As filed with the Securities and Exchange Commission on September 29, 1998
1933 Act Registration No. 2-11357
1940 Act Registration No. 811-582
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ____ [__]
Post-Effective Amendment No. 79 [ X]
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 34 [ X ]
(Check appropriate box or boxes)
NEUBERGER BERMAN EQUITY FUNDS
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger Berman Equity Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
___ on _________________ pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
_X_ on December 15, 1998 pursuant to paragraph (a)(1)
Neuberger Berman Equity Funds is a "master/feeder fund." This
Post-Effective Amendment No. 79 includes a signature page for the master fund,
Equity Managers Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 79 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 79 on Form N-1A
Cross Reference Sheet
Neuberger Berman Focus Fund
Neuberger Berman Genesis Fund
Neuberger Berman Guardian Fund
Neuberger Berman International Fund
Neuberger Berman Manhattan Fund
Neuberger Berman Millennium Fund
Neuberger Berman Partners Fund
Neuberger Berman Socially Responsive Fund
- -------------------------------------------
Part A - Prospectus for Investors Purchasing Directly
Prospectus for Investors Purchasing through Third Parties
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
C-1
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 79 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for
Neuberger Berman Focus Fund,
Neuberger Berman Genesis Fund ,
Neuberger Berman Guardian Fund
Neuberger Berman International Fund,
Neuberger Berman Manhattan Fund,
Neuberger Berman Millennium Fund,
Neuberger Berman Partners Fund, and
Neuberger Berman Socially Responsive Fund
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
Item 1. Front and Back Cover Front and Back Cover Pages
Pages
Item 2. Risk/Return Summary: Expense Information; Performance; Main
Investments, Risks, and Risks
Performance
Item 3. Risk/Return Summary: Fee Performance; Investor Expenses
Table
Item 4. Investment Objectives, Goal & Strategy; Main Risks
Principal Investment
Strategies, and Related
Risks
Item 5. Management's Discussion Not Applicable
of Fund Performance
Item 6. Management, Front Page; Management Sidebar
Organization, and
Capital Structure
Item 7. Shareholder Information Your Investment; Buying Shares;
Maintaining Your Account; Privileges
and Services; Share Prices
Item 8. Distribution Arrangements Fund Structure Sidebar (under
Maintaining Your Account)
Item 9. Financial Highlights Not Applicable
Information
Caption in Part B
C-2
<PAGE>
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page and Table of Cover Page and Table of Contents
Contents
Item 11. Fund History Information Regarding Organization,
Capitalization and Other Matters
Item 12. Description of the Fund Investment Information; Certain Risk
and Its Investments and Considerations
Risks
Item 13. Management of the Fund Trustees and Officers
Item 14. Control Persons and Not Applicable
Principal Holders of
Securities
Item 15. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees and
Officers; Distribution Arrangements;
Reports to Shareholders; Custodian and
Transfer Agent; Independent
Auditors/Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 18. Purchase, Redemption and Additional Purchase Information;
Pricing of Shares Additional Exchange Information;
Additional Redemption Information;
Distribution Arrangements
Item 19. Taxation of the Fund Dividends and Other Distributions;
Additional Tax Information
Item 20. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 21. Calculation of Performance Information
Performance Data
Item 22. Financial Statements Financial Statements
C-3
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No.
79.
<PAGE>
<PAGE>
[PHOTO OF WOODWORKING GOUGE ON CARVED PLANK OF WOOD] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY FUNDS-REGISTERED TRADEMARK-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 15, 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Focus Fund
Genesis Fund
Guardian Fund
International Fund
Manhattan Fund
Millennium Fund
Partners Fund
Socially Responsive Fund
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY FUNDS
PAGE 2 ...... Focus Fund
8 ...... Genesis Fund
14 ...... Guardian Fund
20 ...... International Fund
26 ...... Manhattan Fund
32 ...... Millennium Fund
36 ...... Partners Fund
42 ...... Socially Responsive Fund
YOUR INVESTMENT
48 ...... Share Prices
49 ...... Privileges and Services
50 ...... Distributions and Taxes
52 ...... Maintaining Your Account
56 ...... Buying and Selling Shares
</TABLE>
<PAGE>
- -------------------------------------------------------------
FUND MANAGEMENT
All of the Neuberger Berman Equity Funds are managed by Neuberger Berman
Management Inc., in conjunction with Neuberger Berman, LLC, as sub-adviser.
Together, the firms manage more than $00 billion in total assets and continue an
asset management history that began in 1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
[DATE]).
THESE FUNDS:
- - ARE DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAVE NO CHARGES WHEN YOU BUY OR SELL SHARES, AND HAVE NO DISTRIBUTION (12b-1)
FEES
- - OFFER YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH
PROFESSIONALLY MANAGED STOCK PORTFOLIOS
- - ALSO OFFER THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH FUNDS THAT USE A
VALUE OR A GROWTH APPROACH TO INVESTING
- - CARRY CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU SELL
FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - ARE MUTUAL FUNDS, NOT BANK DEPOSITS, AND ARE NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
FOCUS FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBSSX ABOVE: PORTFOLIO MANAGER KENT C. SIMONS
"OUR INVESTMENT APPROACH FOR FOCUS FUND INVOLVES LOOKING FOR COMPANIES THAT HAVE
LOW PRICE-TO-EARNINGS RATIOS, SOLID BALANCE SHEETS AND STRONG MANAGEMENT. WE
OFTEN FIND THAT THESE COMPANIES ARE CONCENTRATED IN CERTAIN SECTORS OF THE
ECONOMY, AND WE LOOK FURTHER WITHIN THESE SECTORS FOR OTHER COMPANIES THAT MEET
OUR CRITERIA."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
INDUSTRY SECTORS
The economy is divided into sectors, each made up of related industries. By
focusing on several sectors at a time, a fund can add a measure of
diversification and still allow the potential for performance.
This contrasts with an approach of limiting investment to one sector, which may
offer greater opportunity but also more risk. A sector may have above-average
performance during particular periods, but individual sectors also tend to move
up and down more than the broader market.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
companies of any size that fall within the following sectors:
- - autos and housing
- - consumer goods and services
- - defense and aerospace
- - energy
- - financial services
- - health care
- - heavy industry
- - machinery and equipment
- - media and entertainment
- - retailing
- - technology
- - transportation
- - utilities
At any given time, the fund intends to place most of its assets in those sectors
on the list that the manager believes are undervalued. The fund generally
invests at least 90% of net assets in no more than six sectors. However, it does
not invest more than 50% of total assets in any one sector, or more than 25% of
total assets in any one industry.
The manager looks for undervalued companies. Factors in identifying these firms
may include above-average returns, an established market niche, and sound future
business prospects. This approach is designed to let the fund benefit from
potential increases in stock prices while limiting the risks typically
associated with investing in a small number of sectors.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Focus Fund 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Because the fund typically focuses on a few sectors at a time, its performance
is likely to be disproportionately affected by the factors influencing those
sectors. These may include market, economic, political, or regulatory
developments, among others. The fund's performance may also suffer if a sector
does not perform as the portfolio manager expected.
To the extent that the fund emphasizes any particular size of stock, it takes on
the associated risks. Mid- and small-cap stocks tend to be riskier than
large-cap stocks; large-cap stocks may perform less well over time than mid- and
small-cap stocks. At any given time, one size of stock may be out of favor with
investors. If the fund emphasizes that size, it could perform less well than
certain other funds.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the manager failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
Because the fund had a policy of investing heavily in energy stocks prior to
November 1991, and invested mainly in large-cap stocks prior to September 1998,
its performance during those times would have been different if current policies
had been in effect.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 16.47%
89 29.78%
90 -5.92%
91 24.66%
92 21.10%
93 16.33%
94 0.87%
95 36.19%
96 16.22%
97 24.15%
BEST QUARTER: Q2 '97, up 16.95%
WORST QUARTER: Q3 '90, down 9.07%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
FOCUS FUND 24.15 18.19 17.34
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Focus Fund 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
KENT C. SIMONS is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has managed the fund's assets since 1988.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.74% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.74
PLUS: Distribution (12b-1) fees None
Other expenses 0.10
....
EQUALS: Total annual operating expenses 0.84
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $86 $268 $466 $1037
</TABLE>
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 24.00 24.42 28.88 28.46 00.00
PLUS: Income from investment operations
Net investment income 0.21 0.17 0.19 0.08 0.00
Net gains/losses -- realized and unrealized 2.16 5.97 0.85 12.00 0.00
Subtotal: income from investment operations 2.37 6.14 1.04 12.08 0.00
MINUS: Distributions to shareholders
Income dividends 0.25 0.20 0.11 0.22 --
Capital gain distributions 1.70 1.48 1.35 1.43 0.00
Subtotal: distributions to shareholders 1.95 1.68 1.46 1.65 0.00
...........................................
EQUALS: Share price (NAV) at end of year 24.42 28.88 28.46 38.89 00.00
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.85 0.87 0.89 0.86 0.00
Expenses(1) -- -- 0.89 0.86 0.00
Net investment income -- actual 0.89 0.75 0.69 0.21 0.00
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 10.35 27.47 3.70 43.92 0.00
Net assets at end of year (in millions of dollars) 643.9 956.0 1,071.4 1,411.9 0,000.0
Portfolio turnover rate (%) 52 36 39 63 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Focus Fund 7
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GENESIS FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBGNX ABOVE: PORTFOLIO MANAGERS JUDITH M. VALE AND
ROBERT W. D'ALELIO
"WE SEEK OUT SMALL COMPANIES THAT ARE LITTLE-KNOWN AND OFTEN ARE IN LESS
GLAMOROUS INDUSTRIES. FUTURE GROWTH IS ONE AREA WE FOCUS ON, BUT EQUALLY
IMPORTANT TO US IS EVIDENCE OF SOLID PERFORMANCE AND A PROVEN MANAGEMENT TEAM.
AND AS VALUE INVESTORS, WE LOOK FOR STOCKS THAT ARE SELLING AT ATTRACTIVE
PRICES."
THIS FUND IS CURRENTLY CLOSED TO NEW INVESTORS.
8
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers look for undervalued companies whose current product lines and
balance sheets are strong. Factors in identifying these firms may include:
- - above-average returns
- - an established market niche
- - circumstances that would make it difficult for new competitors to enter the
market
- - the ability to finance their own growth
- - sound future business prospects
This approach is designed to let the fund benefit from potential increases in
stock prices while limiting the risks typically associated with small-cap
stocks.
At times, the managers may emphasize certain industries that they believe will
benefit from market or economic trends.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Genesis Fund 9
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Stock prices of many smaller companies are based on future expectations. The
portfolio managers tend to focus on companies whose financial strength is
largely based on existing business lines rather than projected growth. While
this can help reduce risk, the fund is still subject to many of the risks of
small-cap investing. These include the risk that the fund's holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of a given sector that the managers
decided to focus on
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
10 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89 17.25%
90 -16.24%
91 41.55%
92 15.62%
93 13.89%
94 -1.82%
95 27.31%
96 29.86%
97 34.89%
BEST QUARTER: Q1 '91, up 25.05%
WORST QUARTER: Q3 '90, down 21.81%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
GENESIS FUND 34.89 20.05
Russell 2000 Index 22.36 16.40
</TABLE>
The Russell 2000 is an unmanaged index of U.S. small-cap stocks.
Genesis Fund 11
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JUDITH M. VALE is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. A senior member of the Small Cap Group since
1992, she has co-managed the fund's assets since 1994.
ROBERT W. D'ALELIO is a Vice President of Neuberger Berman Management. A senior
member of the Small Cap Group since joining the firm in 1996, he has co-managed
the fund's assets since 1997. From 1988 to 1996, he was a senior portfolio
manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.95% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.97
PLUS: Distribution (12b-1) fees None
Other expenses 0.16
....
EQUALS: Total annual operating expenses 1.13
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $115 $359 $622 $1375
</TABLE>
12 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it
distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 8.62 8.27 9.52 10.91 00.00
PLUS: Income from investment operations
Net investment income (loss) (0.01) -- (0.01) (0.01) 0.00
Net gains/losses -- realized and unrealized 0.42 1.56 1.95 4.80 0.00
Subtotal: income from investment operations 0.41 1.56 1.94 4.79 0.00
MINUS: Distributions to shareholders
Income dividends 0.01 -- -- -- --
Capital gain distributions 0.75 0.31 0.55 0.15 0.00
Subtotal: distributions to shareholders 0.76 0.31 0.55 0.15 0.00
....................................................
EQUALS: Share price (NAV) at end of year 8.27 9.52 10.91 15.55 00.00
- -----------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how they would
have been if certain waivers and expense offset arrangements had not been in effect.
Net expenses -- actual 1.36 1.35 1.28 1.16 0.00
Gross expenses(1) -- 1.38 1.38 1.26 0.00
Expenses(2) -- -- 1.28 1.17 0.00
Net investment income (loss) -- actual (0.20) (0.16) (0.18) (0.08) 0.00
- -----------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 4.77 19.69(3) 21.32(3) 44.32(3) 0.00
Net assets at end of year (in millions of dollars) 135.6 111.5 195.4 718.1 0,000.0
Portfolio turnover rate (%) 63 37 21 18 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO MANAGEMENT FEE
WAIVER.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS; THE MANAGEMENT FEE WAIVER IS INCLUDED, HOWEVER. THIS
CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER 9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT WAIVED A
PORTION OF THE MANAGEMENT FEE.
Genesis Fund 13
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GUARDIAN FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NGUAX ABOVE: PORTFOLIO MANAGERS ALLAN "RICK" WHITE
AND KEVIN L. RISEN
"WITH GUARDIAN FUND WE LOOK FOR ESTABLISHED COMPANIES THAT ARE EITHER 'UNDER A
ROCK' OR 'UNDER A CLOUD' -- MEANING THAT THEY'RE EITHER NOT WELL FOLLOWED ON
WALL STREET OR THEY'RE TEMPORARILY OUT OF FAVOR WITH OTHER INVESTORS. IT'S VERY
MUCH A CONTINUATION OF THE CLASSIC VALUE APPROACH THE FUND HAS USED SINCE ITS
FOUNDING IN 1950."
14
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
LARGE-CAP STOCKS
Large companies are usually well-established. They may have a variety of
products and business lines and a sound financial base that can help them
weather bad times.
Compared to smaller companies, large companies can be less responsive to changes
and opportunities. Historically, they've offered somewhat lower long-term
returns. But they have often been less risky, with their prices rising and
falling less dramatically than those of smaller companies.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A
SECONDARY GOAL.
To pursue these goals, the fund invests mainly in common stocks of
large-capitalization companies. The fund seeks to reduce risk by diversifying
among a large number of companies across many different industries and economic
sectors.
The managers look for well managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - solid balance sheets
- - above-average returns
- - low price-to-earnings ratios
- - consistent earnings
Because the managers tend to find that undervalued stocks may be more common in
certain sectors of the economy at a given time, the fund may emphasize those
sectors.
The fund has paid an income dividend every quarter, and a capital gain
distribution every year, since the fund's inception in 1950. Of course, it
cannot guarantee that it will continue to do so.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Guardian Fund 15
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
At times, large-cap stocks may lag other types of stocks in performance, which
could cause the fund to perform less well than certain other funds. While they
may at times be less risky than small-cap stocks, large-cap stocks may perform
less well over time.
To the extent that the fund emphasizes certain sectors of the economy at any
given time, its performance is likely to be disproportionately affected by the
economic, market, and other developments that may influence those sectors. The
fund's performance may also suffer if a sector does not perform as the portfolio
managers expected.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
16 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 28.05%
89 21.50%
90 -4.71%
91 34.33%
92 19.01%
93 14.45%
94 0.60%
95 32.11%
96 17.88%
97 17.94%
BEST QUARTER: Q1 '91, up 17.42%
WORST QUARTER: Q3 '90, down 15.76%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
GUARDIAN FUND 17.94 16.16 17.49
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Guardian Fund 17
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
ALLAN R. WHITE III is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since September 1998, when he joined the firm. From
1989 to 1998 he was a portfolio manager at another firm.
KEVIN L. RISEN is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has co-managed the fund's assets since
1996. He joined Neuberger Berman in 1992 as an analyst, and has been a portfolio
manager since 1995.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.70% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.70
PLUS: Distribution (12b-1) fees None
Other expenses 0.09
....
EQUALS: Total annual operating expenses 0.79
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $81 $252 $439 $978
</TABLE>
18 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 18.57 19.52 23.61 23.78 00.00
PLUS: Income from investment operations
Net investment income 0.24 0.27 0.31 0.15 0.00
Net gains/losses -- realized and unrealized 1.41 4.30 0.90 8.96 0.00
Subtotal: income from investment operations 1.65 4.57 1.21 9.11 0.00
MINUS: Distributions to shareholders
Income dividends 0.30 0.25 0.28 0.24 --
Capital gain distributions 0.40 0.23 0.76 1.24 0.00
Subtotal: distributions to shareholders 0.70 0.48 1.04 1.48 0.00
...........................................
EQUALS: Share price (NAV) at end of year 19.52 23.61 23.78 31.41 0.00
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.80 0.80 0.82 0.80 0.00
Expenses(1) -- -- 0.82 0.80 0.00
Net investment income -- actual 1.36 1.40 1.37 0.55 0.00
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 9.12 24.06 5.27 39.69 0.00
Net assets at end of year (in millions of dollars) 2,416.5 3,947.5 4,905.2 6,475.1 0,000.0
Portfolio turnover rate (%) 24 26 37 50 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Guardian Fund 19
<PAGE>
[PHOTO]
NEUBERGER BERMAN
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBISX ABOVE: PORTFOLIO MANAGER VALERIE CHANG
"WE TAKE A VALUE INVESTING APPROACH AND APPLY IT AROUND THE GLOBE. WE USE
TOP-DOWN ANALYSIS TO IDENTIFY ATTRACTIVE MARKETS -- DEVELOPED AS WELL AS
EMERGING. THEN WE SEARCH FOR INDIVIDUAL STOCKS, ALWAYS WITH THE SAME BASIC
PURPOSE IN MIND: TO FIND GOOD COMPANIES THAT ARE TRADING AT LOW VALUATIONS
COMPARED TO THEIR PEERS."
20
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
FOREIGN STOCKS
Today, the majority of the world's investment opportunities lie outside the U.S.
These markets often respond to different factors, and therefore tend to follow
cycles that are different from each other.
For this reason, many investors put a portion of their portfolios in foreign
investments as a way of gaining further diversification. While foreign stock
markets can be risky, investors gain an opportunity to add potential long-term
growth.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
COMMON STOCKS OF FOREIGN COMPANIES.
To pursue this goal, the fund invests mainly in foreign companies of any size,
including companies in developed and emerging industrialized markets. The fund
defines a foreign company as one that is organized outside of the United States
and conducts the majority of its business abroad.
The fund seeks to reduce risk by diversifying among many industries. Although it
has the flexibility to invest a significant portion of its assets in one country
or region, it generally intends to remain well-diversified across countries and
geographical regions.
The manager initially analyzes the outlooks for various countries and regions
around the world, examining economic, market, social, and political conditions.
Based on her findings, the manager decides how much of the fund's assets to
invest in which regions and countries.
In picking stocks, the manager looks for well-managed companies whose stock
prices are undervalued. Factors in identifying these firms may include strong
fundamentals, such as attractive cash flows and balance sheets, as well as
prices that are reasonable in light of projected earnings growth.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
International Fund 21
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. The fund may use derivatives for hedging and for speculation. Hedging
could reduce the fund's losses from currency fluctuations, but could also reduce
its gains. A derivative instrument could fail to perform as expected. Any
speculative investment could cause a loss for the fund.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in international stock markets. The behavior of these
markets is unpredictable, particularly in the short term. Because of
this, the value of your investment will rise and fall, sometimes sharply, and
you could lose money.
Foreign stocks are riskier than comparable U.S. stocks. This is in part because
foreign markets are less developed and foreign governments, economies, laws, tax
codes and securities firms may be less stable. There is also a higher chance
that key information will be unavailable, incomplete, or inaccurate. As a
result, foreign stocks can fluctuate more widely in price than comparable U.S.
stocks, and they may also be less liquid. These risks are generally greater in
emerging markets. Over a given period of time, foreign stocks may underperform
U.S. stocks -- sometimes for years. The fund could also underperform if the
manager invests in the wrong countries or regions.
Changes in currency exchange rates bring an added dimension of risk. Currency
fluctuations could erase investment gains or add to investment losses.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the manager failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
22 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
Because the fund had a policy of investing primarily in mid- and large-cap
stocks prior to September 1998, its performance during that time would have been
different if current policies had been in effect.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 7.88%
96 23.69%
97 11.21%
BEST QUARTER: Q2 '97, up 9.30%
WORST QUARTER: Q4 '97, down 8.67%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 6/15/94
<S> <C> <C>
- --------------------------------------------------------------
INTERNATIONAL FUND 11.21 11.54
EAFE Index 2.06 5.38
</TABLE>
The EAFE is an unmanaged index of stocks from Europe, Australasia, and the Far
East.
International Fund 23
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
VALERIE CHANG is an Assistant Vice President of Neuberger Berman Management. In
1996 she joined the firm and became assistant manager of the fund. She has been
the manager since 1997. She began her career in 1993 in banking, and from 1995
to 1996 was a senior securities analyst at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 1.11% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.11
PLUS: Distribution (12b-1) fees None
Other expenses 0.60
....
EQUALS: Total annual operating expenses 1.71
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $174 $539 $928 $2019
</TABLE>
24 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994(1) 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it distributed
to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.00 10.46 10.70 11.91 00.00
PLUS: Income from investment operations
Net investment income 0.01 0.06 0.01 -- 0.00
Net gains/losses -- realized and unrealized 0.45 0.21 1.24 2.94 0.00
Subtotal: income from investment operations 0.46 0.27 1.25 2.94 0.00
MINUS: Distributions to shareholders
Income dividends -- 0.03 0.04 0.02 --
Capital gain distributions -- -- -- -- 0.00
Subtotal: distributions to shareholders -- 0.03 0.04 0.02 0.00
.........................................................
EQUALS: Share price (NAV) at end of year 10.46 10.70 11.91 14.83 0.00
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how they would have
been if certain expense reimbursements/repayments and offset arrangements had not been in effect.
Net expenses -- actual 1.70(2) 1.70 1.70 1.70 0.00
Gross expenses(3) 2.50(2) 2.31 2.28 1.69 0.00
Expenses(4) -- -- 1.70 1.70 0.00
Net investment income (loss) -- actual 0.57(2) 0.73 0.24 (0.02) 0.00
- ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 4.60(5,6) 2.60(6) 11.73(6) 24.71 0.00
Net assets at end of year (in millions of dollars) 6.2 26.4 57.0 115.4 0,000.0
Portfolio turnover rate (%) 5 41 45 37 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 6/15/94 (BEGINNING OF OPERATIONS) TO 8/31/94.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENTS/REPAYMENTS.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
International Fund 25
<PAGE>
[PHOTO]
NEUBERGER BERMAN
MANHATTAN FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NMANX ABOVE: PORTFOLIO MANAGERS JENNIFER K. SILVER
AND BROOKE A. COBB
"WITHOUT QUESTION, WE ARE GROWTH INVESTORS. WE LOOK FOR COMPANIES THAT WE THINK
WILL DELIVER POSITIVE EARNINGS SURPRISES, PARTICULARLY THOSE WITH THE POTENTIAL
TO DO SO CONSISTENTLY. IDEALLY, WE WANT TO IDENTIFY COMPANIES THAT WILL SOMEDAY
RANK AMONG THE FORTUNE 500."
26
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
MID-CAP STOCKS
Mid-cap stocks have historically shown risk/return characteristics that are in
between those of small- and large-cap stocks. Their prices can rise and fall
substantially, although they have the potential to offer comparatively
attractive long-term returns.
Mid-caps are less widely followed on Wall Street than large-caps, which can make
it comparatively easier to find attractive stocks that are not overpriced.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. Often, these stocks are in emerging or
rapidly growing industries.
While most growth stocks are known to investors, they may not yet have reached
their full potential. The growth investor looks for reasons for continued
success.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL. INCOME IS NOT A CONSIDERATION.
To pursue this goal, the fund invests mainly in common stocks of
mid-capitalization companies. The fund seeks to reduce risk by diversifying
among many companies and industries.
The managers look for fast-growing companies that are in new or rapidly evolving
industries. Factors in identifying these firms may include:
- - above-average growth of earnings
- - earnings that have exceeded analysts' expectations
The managers may also look for other characteristics in a company, such as
financial strength, a strong position relative to competitors and a stock price
that is reasonable in light of its growth rate.
The managers follow a disciplined selling strategy, and may drop a stock from
the portfolio when it reaches a target price, fails to perform as expected, or
appears substantially less desirable than another stock.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Manhattan Fund 27
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
By focusing on mid-cap stocks, the fund is subject to their risks, including the
risk its holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
Because the prices of most growth stocks are based on future expectations, these
stocks tend to be more sensitive than value stocks to bad economic news and
negative earnings surprises. While the prices of any type of stock can rise and
fall rapidly, growth stocks in particular may underperform during periods when
the market favors value stocks. The fund's performance may also suffer if
certain stocks do not perform as the portfolio managers expected. To the extent
that the managers sell stocks before they reach their market peak, the fund may
miss out on opportunities for higher performance.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
28 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index as well
as a more focused index of mid-cap growth stocks. The fund's performance figures
include all of its expenses; the indices do not include costs of investment.
Because the fund had a policy of investing in stocks of all capitalizations and
used a comparatively more value-oriented investment approach prior to July 1997,
its performance would have been different if current policies had been in
effect.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 18.31%
89 29.09%
90 -8.05%
91 30.89%
92 17.77%
93 10.01%
94 -3.60%
95 31.00%
96 9.85%
97 29.20%
BEST QUARTER: Q1 '91, up 14.75%
WORST QUARTER: Q3 '90, down 15.88%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
MANHATTAN FUND 29.20 14.54 15.62
Russell Midcap Growth Index 22.54 15.98 16.80
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The Russell Midcap Growth is an unmanaged index of U.S. mid-cap growth stocks.
The S&P 500 is an unmanaged index of U.S. stocks.
Manhattan Fund 29
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JENNIFER K. SILVER is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. Currently the Director of the Growth Equity
Group, she has been co-manager of the fund since joining the firm in 1997. From
1986 to 1997, she was an analyst and a portfolio manager at another firm.
BROOKE A. COBB is a Vice President of Neuberger Berman Management. He has been
co-manager of the fund since joining the firm in 1997. From 1972 to 1997, he was
a portfolio manager at several other firms.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.79% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.79
PLUS: Distribution (12b-1) fees None
Other expenses 0.16
....
EQUALS: Total annual operating expenses 0.95
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $97 $303 $525 $1166
</TABLE>
30 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 12.94 11.28 13.27 11.94 00.00
PLUS: Income from investment operations
Net investment income (loss) 0.02 -- (0.04) (0.03) 0.00
Net gains/losses -- realized and unrealized 0.40 2.70 (0.33) 4.26 0.00
Subtotal: income (loss) from investment operations 0.42 2.70 (0.37) 4.23 0.00
MINUS: Distributions to shareholders
Income dividends 0.02 0.01 -- -- --
Capital gain distributions 2.06 0.70 0.96 1.66 0.00
Subtotal: distributions to shareholders 2.08 0.71 0.96 1.66 0.00
...........................................
EQUALS: Share price (NAV) at end of year 11.28 13.27 11.94 14.51 0.00
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how
they would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.96 0.98 0.98 0.98 0.00
Expenses(1) -- -- 0.98 0.99 0.00
Net investment income (loss) -- actual 0.16 0.03 (0.27) (0.20) 0.00
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 3.49 26.00 (2.91) 38.75 0.00
Net assets at end of year (in millions of dollars) 510.3 612.0 516.2 570.4 0,000.0
Portfolio turnover rate (%) 50 44 53 89 0
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Manhattan Fund 31
<PAGE>
[PHOTO]
NEUBERGER BERMAN
MILLENNIUM FUND
- --------------------------------------------------------------------------------
Ticker Symbol: XXXXX ABOVE: PORTFOLIO MANAGERS MICHAEL F. MALOUF
AND JENNIFER K. SILVER
"WE MAKE IT OUR BUSINESS TO TRACK DOWN PROMISING SMALL-CAP COMPANIES WHEREVER
THEY MAY BE. AS A RESULT, THIS FUND ENABLES INVESTORS WHO CAN ACCEPT THE RISKS
OF SMALL-CAP STOCKS TO PURSUE THE POTENTIAL FOR LONG-TERM GROWTH THAT SMALL-CAPS
MAY PROVIDE."
32
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. Often, these stocks are in emerging or
rapidly growing industries.
While most growth stocks are known to investors, they may not yet have reached
their full potential. The growth investor looks for reasons for continued
success.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers take a growth approach to selecting stocks, looking for new
companies that are in the developmental stage as well as older companies that
appear poised to grow because of new products, markets or management. Factors in
identifying these firms may include financial strength, a strong position
relative to competitors and a stock price that is reasonable in light of its
growth rate.
The managers follow a disciplined selling strategy, and may drop a stock from
the portfolio when it reaches a target price, fails to perform as expected, or
appears substantially less desirable than another stock.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Millennium Fund 33
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
By focusing on small-cap stocks, the fund is subject to many of their risks,
including the risk its holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks, especially when the market or the economy
is not robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of those sectors in which small-cap
growth stocks may be concentrated
Because the prices of most growth stocks are based on future expectations, these
stocks tend to be more sensitive than value stocks to bad economic news and
negative earnings surprises. While the prices of any type of stock can rise and
fall rapidly, growth stocks in particular may underperform during periods when
the market favors value stocks. The fund's performance may also suffer if
certain stocks do not perform as the portfolio managers expected.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
34 Neuberger Berman
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
MICHAEL F. MALOUF is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since its inception in 1998, the year he joined the
firm. From 1991 to 1998 he was a portfolio manager at another firm.
JENNIFER K. SILVER is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. Director of the Growth Equity Group, since
1997, she has been co-manager of the fund since 1998. From 1986 to 1997, she was
an analyst and a portfolio manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.11
PLUS: Distribution (12b-1) fees None
Other expenses 1.20*
....
EQUALS: Total annual operating expenses 2.31*
</TABLE>
(*) OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
UNDER AN ARRANGEMENT WHICH IT CAN TERMINATE UPON SIXTY DAYS' NOTICE,
NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
OTHER EXPENSES ARE LIMITED TO 0.64% AND TOTAL ANNUAL OPERATING EXPENSES ARE
LIMITED TO 1.75% OF AVERAGE NET ASSETS.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- --------------------------------------
Expenses** $234 $721
</TABLE>
(**) UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE
FOOTNOTE ABOVE, YOUR COSTS FOR THE ONE- AND THREE-YEAR PERIODS WOULD BE
$178 AND $551, RESPECTIVELY.
BECAUSE THE FUND IS NEW IT CURRENTLY DOES NOT HAVE PERFORMANCE OR FINANCIAL
HIGHLIGHTS TO REPORT.
Millennium Fund 35
<PAGE>
[PHOTO]
NEUBERGER BERMAN
PARTNERS FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NPRTX ABOVE: PORTFOLIO MANAGERS MICHAEL M. KASSEN,
ROBERT I. GENDELMAN AND S. BASU MULLICK
"OUR MANAGEMENT APPROACH FOCUSES ON FINDING UNDERVALUED COMPANIES. IN
PARTICULAR, WE LOOK FOR 'FALLEN ANGELS' -- GROWTH STOCKS WHOSE PRICES HAVE HIT
NEW LOWS. AT THE SAME TIME, WE TEND TO BE DISCIPLINED IN MAKING SELL DECISIONS.
WE WOULD RATHER SELL EARLY THAN SELL TOO LATE."
36
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
MID- AND LARGE-
CAP STOCKS
Large companies are usually well-established. Compared to mid-cap companies,
they may be less responsive to change and may offer somewhat lower long-term
returns. However, their prices may fluctuate less dramatically.
Mid-cap stocks have historically performed more like small-caps than like large-
caps. Their prices can rise and fall substantially, although they have the
potential to offer comparatively attractive long-term returns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by diversifying
among many companies and industries.
The managers look for well-managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - strong fundamentals
- - consistent cash flow
- - a sound track record through all phases of the market cycle
The managers may also look for other characteristics in a company, such as a
strong position relative to competitors, a high level of stock ownership among
management, and a recent sharp decline in stock price that appears to be the
result of a short-term market overreaction to negative news.
The fund generally considers selling a stock when it reaches the managers'
target price, when it fails to perform as expected, or when other opportunities
appear more attractive.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Partners Fund 37
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; large-cap stocks may perform less well over time than mid-cap stocks. At
any given time, one or both groups of stocks may be out of favor with investors.
If the fund emphasizes either group of stocks, its performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions. To the extent that the managers sell stocks before they
reach their market peak, the fund may miss out on opportunities for higher
performance.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
38 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 15.46%
89 22.78%
90 -5.11%
91 22.36%
92 17.52%
93 16.46%
94 -1.89%
95 35.21%
96 26.49%
97 29.23%
BEST QUARTER: Q2 '97, up 14.04%
WORST QUARTER: Q3 '90, down 9.61%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
PARTNERS FUND 29.23 20.35 17.19
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Partners Fund 39
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
MICHAEL M. KASSEN, ROBERT I. GENDELMAN AND S. BASU MULLICK are Vice Presidents
of Neuberger Berman Management. Kassen and Gendelman are principals of Neuberger
Berman, LLC. Kassen has been manager of the fund since 1990, and was joined by
Gendelman in 1994 and Mullick in 1998. Gendelman was a portfolio manager at
another firm from 1992 to 1993, as was Mullick from 1993 to 1998.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.71% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.71
PLUS: Distribution (12b-1) fees None
Other expenses 0.09
....
EQUALS: Total annual operating expenses 0.80
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $82 $255 $444 $990
</TABLE>
40 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 22.46 21.32 23.72 23.88 00.00
PLUS: Income from investment operations
Net investment income 0.10 0.17 0.22 0.19 0.00
Net gains/losses -- realized and unrealized 1.07 3.94 2.84 10.36 0.00
Subtotal: income from investment operations 1.17 4.11 3.06 10.55 0.00
MINUS: Distributions to shareholders
Income dividends 0.11 0.11 0.20 0.22 --
Capital gain distributions 2.20 1.60 2.70 2.61 0.00
Subtotal: distributions to shareholders 2.31 1.71 2.90 2.83 0.00
............................................
EQUALS: Share price (NAV) at end of year 21.32 23.72 23.88 31.60 0.00
- ---------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they would
have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.81 0.83 0.84 0.81 0.00
Expenses(1) -- -- 0.84 0.81 0.00
Net investment income -- actual 0.48 0.83 0.93 0.72 0.00
- ---------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 5.56 21.53 13.86 47.11 0.00
Net assets at end of year (in millions of dollars) 1,335.9 1,564.0 1,871.9 3,103.7 0,000.00
Portfolio turnover rate (%) 75 98 96 77 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Partners Fund 41
<PAGE>
[PHOTO]
NEUBERGER BERMAN
SOCIALLY RESPONSIVE FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBSRX ABOVE: PORTFOLIO MANAGER JANET PRINDLE
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
42
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
SOCIAL POLICY.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
The managers initially screen companies using value investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
- - environmental concerns
- - diversity in the work force
- - progressive employment and workplace practices
The managers typically also look at a company's record in public health and the
nature of its products. The managers judge firms on their corporate citizenship
overall, considering their accomplishments as well as their goals. While these
judgments are inevitably subjective, the fund has a strict policy of avoiding
companies that receive more than 5% of their earnings from alcohol, tobacco,
gambling, or weapons, as well as companies that sell non-consumer products to
the military or are involved in nuclear power.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Socially Responsive Fund 43
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. These investments are not subject to the fund's social policy.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
- - undervalued stocks that don't meet the social criteria could outperform those
that do
- - economic or political changes could make certain companies less attractive for
investment
- - the social policy could cause the fund to sell or avoid stocks that
subsequently perform well
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; large-cap stocks may perform less well over time than mid-cap stocks. At
any given time, one or both groups of stocks may be out of favor with investors.
If the fund emphasizes either group of stocks, its performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
44 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 38.94%
96 18.50%
97 24.41%
BEST QUARTER: Q2 '97, up 15.54%
WORST QUARTER: Q1 '97, down 1.86%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 3/16/94
<S> <C> <C>
- --------------------------------------------------------------
SOCIALLY RESPONSIVE FUND 24.41 19.66
S&P 500 Index 33.32 24.09
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Socially Responsive Fund 45
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a principal
of Neuberger Berman, LLC, joined the latter firm in 1977. She has been managing
assets using social criteria since 1990 and has been manager of the fund since
1994.
ROBERT LADD and INGRID SAUKAITIS are Assistant Vice Presidents of Neuberger
Berman Management and have been Associate Managers of the fund since 1997. Ladd
has been a portfolio manager at the firm since 1992; Saukaitis was project
director for a social research group from 1995 to 1997.
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services. For
the 12 months ended 8/31/98, the management/administration fees paid to
Neuberger Berman Management were 0.81% of average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.81
PLUS: Distribution (12b-1) fees None
Other expenses 0.29
....
EQUALS: Total annual operating expenses 1.10
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $112 $350 $606 $1340
</TABLE>
46 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994(1) 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it distributed
to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.00 10.07 11.84 13.88 00.00
PLUS: Income from investment operations
Net investment income 0.01 0.03 0.02 0.03 0.00
Net gains/losses -- realized and unrealized 0.06 1.76 2.35 4.33 0.00
Subtotal: income from investment operations 0.07 1.79 2.37 4.36 0.00
MINUS: Distributions to shareholders
Income dividends -- 0.02 0.02 0.03 --
Capital gain distributions -- -- 0.31 0.42 0.00
Subtotal: distributions to shareholders -- 0.02 0.33 0.45 0.00
..........................................................
EQUALS: Share price (NAV) at end of year 10.07 11.84 13.88 17.79 0.00
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how they would have
been if certain expense reimbursements/repayments and offset arrangements had not been in effect.
Net expenses -- actual 1.50(2) 1.51 1.50 1.48 0.00
Gross expenses(3) 2.50(2) 2.50 1.69 1.20 0.00
Expenses(4) -- -- 1.50 1.49 0.00
Net investment income -- actual 0.50(2) 0.36 0.19 0.23 0.00
- -----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each period, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 0.70(5,6) 17.82(6) 20.19(6) 31.96 0.00
Net assets at end of year (in millions of dollars) 2.3 8.2 32.9 59.7 0,000.00
Portfolio turnover rate (%) 14 58 53 51 0
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 3/16/94 (BEGINNING OF OPERATIONS) TO 8/31/94.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENTS/REPAYMENTS.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Socially Responsive Fund 47
<PAGE>
YOUR INVESTMENT
SHARE PRICES
- -------------------------------------------------------------
SHARE PRICE CALCULATIONS
A fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of a fund's securities
changes every business day, the share price usually changes as well.
When valuing portfolio securities, the funds use market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate made
according to methods approved by its trustees. A fund may also use these methods
to value certain types of illiquid securities.
Because these funds do not have sales charges, the price you pay for each share
of a fund is the fund's net asset value per share. Similarly, because there are
no fees for selling shares, the fund pays you the full share price when you sell
shares.
The funds are open for business every day the New York Stock Exchange is open.
In general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted. Each fund calculates
its share price as of the end of regular trading on business days, usually 4:00
p.m. eastern time.
Because foreign markets may be open on days when U.S. markets are closed, the
value of foreign securities owned by a fund could change on days when you can't
buy or sell fund shares. The fund's share price, however, will not change until
the next time it is calculated.
48 Neuberger Berman
<PAGE>
PRIVILEGES
AND SERVICES
- -------------------------------------------------------------
DOLLAR-COST AVERAGING
Systematic investing allows you to take advantage of the principle of
dollar-cost averaging. When you make regular investments of a given amount --
say, $100 a month -- you will end up investing at different share prices over
time. When the share price is high, your $100 buys fewer shares; when the share
price is low, your $100 buys more shares. Over time, this can help lower the
average price you pay per share.
Dollar-cost averaging cannot guarantee you a profit or protect you from losses
in a declining market. But it can be beneficial over the long term.
As a Neuberger Berman fund shareholder, you have access to a range of services
to make investing easier:
SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost
averaging by establishing periodic investments of $100 a month or more. You
choose the schedule and amount. Your investment money may come from a Neuberger
Berman money market fund or your bank account.
SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals of at least
$100 from a Neuberger Berman fund on a periodic schedule. You can also set up
payments to distribute the full value of an account over a given time. While
this service can be helpful to many investors, be aware that it could generate
capital gains or losses.
ELECTRONIC BANK TRANSFERS -- When you sell fund shares, you can have the money
sent to your bank account electronically rather than mailed to you as a check.
Please note that your bank must be a member of the Automated Clearing House, or
ACH, system. This service is not available for retirement accounts.
INTERNET ACCESS -- At WWW.NBFUNDS.COM, you can make transactions, check your
account, and access a wealth of information.
FUNDFONE-REGISTERED TRADEMARK- -- Get up-to-date performance and account
information through our 24-hour automated service by calling 800-335-9366. If
you already have an account with us, you can place orders to buy, sell, or
exchange fund shares.
Your Investment 49
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money a fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before a fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
DISTRIBUTIONS -- Each fund pays out to shareholders any net income and net
capital gains. Ordinarily, the funds make these distributions once a year (in
December), except for Guardian Fund, which typically distributes any income
every quarter.
Unless you tell us otherwise, your income and capital gain distributions from a
fund will be reinvested in that fund. However, if you prefer you may:
- - receive all distributions in cash
- - reinvest capital gain distributions, but receive income distributions in cash
To take advantage of one of these options, please indicate your choice on your
application.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar on facing page) will help clarify
this for you.
50 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that we send you every
January. It details the distributions you received during the past year and
shows their tax status. A separate statement covers your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
Income distributions and short-term capital gain distributions are generally
taxed as ordinary income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund, or whether you reinvested your distributions.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax consequences. The exception, once again, is tax-advantaged retirement
accounts.
Your Investment 51
<PAGE>
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
BACKUP WITHHOLDING
When sending in your application, it's important to provide your Social Security
or other taxpayer ID number. Without this number, the IRS requires the fund to
withhold 31% of all money you receive from the fund, whether from selling shares
or from distributions.
If the appropriate ID number has been applied for but is not available (such as
in the case of a custodial account for a newborn), you may open the account
without a number. However, we must receive the number within 60 days in order to
avoid backup withholding. For information on custodial accounts, call
800-877-9700.
WHEN YOU BUY SHARES -- Instructions for buying shares are on pages 56 and 57.
Whenever you make an initial investment in one of the funds or add to an
existing account (except with an automatic investment), you will be sent a
statement confirming your transaction. All investments must be made in U.S.
dollars, and investment checks must be drawn on a U.S. bank.
The funds do not generally issue certificates for shares, although you can
request them. Please note, however, that the only way to redeem share
certificates is by sending in the certificates. Also, if you lose a certificate,
you will be charged a fee to replace it.
WHEN YOU SELL SHARES -- Instructions for selling shares are on pages 58 and 59.
You can place an order to sell some or all of your shares at any time. The
proceeds from the shares you sold are generally sent out the next business day
after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
52 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
SIGNATURE GUARANTEES
A signature guarantee is a guarantee that your signature is authentic.
Most banks, brokers, and other financial institutions can provide you with one.
Some may charge a fee; others may not, particularly if you are a customer of
theirs.
A notarized signature from a notary public is not a signature guarantee.
In some cases, you will have to place your order to sell shares in writing, and
you will need a signature guarantee (see sidebar). These cases include:
- - when selling more than $50,000 worth of shares
- - when you want the check for the proceeds to be made out to someone other than
an owner of record, or sent somewhere other than the address of record
- - when you want the proceeds sent by wire or electronic transfer to a bank
account you have not designated in advance
When selling shares in an account that you do not intend to close, be sure to
leave at least $1,000 worth of shares in the account. Otherwise, the fund has
the right to request that you bring the balance back up to the minimum level. If
you have not done so within 60 days, we may close your account and send you the
proceeds by mail.
UNCASHED CHECKS -- When you receive a check from us, you may want to deposit or
cash it right away, as you will not receive interest on uncashed checks.
Your Investment 53
<PAGE>
MAINTAINING YOUR
ACCOUNT CONTINUED
- -------------------------------------------------------------------
FUND STRUCTURE
Each of the funds in this prospectus uses a "master-feeder" structure.
Rather than investing directly in securities, each fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus, we have used the word "fund" to mean a feeder fund and its
master portfolio. Costs for a feeder fund include its own costs and its share of
master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, a
feeder fund could switch to another master portfolio or decide to manage its
assets itself. No fund in this prospectus is currently contemplating such a
move.
WHEN YOU EXCHANGE SHARES -- You can move money from one Neuberger Berman fund to
another through an exchange of shares. There are three things to remember when
making an exchange:
- - both accounts must have the same registration
- - you will need to observe the minimum investment and minimum account balance
requirements for the fund accounts involved
- - because an exchange is a sale for tax purposes, consider any tax consequences
before placing your order
The exchange program is available to all shareholders in the funds, but can be
withdrawn from any investor that we believe is trying to "time the market" or is
otherwise making exchanges that we judge to be excessive. Frequent exchanges can
interfere with fund management and affect costs and performance for other
shareholders.
PLACING ORDERS BY TELEPHONE -- Neuberger Berman fund investors have the option
of placing telephone orders to buy, sell, or exchange shares. On non-retirement
accounts, this option is available to you unless you indicate on your account
application (or in a subsequent letter to us or to State Street Bank and Trust
Company) that you don't want it.
Whenever we receive a telephone order, we take steps to make sure the order is
legitimate. These may include asking for identifying information and recording
the call. As long as a fund and its representatives
54 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the funds could be affected by problems relating to the
conversion of European currencies into
the Euro beginning 1/1/99 and the ability of computer systems to recognize the
Year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the funds' portfolios will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
take reasonable measures to verify the authenticity of calls, investors may be
responsible for any losses caused by unauthorized telephone orders.
In unusual circumstances, it may be difficult to place an order by phone. In
these cases, consider sending your order by fax or express delivery.
OTHER POLICIES -- Under certain circumstances, the funds reserve the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - suspend the telephone order privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone your right to sell fund shares on days when trading on the
New York Stock Exchange is restricted, or as otherwise permitted by the SEC
- - change its investment minimums or other requirements for buying and selling,
or waive any minimums or requirements for certain investors
Your Investment 55
<PAGE>
BUYING SHARES
Method Things to know
- -----------------------------------------------------------------------------
SENDING US A CHECK
Your first investment must be at least $1,000
Additional investments can be as little as $100
We cannot accept cash, money orders, or travelers checks
You will be responsible for any losses or fees resulting from a bad check; if
necessary, we may sell other shares belonging to you in order to cover these
losses
All checks must be made out to "Neuberger Berman Funds"; we cannot accept checks
made out to you or other parties and signed over to us
- -----------------------------------------------------------------------------
WIRING MONEY
All wires must be for at least $1,000
- -----------------------------------------------------------------------------
EXCHANGING FROM
ANOTHER FUND
All exchanges must be for at least $1,000
Both accounts involved must be registered in the same name, address and tax ID
number
An exchange order cannot be cancelled or changed once it has been placed
- -----------------------------------------------------------------------------
CALLING IN YOUR ORDER
(with follow-up payment)
All phone investment orders must be for at least $1,000
The money for your shares must be received within three days after you place
your order, or your order may be cancelled
You will be responsible for any losses or fees resulting from a cancelled order;
if necessary, we may sell other shares belonging to you in order to cover these
losses
Not available on retirement accounts
- -----------------------------------------------------------------------------
SETTING UP SYSTEMATIC
INVESTMENTS
All investments must be at least $100
56 Neuberger Berman
<PAGE>
RETIREMENT PLANS
We offer investors a number of tax-advantaged plans for retirement saving:
TRADITIONAL IRAS allow money to grow tax-deferred until you take it out at
retirement. Contributions are deductible for some investors, but even when
they're not, an IRA can be beneficial.
ROTH IRAS offer tax-free growth like a traditional IRA, but instead of tax-
deductible contributions, the withdrawals are tax-free for investors who meet
certain requirements.
Also available: SEP-IRA, SIMPLE, Keogh, and other types of plans. Consult your
tax professional to find out which types of plans may be beneficial for you,
then call 800-877-9700 for information on any Neuberger Berman retirement plan.
Instructions
- ----------------------------------------------------
Fill out the application and enclose your check
If regular first-class mail, address to:
NEUBERGER BERMAN FUNDS
BOSTON SERVICE CENTER
P.O BOX 8403
BOSTON, MA 02266-8403
If express delivery, registered mail, or certified mail, send to:
NEUBERGER BERMAN FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
66 BROOKS DRIVE
BRAINTREE, MA 02184-3839
- ----------------------------------------------------
Before wiring any money, call 800-877-9700 for an order confirmation
Have your financial institution send your wire to State Street Bank and Trust
Company
Include your name, the fund name, your account number and other information as
requested
- ----------------------------------------------------
Call 800-877-9700 to place your order
To place an order using FUNDFONE-Registered Trademark- call 800-335-9366
- ----------------------------------------------------
Call 800-877-9700 to place your order
Follow up with a wire, electronic transfer, or check
(via express delivery)
To add shares to an existing account using FUNDFONE-Registered Trademark-, call
800-335-9366
- ----------------------------------------------------
Call 800-877-9700 for instructions
Your Investment 57
<PAGE>
SELLING SHARES
Method Things to know
- -----------------------------------------------------------------------------
SENDING US A LETTER
Unless you tell us otherwise, we will mail your proceeds by check to the address
of record, payable to the registered owner(s)
If you have designated a bank account on your application, you can request that
we wire the proceeds to this account; if the total balance in all of your
Neuberger Berman fund accounts is less than $200,000, you will be charged an
$8.00 fee
You can also request that we send the proceeds to your designated bank account
by electronic transfer without fee
You may need a signature guarantee (see page 53)
- -----------------------------------------------------------------------------
SENDING US A FAX
For amounts of up to $50,000
Not available if you have changed the address on the account by phone, fax, or
postal address change in the past 15 days
- -----------------------------------------------------------------------------
CALLING IN YOUR ORDER
All phone orders to sell shares must be for at least $1,000, unless you are
closing out an account
Not available if you have declined the phone option or are selling shares in a
retirement account
Not available if you have changed the address on the account by phone, fax, or
postal address change in the past 15 days
- -----------------------------------------------------------------------------
EXCHANGING INTO
ANOTHER FUND
All exchanges must be for at least $1,000
Both accounts involved must be registered in the same name, address and tax ID
number
An exchange order cannot be cancelled or changed once it has been placed
- -----------------------------------------------------------------------------
SETTING UP SYSTEMATIC
WITHDRAWALS
For accounts with at least $5,000 worth of shares in them
Withdrawals must be at least $100
58 Neuberger Berman
<PAGE>
INTERNET CONNECTION
Investors with Internet access can enjoy many valuable and time-saving features
by visiting us on the World Wide Web at WWW.NBFUNDS.COM.
The site offers complete information on our funds, current performance data, and
an Investment Education Center with interactive worksheets for college and
retirement planning. Also available are relevant news items, tax information,
portfolio manager interviews, and related articles.
As a Neuberger Berman funds shareholder, you can use the web site to access
account information and even make secure transactions -- 24 hours a day.
Instructions
- ----------------------------------------------------
Send us a letter requesting us to sell shares signed by all registered owners;
include your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions
If regular first-class mail, send to:
NEUBERGER BERMAN FUNDS
BOSTON SERVICE CENTER
P.O BOX 8403
BOSTON, MA 02266-8403
If express delivery, registered mail, or certified mail, send to:
NEUBERGER BERMAN FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
66 BROOKS DRIVE
BRAINTREE, MA 02184-3839
- ----------------------------------------------------
Draw up a request to sell shares as described above
Fax it to 212-476-8848
Call 800-877-9700 to make sure your fax arrived and is in order
- ----------------------------------------------------
Call 800-877-9700 to place your order
Give your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions
To place an order using FUNDFONE-Registered Trademark- call 800-335-9366
- ----------------------------------------------------
Call 800-877-9700 to place your order
To place an order using FUNDFONE-Registered Trademark- call 800-335-9366
- ----------------------------------------------------
Call 800-877-9700 for instructions
Your Investment 59
<PAGE>
- -------------------------------------------------------------------
NOTES
60
<PAGE>
- --------------------------------------------
61
<PAGE>
[PHOTO]
- -------------------------------------------------------------
[]
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
212-476-8800
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-582
NBEP00031298
NEUBERGER BERMAN EQUITY FUNDS
If you'd like further details on any of these funds, you can request a free copy
of the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager(s) about strategies and market
conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on these funds, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about each fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
<PAGE>
[PHOTO OF WOODWORKING GOUGE ON CARVED PLANK OF WOOD] NEUBERGER BERMAN
NEUBERGER BERMAN
EQUITY FUNDS-REGISTERED TRADEMARK-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 15, 1998
The Securities and Exchange Commission does not say
whether any mutual fund is a good or bad investment or
whether the information in any prospectus is accurate or
complete. It is unlawful for anyone to indicate
otherwise.
Focus Fund
Genesis Fund
Guardian Fund
International Fund
Manhattan Fund
Millennium Fund
Partners Fund
Socially Responsive Fund
<PAGE>
CONTENTS
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY FUNDS
PAGE 2 ...... Focus Fund
8 ...... Genesis Fund
14 ...... Guardian Fund
20 ...... International Fund
26 ...... Manhattan Fund
32 ...... Millennium Fund
36 ...... Partners Fund
42 ...... Socially Responsive Fund
YOUR INVESTMENT
48 ...... Maintaining Your Account
50 ...... Share Prices
51 ...... Distributions and Taxes
53 ...... Fund Structure
</TABLE>
<PAGE>
- -------------------------------------------------------------
FUND MANAGEMENT
All of the Neuberger Berman Equity Funds are managed by Neuberger Berman
Management Inc., in conjunction with Neuberger Berman, LLC, as sub-adviser.
Together, the firms manage more than $00 billion in total assets and continue an
asset management history that began in 1939.
Neuberger Berman's commitment to its asset management approach is reflected in
the more than $125 million the organization's principals, employees and their
families have invested in the Neuberger Berman mutual funds. (All figures as of
[DATE]).
THESE FUNDS:
- - ARE DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - HAVE NO CHARGES WHEN YOU BUY OR SELL SHARES, AND HAVE NO DISTRIBUTION (12b-1)
FEES
- - OFFER YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH
PROFESSIONALLY MANAGED STOCK PORTFOLIOS
- - ALSO OFFER THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH FUNDS THAT USE A
VALUE OR A GROWTH APPROACH TO INVESTING
- - CARRY CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF YOU SELL
FUND SHARES AT A TIME WHEN THEY ARE WORTH LESS THAN WHAT YOU PAID
- - ARE MUTUAL FUNDS, NOT BANK DEPOSITS, AND ARE NOT GUARANTEED OR INSURED
1
<PAGE>
[PHOTO]
NEUBERGER BERMAN
FOCUS FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBSSX ABOVE: PORTFOLIO MANAGER KENT C. SIMONS
"OUR INVESTMENT APPROACH FOR FOCUS FUND INVOLVES LOOKING FOR COMPANIES THAT HAVE
LOW PRICE-TO-EARNINGS RATIOS, SOLID BALANCE SHEETS AND STRONG MANAGEMENT. WE
OFTEN FIND THAT THESE COMPANIES ARE CONCENTRATED IN CERTAIN SECTORS OF THE
ECONOMY, AND WE LOOK FURTHER WITHIN THESE SECTORS FOR OTHER COMPANIES THAT MEET
OUR CRITERIA."
2
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
INDUSTRY SECTORS
The economy is divided into sectors, each made up of related industries. By
focusing on several sectors at a time, a fund can add a measure of
diversification and still allow the potential for performance.
This contrasts with an approach of limiting investment to one sector, which may
offer greater opportunity but also more risk. A sector may have above-average
performance during particular periods, but individual sectors also tend to move
up and down more than the broader market.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
companies of any size that fall within the following sectors:
- - autos and housing
- - consumer goods and services
- - defense and aerospace
- - energy
- - financial services
- - health care
- - heavy industry
- - machinery and equipment
- - media and entertainment
- - retailing
- - technology
- - transportation
- - utilities
At any given time, the fund intends to place most of its assets in those sectors
on the list that the manager believes are undervalued. The fund generally
invests at least 90% of net assets in no more than six sectors. However, it does
not invest more than 50% of total assets in any one sector, or more than 25% of
total assets in any one industry.
The manager looks for undervalued companies. Factors in identifying these firms
may include above-average returns, an established market niche, and sound future
business prospects. This approach is designed to let the fund benefit from
potential increases in stock prices while limiting the risks typically
associated with investing in a small number of sectors.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Focus Fund 3
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Because the fund typically focuses on a few sectors at a time, its performance
is likely to be disproportionately affected by the factors influencing those
sectors. These may include market, economic, political, or regulatory
developments, among others. The fund's performance may also suffer if a sector
does not perform as the portfolio manager expected.
To the extent that the fund emphasizes any particular size of stock, it takes on
the associated risks. Mid- and small-cap stocks tend to be riskier than
large-cap stocks; large-cap stocks may perform less well over time than mid- and
small-cap stocks. At any given time, one size of stock may be out of favor with
investors. If the fund emphasizes that size, it could perform less well than
certain other funds.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the manager failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
Because the fund had a policy of investing heavily in energy stocks prior to
November 1991, and invested mainly in large-cap stocks prior to September 1998,
its performance during those times would have been different if current policies
had been in effect.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 16.47%
89 29.78%
90 -5.92%
91 24.66%
92 21.10%
93 16.33%
94 0.87%
95 36.19%
96 16.22%
97 24.15%
BEST QUARTER: Q2 '97, up 16.95%
WORST QUARTER: Q3 '90, down 9.07%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
FOCUS FUND 24.15 18.19 17.34
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Focus Fund 5
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
KENT C. SIMONS is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has managed the fund's assets since 1988.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.74% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.74
PLUS: Distribution (12b-1) fees None
Other expenses 0.10
....
EQUALS: Total annual operating expenses 0.84
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $86 $268 $466 $1037
</TABLE>
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 24.00 24.42 28.88 28.46 00.00
PLUS: Income from investment operations
Net investment income 0.21 0.17 0.19 0.08 0.00
Net gains/losses -- realized and unrealized 2.16 5.97 0.85 12.00 0.00
Subtotal: income from investment operations 2.37 6.14 1.04 12.08 0.00
MINUS: Distributions to shareholders
Income dividends 0.25 0.20 0.11 0.22 --
Capital gain distributions 1.70 1.48 1.35 1.43 0.00
Subtotal: distributions to shareholders 1.95 1.68 1.46 1.65 0.00
...........................................
EQUALS: Share price (NAV) at end of year 24.42 28.88 28.46 38.89 00.00
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.85 0.87 0.89 0.86 0.00
Expenses(1) -- -- 0.89 0.86 0.00
Net investment income -- actual 0.89 0.75 0.69 0.21 0.00
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 10.35 27.47 3.70 43.92 0.00
Net assets at end of year (in millions of dollars) 643.9 956.0 1,071.4 1,411.9 0,000.0
Portfolio turnover rate (%) 52 36 39 63 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Focus Fund 7
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GENESIS FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBGNX ABOVE: PORTFOLIO MANAGERS JUDITH M. VALE AND
ROBERT W. D'ALELIO
"WE SEEK OUT SMALL COMPANIES THAT ARE LITTLE-KNOWN AND OFTEN ARE IN LESS
GLAMOROUS INDUSTRIES. FUTURE GROWTH IS ONE AREA WE FOCUS ON, BUT EQUALLY
IMPORTANT TO US IS EVIDENCE OF SOLID PERFORMANCE AND A PROVEN MANAGEMENT TEAM.
AND AS VALUE INVESTORS, WE LOOK FOR STOCKS THAT ARE SELLING AT ATTRACTIVE
PRICES."
THIS FUND IS CURRENTLY CLOSED TO NEW INVESTORS.
8
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers look for undervalued companies whose current product lines and
balance sheets are strong. Factors in identifying these firms may include:
- - above-average returns
- - an established market niche
- - circumstances that would make it difficult for new competitors to enter the
market
- - the ability to finance their own growth
- - sound future business prospects
This approach is designed to let the fund benefit from potential increases in
stock prices while limiting the risks typically associated with small-cap
stocks.
At times, the managers may emphasize certain industries that they believe will
benefit from market or economic trends.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Genesis Fund 9
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
Stock prices of many smaller companies are based on future expectations. The
portfolio managers tend to focus on companies whose financial strength is
largely based on existing business lines rather than projected growth. While
this can help reduce risk, the fund is still subject to many of the risks of
small-cap investing. These include the risk that the fund's holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of a given sector that the managers
decided to focus on
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
10 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89 17.25%
90 -16.24%
91 41.55%
92 15.62%
93 13.89%
94 -1.82%
95 27.31%
96 29.86%
97 34.89%
BEST QUARTER: Q1 '91, up 25.05%
WORST QUARTER: Q3 '90, down 21.81%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
GENESIS FUND 34.89 20.05
Russell 2000 Index 22.36 16.40
</TABLE>
The Russell 2000 is an unmanaged index of U.S. small-cap stocks.
Genesis Fund 11
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JUDITH M. VALE is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. A senior member of the Small Cap Group since
1992, she has co-managed the fund's assets since 1994.
ROBERT W. D'ALELIO is a Vice President of Neuberger Berman Management. A senior
member of the Small Cap Group since joining the firm in 1996, he has co-managed
the fund's assets since 1997. From 1988 to 1996, he was a senior portfolio
manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.95% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.97
PLUS: Distribution (12b-1) fees None
Other expenses 0.16
....
EQUALS: Total annual operating expenses 1.13
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $115 $359 $622 $1375
</TABLE>
12 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it
distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 8.62 8.27 9.52 10.91 00.00
PLUS: Income from investment operations
Net investment income (loss) (0.01) -- (0.01) (0.01) 0.00
Net gains/losses -- realized and unrealized 0.42 1.56 1.95 4.80 0.00
Subtotal: income from investment operations 0.41 1.56 1.94 4.79 0.00
MINUS: Distributions to shareholders
Income dividends 0.01 -- -- -- --
Capital gain distributions 0.75 0.31 0.55 0.15 0.00
Subtotal: distributions to shareholders 0.76 0.31 0.55 0.15 0.00
....................................................
EQUALS: Share price (NAV) at end of year 8.27 9.52 10.91 15.55 00.00
- -----------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how they would
have been if certain waivers and expense offset arrangements had not been in effect.
Net expenses -- actual 1.36 1.35 1.28 1.16 0.00
Gross expenses(1) -- 1.38 1.38 1.26 0.00
Expenses(2) -- -- 1.28 1.17 0.00
Net investment income (loss) -- actual (0.20) (0.16) (0.18) (0.08) 0.00
- -----------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 4.77 19.69(3) 21.32(3) 44.32(3) 0.00
Net assets at end of year (in millions of dollars) 135.6 111.5 195.4 718.1 0,000.0
Portfolio turnover rate (%) 63 37 21 18 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO MANAGEMENT FEE
WAIVER.
(2) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS; THE MANAGEMENT FEE WAIVER IS INCLUDED, HOWEVER. THIS
CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER 9/1/95.
(3) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT WAIVED A
PORTION OF THE MANAGEMENT FEE.
Genesis Fund 13
<PAGE>
[PHOTO]
NEUBERGER BERMAN
GUARDIAN FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NGUAX ABOVE: PORTFOLIO MANAGERS ALLAN "RICK" WHITE
AND KEVIN L. RISEN
"WITH GUARDIAN FUND WE LOOK FOR ESTABLISHED COMPANIES THAT ARE EITHER 'UNDER A
ROCK' OR 'UNDER A CLOUD' -- MEANING THAT THEY'RE EITHER NOT WELL FOLLOWED ON
WALL STREET OR THEY'RE TEMPORARILY OUT OF FAVOR WITH OTHER INVESTORS. IT'S VERY
MUCH A CONTINUATION OF THE CLASSIC VALUE APPROACH THE FUND HAS USED SINCE ITS
FOUNDING IN 1950."
14
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
LARGE-CAP STOCKS
Large companies are usually well-established. They may have a variety of
products and business lines and a sound financial base that can help them
weather bad times.
Compared to smaller companies, large companies can be less responsive to changes
and opportunities. Historically, they've offered somewhat lower long-term
returns. But they have often been less risky, with their prices rising and
falling less dramatically than those of smaller companies.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL; CURRENT INCOME IS A
SECONDARY GOAL.
To pursue these goals, the fund invests mainly in common stocks of
large-capitalization companies. The fund seeks to reduce risk by diversifying
among a large number of companies across many different industries and economic
sectors.
The managers look for well managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - solid balance sheets
- - above-average returns
- - low price-to-earnings ratios
- - consistent earnings
Because the managers tend to find that undervalued stocks may be more common in
certain sectors of the economy at a given time, the fund may emphasize those
sectors.
The fund has paid an income dividend every quarter, and a capital gain
distribution every year, since the fund's inception in 1950. Of course, it
cannot guarantee that it will continue to do so.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Guardian Fund 15
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
At times, large-cap stocks may lag other types of stocks in performance, which
could cause the fund to perform less well than certain other funds. While they
may at times be less risky than small-cap stocks, large-cap stocks may perform
less well over time.
To the extent that the fund emphasizes certain sectors of the economy at any
given time, its performance is likely to be disproportionately affected by the
economic, market, and other developments that may influence those sectors. The
fund's performance may also suffer if a sector does not perform as the portfolio
managers expected.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
16 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 28.05%
89 21.50%
90 -4.71%
91 34.33%
92 19.01%
93 14.45%
94 0.60%
95 32.11%
96 17.88%
97 17.94%
BEST QUARTER: Q1 '91, up 17.42%
WORST QUARTER: Q3 '90, down 15.76%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
GUARDIAN FUND 17.94 16.16 17.49
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Guardian Fund 17
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
ALLAN R. WHITE III is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since September 1998, when he joined the firm. From
1989 to 1998 he was a portfolio manager at another firm.
KEVIN L. RISEN is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. He has co-managed the fund's assets since
1996. He joined Neuberger Berman in 1992 as an analyst, and has been a portfolio
manager since 1995.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.70% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.70
PLUS: Distribution (12b-1) fees None
Other expenses 0.09
....
EQUALS: Total annual operating expenses 0.79
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $81 $252 $439 $978
</TABLE>
18 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 18.57 19.52 23.61 23.78 00.00
PLUS: Income from investment operations
Net investment income 0.24 0.27 0.31 0.15 0.00
Net gains/losses -- realized and unrealized 1.41 4.30 0.90 8.96 0.00
Subtotal: income from investment operations 1.65 4.57 1.21 9.11 0.00
MINUS: Distributions to shareholders
Income dividends 0.30 0.25 0.28 0.24 --
Capital gain distributions 0.40 0.23 0.76 1.24 0.00
Subtotal: distributions to shareholders 0.70 0.48 1.04 1.48 0.00
...........................................
EQUALS: Share price (NAV) at end of year 19.52 23.61 23.78 31.41 0.00
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they
would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.80 0.80 0.82 0.80 0.00
Expenses(1) -- -- 0.82 0.80 0.00
Net investment income -- actual 1.36 1.40 1.37 0.55 0.00
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 9.12 24.06 5.27 39.69 0.00
Net assets at end of year (in millions of dollars) 2,416.5 3,947.5 4,905.2 6,475.1 0,000.0
Portfolio turnover rate (%) 24 26 37 50 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Guardian Fund 19
<PAGE>
[PHOTO]
NEUBERGER BERMAN
INTERNATIONAL FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBISX ABOVE: PORTFOLIO MANAGER VALERIE CHANG
"WE TAKE A VALUE INVESTING APPROACH AND APPLY IT AROUND THE GLOBE. WE USE
TOP-DOWN ANALYSIS TO IDENTIFY ATTRACTIVE MARKETS -- DEVELOPED AS WELL AS
EMERGING. THEN WE SEARCH FOR INDIVIDUAL STOCKS, ALWAYS WITH THE SAME BASIC
PURPOSE IN MIND: TO FIND GOOD COMPANIES THAT ARE TRADING AT LOW VALUATIONS
COMPARED TO THEIR PEERS."
20
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
FOREIGN STOCKS
Today, the majority of the world's investment opportunities lie outside the U.S.
These markets often respond to different factors, and therefore tend to follow
cycles that are different from each other.
For this reason, many investors put a portion of their portfolios in foreign
investments as a way of gaining further diversification. While foreign stock
markets can be risky, investors gain an opportunity to add potential long-term
growth.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
COMMON STOCKS OF FOREIGN COMPANIES.
To pursue this goal, the fund invests mainly in foreign companies of any size,
including companies in developed and emerging industrialized markets. The fund
defines a foreign company as one that is organized outside of the United States
and conducts the majority of its business abroad.
The fund seeks to reduce risk by diversifying among many industries. Although it
has the flexibility to invest a significant portion of its assets in one country
or region, it generally intends to remain well-diversified across countries and
geographical regions.
The manager initially analyzes the outlooks for various countries and regions
around the world, examining economic, market, social, and political conditions.
Based on her findings, the manager decides how much of the fund's assets to
invest in which regions and countries.
In picking stocks, the manager looks for well-managed companies whose stock
prices are undervalued. Factors in identifying these firms may include strong
fundamentals, such as attractive cash flows and balance sheets, as well as
prices that are reasonable in light of projected earnings growth.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
International Fund 21
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. The fund may use derivatives for hedging and for speculation. Hedging
could reduce the fund's losses from currency fluctuations, but could also reduce
its gains. A derivative instrument could fail to perform as expected. Any
speculative investment could cause a loss for the fund.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in international stock markets. The behavior of these
markets is unpredictable, particularly in the short term. Because of
this, the value of your investment will rise and fall, sometimes sharply, and
you could lose money.
Foreign stocks are riskier than comparable U.S. stocks. This is in part because
foreign markets are less developed and foreign governments, economies, laws, tax
codes and securities firms may be less stable. There is also a higher chance
that key information will be unavailable, incomplete, or inaccurate. As a
result, foreign stocks can fluctuate more widely in price than comparable U.S.
stocks, and they may also be less liquid. These risks are generally greater in
emerging markets. Over a given period of time, foreign stocks may underperform
U.S. stocks -- sometimes for years. The fund could also underperform if the
manager invests in the wrong countries or regions.
Changes in currency exchange rates bring an added dimension of risk. Currency
fluctuations could erase investment gains or add to investment losses.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the manager failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
22 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
Because the fund had a policy of investing primarily in mid- and large-cap
stocks prior to September 1998, its performance during that time would have been
different if current policies had been in effect.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 7.88%
96 23.69%
97 11.21%
BEST QUARTER: Q2 '97, up 9.30%
WORST QUARTER: Q4 '97, down 8.67%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 6/15/94
<S> <C> <C>
- --------------------------------------------------------------
INTERNATIONAL FUND 11.21 11.54
EAFE Index 2.06 5.38
</TABLE>
The EAFE is an unmanaged index of stocks from Europe, Australasia, and the Far
East.
International Fund 23
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
VALERIE CHANG is an Assistant Vice President of Neuberger Berman Management. In
1996 she joined the firm and became assistant manager of the fund. She has been
the manager since 1997. She began her career in 1993 in banking, and from 1995
to 1996 was a senior securities analyst at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 1.11% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.11
PLUS: Distribution (12b-1) fees None
Other expenses 0.60
....
EQUALS: Total annual operating expenses 1.71
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $174 $539 $928 $2019
</TABLE>
24 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994(1) 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it distributed
to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.00 10.46 10.70 11.91 00.00
PLUS: Income from investment operations
Net investment income 0.01 0.06 0.01 -- 0.00
Net gains/losses -- realized and unrealized 0.45 0.21 1.24 2.94 0.00
Subtotal: income from investment operations 0.46 0.27 1.25 2.94 0.00
MINUS: Distributions to shareholders
Income dividends -- 0.03 0.04 0.02 --
Capital gain distributions -- -- -- -- 0.00
Subtotal: distributions to shareholders -- 0.03 0.04 0.02 0.00
.........................................................
EQUALS: Share price (NAV) at end of year 10.46 10.70 11.91 14.83 0.00
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how they would have
been if certain expense reimbursements/repayments and offset arrangements had not been in effect.
Net expenses -- actual 1.70(2) 1.70 1.70 1.70 0.00
Gross expenses(3) 2.50(2) 2.31 2.28 1.69 0.00
Expenses(4) -- -- 1.70 1.70 0.00
Net investment income (loss) -- actual 0.57(2) 0.73 0.24 (0.02) 0.00
- ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 4.60(5,6) 2.60(6) 11.73(6) 24.71 0.00
Net assets at end of year (in millions of dollars) 6.2 26.4 57.0 115.4 0,000.0
Portfolio turnover rate (%) 5 41 45 37 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 6/15/94 (BEGINNING OF OPERATIONS) TO 8/31/94.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENTS/REPAYMENTS.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
International Fund 25
<PAGE>
[PHOTO]
NEUBERGER BERMAN
MANHATTAN FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NMANX ABOVE: PORTFOLIO MANAGERS JENNIFER K. SILVER
AND BROOKE A. COBB
"WITHOUT QUESTION, WE ARE GROWTH INVESTORS. WE LOOK FOR COMPANIES THAT WE THINK
WILL DELIVER POSITIVE EARNINGS SURPRISES, PARTICULARLY THOSE WITH THE POTENTIAL
TO DO SO CONSISTENTLY. IDEALLY, WE WANT TO IDENTIFY COMPANIES THAT WILL SOMEDAY
RANK AMONG THE FORTUNE 500."
26
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
MID-CAP STOCKS
Mid-cap stocks have historically shown risk/return characteristics that are in
between those of small- and large-cap stocks. Their prices can rise and fall
substantially, although they have the potential to offer comparatively
attractive long-term returns.
Mid-caps are less widely followed on Wall Street than large-caps, which can make
it comparatively easier to find attractive stocks that are not overpriced.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. Often, these stocks are in emerging or
rapidly growing industries.
While most growth stocks are known to investors, they may not yet have reached
their full potential. The growth investor looks for reasons for continued
success.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL. INCOME IS NOT A CONSIDERATION.
To pursue this goal, the fund invests mainly in common stocks of
mid-capitalization companies. The fund seeks to reduce risk by diversifying
among many companies and industries.
The managers look for fast-growing companies that are in new or rapidly evolving
industries. Factors in identifying these firms may include:
- - above-average growth of earnings
- - earnings that have exceeded analysts' expectations
The managers may also look for other characteristics in a company, such as
financial strength, a strong position relative to competitors and a stock price
that is reasonable in light of its growth rate.
The managers follow a disciplined selling strategy, and may drop a stock from
the portfolio when it reaches a target price, fails to perform as expected, or
appears substantially less desirable than another stock.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Manhattan Fund 27
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
By focusing on mid-cap stocks, the fund is subject to their risks, including the
risk its holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks when the market or the economy is not
robust
- - fall in price or be difficult to sell during market downturns
Because the prices of most growth stocks are based on future expectations, these
stocks tend to be more sensitive than value stocks to bad economic news and
negative earnings surprises. While the prices of any type of stock can rise and
fall rapidly, growth stocks in particular may underperform during periods when
the market favors value stocks. The fund's performance may also suffer if
certain stocks do not perform as the portfolio managers expected. To the extent
that the managers sell stocks before they reach their market peak, the fund may
miss out on opportunities for higher performance.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
28 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index as well
as a more focused index of mid-cap growth stocks. The fund's performance figures
include all of its expenses; the indices do not include costs of investment.
Because the fund had a policy of investing in stocks of all capitalizations and
used a comparatively more value-oriented investment approach prior to July 1997,
its performance would have been different if current policies had been in
effect.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 18.31%
89 29.09%
90 -8.05%
91 30.89%
92 17.77%
93 10.01%
94 -3.60%
95 31.00%
96 9.85%
97 29.20%
BEST QUARTER: Q1 '91, up 14.75%
WORST QUARTER: Q3 '90, down 15.88%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
MANHATTAN FUND 29.20 14.54 15.62
Russell Midcap Growth Index 22.54 15.98 16.80
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The Russell Midcap Growth is an unmanaged index of U.S. mid-cap growth stocks.
The S&P 500 is an unmanaged index of U.S. stocks.
Manhattan Fund 29
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JENNIFER K. SILVER is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. Currently the Director of the Growth Equity
Group, she has been co-manager of the fund since joining the firm in 1997. From
1986 to 1997, she was an analyst and a portfolio manager at another firm.
BROOKE A. COBB is a Vice President of Neuberger Berman Management. He has been
co-manager of the fund since joining the firm in 1997. From 1972 to 1997, he was
a portfolio manager at several other firms.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.79% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.79
PLUS: Distribution (12b-1) fees None
Other expenses 0.16
....
EQUALS: Total annual operating expenses 0.95
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $97 $303 $525 $1166
</TABLE>
30 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 12.94 11.28 13.27 11.94 00.00
PLUS: Income from investment operations
Net investment income (loss) 0.02 -- (0.04) (0.03) 0.00
Net gains/losses -- realized and unrealized 0.40 2.70 (0.33) 4.26 0.00
Subtotal: income (loss) from investment operations 0.42 2.70 (0.37) 4.23 0.00
MINUS: Distributions to shareholders
Income dividends 0.02 0.01 -- -- --
Capital gain distributions 2.06 0.70 0.96 1.66 0.00
Subtotal: distributions to shareholders 2.08 0.71 0.96 1.66 0.00
...........................................
EQUALS: Share price (NAV) at end of year 11.28 13.27 11.94 14.51 0.00
- --------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how
they would have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.96 0.98 0.98 0.98 0.00
Expenses(1) -- -- 0.98 0.99 0.00
Net investment income (loss) -- actual 0.16 0.03 (0.27) (0.20) 0.00
- --------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 3.49 26.00 (2.91) 38.75 0.00
Net assets at end of year (in millions of dollars) 510.3 612.0 516.2 570.4 0,000.0
Portfolio turnover rate (%) 50 44 53 89 0
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Manhattan Fund 31
<PAGE>
[PHOTO]
NEUBERGER BERMAN
MILLENNIUM FUND
- --------------------------------------------------------------------------------
Ticker Symbol: XXXXX ABOVE: PORTFOLIO MANAGERS MICHAEL F. MALOUF
AND JENNIFER K. SILVER
"WE MAKE IT OUR BUSINESS TO TRACK DOWN PROMISING SMALL-CAP COMPANIES WHEREVER
THEY MAY BE. AS A RESULT, THIS FUND ENABLES INVESTORS WHO CAN ACCEPT THE RISKS
OF SMALL-CAP STOCKS TO PURSUE THE POTENTIAL FOR LONG-TERM GROWTH THAT SMALL-CAPS
MAY PROVIDE."
32
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SMALL-CAP STOCKS
Historically, stocks of smaller companies have not always moved in tandem with
those of larger companies. Over the last 40 years, small-caps have outperformed
large-caps more than 60% of the time. However, small-caps have often fallen more
severely during market downturns.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. Often, these stocks are in emerging or
rapidly growing industries.
While most growth stocks are known to investors, they may not yet have reached
their full potential. The growth investor looks for reasons for continued
success.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of
small-capitalization companies, which it defines as those with a total market
value of no more than $1.5 billion at the time the fund first invests in them.
The fund may continue to hold or add to a position in a stock after it has grown
beyond $1.5 billion. The fund seeks to reduce risk by diversifying among many
companies and industries.
The managers take a growth approach to selecting stocks, looking for new
companies that are in the developmental stage as well as older companies that
appear poised to grow because of new products, markets or management. Factors in
identifying these firms may include financial strength, a strong position
relative to competitors and a stock price that is reasonable in light of its
growth rate.
The managers follow a disciplined selling strategy, and may drop a stock from
the portfolio when it reaches a target price, fails to perform as expected, or
appears substantially less desirable than another stock.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Millennium Fund 33
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
By focusing on small-cap stocks, the fund is subject to many of their risks,
including the risk its holdings may:
- - fluctuate more widely in price than the market as a whole
- - underperform other types of stocks, especially when the market or the economy
is not robust
- - fall in price or be difficult to sell during market downturns
- - be noticeably affected by the fortunes of those sectors in which small-cap
growth stocks may be concentrated
Because the prices of most growth stocks are based on future expectations, these
stocks tend to be more sensitive than value stocks to bad economic news and
negative earnings surprises. While the prices of any type of stock can rise and
fall rapidly, growth stocks in particular may underperform during periods when
the market favors value stocks. The fund's performance may also suffer if
certain stocks do not perform as the portfolio managers expected.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
34 Neuberger Berman
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
MICHAEL F. MALOUF is a Vice President of Neuberger Berman Management. He has
been co-manager of the fund since its inception in 1998, the year he joined the
firm. From 1991 to 1998 he was a portfolio manager at another firm.
JENNIFER K. SILVER is a Vice President of Neuberger Berman Management and a
principal of Neuberger Berman, LLC. Director of the Growth Equity Group, since
1997, she has been co-manager of the fund since 1998. From 1986 to 1997, she was
an analyst and a portfolio manager at another firm.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 1.11
PLUS: Distribution (12b-1) fees None
Other expenses 1.20*
....
EQUALS: Total annual operating expenses 2.31*
</TABLE>
(*) OTHER EXPENSES ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
UNDER AN ARRANGEMENT WHICH IT CAN TERMINATE UPON SIXTY DAYS' NOTICE,
NEUBERGER BERMAN MANAGEMENT REIMBURSES CERTAIN EXPENSES OF THE FUND SO THAT
OTHER EXPENSES ARE LIMITED TO 0.64% AND TOTAL ANNUAL OPERATING EXPENSES ARE
LIMITED TO 1.75% OF AVERAGE NET ASSETS.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
- --------------------------------------
Expenses** $234 $721
</TABLE>
(**) UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE
FOOTNOTE ABOVE, YOUR COSTS FOR THE ONE- AND THREE-YEAR PERIODS WOULD BE
$178 AND $551, RESPECTIVELY.
BECAUSE THE FUND IS NEW IT CURRENTLY DOES NOT HAVE PERFORMANCE OR FINANCIAL
HIGHLIGHTS TO REPORT.
Millennium Fund 35
<PAGE>
[PHOTO]
NEUBERGER BERMAN
PARTNERS FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NPRTX ABOVE: PORTFOLIO MANAGERS MICHAEL M. KASSEN,
ROBERT I. GENDELMAN AND S. BASU MULLICK
"OUR MANAGEMENT APPROACH FOCUSES ON FINDING UNDERVALUED COMPANIES. IN
PARTICULAR, WE LOOK FOR 'FALLEN ANGELS' -- GROWTH STOCKS WHOSE PRICES HAVE HIT
NEW LOWS. AT THE SAME TIME, WE TEND TO BE DISCIPLINED IN MAKING SELL DECISIONS.
WE WOULD RATHER SELL EARLY THAN SELL TOO LATE."
36
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
MID- AND LARGE-
CAP STOCKS
Large companies are usually well-established. Compared to mid-cap companies,
they may be less responsive to change and may offer somewhat lower long-term
returns. However, their prices may fluctuate less dramatically.
Mid-cap stocks have historically performed more like small-caps than like large-
caps. Their prices can rise and fall substantially, although they have the
potential to offer comparatively attractive long-term returns.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS GROWTH OF CAPITAL.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by diversifying
among many companies and industries.
The managers look for well-managed companies whose stock prices are undervalued.
Factors in identifying these firms may include:
- - strong fundamentals
- - consistent cash flow
- - a sound track record through all phases of the market cycle
The managers may also look for other characteristics in a company, such as a
strong position relative to competitors, a high level of stock ownership among
management, and a recent sharp decline in stock price that appears to be the
result of a short-term market overreaction to negative news.
The fund generally considers selling a stock when it reaches the managers'
target price, when it fails to perform as expected, or when other opportunities
appear more attractive.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Partners Fund 37
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; large-cap stocks may perform less well over time than mid-cap stocks. At
any given time, one or both groups of stocks may be out of favor with investors.
If the fund emphasizes either group of stocks, its performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions. To the extent that the managers sell stocks before they
reach their market peak, the fund may miss out on opportunities for higher
performance.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
38 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988 15.46%
89 22.78%
90 -5.11%
91 22.36%
92 17.52%
93 16.46%
94 -1.89%
95 35.21%
96 26.49%
97 29.23%
BEST QUARTER: Q2 '97, up 14.04%
WORST QUARTER: Q3 '90, down 9.61%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
<S> <C> <C> <C>
- -------------------------------------------------------------------
PARTNERS FUND 29.23 20.35 17.19
S&P 500 Index 33.32 20.22 18.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Partners Fund 39
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
MICHAEL M. KASSEN, ROBERT I. GENDELMAN AND S. BASU MULLICK are Vice Presidents
of Neuberger Berman Management. Kassen and Gendelman are principals of Neuberger
Berman, LLC. Kassen has been manager of the fund since 1990, and was joined by
Gendelman in 1994 and Mullick in 1998. Gendelman was a portfolio manager at
another firm from 1992 to 1993, as was Mullick from 1993 to 1998.
NEUBERGER BERMAN MANAGEMENT is the fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For the 12 months ended 8/31/98, the
management/administration fees paid to Neuberger Berman Management were 0.71% of
average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.71
PLUS: Distribution (12b-1) fees None
Other expenses 0.09
....
EQUALS: Total annual operating expenses 0.80
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $82 $255 $444 $990
</TABLE>
40 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what
it distributed to investors, and how its share price changed.
Share price (NAV) at beginning of year 22.46 21.32 23.72 23.88 00.00
PLUS: Income from investment operations
Net investment income 0.10 0.17 0.22 0.19 0.00
Net gains/losses -- realized and unrealized 1.07 3.94 2.84 10.36 0.00
Subtotal: income from investment operations 1.17 4.11 3.06 10.55 0.00
MINUS: Distributions to shareholders
Income dividends 0.11 0.11 0.20 0.22 --
Capital gain distributions 2.20 1.60 2.70 2.61 0.00
Subtotal: distributions to shareholders 2.31 1.71 2.90 2.83 0.00
............................................
EQUALS: Share price (NAV) at end of year 21.32 23.72 23.88 31.60 0.00
- ---------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually are as well as how they would
have been if certain expense offset arrangements had not been in effect.
Net expenses -- actual 0.81 0.83 0.84 0.81 0.00
Expenses(1) -- -- 0.84 0.81 0.00
Net investment income -- actual 0.48 0.83 0.93 0.72 0.00
- ---------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 5.56 21.53 13.86 47.11 0.00
Net assets at end of year (in millions of dollars) 1,335.9 1,564.0 1,871.9 3,103.7 0,000.00
Portfolio turnover rate (%) 75 98 96 77 0
</TABLE>
The figures above have been audited by Ernst & Young LLP, the fund's independent
auditors. Their report, along with full financial statements, appears in the
fund's most recent shareholder report (see back cover).
(1) SHOWS WHAT EXPENSES WOULD HAVE
BEEN IF THERE HAD BEEN NO EXPENSE
OFFSET ARRANGEMENTS. THIS
CALCULATION IS REQUIRED FOR ALL
PERIODS ENDING AFTER 9/1/95.
Partners Fund 41
<PAGE>
[PHOTO]
NEUBERGER BERMAN
SOCIALLY RESPONSIVE FUND
- --------------------------------------------------------------------------------
Ticker Symbol: NBSRX ABOVE: PORTFOLIO MANAGER JANET PRINDLE
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
42
<PAGE>
GOAL & STRATEGY
- -------------------------------------------------------------
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
before other investors realize their worth.
[LIGHT BULB]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
SOCIAL POLICY.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
The managers initially screen companies using value investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
- - environmental concerns
- - diversity in the work force
- - progressive employment and workplace practices
The managers typically also look at a company's record in public health and the
nature of its products. The managers judge firms on their corporate citizenship
overall, considering their accomplishments as well as their goals. While these
judgments are inevitably subjective, the fund has a strict policy of avoiding
companies that receive more than 5% of their earnings from alcohol, tobacco,
gambling, or weapons, as well as companies that sell non-consumer products to
the military or are involved in nuclear power.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Socially Responsive Fund 43
<PAGE>
MAIN RISKS
- -------------------------------------------------------------
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. These investments are not subject to the fund's social policy.
Foreign securities could add to the ups and downs in the fund's share price,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates unusual market or other conditions, it may temporarily
depart from its goal and invest substantially in high-quality short-term
investments. This could help the fund avoid losses but may mean lost
opportunities.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[ROAD SIGN]
Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
- - undervalued stocks that don't meet the social criteria could outperform those
that do
- - economic or political changes could make certain companies less attractive for
investment
- - the social policy could cause the fund to sell or avoid stocks that
subsequently perform well
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on the
associated risks. Mid-cap stocks tend to be somewhat riskier than large-cap
stocks; large-cap stocks may perform less well over time than mid-cap stocks. At
any given time, one or both groups of stocks may be out of favor with investors.
If the fund emphasizes either group of stocks, its performance could suffer.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
44 Neuberger Berman
<PAGE>
PERFORMANCE
- -------------------------------------------------------------
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[ABACUS] The bar chart below shows how the
fund's performance has varied from one year to another. The table
below the chart shows what the return would equal if you averaged out
actual performance over various lengths of time. This information is based on
past performance; it's not a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1988
89
90
91
92
93
94
95 38.94%
96 18.50%
97 24.41%
BEST QUARTER: Q2 '97, up 15.54%
WORST QUARTER: Q1 '97, down 1.86%
Year-to-date performance as of 9/30/98: up
0.00%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 3/16/94
<S> <C> <C>
- --------------------------------------------------------------
SOCIALLY RESPONSIVE FUND 24.41 19.66
S&P 500 Index 33.32 24.09
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
Socially Responsive Fund 45
<PAGE>
INVESTOR EXPENSES
- -------------------------------------------------------------
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a principal
of Neuberger Berman, LLC, joined the latter firm in 1977. She has been managing
assets using social criteria since 1990 and has been manager of the fund since
1994.
ROBERT LADD and INGRID SAUKAITIS are Assistant Vice Presidents of Neuberger
Berman Management and have been Associate Managers of the fund since 1997. Ladd
has been a portfolio manager at the firm since 1992; Saukaitis was project
director for a social research group from 1995 to 1997.
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services. For
the 12 months ended 8/31/98, the management/administration fees paid to
Neuberger Berman Management were 0.81% of average net assets.
[PARKING METER]
The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management/administration fees 0.81
PLUS: Distribution (12b-1) fees None
Other expenses 0.29
....
EQUALS: Total annual operating expenses 1.10
</TABLE>
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses $112 $350 $606 $1340
</TABLE>
46 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1994(1) 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost), what it distributed
to investors, and how its share price changed.
Share price (NAV) at beginning of year 10.00 10.07 11.84 13.88 00.00
PLUS: Income from investment operations
Net investment income 0.01 0.03 0.02 0.03 0.00
Net gains/losses -- realized and unrealized 0.06 1.76 2.35 4.33 0.00
Subtotal: income from investment operations 0.07 1.79 2.37 4.36 0.00
MINUS: Distributions to shareholders
Income dividends -- 0.02 0.02 0.03 --
Capital gain distributions -- -- 0.31 0.42 0.00
Subtotal: distributions to shareholders -- 0.02 0.33 0.45 0.00
..........................................................
EQUALS: Share price (NAV) at end of year 10.07 11.84 13.88 17.79 0.00
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income or loss -- as they actually are as well as how they would have
been if certain expense reimbursements/repayments and offset arrangements had not been in effect.
Net expenses -- actual 1.50(2) 1.51 1.50 1.48 0.00
Gross expenses(3) 2.50(2) 2.50 1.69 1.20 0.00
Expenses(4) -- -- 1.50 1.49 0.00
Net investment income -- actual 0.50(2) 0.36 0.19 0.23 0.00
- -----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each period, assuming all distributions were
reinvested. The turnover rate reflects how actively the fund bought and sold securities.
Total return (%) 0.70(5,6) 17.82(6) 20.19(6) 31.96 0.00
Net assets at end of year (in millions of dollars) 2.3 8.2 32.9 59.7 0,000.00
Portfolio turnover rate (%) 14 58 53 51 0
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 3/16/94 (BEGINNING OF OPERATIONS) TO 8/31/94.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENTS/REPAYMENTS.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Socially Responsive Fund 47
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- -------------------------------------------------------------
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available through investment
providers such as banks, brokerage firms, workplace retirement programs, and
financial advisers.
The fees and policies outlined in this prospectus are set by the funds and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
To buy or sell shares of any of the funds described in this prospectus, contact
your investment provider. All investments must be made in U.S. dollars, and
investment checks must be drawn on a U.S. bank. The funds do not issue
certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
48 Neuberger Berman
<PAGE>
- -------------------------------------------------------------
BUYING SHARES BEFORE
A DISTRIBUTION
The money a fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before a fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the distribution
has been made.
If you're investing in a tax-advantaged account, you don't need to worry; there
are no tax consequences to you in this case.
Under certain circumstances, the funds reserve the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
The proceeds from the shares you sold are generally sent out the next business
day after your order is executed, and nearly always within three business days.
There are two cases in which proceeds may be delayed beyond this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
Your Investment 49
<PAGE>
SHARE PRICES
- -------------------------------------------------------------
SHARE PRICE CALCULATIONS
A fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of a fund's securities
changes every business day, the share price usually changes as well.
When valuing portfolio securities, the funds use market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate derived
through methods approved by its trustees. A fund may also use these methods to
value certain types of illiquid securities.
Because these funds do not have sales charges, the price you pay for each share
of a fund is the fund's net asset value per share. Similarly, because these
funds charge no fees for selling shares, they pay you the full share price when
you sell shares. Remember that your investment provider may charge fees for its
services.
The funds are open for business every day the New York Stock Exchange is open.
In general, every buy or sell order you place will go through at the next share
price to be calculated after your order has been accepted; check with your
investment provider to find out by what time your order must be received in
order to be processed the same day. Each fund calculates its share price as of
the end of regular trading on business days, usually 4:00 p.m. eastern time.
Depending on when your investment provider accepts orders, it's possible that
the fund's share price could change on days when you are unable to buy or sell
shares.
Also, because foreign markets may be open on days when U.S. markets are closed,
the value of foreign securities owned by a fund could change on days when you
can't buy or sell fund shares. The fund's share price, however, will not change
until the next time it is calculated.
50 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- -------------------------------------------------------------
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, whether you
owe alternative minimum tax, and other issues.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any questions
you may have.
DISTRIBUTIONS -- Each fund pays out to shareholders any net income and net
capital gains. Ordinarily, the funds make any distributions once a year (in
December), except for Guardian Fund, which typically distributes income every
quarter.
Consult your investment provider about whether your income and capital gains
distributions from a fund will be reinvested in that fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless of
whether you take them in cash or reinvest them.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as capital gains. The tax treatment of capital gain distributions depends
on how long the fund held the securities it sold, not when you bought your
shares of the fund or whether you reinvested your distributions.
Your Investment 51
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
- -------------------------------------------------------------------
EURO AND YEAR 2000
ISSUES
Like other mutual funds, the funds could be affected by problems relating to the
conversion of European currencies into the Euro beginning 1/1/99, and the
ability of computer systems to recognize the year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer systems
are compliant with Euro and Year 2000 issues and to determine that the systems
used by our major service providers are also compliant. We are also making
efforts to determine whether companies in the funds' portfolios will be affected
by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
HOW TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally realize a
gain or loss. These transactions, which include exchanges between funds, usually
have tax implications. The exception, once again, is tax-advantaged retirement
accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or cash it
right away, as you will not receive interest on uncashed checks.
52 Neuberger Berman
<PAGE>
FUND STRUCTURE
- -------------------------------------------------------------
Each of the funds in this prospectus uses a "master-feeder" structure.
Rather than investing directly in securities, each fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds.
In this prospectus we have used the word "fund" to mean a feeder fund and its
master portfolio. Costs for a feeder fund include its own costs and its share of
master portfolio costs.
For reasons relating to costs or a change in investment goal, among others, a
feeder fund could switch to another master portfolio or decide to manage its
assets itself. No fund in this prospectus is currently contemplating such a
move.
53
<PAGE>
[PHOTO]
- -------------------------------------------------------------
[]
OBTAINING INFORMATION
You can obtain a share-
holder report, SAI, and other information from your investment provider, or
from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd floor
New York, NY 10158-0180
800-877-9700
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
SEC file number: 811-582
NBEP00041298
NEUBERGER BERMAN EQUITY FUNDS
If you'd like further details on any of these funds, you can request a free copy
of the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio manager(s) about strategies and market
conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on these funds, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about each fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
INVESTMENT MANAGER:
NEUBERGER BERMAN MANAGEMENT INC.
SUB-ADVISER:
NEUBERGER BERMAN, LLC
[LOGO]
605 Third Avenue
New York, NY 10158-0180
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 15, 1998
<TABLE>
<CAPTION>
<S> <C>
Neuberger Berman MANHATTAN Fund Neuberger Berman GENESIS Fund
(and Neuberger Berman Manhattan (and Neuberger Berman Genesis Portfolio)
Portfolio)
Neuberger Berman FOCUS Fund Neuberger Berman GUARDIAN Fund
(and Neuberger Berman Focus Portfolio) (and Neuberger Berman Guardian Portfolio)
Neuberger Berman PARTNERS Fund Neuberger Berman SOCIALLY RESPONSIVE Fund
(and Neuberger Berman Partners (and Neuberger Berman Socially Responsive
Portfolio) Portfolio)
Neuberger Berman MILLENNIUM Fund Neuberger Berman INTERNATIONAL Fund
(and Neuberger Berman Millennium (and Neuberger Berman International Portfolio)
Portfolio)
</TABLE>
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
Neuberger Berman MANHATTAN Fund, Neuberger Berman GENESIS Fund,
Neuberger Berman FOCUS Fund, Neuberger Berman GUARDIAN Fund, Neuberger Berman
PARTNERS Fund, Neuberger Berman MILLENNIUM Fund, Neuberger Berman SOCIALLY
RESPONSIVE Fund, and Neuberger Berman INTERNATIONAL Fund (each a "Fund") are
no-load mutual funds that offer shares pursuant to a Prospectus dated December
15, 1998. The Funds invest all of their net investable assets in Neuberger
Berman MANHATTAN Portfolio, Neuberger Berman GENESIS Portfolio, Neuberger Berman
FOCUS Portfolio, Neuberger Berman GUARDIAN Portfolio, Neuberger Berman PARTNERS
Portfolio, Neuberger Berman MILLENNIUM Fund, Neuberger Berman SOCIALLY
RESPONSIVE Portfolio and Neuberger Berman INTERNATIONAL Portfolio (each a
"Portfolio"), respectively.
The Funds' Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger Berman Management Incorporated ("NB Management"), 605
Third Avenue, 2nd Floor, New York, NY 10158-0180, or by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
<PAGE>
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
2
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT INFORMATION.........................................................1
Investment Policies and Limitations.........................................1
Investment Insight..........................................................5
Neuberger Berman MANHATTAN Portfolio....................................6
Neuberger Berman GENESIS Portfolio......................................7
Neuberger Berman FOCUS Portfolio........................................9
Neuberger Berman PARTNERS Portfolio....................................10
Neuberger Berman SOCIALLY RESPONSIVE Portfolio.........................11
Neuberger Berman INTERNATIONAL Portfolio...............................13
Additional Investment Information..........................................18
Neuberger Berman FOCUS Portfolio - Description of Economic Sectors.........40
Neuberger Berman SOCIALLY RESPONSIVE Portfolio - Description of Social
Policy..................................................................42
PERFORMANCE INFORMATION.......................................................45
Total Return Computations..................................................45
Comparative Information....................................................46
Other Performance Information..............................................47
CERTAIN RISK CONSIDERATIONS...................................................48
TRUSTEES AND OFFICERS.........................................................48
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................55
Investment Manager and Administrator.......................................55
Sub-Adviser................................................................59
Investment Companies Managed...............................................60
Management and Control of NB Management....................................62
DISTRIBUTION ARRANGEMENTS.....................................................63
ADDITIONAL PURCHASE INFORMATION...............................................63
Automatic Investing and Dollar Cost Averaging..............................63
ADDITIONAL EXCHANGE INFORMATION...............................................65
i
<PAGE>
ADDITIONAL REDEMPTION INFORMATION.............................................66
Suspension of Redemptions............................................66
Redemptions in Kind..................................................67
DIVIDENDS AND OTHER DISTRIBUTIONS.............................................67
ADDITIONAL TAX INFORMATION....................................................68
Taxation of the Funds................................................68
Taxation of the Portfolios...........................................69
Taxation of the Funds' Shareholders..................................72
PORTFOLIO TRANSACTIONS........................................................72
Portfolio Turnover...................................................79
REPORTS TO SHAREHOLDERS.......................................................79
ORGANIZATION..................................................................79
CUSTODIAN AND TRANSFER AGENT..................................................82
INDEPENDENT AUDITORS/ACCOUNTANTS..............................................82
LEGAL COUNSEL.................................................................82
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................82
REGISTRATION STATEMENT........................................................83
FINANCIAL STATEMENTS..........................................................83
Appendix A....................................................................84
ii
<PAGE>
INVESTMENT INFORMATION
Each Fund is a separate operating series of Neuberger Berman Equity
Funds ("Trust"), a Delaware business trust that is registered with the
Securities and Exchange Commission ("SEC") as a diversified, open-end management
investment company. Each Fund seeks its investment objective by investing all of
its net investable assets in a Portfolio of Equity Managers Trust or, in the
case of Neuberger Berman INTERNATIONAL Fund, in a Portfolio of Global Managers
Trust that has an investment objective identical to, and a name similar to, that
of the Fund. Each Portfolio, in turn, invests in securities in accordance with
an investment objective, policies, and limitations identical to those of its
corresponding Fund. (Equity Managers Trust and Global Managers Trust ("Managers
Trusts") are open-end management investment companies managed by NB Management;
the Managers Trusts, together with the Trust, are referred to below as the
"Trusts.")
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of each Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of each Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
the corresponding Managers Trust ("Portfolio Trustees") without shareholder
approval. The fundamental investment policies and limitations of a Fund or a
Portfolio may not be changed without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of the Fund or
Portfolio represented at a meeting at which more than 50% of the outstanding
Fund or Portfolio shares are represented, or
(2) a majority of the outstanding shares of the Fund or Portfolio.
These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever a Fund is called upon to vote on a change in a fundamental investment
policy or limitation of its corresponding Portfolio, the Fund casts its votes in
proportion to the votes of its shareholders at a meeting thereof called for that
purpose.
INVESTMENT POLICIES AND LIMITATIONS
Each Fund (except Neuberger Berman SOCIALLY RESPONSIVE, Neuberger
Berman MILLENNIUM, and Neuberger Berman INTERNATIONAL Funds) has the following
fundamental investment policy, to enable it to invest in its corresponding
Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
<PAGE>
Neuberger Berman SOCIALLY RESPONSIVE Fund and Neuberger Berman
MILLENNIUM Fund have the following fundamental investment policy, to enable each
to invest in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund
may invest all of its net investable assets (cash, securities, and
receivables relating to securities) in an open-end management
investment company having substantially the same investment
objective, policies, and limitations as the Fund.
Neuberger Berman INTERNATIONAL Fund has the following fundamental
investment policy, to enable it to invest in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund
may invest all of its net investable assets in an open-end
management investment company having substantially the same
investment objective, policies, and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Portfolio.
The following investment policies and limitations are fundamental and
apply to all Portfolios unless otherwise indicated:
1. BORROWING (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). No Portfolio may borrow money, except that a Portfolio may (i)
borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (ii) enter into reverse repurchase agreements for
any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). If at any time borrowings exceed 33-1/3% of the value
of a Portfolio's total assets, that Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to comply
with the 33-1/3% limitation.
BORROWING (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio may
not borrow money, except that the Portfolio may (i) borrow money from banks for
temporary or emergency purposes and for leveraging or investment and (ii) enter
into reverse repurchase agreements for any purpose; provided that (i) and (ii)
in combination do not exceed 33-1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of the Portfolio's total assets, the
Portfolio will reduce its borrowings within three days (excluding Sundays and
holidays) to the extent necessary to comply with the 33-1/3% limitation.
2
<PAGE>
2. COMMODITIES (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). No Portfolio may purchase physical commodities or contracts thereon,
unless acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit a Portfolio from purchasing futures
contracts or options (including options on futures contracts, but excluding
options or futures contracts on physical commodities) or from investing in
securities of any kind.
COMMODITIES (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio
may not purchase physical commodities or contracts thereon, unless acquired as a
result of the ownership of securities or instruments, but this restriction shall
not prohibit the Portfolio from purchasing futures contracts, options (including
options on futures contracts, but excluding options or futures contracts on
physical commodities), foreign currencies or forward contracts, or from
investing in securities of any kind.
3. DIVERSIFICATION. No Portfolio may, with respect to 75% of the value
of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. No Portfolio may purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
5. LENDING. No Portfolio may lend any security or make any other loan
if, as a result, more than 33-1/3% of its total assets (taken at current value)
would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). None of these Portfolios may purchase real estate unless acquired as
a result of the ownership of securities or instruments, but this restriction
shall not prohibit a Portfolio from purchasing securities issued by entities or
investment vehicles that own or deal in real estate or interests therein or
instruments secured by real estate or interests therein.
REAL ESTATE (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). This Portfolio
may not invest any part of its total assets in real estate or interests in real
estate unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing readily marketable securities issued by entities or investment
vehicles that own or deal in real estate or interests therein or instruments
secured by real estate or interests therein.
7. SENIOR SECURITIES. No Portfolio may issue senior securities, except
as permitted under the 1940 Act.
3
<PAGE>
8. UNDERWRITING. No Portfolio may underwrite securities of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
For purposes of the limitations on commodities, the Portfolios do not
consider foreign currencies or forward contracts to be physical commodities.
The following investment policies and limitations are non-fundamental
and apply to all Portfolios unless otherwise indicated:
1. BORROWING (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). None of these Portfolios may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, no Portfolio may make any loans other than securities
loans.
3. MARGIN TRANSACTIONS. No Portfolio may purchase securities on margin
from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES (ALL PORTFOLIOS EXCEPT NEUBERGER BERMAN
INTERNATIONAL AND NEUBERGER BERMAN MILLENNIUM PORTFOLIOS). None of these
Portfolios may invest more than 10% of the value of its total assets in
securities of foreign issuers, provided that this limitation shall not apply to
foreign securities denominated in U.S. dollars, including American Depositary
Receipts ("ADRs").
5. ILLIQUID SECURITIES. No Portfolio may purchase any security if, as a
result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
6. PLEDGING (NEUBERGER BERMAN GENESIS AND NEUBERGER BERMAN GUARDIAN
PORTFOLIOS). Neither of these Portfolios may pledge or hypothecate any of its
assets, except that (i) Neuberger Berman GENESIS Portfolio may pledge or
hypothecate up to 15% of its total assets to collateralize a borrowing permitted
under fundamental policy 1 above or a letter of credit issued for a purpose set
forth in that policy and (ii) each Portfolio may pledge or hypothecate up to 5%
of its total assets in connection with its entry into any agreement or
arrangement pursuant to which a bank furnishes a letter of credit to
collateralize a capital commitment made by the Portfolio to a mutual insurance
company of which the Portfolio is a member. The other Portfolios are not subject
to any restrictions on their ability to pledge or hypothecate assets and may do
so in connection with permitted borrowings.
4
<PAGE>
7. SECTOR CONCENTRATION (NEUBERGER BERMAN FOCUS PORTFOLIO). This
Portfolio may not invest more than 50% of its total assets in any one economic
sector.
8. INVESTMENTS IN ANY ONE ISSUER (NEUBERGER BERMAN INTERNATIONAL
PORTFOLIO). At the close of each quarter of this Portfolio's taxable year, (i)
no more than 25% of its total assets may be invested in the securities of a
single issuer, and (ii) with regard to 50% of its total assets, no more than 5%
of its total assets may be invested in the securities of a single issuer. These
limitations do not apply to U.S. Government securities, as defined for tax
purposes, or securities of another regulated investment company ("RIC").
Each Portfolio (except Neuberger Berman GUARDIAN, Neuberger Berman
SOCIALLY RESPONSIVE, Neuberger Berman MILLENNIUM, and Neuberger Berman
INTERNATIONAL Portfolios), as an operating policy, does not intend to invest in
futures contracts and options thereon during the coming year. In addition,
although the Portfolios do not have policies limiting their investment in
warrants, no Portfolio currently intends to invest in warrants unless acquired
in units or attached to securities.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, each
Portfolio (except Neuberger Berman SOCIALLY RESPONSIVE Portfolio and Neuberger
Berman INTERNATIONAL Portfolio) may invest up to 100% of its total assets in
cash and cash equivalents, U.S. Government and Agency Securities, commercial
paper and certain other money market instruments, as well as repurchase
agreements collateralized by the foregoing.
Any part of Neuberger Berman SOCIALLY RESPONSIVE Portfolio's assets may
be retained temporarily in investment grade fixed income securities of
non-governmental issuers, U.S. Government and Agency Securities, repurchase
agreements, money market instruments, commercial paper, and cash and cash
equivalents when NB Management believes that significant adverse market,
economic political, or other circumstances require prompt action to avoid
losses. In addition, the feeder funds that invest in NeubergerBerman SOCIALLY
RESPONSIVE Portfolio deal with large institutional investors, and the Portfolio
may hold such instruments pending investment or payout when the Portfolio has
received a large influx of cash due to sales of Neuberger Berman SOCIALLY
RESPONSIVE Fund shares, or shares of another fund which invests in the
Portfolio, or when it anticipates a substantial redemption. Generally, the
foregoing temporary investments for Neuberger Berman SOCIALLY RESPONSIVE
Portfolio are selected with a concern for the social impact of each investment.
For temporary defensive purposes, Neuberger Berman INTERNATIONAL
Portfolio may invest up to 100% of its total assets in short-term foreign and
U.S. investments, such as cash or cash equivalents, commercial paper, short-term
bank obligations, government and agency securities, and repurchase agreements.
Neuberger Berman INTERNATIONAL Portfolio may also invest in such instruments to
increase liquidity or to provide collateral to be held in segregated accounts.
5
<PAGE>
INVESTMENT INSIGHT
NEUBERGER BERMAN MANHATTAN PORTFOLIO
The portfolio co-managers of Neuberger Berman MANHATTAN Portfolio love
surprises - positive earnings surprises that is. Their extensive research has
revealed that historically 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.
The co-managers explain, "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." The
co-managers explain that they are particularly biased towards companies that
have consistently beaten consensus earnings estimates. Their extensive research
has revealed that stocks whose earnings consistently exceeded expectations
offered greater potential for long-term capital appreciation.
The co-managers focus their research efforts on mid-cap stocks in new
and/or rapidly evolving industries. However, the Portfolio can invest in
securities of companies of any capitalization level. The mid-cap growth sector
is less widely followed by Wall Street analysts and therefore, less efficient
than the large-cap stock market. Considering the currently high valuations of
large-cap growth stocks relative to mid-cap growth stocks with what the
co-managers think is comparable or, in many cases, better earnings growth
potential, they believe the Portfolio is particularly well positioned in today's
market.
The Portfolio now uses the Russell Midcap(TM) Growth Index as its
benchmark. Consistent with the Portfolio's capitalization parameters and growth
style, the co-managers believe this is a more appropriate benchmark than the S&P
"500." The Portfolio regards mid-cap companies to be those companies with market
capitalizations that, at the time of investment, fall within the capitalization
range of the Russell Midcap(TM) Index as last announced by the Frank Russell
Company before the date of this SAI. For purposes of this SAI, that range was
approximately $___billion to $___ billion. Companies whose market
capitalizations move out of this mid-cap range after purchase continue to be
considered mid-cap companies for purposes of the Portfolio's investment program.
The Portfolio does not follow a policy of active trading for short-term profits.
They reiterate, "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 the co-managers
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, the co-managers will select the one trading at
the lower multiple to earnings growth.
6
<PAGE>
"We are dispassionate sellers," say the co-managers. "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."
NEUBERGER BERMAN GENESIS PORTFOLIO
Neuberger Berman GENESIS Fund was established in 1988. A fund dedicated
primarily to small-capitalization stocks (companies with total market value of
outstanding common stock of up to $1.5 billion at the time the Portfolio
invests), Neuberger Berman GENESIS Portfolio is devoted to the same value
principles as most of the other equity funds managed by NB Management. The
Portfolio is comprised of small-cap stocks with solid earnings today, not just
promises for tomorrow.
Many people think that small-capitalization stock funds are
predominantly invested in high-risk companies. That is not necessarily the case.
Neuberger Berman GENESIS Portfolio looks for the same fundamentals in
small-capitalization stocks as other Portfolios look for in stocks of larger
companies. The portfolio co-managers stick to the areas they understand. They
look for the most persistent earnings growth at the lowest multiple, as well as
for well-established companies with entrepreneurial management and sound
finances. Also considered are catalysts to exposing value, such as management
changes and new product lines. Often, these are firms that have suffered
temporary setbacks or undergone a restructuring.
Neuberger Berman GENESIS Portfolio's motto is "boring is beautiful."
Instead of investing in trendy, high-priced stocks that tend to hurt
shareholders on the downside, the Portfolio looks for little-known, solid,
growing companies whose stocks the managers believe are wonderful bargains.
AN INTERVIEW WITH THE PORTFOLIO CO-MANAGER
Q: If I already own a large-cap stock fund, why should I consider
investing in a small-cap fund as well?
A: Look at how fast a sapling grows compared to, say, a mature tree.
Much of the same can be true about companies. It's possible for a smaller
company to grow 50% faster than an IBM or a Coca-Cola.
So, many small-cap stocks offer superior growth potential. Consider the
cereal you eat, the detergent you use, the coffee you drink -- and imagine if
you had invested in these products BEFORE they became household names. If you
had invested only in the blue-chip companies of the day, you would have missed
out on these opportunities.
Of course, we're not advocating that an investor's portfolio consist
only of small-cap stock funds. It pays to diversify. Let's look back about 25
7
<PAGE>
years. While past performance cannot indicate future performance, small-cap
stocks outperformed larger-cap stocks __ of the years from 1971 to ____, which
means larger-cap stocks did better the rest of the time.1/
Q: Neuberger Berman GENESIS Fund is classified as a "small-cap value
fund." To many people, "small-cap value" is an oxymoron. Can you clarify the
Portfolio's investment approach?
A: We understand the confusion. After all, a lot of people equate
"small-cap" with "growth." They also equate "value" with "cheap." At Neuberger
Berman GENESIS Portfolio, we're 100% behind finding GROWING small-cap companies
- -- what we believe are highly profitable companies with solid records and
promising futures. So where do we part company with managers who follow a
"Millennium" style? It comes down to how much growth and at what price.
Millennium investors seem willing to pay a premium for vastly superior growth.
This results in two problems: a) growth tends to be discounted by the premium
valuations, and b) the growth expectations are so high as to be unsustainable.
We believe superior yet more stable returns can be purchased at significant
discounts. They may be found in mundane, perhaps even boring, industries.
Remember, the same glamorous appeal that attracts so many growth investors also
attracts competitors.
In that respect, we're "value" managers. Yet we'd like to make this
point clear: Low price-to-earnings multiples, in and of themselves, cannot
justify a "buy" decision. When we search for growing, high-quality small-cap
companies selling at what we feel are bargain prices, we ask ourselves: Is the
company cheap for a good reason? Or, does it have the financial muscle and the
management talent to make it into the big leagues?
Q: Let's turn to specifics. What criteria are used to decide which
small-cap companies make the cut -- and which ones don't?
A: Over the years, we've seen hundreds of small-cap companies that
flourished and just as many that failed to deliver on their early promises. What
made the difference? While every case is unique, here are a few important traits
of the winners.
First of all, a successful small-cap company normally produces high
returns. In practice, this means the business has a number of barriers to entry.
- ---------------------
1/ Results are on a total return basis and include reinvestment of all dividends
and other distributions. Small-cap stocks are represented by the fifth
capitalization quintile of stocks on the NYSE from 1971 to 1981 and performance
of the Dimensional Fund Advisors (DFA) Small Company Fund from 1982 to ____.
Larger-cap stocks are represented by the S&P "500" Index, an unmanaged group of
stocks. Please note that indices do not take into account any fees or expenses
of investing in the individual securities that they track. Data about these
indices are prepared or obtained by N&B Management. The Portfolio may invest in
many securities not included in the above-described indices. Source: STOCKS,
BONDS, BILLS AND INFLATION 1998 YEARBOOK(TRADEMARK), Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved.
8
<PAGE>
Perhaps the company has a technology that's hard to duplicate. Or maybe it can
make a product at a substantially lower cost than anyone else. Unlike most
businesses, it has an advantage that allows it to continue earning above-market
returns.
In addition to having a competitive edge, a successful small-cap
company should generate healthy cash flow. With excess cash, a company has the
ability to finance its own growth without diluting the ownership stake of
existing stockholders by issuing more shares.
No small-cap company can grow without having the right people on board.
That's why we spend so much time meeting the CEOs and CFOs of small-cap
companies. While we question the managers about future plans and strategies, we
spend as much time evaluating them as people. Do they seem honest and capable?
Or do they puff up their case? Making portfolio decisions is a lot about making
character judgments -- who has the stuff to manage a growing company, and who
doesn't.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS
PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE
PROSPECTUS.
NEUBERGER BERMAN FOCUS PORTFOLIO
Neuberger Berman FOCUS Portfolio's investment objective is long-term
capital appreciation. Like the other Portfolios that use a value-oriented
investment approach, it seeks to buy undervalued securities that offer
opportunities for growth, but then it focuses its assets in those sectors where
undervalued stocks are clustered. The portfolio manager begins by looking for
stocks that are selling for less than the manager thinks they're worth, a
"bottom-up approach." More often than not, such stocks are in a few economic
sectors that are out of favor and are undervalued as a group. The portfolio
manager thinks most cheap stocks deserve to be cheap and their job is to find
the few that don't.
The portfolio manager doesn't pick sectors for Neuberger Berman FOCUS
Portfolio based on his perception of what the economy is going to do. He looks
for stocks with low valuations; often, these stocks will be found in a
particular sector. If an investment manager rotates the sectors in a portfolio
by buying sectors when they are undervalued and selling them when they become
fully valued, the manager may be able to achieve above-average performance. When
a particular industry may fall within more than one sector, NB Management uses
its judgment and experience to determine the placement of that industry within a
sector.
NEUBERGER BERMAN GUARDIAN PORTFOLIO
Neuberger Berman GUARDIAN Portfolio subscribes to the same
stock-picking philosophy followed since Roy R. Neuberger founded Neuberger
Berman GUARDIAN Fund in 1950.
It's no great trick for a mutual fund to make money when the market is
rising. The tide that lifts stock values will carry most funds along. The true
test of management is its ability to make money even when the market is flat or
declining. By that measure, Neuberger Berman GUARDIAN Fund has served
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<PAGE>
shareholders well and has paid a dividend every quarter and a capital gain
distribution every year since 1950. Of course, there can be no assurance that
this trend will continue.
The portfolio co-managers place a high premium on being knowledgeable
about the companies whose stocks they buy. That knowledge is important, because
sometimes it takes courage to buy stocks that the rest of the market has
forsaken. The managers would rather buy an undervalued stock because they expect
it to become fairly valued than buy one fairly valued and hope it becomes
overvalued. The managers tend to buy stocks that are out of favor, believing
that an investor is not going to get great companies at great valuations when
the market perception is great.
Investors who switch around a lot are not going to benefit from
Neuberger Berman GUARDIAN Portfolio's approach. They're following the market --
this Portfolio is looking at fundamentals.
NEUBERGER BERMAN PARTNERS PORTFOLIO
Neuberger Berman PARTNERS Portfolio's objective is capital growth. It
seeks to make money in good markets and not give up those gains during rough
times.
Investors in Neuberger Berman PARTNERS Fund typically seek consistent
performance and have a moderate risk tolerance. They do know, however, that
stock investments can provide the long-term upside potential essential to
meeting their long-term investment goals, particularly a comfortable retirement
and planning for a college education.
The portfolio co-managers look for stocks that are undervalued in the
marketplace either in relation to strong current fundamentals, such as a low
price-to-earnings ratio, consistent cash flow, and support from asset values, or
in relation to their projection of the growth of the company's future earnings.
If the market goes down, those stocks the Portfolio elects to hold,
historically, have gone down less.
The portfolio co-managers monitor stocks of medium- to large-sized
companies that often are not closely scrutinized by other investors. The
managers research these companies in order to determine if they are likely to
produce a new product, become an acquisition target, or undergo a financial
restructuring.
What else catches the portfolio co-managers' eyes? Companies whose
management's own their own stock. These companies usually seek to build
shareholder wealth by buying back shares or making acquisitions that have a
swift and positive impact on the bottom line.
To increase the upside potential, the managers zero in on companies
that dominate their industries or their specialized niches. The managers'
reasoning? Market leaders tend to earn higher levels of profits.
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<PAGE>
NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO
Securities for this Portfolio are selected through a two-phase process.
The first is financial. The portfolio manager analyzes a universe of companies
according to NB Management's value-oriented philosophy and looks for stocks
which are undervalued for any number of reasons. The manager focuses on
financial fundamentals, including balance sheet ratios and cash flow analysis,
and meets with company management in an effort to understand how those
unrecognized values might be realized in the market.
The second part of the process is social screening. NB Management's
social research is based on the same kind of philosophy that governs its
financial approach: NB Management believes that first-hand knowledge and
experience are its most important tools. Utilizing a database, the portfolio
manager does careful, in-depth tracking and analyzes a large number of companies
on some eighty issues in six broad social categories. The manager uses a wide
variety of sources to determine company practices and policies in these areas.
Performance is analyzed in light of knowledge of the issues and of the best
practices in each industry.
Under normal conditions, at least 65% of the Portfolio's total assets
are invested in accordance with its social policy, and at least 65% of its total
assets are invested in equity securities. The Portfolio expects that
substantially all of its equity securities will be selected in accordance with
the social policy. On occasion, the Portfolio Manager may consider deposits with
community banks and credit unions for investment. The Portfolio may also engage
in portfolio management techniques that are not subject to the social policy,
such as lending securities and purchasing and selling put and call options on
securities and currencies, futures contracts, options on futures contracts, and
forward contracts.
The portfolio manager understands that, for many issues and in many
industries, absolute standards are elusive and often counterproductive. Thus, in
addition to quantitative measurements, the manager places value on such
indicators as management commitment, progress, direction, and industry
leadership.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: First things first. How do you begin your stock selection process?
A: Our first question is always: On financial grounds alone, is a
company a smart investment? For a company's stock to meet our financial test, it
must pass a number of hurdles.
We look for bargains, just like the portfolio managers of the other
Portfolios. More specifically, we search for companies that we believe have
terrific products, excellent customer service, and solid balance sheets -- but
because they may have missed quarterly earnings expectations by a few pennies,
because their sectors are currently out of favor, because Wall Street
overreacted to a temporary setback, or because the company's merits aren't
widely known, their stocks are selling at a discount.
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<PAGE>
While we look at the stock's fundamentals carefully, that's not all we
examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger Berman each year, and we're also frequently on the
road visiting dozens of corporations. From Neuberger Berman SOCIALLY RESPONSIVE
Fund's inception, we've met with representatives of every company we own.
When we're face to face with a CEO, we're searching for answers to two
crucial questions: "Does the company have a vision of where it wants to go?" and
"Can the management team make it happen?" We've analyzed companies for over
three decades, and we always look for companies that have both clear strategies
and management talent.
Q: When you evaluate a company's balance sheet, what matters the most
to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending. Or
increase its dividend payments.
When a company generates lots of excess cash flow, it has growth
capital at its disposal. It can invest for higher profits down the line and
improve shareholder value. Determining exactly HOW a company intends to spend
its excess cash is an entirely different matter -- and that's where the
information learned in our company meetings comes in. Still, you've got to have
the extra cash in the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and its
management. After a company passes your financial test, what do you do next?
A: After we're convinced of a company's merits on financial grounds
alone, we review its record as a corporate citizen. In particular, we look for
evidence of leadership in three key areas: concern for the environment,
workplace diversity, and enlightened employment practices.
It should be clear that our social screening always takes place after
we search far and wide for what we believe are the best investment opportunities
available. This is a crucial point, and an analogy can be used to explain it.
Let's assume you're looking to fill a vital position in your company. What you'd
pay attention to first is the candidate's competence: Can he or she do the job?
So after interviewing a number of candidates, you'd narrow your list to those
that are highly qualified. To choose from this smaller group, you might look at
the candidate's personality: Can he or she get along with everyone in your
group?
Obviously, you wouldn't hire an unqualified person simply because he or
she is likable. What you'd probably do is give the job to a highly qualified
person who is ALSO compatible with your group.
12
<PAGE>
Now, let's turn to the companies that do make our financial cuts. How
do we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of
looking for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to Neuberger Berman SOCIALLY
RESPONSIVE Fund?
A: Our shareholders are looking to invest for the future in more ways
than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
NEUBERGER BERMAN INTERNATIONAL PORTFOLIO
Equity portfolios consisting solely of domestic investments generally
have not enjoyed the higher returns foreign opportunities can offer. Over the
past thirty years, for example, the average growth rates of many foreign
economies have outpaced that of the United States. While the United States
accounted for almost 66% of the world's total securities market capitalization
in 1970, it accounted for less than 30% of that total at the end of 1996 -- or
less than a third of the dollar value of the world's available stocks and
bonds.2/
Over time, a number of international equity markets have outperformed
their U.S. counterpart. Although there are no guarantees, foreign markets could
continue to provide attractive investment opportunities.
In addition, according to Morgan Stanley Capital International, the
leading companies in any given sector are not always U.S.-based. For example,
- -----------------------
Source: Morgan Stanley Capital International.
13
<PAGE>
all ten of the largest construction companies, nine of the ten largest banks and
seven of the ten largest automobile companies are based outside of the United
States.
A principal advantage of investing overseas is diversification. A
diversified portfolio gives investors the opportunity to pursue increased
overall return while reducing risk. It is prudent to diversify by taking
advantage of investment opportunities in more than one country's stock or bond
market. By investing in several countries through a worldwide portfolio,
investors can lower their exposure and vulnerability to weakness in any one
market. Investors should be aware, however, that international investing is not
a guarantee against market risk and may be affected by the economic and other
factors described in the Prospectus. These include the prospects of individual
companies and other risks such as currency fluctuations or controls,
expropriation, nationalization and confiscator taxation.
Furthermore, buying foreign stocks and bonds can be difficult for the
individual investor and involves many decisions. Accessing international markets
is complicated; few individuals have the time or resources to evaluate
thoroughly foreign companies and markets or the ability to incur the high
transaction costs of direct investment in such markets. A mutual fund investing
in foreign securities offers an investor broad diversification at a relatively
low cost.
At least 65% of the Portfolio's total assets normally are invested in
equity securities of foreign issuers. The Portfolio invests primarily in equity
securities of companies located in developed foreign economies, as well as in
"emerging markets." In all cases, NB Management's investment process includes a
combination of "top-down country allocation" and "bottom-up security selection."
The Portfolio may use leverage to facilitate transactions it enters into for
hedging purposes.
The portfolio manager searches the world for investment opportunities
wherever and whenever they arise -- in both developed and emerging markets.
First, the portfolio manager looks for countries with strong potential for
growth. NB Management believes that the majority of the total return in a global
equity portfolio can be attributed to country allocation. The Portfolio's stock
selection process leads to diversification across more than 20 countries that
the manager believes offer the best value.
Then, the portfolio manager focuses on individual companies. The
portfolio manager looks at the fundamentals. Does the company lead its market
niche? How strong is its management? If the company is small, has it shown
sustained growth? In general, the Portfolio's selection process leads to
investments in mid-sized companies in developed countries and larger, more
established firms in emerging markets such as Hungary and Singapore.
TOP-DOWN APPROACH TO REGIONAL AND COUNTRY DIVERSIFICATION
NB Management uses extensive economic research to identify countries
that offer attractive investment opportunities, by analyzing factors such as
growth rates of gross domestic product, interest rate trends, and currency
exchange rates. Market valuations, combined with correlation and volatility
comparisons, provide NB Management with a target allocation across twenty or
more countries.
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BOTTOM-UP APPROACH TO SECURITY SELECTION
NB Management's value-oriented approach seeks out attractively priced
issues, by concentrating on criteria such as a low price-to-earnings ratio
relative to earnings growth rate, balance sheet strength, low price to cash
flow, and management quality. Typically, the Portfolio's investment portfolio is
comprised of over 100 different securities issues.
CURRENCY RISK MANAGEMENT
Exchange rate movements and volatility are important factors in
international investing. The portfolio manager believes in actively managing the
Portfolio's currency exposure, in an effort to capitalize on foreign currency
trends and to reduce overall portfolio volatility. Currency risk management is
performed separately from equity analysis. The portfolio manager uses a
combination of economic analysis to guide the Portfolio's longer-term posture
and quantitative trend analysis to assist in timing decisions with respect to
whether (or when) to invest in instruments denominated in a particular foreign
currency, or whether (or when) to hedge particular foreign currencies in which
liquid foreign exchange markets exist.
For much of the past two decades, international stocks, on average,
have outperformed U.S. stocks. If you had invested $10,000 in the international
stocks that comprise the EAFE(R) Index and the U.S. stocks that make up the S&P
"500" Index twenty years ago, here's what your investments would have been worth
as of December 31, 1997 and August 31, 1998:
<TABLE>
<CAPTION>
Value of investment Avg. annual total return3/
<S> <C> <C> <C> <C>
12/31/97 8/31/98 12/31/97 8/31/98
International stocks (EAFE(REGISTERED)) $_______ $_______ $_______ $_______
Domestic stocks (S&P "500") $_______ $_______ $_______ $_______
</TABLE>
Of course, these historical results may not continue in the future.
Investors should keep in mind the greater risks inherent in foreign markets,
such as currency exchange fluctuations, interest rates, and potentially adverse
economic and political conditions.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: Why should investors allocate a portion of their assets to
international markets?
- ----------------------
2/ Total return includes reinvestment of all dividends and other distributions.
The EAFE(R) Index, also known as the Morgan Stanley Capital International
Europe, Australasia, Far East Index, is an unmanaged index of over 1,000 foreign
stock prices and is translated into U.S. dollars. The S&P "500" Index is an
unmanaged index generally considered to be representative of U.S. stock market
activity. Indices do not take into account brokerage commissions or other fees
and expenses of investing in the individual securities that they track. Data
about the performance of these indices are prepared or obtained by N&B
Management.
15
<PAGE>
A: First, an investor who does not invest internationally misses out on
about two-thirds of the world's potential investment opportunities. The U.S.
stock market today represents less than one-third of the world's stock market
capitalization, and the U.S. portion continues to shrink as other countries
around the world introduce or expand the size of their equity markets.
Privatizations of government-owned corporations, initial public offerings, and
the occasional creation of official stock exchanges in emerging economies
continuously present new opportunities for capital in an expanding global
market.
Second, many foreign economies are in earlier stages of development
than ours and are growing fast. Economic growth can often mean potential for
investment growth.
Finally, international investing helps an investor increase
diversification, which can reduce risk. Domestic and foreign markets generally
do not all move in the same direction, so gains in one market may offset losses
in another.
Q: Does international investing involve special risks?
A: Currency risk is one important risk presented by international
investing. Fluctuations in exchange rates can either add to or reduce an
investor's returns. Anyone who invests in foreign markets should keep that fact
in mind.
Other risks include, but are not limited to, greater market volatility,
less government supervision and availability of public information, and the
possibility of adverse economic or political developments. Additional special
risks of foreign investing are discussed in the Prospectus.
Q: What are some of the advantages of investing in an international
fund?
A: An international mutual fund can be a convenient way to invest
internationally and diversify assets among several markets to reduce risk.
Additionally, the considerable burden of obtaining timely, accurate, and
comprehensive information about foreign economies and securities is left to
professional managers.
Q: What is your investment approach?
A: We seek to capitalize on investments in countries where we believe
that positive economic and political factors are likely to produce above-average
returns. Studies have shown that the allocation of assets among countries is
typically the most important factor contributing to portfolio performance. We
believe that, in the long term, a nation's economic growth and the performance
of its equity market are highly correlated. Therefore, we continuously evaluate
the global economic outlook as well as individual country data to guide country
allocation. Our process also leads to diversification across many countries,
typically twenty or more, in an effort to limit total portfolio risk.
We strive to invest in companies within the selected countries that are
in the best position to capitalize on such positive developments or companies
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<PAGE>
that are most attractively valued. We usually include in the Portfolio's
investments the securities of large-capitalization companies, determined in
relation to the appropriate national market, as well as securities of
faster-growing, small- and medium-sized companies that offer potentially higher
returns but are often associated with higher risk.
The criteria for security selection focus on companies with leadership
in specific markets or with niches in specific industries, which appear to
exhibit positive fundamentals and seem undervalued relative to their earnings
potential or the worth of their assets. Typically, in emerging markets, we
invest in relatively large, established companies that we believe possess the
managerial, financial, and marketing strength to exploit successfully the growth
of a dynamic economy. In more developed markets, such as Europe and Japan, the
Portfolio may invest to a higher degree in medium-sized companies. Medium-sized
companies can often provide above-average growth and are less followed by market
analysts, which sometimes leads to inefficient valuation.
Finally, we strive to limit total portfolio volatility and protect the
value of portfolio securities by selectively hedging the Portfolio's foreign
currency exposure in times when we expect the U.S. dollar to strengthen.
Q: How do you perceive the current outlook?
A: There is still an abundance of exciting investment opportunities
around the world. Many equity markets still have not reached the maturity stage
of the U.S. market and have much more room to grow. There are new markets
opening up to foreign investment and many changes are occurring in markets where
equity investments have traditionally commanded less attention than fixed income
securities.
Q: Compared to the stock market in the United States, are there more
anomalies in security pricing abroad?
A: Well, the rest of the world is not as well followed as the United
States. So you'll find more anomalies. At the same time, though, the level of
analysis of companies around the world is improving every day, and the gap in
coverage is narrowing.
What never changes is the psychology of the investor -- you regularly
see either despair or euphoria in different sectors of every international
market. That, in our opinion, creates opportunities to find undiscovered gems at
extraordinarily cheap prices.
These opportunities can come from, say, uncertainty over an election
going one way or another. Investors may see the outcome as totally disastrous
for a country -- or as totally euphoric. Then, reality sets in, and things are
never as bleak or as wonderful as they had been painted.
Q: Do you integrate ideas from Neuberger Berman's research and the
domestic portfolio managers?
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A: Oh, sure. As everyone knows, the world is becoming smaller, and
certain industries are becoming global (or have become global). Whether one
thinks about technology, pharmaceuticals, medical devices, or the automobile
industry, it's really become one world market. So it's crucial to have good
knowledge about BOTH the United States and the areas outside the United States
where these companies dominate.
NEUBERGER BERMAN MILLENNIUM PORTFOLIO
(TO BE PROVIDED BY NBMI)
* * * * *
Each Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of any Portfolio's total assets. Of course,
each Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
Some or all of the Portfolios, as indicated below, may make the
following investments, among others, although they may not buy all of the types
of securities or use all of the investment techniques that are described.
ILLIQUID SECURITIES. (ALL PORTFOLIOS). Illiquid securities are
securities that cannot be expected to be sold within seven days at approximately
the price at which they are valued. These may include unregistered or other
restricted securities and repurchase agreements maturing in greater than seven
days. Illiquid securities may also include commercial paper under section 4(2)
of the Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless NB Management, acting
pursuant to guidelines established by the trustees of the Managers Trusts,
determines they are liquid. Generally, foreign securities freely tradable in
their principal market are not considered restricted or illiquid. Illiquid
securities may be difficult for a Portfolio to value or dispose of due to the
absence of an active trading market. The sale of some illiquid securities by the
Portfolios may be subject to legal restrictions which could be costly to the
Portfolios.
POLICIES AND LIMITATIONS. Each Portfolio may invest up to 15% of its
net assets in illiquid securities.
REPURCHASE AGREEMENTS (All Portfolios). In a repurchase agreement, a
Portfolio purchases securities from a bank that is a member of the Federal
Reserve System (or, in the case of Neuberger Berman INTERNATIONAL Portfolio,
also from a foreign bank or a U.S. branch or agency of a foreign bank) or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. Costs, delays, or losses
could result if the selling party to a repurchase agreement becomes bankrupt or
18
<PAGE>
otherwise defaults. NB Management monitors the creditworthiness of sellers. If
Neuberger Berman INTERNATIONAL Portfolio enters into a repurchase agreement
subject to foreign law and the counter-party defaults, that Portfolio may not
enjoy protections comparable to those provided to certain repurchase agreements
under U.S. bankruptcy law and may suffer delays and losses in disposing of the
collateral as a result.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. No Portfolio may enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 15% of the value of its net assets would then be invested in
such repurchase agreements and other illiquid securities. A Portfolio may enter
into a repurchase agreement only if (1) the underlying securities are of a type
that the Portfolio's investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities, including
accrued interest, at all times equals or exceeds the repurchase price, and (3)
payment for the underlying securities is made only upon satisfactory evidence
that the securities are being held for the Portfolio's account by its custodian
or a bank acting as the Portfolio's agent.
SECURITIES LOANS (All Portfolios). Each Portfolio may lend securities
to unaffiliated entities, including banks, brokerage firms, and other
institutional investors judged creditworthy by NB Management, provided that cash
or equivalent collateral, equal to at least 100% of the market value of the
loaned securities, is continuously maintained by the borrower with the
Portfolio. The Portfolio may invest the cash collateral and earn income, or it
may receive an agreed upon amount of interest income from a borrower who has
delivered equivalent collateral. During the time securities are on loan, the
borrower will pay the Portfolio an amount equivalent to any dividends or
interest paid on such securities. These loans are subject to termination at the
option of the Portfolio or the borrower. The Portfolio may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. The Portfolio does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment. NB Management
believes the risk of loss on these transactions is slight because, if a borrower
were to default for any reason, the collateral should satisfy the obligation.
However, as with other extensions of secured credit, loans of portfolio
securities involve some risk of loss of rights in the collateral should the
borrower fail financially.
POLICIES AND LIMITATIONS. Each Portfolio may lend portfolio securities
with a value not exceeding 33-1/3% of its total assets to banks, brokerage
firms, or other institutional investors judged creditworthy by NB Management.
Borrowers are required continuously to secure their obligations to return
securities on loan from a Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
Securities lending by Neuberger Berman SOCIALLY RESPONSIVE Portfolio is not
subject to the Social Policy.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (All Portfolios). Each
Portfolio may invest in restricted securities, which are securities that may not
be sold to the public without an effective registration statement under the 1933
Act. Before they are registered, such securities may be sold only in a privately
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<PAGE>
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of a Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
Where registration is required, a Portfolio may be obligated to pay all
or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
for which no market exists are priced by a method that the Portfolio Trustees
believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to each Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS (All Portfolios). In a reverse repurchase
agreement, a Portfolio sells portfolio securities subject to its agreement to
repurchase the securities at a later date for a fixed price reflecting a market
rate of interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of each Portfolio's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, a
Portfolio will deposit in a segregated account with its custodian cash or
appropriate liquid securities, marked to market daily, in an amount at least
equal to the Portfolio's obligations under the agreement.
LEVERAGE (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). The Portfolio may
make investments while borrowings are outstanding. Leverage creates an
opportunity for increased net income but, at the same time, creates special risk
considerations. For example, leverage may amplify changes in the Portfolio's and
its corresponding Fund's net asset values ("NAVs"). Although the principal of
such borrowings will be fixed, the Portfolio's assets may change in value during
the time the borrowing is outstanding. Leverage creates interest expenses for
the Portfolio. To the extent the income derived from securities purchased with
borrowed funds exceeds the interest the Portfolio will have to pay, the
Portfolio's net income will be greater than it would be if leverage were not
used. Conversely, if the income from the assets obtained with borrowed funds is
not sufficient to cover the cost of leveraging, the net income of the Portfolio
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will be less than it would be if leverage were not used, and therefore the
amount available for distribution to the Fund's shareholders as dividends will
be reduced. Reverse repurchase agreements create leverage and are considered
borrowings for purposes of the Portfolio's investment limitations.
POLICIES AND LIMITATIONS. Generally, the Portfolio does not intend to
use leverage for investment purposes. It may, however, use leverage to purchase
securities needed to close out short sales entered into for hedging purposes and
to facilitate other hedging transactions.
FOREIGN SECURITIES (All Portfolios). Each Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. While investments in foreign securities are intended to reduce
risk by providing further diversification, such investments involve sovereign
and other risks, in addition to the credit and market risks normally associated
with domestic securities. These additional risks include the possibility of
adverse political and economic developments (including political instability,
nationalization, expropriation, or confiscator taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
Each Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolios endeavor to
achieve the most favorable net results on portfolio transactions.
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
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temporary periods when a portion of the assets of a Portfolio are uninvested and
no return is earned thereon. The inability of a Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a Portfolio due
to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
Neuberger Berman INTERNATIONAL and Neuberger Berman MILLENNIUM
Portfolios may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or
unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers of
the securities underlying sponsored ADRs, but not unsponsored ADRs, are
contractually obligated to disclose material information in the United States.
Therefore, the market value of unsponsored ADRs may not reflect the effect of
such information. EDRs and IDRs are receipts typically issued by a European bank
or trust company evidencing its ownership of the underlying foreign securities.
GDRs are receipts issued by either a U.S. or non-U.S. banking institution
evidencing its ownership of the underlying foreign securities and are often
denominated in U.S. dollars.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, a Portfolio (except
Neuberger Berman INTERNATIONAL Portfolio) may not purchase any such security if,
as a result, more than 10% of its total assets (taken at market value) would be
invested in foreign currency denominated securities. Within that limitation,
however, no Portfolio is restricted in the amount it may invest in securities
denominated in any one foreign currency. Neuberger Berman INTERNATIONAL
Portfolio invests primarily in foreign securities.
Investments in securities of foreign issuers are subject to each
Portfolio's quality standards. Each Portfolio (except Neuberger Berman
INTERNATIONAL Portfolio) may invest only in securities of issuers in countries
whose governments are considered stable by NB Management.
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FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES (Neuberger Berman
INTERNATIONAL Portfolio). The Portfolio may purchase securities on a when-issued
basis and may purchase or sell securities on a forward commitment basis. These
transactions involve a commitment by the Portfolio to purchase or sell
securities at a future date (ordinarily within two months, although the
Portfolio may agree to a longer settlement period). The price of the underlying
securities (usually expressed in terms of yield) and the date when the
securities will be delivered and paid for (the settlement date) are fixed at the
time the transaction is negotiated. When-issued purchases and forward commitment
transactions are negotiated directly with the other party, and such commitments
are not traded on exchanges.
When-issued purchases and forward commitment transactions enable the
Portfolio to "lock in" what NB Management believes to be an attractive price or
yield on a particular security for a period of time, regardless of future
changes in interest rates. For instance, in periods of rising interest rates and
falling prices, the Portfolio might sell securities it owns on a forward
commitment basis to limit its exposure to falling prices. In periods of falling
interest rates and rising prices, the Portfolio might purchase a security on a
when-issued or forward commitment basis and sell a similar security to settle
such purchase, thereby obtaining the benefit of currently higher yields. If the
seller fails to complete the sale, the Portfolio may lose the opportunity to
obtain a favorable price.
The value of securities purchased on a when-issued or forward
commitment basis and any subsequent fluctuations in their value are reflected in
the computation of the Portfolio's NAV starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date. When the Portfolio makes a
forward commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Portfolio's assets. Fluctuations in the market
value of the underlying securities are not reflected in the Portfolio's NAV as
long as the commitment to sell remains in effect.
POLICIES AND LIMITATIONS. The Portfolio will purchase securities on a
when-issued basis or purchase or sell securities on a forward commitment basis
only with the intention of completing the transaction and actually purchasing or
selling the securities. If deemed advisable as a matter of investment strategy,
however, the Portfolio may dispose of or renegotiate a commitment after it has
been entered into. The Portfolio also may sell securities it has committed to
purchase before those securities are delivered to the Portfolio on the
settlement date. The Portfolio may realize capital gains or losses in connection
with these transactions.
When the Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio will deposit in a segregated account with its
custodian, until payment is made, appropriate liquid securities having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the custodian will hold the portfolio securities themselves in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio maintains sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitment transactions.
FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES AND INDICES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "FINANCIAL INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER BERMAN SOCIALLY
RESPONSIVE, INTERNATIONAL AND GUARDIAN PORTFOLIOS). Neuberger Berman SOCIALLY
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RESPONSIVE Portfolio may purchase and sell interest rate futures contracts,
stock and bond index futures contracts, and foreign currency futures contracts
and may purchase and sell options thereon in an attempt to hedge against changes
in the prices of securities or, in the case of foreign currency futures and
options thereon, to hedge against changes in prevailing currency exchange rates.
Because the futures markets may be more liquid than the cash markets, the use of
futures contracts permits the Portfolio to enhance portfolio liquidity and
maintain a defensive position without having to sell portfolio securities. This
Portfolio views investment in (i) interest rate and securities index futures and
options thereon as a maturity management device and/or a device to reduce risk
or preserve total return in an adverse environment for the hedged securities,
and (ii) foreign currency futures and options thereon as a means of establishing
more definitely the effective return on, or the purchase price of, securities
denominated in foreign currencies that are held or intended to be acquired by
the Portfolio.
Neuberger Berman INTERNATIONAL Portfolio may enter into futures
contracts on currencies, debt securities, interest rates, and securities indices
that are traded on exchanges regulated by the Commodity Futures Trading
Commission ("CFTC") or on foreign exchanges. Trading on foreign exchanges is
subject to the legal requirements of the jurisdiction in which the exchange is
located and to the rules of such foreign exchange.
Neuberger Berman INTERNATIONAL Portfolio may sell futures contracts in
order to offset a possible decline in the value of its portfolio securities.
When a futures contract is sold by the Portfolio, the value of the contract will
tend to rise when the value of the portfolio securities declines and will tend
to fall when the value of such securities increases. The Portfolio may purchase
futures contracts in order to fix what NB Management believes to be a favorable
price for securities the Portfolio intends to purchase. If a futures contract is
purchased by the Portfolio, the value of the contract will tend to change
together with changes in the value of such securities. To compensate for
differences in historical volatility between positions Neuberger Berman
INTERNATIONAL Portfolio wishes to hedge and the standardized futures contracts
available to it, the Portfolio may purchase or sell futures contracts with a
greater or lesser value than the securities it wishes to hedge.
With respect to currency futures, Neuberger Berman INTERNATIONAL
Portfolio may sell a futures contract or a call option, or it may purchase a put
option on such futures contract, if NB Management anticipates that exchange
rates for a particular currency will fall. Such a transaction will be used as a
hedge (or, in the case of a sale of a call option, a partial hedge) against a
decrease in the value of portfolio securities denominated in that currency. If
NB Management anticipates that a particular currency will rise, Neuberger Berman
INTERNATIONAL Portfolio may purchase a currency futures contract or a call
option to protect against an increase in the price of securities which are
denominated in that currency and which the Portfolio intends to purchase. The
Portfolio may also purchase a currency futures contract or a call option thereon
for non-hedging purposes when NB Management anticipates that a particular
currency will appreciate in value, but securities denominated in that currency
do not present an attractive investment and are not included in the Portfolio.
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Neuberger Berman GUARDIAN Portfolio may purchase and sell stock index
futures contracts, and may purchase and sell options thereon. For purposes of
managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P 500.
A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange. Although futures
contracts by their terms may require the actual delivery or acquisition of the
underlying securities or currency, in most cases the contractual obligation is
extinguished by being offset before the expiration of the contract. A futures
position is offset by buying (to offset an earlier sale) or selling (to offset
an earlier purchase) an identical futures contract calling for delivery in the
same month. This may result in a profit or loss. While futures contracts entered
into by a Portfolio will usually be liquidated in this manner, the Portfolio may
instead make or take delivery of underlying securities whenever it appears
economically advantageous for it to do so.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by Neuberger Berman SOCIALLY RESPONSIVE, INTERNATIONAL or
GUARDIAN Portfolio with, or for the benefit of, a futures commission merchant in
order to initiate and maintain the Portfolio's futures positions. The margin
deposit made by the Portfolio when it enters into a futures contract ("initial
margin") is intended to assure its performance of the contract. If the price of
the futures contract changes -- increases in the case of a short (sale) position
or decreases in the case of a long (purchase) position -- so that the unrealized
loss on the contract causes the margin deposit not to satisfy margin
requirements, the Portfolio will be required to make an additional margin
deposit ("variation margin"). However, if favorable price changes in the futures
contract cause the margin deposit to exceed the required margin, the excess will
be paid to the Portfolio. In computing their NAVs, Neuberger Berman SOCIALLY
RESPONSIVE, INTERNATIONAL and GUARDIAN Portfolios mark to market the value of
their open futures positions. Each Portfolio also must make margin deposits with
respect to options on futures that it has written (but not with respect to
options on futures that it has purchased). If the futures commission merchant
holding the margin deposit goes bankrupt, the Portfolio could suffer a delay in
recovering its funds and could ultimately suffer a loss.
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An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although each of Neuberger Berman SOCIALLY RESPONSIVE, INTERNATIONAL
and GUARDIAN Portfolios believes that the use of futures contracts will benefit
it, if NB Management's judgment about the general direction of the markets or
about interest rate or currency exchange rate trends is incorrect, the
Portfolio's overall return would be lower than if it had not entered into any
such contracts. The prices of futures contracts are volatile and are influenced
by, among other things, actual and anticipated changes in interest or currency
exchange rates, which in turn are affected by fiscal and monetary policies and
by national and international political and economic events. At best, the
correlation between changes in prices of futures contracts and of securities
being hedged can be only approximate due to differences between the futures and
securities markets or differences between the securities or currencies
underlying a Portfolio's futures position and the securities held by or to be
purchased for the Portfolio. The currency futures market may be dominated by
short-term traders seeking to profit from changes in exchange rates. This would
reduce the value of such contracts used for hedging purposes over a short-term
period. Such distortions are generally minor and would diminish as the contract
approaches maturity.
Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage; as a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, or
gain, to the investor. Losses that may arise from certain futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by Neuberger Berman SOCIALLY RESPONSIVE, INTERNATIONAL or
GUARDIAN Portfolio, it could (depending on the size of the position) have an
adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. Neuberger Berman SOCIALLY RESPONSIVE
Portfolio may purchase and sell futures contracts and may purchase and sell
options thereon in an attempt to hedge against changes in the prices of
securities or, in the case of foreign currency futures and options thereon, to
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hedge against prevailing currency exchange rates. The Portfolio does not engage
in transactions in futures and options on futures for speculation. The use of
futures and options on futures by Neuberger Berman SOCIALLY RESPONSIVE Portfolio
is not subject to the Social Policy.
Neuberger Berman INTERNATIONAL Portfolio may purchase and sell futures
for BONA FIDE hedging and non-hedging purposes (i.e., in an effort to enhance
income) as defined in regulations of the CFTC. The Portfolio may also purchase
and write put and call options on such futures contracts for BONA FIDE hedging
and non-hedging purposes.
Neuberger Berman GUARDIAN Portfolio may purchase and sell stock index
futures contracts, and may purchase and sell options thereon. For purposes of
managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P 500.
CALL OPTIONS ON SECURITIES (ALL PORTFOLIOS). Neuberger Berman SOCIALLY
RESPONSIVE and INTERNATIONAL Portfolios may write covered call options and may
purchase call options on securities. Each of the other Portfolios may write
covered call options and may purchase call options in related closing
transactions. The purpose of writing call options is to hedge (i.e., to reduce,
at least in part, the effect of price fluctuations of securities held by the
Portfolio on the Portfolio's and its corresponding Fund's NAVs) or to earn
premium income. Portfolio securities on which call options may be written and
purchased by a Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective.
When a Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk but is capable of
enhancing the Portfolios' total return. When writing a covered call option, a
Portfolio, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
If a call option that a Portfolio has written expires unexercised, the
Portfolio will realize a gain in the amount of the premium; however, that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
When a Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date.
POLICIES AND LIMITATIONS. Each Portfolio may write covered call options
and may purchase call options in related closing transactions. Each Portfolio
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writes only "covered" call options on securities it owns (in contrast to the
writing of "naked" or uncovered call options, which the Portfolios will not do).
A Portfolio would purchase a call option to offset a previously written
call option. Neuberger Berman SOCIALLY RESPONSIVE Portfolio also may purchase a
call option to protect against an increase in the price of securities it intends
to purchase. The use of call options on securities by Neuberger Berman SOCIALLY
RESPONSIVE Portfolio is not subject to the Social Policy. Neuberger Berman
INTERNATIONAL Portfolio may purchase call options for hedging or non-hedging
purposes.
PUT OPTIONS ON SECURITIES (NEUBERGER BERMAN SOCIALLY RESPONSIVE AND
INTERNATIONAL PORTFOLIOS). EACH OF THESE PORTFOLIOS MAY WRITE AND PURCHASE PUT
OPTIONS ON SECURITIES.
Neuberger Berman SOCIALLY RESPONSIVE or INTERNATIONAL Portfolio will
receive a premium for writing a put option, which obligates the Portfolio to
acquire a security at a certain price at any time until a certain date if the
purchaser decides to exercise the option. The Portfolio may be obligated to
purchase the underlying security at more than its current value.
When Neuberger Berman SOCIALLY RESPONSIVE or INTERNATIONAL Portfolio
purchases a put option, it pays a premium to the writer for the right to sell a
security to the writer for a specified amount at any time until a certain date.
A Portfolio might purchase a put option in order to protect itself against a
decline in the market value of a security it owns.
Portfolio securities on which put options may be written and purchased
by Neuberger Berman SOCIALLY RESPONSIVE or INTERNATIONAL Portfolio are purchased
solely on the basis of investment considerations consistent with the Portfolio's
investment objective. When writing a put option, a Portfolio, in return for the
premium, takes the risk that it must purchase the underlying security at a price
that may be higher than the current market price of the security. If a put
option that the Portfolio has written expires unexercised, the Portfolio will
realize a gain in the amount of the premium.
POLICIES AND LIMITATIONS. Neuberger Berman SOCIALLY RESPONSIVE and
Neuberger Berman INTERNATIONAL Portfolios generally write and purchase put
options on securities for hedging purposes (i.e., to reduce, at least in part,
the effect of price fluctuations of securities held by the Portfolio on the
Portfolio's and its corresponding Fund's NAVs). However, Neuberger Berman
INTERNATIONAL Portfolio also may use put options for non-hedging purposes. The
use of put options on securities by Neuberger Berman SOCIALLY RESPONSIVE
Portfolio is not subject to the Social Policy.
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GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. Neuberger
Berman INTERNATIONAL Portfolio also may purchase European-style options, which
are exercisable only immediately prior to their expiration date. The obligation
under any option written by a Portfolio terminates upon expiration of the option
or, at an earlier time, when the Portfolio offsets the option by entering into a
"closing purchase transaction" to purchase an option of the same series. If an
option is purchased by a Portfolio and is never exercised or closed out, the
Portfolio will lose the entire amount of the premium paid.
Options are traded both on U.S. national securities exchanges and in
the over-the-counter ("OTC") market. Neuberger Berman INTERNATIONAL Portfolio
also may purchase and sell options that are traded on foreign exchanges.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed; the clearing organization in effect
guarantees completion of every exchange-traded option. In contrast, OTC options
are contracts between a Portfolio and a counter-party, with no clearing
organization guarantee. Thus, when a Portfolio sells (or purchases) an OTC
option, it generally will be able to "close out" the option prior to its
expiration only by entering into a closing transaction with the dealer to whom
(or from whom) the Portfolio originally sold (or purchased) the option. There
can be no assurance that the Portfolio would be able to liquidate an OTC option
at any time prior to expiration. Unless a Portfolio is able to effect a closing
purchase transaction in a covered OTC call option it has written, it will not be
able to liquidate securities used as cover until the option expires or is
exercised or until different cover is substituted. In the event of the
counter-party's insolvency, a Portfolio may be unable to liquidate its options
position and the associated cover. NB Management monitors the creditworthiness
of dealers with which a Portfolio may engage in OTC options transactions.
The premium received (or paid) by a Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by a Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits Neuberger Berman SOCIALLY
RESPONSIVE OR INTERNATIONAL Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or both.
There is, of course, no assurance that a Portfolio will be able to effect
closing transactions at favorable prices. If a Portfolio cannot enter into such
a transaction, it may be required to hold a security that it might otherwise
have sold (or purchase a security that it would not have otherwise bought), in
which case it would continue to be at market risk on the security.
A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
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likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
A Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. From time to time, Neuberger Berman SOCIALLY RESPONSIVE or
INTERNATIONAL Portfolio may purchase an underlying security for delivery in
accordance with an exercise notice of a call option assigned to it, rather than
delivering the security from its portfolio. In those cases, additional brokerage
commissions are incurred.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
POLICIES AND LIMITATIONS. Each Portfolio may use American-style
options. Neuberger Berman INTERNATIONAL Portfolio may also purchase
European-style options and may purchase and sell options that are traded on
foreign exchanges.
The assets used as cover (or held in a segregated account) for OTC
options written by a Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
The use of put and call options by Neuberger Berman SOCIALLY RESPONSIVE
Portfolio is not subject to the Social Policy.
PUT AND CALL OPTIONS ON SECURITIES INDICES (NEUBERGER BERMAN
INTERNATIONAL AND NEUBERGER BERMAN GUARDIAN PORTFOLIOS). Neuberger Berman
INTERNATIONAL Portfolio may purchase put and call options on securities indices
for the purpose of hedging against the risk of price movements that would
adversely affect the value of the Portfolio's securities or securities the
Portfolio intends to buy. The Portfolio may write securities index options to
close out positions in such options that it has purchased.
For purposes of managing cash flow, Neuberger Berman GUARDIAN Portfolio
may purchase put and call options on securities indices to increase the
Portfolio's exposure to the performance of a recognize securities index, such as
the S&P 500.
Unlike a securities option, which gives the holder the right to
purchase or sell a specified security at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (1) the difference between the exercise price of the
option and the value of the underlying securities index on the exercise date (2)
multiplied by a fixed "index multiplier." A securities index fluctuates with
changes in the market values of the securities included in the index. Options on
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stock indices are currently traded on the Chicago Board Options Exchange, the
New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S.
and foreign exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks similar to
those of securities options, as discussed herein.
POLICIES AND LIMITATIONS. Neuberger Berman INTERNATIONAL Portfolio may
purchase put and call options on securities indices for the purpose of hedging.
All securities index options purchased by the Portfolio will be listed and
traded on an exchange. The Portfolio currently does not expect to invest a
substantial portion of its assets in securities index options.
For purposes of managing cash flow, Neuberger Berman GUARDIAN Portfolio
may purchase put and call options on securities indices to increase the
Portfolio's exposure to the performance of a recognize securities index, such as
the S&P 500 . All securities index options purchased by Neuberger Berman
GUARDIAN Portfolio will be listed and traded on an exchange.
FOREIGN CURRENCY TRANSACTIONS (All Portfolios). Each Portfolio may
enter into contracts for the purchase or sale of a specific currency at a future
date (usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolios also may engage in foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Portfolios (other than Neuberger Berman INTERNATIONAL Portfolio)
enter into forward contracts in an attempt to hedge against changes in
prevailing currency exchange rates. The Portfolios do not engage in transactions
in forward contracts for speculation; they view investments in forward contracts
as a means of establishing more definitely the effective return on, or the
purchase price of, securities denominated in foreign currencies. Forward
contract transactions include forward sales or purchases of foreign currencies
for the purpose of protecting the U.S. dollar value of securities held or to be
acquired by a Portfolio or protecting the U.S. dollar equivalent of dividends,
interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, a Portfolio
may either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract. If the Portfolio
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chooses to make delivery of the foreign currency, it may be required to obtain
such currency through the sale of portfolio securities denominated in such
currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if NB Management is incorrect in its judgment of future
exchange rate relationships, a Portfolio could be in a less advantageous
position than if such a hedge had not been established. If a Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of a Portfolio's securities against a decline in the value of a currency
does not eliminate fluctuations in the prices of the underlying securities.
Because forward contracts are not traded on an exchange, the assets used to
cover such contracts may be illiquid. A Portfolio may experience delays in the
settlement of its foreign currency transactions.
Neuberger Berman INTERNATIONAL Portfolio may purchase securities of an
issuer domiciled in a country other than the country in whose currency the
instrument is denominated. The Portfolio may invest in securities denominated in
the European Currency Unit ("ECU"), which is a "basket" consisting of a
specified amount of the currencies of certain of the member states of the
European Union. The specific amounts of currencies comprising the ECU may be
adjusted by the Council of Ministers of the European Union from time to time to
reflect changes in relative values of the underlying currencies. The market for
ECUs may become illiquid at times of uncertainty or rapid change in the European
currency markets, limiting the Portfolio's ability to prevent potential losses.
In addition, Neuberger Berman International Portfolio may invest in securities
denominated in other currency baskets.
POLICIES AND LIMITATIONS. The Portfolios (other than Neuberger Berman
INTERNATIONAL Portfolio) may enter into forward contracts for the purpose of
hedging and not for speculation. The use of forward contracts by Neuberger
Berman SOCIALLY RESPONSIVE Portfolio is not subject to the Social Policy.
Neuberger Berman INTERNATIONAL Portfolio may enter into forward
contracts for hedging or non-hedging purposes. When the Portfolio engages in
foreign currency transactions for hedging purposes, it will not enter into
forward contracts to sell currency or maintain a net exposure to such contracts
if their consummation would obligate the Portfolio to deliver an amount of
foreign currency materially in excess of the value of its portfolio securities
or other assets denominated in that currency. Neuberger Berman INTERNATIONAL
Portfolio may also purchase and sell forward contracts for non-hedging purposes
when NB Management anticipates that a foreign currency will appreciate or
depreciate in value, but securities in that currency do not present attractive
investment opportunities and are not held in the Portfolio's investment
portfolio.
OPTIONS ON FOREIGN CURRENCIES (ALL PORTFOLIOS). Each Portfolio may
write and purchase covered call and put options on foreign currencies. Neuberger
Berman INTERNATIONAL Portfolio may write (sell) put and covered call options on
any currency in order to realize greater income than would be realized on
portfolio securities alone.
Currency options have characteristics and risks similar to those of
securities options, as discussed herein. Certain options on foreign currencies
are traded on the OTC market and involve liquidity and credit risks that may not
be present in the case of exchange-traded currency options.
POLICIES AND LIMITATIONS. A Portfolio would use options on foreign
currencies to protect against declines in the U.S. dollar value of portfolio
securities or increases in the U.S. dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends, interest, or other payments
on those securities. In addition, Neuberger Berman INTERNATIONAL Portfolio may
purchase put and call options on foreign currencies for non-hedging purposes
when NB Management anticipates that a currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not included in the Portfolio. The use of
options on currencies by Neuberger Berman SOCIALLY RESPONSIVE Portfolio is not
subject to the Social Policy.
REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent a
Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets. The Portfolios (except Neuberger Berman SOCIALLY RESPONSIVE and
INTERNATIONAL Portfolios) do not intend to invest in futures contracts and
options thereon during the coming year.
COVER FOR FINANCIAL INSTRUMENTS. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of a Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. A Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
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POLICIES AND LIMITATIONS. Each Portfolio will comply with SEC
guidelines regarding "cover" for Financial Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities.
GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using
Financial Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by a Portfolio and the prices of Financial Instruments; (2) possible lack of a
liquid secondary market for Financial Instruments and the resulting inability to
close out Financial Instruments when desired; (3) the fact that the skills
needed to use Financial Instruments are different from those needed to select a
Portfolio's securities; (4) the fact that, although use of Financial Instruments
for hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of a Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for a Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Financial Instruments.
There can be no assurance that a Portfolio's use of Financial Instruments will
be successful.
Each Portfolio's use of Financial Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if its corresponding Fund is to continue to qualify as a RIC. See
"Additional Tax Information." Hedging instruments may not be available with
respect to some currencies, especially those of so-called emerging market
countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Financial Instruments whose behavior
is expected to resemble or offset that of a Portfolio's underlying securities or
currency. NB Management intends to reduce the risk that a Portfolio will be
unable to close out Financial Instruments by entering into such transactions
only if NB Management believes there will be an active and liquid secondary
market.
SHORT SALES (NEUBERGER BERMAN INTERNATIONAL PORTFOLIO). Neuberger
Berman INTERNATIONAL Portfolio may attempt to limit exposure to a possible
decline in the market value of portfolio securities through short sales of
securities that NB Management believes possess volatility characteristics
similar to those being hedged. The Portfolio also may use short sales in an
attempt to realize gain. To effect a short sale, the Portfolio borrows a
security from a brokerage firm to make delivery to the buyer. The Portfolio then
is obliged to replace the borrowed security by purchasing it at the market price
at the time of replacement. Until the security is replaced, the Portfolio is
required to pay the lender any dividends and may be required to pay a premium or
interest.
Neuberger Berman INTERNATIONAL Portfolio will realize a gain if the
security declines in price between the date of the short sale and the date on
which the Portfolio replaces the borrowed security. The Portfolio will incur a
loss if the price of the security increases between those dates. The amount of
any gain will be decreased, and the amount of any loss increased, by the amount
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of any premium or interest the Portfolio is required to pay in connection with
the short sale. A short position may be adversely affected by imperfect
correlation between movements in the price of the securities sold short and the
securities being hedged.
Neuberger Berman INTERNATIONAL Portfolio also may make short sales
against-the-box, in which it sells securities short only if it owns or has the
right to obtain without payment of additional consideration an equal amount of
the same type of securities sold.
The effect of short selling on the Portfolio is similar to the effect
of leverage. Short selling may amplify changes in the Portfolio's and Neuberger
Berman INTERNATIONAL Fund's NAVs. Short selling may also produce higher than
normal portfolio turnover, which may result in increased transaction costs to
the Portfolio.
POLICIES AND LIMITATIONS. Under applicable guidelines of the SEC staff,
if the Portfolio engages in a short sale (other than a short sale
against-the-box), it must put in a segregated account (not with the broker) an
amount of cash or appropriate liquid securities equal to the difference between
(1) the market value of the securities sold short at the time they were sold
short and (2) any cash or securities required to be deposited as collateral with
the broker in connection with the short sale (not including the proceeds from
the short sale). In addition, until the Portfolio replaces the borrowed
security, it must daily maintain the segregated account at such a level that (1)
the amount deposited in it plus the amount deposited with the broker as
collateral equals the current market value of the securities sold short, and (2)
the amount deposited in it plus the amount deposited with the broker as
collateral is not less than the market value of the securities at the time they
were sold short.
FIXED INCOME SECURITIES (ALL PORTFOLIOS). While the emphasis of the
Portfolios' investment programs is on common stocks and other equity securities,
the Portfolios may also invest in money market instruments, U.S. Government and
Agency Securities, and other fixed income securities. Each Portfolio may invest
in investment grade corporate bonds and debentures
U.S. Government Securities are obligations of the U.S. Treasury backed
by the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and the
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may by supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investor Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating
organizations ("NRSRO") or, if unrated by any NRSRO, deemed by NB Management
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comparable to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest rating category (Baa) or
Comparable Unrated Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolios may rely on the ratings of any NRSRO,
the Portfolios primarily refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of the fixed income securities in which a
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of a Portfolio's fixed income
investments is likely to rise. Foreign debt securities are subject to risks
similar to those of other foreign securities.
Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates. Debt
securities in the lowest rating categories may involve a substantial risk of
default or may be in default. Changes in economic conditions or developments
regarding the individual issuer are more likely to cause price volatility and
weaken the capacity of the issuer of such securities to make principal and
interest payments than is the case for higher-grade debt securities. An economic
downturn affecting the issuer may result in an increased incidence of default.
The market for lower-rated securities may be thinner and less active than for
higher-rated securities. Pricing of thinly traded securities requires greater
judgment than pricing of securities for which market transactions are regularly
reported. NB Management will invest in lower-rated securities only when it
concludes that the anticipated return on such an investment to Neuberger Berman
PARTNERS Portfolio or Neuberger Berman INTERNATIONAL Portfolio warrants exposure
to the additional level of risk.
POLICIES AND LIMITATIONS. Each Portfolio normally may invest up to 35%
of its total assets in debt securities. Neuberger Berman PARTNERS Portfolio may
invest up to 15% of its net assets in corporate debt securities rated below
investment grade or Comparable Unrated Securities. Neuberger Berman
INTERNATIONAL Portfolio may invest in domestic and foreign debt securities of
any rating, including those rated below investment grade and Comparable Unrated
Securities.
Subsequent to its purchase by a Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by that Portfolio. In such a case, Neuberger
Berman SOCIALLY RESPONSIVE Portfolio will engage in an orderly disposition of
the downgraded securities. Each other Portfolio (except Neuberger Berman
INTERNATIONAL Portfolio) will engage in an orderly disposition of the downgraded
securities to the extent necessary to ensure that the Portfolio's holdings of
securities rated below investment grade and Comparable Unrated Securities will
not exceed 5% of its net assets (15% in the case of Neuberger Berman PARTNERS
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Portfolio). NB Management will make a determination as to whether Neuberger
Berman INTERNATIONAL Portfolio should dispose of the downgraded securities.
COMMERCIAL PAPER (All Portfolios). Commercial paper is a short-term
debt security issued by a corporation or bank, usually for purposes such as
financing current operations. Each Portfolio may invest in commercial paper that
cannot be resold to the public without an effective registration statement under
the 1933 Act. While restricted commercial paper normally is deemed illiquid, NB
Management may in certain cases determine that such paper is liquid, pursuant to
guidelines established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolios may invest in commercial paper
only if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality. Neuberger Berman
INTERNATIONAL Portfolio may invest in such commercial paper as a defensive
measure, to increase liquidity, or as needed for segregated accounts.
ZERO COUPON SECURITIES (Neuberger Berman PARTNERS and Neuberger Berman
SOCIALLY RESPONSIVE Portfolios). Each of these Portfolios may invest in zero
coupon securities, which are debt obligations that do not entitle the holder to
any periodic payment of interest prior to maturity or that specify a future date
when the securities begin to pay current interest. Zero coupon securities are
issued and traded at a discount from their face amount or par value. This
discount varies depending on prevailing interest rates, the time remaining until
cash payments begin, the liquidity of the security, and the perceived credit
quality of the issuer.
The discount on zero coupon securities ("original issue discount") must
be taken into income ratably by each such Portfolio prior to the receipt of any
actual payments. Because its corresponding Fund must distribute substantially
all of its net income (including its share of the Portfolio's accrued original
issue discount) to its shareholders each year for income and excise tax
purposes, each such Portfolio may have to dispose of portfolio securities under
disadvantageous circumstances to generate cash, or may be required to borrow, to
satisfy its corresponding Fund's distribution requirements. See "Additional Tax
Information."
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically. Zero coupon
securities are likely to respond to changes in interest rates to a greater
degree than other types of debt securities having a similar maturity and credit
quality.
CONVERTIBLE SECURITIES (All Portfolios). Each Portfolio may invest in
convertible securities. A convertible security is a bond, debenture, note,
preferred stock, or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities generally have features of both common stocks and debt securities. A
convertible security entitles the holder to receive the interest paid or accrued
on debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, such
securities ordinarily provide a stream of income with generally higher yields
than common stocks of the same or similar issuers, but lower than the yield on
non-convertible debt. Convertible securities are usually subordinated to
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comparable-tier non-convertible securities but rank senior to common stock in a
corporation's capital structure. The value of a convertible security is a
function of (1) its yield in comparison to the yields of other securities of
comparable maturity and quality that do not have a conversion privilege and (2)
its worth if converted into the underlying common stock.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by a Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and its corresponding Fund's ability to achieve their investment objectives.
POLICIES AND LIMITATIONS. Neuberger Berman SOCIALLY RESPONSIVE
Portfolio may invest up to 20% of its net assets in convertible securities. The
Portfolio does not intend to purchase any convertible securities that are not
investment grade. Convertible debt securities are subject to each Portfolio's
investment policies and limitations concerning fixed income securities.
PREFERRED STOCK (ALL PORTFOLIOS). Each Portfolio may invest in
preferred stock. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's board of
directors. Preferred shareholders may have certain rights if dividends are not
paid but generally have no legal recourse against the issuer. Shareholders may
suffer a loss of value if dividends are not paid. The market prices of preferred
stocks are generally more sensitive to changes in the issuer's creditworthiness
than are the prices of debt securities.
SWAP AGREEMENTS (Neuberger Berman INTERNATIONAL Portfolio). The
Portfolio may enter into swap agreements to manage or gain exposure to
particular types of investments (including equity securities or indices of
equity securities in which the Portfolio otherwise could not invest
efficiently). In a swap agreement, one party agrees to make regular payments
equal to a floating rate on a specified amount in exchange for payments equal to
a fixed rate, or a different floating rate, on the same amount for a specified
period.
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on the
Portfolio's performance. The risks of swap agreements depend upon the other
party's creditworthiness and ability to perform, as well as the Portfolio's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. Swap agreements may be illiquid. The swap market is
relatively new and is largely unregulated.
POLICIES AND LIMITATIONS. In accordance with SEC staff requirements,
the Portfolio will segregate cash or appropriate liquid securities in an amount
equal to its obligations under swap agreements; when an agreement provides for
netting of the payments by the two parties, the Portfolio will segregate only
the amount of its net obligation, if any.
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JAPANESE INVESTMENTS (Neuberger Berman INTERNATIONAL Portfolio). All of
the Portfolios may invest in foreign securities, including securities of
Japanese issuers. From time to time, Neuberger Berman INTERNATIONAL Portfolio
may invest a significant portion of its assets in securities of Japanese
issuers. The performance of the Portfolio may therefore be significantly
affected by events influencing the Japanese economy and the exchange rate
between the Japanese yen and the U.S. dollar. Japan has experienced a severe
recession, including a decline in real estate values and other events that
adversely affected the balance sheets of many financial institutions and
indicate that there may be structural weaknesses in the Japanese financial
system. The effects of this economic downturn may be felt for a considerable
period and are being exacerbated by the currency exchange rate. Japan is heavily
dependent on foreign oil. Japan is located in a seismically active area, and
severe earthquakes may damage important elements of the country's
infrastructure. Japan's economic prospects may be affected by the political and
military situations of its near neighbors, notably North and South Korea, China
and Russia.
OTHER INVESTMENT COMPANIES (Neuberger Berman INTERNATIONAL and
Neuberger Berman GUARDIAN Portfolios). Neuberger Berman INTERNATIONAL Portfolio
may invest in the shares of other investment companies. Such investment may be
the most practical or only manner in which the Portfolio can participate in
certain foreign markets because of the expenses involved or because other
vehicles for investing in those countries may not be available at the time the
Portfolio is ready to make an investment. Neuberger Berman GUARDIAN Portfolio at
times may invest in instruments structured as investment companies to gain
exposure to the performance of a recognized securities index, such as the S&P
500.
As a shareholder in an investment company, a Portfolio would bear its
pro rata share of that investment company's expenses. Investment in other funds
may involve the payment of substantial premiums above the value of such issuer's
portfolio securities. Neuberger Berman INTERNATIONAL and Neuberger Berman
GUARDIAN Portfolios do not intend to invest in such funds unless, in the
judgment of N&B Management, the potential benefits of such investment justify
the payment of any applicable premium or sales charge.
POLICIES AND LIMITATIONS. Each Portfolio's investment in such
securities is limited to (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Portfolio's total assets with respect to any one
investment company and (iii) 10% of the Portfolio's total assets in the
aggregate.
INDEXED SECURITIES (Neuberger Berman INTERNATIONAL Portfolio).
Neuberger Berman INTERNATIONAL Portfolio may invest in indexed securities whose
values are linked to currencies, interest rates, commodities, indices, or other
financial indicators. Most indexed securities are short- to intermediate-term
fixed income securities whose values at maturity or interest rates rise or fall
according to the change in one or more specified underlying instruments. The
value of indexed securities may increase or decrease if the underlying
instrument appreciates, and they may have return characteristics similar to
direct investment in the underlying instrument. Indexed securities may be more
volatile than the underlying instrument itself.
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NEUBERGER BERMAN FOCUS PORTFOLIO - DESCRIPTION OF ECONOMIC SECTORS.
Neuberger Berman FOCUS Portfolio seeks to achieve its investment
objective by investing principally in common stocks in the following thirteen
multi-industry economic sectors, normally making at least 90% of its investments
in not more than six such sectors:
(1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production,
or sale of automobiles, automobile parts, mobile homes, or related products
("automobile industries") or design, construction, renovation, or refurbishing
of residential dwellings. The value of securities of companies in the automobile
industries is affected by, among other things, foreign competition, the level of
consumer confidence and consumer debt, and installment loan rates. The housing
construction industry may be affected by the level of consumer confidence and
consumer debt, mortgage rates, tax laws, and the inflation outlook.
(2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing
consumer goods or services, including design, processing, production, sale, or
storage of packaged, canned, bottled, or frozen foods and beverages and design,
production, or sale of home furnishings, appliances, clothing, accessories,
cosmetics, or perfumes. Certain of these companies are subject to government
regulation affecting the use of various food additives and production methods,
which could affect profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns, health concerns,
and other factors affecting supply and demand.
(3) DEFENSE AND AEROSPACE SECTOR: Companies engaged in research,
manufacture, or sale of products or services related to the defense or aerospace
industries, including air transport; data processing or computer-related
services; communications systems; military weapons or transportation; general
aviation equipment, missiles, space launch vehicles, or spacecraft; machinery
for guidance, propulsion, or control of flight vehicles; and airborne or
ground-based equipment essential to the test, operation, or maintenance of
flight vehicles. Because these companies rely largely on U.S. (and foreign)
governmental demand for their products and services, their financial conditions
are heavily influenced by defense spending policies.
(4) ENERGY SECTOR: Companies involved in the production, transmission,
or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal,
oil shale, or solar sources of energy (but excluding public utility companies).
Also included are companies that provide component products or services for
those activities. The value of these companies' securities varies based on the
price and supply of energy fuels and may be affected by international politics,
energy conservation, the success of exploration projects, environmental
considerations, and the tax and other regulatory policies of various
governments.
(5) FINANCIAL SERVICES SECTOR: Companies providing financial services
to consumers or industry, including commercial banks and savings and loan
associations, consumer and industrial finance companies, securities brokerage
companies, leasing companies, and insurance companies. These companies are
subject to extensive governmental regulations. Their profitability may fluctuate
significantly as a result of volatile interest rates, concerns about particular
banks and savings institutions, and general economic conditions.
40
<PAGE>
(6) Health Care Sector: Companies engaged in design, manufacture, or
sale of products or services used in connection with the provision of health
care, including pharmaceutical companies; firms that design, manufacture, sell,
or supply medical, dental, or optical products, hardware, or services; companies
involved in biotechnology, medical diagnostic, or biochemical research and
development; and companies that operate health care facilities. Many of these
companies are subject to government regulation and potential health care
reforms, which could affect the price and availability of their products and
services. Also, products and services of these companies could quickly become
obsolete.
(7) Heavy Industry Sector: Companies engaged in research, development,
manufacture, or marketing of products, processes, or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals, steel,
or pollution control industries, including synthetic and natural materials (for
example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or
fragrances), paper, wood products, steel, and cement. Certain of these companies
are subject to state and federal regulation, which could require alteration or
cessation of production of a product, payment of fines, or cleaning of a
disposal site. Furthermore, because some of the materials and processes used by
these companies involve hazardous components, there are additional risks
associated with their production, handling, and disposal. The risk of product
obsolescence also is present.
(8) Machinery and Equipment Sector: Companies engaged in the research,
development, or manufacture of products, processes, or services relating to
electrical equipment, machinery, pollution control, or construction services,
including transformers, motors, turbines, hand tools, earth-moving equipment,
and waste disposal services. The profitability of most of these companies may
fluctuate significantly in response to capital spending and general economic
conditions. As is the case for the heavy industry sector, there are risks
associated with the production, handling, and disposal of materials and
processes that involve hazardous components and the risk of product
obsolescence.
(9) Media and Entertainment Sector: Companies engaged in design,
production, or distribution of goods or services for the media industries
(including television or radio broadcasting or manufacturing, publishing,
recordings and musical instruments, motion pictures, and photography) and the
entertainment industries (including sports arenas, amusement and theme parks,
gaming casinos, sporting goods, camping and recreational equipment, toys and
games, travel-related services, hotels and motels, and fast food and other
restaurants). Many products produced by companies in this sector -- for example,
video and electronic games -- may become obsolete quickly. Additionally,
companies engaged in television and radio broadcast are subject to government
regulation.
(10) Retailing Sector: Companies engaged in retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products, or
other consumer goods, including department stores, supermarkets, and retail
chains specializing in particular items such as shoes, toys, or pharmaceuticals.
The value of these companies' securities fluctuates based on consumer spending
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<PAGE>
patterns, which depend on inflation and interest rates, the level of consumer
debt, and seasonal shopping habits. The success or failure of a company in this
highly competitive sector depends on its ability to predict rapidly changing
consumer tastes.
(11) Technology Sector: Companies that are expected to have or develop
products, processes, or services that will provide, or will benefit
significantly from, technological advances and improvements or future automation
trends, including semiconductors, computers and peripheral equipment, scientific
instruments, computer software, telecommunications equipment, and electronic
components, instruments, and systems. These companies are sensitive to foreign
competition and import tariffs. Also, many of their products may become obsolete
quickly.
(12) Transportation Sector: Companies involved in providing
transportation of people and products, including airlines, railroads, and
trucking firms. Revenues of these companies are affected by fluctuations in fuel
prices and government regulation of fares.
(13) Utilities Sector: Companies in the public utilities industry and
companies that derive a substantial majority of their revenues through supplying
public utilities (including companies engaged in the manufacture, production,
generation, transmission, or sale of gas and electric energy) and that provide
telephone, telegraph, satellite, microwave, and other communication facilities
to the public. The gas and electric public utilities industries are subject to
various uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear power
facilities.
NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO - DESCRIPTION OF SOCIAL POLICY
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship between
business and society, socially responsive investing ("SRI") is a mechanism for
assuring that investors' social values are reflected in their investment
decisions. As such, SRI is a direct descendent of the successful effort begun in
the early 1970's to encourage companies to divest their South African operations
and subscribe to the Sullivan Principles. Today, a growing number of individuals
and institutions are applying similar strategies to a broad range of problems.
Although there are many strategies available to the socially responsive
investor, including proxy activism, below-market loans to community projects,
and venture capital, the SRI strategies used by the Portfolio generally fall
into two categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to avoid
holding securities of companies whose products or policies are seen as being at
odds with the social good. The most common exclusions historically have involved
tobacco companies and weapons manufacturers.
LEADERSHIP INVESTING. A growing number of investors actively look for
companies with progressive programs that are exemplary or companies which make
it their business to try to solve some of the problems of today's society.
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<PAGE>
The marriage of social and financial objectives would not have
surprised Adam Smith, who was, first and foremost, a moral philosopher. The
Wealth of Nations is firmly rooted in the Enlightenment conviction that the
purpose of capital is the social good and the related belief that idle capital
is both wasteful and unethical. But, what very likely would have surprised Smith
is the sheer complexity of the social issues we face today and the diversity of
our attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger Berman, LLC ("Neuberger Berman"), the Portfolio's
sub-adviser, maintains a database of information about the social impact of the
companies it follows. NB Management uses the database to evaluate social issues
after it deems a stock acceptable from a financial standpoint for acquisition by
the Portfolio. The aim of the database is to be as comprehensive as possible,
given that much of the information concerning corporate responsibility comes
from subjective sources. Information for the database is gathered by Neuberger
Berman in many categories and then analyzed by NB Management in the following
six categories of corporate responsibility:
WORKPLACE DIVERSITY AND EMPLOYMENT. NB Management looks for companies
that show leadership in areas such as employee training and promotion policies
and benefits, such as flextime, generous profit sharing, and parental leave. NB
Management looks for active programs to promote women and minorities and takes
into account their representation among the officers of an issuer and members of
its board of directors. As a basis for exclusion, NB Management looks for Equal
Employment Opportunity Act infractions and Occupational Safety and Health Act
violations; examines each case in terms of severity, frequency, and time elapsed
since the incident; and considers actions taken by the company since the
violation. NB Management also monitors companies' progress and attitudes toward
these issues.
ENVIRONMENT. A company's impact on the environment depends largely on
the industry. Therefore, NB Management examines a company's environmental record
vis-a-vis those of its peers in the industry. All companies operating in an
industry with inherently high environmental risks are likely to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies, NB Management examines their problems in
terms of severity, frequency, and elapsed time. NB Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental policies, procedures, and practices. NB Management defines an
environmental leadership company as one that puts into place strong affirmative
programs to minimize emissions, promote safety, reduce waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products. NB Management looks for the commitment and
active involvement of senior management in all these areas. Several major
43
<PAGE>
manufacturers which still produce substantial amounts of pollution are among the
leaders in developing outstanding waste source reduction and remediation
programs.
PRODUCT. NB Management considers company announcements, press reports,
and public interest publications relating to the health, safety, quality,
labeling, advertising, and promotion of both consumer and industrial products.
NB Management takes note of companies with a strong commitment to quality and
with marketing practices which are ethical and consumer-friendly. NB Management
pays particular attention to companies whose products and services promote
progressive solutions to social problems.
PUBLIC HEALTH. NB Management measures the participation of companies in
such industries and markets as alcohol, tobacco, gambling and nuclear power. NB
Management also considers the impact of products and marketing activities
related to those products on nutritional and other health concerns, both
domestically and in foreign markets.
WEAPONS. NB Management keeps track of domestic military sales and,
whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. NB Management gathers information about a
company's participation in community affairs, its policies with respect to
charitable contributions, and its support of education and the arts. NB
Management looks for companies with a focus, dealing with issues not just by
making financial contributions, but also by asking the questions: What can we do
to help? What do we have to offer? Volunteerism, high-school mentoring programs,
scholarships and grants, and in-kind donations to specific groups are just a few
ways that companies have responded to these questions.
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by NB Management from a financial
standpoint are analyzed using Neuberger Berman's database. The companies are
then evaluated by the portfolio manager to determine if the companies' policies,
practices, products, and services withstand scrutiny in the following major
areas of concern: the environment and workplace diversity and employment.
Companies are then further evaluated to determine their track record in issues
and areas of concern such as public health, weapons, product, and corporate
citizenship.
The issues and areas of concern that are tracked lend themselves to
objective analysis in varying degrees. Few, however, can be resolved entirely on
the basis of scientifically demonstrable facts. Moreover, a substantial amount
of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend on Neuberger Berman's ability to tap a wide variety of sources
and on the experience and judgment of the people at NB Management who interpret
the information.
44
<PAGE>
In applying the information in the database to stock selection for the
Portfolio, NB Management considers several factors. NB Management examines the
severity and frequency of various infractions, as well as the time elapsed since
their occurrence. NB Management also takes into account any remedial action
which has been taken by the company relating to these infractions. NB Management
notes any quality innovations made by the company in its effort to create
positive change and looks at the company's overall approach to social issues.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The share price and total return of
each Fund will vary, and an investment in a Fund, when redeemed, may be worth
more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
Each Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
n
P(1+T) = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results. As
of the date of this SAI, Neuberger Berman Millennium Fund had been in existence
only a very short time and had no meaningful performance history.
<TABLE>
<CAPTION>
Average Annual Total Returns
Fund Periods Ended 8/31/1998
One Year Five Years Ten Years Period from Inception
-------- ---------- --------- ---------------------
<S> <C> <C> <C> <C>
MANHATTAN -11.02% +9.34% +12.65%
GENESIS -18.82% +12.25% N/A +12.50% (from inception on 9/27/88)
FOCUS -17.37% +11.65% +14.07%
GUARDIAN -20.80% +9.53% +13.07%
PARTNERS -10.03% +14.09% +14.56%
SOCIALLY RESPONSIVE -6.02% N/A N/A +13.63% (from inception on 3/16/94)
INTERNATIONAL -5.69% N/A N/A +8.50% (from inception on 6/15/94)
</TABLE>
Prior to January 5, 1989, the investment policies of Neuberger Berman
FOCUS Fund required that at least 80% of its investments normally be in
energy-related investments; prior to November 1, 1991, those investment policies
45
<PAGE>
required that at least 25% of its investments normally be in the energy sector.
Neuberger Berman FOCUS Fund may be required, under applicable law, to include
information reflecting performance and expenses for periods before November 1,
1991, in its advertisements, sales literature, financial statements, and other
documents filed with the SEC and/or provided to current and prospective
shareholders. Investors should be aware that such information may not
necessarily reflect the level of performance and expenses that would have been
experienced had the Fund's current investment policies been in effect.
NB Management may from time to time waive a portion of its fees due
from any Fund or Portfolio or reimburse a Fund or Portfolio for a portion of its
expenses. Such action has the effect of increasing total return. Actual
reimbursements and waivers are described in the Prospectus and in "Investment
Management and Administration Services" below.
COMPARATIVE INFORMATION
From time to time each Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings)
published by independent services or publications (including
newspapers, newsletters, and financial periodicals) that monitor the
performance of mutual funds, such as Lipper Analytical Services, Inc.,
C.D.A. Investment Technologies, Inc., Wiesenberger Investment Companies
Service, Investment Company Data Inc., Morningstar, Inc., Micropal
Incorporated, and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World Report
magazines, The Wall Street Journal, The New York Times, Kiplinger's
Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell
2000 Stock Index, Russell Midcap Growth Index, Dow Jones Industrial
Average ("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index,
Montgomery Securities Growth Stock Index, Value Line Index, U.S.
Department of Labor Consumer Price Index ("Consumer Price Index"),
College Board Annual Survey of Colleges, Kanon Bloch's Family
Performance Index, the Barra Growth Index, the Barra Value Index, the
EAFE(R) Index, the Financial Times World XUS Index, and various other
domestic, international, and global indices. The S&P 500 Index is a
broad index of common stock prices, while the DJIA represents a
narrower segment of industrial companies. The S&P 600 Index includes
stocks that range in market value from $40 million to $2.3 billion,
with an average of $451 million. The S&P 400 Index measures mid-sized
companies that have an average market capitalization of $1.6 billion.
The EAFE(R) Index is an unmanaged index of common stock prices of more
than 1,000 companies from Europe, Australia, and the Far East
translated into U.S. dollars. The Financial Times World XUS Index is an
index of 24 international markets, excluding the U.S. market. Each
assumes reinvestment of distributions and is calculated without regard
to tax consequences or the costs of investing. Each Portfolio may
46
<PAGE>
invest in different types of securities from those included in some of
the above indices.
Neuberger Berman SOCIALLY RESPONSIVE Fund's performance may also be
compared to various socially responsive indices. These include The Domini Social
Index and the indices developed by the quantitative department of Prudential
Securities, such as that department's Large and Mid-Cap portfolio indices for
various breakdowns ("Sin" Stock Free, Cigarette-Stock Free, S&P Composite,
etc.).
Evaluations of the Funds' performance, their total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about a Portfolio's portfolio allocation
and holdings as of a particular date may be included in Advertisements for the
corresponding Fund. This information may include the Portfolio's portfolio
diversification by asset type or, in the case of Neuberger Berman SOCIALLY
RESPONSIVE Portfolio, by the social characteristics of companies owned.
Information used in Advertisements may include statements or illustrations
relating to the appropriateness of types of securities and/or mutual funds that
may be employed to meet specific financial goals, such as (1) funding
retirement, (2) paying for children's education, and (3) financially supporting
aging parents.
NB Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find Neuberger Berman PARTNERS Fund, Neuberger Berman
GUARDIAN Fund or Neuberger Berman FOCUS Fund to be an attractive investment
vehicle also include parents saving to meet college costs for their children.
For instance, the cost of a college education is rapidly approaching the cost of
the average family home. Estimates of total four-year costs (tuition, room and
board, books and other expenses) for students starting college in various years
may be included in Advertisements, based on the College Board Annual Survey of
Colleges.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
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<PAGE>
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information regarding the effects of automatic investing and systematic
withdrawal plans, investing at market highs and/or lows, and investing early
versus late for retirement plans also may be included in Advertisements, if
appropriate.
CERTAIN RISK CONSIDERATIONS
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that any Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
THE TRUST AND EQUITY MANAGERS TRUST:
<TABLE>
<CAPTION>
Positions Held
With the Trust and Equity
Name, Age, and Address(1) Managers Trust Principal Occupation(s)(2)
------------------------- -------------- --------------------------
<S> <C> <C>
Faith Colish (63) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
Stanley Egener* (64) Chairman of the Board, Chief Principal of Neuberger Berman; President and
Executive Officer, and Trustee Director of NB Management; Chairman of the
of each Trust Board, Chief Executive Officer and Trustee
of eight other mutual funds for which NB
Management acts as investment manager
or administrator.
Howard A. Mileaf (61) Trustee of each Trust Vice President and Special Counsel
to WHX WHX Corporation Corporation (holding
company) since 1992; 110 East 59th Street
Director of Kevlin Corporation (manufacturer
30th Floor of microwave and other products).
New York, NY 10022
48
<PAGE>
Positions Held
With the Trust and Equity
Name, Age, and Address(1) Managers Trust Principal Occupation(s)(2)
------------------------- -------------- --------------------------
Edward I. O'Brien* (70) Trustee of each Trust Until 1993, President of the Securities
12 Woods Lane Industry Association ("SIA") (securities
Scarsdale, NY 10583 industry's representative in government
relations and regulatory matters at the
federal and state levels); until November
1993, employee of the SIA; Director of Legg
Mason, Inc.
John T. Patterson, Jr. (70) Trustee of each Trust Retired. Formerly, President of SOBRO
7082 Siena Court (South Bronx Overall Economic Development
Boca Raton, FL 33433 Corporation).
John P. Rosenthal (65) Trustee of each Trust Senior Vice President of Burnham Securities
Burnham Securities Inc. Inc. (a registered broker-dealer) since
Burnham Asset Management Corp. 1991; Director, Cancer Treatment Holdings,
1325 Avenue of the Americas Inc.
17th Floor
New York, NY 10019
Cornelius T. Ryan (67) Trustee of each Trust General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture capital
315 Post Road West partnerships) and President of Oxford
Westport, CT 06880 Venture Corporation; Director of Capital
Cash Management Trust (money market fund)
and Prime Cash Fund.
Gustave H. Shubert (69) Trustee of each Trust Senior Fellow/Corporate Advisor and Advisory
13838 Sunset Boulevard Trustee of Rand (a non-profit public
Pacific Palisades, CA 90272 interest research institution) since 1989;
Honorary Member of the Board of Overseers of
the Institute for Civil Justice, the Policy
Advisory Committee of the Clinical Scholars
Program at the University of California, the
American Association for the Advancement of
Science, the Counsel on Foreign Relations,
and the Institute for Strategic Studies
(London); advisor to the Program Evaluation
49
<PAGE>
Positions Held
With the Trust and Equity
Name, Age, and Address(1) Managers Trust Principal Occupation(s)(2)
------------------------- -------------- --------------------------
and Methodology Division of the U.S. General
Accounting Office; formerly Senior Vice
President and Trustee of Rand.
Lawrence Zicklin* (62) President and Trustee of each Principal of Neuberger Berman; Director of
Trust NB Management; President and/or Trustee of
five other mutual funds for which NB
Management acts as investment manager or
administrator.
Daniel J. Sullivan (58) Vice President of each Trust Senior Vice President of NB Management since
1992; Vice President of eight other mutual
funds for which NB Management acts as
investment manager or administrator.
Michael J. Weiner (51) Vice President and Principal Senior Vice President of NB Management since
Financial Officer of each Trust 1992; Treasurer of NB Management from 1992
to 1996; Vice President and Principal
Financial Officer of eight other mutual
funds for which NB Management acts as
investment manager or administrator.
Claudia A. Brandon (42) Secretary of each Trust Vice President of NB Management; Secretary
of eight other mutual funds for which NB
Management acts as investment manager or
administrator.
Richard Russell (51) Treasurer and Principal Vice President of NB Management since 1993;
Accounting Officer of each Treasurer and Principal Accounting Officer
Trust of eight other mutual funds for which NB
Management acts as investment manager or
administrator.
50
<PAGE>
Positions Held
With the Trust and Equity
Name, Age, and Address(1) Managers Trust Principal Occupation(s)(2)
------------------------- -------------- --------------------------
Stacy Cooper-Shugrue (35) Assistant Secretary of each Assistant Vice President of NB Management
Trust since 1993; Assistant Secretary of eight
other mutual funds for which NB Management
acts as investment manager or administrator.
C. Carl Randolph (61) Assistant Secretary of each Principal of Neuberger Berman since 1992;
Trust Assistant Secretary of eight other mutual
funds for which NB Management acts as
investment manager or administrator.
Barbara DiGiorgio (39) Assistant Treasurer of each Assistant Vice President of NB Management
Trust since 1993; Assistant Treasurer since 1996
of eight other mutual funds for which NB
Management acts as investment manager or
administrator.
Celeste Wischerth (37) Assistant Treasurer of each Assistant Vice President of NB Management
Trust since 1994; prior thereto, employee of NB
Management; Assistant Treasurer since 1996
of eight other mutual funds for which NB
Management acts as investment manager or
administrator.
GLOBAL MANAGERS TRUST:
Positions Held
With the Trust and Equity
Name, Age, and Address(1) Managers Trust Principal Occupation(s)(2)
------------------------- -------------- --------------------------
Stanley Egener* (64) Chairman of the Board, Chief (See above)
Executive Officer and Trustee
Howard A. Mileaf (61) Trustee (See above)
WHX Corporation
110 East 59th Street
30th Floor
New York, NY 10022
51
<PAGE>
Positions Held
With the Trust and Equity
Name, Age, and Address(1) Managers Trust Principal Occupation(s)(2)
------------------------- -------------- --------------------------
John T. Patterson, Jr. (70) Trustee (See above)
7082 Siena Court
Boca Raton, FL 33433
John P. Rosenthal (65) Trustee (See above)
Burnham Securities Inc.
Burnham Asset Management Corp.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Lawrence Zicklin (62) President (See above)
Daniel J. Sullivan (58) Vice President (See above)
Michael J. Weiner (51) Vice President and Principal (See above)
Financial Officer
Richard Russell (51) Treasurer and Principal (See above)
Accounting Officer
Claudia A. Brandon (42) Secretary (See above)
Stacy Cooper-Shugrue (35) Assistant Secretary (See above)
C. Carl Randolph (61) Assistant Secretary (See above)
Barbara DiGiorgio (39) Assistant Treasurer (See above)
Celeste Wischerth (37) Assistant Treasurer (See above)
Jacqueline Henning (56) Assistant Treasurer Managing Director, State Street
Cayman Trust Co., Ltd. since 1994; Assistant
Director, Morgan Grenfell, 1993-94; Bank of
Nova Scotia Trust Co. (Cayman) Ltd.,
Managing Director, 1988-93.
Lenore Joan McCabe (37) Assistant Secretary Operations Supervisor, State Street
Cayman Trust Co., Ltd.; Project
Manager, State Street Canada, Inc.,
1992-94.
</TABLE>
52
<PAGE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" within the meaning of the
1940 Act. Messrs. Egener and Zicklin are interested persons of each Trust by
virtue of the fact that they are officers and/or directors of NB Management and
principals of Neuberger Berman. Mr. O'Brien is an interested person of the Trust
and Equity Managers Trust by virtue of the fact that he is a director of Legg
Mason, Inc., a wholly owned subsidiary of which, from time to time, serves as a
broker or dealer to the Portfolios and other funds for which NB Management
serves as investment manager.
The Trust's Trust Instrument and each Managers Trust's
Declaration of Trust provide that each such Trust will indemnify its trustees
and officers against liabilities and expenses reasonably incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger Berman Funds(R)
has any retirement plan for its trustees.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/98
Aggregate Total Compensation from Investment
Compensation Companies in the Neuberger Berman
Name and Position with the from the Trust Fund Complex Paid to Trustees
-------------------------- -------------- -----------------------------
<S> <C> <C>
Faith Colish $ ______ $ ______
Trustee (5 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief Executive (9 other investment
Officer, and Trustee companies)
53
<PAGE>
Aggregate Total Compensation from Investment
Compensation Companies in the Neuberger Berman
Name and Position with the from the Trust Fund Complex Paid to Trustees
-------------------------- -------------- -----------------------------
Alan R. Gruber, Trustee, and $ ______ $ ______
The Estate of (3 other investment
Alan R. Gruber companies)
Howard A. Mileaf $ ______ $ ______
Trustee (4 other investment
companies)
Edward I. O'Brien $ ______ $ ______
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ ______ $ ______
Trustee (4 other investment
companies)
John P. Rosenthal $ ______ $ ______
Trustee (4 other investment
companies)
Cornelius T. Ryan $ ______ $ ______
Trustee (3 other investment
companies)
Gustave H. Shubert $ ______ $ ______
Trustee (3 other investment
companies)
Lawrence Zicklin $ ______ $ 0
President and Trustee (5 other investment
companies)
</TABLE>
At November __, 1998, the trustees and officers of the Trust
and the corresponding Managers Trust, as a group, owned beneficially or of
record less than 1% of the outstanding shares of each Fund (except Neuberger
Berman INTERNATIONAL Fund). As of that date, the trustees and officers of the
Trust and Global Managers Trust, as a group, owned _____% of the outstanding
shares of Neuberger Berman INTERNATIONAL Fund.
54
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager and Administrator
Because all of the Funds' net investable assets are invested
in their corresponding Portfolios, the Funds do not need an investment manager.
NB Management serves as the investment manager to all the Portfolios (except
Neuberger Berman INTERNATIONAL Portfolio) pursuant to a management agreement
with Equity Managers Trust, dated as of August 2, 1993 ("EMT Management
Agreement"). [NB Management is a wholly-owned subsidiary of Neuberger Berman
Inc.]
The EMT Management Agreement was approved by the holders of
the interests in all the Portfolios (except Neuberger Berman SOCIALLY RESPONSIVE
Portfolio) on August 2, 1993, and by the holders of the interests in Neuberger
Berman SOCIALLY RESPONSIVE Portfolio on March 9, 1994. That Portfolio was
authorized to become subject to the EMT Management Agreement by vote of the
Portfolio Trustees on October 20, 1993, and became subject to it on March 14,
1994. NB Management serves as the investment manager to Neuberger Berman
INTERNATIONAL Portfolio pursuant to a management agreement with Global Managers
Trust, dated as of November 1, 1995 ("GMT Management Agreement"). The GMT
Management Agreement was approved by the holders of the interests in Neuberger
Berman INTERNATIONAL Portfolio on October 26, 1995. That Portfolio was
authorized to become subject to the GMT Management Agreement by vote of the
Portfolio Trustees on August 8, 1995, and became subject to it on November 1,
1995.
The EMT Management Agreement and GMT Management Agreement
("Management Agreements") provide, in substance, that NB Management will make
and implement investment decisions for the Portfolios in its discretion and will
continuously develop an investment program for the Portfolios' assets. The
Management Agreements permit NB Management to effect securities transactions on
behalf of each Portfolio through associated persons of NB Management. The
Management Agreements also specifically permit NB Management to compensate,
through higher commissions, brokers and dealers who provide investment research
and analysis to the Portfolios, although NB Management has no current plans to
pay a material amount of such compensation.
NB Management provides to each Portfolio, without separate
cost, office space, equipment, and facilities and the personnel necessary to
perform executive, administrative, and clerical functions. NB Management pays
all salaries, expenses, and fees of the officers, trustees, and employees of the
Managers Trusts who are officers, directors, or employees of NB Management. Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees
and/or officers of the Trusts. See "Trustees and Officers." Each Portfolio pays
NB Management a management fee based on the Portfolio's average daily net
assets, as described in the Prospectus.
NB Management provides facilities, services, and personnel to
each Fund pursuant to an administration agreement with the Trust, dated May 1,
1995, as amended on August 2, 1997 ("Administration Agreement"). Neuberger
Berman INTERNATIONAL Fund was authorized to become subject to the Administration
Agreement by vote of the Fund Trustees on August 11, 1995, and became subject to
it on November 1, 1995. For such administrative services, each Fund pays NB
55
<PAGE>
Management a fee based on the Fund's average daily net assets, as described in
the Prospectus.
Under the Administration Agreement, NB Management also
provides to each Fund and its shareholders certain shareholder,
shareholder-related, and other services that are not furnished by the Fund's
shareholder servicing agent. NB Management provides the direct shareholder
services specified in the Administration Agreement, assists the shareholder
servicing agent in the development and implementation of specified programs and
systems to enhance overall shareholder servicing capabilities, solicits and
gathers shareholder proxies, performs services connected with the qualification
of each Fund's shares for sale in various states, and furnishes other services
the parties agree from time to time should be provided under the Administration
Agreement.
From time to time, NB Management or a Fund may enter into
arrangements with registered broker-dealers or other third parties pursuant to
which it pays the broker-dealer or third party a per account fee or a fee based
on a percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.
Because Neuberger Berman INTERNATIONAL Portfolio has its
principal offices in the Cayman Islands, Global Managers Trust has entered into
an Administrative Services Agreement with State Street Cayman Trust Company Ltd.
("State Street Cayman"), Elizabethan Square, P.O. Box 1984, George Town, Grand
Cayman, Cayman Islands, British West Indies, effective August 31, 1994. Under
the Administrative Services Agreement, State Street Cayman provides sufficient
personnel and suitable facilities for the principal offices of Neuberger Berman
INTERNATIONAL Portfolio and provides certain administrative, fund accounting,
and transfer agency services with respect to that Portfolio. The Administrative
Services Agreement terminates if assigned by State Street Cayman; however, State
Street Cayman is permitted to, and does, employ an affiliate, State Street
Canada, Inc., to perform certain accounting functions.
Prior to November 1, 1995, Neuberger Berman INTERNATIONAL
Portfolio was advised by BNP-NB Global Asset Management, L.P. ("BNP-NB Global"),
a joint venture of Banque Nationale de Paris ("BNP") and Neuberger Berman,
pursuant to an investment advisory agreement dated June 15, 1994. During that
period, BNP-NB Global voluntarily reimbursed the Portfolio to the extent that
its operating expenses (excluding interest, taxes, brokerage commissions, and
extraordinary expenses) exceeded 0.70% per annum of the Portfolio's average
daily net assets. NB Management provided the Portfolio with administrative
services pursuant to a separate administration agreement dated June 15, 1994.
Prior to November 1, 1995, NB Management provided similar services to the Fund
pursuant to an administration agreement dated June 15, 1994 and amended May 1,
1995.
56
<PAGE>
Management and Administration Fees
MANAGEMENT AND ADMINISTRATION FEES
ACCRUED FOR FISCAL YEARS
FUND ENDED AUGUST 31
1998 1997 1996
---- ---- ----
MANHATTAN $4,723,225 $4,249,498 $4,716,468
GENESIS $12,686,644 $4,174,636 $1,535,678
FOCUS $11,017,126 $9,279,747 $8,144,099
GUARDIAN $43,073,250 $40,024,744 $32,628,373
INTERNATIONAL $1,503,496 $998,616 $469,310
PARTNERS $24,233,862 $17,596,503 $03,049,313
SOCIALLY RESPONSIVE $661,068 $383,500 $145,742
57
<PAGE>
Waivers and Reimbursements
From May 1, 1995 to December 15, 1997, NB Management
voluntarily waived a portion of the management fee born by Neuberger Berman
GENESIS Portfolio to reduce the fee by 0.10% per annum of the average daily net
assets of that portfolio.
PORTION OF MANAGEMENT FEE WAIVED
FOR FISCAL YEARS ENDED AUGUST 31
1998 1997
---- ----
GENESIS Portfolio $295,705 $385,721
Until December 31, 1997, NB Management had voluntarily
undertaken to reimburse Neuberger Berman SOCIALLY RESPONSIVE Fund for its Total
Operating Expenses (as defined in the Prospectus) which exceeded 1.50% per annum
of the Fund's average daily net assets. The Fund had in turn agreed to repay NB
Management through March 14, 1998 for the excess Total Operating Expenses that
NB Management reimbursed to the Fund through March 14, 1996, for the excess
Total Operating Expenses that NB Management reimbursed to the Fund through March
14, 1996, so long as the Fund's Total Operating Expenses during that period do
not exceed the above expense limitation. During the fiscal year ended August 31,
1997, Neuberger Berman SOCIALLY RESPONSIVE Fund repaid NB Management $131,041 of
expenses that NB Management reimbursed to the Fund through March 14, 1996. As of
August 31, 1997, Neuberger Berman SOCIALLY RESPONSIVE Fund has repaid NB
Management for all such expenses.
AMOUNT OF TOTAL OPERATING EXPENSES
REIMBURSED BY NB MANAGEMENT
FOR FISCAL YEARS ENDED AUGUST 31
FUND 1997 1996
---- ----
Socially Responsive Fund $0 $34,074
During the fiscal years ended August 31, 1998, 1997 and 1996,
NB Management (and for periods prior to November 1, 1995, BNPN&B Global)
reimbursed Neuberger Berman INTERNATIONAL Fund for $0, $0, and $282,021,
respectively, in expenses. During the fiscal years ended August 31, 1998 and
1997, Neuberger Berman INTERNATIONAL Fund repaid NB Management $126,741 and
$13,955, respectively, of expenses that NB Management reimbursed to the Fund
through December 31, 1996.
The Management Agreements continue until August 2, 1999. The
Management Agreements are renewable thereafter from year to year with respect to
each Portfolio, so long as their continuance is approved at least annually (1)
by the vote of a majority of the Portfolio Trustees who are not "interested
persons" of NB Management or the corresponding Managers Trust ("Independent
58
<PAGE>
Portfolio Trustees"), cast in person at a meeting called for the purpose of
voting on such approval, and (2) by the vote of a majority of the Portfolio
Trustees or by a 1940 Act majority vote of the outstanding interests in that
Portfolio. The Administration Agreement continues until August 2, 1999. The
Administration Agreement is renewable from year to year with respect to a Fund,
so long as its continuance is approved at least annually (1) by the vote of a
majority of the Fund Trustees who are not "interested persons" of NB Management
or the Trust ("Independent Fund Trustees"), cast in person at a meeting called
for the purpose of voting on such approval, and (2) by the vote of a majority of
the Fund Trustees or by a 1940 Act majority vote of the outstanding shares in
that Fund.
The Management Agreements are terminable, without penalty,
with respect to a Portfolio on 60 days' written notice either by the
corresponding Managers Trust or by NB Management. The Administration Agreement
is terminable, without penalty, with respect to a Fund on 60 days' written
notice either by NB Management or by the Trust. Each Agreement terminates
automatically if it is assigned.
Sub-Adviser
NB Management retains Neuberger Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to each Portfolio (except
Neuberger Berman INTERNATIONAL Portfolio) pursuant to a sub-advisory agreement
dated August 2, 1993 ("EMT Sub-Advisory Agreement"). [Neuberger Berman is a
wholly-owned subsidiary of Neuberger Berman Inc.]
The EMT Sub-Advisory Agreement was approved by the holders of
the interests in the Portfolios (except Neuberger Berman SOCIALLY RESPONSIVE
Portfolio) on August 2, 1993, and by the holders of the interests in Neuberger
Berman SOCIALLY RESPONSIVE Portfolio on March 9, 1994. That Portfolio was
authorized to become subject to the EMT Sub-Advisory Agreement by vote of the
Portfolio Trustees on October 20, 1993, and became subject to it on March 14,
1994. NB Management retains Neuberger Berman as sub-adviser with respect to
Neuberger Berman INTERNATIONAL Portfolio pursuant to a sub-advisory agreement
dated November 1, 1995 ("GMT Sub-Advisory Agreement"). The GMT Sub-Advisory
Agreement was approved by the holders of the interests in Neuberger Berman
INTERNATIONAL Portfolio on October 26, 1995. That Portfolio was authorized to
become subject to the GMT Sub-Advisory Agreement by vote of the Portfolio
Trustees on August 8, 1995, and became subject to it on November 1, 1995.
The EMT Sub-Advisory Agreement and GMT Sub-Advisory Agreement
("Sub-Advisory Agreements") provide in substance that Neuberger Berman will
furnish to NB Management, upon reasonable request, the same type of investment
recommendations and research that Neuberger Berman, from time to time, provides
to its principals and employees for use in managing client accounts. In this
manner, NB Management expects to have available to it, in addition to research
from other professional sources, the capability of the research staff of
Neuberger Berman. This staff consists of numerous investment analysts, each of
whom specializes in studying one or more industries, under the supervision of
the Director of Research, who is also available for consultation with NB
59
<PAGE>
Management. The Sub-Advisory Agreements provide that NB Management will pay for
the services rendered by Neuberger Berman based on the direct and indirect costs
to Neuberger Berman in connection with those services. Neuberger Berman also
serves as sub-adviser for all of the other mutual funds managed by NB
Management.
The Sub-Advisory Agreements continue until August 2, 1999 and
are renewable from year to year, subject to approval of their continuance in the
same manner as the Management Agreements. The Sub-Advisory Agreements are
subject to termination, without penalty, with respect to each Portfolio by the
Portfolio Trustees or a 1940 Act majority vote of the outstanding interests in
that Portfolio, by NB Management, or by Neuberger Berman on not less than 30 nor
more than 60 days' prior written notice. The Sub-Advisory Agreements also
terminate automatically with respect to each Portfolio if they are assigned or
if the Management Agreement terminates with respect to that Portfolio.
Most money managers that come to the Neuberger Berman
organization have at least fifteen years experience. Neuberger Berman and NB
Management employ experienced professionals that work in a competitive
environment.
Investment Companies Managed
As of September 30, 1998, the investment companies managed by
NB Management had aggregate net assets of approximately $____ billion. NB
Management currently serves as investment manager of the following investment
companies:
<TABLE>
<CAPTION>
Approximate
Net Assets at
Name September 30, 1998
- ---- ------------------
<S> <C>
Neuberger Berman Cash Reserves Portfolio ...............................................................$__________
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio.............................................................$__________
(investment portfolio for Neuberger Berman Government Money Fund)
Neuberger Berman Limited Maturity Bond Portfolio........................................................$__________
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund and Neuberger
Berman Limited Maturity Bond Trust)
Neuberger Berman Municipal Money Portfolio..............................................................$__________
(investment portfolio for Neuberger Berman Municipal Money Fund)
Neuberger Berman Municipal Securities Portfolio.........................................................$__________
(investment portfolio for Neuberger Berman Municipal Securities Trust)
60
<PAGE>
Neuberger Berman Ultra Short Bond Portfolio.............................................................$__________
(investment portfolio for Neuberger Berman Ultra Short Bond Fund and Neuberger
Berman Ultra Short Bond Trust)
Neuberger Berman Focus Portfolio........................................................................$__________
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman Focus Trust
and Neuberger Berman Focus Assets)
Neuberger Berman Genesis Portfolio......................................................................$__________
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman Genesis
Trust and Neuberger Berman Genesis Assets)
Neuberger Berman Guardian Portfolio................................................................... $__________
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger Berman Guardian
Trust and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio................................................................$__________
(investment portfolio for Neuberger Berman International Fund and Neuberger Berman
International Trust)
Neuberger Berman Manhattan Portfolio....................................................................$__________
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger Berman Manhattan
Trust and Neuberger Berman Manhattan Assets)
Neuberger Berman Partners Portfolio.....................................................................$__________
(investment portfolio for Neuberger Berman Partners Fund, Neuberger Berman Partners
Trust and Neuberger Berman Partners Assets)
Neuberger Berman Socially Responsive....................................................................$__________
Portfolio (investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive Trust and Neuberger Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust...............................................................$_____________ (seven series)
</TABLE>
The investment decisions concerning the Portfolios and the
other mutual funds managed by NB Management (collectively, "Other NB Funds")
have been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other NB Funds differ from the
Portfolios. Even where the investment objectives are similar, however, the
methods used by the Other NB Funds and the Portfolios to achieve their
objectives may differ. The investment results achieved by all of the mutual
funds managed by NB Management have varied from one another in the past and are
likely to vary in the future.
There may be occasions when a Portfolio and one or more of the
Other NB Funds or other accounts managed by Neuberger Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
61
<PAGE>
have a detrimental effect on the price or volume of the securities as to a
Portfolio, in other cases it is believed that a Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolios' having their advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolios are subject to certain limitations imposed on
all advisory clients of Neuberger Berman (including the Portfolios, the Other NB
Funds, and other managed accounts) and personnel of Neuberger Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger Berman that limit
the aggregate purchases, by all accounts under management, of the outstanding
shares of public companies.
Management and Control of NB Management
The directors and officers of NB Management, all of whom have
offices at the same address as NB Management, are Richard A. Cantor, Chairman of
the Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph G. Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President; Ellen
Metzger, Vice President and Secretary; Paul Metzger, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice President;
Frederic B. Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh,
Vice President; Allan R. White, President; Thomas Wolfe, Vice President; Andrea
Trachtenberg, Vice President of Marketing; Robert Conti, Treasurer; Ramesh Babu,
Assistant Vice President; Valerie Chang, Assistant Vice President; Stacy
Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant Vice
President; Michael J. Hanratty, Assistant Vice President; Leslie Holliday-Soto,
Assistant Vice President; Robert L. Ladd, Assistant Vice President; Carmen G.
Martinez, Assistant Vice President; Joseph S. Quirk, Assistant Vice President;
Ingrid Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice
President; Celeste Wischerth, Assistant Vice President; and Loraine Olavarria,
Assistant Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen,
Lainoff, Risen, Simons, Sundman and Zicklin and Mmes. Prindle, Silver and Vale
are principals of Neuberger Berman.
Mr. Egener is a trustee and officer of the Trust and the
Managers Trusts. Mr. Zicklin is a trustee of the Trust and Equity Managers Trust
and an officer of the Trust and the Managers Trusts. Messrs. Russell, Sullivan,
and Weiner, and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and Wischerth are
officers of each Trust. C. Carl Randolph, a principal of Neuberger Berman, also
is an officer of each Trust.
62
<PAGE>
All of the outstanding voting stock in NB Management is owned
by persons who are also principals of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in
connection with the offering of each Fund's shares on a no-load basis. In
connection with the sale of its shares, each Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of each Fund's shares without sales commission or other
compensation and bears all advertising and promotion expenses incurred in the
sale of the Funds' shares.
The Distributor or one of its affiliates may, from time to
time, deem it desirable to offer to shareholders of the Funds, through use of
their shareholder lists, the shares of other mutual funds for which the
Distributor acts as distributor or other products or services. Any such use of
the Funds' shareholder lists, however, will be made subject to terms and
conditions, if any, approved by a majority of the Independent Fund Trustees.
These lists will not be used to offer the Funds' shareholders any investment
products or services other than those managed or distributed by NB Management or
Neuberger Berman.
The Trust, on behalf of each Fund, and the Distributor are
parties to a Distribution Agreement that continues until August 2, 1999. The
Distribution Agreement may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreements.
ADDITIONAL PURCHASE INFORMATION
Share Prices and Net Asset Value
Each Fund's shares are bought or sold at a price that is the
Fund's NAV per share. The NAVs for each Fund and its corresponding Portfolio are
calculated by subtracting liabilities from total assets (in the case of a
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of a Fund, its percentage interest in its
corresponding Portfolio, multiplied by the Portfolio's NAV, plus any other
assets). Each Fund's per share NAV is calculated by dividing its NAV by the
number of Fund shares outstanding and rounding the result to the nearest full
cent. Each Fund and its corresponding Portfolio calculate their NAVs as of the
close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day
the NYSE is open.
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<PAGE>
Each Portfolio (except Neuberger Berman INTERNATIONAL
Portfolio) values securities (including options) listed on the NYSE, the
American Stock Exchange or other national securities exchanges or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices on that day. These Portfolios
value all other securities and assets, including restricted securities, by a
method that the trustees of Equity Managers Trust believe accurately reflects
fair value.
Neuberger Berman INTERNATIONAL Portfolio values equity
securities at the last sale price on the principal exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
regular trading on the NYSE on the day the securities are being valued or, if
there are no sales, at the last available bid price on that day. Debt
obligations are valued at the last available bid price for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality, and type. Foreign securities are translated from the local
currency into U.S. dollars using current exchange rates. The Portfolio values
all other types of securities and assets, including restricted securities and
securities for which market quotations are not readily available, by a method
that the trustees of Global Managers Trust believe accurately reflects fair
value.
Neuberger Berman INTERNATIONAL Portfolio's portfolio
securities are traded primarily in foreign markets which may be open on days
when the NYSE is closed. As a result, the NAV of Neuberger Berman International
Fund may be significantly affected on days when shareholders have no access to
that Fund.
If NB Management believes that the price of a security
obtained under a Portfolio's valuation procedures (as described above) does not
represent the amount that the Portfolio reasonably expects to receive on a
current sale of the security, the Portfolio will value the security based on a
method that the trustees of the corresponding Managers Trust believe accurately
reflects fair value.
Automatic Investing and Dollar Cost Averaging
Shareholders may arrange to have a fixed amount automatically
invested in Fund shares each month. To do so, a shareholder must complete an
application, available from the Distributor, electing to have automatic
investments funded either through (1) redemptions from his or her account in a
money market fund for which NB Management serves as investment manager or (2)
withdrawals from the shareholder's checking account. In either case, the minimum
monthly investment is $100. A shareholder who elects to participate in automatic
investing through his or her checking account must include a voided check with
the completed application. A completed application should be sent to Neuberger
Berman Management Incorporated, 605 Third Avenue, 2nd Floor, New York, NY
10158-0180.
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<PAGE>
Automatic investing enables a shareholder to take advantage of
"dollar cost averaging." As a result of dollar cost averaging, a shareholder's
average cost of Fund shares generally would be lower than if the shareholder
purchased a fixed number of shares at the same pre-set intervals. Additional
information on dollar cost averaging may be obtained from the Distributor.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus
entitled "Maintaining Your Account," shareholders may redeem at least $1,000
worth of a Fund's shares and invest the proceeds in shares of one or more of the
other Funds or the Income and Municipal Funds that are briefly described below,
provided that the minimum investment requirements of the other fund(s) are met.
INCOME FUNDS
Neuberger Berman A U.S. Government money market
Government Money Fund fund seeking maximum safety and
liquidity and the highest
available current income. The
corresponding portfolio invests
only in U.S. Treasury
obligations and other money
market instruments backed by
the full faith and credit of
the United States. It seeks to
maintain a constant purchase
and redemption price of $1.00.
Neuberger Berman A money market fund seeking the
Cash Reserves highest current income
consistent with safety and
liquidity. The corresponding
portfolio invests in
high-quality money market
instruments. It seeks to
maintain a constant purchase
and redemption price of $1.00.
Neuberger Berman Seeks the highest current
Limited Maturity Bond Fund income consistent with low risk
to principal and liquidity and,
secondarily, total return. The
corresponding portfolio invests
in debt securities, primarily
investment grade; maximum 10%
below investment grade, but no
lower than B.*/ Maximum average
duration of four years.
Neuberger Berman In seeking its objective of
High Yield Bond Fund high current income and,
secondarily, capital growth,
the fund invests primarily in
lower-rated debt securities,
and in investment grade
income-producing and non-income
producing debt and equity
securities.
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<PAGE>
MUNICIPAL FUNDS
Neuberger Berman A money market fund seeking the
Municipal Money Fund maximum current income exempt
from federal income tax,
consistent with safety and
liquidity. The corresponding
portfolio invests in
high-quality, short-term
municipal securities. It seeks
to maintain a constant purchase
and redemption price of $1.00.
Neuberger Berman Municipal Seeks high current tax-exempt
Securities Trust income with low risk to
principal, limited price
fluctuation, and liquidity and,
secondarily, total return. The
corresponding portfolio invests
in investment grade municipal
securities. Maximum average
duration of 10 years.
*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by NB Management to be of comparable quality.
Any Fund described herein, and any of the Income or Municipal
Funds, may terminate or modify its exchange privilege in the future.
Before effecting an exchange, Fund shareholders must obtain
and should review a currently effective prospectus of the fund into which the
exchange is to be made. An exchange is treated as a sale for federal income tax
purposes and, depending on the circumstances, a capital gain or loss may be
realized.
There can be no assurance that Neuberger Berman Government
Money Fund, Neuberger Berman Cash Reserves, or Neuberger Berman Municipal Money
Fund, each of which is a money market fund that seeks to maintain a constant
purchase and redemption price of $1.00, will be able to maintain that price. An
investment in any of the above-referenced funds, as in any other mutual fund, is
neither insured nor guaranteed by the U.S. Government.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
The right to redeem a Fund's shares may be suspended or
payment of the redemption price postponed (1) when the NYSE is closed, (2) when
trading on the NYSE is restricted, (3) when an emergency exists as a result of
which it is not reasonably practicable for its corresponding Portfolio to
dispose of securities it owns or fairly to determine the value of its net
assets, or (4) for such other period as the SEC may by order permit for the
protection of the Fund's shareholders. Applicable SEC rules and regulations
shall govern whether the conditions prescribed in (2) or (3) exist. If the right
of redemption is suspended, shareholders may withdraw their offers of
redemption, or they will receive payment at the NAV per share in effect at the
close of business on the first day the NYSE is open ("Business Day") after
termination of the suspension.
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Redemptions in Kind
Each Fund reserves the right, under certain conditions, to
honor any request for redemption (or a combination of requests from the same
shareholder in any 90-day period) exceeding $250,000 or 1% of the net assets of
the Fund, whichever is less, by making payment in whole or in part in securities
valued as described in "Share Prices and Net Asset Value" above. If payment is
made in securities, a shareholder generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Funds do not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of a
Fund's shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders substantially all of
its share of any net investment income (after deducting expenses incurred
directly by the Fund), any net realized capital gains, and any net realized
gains from foreign currency transactions earned or realized by its corresponding
Portfolio. A Portfolio's net investment income consists of all income accrued on
portfolio assets less accrued expenses, but does not include capital and foreign
currency gains and losses. Net investment income and realized gains and losses
are reflected in a Portfolio's NAV (and, hence, its corresponding Fund's NAV)
until they are distributed. Each Fund calculates its net investment income and
NAV per share as of the close of regular trading on the NYSE on each Business
Day (usually 4:00 p.m. Eastern time).
Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December, except that Neuberger Berman GUARDIAN Fund distributes
substantially all of its share of Neuberger Berman GUARDIAN Portfolio's net
investment income (after deducting expenses incurred directly by Neuberger
Berman GUARDIAN Fund), if any, near the end of each other calendar quarter.
Dividends and other distributions are automatically reinvested
in additional shares of the distributing Fund, unless the shareholder elects to
receive them in cash ("cash election"). Shareholders may make a cash election on
the original account application or at a later date by writing to State Street
Bank and Trust Company ("State Street"), c/o Boston Service Center, P.O. Box
8403, Boston, MA 02266-8403. Cash distributions can be paid through an
electronic transfer to a bank account designated in the shareholder's original
account application. To the extent dividends and other distributions are subject
to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares.
A cash election with respect to any Fund remains in effect
until the shareholder notifies State Street in writing to discontinue the
election. If it is determined, however, that the U.S. Postal Service cannot
properly deliver Fund mailings to the shareholder for 180 days, the Fund will
terminate the shareholder's cash election. Thereafter, the shareholder's
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dividends and other distributions will automatically be reinvested in additional
Fund shares until the shareholder notifies State Street or the Fund in writing
to request that the cash election be reinstated.
Dividend or other distribution checks that are not cashed or deposited
within 180 days from being issued will be reinvested in additional shares of the
distributing Fund at the Fund's price on the day the check is reinvested. No
interest will accrue on amounts represented by uncashed dividend or distribution
checks.
ADDITIONAL TAX INFORMATION
Taxation of the Funds
In order to continue to qualify for treatment as a RIC under
the Code, each Fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions) ("Distribution Requirement") and must meet
several additional requirements. With respect to each Fund, these requirements
include the following: (1) the Fund must derive at least 90% of its gross income
each taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from Financial Instruments) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); and (2) at the close of each quarter of the Fund's
taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs, and other securities limited, in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's outstanding voting securities,
and (ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer.
The Funds (except Neuberger Berman SOCIALLY RESPONSIVE and
Neuberger Berman INTERNATIONAL Funds) have received rulings from the Internal
Revenue Service ("Service") that each such Fund, as an investor in its
corresponding Portfolio, will be deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied on as precedent by Neuberger Berman SOCIALLY
RESPONSIVE and Neuberger Berman INTERNATIONAL Funds, NB Management believes that
the reasoning thereof and, hence, their conclusion apply to those Funds as well.
Each Fund will be subject to a nondeductible 4% excise tax
("Excise Tax") to the extent it fails to distribute by the end of any calendar
year substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
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See the next section for a discussion of the tax consequences
to the Funds of distributions to them from the Portfolios, investments by the
Portfolios in certain securities, and hedging transactions engaged in by the
Portfolios.
Taxation of the Portfolios
The Portfolios (except Neuberger Berman SOCIALLY RESPONSIVE
and Neuberger Berman INTERNATIONAL Portfolios) have received rulings from the
Service to the effect that, among other things, each such Portfolio will be
treated as a separate partnership for federal income tax purposes and will not
be a "publicly traded partnership." Although these rulings may not be relied on
as precedent by Neuberger Berman SOCIALLY RESPONSIVE and Neuberger Berman
INTERNATIONAL Portfolios, NB Management believes the reasoning thereof and,
hence, their conclusion apply to those Portfolios as well. As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio, such as a Fund, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any cash
distributions from the Portfolio. Each Portfolio also is not subject to Delaware
or New York income or franchise tax.
Because each Fund is deemed to own a proportionate share of
its corresponding Portfolio's assets and income for purposes of determining
whether the Fund satisfies the requirements to qualify as a RIC, each Portfolio
intends to continue to conduct its operations so that its corresponding Fund
will be able to continue to satisfy all those requirements.
Distributions to a Fund from its corresponding Portfolio
(whether pursuant to a partial or complete withdrawal or otherwise) will not
result in the Fund's recognition of any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, (3)
loss will be recognized if a liquidation distribution consists solely of cash
and/or unrealized receivables, and (4) gain or loss may be recognized on a
distribution to a Fund that contributed property to a Portfolio (all Funds other
than Neuberger Berman SOCIALLY RESPONSIVE and Neuberger Berman INTERNATIONAL
Funds). A Fund's basis for its interest in its corresponding Portfolio generally
equals the amount of cash and the basis of any property the Fund invests in the
Portfolio, increased by the Fund's share of the Portfolio's net income and
capital gains and decreased by (1) the amount of cash and the basis of any
property the Portfolio distributes to the Fund and (2) the Fund's share of the
Portfolio's losses.
Dividends and interest received by a Portfolio, and gains
realized by a Portfolio, may be subject to income, withholding, or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax treaties between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
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If more than 50% of the value of Neuberger Berman
INTERNATIONAL Fund's total assets (taking into account its share of Neuberger
Berman INTERNATIONAL Portfolio's total assets) at the close of its taxable year
consists of securities of foreign corporations, that Fund will be eligible to,
and may, file an election with the Service that will enable its shareholders, in
effect, to receive the benefit of the foreign tax credit with respect to the
Fund's share of any foreign taxes paid by the Portfolio ("Fund's foreign
taxes"). Pursuant to the election, Neuberger Berman INTERNATIONAL Fund would
treat those taxes as dividends paid to its shareholders and each shareholder
would be required to (1) include in gross income, and treat as paid by the
shareholder, his or her share of those taxes, (2) treat his or her share of
those taxes and of any dividend paid by the Fund that represents its share of
the Portfolio's income from foreign or U.S. possessions sources as his or her
own income from those sources, and (3) either deduct the taxes deemed paid by
him or her in computing his or her taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against his or her
federal income tax. Neuberger Berman INTERNATIONAL Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's foreign taxes and income (taking into account its share of the
Portfolio's income) from sources within foreign countries and U.S. possessions
if it makes this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax
Act"), beginning in 1998 individual shareholders of the Fund who have no more
than $300 ($600 for married persons filing jointly) of creditable foreign taxes
included on Forms 1099 and all of whose foreign source income is "qualified
passive income" may elect each year to be exempt from the extremely complicated
foreign tax credit limitation and will be able to claim a foreign tax credit
without having to file the detailed Form 1116 that otherwise is required.
A Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which a Portfolio is a U.S. shareholder (effective for
the taxable year beginning September 1, 1998) -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, if a Portfolio holds stock of a
PFIC, its corresponding Fund (indirectly through its interest in the Portfolio)
will be subject to federal income tax on its share of a portion of any "excess
distribution" received by the Portfolio on the stock or of any gain on the
Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If a Portfolio invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund" ("QEF"), then in lieu of its corresponding Fund's
incurring the foregoing tax and interest obligation, the Fund would be required
to include in income each year its share of the Portfolio's pro rata share of
the QEF's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
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and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of
stock in any PFIC may elect to include in ordinary income each taxable year the
excess, if any, of the fair market value of the stock over the adjusted basis
therein as of the end of that year. Pursuant to the election, a deduction (as an
ordinary, not capital, loss) also would be allowed for the excess, if any, of
the holder's adjusted basis in PFIC stock over the fair market value thereof as
of the taxable year-end, but only to the extent of any net mark-to-market gains
with respect to that stock included in income for prior taxable years. The
adjusted basis in each PFIC's stock subject to the election would be adjusted to
reflect the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolios' use of hedging strategies, such as writing
(selling) and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the amount, character and timing of recognition of the gains and losses the
Portfolios realize in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from Financial Instruments derived by a Portfolio with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for its corresponding Fund under the Income
Requirement.
Exchange-traded futures contracts, certain forward contracts
and listed options thereon ("Section 1256 contracts") are required to be marked
to market (that is, treated as having been sold at market value) for federal
income tax purposes at the end of a Portfolio's taxable year. Sixty percent of
any net gain or loss recognized as a result of these "deemed sales," and 60% of
any net realized gain or loss from any actual sales, of Section 1256 contracts
are treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months. However, proposed technical corrections legislation
would clarify that the 20% rate applies.
Each of Neuberger Berman PARTNERS and Neuberger Berman
SOCIALLY RESPONSIVE Portfolios may acquire zero coupon securities or other
securities issued with original issue discount ("OID"). As a holder of those
securities, each such Portfolio (and, through it, its corresponding Fund) must
take into income the OID that accrues on the securities during the taxable year,
even if it receives no corresponding payment on the securities during the year.
Because each such Fund annually must distribute substantially all of its
investment company taxable income (including its share of its corresponding
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Portfolio's accrued OID) to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, the Fund may be required in a particular year to
distribute as a dividend an amount that is greater than its share of the total
amount of cash its corresponding Portfolio actually receives. Those
distributions will be made from a Fund's (or its share of its corresponding
Portfolio's) cash assets or, if necessary, from the proceeds of sales of that
Portfolio's securities. A Portfolio may realize capital gains or losses from
those sales, which would increase or decrease its corresponding Fund's
investment company taxable income and/or net capital gain.
Taxation of the Funds' Shareholders
If Fund shares are sold at a loss after being held for six
months or less, the loss will be treated as long-term, instead of short-term,
capital loss to the extent of any capital gain distributions received on those
shares.
Each Fund is required to withhold 31% of all dividends,
capital gain distributions, and redemption proceeds payable to any individuals
and certain other non-corporate shareholders who do not provide the Fund with a
correct taxpayer identification number. Withholding at that rate also is
required from dividends and other distributions payable to such shareholders who
otherwise are subject to backup withholding.
As described in "Maintaining Your Account" in the Prospectus,
a Fund may close a shareholder's account with the Fund and redeem the remaining
shares if the account balance falls below the specified minimum and the
shareholder fails to reestablish the minimum balance after being given the
opportunity to do so. If an account that is closed pursuant to the foregoing was
maintained for an IRA (including, after 1997, a Roth IRA) or a qualified
retirement plan (including a simplified employee pension plan, savings incentive
match plan for employees, Keogh plan, corporate profit-sharing and money
purchase pension plan, Code section 401(k) plan, and Code section 403(b)(7)
account), the Fund's payment of the redemption proceeds may result in adverse
tax consequences for the accountholder. The accountholder should consult his or
her tax adviser regarding any such consequences.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as principal broker for each Portfolio
(except Neuberger Berman INTERNATIONAL Portfolio) in the purchase and sale of
its portfolio securities (other than certain securities traded on the OTC
market) and in connection with the purchase and sale of options on its
securities. Neuberger Berman may act as broker for Neuberger Berman
INTERNATIONAL Portfolio. A substantial portion of the portfolio transactions of
Neuberger Berman GENESIS Portfolio involves securities traded on the OTC market;
that Portfolio purchases and sells OTC securities in principal transactions with
dealers who are the principal market makers for such securities.
During the fiscal year ended August 31, 1996, Neuberger Berman
MANHATTAN Portfolio paid brokerage commissions of $940,324, of which $543,020
was paid to Neuberger Berman. During the fiscal year ended August 31, 1997,
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Neuberger Berman MANHATTAN Portfolio paid brokerage commissions of $971,026, of
which $458,679 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
MANHATTAN Portfolio paid brokerage commissions of $___________, of which
$________ was paid to Neuberger Berman. Transactions in which that Portfolio
used Neuberger Berman as broker comprised _____% of the aggregate dollar amount
of transactions involving the payment of commissions, and ____% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1998. _____% of the $_____ paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $________) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1998, that
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act) ("Regular B/Ds"): General Electric Capital
Corp., Merrill, Lynch, Pierce, Fenner & Smith Inc., and State Street Bank and
Trust Company, N.A.; at that date, that Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$_____ and State Street Bank & Trust Company, N.A.,
$-------.
During the fiscal year ended August 31, 1996, Neuberger Berman
GENESIS Portfolio paid brokerage commissions of $206,150, of which $95,999 was
paid to Neuberger Berman. During the fiscal year ended August 31, 1997,
Neuberger Berman GENESIS Portfolio paid brokerage commissions of $860,097, of
which $516,040 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
GENESIS Portfolio paid brokerage commissions of $______, of which $______ was
paid to Neuberger Berman. Transactions in which that Portfolio used Neuberger
Berman as broker comprised _____% of the aggregate dollar amount of transactions
involving the payment of commissions, and _____% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
_____% of the $______ paid to other brokers by that Portfolio during that fiscal
year (representing commissions on transactions involving approximately
$_________) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: Chevron Oil Finance Company,
General Electric Capital Corp., and State Street Bank and Trust Company, N.A.;
at that date, that Portfolio held the securities of its Regular B/Ds with an
aggregate value as follows: General Electric Capital Corp., $_________.
During the fiscal year ended August 31, 1996, Neuberger Berman
FOCUS Portfolio paid brokerage commissions of $1,165,851, of which $583,212 was
paid to Neuberger Berman. During the fiscal year ended August 31, 1997,
Neuberger Berman FOCUS Portfolio paid brokerage commissions of $1,825,493, of
which $920,202 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
FOCUS Portfolio paid brokerage commissions of $_________, of which $_______ was
paid to Neuberger Berman. Transactions in which that Portfolio used Neuberger
Berman as broker comprised _____% of the aggregate dollar amount of transactions
involving the payment of commissions, and _____% of the aggregate brokerage
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commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
_____% of the $_____ paid to other brokers by that Portfolio during that fiscal
year (representing commissions on transactions involving approximately
$________) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: General Electric Capital Corp.,
Merrill, Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley, Dean Witter,
Discover & Co., and State Street Bank and Trust Company, N.A.; at that date,
that Portfolio held the securities of its Regular B/Ds with an aggregate value
as follows: General Electric Capital Corp., $________; Merrill, Lynch, Pierce,
Fenner & Smith Inc., $________; and Morgan Stanley, Dean Witter, Discover & Co.,
$________.
During the fiscal year ended August 31, 1996, Neuberger
Berman GUARDIAN Portfolio paid brokerage commissions of $6,886,590, of which
$3,542,127 was paid to Neuberger Berman. During the fiscal year ended August 31,
1997, Neuberger Berman GUARDIAN Portfolio paid brokerage commissions of
$8,540,335, of which $4,806,913 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
GUARDIAN Portfolio paid brokerage commissions of $________, of which $________
was paid to Neuberger Berman. Transactions in which that Portfolio used
Neuberger Berman as broker comprised _____% of the aggregate dollar amount of
transactions involving the payment of commissions, and _____% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1998. _____% of the $_______ paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $_________); was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1998, that
Portfolio acquired securities of the following of its Regular B/Ds: Chevron Oil
Finance Company, General Electric Capital Corp., Merrill, Lynch, Pierce, Fenner
& Smith Inc., Morgan Stanley, Dean Witter, Discover & Co., and State Street Bank
and Trust Company, N.A.; at that date, that Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$________; Merrill, Lynch, Pierce, Fenner & Smith Inc., $_________; and Morgan
Stanley, Dean Witter, Discover & Co., $________.
During the fiscal year ended August 31, 1996, Neuberger Berman
PARTNERS Portfolio paid brokerage commissions of $4,697,854, of which $2,741,666
was paid to Neuberger Berman. During the fiscal year ended August 31, 1997,
Neuberger Berman PARTNERS Portfolio paid brokerage commissions of $5,413,453, of
which $3,508,790 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
PARTNERS Portfolio paid brokerage commissions of $________, of which $________
was paid to Neuberger Berman. Transactions in which that Portfolio used
Neuberger Berman as broker comprised _____% of the aggregate dollar amount of
transactions involving the payment of commissions, and _____% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1998. ______% of the $_________ paid to other brokers by that Portfolio
during that fiscal year (representing commissions on transactions involving
approximately $_________) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1998, that
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Portfolio acquired securities of the following of its Regular B/Ds: Chevron Oil
Finance Company, General Electric Capital Corp., and State Street Bank and Trust
Company, N.A.; at that date, that Portfolio held securities of its Regular B/Ds
with an aggregate value as follows: General Electric Capital Corp., $_________.
During the fiscal year ended August 31, 1996, Neuberger Berman
SOCIALLY RESPONSIVE Portfolio paid brokerage commissions of $208,834, of which
$124,879 was paid to Neuberger Berman. During the fiscal year ended August 31,
1997, Neuberger Berman SOCIALLY RESPONSIVE Portfolio paid brokerage commissions
of $305,640, of which $232,238 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
SOCIALLY RESPONSIVE Portfolio paid brokerage commissions of $_______, of which
$_______ was paid to Neuberger Berman. Transactions in which that Portfolio used
Neuberger Berman as broker comprised _____% of the aggregate dollar amount of
transactions involving the payment of commissions, and _____% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1998. _____% of the $_____ paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $_______) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1998, that
Portfolio acquired securities of the following of its Regular B/Ds: State Street
Bank and Trust Company, N.A.; at that date, that Portfolio held [none of the
securities of its Regular B/Ds].
During the fiscal year ended August 31, 1996, Neuberger Berman
INTERNATIONAL Portfolio paid brokerage commissions of $183,335, of which $5,485
was paid to Neuberger Berman and $0 was paid to BNP-International Financial
Services Corporation. During the fiscal year ended August 31, 1997, Neuberger
Berman INTERNATIONAL Portfolio paid brokerage commissions of $297,431, of which
$5,910 was paid to Neuberger Berman.
During the fiscal year ended August 31, 1998, Neuberger Berman
INTERNATIONAL Portfolio paid brokerage commissions of $_______, of which $______
was paid to Neuberger Berman. Transactions in which the Portfolio used Neuberger
Berman as broker comprised ____% of the aggregate dollar amount of transactions
involving the payment of commissions, and ____% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1998.
Of the $____ paid to other brokers by that Portfolio during that fiscal year,
95.22% (representing commissions on transactions involving approximately
$______) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1998, that Portfolio acquired
securities of the following of its Regular B/Ds: HSBC Securities, Inc., Societe
Generale Securities Corporation, and State Street Bank and Trust Company, N.A.;
at that date, that Portfolio held the securities of its Regular B/Ds with an
aggregate value as follows: HSBC Securities, Inc., $_______ and Societe General
Securities Corporation, $_________.
Insofar as portfolio transactions of Neuberger Berman PARTNERS
Portfolio result from active management of equity securities, and insofar as
portfolio transactions of Neuberger Berman MANHATTAN Portfolio result from
seeking capital appreciation by selling securities whenever sales are deemed
advisable without regard to the length of time the securities may have been
held, it may be expected that the aggregate brokerage commissions paid by those
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Portfolios to brokers (including Neuberger Berman where it acts in that
capacity) may be greater than if securities were selected solely on a long-term
basis.
Prior to June 15, 1998, portfolio securities were, from time
to time, loaned by a Portfolio to Neuberger Berman in accordance with the terms
and conditions of an order issued by the SEC. The order exempts such
transactions from provisions of the 1940 Act that would otherwise prohibit such
transactions, subject to certain conditions.
The following information reflects interest income earned by
the Portfolios from the cash collateralization of securities loans during the
fiscal years ended 1998, 1997, and 1996. As reflected below, Neuberger Berman
received a portion of the interest income from the cash collateral.
<TABLE>
<CAPTION>
Interest Income from
Collateralization of Amount Paid to Neuberger
Name of Portfolio Fiscal Year End Securities Loans Berman
- ----------------- --------------- ---------------- ------
<S> <C> <C> <C>
Neuberger Berman MANHATTAN 8/31/98 $________ $________
Portfolio 8/31/97 $ 988,931 $ 326,403
8/31/96 $ 301,788 $ 186,163
- ----------------------------------------------------------------------------------------------------------------
Neuberger Berman GENESIS Portfolio 8/31/98 $________ $________
8/31/97 $ 168,552 $ 69,948
8/31/96 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Neuberger Berman GUARDIAN 8/31/98 $________ $________
Portfolio 8/31/97 $4,005,765 $3,523,486
8/31/96 $2,427,096 $2,129,341
- ----------------------------------------------------------------------------------------------------------------
Neuberger Berman FOCUS Portfolio 8/31/98 $________ $________
8/31/97 $1,053,272 $ 898,127
8/31/96 $ 368,663 $ 330,001
- ----------------------------------------------------------------------------------------------------------------
Neuberger Berman PARTNERS 8/31/98 $________ $________
Portfolio 8/31/97 $ 797,133 $ 688,624
8/31/96 $ 173,908 $ 118,041
- ----------------------------------------------------------------------------------------------------------------
Neuberger Berman SOCIALLY 8/31/98 $________ $________
RESPONSIVE Portfolio 8/31/97 $ 80,484 $ 51,639
8/31/96 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Neuberger Berman INTERNATIONAL 8/31/98 $________ $________
Portfolio 8/31/97 $ 0 $ 0
8/31/96 $ 0 $ 0
</TABLE>
In effecting securities transactions, each Portfolio generally
seeks to obtain the best price and execution of orders. Commission rates, being
a component of price, are considered along with other relevant factors. Each
Portfolio plans to continue to use Neuberger Berman as its broker where, in the
judgment of NB Management, that firm is able to obtain a price and execution at
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<PAGE>
least as favorable as other qualified brokers. To the Portfolios' knowledge, no
affiliate of any Portfolio receives give-ups or reciprocal business in
connection with their securities transactions.
The use of Neuberger Berman as a broker for each Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. The Managers Trusts and NB Management have
expressly authorized Neuberger Berman to retain such compensation, and Neuberger
Berman has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by a Portfolio to
Neuberger Berman in connection with a purchase or sale of securities on a
securities exchange may not exceed the usual and customary broker's commission.
Accordingly, it is each Portfolio's policy that the commissions paid to
Neuberger Berman must, in NB Management's judgment, be (1) at least as favorable
as those charged by other brokers having comparable execution capability and (2)
at least as favorable as commissions contemporaneously charged by Neuberger
Berman on comparable transactions for its most favored unaffiliated customers,
except for accounts for which Neuberger Berman acts as a clearing broker for
another brokerage firm and customers of Neuberger Berman considered by a
majority of the Independent Portfolio Trustees not to be comparable to the
Portfolio. The Portfolios do not deem it practicable and in their best interests
to solicit competitive bids for commissions on each transaction effected by
Neuberger Berman. However, consideration regularly is given to information
concerning the prevailing level of commissions charged by other brokers on
comparable transactions during comparable periods of time. The 1940 Act
generally prohibits Neuberger Berman from acting as principal in the purchase of
portfolio securities from, or the sale of portfolio securities to, a Portfolio
unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to
time reviews, among other things, information relating to the commissions
charged by Neuberger Berman to the Portfolios and to its other customers and
information concerning the prevailing level of commissions charged by other
brokers having comparable execution capability. In addition, the procedures
pursuant to which Neuberger Berman effects brokerage transactions for the
Portfolios must be reviewed and approved no less often than annually by a
majority of the Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including a
Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
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Each Portfolio expects that it will continue to execute a
portion of its transactions through brokers other than Neuberger Berman. In
selecting those brokers, NB Management considers the quality and reliability of
brokerage services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of NB Management and
principals of Neuberger Berman who are portfolio managers of some of the
Portfolios and Other NB Funds (collectively, "NB Funds") and some of Neuberger
Berman's managed accounts ("Managed Accounts") evaluates semi-annually the
nature and quality of the brokerage and research services provided by other
brokers. Based on this evaluation, the committee establishes a list and
projected rankings of preferred brokers for use in determining the relative
amounts of commissions to be allocated to those brokers. Ordinarily, the brokers
on the list effect a large portion of the brokerage transactions for the NB
Funds and the Managed Accounts that are not effected by Neuberger Berman.
However, in any semi-annual period, brokers not on the list may be used, and the
relative amounts of brokerage commissions paid to the brokers on the list may
vary substantially from the projected rankings. These variations reflect the
following factors, among others: (1) brokers not on the list or ranking below
other brokers on the list may be selected for particular transactions because
they provide better price and/or execution, which is the primary consideration
in allocating brokerage; (2) adjustments may be required because of periodic
changes in the execution capabilities of or research provided by particular
brokers or in the execution or research needs of the NB Funds and/or the Managed
Accounts; and (3) the aggregate amount of brokerage commissions generated by
transactions for the NB Funds and the Managed Accounts may change substantially
from one semi-annual period to the next.
The commissions paid to a broker other than Neuberger Berman
may be higher than the amount another firm might charge if NB Management
determines in good faith that the amount of those commissions is reasonable in
relation to the value of the brokerage and research services provided by the
broker. NB Management believes that those research services benefit the
Portfolios by supplementing the information otherwise available to NB
Management. That research may be used by NB Management in servicing Other NB
Funds and, in some cases, by Neuberger Berman in servicing the Managed Accounts.
On the other hand, research received by NB Management from brokers effecting
portfolio transactions on behalf of the Other NB Funds and by Neuberger Berman
from brokers effecting portfolio transactions on behalf of the Managed Accounts
may be used for the Portfolios' benefit.
Kent C. Simons and Kevin L. Risen; Judith M. Vale and Robert
W. D'Alelio; Valerie Chang; Jennifer K. Silver and Brooke A. Cobb; Michael M.
Kassen and Robert I. Gendelman; and Janet W. Prindle, each of whom is a Vice
President of NB Management (except for Ms. Chang, who is an Assistant Vice
President) and a principal of Neuberger Berman (except for Mr. D'Alelio, Mr.
Cobb, and Ms. Chang), are the persons primarily responsible for making decisions
as to specific action to be taken with respect to the investment portfolios of
Neuberger Berman FOCUS and Neuberger Berman GUARDIAN, Neuberger Berman GENESIS,
Neuberger Berman INTERNATIONAL, Neuberger Berman MANHATTAN, Neuberger Berman
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<PAGE>
PARTNERS, and Neuberger Berman SOCIALLY RESPONSIVE Portfolios, respectively.
Each of them has full authority to take action with respect to portfolio
transactions and may or may not consult with other personnel of NB Management
prior to taking such action. If Ms. Prindle is unavailable to perform her
responsibilities, Robert Ladd and/or Ingrid Saukaitis, each of whom is an
Assistant Vice President of NB Management, will assume responsibility for the
portfolio of Neuberger Berman SOCIALLY RESPONSIVE Portfolio.
Portfolio Turnover
A Portfolio's portfolio turnover rate is calculated by
dividing (1) the lesser of the cost of the securities purchased or the proceeds
from the securities sold by the Portfolio during the fiscal year (other than
securities, including options, whose maturity or expiration date at the time of
acquisition was one year or less) by (2) the month-end average of the value of
such securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual
financial statements, as well as year-end financial statements audited by the
independent auditors or independent accountants for the Fund and its
corresponding Portfolio. Each Fund's statements show the investments owned by
its corresponding Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in its corresponding Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
The Funds
Each Fund is a separate ongoing series of the Trust, a
Delaware business trust organized pursuant to a Trust Instrument dated as of
December 23, 1992. The Trust is registered under the Investment Company Act of
1940 as a diversified, open-end management investment company, commonly known as
a mutual fund. The Trust has seven separate operating series. Each Fund invests
all of its net investable assets in its corresponding Portfolio, in each case
receiving a beneficial interest in that Portfolio. The trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders. The assets of each series belong only to that series, and the
liabilities of each series are borne solely by that series and no other.
The name of Neuberger Berman FOCUS Fund was "Neuberger Berman
Selected Sectors Fund, Inc." before August 2, 1993; and "Neuberger Berman
Selected Sectors Fund" before January 1, 1995. Prior to January 1, 1995, the
name of Neuberger Berman FOCUS Portfolio was Neuberger Berman Selected Sectors
Portfolio.
Before August 2, 1993, the respective names of Neuberger
Berman MANHATTAN Fund, Neuberger Berman GENESIS Fund, Neuberger Berman GUARDIAN
Fund and Neuberger Berman PARTNERS Fund were Neuberger Berman Manhattan Fund,
Inc., Neuberger Berman Genesis Fund, Inc., Neuberger Berman Guardian Fund, Inc.,
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<PAGE>
and Neuberger Berman Partners Fund, Inc. Prior to November 17, 1995, the name of
Neuberger Berman INTERNATIONAL Portfolio was International Portfolio.
DESCRIPTION OF SHARES. Each Fund is authorized to issue an
unlimited number of shares of beneficial interest (par value $0.001 per share).
Shares of each Fund represent equal proportionate interests in the assets of
that Fund only and have identical voting, dividend, redemption, liquidation, and
other rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other rights to subscribe to any additional
shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend
to hold annual meetings of shareholders of the Funds. The trustees will call
special meetings of shareholders of a Fund only if required under the 1940 Act
or in their discretion or upon the written request of holders of 10% or more of
the outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law,
the shareholders of a Fund will not be personally liable for the obligations of
any Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or a Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
The Portfolios
Each Portfolio (except Neuberger Berman INTERNATIONAL
Portfolio) is a separate operating series of Equity Managers Trust, a New York
common law trust organized as of December 1, 1992. Neuberger Berman
INTERNATIONAL Portfolio is a separate operating series of Global Managers Trust,
a New York common law trust organized as of March 18, 1994. The Managers Trusts
are registered under the 1940 Act as diversified, open-end management investment
companies. Equity Managers Trust has six separate Portfolios. Global Managers
Trust currently has one operating Portfolio. The assets of each Portfolio belong
only to that Portfolio, and the liabilities of each Portfolio are borne solely
by that Portfolio and no other.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund"
that seeks to achieve its investment objective by investing all of its net
investable assets in its corresponding Portfolio, which is a "master fund." The
Portfolio, which has the same investment objective, policies, and limitations as
the Fund, in turn invests in securities; the Fund thus acquires an indirect
interest in those securities.
Each Fund's investment in its corresponding Portfolio is in
the form of a non-transferable beneficial interest. Members of the general
public may not purchase a direct interest in a Portfolio. Series of two other
investment companies, Neuberger Berman Equity Trust ("NB Equity Trust") and
Neuberger Berman Equity Assets ("NB Equity Assets"), invest all of their
respective net assets in corresponding Portfolios of Equity Managers Trust. NB
Equity Trust and NB Equity Assets do not sell their shares directly to members
of the general public.
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Each Portfolio may also permit other investment companies
and/or other institutional investors to invest in the Portfolio. All investors
will invest in a Portfolio on the same terms and conditions as a Fund and will
pay a proportionate share of the Portfolio's expenses. Other investors in a
Portfolio are not required to sell their shares at the same public offering
price as a Fund, could have a different administration fee and expenses than a
Fund, and (except NB Equity Trust and NB Equity Assets) might charge a sales
commission. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in the
Portfolio. There is currently no such other investment company that offers its
shares directly to members of the general public. Information regarding any Fund
that invests in a Portfolio is available from NB Management by calling
800-877-9700.
The trustees of the Trust believe that investment in a
Portfolio by a series of NB Equity Trust or NB Equity Assets or by other
potential investors in addition to a Fund may enable the Portfolio to realize
economies of scale that could reduce its operating expenses, thereby producing
higher returns and benefitting all shareholders. However, a Fund's investment in
its corresponding Portfolio may be affected by the actions of other large
investors in the Portfolio, if any. For example, if a large investor in a
Portfolio (other than a Fund) redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
Each Fund may withdraw its entire investment from its
corresponding Portfolio at any time, if the trustees of the Trust determine that
it is in the best interests of the Fund and its shareholders to do so. A Fund
might withdraw, for example, if there were other investors in a Portfolio with
power to, and who did by a vote of all investors (including the Fund), change
the investment objective, policies, or limitations of the Portfolio in a manner
not acceptable to the trustees of the Trust. A withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution)
by the Portfolio to the Fund. That distribution could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund's investment portfolio. If the Fund decided to convert
those securities to cash, it usually would incur brokerage fees or other
transaction costs. If a Fund withdrew its investment from a Portfolio, the
trustees of the Trust would consider what actions might be taken, including the
investment of all of the Fund's net investable assets in another pooled
investment entity having substantially the same investment objective as the Fund
or the retention by the Fund of its own investment manager to manage its assets
in accordance with its investment objective, policies, and limitations. The
inability of the Fund to find a suitable replacement could have a significant
impact on shareholders.
INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not
hold meetings of investors except as required by the 1940 Act. Each investor in
a Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, a
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in a Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in a Portfolio, they could have voting
control of the Portfolio.
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CERTAIN PROVISIONS. Each investor in a Portfolio, including a
Fund, will be liable for all obligations of the Portfolio. However, the risk of
an investor in a Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of a Portfolio, investors would
be entitled to share pro rata in the net assets of the Portfolio available for
distribution to investors.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street, 225
Franklin Street, Boston, MA 02110, as custodian for its securities and cash.
State Street also serves as each Fund's transfer and shareholder servicing
agent, administering purchases, redemptions, and transfers of Fund shares and
the payment of dividends and other distributions through its Boston Service
Center. All correspondence should be mailed to Neuberger Berman Funds, c/o
Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403. In addition, State
Street serves as transfer agent for each Portfolio (except Neuberger Berman
INTERNATIONAL Portfolio). State Street Cayman serves as transfer agent for
Neuberger Berman INTERNATIONAL Portfolio.
INDEPENDENT AUDITORS/ACCOUNTANTS
Each Fund and Portfolio (other than Neuberger Berman
INTERNATIONAL Portfolio, Neuberger Berman MANHATTAN Fund and Portfolio, and
Neuberger Berman SOCIALLY RESPONSIVE Fund and Portfolio) has selected Ernst &
Young LLP, 200 Clarendon Street, Boston, MA 02116, as the independent auditors
who will audit its financial statements. Neuberger Berman INTERNATIONAL
Portfolio has selected Ernst & Young, Shedden Road, George Town, Grand Cayman,
Cayman Islands, British West Indies as the independent auditors who will audit
its financial statements. Neuberger Berman MANHATTAN Fund and Portfolio and
Neuberger Berman SOCIALLY RESPONSIVE Fund and Portfolio have selected Coopers &
Lybrand L.L.P., One Post Office Square, Boston, MA 02109, as the independent
accountants who will audit their financial statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick & Lockhart
LLP, 1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
its legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and
percentage of ownership of each person who was known by each Fund to own
beneficially or of record 5% or more of that Fund's outstanding shares at
December 1, 1998:
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Percentage of
Ownership at
Name and Address December 1, 1998
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C. The SEC maintains a Website (http://www.sec.gov)
that contains this SAI, material incorporated by reference, and other
information regarding the Funds and Portfolios.
Statements contained in this SAI and in the Prospectus as to
the contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to shareholders
for the fiscal year ended August 31, 1998:
The audited financial statements of the Funds
and Portfolios and notes thereto for the fiscal
year ended August 31, 1998, and the reports of
Ernst & Young LLP, independent auditors, with
respect to such audited financial statements of
Neuberger Berman GENESIS Fund and Portfolio,
Neuberger Berman GUARDIAN Fund and Portfolio,
Neuberger Berman PARTNERS Fund and Portfolio,
Neuberger Berman FOCUS Fund and Portfolio, and
Neuberger Berman INTERNATIONAL Fund; the report
of Ernst & Young, independent auditors, with
respect to such audited financial statements of
Neuberger Berman INTERNATIONAL Portfolio; and
the reports of Coopers & Lybrand L.L.P.,
independent accountants, with respect to such
audited financial statements of Neuberger Berman
MANHATTAN Fund and Portfolio and Neuberger
Berman SOCIALLY RESPONSIVE Fund and Portfolio.
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Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D - Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
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of protection may not be as large as in AAA-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in AAA-rated
securities.
A - Bonds rated A possess many favorable investment attributes
and are considered to be upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
- Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca - Bonds rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3
in each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
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MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated PRIME-1 (or related supporting institutions),
also known as P-1, have a superior capacity for repayment of short-term
promissory obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial
markets and assured sources of alternate liquidity.
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NEUBERGER BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 79 ON FORM N-1A
PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits. None.
(b) Exhibits:
Exhibit
Number Description
------ -----------
(a) (1) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(2) Trust Instrument of Neuberger Berman Equity
Funds. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
(3) Schedule A - Current Series of Neuberger Berman
Equity Funds. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
(b) By-laws of Neuberger Berman Equity Funds.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
C-4
<PAGE>
(c) (1) Trust Instrument of Neuberger Berman Equity
Funds, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(2) By-Laws of Neuberger Berman Equity Funds,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(d) (1) (i) Management Agreement Between Equity Managers
Trust and Neuberger Berman Management
Incorporated. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(iii) Schedule B - Schedule of Compensation Under the
Management Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(2) (i) Sub-Advisory Agreement Between Neuberger Berman
Management Incorporated and Neuberger Berman,
LLC with Respect to Equity Managers Trust.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Sub-Advisory
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
C-5
<PAGE>
(3) (i) Management Agreement Between Global Managers
Trust and Neuberger Berman Management
Incorporated. Incorporated by Reference to
Post-Effective Amendment No. 74 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation Under the
Management Agreement. Incorporated by Reference
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000426.
(4) (i) Sub-Advisory Agreement Between Neuberger Berman
Management Incorporated and Neuberger Berman,
LLC with Respect to Global Managers Trust.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Sub-Advisory
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 74 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession
No. 0000898432-95-000426.
(e) (1) Distribution Agreement Between Neuberger Berman Equity
Funds and Neuberger Berman Management Incorporated.
Incorporated by Reference to Post-Effective Amendment
No. 77 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession No.
0000898432-97-000516.
(2) Schedule A - Series of Neuberger Berman Equity Funds
Currently Subject to the Distribution Agreement.
Incorporated by Reference to Post-Effective Amendment
No. 77 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession
No. 0000898432-97-000516.
(f) Bonus, Profit Sharing or Pension Plans. None.
C-6
<PAGE>
(g) (1) Custodian Contract Between Neuberger Berman Equity
Funds and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective Amendment
No. 74 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession
No. 0000898432-95-000426.
(2) Schedule A - Approved Foreign Banking Institutions and
Securities Depositories Under the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 3 to the Registration
Statement of Neuberger Berman Equity Assets, File
Nos. 33-82568 and 811-8106, Edgar Accession
No. 0000898432-95-000426.
(3) Schedule B - Approved Foreign Banking Institutions and
Securities Depositories under the Custodian Contract
with Respect to Neuberger Berman International Fund.
To Be Filed By Amendment.
(4) Schedule of Compensation under the Custodian Contract.
Incorporated by Reference to Post-Effective Amendment
No. 76 to Registrant's Registration Statement, File
Nos. 2-11357 and 811-582, Edgar Accession No.
0000898432-96-000525.
(h) (1) (i) Transfer Agency and Service Agreement Between
Neuberger Berman Equity Funds and State Street
Bank and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(ii) Agreement Between Neuberger Berman Equity Funds
and State Street Bank and Trust Company Adding
Neuberger Berman International Fund as a
Portfolio Governed by the Transfer Agency and
Service Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(iii) First Amendment to Transfer Agency and Service
Agreement Between Neuberger Berman Equity Funds
and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
C-7
<PAGE>
(iv) Second Amendment to Transfer Agency and Service
Agreement between Neuberger Berman Equity Funds
and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
Amendment No. 77 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-97-000516.
(v) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated by
Reference to Post-Effective Amendment No. 76 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-96-000525.
(2) (i) Administration Agreement Between Neuberger
Berman Equity Funds and Neuberger Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 77 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession
No. 0000898432-97-000516.
(ii) Schedule A - Series of Neuberger Berman Equity
Funds Currently Subject to the Administration
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 77 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582, Edgar Accession
No. 0000898432-97-000516.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-95-000314.
(i) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters. To Be Filed by Amendment.
(j) Consent of Independent Auditors. To be Filed by
Amendment.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedule. To be Filed by Amendment.
(o) Plan Pursuant to Rule 18f-3. None.
C-8
<PAGE>
Item 24. Persons Controlled By or Under Common Control with Registrant.
No person is controlled by or under common control with the Registrant.
(Registrant is organized in a master/feeder fund structure, and technically may
be considered to control the master funds in which it invests, Equity Managers
Trust and Global Managers Trust.)
Item 25. Indemnification.
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, oNBehalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger Berman
Management Incorporated ("NB Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
referred to as the "Managers Trusts") provide that neither NB Management nor any
director, officer or employee of NB Management performing services for the
series of the Managers Trusts at the direction or request of NB Management in
connection with NB Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relates; provided, that nothing in the Agreements shall be construed
C-9
<PAGE>
(i) to protect NB Management against any liability to the Managers Trusts or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
disregard of its obligations and duties under the Agreements, or (ii) to protect
any director, officer or employee of NB Management who is or was a trustee or
officer of the Managers Trusts against any liability to the Managers Trusts or
any series thereof or its interest holders to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's office
with Managers Trusts.
Section 1 of the Sub-Advisory Agreements between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Managers Trusts
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties or of reckless disregard of its
duties and obligations under the Agreement, Neuberger Berman will not be subject
to any liability for any act or omission or any loss suffered by any series of
the Managers Trusts or their interest holders in connection with the matters to
which the Agreements relate.
Section 12 of the Administration Agreement between the Registrant and NB
Management provides that NB Management will not be liable to the Registrant for
any action taken or omitted to be takeNBy NB Management or its employees, agents
or contractors in carrying out the provisions of the Agreement if such action
was taken or omitted in good faith and without negligence or misconduct on the
part of NB Management, or its employees, agents or contractors. Section 13 of
the Administration Agreement provides that the Registrant shall indemnify NB
Management and hold it harmless from and against any and all losses, damages and
expenses, including reasonable attorneys' fees and expenses, incurred by NB
Management that result from: (i) any claim, action, suit or proceeding in
connection with NB Management's entry into or performance of the Agreement; or
(ii) any action taken or omission to act committed by NB Management in the
performance of its obligations under the Agreement; or (iii) any action of NB
Management upon instructions believed in good faith by it to have been executed
by a duly authorized officer or representative of a Series; provided, that NB
Management will not be entitled to such indemnification in respect of actions or
omissions constituting negligence or misconduct on the part of NB Management, or
its employees, agents or contractors. Amounts payable by the Registrant under
this provision shall be payable solely out of assets belonging to that Series,
and not from assets belonging to any other Series of the Registrant. Section 14
of the Administration Agreement provides that NB Management will indemnify the
Registrant and hold it harmless from and against any and all losses, damages and
expenses, including reasonable attorneys' fees and expenses, incurred by the
Registrant that result from: (i) NB Management's failure to comply with the
terms of the Agreement; or (ii) NB Management's lack of good faith in performing
its obligations under the Agreement; or (iii) the negligence or misconduct of NB
Management, or its employees, agents or contractors in connection with the
Agreement. The Registrant shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of the Registrant or its employees, agents or contractors other than NB
Management, unless such negligence or misconduct results from or is accompanied
by negligence or misconduct on the part of NB Management, any affiliated person
of NB Management, or any affiliated person of an affiliated person of NB
Management.
Section 11 of the Distribution Agreement between the Registrant and NB
Management provides that NB Management shall look only to the assets of a Series
for the Registrant's performance of the Agreement by the Registrant oNBehalf of
such Series, and neither the Trustees nor any of the Registrant's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
C-10
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnificatioNBy it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Adviser and Sub-Adviser.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of NB Management and each principal of Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger Berman
Vice President, NB Advisers Management Trust;
Management Secretary, Advisers Managers
Trust; Secretary, Neuberger Berman
Income Funds; Secretary, Neuberger
Berman Income Trust; Secretary,
Neuberger Berman Equity Funds;
Secretary, Neuberger Berman Equity
Trust; Secretary, Income Managers
Trust; Secretary, Equity Managers
Trust; Secretary, Global Managers
Trust; Secretary, Neuberger Berman Equity Assets.
Valerie Chang Senior Securities Analyst, TIAA/CREF.3
Assistant Vice
President,
NB Management
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, International Investors.1
NB Management
Stacy Cooper-Shugrue Assistant Secretary, Neuberger
Assistant Vice Berman Advisers Management Trust;
President, Assistant Secretary, Advisers
NB Management Managers Trust; Assistant
Secretary, Neuberger Berman Income
Funds; Assistant Secretary,
Neuberger Berman Income Trust;
Assistant Secretary, Neuberger
- ------
(1) Until 1997.
C-11
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Berman Equity Funds; Assistant
Secretary, Neuberger Berman Equity
Trust; Assistant Secretary, Income
Managers Trust; Assistant
Secretary, Equity Managers Trust;
Assistant Secretary, Global
Managers Trust; Assistant
Secretary, Neuberger Berman Equity
Assets.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, NB Investments.2
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger
Assistant Vice Berman Advisers Management Trust;
President, Assistant Treasurer, Advisers
NB Management Managers Trust; Assistant
Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer,
Neuberger Berman Income Trust;
Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant
Treasurer, Neuberger Berman Equity
Trust; Assistant Treasurer, Income
Managers Trust; Assistant
Treasurer, Equity Managers Trust;
Assistant Treasurer, Global
Managers Trust; Assistant
Treasurer, Neuberger Berman Equity
Assets.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger Berman Advisers
NB Management; Management Trust; Chairman of the
Principal, Neuberger Board and Trustee, Advisers
Berman Managers Trust; Chairman of the
Board and Trustee, Neuberger
Berman Income Funds; Chairman of
the Board and Trustee, Neuberger
Berman Income Trust; Chairman of
the Board and Trustee, Neuberger
Berman Equity Funds; Chairman of
the Board and Trustee, Neuberger
Berman Equity Trust; Chairman of
the Board and Trustee, Income
Managers Trust; Chairman of the
Board and Trustee, Equity Managers
Trust; Chairman of the Board and
Trustee, Global Managers Trust;
Chairman of the Board and Trustee,
Neuberger Berman Equity Assets.
- ------
(2) Until 1996.
C-12
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Theodore P. Giuliano President and Trustee, Neuberger
Vice President and Berman Income Funds; President and
Director, NB Trustee, Neuberger Berman Income
Management; Trust; President and Trustee,
Principal, Neuberger Income Managers Trust.
Berman
C. Carl Randolph Assistant Secretary, Neuberger
Principal, Neuberger Berman Advisers Management Trust;
Berman Assistant Secretary, Advisers
Managers Trust; Assistant
Secretary, Neuberger Berman Income
Funds; Assistant Secretary,
Neuberger Berman Income Trust;
Assistant Secretary, Neuberger
Berman Equity Funds; Assistant
Secretary, Neuberger Berman Equity
Trust; Assistant Secretary, Income
Managers Trust; Assistant
Secretary, Equity Managers Trust;
Assistant Secretary, Global
Managers Trust; Assistant
Secretary, Neuberger Berman Equity
Assets.
Richard Russell Treasurer, Neuberger Berman
Vice President, Advisers Management Trust;
NB Management Treasurer, Advisers Managers
Trust; Treasurer, Neuberger Berman
Income Funds; Treasurer, Neuberger
Berman Income Trust; Treasurer,
Neuberger Berman Equity Funds;
Treasurer, Neuberger Berman Equity
Trust; Treasurer, Income Managers
Trust; Treasurer, Equity Managers
Trust; Treasurer, Global Managers
Trust; Treasurer, Neuberger Berman
Equity Assets.
Ingrid Saukaitis Project Director, Council on
Assistant Vice Economic Priorities.3
President,
NB Management
Jennifer K. Silver Portfolio Manager and Director,
Vice President, Putnam Investments.4
NB Management;
Principal,
Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman
Senior Vice President, Advisers Management Trust; Vice
NB Management President, Advisers Managers
Trust; Vice President, Neuberger
Berman Income Funds; Vice
President, Neuberger Berman Income
Trust; Vice President, Neuberger
Berman Equity Funds; Vice
President, Neuberger Berman Equity
Trust; Vice President, Income
- ------
(3) Until 1997.
(4) Until 1997.
C-13
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Managers Trust; Vice President,
Equity Managers Trust; Vice
President, Global Managers Trust;
Vice President, Neuberger Berman
Equity Assets.
Michael J. Weiner Vice President, Neuberger Berman
Senior Vice President, Advisers Management Trust; Vice
NB Management President, Advisers Managers
Trust; Vice President, Neuberger
Berman Income Funds; Vice
President, Neuberger Berman Income
Trust; Vice President, Neuberger
Berman Equity Funds; Vice
President, Neuberger Berman Equity
Trust; Vice President, Income
Managers Trust; Vice President,
Equity Managers Trust; Vice
President, Global Managers Trust;
Vice President, Neuberger Berman
Equity Assets.
Celeste Wischerth, Assistant Treasurer, Neuberger
Assistant Vice Berman Advisers Management Trust;
President, Assistant Treasurer, Advisers
NB Management Managers Trust; Assistant
Treasurer, Neuberger Berman Income
Funds; Assistant Treasurer,
Neuberger Berman Income Trust;
Assistant Treasurer, Neuberger
Berman Equity Funds; Assistant
Treasurer, Neuberger Berman Equity
Trust; Assistant Treasurer, Income
Managers Trust; Assistant
Treasurer, Equity Managers Trust;
Assistant Treasurer, Global
Managers Trust; Assistant
Treasurer, Neuberger Berman Equity
Assets.
Lawrence Zicklin President and Trustee, Neuberger
Director, NB Berman Advisers Management Trust;
Management; President and Trustee, Advisers
Principal, Neuberger Managers Trust; President and
Berman Trustee, Neuberger Berman Equity
Funds; President and Trustee,
Neuberger Berman Equity Trust;
President and Trustee, Equity
Managers Trust; President, Global
Managers Trust; President and
Trustee, Neuberger Berman Equity
Assets.
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
C-14
<PAGE>
Item 27. Principal Underwriters.
(a) NB Management, the principal underwriter distributing securities
of the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Trust
Neuberger Berman Equity Assets
Neuberger Berman Equity Series
Neuberger Berman Income Funds
Neuberger Berman Income Trust
NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and officers
of the Registrant's principal underwriter. The principal business address of
each of the persons listed is 605 Third Avenue, New York, New York 10158-0180,
which is also the address of the Registrant's principal underwriter.
NAME POSITIONS AND OFFICES POSITIONS AND
---- WITH UNDERWRITER OFFICES
--------------------- WITH REGISTRANT
---------------------
Ramesh Babu Assistant Vice None
President
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Assistant Vice None
President
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Assistant Vice Assistant Secretary
Cooper-Shugrue President
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice Assistant Treasurer
President
Roberta D'Orio Vice President None
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
C-15
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND
---- WITH UNDERWRITER OFFICES
--------------------- WITH REGISTRANT
---------------------
Brian J. Gaffney Vice President None
Joseph G. Galli Vice President None
Robert I. Gendelman Vice President None
Theodore P. Vice President and None
Giuliano Director
Michael J. Hanratty Assistant Vice None
President
Leslie Assistant Vice None
Holliday-Soto President
Michael M. Kassen Vice President and None
Director
Robert L. Ladd Assistant Vice None
President
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice None
President
Ellen Metzger Vice President and None
Secretary
Paul Metzger Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice None
President
Kevin L. Risen Vice President None
Richard Russell Vice President Treasurer and
Principal
Accounting Officer
Ingrid Saukaitis Assistant Vice None
President
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Vice President of None
Marketing
C-16
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND
---- WITH UNDERWRITER OFFICES
--------------------- WITH REGISTRANT
---------------------
Judith M. Vale Vice President None
Josephine Velez Assistant Vice None
President
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal
Financial Officer
Celeste Wischerth Assistant Vice Assistant Treasurer
President
Thomas G. Wolfe Vice President None
Lawrence Zicklin Director Trustee and
President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for Equity Managers Trust's Declaration of Trust and By-laws, minutes of
meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Global Managers Trust are maintained at the offices of State
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
C-17
<PAGE>
Item 29. Management Services
Other than as set forth in Parts A and B of this Post-Effective
Amendment, the Registrant is not a party to any management-related service
contract.
Item 30. Undertakings
None.
C-18
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 78 ON FORM N-1A
INDEX TO EXHIBITS
Exhibit Description Sequentially
Number ----------- Numbered
------- Page
------------
(a) (1) Certificate of Trust. N.A.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(2) Trust Instrument of Neuberger N.A.
Berman Equity Funds. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
(3) Schedule A - Current Series of N.A.
Neuberger Berman Equity Funds.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(b) By-laws of Neuberger Berman Equity N.A.
Funds. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(c) (1) Trust Instrument of Neuberger N.A.
Berman Equity Funds, Articles IV, V,
and VI. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(2) By-laws of Neuberger Berman N.A.
Equity Funds, Articles V, VI, and
VIII. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
<PAGE>
Exhibit Description Sequentially
Number ----------- Numbered
------- Page
------------
(d) (1) (i) Management Agreement N.A.
Between Equity Managers Trust and
Neuberger Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
(ii) Schedule A - Series of N.A.
Equity Managers Trust Currently Subject
to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(iii) Schedule B - Schedule of N.A.
Compensation Under the Management
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(2) (i) Sub-Advisory Agreement N.A.
Between Neuberger Berman Management
Incorporated and Neuberger Berman, LLC
with Respect to Equity Managers Trust.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(ii) Schedule A - Series of N.A.
Equity Managers Trust Currently Subject
to the Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
<PAGE>
Exhibit Description Sequentially
Number ----------- Numbered
------- Page
------------
(3) (i) Management Agreement N.A.
Between Global Managers Trust and
Neuberger Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession
No. 0000898432-95-000426.
(ii) Schedule A - Series of N.A.
Global Managers Trust Currently Subject
to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(iii) Schedule B - Schedule of N.A.
Compensation Under the Management
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(4) (i) Sub-Advisory Agreement N.A.
Between Neuberger Berman Management
Incorporated and Neuberger Berman, LLC
with respect to Global Managers Trust.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of N.A.
Global Managers Trust Currently Subject
to Sub-Advisory Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
<PAGE>
Exhibit Description Sequentially
Number ----------- Numbered
------- Page
------------
(e) (1) Distribution Agreement Between N.A.
Neuberger Berman Equity Funds and
Neuberger Berman Management
Incorporated. Incorporated by Reference
to Post-Effective Amendment No. 77 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-97-000516.
(2) Schedule A - Series of Neuberger N.A.
Berman Equity Funds Currently Subject
to the Distribution Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 77 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-97-000516.
(f) Bonus, Profit Sharing or Pension N.A.
Plans. None.
(g) (1) Custodian Contract Between N.A.
Neuberger Berman Equity Funds and State
Street Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(2) Schedule A - Approved N.A.
ForeigNBanking Institutions and
Securities Depositories Under the
Custodian Contract. Incorporated by
Reference to Post-Effective Amendment
No. 3 to the Registration Statement of
Neuberger Berman Equity Assets, File
Nos. 33-82568 and 811-8106, Edgar
Accession No. 0000898432-95-000426.
(3) Schedule B - Approved N.A.
ForeigNBanking Institutions and Securities
Depositories under the Custodian Contract
with Respect to Neuberger Berman
International Fund. To Be Filed by
Amendment.
(4) Schedule of Compensation under N.A.
the Custodian Contract. Incorporated
by Reference to Post-Effective
Amendment No. 76 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession
No. 0000898432-96-000525.
<PAGE>
Exhibit Description Sequentially
Number ----------- Numbered
------- Page
------------
(h) (1) (i) Transfer Agency and Service N.A.
Agreement Between Neuberger Berman
Equity Funds and State Street Bank and
Trust Company. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000314.
(ii) Agreement Between Neuberger N.A.
Berman Equity Funds and State Street
Bank and Trust Company Adding Neuberger
Berman International Fund as a
Portfolio Governed by the Transfer
Agency and Service Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(iii) First Amendment to Transfer N.A.
Agency and Service Agreement Between
Neuberger Berman Equity Funds and State
Street Bank and Trust Company.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(iv) Second Amendment N.A.
to Transfer Agency and Service
Agreement between Neuberger Berman
Equity Funds and State Street Bank and
Trust Company. Incorporated by
Reference to Post-Effective Amendment
No. 77 to Registrant's Registration
Statement, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-97-000516.
(v) Schedule of Compensation N.A.
under the Transfer Agency and Service
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 76 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-96-000525.
<PAGE>
Exhibit Description Sequentially
Number ----------- Numbered
------- Page
------------
(2) (i) Administration Agreement N.A.
Between Neuberger Berman Equity Funds
and Neuberger Berman Management
Incorporated. Incorporated by Reference
to Post-Effective Amendment No. 77 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-97-000516.
(ii) Schedule A - Series of N.A.
Neuberger Berman Equity Funds Currently
Subject to the Administration
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 77 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-97-000516.
(iii) Schedule B - Schedule of N.A.
Compensation Under the Administration
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000314.
(i) Opinion and Consent of Kirkpatrick & N.A.
Lockhart LLP on Securities Matters. To
Be Filed by Amendment.
(j) Consent of Independent Auditors. To N.A.
Be Filed by Amendment.
(k) Financial Statements Omitted from N.A.
Prospectus. None.
(l) Letter of Investment Intent. None. N.A.
(m) Plan Pursuant to Rule 12b-1. None. N.A.
(n) Financial Data Schedule. To Be Filed N.A.
by Amendment.
(o) Plan Pursuant to Rule 18f-3. None. N.A.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY FUNDS
has duly caused this Post-Effective Amendment No. 79 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 24th day of September,1998.
NEUBERGER & BERMAN EQUITY FUNDS
By: /S/LAWRENCE ZICKLIN
--------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 79 has been signed below by the following persons
in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/S/FAITH COLISH Trustee September 24, 1998
- -----------------
Faith Colish
/S/STANLEY EGENER Chairman of the Board September 24, 1998
- -----------------
Stanley Egener and Trustee (Chief
Executive Officer)
/S/HOWARD A. MILEAF Trustee September 24, 1998
- ---------------------
Howard A. Mileaf
/S/EDWARD I. O'BRIEN Trustee September 24, 1998
- ---------------------
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
/S/JOHN T. PATTERSON,JR. Trustee September 24,1998
- ------------------------
John T. Patterson, Jr.
/S/JOHN P. ROSENTHAL Trustee September 24, 1998
- --------------------
John P. Rosenthal
/S/GUSTAVE H. SHUBERT Trustee September 24, 1998
- ---------------------
Gustave H. Shubert
/S/LAWRENCE ZICKLIN President September 24, 1998
- ------------------- and Trustee
Lawrence Zicklin
/S/MICHAEL J. WEINER Vice President September 24, 1998
- -------------------- (Principal Financial
Michael J. Weiner Officer)
/S/RICHARD RUSSELL Treasurer September 24, 1998
- -------------------- (Principal
Richard Russell Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST has duly caused the
Post-Effective Amendment No. 79 to be signed on its behalf by the undersigned,
thereto duly authorized, in the City and State of New York on the 24th day of
September, 1998.
EQUITY MANAGERS TRUST
By: /s/Lawrence Zicklin
-------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 79 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/Faith Colish Trustee September 24, 1998
- -------------------------
Faith Colish
/s/Stanley Egener Chairman of the Board
- ------------------------- and Trustee (Chief September 24, 1998
Stanley Egener Executive Officer)
/s/Howard Mileaf Trustee September 24, 1998
- -------------------------
Howard A. Mileaf
/s/Edward I. O'Brien Trustee September 24, 1998
- -------------------------
Edward I. O'Brien
/s/John T. Patterson, Jr. Trustee September 24, 1998
- -------------------------
John T. Patterson, Jr.
/s/John P. Rosenthal Trustee September 24, 1998
- -------------------------
John P. Rosenthal
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/Gustave H. Shubert Trustee September 24, 1998
- -------------------------
Gustave H. Shubert
/s/Lawrence Zicklin President and Trustee September 24, 1998
- -------------------
Lawrence Zicklin
/s/Michael J.Weiner Vice President (Principal September 24, 1998
- -------------------
Michael J. Weiner Financial Officer)
/s/Richard Russell Treasurer (Principal
- -------------------- Accounting Officer) September 24, 1998
Richard Russell
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, GLOBAL MANAGERS TRUST has duly caused
Post-Effective Amendment No. 79 to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York in the State of New York, on
the 24th day of September,1998.
GLOBAL MANAGERS TRUST
By:/s/Stanley Egener
-----------------
Stanley Egener, Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. 79 has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/Stanley Egener Chairman of the Board September 24, 1998
- ----------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/Howard A. Mileaf Trustee September 24, 1998
- --------------------
Howard A. Mileaf
/s/John T. Patterson,Jr. Trustee September 24,1998
- ------------------------
John T. Patterson, Jr.
/s/John P. Rosenthal Trustee September 24, 1998
- ---------------------
John P. Rosenthal
/s/Michael J. Weiner Vice President September 24, 1998
- --------------------
Michael J. Weiner (Principal Financial
Officer)
/s/Richard Russell Treasurer September 24, 1998
- ------------------- (Principal Accounting
Richard Russell Officer)