73,633,000 2,601,962,000
MANHATTAN PORTFOLIO 522,622,000 103,997,000 10,715,000 93,282,000
PARTNERS PORTFOLIO 2,885,221,000 733,767,000 34,927,000 698,840,000
SOCIALLY RESPONSIVE PORTFOLIO 188,591,000 69,292,000 2,033,000 67,259,000
</TABLE>
7) Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers under Rule 144A. At August 31, 1997, these
securities amounted to $3,757,000 or .3% of net assets for Neuberger&Berman
Genesis Portfolio, $15,075,000 or .2% of net assets for Neuberger&Berman
Guardian Portfolio, $2,244,000 or 1.9% of net assets for Neuberger&Berman
International Portfolio, and $38,481,000 or 1.1% of net assets for
Neuberger&Berman Partners Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS
B-57
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
------------------------------------------------
FOCUS GENESIS GUARDIAN
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 1,470,876 $ 1,130,629 $ 7,690,732
Non-controlled affiliated issuers 117,900 -- 1,110,586
------------------------------------------------
1,588,776 1,130,629 8,801,318
Cash 8 26 13
Deferred organization costs (Note A) 8 2 23
Dividends and interest receivable 959 466 6,874
Net receivable for forward currency exchange
contracts (Note C) -- -- --
Prepaid expenses and other assets 33 17 175
Receivable for securities sold 13,792 85 16,328
------------------------------------------------
1,603,576 1,131,225 8,824,731
------------------------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) 5,281 -- 12,352
Payable for collateral on securities loaned
(Note A) 3,431 15,251 1,566
Payable for securities purchased 20,629 31,635 49,050
Payable for variation margin (Note A) -- -- --
Payable to investment manager (Note B) 660 581 3,281
Accrued expenses 134 107 275
------------------------------------------------
30,135 47,574 66,524
------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 1,573,441 $ 1,083,651 $ 8,758,207
------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 989,214 $ 811,371 $ 6,162,849
Net unrealized appreciation in value of
investment securities, option contracts
written, financial futures contracts,
translation of assets and liabilities in
foreign currencies, and foreign currency
contracts 584,227 272,280 2,595,358
------------------------------------------------
NET ASSETS $ 1,573,441 $ 1,083,651 $ 8,758,207
------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 900,387 $ 858,349 $ 5,377,996
Non-controlled affiliated issuers 100,866 -- 821,103
------------------------------------------------
Total cost of investments $ 1,001,253 $ 858,349 $ 6,199,099
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-58
<PAGE>
August 31, 1997
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
MANAGERS EQUITY MANAGERS TRUST
TRUST ------------------------------------------------
-------------- SOCIALLY
INTERNATIONAL MANHATTAN PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 115,099 $ 615,904 $ 3,584,061 $ 255,850
Non-controlled affiliated issuers -- -- -- --
-----------------------------------------------------------------
115,099 615,904 3,584,061 255,850
Cash 28 12 19 1
Deferred organization costs (Note A) 21 9 16 10
Dividends and interest receivable 129 165 2,833 279
Net receivable for forward currency exchange
contracts (Note C) 143 -- -- --
Prepaid expenses and other assets 2 18 78 4
Receivable for securities sold -- 20,605 27,925 2,969
-----------------------------------------------------------------
115,422 636,713 3,614,932 259,113
-----------------------------------------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) -- -- -- --
Payable for collateral on securities loaned
(Note A) -- -- 5,761 --
Payable for securities purchased -- 14,593 32,033 2,668
Payable for variation margin (Note A) 6 -- -- --
Payable to investment manager (Note B) 87 282 1,377 122
Accrued expenses 65 95 188 42
-----------------------------------------------------------------
158 14,970 39,359 2,832
-----------------------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 115,264 $ 621,743 $ 3,575,573 $ 256,281
-----------------------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 92,406 $ 528,461 $ 2,874,020 $ 188,995
Net unrealized appreciation in value of
investment securities, option contracts
written, financial futures contracts,
translation of assets and liabilities in
foreign currencies, and foreign currency
contracts 22,858 93,282 701,553 67,286
-----------------------------------------------------------------
NET ASSETS $ 115,264 $ 621,743 $ 3,575,573 $ 256,281
-----------------------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 91,445 $ 522,622 $ 2,882,508 $ 188,564
Non-controlled affiliated issuers -- -- -- --
-----------------------------------------------------------------
Total cost of investments $ 91,445 $ 522,622 $ 2,882,508 $ 188,564
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-59
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
------------------------------------------
FOCUS GENESIS GUARDIAN
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 12,565 $ 4,129 $ 78,254
Dividend income -- non-controlled affiliated
issuers 406 -- 3,303
Interest income 1,187 1,749 20,405
Foreign taxes withheld (Note A) (28) -- (798)
------------------------------------------
Total income 14,130 5,878 101,164
------------------------------------------
Expenses:
Investment management fee (Note B) 6,610 4,420 32,887
Accounting fees 10 10 10
Amortization of deferred organization and
initial offering expenses (Note A) 9 2 26
Auditing fees 41 23 49
Custodian fees (Note B) 288 172 1,113
Insurance expense 24 5 130
Interest expense (Note D) -- -- --
Legal fees 17 41 18
Trustees' fees and expenses 17 10 70
Miscellaneous 1 11 6
------------------------------------------
Total expenses 7,017 4,694 34,309
Fee waived by investment manager and/or
expenses reduced by custodian fee
arrangement (Note B) (6) (544) (3)
------------------------------------------
Total net expenses 7,011 4,150 34,306
------------------------------------------
Net investment income 7,119 1,728 66,858
------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities
sold in unaffiliated issuers 176,798 18,411 906,206
Net realized loss on investment securities
sold in non-controlled affiliated issuers -- -- (26,691)
Net realized loss on option contracts written
(Note A) (327) -- (8,365)
Net realized gain on financial futures
contracts (Note A) -- -- --
Net realized gain on foreign currency
transactions (Note A) -- -- --
Change in net unrealized appreciation of
investment securities, option contracts
written, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts 298,137 211,059 1,570,338
Change in net unrealized depreciation of
financial futures contracts (Note A) -- -- --
------------------------------------------
Net gain on investments 474,608 229,470 2,441,488
------------------------------------------
Net increase in net assets resulting from
operations $ 481,727 $ 231,198 $ 2,508,346
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-60
<PAGE>
For the Year Ended August 31, 1997
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
MANAGERS EQUITY MANAGERS TRUST
TRUST -------------------------------------------------
------------ SOCIALLY
INTERNATIONAL MANHATTAN PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 1,304 $ 3,701 $ 35,204 $ 2,887
Dividend income -- non-controlled affiliated
issuers -- -- -- --
Interest income 382 934 6,410 612
Foreign taxes withheld (Note A) (174) (63) (182) (6)
----------------------------------------------------------------
Total income 1,512 4,572 41,432 3,493
----------------------------------------------------------------
Expenses:
Investment management fee (Note B) 764 3,093 12,498 1,123
Accounting fees 10 10 10 10
Amortization of deferred organization and
initial offering expenses (Note A) 11 10 18 7
Auditing fees 30 37 43 20
Custodian fees (Note B) 204 205 457 91
Insurance expense 1 13 44 3
Interest expense (Note D) -- 4 -- --
Legal fees 52 29 19 19
Trustees' fees and expenses 14 10 28 7
Miscellaneous 2 8 2 --
----------------------------------------------------------------
Total expenses 1,088 3,419 13,119 1,280
Fee waived by investment manager and/or
expenses reduced by custodian fee
arrangement (Note B) (1) (1) (3) (1)
----------------------------------------------------------------
Total net expenses 1,087 3,418 13,116 1,279
----------------------------------------------------------------
Net investment income 425 1,154 28,316 2,214
----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities
sold in unaffiliated issuers 1,394 180,525 531,668 11,478
Net realized loss on investment securities
sold in non-controlled affiliated issuers -- -- -- --
Net realized loss on option contracts written
(Note A) -- -- -- --
Net realized gain on financial futures
contracts (Note A) 51 -- -- --
Net realized gain on foreign currency
transactions (Note A) 923 -- -- --
Change in net unrealized appreciation of
investment securities, option contracts
written, translation of assets and
liabilities in foreign currencies, and
foreign currency contracts 17,007 10,646 473,597 44,043
Change in net unrealized depreciation of
financial futures contracts (Note A) (793) -- -- --
----------------------------------------------------------------
Net gain on investments 18,582 191,171 1,005,265 55,521
----------------------------------------------------------------
Net increase in net assets resulting from
operations $ 19,007 $ 192,325 $ 1,033,581 $ 57,735
----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-61
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS
TRUST
FOCUS GENESIS
PORTFOLIO PORTFOLIO
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 7,119 $ 11,390 $ 1,728 $ 471
Net realized gain on investments 176,471 51,701 18,411 5,660
Change in net unrealized
appreciation (depreciation) of
investments 298,137 (21,728) 211,059 27,635
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 481,727 41,363 231,198 33,766
-------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 156,839 231,514 609,195 110,968
Reductions (187,496) (119,679) (16,606) (27,030)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (30,657) 111,835 592,589 83,938
-------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 451,070 153,198 823,787 117,704
NET ASSETS:
Beginning of year 1,122,371 969,173 259,864 142,160
-------------------------------------------------------------
End of year $ 1,573,441 $ 1,122,371 $ 1,083,651 $ 259,864
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-62
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS GLOBAL MANAGERS EQUITY MANAGERS
TRUST TRUST TRUST
GUARDIAN INTERNATIONAL MANHATTAN
PORTFOLIO PORTFOLIO PORTFOLIO
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1997 1996 1997 1996 1997 1996
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 66,858 $ 97,934 $ 425 $ 233 $ 1,154 $ 829
Net realized gain on investments 871,150 307,410 2,368 609 180,525 59,509
Change in net unrealized
appreciation (depreciation) of
investments 1,570,338 (111,192) 16,214 3,964 10,646 (74,167)
-------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 2,508,346 294,152 19,007 4,806 192,325 (13,829)
-------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 592,646 1,540,028 61,548 30,618 41,417 70,833
Reductions (575,327) (214,834) (22,274) (4,847) (179,425) (134,984)
-------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests 17,319 1,325,194 39,274 25,771 (138,008) (64,151)
-------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 2,525,665 1,619,346 58,281 30,577 54,317 (77,980)
NET ASSETS:
Beginning of year 6,232,542 4,613,196 56,983 26,406 567,426 645,406
-------------------------------------------------------------------------
End of year $ 8,758,207 $ 6,232,542 $ 115,264 $ 56,983 $ 621,743 $ 567,426
-------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-63
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS
TRUST
SOCIALLY
PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 28,316 $ 23,394 $ 2,214 $ 1,307
Net realized gain on investments 531,668 240,765 11,478 11,385
Change in net unrealized
appreciation (depreciation) of
investments 473,597 (30,217) 44,043 9,035
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 1,033,581 233,942 57,735 21,727
-------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 715,909 309,196 57,455 45,974
Reductions (173,520) (167,061) (17,394) (5,963)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests 542,389 142,135 40,061 40,011
-------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 1,575,970 376,077 97,796 61,738
NET ASSETS:
Beginning of year 1,999,603 1,623,526 158,485 96,747
-------------------------------------------------------------
End of year $ 3,575,573 $ 1,999,603 $ 256,281 $ 158,485
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-64
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
- ----------------------------------------------------------------------
Equity Managers Trust and Global Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Focus Portfolio ("Focus"), Neuberger&Berman Genesis
Portfolio ("Genesis"), Neuberger&Berman Guardian Portfolio ("Guardian"),
Neuberger&Berman Manhattan Portfolio ("Manhattan"), Neuberger& Berman
Partners Portfolio ("Partners"), and Neuberger&Berman Socially Responsive
Portfolio ("Socially Responsive") are separate operating series of Equity
Managers Trust ("Managers Trust"), a New York common law trust organized as
of December 1, 1992. Neuberger&Berman International Portfolio
("International," formerly International Portfolio) is a separate operating
series of Global Managers Trust ("Global"), a New York common law trust
organized as of March 18, 1994, with its principal office in the Cayman
Islands. These seven aforementioned series are collectively referred to as
the "Portfolios." Managers Trust and Global (collectively, the "Trusts") are
registered as diversified, open-end management investment companies under the
Investment Company Act of 1940, as amended (the "1940 Act"). The trustees of
Global changed the name of International Portfolio to Neuberger&Berman
International Portfolio, effective November 1, 1995. Other regulated
investment companies sponsored by Neuberger&Berman Management Incorporated
("Management"), whose financial statements are not presented herein, also
invest in Managers Trust. Global currently has only one Portfolio.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolios' Schedule of Investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange of such currency against the U.S.
dollar to determine the value of investments, other assets and liabilities.
Purchase and sale prices of securities, and income and expenses are
translated into U.S. dollars at the prevailing rate of exchange on the
respective dates of such transactions.
4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date or, for certain foreign dividends, as soon as the Portfolio
becomes aware of the dividends. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, accretion of original issue discount, where
applicable, and accretion of discount
B-65
<PAGE>
on short-term investments is recorded on the accrual basis. Realized gains
and losses from securities transactions and foreign currency transactions are
recorded on the basis of identified cost.
5) FORWARD FOREIGN CURRENCY CONTRACTS: The Portfolios may enter into forward
foreign currency contracts ("contracts") in connection with planned purchases
or sales of securities, or to hedge the U.S. dollar value of portfolio
securities denominated in a foreign currency. International may also enter
into such contracts to increase or decrease its exposure to a currency other
than U.S. dollars. The gain or loss arising from the difference between the
original contract price and the closing price of such contract is included in
net realized gains or losses on foreign currency transactions. Fluctuations
in the value of forward foreign currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by each Portfolio. The
Portfolios, with the exception of International which has no specific
limitation, have restrictions limiting the portion of their net assets which
may be committed to these types of contracts to 5% of their net assets; these
restrictions will be eliminated, effective December, 1997. The Portfolios
could be exposed to risks if a counterparty to a contract were unable to meet
the terms of its contract or if the value of the foreign currency changes
unfavorably. The U.S. dollar value of foreign currency underlying all
contractual commitments held by each Portfolio is determined using forward
foreign currency exchange rates supplied by an independent pricing service.
6) TAXES: Managers Trust intends to comply with the requirements of the Internal
Revenue Code of 1986, as amended. Each Portfolio of Managers Trust and Global
also intends to conduct its operations so that each of its investors (in the
case of Global, its U.S. investors) will be able to qualify as a regulated
investment company. Each Portfolio will be treated as a partnership for U.S.
Federal income tax purposes and is therefore not subject to U.S. Federal
income tax. There is, at present, no direct taxation in the Cayman Islands,
and therefore interest, dividends, and capital gains derived by Global are
not subject to taxes in that jurisdiction.
7) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign
tax authorities, net of refunds recoverable.
8) ORGANIZATION EXPENSES: Expenses incurred by each Portfolio in connection with
its organization are being amortized by each Portfolio on a straight-line
basis over a five-year period. At August 31, 1997, the unamortized balance of
such expenses amounted to $7,998, $1,763, $23,447, $20,782, $8,926, $16,249,
and $10,339, for Focus, Genesis, Guardian, International, Manhattan,
Partners, and Socially Responsive, respectively.
9) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by each of the Trusts with respect to any two or more
Portfolios are
B-66
<PAGE>
allocated in proportion to the net assets of such Portfolios, except where a
more appropriate allocation of expenses to each Portfolio can otherwise be
made fairly. Expenses directly attributable to a Portfolio are charged to
that Portfolio.
10) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered
call option are recorded in the liability section of each Portfolio's
Statement of Assets and Liabilities and are subsequently adjusted to the
current market value. When an option is exercised, closed, or expired, the
Portfolio realizes a gain or loss and the liability is eliminated. A
Portfolio bears the risk of a decline in the price of the security during
the period, although any potential loss during the period would be reduced
by the amount of the option premium received. In general, written covered
call options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. All securities
covering outstanding options are held in escrow by the custodian bank.
Summary of option transactions for the year ended August 31, 1997:
<TABLE>
<CAPTION>
VALUE
WHEN
FOCUS NUMBER WRITTEN
- --------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/96 0 $ 0
CONTRACTS WRITTEN 11,918 5,472,524
CONTRACTS EXPIRED (600) (125,696)
CONTRACTS EXERCISED (4,268) (1,153,282)
CONTRACTS CLOSED (5,800) (2,208,361)
-------------------------
CONTRACTS OUTSTANDING 8/31/97 1,250 $ 1,985,185
-------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
WHEN
GUARDIAN NUMBER WRITTEN
- ---------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/96 0 $ 0
CONTRACTS WRITTEN 42,060 20,271,636
CONTRACTS EXPIRED (60) (13,319)
CONTRACTS EXERCISED (13,004) (4,664,985)
CONTRACTS CLOSED (20,999) (10,102,298)
--------------------------
CONTRACTS OUTSTANDING 8/31/97 7,997 $ 5,491,034
--------------------------
</TABLE>
11) FINANCIAL FUTURES CONTRACTS: International and Socially Responsive may buy
and sell financial futures contracts to hedge against a possible decline in
the value of its portfolio securities. International may also buy and sell
financial futures contracts for non-hedging purposes. At the time a
Portfolio enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or liquid securities,
known as "initial margin," ranging upward from 1.1% of the value of the
financial futures contract being traded. Each day, the futures contract is
valued at the official settlement price of the board of trade or U.S.
commodity exchange on which such futures contract is traded. Subsequent
B-67
<PAGE>
payments, known as "variation margin," to and from the broker are made on a
daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this "mark to
market," are recorded by the Portfolio as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of
matching financial futures contracts. When the contracts are closed, a
Portfolio recognizes a gain or loss. Risks of entering into futures
contracts include the possibility there may be an illiquid market and/or
that a change in the value of the contract may not correlate with changes in
the value of the underlying securities.
For U.S. Federal income tax purposes, the futures transactions undertaken
by a Portfolio may cause that Portfolio to recognize gains or losses from
marking to market even though its positions have not been sold or
terminated, may affect the character of the gains or losses recognized as
long-term or short-term, and may affect the timing of some capital gains and
losses realized by the Portfolio. Also, a Portfolio's losses on transactions
involving futures contracts may be deferred rather than being taken into
account currently in calculating such Portfolio's taxable income.
During the year ended August 31, 1997, Socially Responsive did not enter
into any financial futures contracts.
At August 31, 1997, open positions in financial futures contracts for
International were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
- -----------------------------------------------------------------------------
<C> <S> <C> <C>
September 1997 90 Nikkei Futures Long $ 936,000
</TABLE>
At August 31, 1997, International had deposited $590,000 U.S. Treasury
Bills, 5.055%, due 9/18/97, in a segregated account to cover margin
requirements on open financial futures contracts.
12) SECURITY LENDING: Portfolio securities loans involve certain risks in the
event a borrower should fail financially, including delays or inability to
recover the lent securities or foreclose against the collateral. The
investment manager, under the general supervision of the Trusts' Boards of
Trustees, monitors the creditworthiness of the parties to whom the
Portfolios make security loans. The Portfolios will not lend securities on
which covered call options have been written, or lend securities on terms
which would prevent each of their investors from qualifying as a regulated
investment company. Portfolio securities loans to Neuberger&Berman, LLC
("Neuberger"), the Portfolios' principal broker and sub-adviser, are made in
accordance with an exemptive order issued by the Securities and Exchange
Commission under the 1940 Act. The Portfolios receive
B-68
<PAGE>
cash as collateral against the lent securities, which must be maintained at
not less than 100% of the market value of the lent securities during the
period of the loan. The Portfolios receive income earned on the lent
securities and a portion of the income earned on the cash collateral. During
the year ended August 31, 1997, Focus, Genesis, Guardian, Manhattan,
Partners, and Socially Responsive lent securities to Neuberger. At August
31, 1997, the value of the securities loaned and the value of the collateral
were as follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
- ------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 3,400,231 $ 3,430,700
GENESIS 14,670,344 15,251,200
GUARDIAN 1,533,081 1,565,700
PARTNERS 5,298,063 5,761,000
</TABLE>
13) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
with institutions that each Portfolio's investment manager has determined
are creditworthy. Each repurchase agreement is recorded at cost. A Portfolio
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable a Portfolio to
obtain those securities in the event of a default under the repurchase
agreement. A Portfolio monitors, on a daily basis, the value of the
securities transferred to ensure that their value, including accrued
interest, is greater than amounts owed to a Portfolio under each such
repurchase agreement.
NOTE B -- ADMINISTRATION AND ADVISORY/MANAGEMENT FEES AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
(except Genesis and International) pays Management a fee at the annual rate of
0.55% of the first $250 million of that Portfolio's average daily net assets,
0.525% of the next $250 million, 0.50% of the next $250 million, 0.475% of the
next $250 million, 0.45% of the next $500 million, and 0.425% of average daily
net assets in excess of $1.5 billion. Genesis has contracted to pay Management a
fee for investment management services at the annual rate of 0.85% of the first
$250 million of that Portfolio's average daily net assets, 0.80% of the next
$250 million, 0.75% of the next $250 million, 0.70% of the next $250 million,
and 0.65% of average daily net assets in excess of $1 billion. Management has
voluntarily agreed to waive a portion of the management fee borne directly by
Genesis and indirectly by Neuberger&Berman Genesis Fund to reduce the annual fee
by 0.10% per annum of average daily net assets of Genesis, effective May 1,
1995. International pays Management a fee for investment management services at
the annual rate of 0.85% of the first $250 million of that Portfolio's average
daily net assets,
B-69
<PAGE>
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.
Prior to November 1, 1995, International had retained BNP-N&B Global Asset
Management L.P. ("BNP-N&B Global"), a partnership jointly owned by Banque
Nationale de Paris ("BNP") and Neuberger, as its investment adviser. For such
investment advisory services, International paid BNP-N&B Global a fee at the
annual rate of 0.50% of the first $250 million of that Portfolio's average daily
net assets, 0.475% of the next $250 million, 0.45% of the next $250 million, and
0.425% of average daily net assets in excess of $750 million. Additionally,
under a separate Administration Agreement (the "Portfolio Administration
Agreement"), which was in effect through October 31, 1995, International had
retained Management to provide certain administrative services. Pursuant to the
Portfolio Administration Agreement, International paid Management a fee at the
annual rate of 0.10% of the first $250 million of that Portfolio's average daily
net assets, 0.08% of the next $250 million, 0.06% of the next $250 million, and
0.04% of average daily net assets in excess of $750 million. The minimum
administration fee was $100,000 per annum.
Prior to November 1, 1995, BNP-N&B Global had voluntarily undertaken to
reimburse International for its operating expenses (excluding interest, taxes,
brokerage commissions, and extraordinary expenses) ("Operating Expenses") that
exceeded 0.70% per annum of that Portfolio's average daily net assets. Effective
November 1, 1995, the above expense limitation was terminated.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger, a member firm of The New York Stock Exchange and sub-
adviser to each Portfolio. Neuberger is retained by Management to furnish it
with investment recommendations and research information without added cost to
each Portfolio. Several individuals who are officers and/or trustees of the
Trusts are also principals of Neuberger and/or officers and/or directors of
Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Custodian fees was a reduction of $5,870,
$4,507, $3,355, $916, $839, $3,408, and $509, for Focus, Genesis, Guardian,
International, Manhattan, Partners, and Socially Responsive, respectively, which
is less than .01% of each Portfolio's average daily net assets.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended August 31, 1997, there were purchase and sale
transactions (excluding short-term securities, forward foreign currency
contracts, financial futures contracts, and option contracts written) as
follows:
B-70
<PAGE>
<TABLE>
<CAPTION>
PURCHASES SALES
- ------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 824,820,266 $ 831,328,130
GENESIS 633,503,648 94,550,616
GUARDIAN 3,570,949,280 3,874,878,295
INTERNATIONAL 66,032,688 30,321,431
MANHATTAN 508,485,851 692,207,887
PARTNERS 2,566,392,485 1,986,851,872
SOCIALLY RESPONSIVE 136,770,015 98,492,220
</TABLE>
At August 31, 1997, International had entered into various contracts to
receive currencies at specific future dates. Open contracts were as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS TO IN EXCHANGE SETTLEMENT APPRECIATION
PURCHASES RECEIVE FOR DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 368,820,000 $3,000,000 9/8/97 $ 3,057,808 $ 57,808
Japanese Yen 242,960,000 2,000,000 9/12/97 2,015,427 15,427
Japanese Yen 118,070,000 1,000,000 9/16/97 979,961 (20,039)
Japanese Yen 110,800,000 1,000,000 9/22/97 920,373 (79,627)
----------- ----------- -------
$7,000,000 $ 6,973,569 $(26,431)
----------- ----------- -------
</TABLE>
At August 31, 1997, International had entered into various contracts to
deliver currencies at specified future dates. Open contracts were as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS TO IN EXCHANGE SETTLEMENT APPRECIATION
SALES DELIVER FOR DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
French Franc 5,754,000 $1,000,000 9/15/97 $ 948,288 $ 51,712
German Mark 1,692,700 1,000,000 9/15/97 938,880 61,120
Swiss Franc 1,420,400 1,000,000 9/15/97 956,286 43,714
French Franc 5,811,600 1,000,000 10/20/97 959,977 40,023
Italian Lira 1,704,380,000 1,000,000 10/20/97 963,653 36,347
French Franc 6,232,900 1,000,000 12/2/97 1,032,247 (32,247)
German Mark 1,850,200 1,000,000 12/2/97 1,031,426 (31,426)
----------- ----------- --------------
$7,000,000 $ 6,830,757 $169,243
----------- ----------- --------------
</TABLE>
During the year ended August 31, 1997, there were brokerage commissions on
securities paid to Neuberger and other brokers as follows:
B-71
<PAGE>
<TABLE>
<CAPTION>
OTHER
NEUBERGER BROKERS TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOCUS $ 920,202 $ 905,291 $ 1,825,493
GENESIS 516,040 344,057 860,097
GUARDIAN 4,806,913 3,733,422 8,540,335
INTERNATIONAL 5,910 291,521 297,431
MANHATTAN 458,679 512,347 971,026
PARTNERS 3,508,790 1,904,663 5,413,453
SOCIALLY RESPONSIVE 232,238 73,402 305,640
</TABLE>
In addition, Neuberger's share of the total interest income earned for the
year ended August 31, 1997, from the collateralization of securities loaned to
or through Neuberger was $898,127, $69,948, $3,523,486, $326,403, $688,624, and
$51,639, for Focus, Genesis, Guardian, Manhattan, Partners, and Socially
Responsive, respectively.
NOTE D -- COMBINED LINE OF CREDIT:
At August 31, 1997, Genesis and Manhattan were two of the holders of an
unsecured $60,000,000 combined line of credit with State Street Bank and Trust
Company, to be used only for temporary or emergency purposes. Interest is
charged on borrowings under this agreement at the overnight Federal Funds Rate
plus .75% per annum. A facility fee of .1% per annum of the available line of
credit is charged, of which Genesis and Manhattan each has agreed to pay its pro
rata share, based on the ratio of its individual net assets to the net assets of
all the participants at the time the fee is due and payable. The fee is paid
quarterly in arrears, commencing June 30, 1997. No compensating balance is
required. Another investment company managed by Management also participates in
the line of credit on the same terms. Because several investment companies
participate, there is no assurance that an individual Portfolio will have access
to the entire $60,000,000 at any particular time. Genesis and Manhattan had no
loans outstanding pursuant to this line of credit at August 31, 1997, nor had
Genesis utilized this line of credit at anytime prior to that date. The
following information relates to short-term borrowings for the year ended August
31, 1997, for Manhattan. The average loan amount outstanding (total of daily
outstanding principal balances divided by the number of days with debt
outstanding) during the period was $4,550,758, the average interest rate was
6.13%, and the total interest expense on such borrowings was $3,875.
At August 31, 1997, International was one of two holders of a $20,000,000
combined uncommitted, secured line of credit with State Street Bank & Trust
Company to be used for temporary or emergency purposes or for leverage. Interest
is charged at LIBOR, or the overnight Federal Funds Rate, plus a spread to be
determined at the time of borrowing. Another investment company managed by
Management also participates in the line of credit on the same terms. Because
another
B-72
<PAGE>
investment company participates, there is no assurance that an individual
Portfolio will have access to the entire $20,000,000 at any particular time.
International had no loans outstanding pursuant to this line of credit at August
31, 1997, nor had it utilized this line of credit at any time prior to that
date.
NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
<TABLE>
<CAPTION>
BALANCE
OF
SHARES BALANCE OF
HELD GROSS GROSS SHARES
AUGUST PURCHASES SALES HELD VALUE
FOCUS 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1996 ADDITIONS REDUCTIONS 1997 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVANTA Corp. Class A 0 1,691,500 0 1,691,500 $56,030,938
DT Industries 0 1,045,000 0 1,045,000 31,088,750
Sierra Health Services 0 934,500 0 934,500 30,780,094
</TABLE>
<TABLE>
<CAPTION>
BALANCE OF BALANCE OF
SHARES GROSS GROSS SHARES
HELD PURCHASES SALES HELD VALUE
GUARDIAN AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1996 ADDITIONS REDUCTIONS 1997 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGCO Corp. 0 4,737,400 0 4,737,400 $ 153,965,500
Capital One Financial 2,424,000 2,036,000 15,000 4,445,000 171,132,500
Coltec Industries 4,778,900 115,000 0 4,893,900 109,501,013
Countrywide Credit Industries 4,800,000 645,000 0 5,445,000 183,428,438
Fingerhut Cos.** 3,241,700 0 3,241,700 0 0
Foundation Health Systems 3,020,000 6,045,800 0 9,065,800 288,405,763
Healthsource Inc.** 4,190,000 0 4,190,000 0 0
Hospitality Properties Trust** 1,442,600 0 1,442,600 0 0
J & L Specialty Steel** 3,278,200 10,000 3,288,200 0 0
UCAR International 0 3,404,400 0 3,404,400 160,645,125
USFreightways Corp.** 1,257,000 0 1,257,000 0 0
Zeigler Coal Holding 1,702,000 0 0 1,702,000 43,507,375
</TABLE>
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE
PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES.
**AT AUGUST 31, 1997, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED
WITH THE PORTFOLIO.
B-73
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
FOCUS GENESIS
PORTFOLIO PORTFOLIO
Period Period
from from
August August
2, 2,
1993(1) 1993(1)
to to
August August
Year Ended August 31, 31, Year Ended August 31, 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE
NET ASSETS:
Gross
Expenses(2) .53% .54% -- -- -- .77% .85% -- -- --
----------------------------------------------------------------------------------------------------
Net Expenses .53% .54% .57% .58% .58%(3) .77%(4) .85%(4) .94%(4) .98% 1.07%(3)
----------------------------------------------------------------------------------------------------
Net Investment
Income .54% 1.04% 1.05% 1.16% 1.46%(3) .32%(4) .27%(4) .25%(4) .18% .37%(3)
----------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate 63% 39% 36% 52% 4% 18% 21% 37% 63% 3%
----------------------------------------------------------------------------------------------------
Average Commission
Rate Paid $0.0555 $0.0578 -- -- -- $0.0565 $0.0576 -- -- --
----------------------------------------------------------------------------------------------------
Net Assets, End of
Year (in millions) $1,573.4 $1,122.4 $969.2 $645.0 $574.0 $1,083.7 $259.9 $142.2 $138.6 $118.6
----------------------------------------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements. For Genesis, these ratios include the management fee waiver.
3) Annualized.
4) Had Management not waived a portion of the management fee, the annualized
ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
Year Ended August 31,
GENESIS 1997 1996 1995
- -------------------------------------------------------
<S> <C> <C> <C>
Net Expenses .87% .95% .97%
Net Investment
Income .22% .17% .22%
</TABLE>
B-74
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST GLOBAL MANAGERS TRUST
GUARDIAN INTERNATIONAL
PORTFOLIO PORTFOLIO
Period Period
from from
August June
2, 15,
1993(1) 1994(1)
to to
August August
Year Ended August 31, 31, Year Ended August 31, 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE
NET ASSETS:
Gross
Expenses(2) .46% .46% -- -- -- 1.21% 1.37% -- --
-----------------------------------------------------------------------------------------
Net Expenses .46% .46% .48% .50% .51%(3) 1.21% 1.37%(4) .70%(4) .70%(3)(4)
-----------------------------------------------------------------------------------------
Net Investment
Income .89% 1.72% 1.72% 1.66% 2.45%(3) .47% .58%(4) 1.74%(4) 1.63%(3)(4)
-----------------------------------------------------------------------------------------
Portfolio Turnover
Rate 50% 37% 26% 24% 3% 37% 45% 41% 5%
-----------------------------------------------------------------------------------------
Average Commission
Rate Paid $0.0538 $0.0580 -- -- -- $0.0161 $0.0150 -- --
-----------------------------------------------------------------------------------------
Net Assets, End of
Year (in millions) $8,758.2 $6,232.5 $4,613.2 $2,480.3 $1,777.6 $115.3 $57.0 $26.4 $6.1
-----------------------------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements.
3) Annualized.
4) After reimbursement of expenses by BNP-N&B Global as described in Note B of
Notes to Financial Statements. Had BNP-N&B Global not undertaken such action,
the annualized ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
Year Ended August June 15, 1994
31, to August 31,
INTERNATIONAL 1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.49% 2.24% 2.50%
Net Investment Income
(Loss) .46% .20% (.17%)
</TABLE>
B-75
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
MANHATTAN PARTNERS
PORTFOLIO PORTFOLIO
Period
from
Period August
from 2,
August 2, 1993(1)
1993(1) to
to August August
Year Ended August 31, 31, Year Ended August 31, 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE
NET ASSETS:
Gross
Expenses(2) .59% .58% -- -- -- .48% .51% -- -- --
--------------------------------------------------------------------------------------------------
Net Expenses .59% .58% .59% .59% .59%(3) .48% .51% .53% .54% .54%(3)
--------------------------------------------------------------------------------------------------
Net Investment
Income .20% .13% .42% .53% .55%(3) 1.05% 1.26% 1.13% .75% 1.19%(3)
--------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate 89% 53% 44% 50% 3% 77% 96% 98% 75% 8%
--------------------------------------------------------------------------------------------------
Average Commission
Rate Paid $0.0573 $0.0373 -- -- -- $0.0522 $0.0494 -- -- --
--------------------------------------------------------------------------------------------------
Net Assets, End of
Year (in millions) $621.7 $567.4 $645.4 $521.7 $536.8 $3,575.6 $1,999.6 $1,623.5 $1,340.3 $1,182.1
--------------------------------------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements.
3) Annualized.
B-76
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
SOCIALLY RESPONSIVE
PORTFOLIO
Period
from
March 14,
1994(1)
to August
Year Ended August 31, 31,
1997 1996 1995 1994
---------------------------------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2) .63% .65% -- --
---------------------------------------------
Net Expenses .63% .65% .68% .69%(3)
---------------------------------------------
Net Investment Income 1.08% 1.02% 1.18% 1.33%(3)
---------------------------------------------
Portfolio Turnover Rate 51% 53% 58% 14%
---------------------------------------------
Average Commission Rate Paid $0.0568 $0.0587 -- --
---------------------------------------------
Net Assets, End of Year (in
millions) $256.3 $158.5 $96.7 $70.7
---------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements.
3) Annualized.
B-77
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger&Berman Manhattan Portfolio and
Neuberger&Berman Socially Responsive Portfolio
We have audited the accompanying statements of assets and liabilities of
Neuberger&Berman Manhattan Portfolio and Neuberger&Berman Socially Responsive
Portfolio (collectively the "Portfolios"), including the schedules of
investments, as of August 31, 1997, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger&Berman Manhattan Portfolio and Neuberger&Berman Socially Responsive
Portfolio as of August 31, 1997, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
B-78
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger&Berman Focus Portfolio
Neuberger&Berman Genesis Portfolio
Neuberger&Berman Guardian Portfolio and
Neuberger&Berman Partners Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger&Berman Focus Portfolio,
Neuberger&Berman Genesis Portfolio, Neuberger&Berman Guardian Portfolio, and
Neuberger&Berman Partners Portfolio, four of the series comprising Equity
Managers Trust (the "Trust"), as of August 31, 1997, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1997, by correspondence with the custodian and
brokers or other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Equity Managers Trust at August 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts /s/ ERNST & YOUNG LLP
October 3, 1997
B-79
<PAGE>
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS
To the Board of Trustees
Global Managers Trust and Owners of Beneficial Interest of
Neuberger&Berman International Portfolio
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Neuberger&Berman International
Portfolio, a series of Global Managers Trust (the "Trust"), as of August 31,
1997, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of August 31, 1997, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Neuberger&Berman International Portfolio at August 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated therein, in conformity with accounting principles
generally accepted in the United States of America.
[SIGNATURE]
/s/ ERNST & YOUNG
Grand Cayman,
Cayman Islands
October 3, 1997
B-80
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT ACCOUNTANTS/AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Ernst & Young
One Capital Place
Shedden Road
George Town
Grand Cayman, Cayman Islands
Neuberger&Berman Management Inc., Neuberger&Berman Focus Fund, Neuberger&Berman
Genesis Fund, Neuberger&Berman Guardian Fund, Neuberger&Berman International
Fund, Neuberger&Berman Manhattan Fund, Neuberger&Berman Partners Fund, and
Neuberger&Berman Socially Responsive Fund are registered service marks of
Neuberger&Berman Management Inc.
- -C- 1997 Neuberger&Berman Management Inc.
C-1
<PAGE>
OFFICERS AND TRUSTEES
EQUITY MANAGERS TRUST/ GLOBAL MANAGERS TRUST
NEUBERGER&BERMAN EQUITY FUNDS Stanley Egener
Stanley Egener CHAIRMAN OF THE BOARD AND TRUSTEE
CHAIRMAN OF THE BOARD AND TRUSTEE Lawrence Zicklin
Lawrence Zicklin PRESIDENT
PRESIDENT AND TRUSTEE Howard A. Mileaf
Faith Colish TRUSTEE
TRUSTEE John T. Patterson, Jr.
Donald M. Cox TRUSTEE
TRUSTEE John P. Rosenthal
Howard A. Mileaf TRUSTEE
TRUSTEE Daniel J. Sullivan
Edward I. O'Brien VICE PRESIDENT
TRUSTEE Michael J. Weiner
John T. Patterson, Jr. VICE PRESIDENT
TRUSTEE Richard Russell
John P. Rosenthal TREASURER
TRUSTEE Claudia A. Brandon
Cornelius T. Ryan SECRETARY
TRUSTEE Barbara DiGiorgio
Gustave H. Shubert ASSISTANT TREASURER
TRUSTEE Jacqueline Henning
Daniel J. Sullivan ASSISTANT TREASURER
VICE PRESIDENT Celeste Wischerth
Michael J. Weiner ASSISTANT TREASURER
VICE PRESIDENT Stacy Cooper-Shugrue
Richard Russell ASSISTANT SECRETARY
TREASURER Lenore Joan McCabe
Claudia A. Brandon ASSISTANT SECRETARY
SECRETARY C. Carl Randolph
Barbara DiGiorgio ASSISTANT SECRETARY
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
C-2
<PAGE>
Notice to Shareholders (Unaudited)
For Neuberger&Berman Guardian Fund 76% of the dividends distributed during
the fiscal year ended August 31, 1997 qualifies for the dividend received
deduction for corporate shareholders. The Fund will notify shareholders in
January 1998 of the applicable percentage of qualifying dividends for corporate
shareholders for use in preparing 1997 income tax returns.
Neuberger&Berman International Fund has elected to pass through to its
shareholders the credit for taxes paid to foreign countries. For the fiscal year
ended August 31, 1997 the Fund had $173,873 of such credits. The Fund hereby
designates $66,284 as a capital gain distribution. In January 1998, each
shareholder will receive a 1997 Form 1099 which will provide specific
information for preparing tax returns.
C-3
<PAGE>
NEUBERGER&BERMAN MANAGEMENT INC.-Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800-877-9700
INSTITUTIONAL SERVICES
800-366-6264
Statistics and projections in this report are derived from sources
deemed to be reliable but cannot be regarded as a representation of
future results of the Funds. This report is prepared for the general infor-
mation of shareholders and is not an offer of shares of the Funds.
Shares are sold only through the currently effective prospectus, which
must precede or accompany this report.
[LOGO] PRINTED ON RECYCLED PAPER
NBEFAR010897
