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Neuberger Berman
Equity Funds
Annual Report
August 31, 1999
Focus Fund
Genesis Fund
Guardian Fund
International Fund
Manhattan Fund
Millennium Fund
Partners Fund
Regency Fund
Socially Responsive Fund
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TABLE OF CONTENTS
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THE FUNDS
CHAIRMAN'S LETTER A-4
PORTFOLIO COMMENTARY
Focus Fund A-5
Genesis Fund A-8
Guardian Fund A-11
International Fund A-14
Manhattan Fund A-17
Millennium Fund A-20
Partners Fund A-23
Regency Fund A-26
Socially Responsive Fund A-29
GROWTH OF A DOLLAR CHARTS
COMPARISON OF A
$10,000 INVESTMENT
Focus Fund B-1
Genesis Fund B-2
Guardian Fund B-3
International Fund B-4
Manhattan Fund B-5
Millennium Fund B-6
Partners Fund B-7
Regency Fund B-8
Socially Responsive Fund B-9
FINANCIAL STATEMENTS B-10
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Focus Fund B-22
Genesis Fund B-23
Guardian Fund B-24
International Fund B-25
Manhattan Fund B-26
Millennium Fund B-27
Partners Fund B-28
Regency Fund B-29
Socially Responsive Fund B-30
REPORT OF INDEPENDENT
ACCOUNTANTS/AUDITORS B-33
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
TOP TEN EQUITY
HOLDINGS
Focus Portfolio C-1
Genesis Portfolio C-3
Guardian Portfolio C-7
International Portfolio C-10
Manhattan Portfolio C-14
Millennium Portfolio C-17
Partners Portfolio C-20
Regency Portfolio C-23
Socially Responsive
Portfolio C-26
FINANCIAL STATEMENTS C-30
FINANCIAL HIGHLIGHTS
Focus Portfolio C-48
Genesis Portfolio C-49
Guardian Portfolio C-50
International Portfolio C-51
Manhattan Portfolio C-52
Millennium Portfolio C-53
Partners Portfolio C-54
Regency Portfolio C-55
Socially Responsive
Portfolio C-56
REPORT OF INDEPENDENT
ACCOUNTANTS/AUDITORS C-57
DIRECTORY D-1
OFFICERS AND TRUSTEES D-2
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The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the individual fund names in this report
are either service marks or registered trademarks of Neuberger Berman Management
Inc. -C-1999 Neuberger Berman Management Inc.
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CHAIRMAN'S LETTER October 1, 1999
Dear Fellow Shareholder,
In the summer of 1998, the sky appeared to be falling. Southeast Asian
economies had collapsed, Russia was imploding, and Latin America seemed to be on
the brink of financial disaster. Many investors feared that even the mighty U.S.
economy would falter, and they began dumping stocks indiscriminately.
At Neuberger Berman, we urged patience. We worked hard to assess the potential
consequences of overseas economic troubles on our own economy. We came to the
conclusion that things were not as bad as they seemed and opined that the drop
in the U.S. stocks should be viewed as a long-term buying opportunity. In my
letter in last year's Annual Report, I asked the rhetorical question, "Is this
the time to abandon equities?" and answered, "We think not." This turned out to
be good advice, as stocks rallied through most of fiscal 1999.
Where do we go from here? Over the near term, we can't predict. A positive
outlook for the U.S. and global economy must be tempered by concern that
domestic equities valuations are quite high by historical yardsticks. We believe
the only predictable thing in the financial markets is that vigorous investment
research and disciplined portfolio management can enhance long-term returns.
We are pleased to introduce the new Regency portfolio, which commenced
operations on June 1, 1999, with Michael Kassen, Robert Gendelman and S. Basu
Mullick serving as portfolio co-managers. I encourage you to read their
commentary in this report.
Sadly, this will be my last letter to you as Chairman of Neuberger Berman
Equity Funds. After thirty-nine years in the investment business, the last
twenty-five at Neuberger Berman, I am retiring. Although I will continue to
serve as a consultant to the company, I will miss the daily contact with all my
colleagues at Neuberger Berman and the opportunity to share my thoughts with
you. I leave with pride and confidence, however, that the Neuberger Berman
legacy lives on. Your assets remain in the hands of wise and experienced
managers.
Sincerely,
/s/ Stanley Egener
Stanley Egener
Chairman of the Board
Neuberger Berman Equity Funds
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PORTFOLIO COMMENTARY
Neuberger Berman
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Focus Fund
For the six and twelve month periods ending August 31, 1999, the total return
for the Focus Fund was 1.31% and 38.09%. During the same period of time the
Russell 1000 Value Index was up 6.16% and 30.08%. The S&P 500 advanced 7.29% and
39.82% over the corresponding six and twelve month periods. These results are
gratifying because we achieved them during a 12 month period that tested our
discipline, our resolve and at times our patience. Ultimately, adhering to our
long-held value discipline proved rewarding. (See page B-1 for comparison of
$10,000 investment and average annual total returns as of August 31, 1999).*
It is important to remember that, as its name implies, the Focus portfolio is
by design a concentrated portfolio investing at least 90% of net assets in no
more than six sectors. Since we believe that truly attractive valuations are
unlikely to be evenly distributed throughout the entire market at any given
point in time, this focused approach enables us to invest in those few areas
where we believe real value resides. We usually do this by investing in
industries that we think are temporarily out of favor, and we select what we
believe are the best companies in those industries. We believe this creates a
meaningful distinction between the Focus portfolio and other value portfolios:
We seek higher quality companies and we look for equities that have historically
had a significantly higher earnings growth rate than those found in the average
value fund.
For example, two years ago difficulties in Asia led to the semiconductor and
semiconductor equipment industries falling into extreme disfavor. We initiated
or added to our positions in what we consider the best companies in those areas:
Applied Materials, KLA-Tencor, Novellus and Texas Instruments. Their substantial
appreciation helped the fund considerably this year. Their valuations have
recently reached such high levels that we eliminated the first three positions
from our portfolio, and pared back Texas Instruments.
Similarly, a year ago the global financial panic sparked by financial problems
in Russia led to an indiscriminate sell-off of all financial stocks.
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Focus Fund (Cont'd)
We took advantage of this by building up substantial positions in what we
consider the best investment bank (Morgan Stanley Dean Witter); the best money
center bank (Chase Manhattan); the best credit card company (Capital One
Financial); and the best financial services company (CITIGROUP). All of these
contributed noticeably to the fund's performance this year, and all remain
important positions in the fund.
It seems that investors' time horizons have grown increasingly short term,
which in turn has led to higher levels of market volatility. While this can be
disconcerting, it also provides opportunities. Earlier this year, for example,
the stock market became pre-occupied, if not obsessed, with the potential impact
of modifying the nation's computers to handle the transition from 1999 to 2000.
Many investors feared this so-called Y2K problem would require so much spending
that a virtual freeze in software spending would occur. As a result, companies
that rarely show up as real values began coming across our radar screens. While
we recognized that some disruption in typical software spending patterns could
occur, many Y2K issues would be addressed shortly after January 1, 2000. Since
we were willing to endure the discomfort of some short-term volatility, we made
some investments in Oracle, Platinum Technology, BMC Software and Compuware that
have performed well.
As I mentioned at the outset, this has been a year that has tested our
discipline and patience. Our basic discipline, buying the best company in an out
of favor industry at a discount valuation with above average earnings growth,
led both to the successful investments mentioned above, and to two of our most
frustrating investments: Countrywide Credit and Furniture Brands.
Countrywide Credit is the nation's leading mortgage company. While the
company's earnings growth rate has been steady and superior over the last five
years, the stock has significantly underperformed the market over the last year
to the point at which its price-to-earnings ratio is only 25% of the S&P 500's.
The conventional wisdom to explain this unusually low valuation is that the
company's earnings will be pressured by the recent rise in interest rates. We
think this will not be
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Focus Fund (Cont'd)
the case: Countrywide's earnings have increased in each of the last four
quarters, despite a 100 basis point rise in interest rates. We believe our
patience will be rewarded; in the meantime it is being tested.
Furniture Brands is the leading furniture manufacturer in the country. Its
earnings growth over the past five years has averaged 34% a year, far superior
to the overall market. Similar to Countrywide, Furniture Brands' stock also sold
at 25% of the market multiple and its earnings record has been virtually
ignored. The management of Furniture Brands is doing all that an investor could
ask, and we feel that in time the facts of superior earnings growth will, as is
usually the case, overwhelm the market's negative bias.
Looking forward, we are bothered by how narrow the market has become. A
relatively small number of stocks, selling at very high valuations, are
performing far better than the majority of stocks. Still, the price-to-earnings
ratios of the Focus portfolio's holdings seem very attractive given the
prospects of the companies they represent. Adhering to our value discipline
required fortitude last year, but our patience was rewarded. We think the
rewards will continue to accumulate in the future.
Sincerely,
/s/ Kent Simons
Kent Simons
PORTFOLIO MANAGER
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change.
While the value-oriented approach is intended to limit risks, the Portfolio --
with its concentration in sectors -- may be more greatly affected by any single
economic, political or regulatory development than a more diversified mutual
fund.
Past performance is no guarantee of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Genesis Fund
For the six and twelve month periods concluding August 31, 1999, Genesis Fund
gained 11.03% and 19.20%, respectively, compared to the Russell 2000's 9.91% and
28.36% returns over the same time periods (See page B-2 for comparison of a
$10,000 investment and average annual total returns as of August 31, 1999).*
We are pleased with the fund's solid gains in fiscal 1999 following a very
disappointing fiscal 1998. The fund's 12-month returns relative to its Russell
2000 benchmark, however, continue to reflect the large performance gap between
small-cap growth and small-cap value stocks. Indeed, for the fiscal year, the
Russell 2000 Growth Index gained 43.31% compared to the Russell 2000 Value
Index's 14.08% return.
We don't expect the wide performance gulf between growth and value stocks in
the small-cap arena to continue forever. Small-cap value stocks made up some
ground relative to small-cap growth stocks from April through July 1999 as
investor sentiment, especially in Internet stocks, seemed to turn from greed to
fear. We note that the flood of Internet IPOs (Initial Public Offerings) has
slowed to a trickle and that the majority of 1999's Internet IPOs are now
trading below their initial offering prices. We suspect that once-burned,
twice-shy small-cap investors may continue to rotate away from speculative
Internet stocks and into more reasonably valued small companies with operating
track records and positive cash flow and earnings.
At this juncture, however, the investing public is still shying away from
small-cap value stocks. Corporate acquirers, on the other hand, are bargain
hunting, as evidenced by accelerating takeover activity in this market sector.
More than a dozen of our holdings were taken over during this fiscal year and we
suspect more of our portfolio bargains will become targets in the year ahead. We
are also seeing corporate managements aggressively buying their own deeply
discounted stocks. The number of small-cap company share repurchase programs is
approaching the totals seen following the 1987 market crash. This gives us hope
that the investing public will soon become more enthusiastic.
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Genesis Fund (Cont'd)
In the Genesis portfolio during fiscal 1999, our energy investments, primarily
small oil services companies, posted impressive gains. They were among the
portfolio's poorest performers last year, but we added to our positions in the
energy sector, believing that as the global economy recovered, oil prices and
oil service company profits would rebound strongly. Oil has surged to $23 per
barrel, up from around $10 at the 1998 bottom, and we expect oil services
company earning to follow suit.
The portfolio's technology holdings also contributed to returns. On a relative
performance basis, our focus on what we believed were reasonably valued
technology stocks capable of consistent, if not spectacular, earnings growth
worked against us through most of first half fiscal 1999, when the Internet
stocks were sizzling. This strategy worked to our advantage in the second half,
when the "dot-com" stocks flamed out.
Portfolio disappointments include financial stocks, most notably small savings
and loans institutions, whose earnings were restrained by rising interest rates
and the flat yield curve. We believe modestly higher interest rates are already
baked into current valuations. Should interest rates stabilize around current
levels or drop, the financials could regain momentum. Separately, despite
recording decent operating results, our healthcare investments also languished.
This group remains under a cloud of uncertainty regarding changes in federal
insurance reimbursement programs; it also suffers from a general lack of
interest from small-cap investors focused on the hot technology sector. Going
forward, if our healthcare positions meet earnings expectations, we believe they
will receive a better diagnosis from investors.
Let us give you an example of a current portfolio holding that demonstrates
our value-oriented discipline. Bear in mind this is not a recommendation and we
may sell this stock without notice if circumstances change. Methode Electronics
has two businesses. The first, auto electronics components, has been a "steady
as she goes" growth business benefiting from the secular growth of electronic
systems in automobiles. Methode's second business, electronic components that
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Genesis Fund (Cont'd)
expand the bandwidth of telecommunications companies' networks, is considerably
more exciting. The Internet requires faster, higher capacity digital
transmission systems, so the demand for greater bandwidth is exploding. Methode
already has several leading telecommunications equipment companies on its
customer list. Yet, despite a promising start in this fast growth business, at
the close of this reporting period, Methode was trading at around 14 times next
calendar year's earnings estimates. We believe our 20% annual earnings growth
rate projections for Methode could prove conservative if the company's bandwidth
enhancing electronics business lives up to its potential. Even if it takes
longer to develop, we believe the stock is supported at current levels by its
stable auto electronics business.
In closing, the Genesis portfolio delivered solid returns in fiscal 1999. We
stuck with our discipline during a very difficult period for small-cap value
stocks. We see excellent value in our portfolio and remain confident these
bargains will attract more investor attention in the year ahead.
Sincerely,
/s/ Judith Vale /s/ Robert D'Alelio
Judith Vale and Robert D'Alelio
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Genesis Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY
IN COMPANIES WITH SMALL MARKET CAPITALIZATIONS ARE SET FORTH IN THE PROSPECTUS.
Past performance is no guarantee of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Guardian Fund
For the six and twelve month periods concluding August 31, 1999, the Guardian
Fund returned 1.22% and 26.12%, respectively, versus the Russell 1000 Value
Index's 6.16% and 30.08% gains over the same time periods. The S&P 500 advanced
7.29% and 39.82% over the corresponding six and twelve month periods (see
page B-3 for comparison of $10,000 investment and average annual total returns
as of August 31, 1999).*
Technology was a big story in our portfolio in fiscal 1999. In mid-year 1998,
as Wall Street underestimated demand for technology industries, we were able to
buy some solid tech companies at very attractive prices. Then, driven by the
cyclical recovery in semiconductors and semiconductor capital equipment, and
enormous investment in digital communications and Internet infrastructure,
technology companies' operating results began coming in well ahead of
expectations. Analysts' estimates were revised upward through the year and
technology companies kept beating projections. This provided a strong tailwind
for tech stocks, and we saw substantial gains in our technology holdings.
Today, the outlook for technology stocks is somewhat uncertain. Business
conditions continue to be strong, but valuations are high and leave little room
for disappointing earnings. Y2K issues also add a degree of uncertainty about
the future. Although at the end of this reporting period we still have about 15%
of assets in technology, we will likely continue to take profits in this sector.
Our energy investments also delivered strong returns. Oil prices surged and
our positions in the major integrated oil companies took off. As demand trends
continued to improve, we augmented our positions in the integrated oils with
investments in oil services and drilling companies.
Our communications service holdings also closed fiscal 1999 with strong gains.
These stocks have retreated recently due to concern over competitive pricing,
particularly in the long distance business. We
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Guardian Fund (Cont'd)
believe this will prove to be a passing cloud, however, and that our portfolio
companies have the scale, brand identity, and global assets to allow them to
prosper over the long term.
We would say the same about our financial company investments -- among the
portfolio's more disappointing performers this year. Most of these stocks did
well through February, and then began retreating when bond yields trended higher
and the Federal Reserve reversed course and started tightening. We believe
interest rates will stabilize or perhaps rise modestly above current levels and
that financial companies can continue to deliver favorable earnings. We own the
stocks of strong franchises in the banking, insurance, credit card, and
brokerage/asset management industries. Even if we are wrong about interest
rates, we believe these stocks are supported by very attractive valuations
relative to long-term business prospects.
Our capital goods holdings were a drag on performance, particularly our
investments in waste management, which fell short of expectations. We thought
that consolidation in this fragmented industry would improve margins and
earnings. It didn't happen and it's looking like it won't happen in the
foreseeable future. Consequently, we have substantially reduced our exposure to
this group.
Wellpoint Health Network is an example of our investment philosophy at work.
This is not a recommendation, and if fundamentals deteriorate or the stock runs
up out of our value range, we may sell without notice. Formerly named Blue
Cross, Blue Shield of California, Wellpoint is now a national managed healthcare
company. It has all the things we like: favorable operating characteristics; a
strong balance sheet; a history of superior financial returns; terrific
management; and an attractive valuation. We think management's strategy of
offering a wide variety of plan options to a public which demands choice will
pay off. Wellpoint also has very little Medicare business, and therefore is
subject to less federal government regulatory risk than its peers. We are
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Guardian Fund (Cont'd)
projecting 15% average annual earnings growth for the company, and at the end of
this reporting period, the stock was trading at just 15 times next year's
earnings projections.
In closing, a few brief comments on the value versus growth issue. Although
value investors are generally loath to admit it, there have been legitimate
reasons for the superior performance of growth stocks in recent years. Economic
trends -- an extended period of modest economic growth and declining interest
rates -- have favored growth companies. This may be changing. We are in the
midst of a more vigorous economic expansion, which unless choked off by the Fed,
appears to have legs. We expect this to lengthen the earnings cycle for cyclical
stocks. Also, interest rates are no longer declining. This means growth stock
multiples aren't likely to expand, and may contract. Finally, by historical
valuation yardsticks, growth is very expensive and value remains attractive. Our
conclusion is that value investing should provide more competitive and, perhaps,
superior returns in the years ahead.
Sincerely,
/s/ Kevin Risen /s/ Rick White
Kevin Risen and Rick White
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Guardian Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
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PORTFOLIO COMMENTARY
Neuberger Berman
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International Fund
For the six and twelve month periods ended August 31, 1999 the International
Fund was up 12.18% and 21.09% respectively versus the MSCI EAFE Index's return
of 10.55% and 26.03% for the same periods. (See page B-4 for comparison of
$10,000 investment and average annual total returns as of August 31, 1999).*
We are pleased with our results, having weathered some challenging times for
international investing. At this time last year international investors were
suffering through a protracted global emerging markets crisis which began in
Asia during the summer of 1997 and grew worse after Russia's financial troubles
in August 1998. We had pared back our exposure to Latin America, but emerging
market holdings hurt the portfolio's performance in the third quarter of 1998,
the beginning of this fiscal year. Even our holdings in developed international
markets were adversely affected by the global crisis.
The world has greatly changed since then, as has our portfolio. We have
increased our exposure to the markets of the Pacific Rim, including Japan,
Singapore, Hong Kong, and South Korea. Whereas at the end of August 1998 we had
approximately 7% committed to the region, this weighting has grown to 43%. This
strategy proved fortuitous, as the Asian markets have been the leading
contributors to the portfolio's performance this fiscal year.
Most of the shift in assets came from reducing our holdings throughout
Continental Europe. In total, we have reduced our exposure to Europe by
approximately 23%. We find few exciting opportunities in Europe, and while this
market is still a large overall allocation, we feel that European markets in
general appear to be in a neutral holding pattern. In particular, we withdrew
from many investments in Germany where neither economic prospects nor business
outlook seem particularly dynamic.
We also reduced our exposure to emerging markets in Eastern Europe, where the
economy is closely tied to Russia, and other regions,
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International Fund (Cont'd)
including South Africa. Conditions in South Africa, where the portfolio enjoyed
excellent performance from such names as Specialised Outsourcing, have come
under pressure. We had already taken profits and trimmed our holdings, and
currently have no exposure to South Africa.
It is also worth noting that our Latin American allocation, all of which is in
Mexico, stands at its lowest in the history of the fund. Our country and
regional commitments are contingent upon our ability to uncover compelling
investment opportunities. As of this writing, we are still quite cautious about
conditions in Latin America, in large part based on the still uncertain economic
situation in Brazil.
The portfolio is currently diversified across 22 countries with the following
regional allocation.(1)
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NEUBERGER BERMAN
INTERNATIONAL PORTFOLIO MSCI EAFE INDEX
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CONTINENTAL EUROPE 32.8% 46.9%
UNITED KINGDOM 16.9% 21.6%
JAPAN 29.4% 25.3%
PACIFIC BASIN EX
JAPAN 13.6% 6.2%
LATIN AMERICA 0.9% 0.0%
OTHER MARKETS(2) 2.9% 0.0%
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Our industry themes remain constant. We are still very optimistic about the
Telecommunications industry, with 19.4% of the portfolio invested in
telecommunications and related companies. Other industry themes that we favor
are Banking and Finance (13.3% of net assets), Technology (8.2% of net assets)
and Pharmaceuticals (8.7% of net assets). Indeed, our top five performing
stocks, in terms of net contribution for the period, each come from one of these
industries, including: Nokia Corp., Datacraft Asia, Softbank, Venture
Manufacturing, and Takeda Chemical.
1) Regions listed total 96.5% of the Portfolio's holdings.
2) Canada, Bermuda, Russia
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International Fund (Cont'd)
Looking ahead, we will remain flexible in our regional allocations as market
conditions and investment opportunities warrant. We are committed to our
research driven, bottom-up stock selection process to guide us in selecting the
best investments for the fund.
Sincerely,
/s/ Valerie Chang
Valerie Chang
PORTFOLIO MANAGER
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio may invest in many securities not included in the index listed.
The composition, industries and holdings of the Portfolio are subject to
change. International Portfolio is invested in a wide array of stocks and no
single holding makes up more than a small fraction of the Portfolio's total
assets.
INVESTING IN FOREIGN SECURITIES INVOLVES GREATER RISKS THAN INVESTING IN
SECURITIES OF U.S. ISSUERS, INCLUDING CURRENCY FLUCTUATIONS, INTEREST RATES AND
POLITICAL CONDITIONS. IN AN ATTEMPT TO REDUCE OVERALL VOLATILITY, NEUBERGER
BERMAN MANAGEMENT INC. DIVERSIFIES THE PORTFOLIO HOLDINGS OVER A WIDE ARRAY OF
COUNTRIES AND INDIVIDUAL STOCKS.
Past performance is no guarantee of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Manhattan Fund
For the six and twelve month periods ending August 31, 1999, the Manhattan
Fund gained 7.77% and 37.40%, respectively, compared to the Russell Midcap
Growth Index's 11.68% and 48.83% returns over the same time periods (see page
B-5 for comparison of a $10,000 investment and average annual total returns as
of August 31, 1999).*
Our returns were quite healthy this year, although we did lag our benchmark
Russell Midcap Growth Index. We attribute this shortfall to the smaller average
capitalization of our portfolio compared to the benchmark's. Early in the year,
larger stocks materially outperformed smaller ones. We have adjusted our
holdings and the portfolio's weighted average market cap now closely
approximates the benchmark index. We also had a few unpleasant
surprises -- portfolio companies reported earnings below consensus expectations.
The last three months of this reporting period have brought better news,
however, and our fund materially outperformed its benchmark in June, July, and
August.
Our new fiscal year is off to a solid start as well. The corporate earnings
report season that ended in August brought news that 65% of our portfolio
holdings exceeded Wall Street's consensus earnings expectations. These
companies' earnings growth, which had been projected at about 36%, came in
closer to 50%. We believe this will produce some performance momentum as we head
into fiscal 2000.
In fiscal 1999, our technology investments performed exceptionally well. We
took a balanced approach to this sector, allocating assets among software,
semiconductor, telecommunications equipment, and Internet companies. As always,
we had winners and losers, but on average, we earned excellent returns from each
of these tech sectors. Our Internet strategy--favoring companies that provide
essential products and services to a wide range of Internet companies, rather
than putting all our money on narrowly focused companies that may or may not
succeed--served us well, and we believe our strategy will continue to mitigate
risk in this volatile group. While our allocation to Internet stocks remained
fairly constant throughout the fiscal year, we took profits in stocks whose
valuations had soared and redirected that money
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Manhattan Fund (Cont'd)
to more reasonably priced opportunities. This helped us avoid some of the
Internet stocks that collapsed under the weight of excessive valuations in the
second half of the year.
The portfolio's energy holdings also boosted returns. We modestly overweighted
energy in expectation that rising natural gas prices would produce very
favorable earnings surprises in this out-of-favor group. Indeed, our energy
stock earnings came in well above consensus expectations. Our healthcare
investments, however, were a mixed bag. The portfolio's biotechnology holdings
excelled, but our healthcare services stocks took sick. In some instances, it
was a simple case of investor anxiety over prospective changes in federal
insurance reimbursement programs. In other cases it was more
serious -- disappointing earnings. True to our discipline, we removed companies
in the latter situation from our portfolio.
The performance of our telecommunications services investments, primarily
Competitive Local Exchange Carriers (CLECs), disappointed us despite the fact
that earnings met expectations. We call situations like these "performance in
the warehouse." In other words, the earnings growth and value is effectively
sitting on a shelf in the portfolio. We think it is just a matter of time until
this inventory gets marked up.
We continually monitor the Manhattan portfolio's fundamental characteristics
to make sure they are in line with our investment parameters. At the close of
this reporting period, the portfolio was on target. Based on consensus earnings
estimates from First Call, (an independent research firm that compiles and
distributes Wall Street earnings estimates), the portfolio has a 3-5 year
projected annual earnings growth rate of 29.23% compared to 26.65% for the
Russell Midcap Growth Index. Its price/earnings ratio (consensus calendar 2000
earnings estimates) was 33.79 compared to the benchmark's 29.68.
In closing, it's interesting to note that the Russell Midcap Growth Index
handily beat the S&P 500 in fiscal 1999. This was quite a reversal in fortune
considering the whipping the mid-cap index took in fiscal 1998. Does this
foreshadow another good year for mid-cap growth
A-18
<PAGE>
- ----------------------------------------------------------------------
Manhattan Fund (Cont'd)
stocks versus the large-cap market darlings that have been on top for so long?
We don't know. But judging from the declining average capitalization of some of
the leading large-cap growth funds, it appears portfolio managers are beginning
to move down the capitalization ladder in search of opportunities. We welcome
them to the mid-cap arena and hope all their buying power will provide a
tailwind for the mid-cap stocks in our portfolio.
Sincerely,
/s/ Jennifer Silver /s/ Brooke Cobb
Jennifer Silver and Brooke Cobb
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Manhattan Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and/or investment styles as the Portfolio. You should be aware that
the Portfolio is likely to differ from the other mutual funds in size, cash
flow pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-19
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Millennium Fund
For the six month period ended August 31, 1999, the Millennium Fund returned
30.91% compared to 10.85% for the Russell 2000 Growth Index 9.91% for the
Russell 2000 Index. Since its inception on October 20, 1998 through August 31,
1999, the Millennium Fund gained 94.80% versus 34.43% and 22.81% for the Russell
2000 Growth and Russell 2000 Indexes, respectively. Because of the Fund's
aggressive investment approach, its share price is subject to greater volatility
than may be found in a more conservative fund (see page B-6 for comparison of
$10,000 investment and average annual total returns as of August 31, 1999).*
A lot of positive things happened to the Millennium portfolio in our first
year, not the least of which was our launch date. We commenced operations on
October 20, 1998, just 12 days after the small-cap stock market bottomed. We
were able to buy many solid companies at bargain basement prices in what may
prove to have been the small-cap stock "sale of the century." High quality
software, semiconductor, telecommunications equipment, and Internet stocks were
very cheap, and we bought what we view as some of the very best companies in
these businesses at incredible discounts.
We may have bought at the right time and at the right price, but we also made
some timely sell decisions. For example, by the end of March, some of our
Internet holdings were trading at what we believed were unsustainable
valuations. We began taking profits, reducing our Internet stock exposure from
approximately 12% of total assets at the beginning of April to about 4.9% by the
end of the month. As a result, we were able to preserve portfolio gains when
Internet stocks retreated in early summer. Recently, we have taken advantage of
more reasonable pricing to rebuild our Internet exposure to about 12% of assets
at the close of this reporting period.
Technology was not our only productive industry group. We saw nice gains in
our capital goods, consumer cyclicals and financial services investments as
well. Our biggest disappointments came in the healthcare arena. Some qualified
as mistakes and others actually met our
A-20
<PAGE>
- ----------------------------------------------------------------------
Millennium Fund (Cont'd)
expectations, yet failed to attract any investor sponsorship. We have eliminated
the former and held on to the latter. We believe that when the dust clears on
federal insurance reimbursement issues, healthcare companies that grow earnings
will get another look.
Allow us to provide an example of our investment methodology at work. Please
do not consider this a recommendation and be advised we may sell it without
notice should the company not meet our growth expectations. Pinnacle Holdings
owns and manages cellular telephone transmission towers. As the cellular
customer market grows, Pinnacle collects more rent from cellular operators.
Pinnacle is using this cash to build and buy additional towers. At this stage,
Pinnacle is a cash flow story, not an earnings story. We are projecting annual
cash flow growth in the 30-40% range over the next several years. At the end of
this reporting period, Pinnacle stock was trading at just 11.5 times next year's
projected cash flow. We believe that is a very reasonable price for a very good
growth company.
Small-cap growth stocks delivered good returns and performed reasonably well
relative to large-cap growth stocks in fiscal 1999. Can small caps outperform
large caps in the year ahead? We think three things must happen for small caps
to do so. Small caps must grow earnings considerably faster than large caps;
they must present an attractive valuation discount; and investor sentiment must
change. We believe the first two of these requirements are likely to be met.
Russell 2000 earnings are expected to outdistance S&P 500 earnings in coming
years. Despite better projected earnings growth, the Russell currently has a
lower price-to-earnings ratio than the S&P. Investor sentiment, however, does
not seem to have switched direction: After five years of under-performance
relative to large-cap stocks, small-cap mutual funds are still suffering net
redemptions. As mutual fund managers move down the market capitalization
spectrum looking for opportunities, perhaps they will lead the investing public
to what we view as the promised land.
A-21
<PAGE>
- ----------------------------------------------------------------------
Millennium Fund (Cont'd)
In closing, some people say it is better to be lucky than good. We were lucky
this year in that we started operations at a time when the small-cap stock
market was holding a half-off sale. But, we'll take some credit for being good
as well, as is reflected in the portfolio's exceptional returns relative to its
benchmark index. Looking ahead, we don't expect to match this year's rather
spectacular returns. But we do believe there are still some small growth
companies available at very attractive valuations. We are confident that our
research and portfolio management discipline will generate satisfactory returns
for our shareholders in the years ahead.
Sincerely,
/s/ Michael Malouf /s/ Jennifer Silver
Michael Malouf and Jennifer Silver
PORTFOLIO CO-MANAGERS
*THESE ARE CUMULATIVE RETURNS AND ARE NOT ANNUALIZED. THE CUMULATIVE RETURNS FOR
NEUBERGER BERMAN MILLENNIUM FUND, RUSSELL 2000-REGISTERED TRADEMARK- GROWTH
INDEX AND RUSSELL 2000 INDEX ARE FROM OCTOBER 20, 1998, WHICH IS THE INCEPTION
OF THE FUND, THROUGH AUGUST 31, 1999. BECAUSE THIS IS A NEW FUND, SHORT-TERM
RESULTS MAY NOT BE DUPLICATED. AVERAGE NET ASSETS OF THE PORTFOLIO FOR ITS
FIRST TEN MONTHS WERE APPROXIMATELY $32.1 MILLION. IT MAY BE EASIER TO ACHIEVE
HIGHER RETURNS IN A SMALL FUND THAN IN A LARGER FUND. IN PARTICULAR, IPOS HAD A
SIGNIFICANT IMPACT ON THE PERFORMANCE OF THIS FUND. MILLENNIUM FUND'S
PERFORMANCE CAN ALSO BE ATTRIBUTED TO ITS FOCUS ON THE SMALL-CAP GROWTH SECTOR
OF THE STOCK MARKET, WHICH HAS EXPERIENCED A PERIOD OF ACCELERATED GROWTH.
NEUBERGER BERMAN MANAGEMENT INC. CURRENTLY ABSORBS CERTAIN EXPENSES OF THE
FUND. THIS ARRANGEMENT IS SUBJECT TO CHANGE, AND WITHOUT THIS ARRANGEMENT, THE
FUND'S RETURNS WOULD HAVE BEEN LESS. TOTAL RETURN INCLUDES REINVESTMENT OF
DIVIDENDS AND DISTRIBUTIONS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS
AND SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to change.
Millennium Portfolio is invested in a wide array of stocks and no single holding
makes up more than a small fraction of the Portfolio's total assets.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN
COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS.
A-22
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Partners Fund
For the six and twelve month periods concluding August 31, 1999, the Partners
Fund returned 4.84% and 26.08%, respectively, versus the Russell 1000 Value
Index's 6.16% and 30.08% gains over the same time periods. The S&P 500 advanced
7.29% and 39.82% over the corresponding six and twelve month periods (see page
B-7 for comparison of $10,000 investment and average annual total returns as of
August 31, 1999).*
We are pleased to report solid results in fiscal 1999. Growth stocks
materially out-performed value stocks again this year, but investors appear to
be questioning growth stock valuations and reawakening to opportunities in the
value sector. Value stocks in industries such as basic materials, energy,
capital goods, and industrial cyclicals performed quite well in the second half,
while some of the most popular growth stocks retreated. Although the Internet
bubble didn't burst, it lost quite a bit of air. We aren't predicting value will
outpace growth in the year ahead, but we believe the race will be much closer.
Technology stocks made the greatest contribution to our portfolio's returns in
fiscal 1999. For those who question the presence of technology stocks in a value
portfolio, we point out that our gains came from established companies such as
Teradyne, Texas Instruments, Hewlett Packard, and IBM, all of which we bought at
below market average multiples. Technology is not incompatible with value when
high quality companies are available at discounted valuations.
Our basic materials investments performed quite well after a dismal fiscal
1998. The global economy is recovering and revenues for basic materials
companies are exceeding consensus estimates. We believe earnings should begin
reflecting these stronger than anticipated revenue gains. Basic materials
companies still have very little pricing flexibility. But this could change if
demand continues to increase. We believe our basic materials holdings are good
values today, and could become even better ones tomorrow, if some pricing
flexibility returns to their markets in the year ahead.
A-23
<PAGE>
- ----------------------------------------------------------------------
Partners Fund (Cont'd)
Our consumer staples and communications services holdings also boosted our
portfolio performance, with strong performers including Anheuser Busch, Nabisco,
and MCI WorldCom. Rounding out our list of winners is energy. We bought
positions in energy companies because we were confident that as the global
economy stabilized, the price of oil would rebound from its low of $10 per
barrel in 1998. We were delighted to watch it more than double in 1999,
producing excellent gains for our energy holdings.
Financial stocks were among our biggest portfolio disappointments this year,
due in part to the poor performance of our property and casualty insurance
holdings. In our opinion, Ace Ltd. and XL Capital Limited are the premier
underwriters in the business. To their credit, they have refused to participate
in the pricing war that has plagued the industry. But it has cost them revenues
and restrained their earnings. We see a light at the end of the tunnel however,
largely thanks to the declining bond market. Property and casualty insurers have
had huge gains in their bond portfolios in recent years, encouraging them to
pursue business at any price. The losses they are likely to sustain as a result
of under-priced policies, we believe, will eventually eliminate some of the
competition in this business. If we are right, we believe our investments in Ace
and XL Capital Limited could be quite rewarding.
We always provide an example of our investment strategy at work. Please be
advised this not a recommendation, and that we may sell our position without
notice if circumstances warrant it. CIGNA is in the process of overcoming its
identity crisis. It has completed the sale of its property and casualty
insurance assets and is now a pure employee benefits company. Its managed
healthcare business is doing quite well. CIGNA's price-to-earnings multiple has
already expanded from about 12 times earnings (the kind of multiple accorded
property casualty insurers) to around 15. That's only about half-way to the
level of price-to-earnings multiple currently enjoyed by high quality employee
benefits companies. In addition, after a $1 billion share buyback, the company
still has $3.5 billion in cash left from the sale of its insurance
A-24
<PAGE>
- ----------------------------------------------------------------------
Partners Fund (Cont'd)
business. We can't be sure what management will do with this money. However, we
think additional share repurchases or some other effective strategy to enhance
shareholder value is a distinct possibility.
In closing, we are pleased to have rewarded loyal shareholders with solid
returns in fiscal 1999. Although the market continued to favor growth stocks
this year, we believe the tide is turning and that value investing will produce
more competitive returns in the year ahead. Over the long term, we remain
confident that investing in quality companies at opportunistic prices will be an
effective way to grow the assets you have entrusted to us.
Sincerely,
/s/ Robert Gendelman /s/ Michael Kassen /s/ S. Basu Mullick
Robert Gendelman, Michael Kassen, and S. Basu Mullick,
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Partners Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-25
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Regency Fund
From inception on June 1, 1999 through August 31, 1999, the Regency Fund-SM-
lost (1.80%) versus a (4.80%) loss for the Russell Midcap Value Index (see
page B-8 for comparison of $10,000 investment and average annual total returns
as of August 31, 1999).*
We are pleased to have outperformed our benchmark in our first reporting
period. Of course, three month performance in an uninspiring market can't
provide much insight. So we will comment only briefly on what has occurred in
the Regency portfolio's infancy. We earned very generous returns from our
technology and energy investments, two groups that flourished in a market
stalled by the twin specters of higher inflation and rising interest rates. Our
investments in consumer staples, consumer cyclicals, and healthcare
disappointed, while the balance of our industry categories drifted.
In our first letter to shareholders, we'd like to detail our investment
strategy and provide several examples of how we are implementing it. We'll start
by explaining that we are value investors in the traditional sense of the term.
We buy stocks trading at low price-to-earnings and/ or low price-to-cash flow
multiples. Stocks generally have low valuations for a reason. Sometimes, it is
simply investor misperception -- problems more imagined than real. More often,
stocks are cheap because something has gone wrong at the company. We must
determine if something is likely to go right in the future. So we look for a
catalyst -- some element of favorable change in a company's industry or in the
company itself that will result in better operating results and a materially
higher stock price in the future.
The Regency portfolio's valuation characteristics reflect our discipline. The
portfolio has a price-to-next year's projected earnings ratio of 16 and a
price-to-book value ratio of 2.35. It is also worth noting the portfolio has a
trailing 5-year average annual earnings growth rate of 22.7% and a Return on
Equity of 18.6%. Those are fairly impressive profitability numbers for a value
portfolio.
We employ this value strategy in the mid-cap stock arena. Mid-cap stocks are
less widely followed by Wall Street and generally are less widely owned by large
institutions. Consequently, we believe the mid-
A-26
<PAGE>
- ----------------------------------------------------------------------
Regency Fund (Cont'd)
cap universe presents more opportunities for research driven investors like us.
The Regency portfolio's weighted median market capitalization is approximately
$4 billion and its weighted average market cap is about $6 billion. Roughly
eighty two percent of our holdings have capitalizations under $8.8 billion. All
these capitalization characteristics are consistent with those of our Russell
Midcap Value Index benchmark.
That's our strategy. Now, here is an example of how we are putting it to work.
Take heed, this is an illustration of our investment style, not a
recommendation. W.R. Grace is the industry leader in the fluid cracking catalyst
business, selling to refineries worldwide. Despite the company's dominant market
share, it hasn't been making very good money in this business. That's one of the
reasons the stock is trading at just 12 times earnings. The other reason is an
estimated $400 million in potential asbestos liability. New management, formerly
at Allied Signal, has taken over at W.R. Grace and says it is committed to
cutting costs, increasing productivity, and improving margins. Judging from the
last two quarters' earnings, which were much better than Wall Street's consensus
expectations, it is succeeding. Management reportedly plans to use excess cash
flow initially to repurchase shares and eventually to make acquisitions in other
niche industrial businesses. We applaud this strategy and have faith in
management's ability to execute it effectively.
We have taken a very hard look at the asbestos liability issue. Asbestos
liability lawsuits are stable and Grace has strong cash flow to provide for the
full amount of projected liability. We certainly understand investor concern
over this issue. However, we don't believe it will be a significant factor
impacting the company's future value. To sum up, W.R. Grace is number one in its
industry; it trades at a deeply discounted valuation; and it has a catalyst in
the form of new management. Its new managers appear to be succeeding at
improving operating results. They seem to have a sound strategy for growing the
company, and they appear committed to rewarding shareholders.
A-27
<PAGE>
- ----------------------------------------------------------------------
Regency Fund (Cont'd)
In closing, we welcome our new shareholders. We've explained our investment
strategy and provided an example of how we are implementing it. Now it's back to
work, looking for the kind of value-oriented investment opportunities that can
help us achieve our shared investment objectives.
Sincerely,
/s/ Robert Gendelman /s/ S. Basu Mullick
Robert Gendelman and S. Basu Mullick
PORTFOLIO CO-MANAGERS
*THESE ARE CUMULATIVE RETURNS AND ARE NOT ANNUALIZED. THE CUMULATIVE RETURNS FOR
REGENCY FUND AND THE RUSSELL MIDCAP VALUE INDEX ARE FROM JUNE 1, 1999, WHICH IS
THE INCEPTION OF THE FUND, THROUGH AUGUST 31, 1999. BECAUSE THIS IS A NEW FUND,
SHORT-TERM RESULTS MAY NOT BE DUPLICATED. AVERAGE NET ASSETS OF THE PORTFOLIO
FROM INCEPTION THROUGH AUGUST 31, 1999 WERE APPROXIMATELY $6.1 MILLION. IT MAY
BE EASIER TO ACHIEVE HIGHER RETURNS IN A SMALL FUND THAN IN A LARGER FUND. IN
PARTICULAR, IPOS HAD A SIGNIFICANT IMPACT ON THE PERFORMANCE OF THIS FUND.
NEUBERGER BERMAN MANAGEMENT INC.-REGISTERED TRADEMARK- CURRENTLY ABSORBS
CERTAIN EXPENSES OF THE FUND. WITHOUT THIS ARRANGEMENT, THE FUND'S RETURNS
WOULD HAVE BEEN LESS. THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM
INVESTMENTS PRIMARILY IN COMPANIES WITH MEDIUM MARKET CAPITALIZATION ARE SET
FORTH IN THE PROSPECTUS.
For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio may invest in many securities not included in the index listed.
The composition, industries and holdings of the Portfolio are subject to
change. Regency Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Past performance is no guarantee of future results.
A-28
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Socially Responsive Fund
For the six and twelve month periods concluding August 31, 1999, the Socially
Responsive Fund gained 9.89% and 37.09%, respectively, compared to the
Standard & Poor's 500 Index's 7.29% and 39.82% returns over the same time
periods (see page B-9 for comparison of a $10,000 investment and average annual
total returns as of August 31, 1999).*
Value reasserted itself in the second half of fiscal 1999, boosting the
performance of our portfolio to levels competitive with the growth-stock
dominated S&P 500. Beginning in April, value-oriented sectors including basic
materials, energy, capital goods, and industrial and consumer cyclicals rallied
strongly from severely depressed levels. Concurrently, high priced growth
sectors such as branded consumer goods, pharmaceutical companies, and some of
the technology high flyers began to fade.
Is this the beginning of a true value renaissance or only a temporary change
in the growth stock dominance of recent years? Investor behavior is impossible
to predict. However, based on historical valuation benchmarks, value stocks are
still fundamentally cheap and growth stocks are still rather richly priced.
Perhaps more importantly, if the U.S. economy keeps growing at a decent pace and
the rest of the world regains some momentum, we expect economically sensitive
companies in the value camp to continue to enjoy very favorable earnings
comparisons. We are not suggesting growth stock investing won't continue to be
rewarding. However, we do anticipate a broader market in which value stocks will
provide much more competitive returns.
We enjoyed generous returns from our technology holdings in fiscal 1999. This
was not accomplished by owning market darlings with high price-to-earnings
ratios, but rather from our positions in more reasonably priced technology
stocks including Unisys, Intel, and Hewlett Packard. Our success in these stocks
reaffirms our belief that we can generate attractive returns in the technology
sector without sacrificing our value principles. Biotechnology investments
Biogen and Alza also performed quite well.
A-29
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Fund (Cont'd)
Our energy holdings, most notably, oil service company Cooper Cameron,
contributed to portfolio returns, as energy prices rebounded from 1998 lows.
Tyco International, a diversified industrial company with a terrific acquisition
record, and consumer electronics retailer Circuit City made our Top Ten
performance list this year (based on contribution to overall return).
Our two primary sector disappointments were financial stocks and
utilities -- both interest rate sensitive groups that sold off as interest rates
trended higher this summer. If rates continue to rise, financial stocks may come
under more selling pressure. However, if interest rates stabilize around current
levels, we expect financial company earnings to remain relatively strong. With
high quality financial companies now trading at just about half the S&P 500's
price-to-earnings ratio, we view them as outstanding long term investment
bargains. We are less optimistic regarding the prospects for utilities and
consequently, have eliminated them from the portfolio.
As is our custom, we will highlight two socially responsive portfolio
companies we believe have excellent investment potential: Valassis
Communications and Hewlett Packard. Please be advised these are examples of our
investment philosophy at work, not recommendations and we may sell these stocks
without notice if circumstances change. Valassis Communications produces the
coupons accompanying your Sunday newspaper. It's a niche business with only one
major competitor (NewsCorp). We bought Valassis when it was trading at about 12
times earnings and even after an excellent year, it is still trading at 18.5
times next year's estimates -- a discount to the S&P 500's multiple. Named by
Fortune Magazine as one of the 100 best places to work, Valassis' commitment to
the well being of its employees is clearly demonstrated by the fact the company
highlights its progressive workplace policies in its standard presentations to
Wall Street analysts. Good company, good investment value, good corporate
citizen.
A-30
<PAGE>
- ------------------------------------------------------------
Socially Responsive Fund Cont'd
Via an upcoming spin-off, Hewlett Packard is separating its measurement
instrument division from its computer and imaging businesses. We believe this
will help investors focus on HP's strengths, most notably its computer printer
business, which boasts a dominant market share. We believe when the spin-off is
completed, investors will value the sum of the parts higher than the current
price of the whole. Despite excellent performance this year, Hewlett Packard
still trades at a modest price-to-earnings discount to the market. In addition,
HP is a socially responsive role model for corporate America. It is one of the
largest companies led by a woman CEO. In addition to the progressive work-place
policies that earned HP's designation as one of the 100 Best Places to Work, the
company also gets good corporate citizenship grades for its environmentally
friendly product recycling programs.
In closing, although we are stock-specific investors, we also monitor overall
portfolio characteristics to ensure that we are well within the bounds of our
value discipline. The analysis at the close of this reporting period reveals
that the portfolio's price-to-earnings, price-to-cash flow, and price-to-book
value ratios are all below the S&P 500's.
Sincerely,
/s/ Janet Prindle
Janet Prindle
PORTFOLIO MANAGER
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the index listed.
The composition, industries and holdings of the Portfolio are subject to
change. Socially Responsive Portfolio is invested in a wide array of stocks and
no single holding makes up more than a small fraction of the Portfolio's total
assets.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-31
<PAGE>
GLOSSARY OF INDICES
<TABLE>
<S> <C>
S&P 500 INDEX: An unmanaged index generally considered
to be representative of stock market
activity.
RUSSELL 1000-REGISTERED TRADEMARK-INDEX: Measures the performance of the 1,000
largest companies in the Russell
3000-Registered Trademark- Index (which
measures the performance of the 3,000
largest U.S. companies based on total
market capitalization). The Russell
1000 Index represents approximately 92%
of the total market capitalization of
the Russell 3000 Index.
RUSSELL 1000-REGISTERED TRADEMARK-VALUE Measures the performance of those
INDEX: Russell 1000 companies with lower
price-to-book ratios and lower
forecasted growth values.
RUSSELL 2000-REGISTERED TRADEMARK-INDEX: An unmanaged index consisting of
securities of the 2,000 issuers having
the smallest capitalization in the
Russell 3000-Registered Trademark-
Index, representing approximately 8% of
the Russell 3000 total market
capitalization. The smallest company's
market capitalization is roughly $178
million.
RUSSELL 2000-REGISTERED TRADEMARK-GROWTH Measures the performance of those
INDEX: Russell 2000-Registered Trademark-
Index companies with higher
price-to-book ratios and higher
forecasted growth values.
RUSSELL 2000-REGISTERED TRADEMARK-VALUE Measures the performance of those
INDEX: Russell 2000-Registered Trademark-
Index companies with lower
price-to-book ratios and lower
forecasted growth values.
RUSSELL 3000-REGISTERED TRADEMARK-INDEX: Measures the performance of the 3,000
largest U.S. companies based on total
market capitalization.
EAFE-REGISTERED TRADEMARK-INDEX: Also known as the Morgan Stanley
Capital International Europe,
Australasia, Far East Index. An
unmanaged index of over 1,000 foreign
stock prices. The index is translated
into U.S. dollars and includes
reinvestment of all dividends and
capital gain distributions.
RUSSELL MIDCAP-TRADEMARK- INDEX: Measures the performance of the 800
smallest companies in the Russell
1000-Registered Trademark- Index, that
represents approximately 26% of the
total market capitalization of the
Russell 1000 Index (which in turn,
consists of the 1,000 largest US
companies, based on market
capitalization).
RUSSELL MIDCAP-TRADEMARK- GROWTH INDEX: An unmanaged index that measures the
performance of those Russell Midcap
Index companies with higher
price-to-book ratios and higher
forecasted growth values.
RUSSELL MIDCAP-TRADEMARK- VALUE INDEX: An unmanaged index that measures the
performance of those Russell Midcap-
Trademark- Index companies with lower
price-to-book ratios and lower
forecasted growth values.
</TABLE>
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of these indices
are prepared or obtained by Neuberger Berman Management Inc. and include
reinvestment of all dividends and capital gain distributions.
A-32
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Focus Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
FOCUS S&P 500(2)
1 YEAR +38.09% +39.82%
5 YEAR +16.77% +25.11%
10 YEAR +14.38% +17.09%
LIFE OF FUND +12.16% +12.09%
Focus Fund S&P 500
1989 $10,000 $10,000
1990 $9,627 $9,488
1991 $11,164 $12,048
1992 $12,482 $13,004
1993 $16,007 $14,980
1994 $17,665 $15,806
1995 $22,517 $19,192
1996 $23,350 $22,780
1997 $33,605 $32,057
1998 $27,767 $34,647
1999 $38,343 $48,444
</TABLE>
The inception date of Neuberger Berman Focus Fund is 10/19/55.
The Fund's name prior to January 1, 1995 was Neuberger&Berman Selected
Sectors Fund. Prior to November 1, 1991, the investment policies of Neuberger
Berman Focus Fund required that a substantial percentage of its assets be
invested in the energy field; accordingly, performance results prior to that
time do not necessarily reflect the level of performance that may be expected
under the Fund's current investment policies. While the Fund's value-oriented
approach is intended to limit risks, the Portfolio, with its concentration in
sectors, may be more greatly affected by any single economic, political or
regulatory development than a more diversified mutual fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio may invest in many securities not included in the
above-described index.
B-1
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Genesis Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
GENESIS RUSSELL 2000-REGISTERED TRADEMARK-(2)
1 YEAR +19.20% +28.36%
5 YEAR +15.19% +12.31%
10 YEAR +11.41% +10.97%
LIFE OF FUND +13.10% +12.10%
Genesis Fund Russell 2000
1989 $10,000 $10,000
1990 $7,847 $8,019
1991 $10,621 $10,525
1992 $11,163 $11,294
1993 $13,865 $14,967
1994 $14,526 $15,846
1995 $17,386 $19,146
1996 $21,093 $21,218
1997 $30,440 $27,362
1998 $24,711 $22,055
1999 $29,455 $28,309
</TABLE>
The inception date of Neuberger Berman Genesis Fund is 9/27/88.
From May 15, 1995 through December 14, 1997, Neuberger Berman Management Inc.
waived a portion of the management fee borne directly by Neuberger Berman
Genesis Portfolio and indirectly by Neuberger Berman Genesis Fund to reduce that
fee by 0.10% of the Portfolio's average daily net assets per annum. Absent such
waiver, the average annual total returns would have been less.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell 2000 Index is an unmanaged index that measures the performance of
the 2,000 issuers having the smallest capitalization in the Russell
3000-Registered Trademark- Index, representing approximately 8% of the Russell
3000 total market capitalization. The smallest company's market capitalization
is roughly $178 million. Please note that indices do not take into account any
fees and expenses of investing in the individual securities that they track, and
that individuals cannot invest directly in any index. Data about the performance
of this index are prepared or obtained by Neuberger Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
index.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN
COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS.
B-2
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Guardian Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
GUARDIAN S&P 500(2) RUSSELL 1000 -REGISTERED TRADEMARK- VALUE(2)
1 YEAR +26.12% +39.82% +30.08%
5 YEAR +12.75% +25.11% +21.44%
10 YEAR +12.40% +17.09% +15.25%
LIFE OF FUND +12.85% +13.23% N/A
Guardian Fund S&P 500 Russell 1000 Value
1989 $10,000 $10,000 $10,000
1990 $8,751 $9,488 $8,819
1991 $11,418 $12,048 $10,897
1992 $13,004 $13,004 $11,991
1993 $16,181 $14,980 $15,212
1994 $17,657 $15,806 $15,647
1995 $21,905 $19,192 $18,648
1996 $23,059 $22,780 $21,919
1997 $32,210 $32,057 $30,585
1998 $25,511 $34,647 $31,775
1999 $32,173 $48,444 $41,333
</TABLE>
The inception date of Neuberger Berman Guardian Fund is 6/1/50.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell 1000-Registered Trademark- Index measures the performance of the
1,000 largest companies in the Russell 3000-Registered Trademark- Index (which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization). The Russell 1000 Index represents approximately 92% of
the total market capitalization of the Russell 3000 Index. The Russell 1000
Value Index measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The S&P 500 Index is an
unmanaged index generally considered to be representative of stock market
activity. Please note that indices do not take into account any fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
these indices are prepared or obtained by Neuberger Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
indices.
B-3
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
International Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
INTERNATIONAL EAFE-REGISTERED TRADEMARK- INDEX(2)
1 YEAR +21.09% +26.03%
5 YEAR +10.30% +8.52%
LIFE OF FUND +10.81% +8.90%
International Fund EAFE Index
6/15/94 $10,000 $10,000
8/31/94 $10,460 $10,366
1995 $10,732 $10,449
1996 $11,991 $11,305
1997 $14,954 $12,363
1998 $14,104 $12,379
1999 $17,079 $15,601
</TABLE>
The inception date of Neuberger Berman International Fund is 6/15/94.
Neuberger Berman Management Inc. ("Management") has voluntarily undertaken to
reimburse International Fund for its operating expenses and its pro rata share
of its Portfolio's operating expenses which, in the aggregate, exceed 1.70% per
annum of International Fund's average daily net assets ("Expense Limitation"),
subject to termination upon at least 60 days' prior written notice. Absent such
reimbursement, the average annual total returns would have been lower.
International Fund had agreed to repay Management through December 31, 1998 for
its excess operating expenses previously reimbursed by Management, so long as
its annual operating expenses during that period did not exceed the Expense
Limitation. Absent this repayment arrangement, the average annual total returns
would have been higher.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The EAFE 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. The index is translated into U.S. dollars and includes
reinvestment of all dividends and capital gain distributions. Please note that
indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest
directly in any index. Data about the performance of this index are prepared or
obtained by Management and include reinvestment of all dividends and capital
gain distributions. The Portfolio may invest in many securities not included in
the above-described index.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN
COMPANIES BASED OUTSIDE THE UNITED STATES ARE SET FORTH IN THE PROSPECTUS.
B-4
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Manhattan Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
RUSSELL MIDCAP-TM
MANHATTAN S&P 500(2) GROWTH(2)
1 YEAR +37.40% +39.82% +48.83%
5 YEAR +15.72% +25.11% +19.25%
10 YEAR +12.24% +17.09% +15.22%
LIFE OF FUND +16.81% +17.66% N/A
Russell Midcap
Manhattan Fund S&P 500 Growth
1989 $10,000 $10,000 $10,000
1990 $8,754 $9,488 $9,009
1991 $11,044 $12,048 $12,520
1992 $11,568 $13,004 $13,366
1993 $14,779 $14,980 $16,228
1994 $15,295 $15,806 $17,102
1995 $19,270 $19,192 $21,335
1996 $18,710 $22,780 $23,857
1997 $25,961 $32,057 $31,308
1998 $23,101 $34,647 $27,715
1999 $31,741 $48,444 $41,250
</TABLE>
The inception date of Neuberger Berman Manhattan Fund is 3/1/79 when
Neuberger Berman Management Inc. ("Management") first became its investment
adviser.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell Midcap Growth Index measures the performance of those Russell
Midcap-TM- Index companies with higher price-to-book ratios and higher
forecasted growth values. The Russell Midcap Index measures the performance of
the 800 smallest companies in the Russell 1000-Registered Trademark- Index,
which represents approximately 26% of the total market capitalization of the
Russell 1000 Index (which, in turn, consists of the 1,000 largest U.S.
companies, based on market capitalization). The S&P 500 Index is an unmanaged
index generally considered to be representative of overall stock market
activity. Please note that indices do not take into account any fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
these indices are prepared or obtained by Management and include reinvestment of
all dividends and capital gain distributions. The Portfolio may invest in many
securities not included in the above-described indices.
B-5
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Millennium Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
AGGREGATE TOTAL RETURN(1)
MILLENNIUM FUND RUSSELL 2000-REGISTERED TRADEMARK-GROWTH(2) RUSSELL 2000-REGISTERED TRADEMARK-(2)
LIFE OF FUND +94.90% +34.43% +22.81%
Millennium Fund Russell 2000 Growth Russell 2000
10/20/98 $10,000 $10,000 $10,000
8/31/99 $19,490 $13,443 $12,281
</TABLE>
These are cumulative returns and are not annualized. The cumulative returns
for Neuberger Berman Millennium Fund, the Russell 2000 Growth Index, and the
Russell 2000 Index are from October 20, 1998, which is the commencement of
operations of the Fund, through August 31, 1999. Because this is a new fund,
short-term results may not be duplicated. Average net assets of Neuberger Berman
Millennium Portfolio through August 31, 1999 were approximately $32.1 million.
It may be easier to achieve higher returns in a small fund than in a larger
fund. In particular, IPOs had a significant impact on the performance of the
Fund. Millennium Fund's performance can also be attributed to its focus on the
small-cap growth sector of the stock market, which has experienced a period of
accelerated growth. Neuberger Berman Management Inc. ("Management") currently
absorbs certain operating expenses that exceed, in the aggregate, 1.75% of the
average daily net assets per annum of the Fund, subject to termination upon at
least 60 days' prior written notice. Absent this arrangement, which is subject
to change, the Fund's returns would have been less. The risks involved in
seeking capital appreciation from investments primarily in companies with small
market capitalization are set forth in the prospectus.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell 2000 Growth Index measures the performance of those Russell 2000
Index companies with higher price-to-book ratios and higher forecasted growth
values. The Russell 2000 Index is an unmanaged index that measures the
performance of the 2,000 issuers having the smallest capitalization in the
Russell 3000-Registered Trademark- Index, representing approximately 8% of the
Russell 3000 total market capitalization. The smallest company's market
capitalization is roughly $178 million. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of these indices are prepared or obtained by Management
and include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
indices.
B-6
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Partners Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
PARTNERS S&P 500(2) RUSSELL 1000-REGISTERED TRADEMARK- VALUE(2)
1 YEAR +26.08% +39.82% +30.08%
5 YEAR +18.22% +25.11% +21.44%
10 YEAR +14.06% +17.09% +15.25%
LIFE OF FUND +17.63% +16.78% N/A
Partners Fund S&P 500 Russell 1000 Value
1989 $10,000 $10,000 $10,000
1990 $9,318 $9,488 $8,819
1991 $10,998 $12,048 $10,897
1992 $11,933 $13,004 $11,991
1993 $15,291 $14,980 $15,212
1994 $16,141 $15,806 $15,647
1995 $19,616 $19,192 $18,648
1996 $22,335 $22,780 $21,919
1997 $32,858 $32,057 $30,585
1998 $29,563 $34,647 $31,775
1999 $37,273 $48,444 $41,333
</TABLE>
The inception date of Neuberger Berman Partners Fund is 1/20/75 when
Neuberger Berman Management Inc. first became its investment adviser.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell 1000-Registered Trademark- Index measures the performance of the
1,000 largest companies in the Russell 3000-Registered Trademark- Index (which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization). The Russell 1000 Index represents approximately 92% of
the total market capitalization of the Russell 3000 Index. The Russell 1000
Value Index measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The S&P 500 Index is an
unmanaged index generally considered to be representative of stock market
activity. Please note that indices do not take into account any fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
these indices are prepared or obtained by Neuberger Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
indices.
B-7
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Regency Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
AGGREGATE TOTAL RETURN(1)
REGENCY RUSSELL MIDCAP -TM-VALUE(2) RUSSELL MIDCAP-TM-(2)
LIFE OF FUND -1.80% -4.80% -1.92%
Regency Fund Russell Midcap Value Russell Midcap
6/1/99 $10,000 $10,000 $10,000
8/31/99 $9,820 $9,520 $9,808
</TABLE>
These are cumulative returns and are not annualized. The cumulative returns
for Neuberger Berman Regency Fund, the Russell Midcap Value Index, and the
Russell Midcap Index are from June 1, 1999, which is the commencement of
operations of the Fund, through August 31, 1999. Because this is a new fund,
short-term results may not be duplicated. Average net assets of Neuberger Berman
Regency Portfolio through August 31, 1999 were approximately $6.1 million. It
may be easier to achieve higher returns in a small fund than in a larger fund.
In particular, IPOs had a significant impact on the performance of the Fund.
Neuberger Berman Management Inc. ("Management") currently absorbs certain
operating expenses that exceed, in the aggregate, 1.50% of the average daily net
assets per annum of the Fund, until December 31, 2002. Absent this arrangement,
the Fund's returns would have been less. The risks involved in seeking capital
appreciation from investments primarily in companies with medium market
capitalization are set forth in the prospectus.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The Russell Midcap Value Index measures the performance of those Russell
Midcap Index companies with lower price to book ratios and lower forecasted
growth values. The Russell Midcap Index measures the performance of the 800
smallest companies in the Russell 1000-Registered Trademark- Index, which
represents approximately 26% of the total market capitalization of the Russell
1000 Index (which, in turn, consists of the 1,000 largest U.S. companies, based
on market capitalization). Please note that indices do not take into account any
fees and expenses of investing in the individual securities that they track, and
that individuals cannot invest directly in any index. Data about the performance
of these indices are prepared or obtained by Management and include reinvestment
of all dividends and capital gain distributions. The Portfolio may invest in
many securities not included in the above-described indices.
B-8
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Socially Responsive Fund
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN(1)
SOCIALLY RESPONSIVE S&P 500(2)
1 YEAR +37.09% +39.82%
5 YEAR +19.21% +25.11%
LIFE OF FUND +17.60% +23.39%
Socially Responsive Fund S&P 500
3/16/94 $10,000 $10,000
8/31/94 $10,070 $10,279
1995 $11,865 $12,481
1996 $14,261 $14,814
1997 $18,818 $20,848
1998 $17,686 $22,533
1999 $24,245 $31,505
</TABLE>
The inception date of Neuberger Berman Socially Responsive Fund is 3/16/94.
Neuberger Berman Management Inc. ("Management") had voluntarily undertaken to
reimburse Socially Responsive Fund for its operating expenses and its pro rata
share of its Portfolio's operating expenses which, in the aggregate, exceeded
1.50% per annum of Socially Responsive Fund's average daily net assets ("Expense
Limitation"). Absent such reimbursement, the average annual total returns would
have been lower. Socially Responsive Fund had agreed to repay Management through
March 14, 1998 for its excess operating expenses previously reimbursed by
Management, so long as its annual operating expenses during that period did not
exceed the Expense Limitation of the Fund; the Fund has entirely repaid
Management for these amounts. Absent this repayment arrangement, the average
annual total returns would have been higher.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Fund and the return on the investment
both will fluctuate, and redemption proceeds may be higher or lower than an
investor's original cost.
2. The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Management and
include reinvestment of all dividends and capital gain distributions. The
Portfolio may invest in many securities not included in the above-described
index.
B-9
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) FUND FUND FUND
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in corresponding
Portfolio, at value (Note A) $ 1,327,814 $ 848,098 $ 3,446,910
Receivable for Trust shares sold 313 5,080 1,652
Receivable from
administrator -- net (Note B) -- -- --
------------------------------------------------
1,328,127 853,178 3,448,562
------------------------------------------------
LIABILITIES
Payable for Trust shares redeemed 781 1,423 5,508
Payable to administrator -- net
(Note B) 307 194 804
Accrued expenses 431 306 1,217
------------------------------------------------
1,519 1,923 7,529
------------------------------------------------
NET ASSETS at value $ 1,326,608 $ 851,255 $ 3,441,033
------------------------------------------------
NET ASSETS consist of:
Par value $ 37 $ 59 $ 151
Paid-in capital in excess of par
value 685,109 803,757 2,246,592
Accumulated undistributed net
investment income (loss) 118 3,735 6,714
Accumulated net realized gains
(losses) on investment 183,643 (58,958) 746,872
Net unrealized appreciation
(depreciation) in value
of investment 457,701 102,662 440,704
------------------------------------------------
NET ASSETS at value $ 1,326,608 $ 851,255 $ 3,441,033
------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 36,598 59,152 151,434
------------------------------------------------
NET ASSET VALUE, offering and redemption
price per share $36.25 $14.39 $22.72
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-10
<PAGE>
August 31, 1999
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
SOCIALLY
INTERNATIONAL MANHATTAN MILLENNIUM PARTNERS REGENCY RESPONSIVE
FUND FUND FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in
corresponding
Portfolio, at
value (Note A) $ 112,213 $ 565,838 $ 66,037 $ 2,857,082 $ 7,923 $ 118,614
Receivable for
Trust shares sold 586 876 669 1,285 6 489
Receivable from
administrator -- net
(Note B) -- -- -- -- 29 --
---------------------------------------------------------------------------------------------------
112,799 566,714 66,706 2,858,367 7,958 119,103
---------------------------------------------------------------------------------------------------
LIABILITIES
Payable for Trust
shares redeemed 176 302 206 2,595 1 101
Payable to
administrator -- net
(Note B) 25 124 5 653 -- 27
Accrued expenses 82 328 49 761 14 75
---------------------------------------------------------------------------------------------------
283 754 260 4,009 15 203
---------------------------------------------------------------------------------------------------
NET ASSETS at value $ 112,516 $ 565,960 $ 66,446 $ 2,854,358 $ 7,943 $ 118,900
---------------------------------------------------------------------------------------------------
NET ASSETS consist of:
Par value $ 7 $ 47 $ 3 $ 108 $ 1 $ 6
Paid-in capital in
excess of par
value 76,407 401,745 52,893 2,235,773 8,361 88,754
Accumulated
undistributed net
investment
income (loss) (328) -- -- 29,186 10 116
Accumulated net
realized gains
(losses) on
investment 1,519 52,950 7,642 297,910 72 4,840
Net unrealized
appreciation
(depreciation) in
value
of investment 34,911 111,218 5,908 291,381 (501) 25,184
---------------------------------------------------------------------------------------------------
NET ASSETS at value $ 112,516 $ 565,960 $ 66,446 $ 2,854,358 $ 7,943 $ 118,900
---------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
($.001 par value;
unlimited shares
authorized) 6,712 46,894 3,409 108,043 809 5,575
---------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering
and redemption price
per share $16.76 $12.07 $19.49 $26.42 $9.82 $21.33
---------------------------------------------------------------------------------------------------
</TABLE>
B-11
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
FUND FUND FUND
For the For the For the
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
(000'S OMITTED) 1999 1999 1999
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding
Portfolio (Note A) $ 12,149 $ 17,965 $ 62,696
------------------------------------------
Expenses:
Administration fee (Note B) 3,585 2,634 10,690
Amortization of deferred
organization and initial
offering expenses (Note A) -- -- --
Auditing fees 8 8 9
Custodian fees 10 10 10
Legal fees 7 12 14
Registration and filing fees 24 188 48
Reimbursement of expenses
previously assumed by
administrator (Note B) -- -- --
Shareholder reports 159 250 455
Shareholder servicing agent fees 835 1,147 3,447
Trustees' fees and expenses 20 14 52
Miscellaneous 38 26 108
Expenses from corresponding
Portfolio
(Notes A & B) 7,052 7,546 18,987
------------------------------------------
Total expenses 11,738 11,835 33,820
Expenses reimbursed by
administrator and/or reduced by
custodian fee expense offset
arrangement (Note B) (3) (3) (3)
------------------------------------------
Total net expenses 11,735 11,832 33,817
------------------------------------------
Net investment income (loss) 414 6,133 28,879
------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS FROM CORRESPONDING
PORTFOLIO (NOTE A)
Net realized gain (loss) on
investment securities 187,108 (58,582) 660,943
Net realized gain on option
contracts 46 -- 5,673
Net realized gain (loss) on
financial futures contracts -- -- 94,673
Net realized loss on foreign
currency transactions -- -- --
Net realized loss on equity swap
contracts -- -- --
Change in net unrealized
appreciation (depreciation) of
investment securities, financial
futures contracts, option
contracts, equity swap contracts,
translation of assets and
liabilities in foreign currencies,
and foreign currency contracts 227,003 235,324 244,338
------------------------------------------
Net gain (loss) on investments
from corresponding Portfolio
(Note A) 414,157 176,742 1,005,627
------------------------------------------
Net increase (decrease) in net
assets resulting from
operations $ 414,571 $ 182,875 $ 1,034,506
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-12
<PAGE>
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
MILLENNIUM
FUND REGENCY
FUND
For the SOCIALLY
INTERNATIONAL MANHATTAN Period from PARTNERS For the RESPONSIVE
FUND FUND October 20, FUND Period from FUND
1998 June 1, 1999
For the For the (Commencement For the (Commencement For the
Year Year of Operations) Year of Operations) Year
Ended Ended to Ended to Ended
August 31, August 31, August 31, August 31, August 31, August 31,
1999 1999 1999 1999 1999 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Investment income
from corresponding
Portfolio (Note A) $ 1,393 $ 2,810 $ 140 $ 54,515 $ 32 $ 1,314
---------------------------------------------------------------------------------------------------
Expenses:
Administration fee
(Note B) 307 1,473 70 8,070 4 280
Amortization of
deferred
organization and
initial offering
expenses
(Note A) 16 -- -- -- -- 8
Auditing fees 9 10 6 9 5 8
Custodian fees 10 10 9 10 2 10
Legal fees 16 12 30 11 27 11
Registration and
filing fees 27 56 41 184 38 32
Reimbursement of
expenses
previously
assumed by
administrator
(Note B) 20 -- -- -- -- --
Shareholder reports 46 143 60 347 7 47
Shareholder
servicing agent
fees 138 640 29 2,051 1 138
Trustees' fees and
expenses 6 11 5 40 -- 3
Miscellaneous 3 16 2 78 -- 3
Expenses from
corresponding
Portfolio
(Notes A & B) 1,302 3,276 321 14,533 39 640
---------------------------------------------------------------------------------------------------
Total expenses 1,900 5,647 573 25,333 123 1,180
Expenses reimbursed
by administrator
and/or reduced by
custodian fee
expense offset
arrangement
(Note B) (3) (5) (105) (4) (101) --
---------------------------------------------------------------------------------------------------
Total net
expenses 1,897 5,642 468 25,329 22 1,180
---------------------------------------------------------------------------------------------------
Net investment
income (loss) (504) (2,832) (328) 29,186 10 134
---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS FROM
CORRESPONDING PORTFOLIO
(NOTE A)
Net realized gain
(loss) on
investment
securities 15,450 53,255 7,970 304,202 72 4,788
Net realized gain on
option contracts -- -- -- -- -- --
Net realized gain
(loss) on financial
futures contracts (1,360) -- -- -- -- --
Net realized loss on
foreign currency
transactions (2,172) -- -- -- -- --
Net realized loss on
equity swap
contracts (273) -- -- -- -- --
Change in net
unrealized
appreciation
(depreciation) of
investment
securities,
financial futures
contracts, option
contracts, equity
swap contracts,
translation of
assets and
liabilities in
foreign currencies,
and foreign
currency contracts 12,310 122,884 5,908 381,420 (501) 25,901
---------------------------------------------------------------------------------------------------
Net gain (loss)
on investments
from
corresponding
Portfolio
(Note A) 23,955 176,139 13,878 685,622 (429) 30,689
---------------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets
resulting from
operations $ 23,451 $ 173,307 $ 13,550 $ 714,808 $ (419) $ 30,823
---------------------------------------------------------------------------------------------------
</TABLE>
B-13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
FOCUS FUND GENESIS FUND
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1999 1998 1999 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 414 $ 3,949 $ 6,133 $ 9,699
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 187,154 80,090 (58,582) 27,717
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 227,003 (318,701) 235,324 (330,423)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 414,571 (234,662) 182,875 (293,007)
-------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,445) (2,176) (9,718) --
Net realized gain on investments (75,412) (178,818) (27,534) (14,284)
-------------------------------------------------------------
Total distributions to shareholders (78,857) (180,994) (37,252) (14,284)
-------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 129,052 193,247 237,870 1,453,709
Proceeds from reinvestment of
dividends and distributions 69,014 160,844 33,074 13,158
Payments for shares redeemed (327,093) (230,424) (644,388) (798,608)
-------------------------------------------------------------
Net increase (decrease) from Trust
share transactions (129,027) 123,667 (373,444) 668,259
-------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 206,687 (291,989) (227,821) 360,968
NET ASSETS:
Beginning of year 1,119,921 1,411,910 1,079,076 718,108
-------------------------------------------------------------
End of year $ 1,326,608 $ 1,119,921 $ 851,255 $ 1,079,076
-------------------------------------------------------------
Accumulated undistributed net
investment income (loss) at end of
year $ 118 $ 3,155 $ 3,735 $ 9,699
-------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 3,650 5,176 17,134 89,859
Issued on reinvestment of dividends
and distributions 1,951 5,052 2,369 850
Redeemed (9,296) (6,242) (46,885) (50,355)
-------------------------------------------------------------
Net increase (decrease) in shares
outstanding (3,695) 3,986 (27,382) 40,354
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-14
<PAGE>
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
GUARDIAN FUND INTERNATIONAL FUND MANHATTAN FUND
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1999 1998 1999 1998 1999 1998
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income
(loss) $ 28,879 $ 36,229 $ (504) $ (321) $ (2,832) $ (2,526)
Net realized gain
(loss) on
investments from
corresponding
Portfolio (Note A) 761,289 737,046 11,645 (10,595) 53,255 42,660
Change in net
unrealized
appreciation
(depreciation) of
investments from
corresponding
Portfolio (Note A) 244,338 (1,869,600) 12,310 (254) 122,884 (97,621)
---------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets resulting
from operations 1,034,506 (1,096,325) 23,451 (11,170) 173,307 (57,487)
---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (27,356) (37,408) -- -- -- --
Net realized gain on
investments (663,907) (809,963) (86) (1,069) (40,870) (148,169)
---------------------------------------------------------------------------------------------
Total distributions
to shareholders (691,263) (847,371) (86) (1,069) (40,870) (148,169)
---------------------------------------------------------------------------------------------
FROM TRUST SHARE
TRANSACTIONS:
Proceeds from shares
sold 317,386 672,782 170,346 138,963 71,250 82,374
Proceeds from
reinvestment of
dividends and
distributions 637,856 785,350 79 999 37,860 137,125
Payments for shares
redeemed (2,068,212) (1,778,812) (206,780) (117,593) (152,235) (107,644)
---------------------------------------------------------------------------------------------
Net increase
(decrease) from
Trust share
transactions (1,112,970) (320,680) (36,355) 22,369 (43,125) 111,855
---------------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS (769,727) (2,264,376) (12,990) 10,130 89,312 (93,801)
NET ASSETS:
Beginning of year 4,210,760 6,475,136 125,506 115,376 476,648 570,449
---------------------------------------------------------------------------------------------
End of year $ 3,441,033 $ 4,210,760 $ 112,516 $ 125,506 $ 565,960 $ 476,648
---------------------------------------------------------------------------------------------
Accumulated
undistributed net
investment income
(loss) at end of
year $ 6,714 $ 5,254 $ (328) $ (118) $ -- $ --
---------------------------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 13,413 23,020 11,513 8,477 6,259 6,569
Issued on
reinvestment of
dividends and
distributions 28,622 31,246 5 70 3,301 13,235
Redeemed (88,128) (62,892) (13,865) (7,268) (13,292) (8,493)
---------------------------------------------------------------------------------------------
Net increase
(decrease) in
shares outstanding (46,093) (8,626) (2,347) 1,279 (3,732) 11,311
---------------------------------------------------------------------------------------------
</TABLE>
B-15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
Neuberger Berman
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
MILLENNIUM
FUND
Period from
October 20,
1998
(Commencement
of
Operations)
to
August 31,
(000'S OMITTED) 1999
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (328)
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 7,970
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 5,908
-------------
Net increase (decrease) in net
assets resulting from operations 13,550
-------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gain on investments --
-------------
Total distributions to shareholders --
-------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 64,149
Proceeds from reinvestment of
dividends and distributions --
Payments for shares redeemed (11,253)
-------------
Net increase (decrease) from Trust
share transactions 52,896
-------------
NET INCREASE (DECREASE) IN NET ASSETS 66,446
NET ASSETS:
Beginning of year --
-------------
End of year $ 66,446
-------------
Accumulated undistributed net
investment income (loss) at end of
year $ --
-------------
NUMBER OF TRUST SHARES:
Sold 4,097
Issued on reinvestment of dividends
and distributions --
Redeemed (688)
-------------
Net increase (decrease) in shares
outstanding 3,409
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-16
<PAGE>
- ----------------------------------------------------------------------
Equity Funds
<TABLE>
<CAPTION>
REGENCY FUND
Period from
June 1, 1999 SOCIALLY
PARTNERS FUND (Commencement RESPONSIVE FUND
of
Year Operations) Year
Ended to Ended
August 31, August 31, August 31,
1999 1998 1999 1999 1998
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 29,186 $ 26,638 $ 10 $ 134 $ 356
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 304,202 379,905 72 4,788 4,904
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 381,420 (727,668) (501) 25,901 (13,949)
-----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 714,808 (321,125) (419) 30,823 (8,689)
-----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (18,986) -- (355) (83)
Net realized gain on investments (282,180) (583,567) -- (4,467) (1,563)
-----------------------------------------------------------------------------
Total distributions to shareholders (282,180) (602,553) -- (4,822) (1,646)
-----------------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 350,742 759,283 8,590 38,284 44,463
Proceeds from reinvestment of
dividends and distributions 268,026 573,055 -- 4,361 1,494
Payments for shares redeemed (1,009,715) (699,711) (228) (32,244) (12,864)
-----------------------------------------------------------------------------
Net increase (decrease) from Trust
share transactions (390,947) 632,627 8,362 10,401 33,093
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 41,681 (291,051) 7,943 36,402 22,758
NET ASSETS:
Beginning of year 2,812,677 3,103,728 -- 82,498 59,740
-----------------------------------------------------------------------------
End of year $ 2,854,358 $ 2,812,677 $ 7,943 $ 118,900 $ 82,498
-----------------------------------------------------------------------------
Accumulated undistributed net
investment income (loss) at end of
year $ 29,186 $ -- $ 10 $ 116 $ 326
-----------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 13,336 26,171 831 1,926 2,283
Issued on reinvestment of dividends
and distributions 10,691 22,596 -- 224 85
Redeemed (38,449) (24,506) (22) (1,630) (671)
-----------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding (14,422) 24,261 809 520 1,697
-----------------------------------------------------------------------------
</TABLE>
B-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Equity Funds
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Fund ("Focus"), Neuberger Berman Genesis Fund
("Genesis"), Neuberger Berman Guardian Fund ("Guardian"), Neuberger Berman
International Fund ("International"), Neuberger Berman Manhattan Fund
("Manhattan"), Neuberger Berman Millennium Fund ("Millennium"), Neuberger
Berman Partners Fund ("Partners"), Neuberger Berman Regency Fund ("Regency"),
and Neuberger Berman Socially Responsive Fund ("Socially Responsive")
(collectively, the "Funds") are separate operating series of Neuberger Berman
Equity Funds (the "Trust"), a Delaware business trust organized pursuant to a
Trust Instrument dated December 23, 1992. The Trust is registered as a
diversified, open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and its shares are
registered under the Securities Act of 1933, as amended (the "1933 Act").
Millennium and Regency had no operations until October 20, 1998 and June 1,
1999, respectively, other than matters relating to their organization and
registration as diversified, open-end management investment companies under
the 1940 Act, and registration of their shares under the 1933 Act. The
trustees of the Trust may establish additional series or classes of shares
without the approval of shareholders.
The assets of each Fund belong only to that Fund, and the liabilities of
each Fund are borne solely by that Fund and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding portfolio of Equity Managers
Trust (Global Managers Trust with respect to International) (each a
"Portfolio") having the same investment objective and policies as the Fund.
The value of each Fund's investment in its corresponding Portfolio reflects
that Fund's proportionate interest in the net assets of that Portfolio
(85.86%, 48.43%, 72.97%, 97.99%, 92.33%, 96.78%, 75.81%, 95.74%, and 29.87%,
for Focus, Genesis, Guardian, International, Manhattan, Millennium, Partners,
Regency, and Socially Responsive, respectively, at August 31, 1999). 63.74%
of Neuberger Berman Socially Responsive Portfolio is held by another
regulated investment company, which has decided to redeem its interest in the
Portfolio subsequent to August 31, 1999. Neuberger Berman Management Inc.
("Management") is endeavoring to carry out this transaction in a way that
would minimize the effect on the Portfolio. The
B-18
<PAGE>
performance of each Fund is directly affected by the performance of its
corresponding Portfolio. The financial statements of each Portfolio,
including the Schedule of Investments, are included elsewhere in this report
and should be read in conjunction with the corresponding Fund's financial
statements.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
as indicated in the notes following the Portfolios' Schedule of Investments.
3) TAXES: The Funds are treated as separate entities for U.S. Federal income tax
purposes. It is the policy of Focus, Genesis, Guardian, International,
Manhattan, Partners, and Socially Responsive to continue to and the intention
of Millennium and Regency to qualify as regulated investment companies by
complying with the provisions available to certain investment companies, as
defined in applicable sections of the Internal Revenue Code, and to make
distributions of investment company taxable income and net capital gains
(after reduction for any amounts available for U.S. Federal income tax
purposes as capital loss carryforwards) sufficient to relieve it from all, or
substantially all, U.S. Federal income taxes. Accordingly, each Fund paid no
U.S. Federal income taxes and no provision for U.S. Federal income taxes was
required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net of
Portfolio expenses, daily on its investment in its corresponding Portfolio.
Income dividends and distributions from net realized capital gains, if any,
are normally distributed in December. Guardian generally distributes
substantially all of its net investment income, if any, at the end of each
calendar quarter. Income dividends and capital gain distributions to
shareholders are recorded on the ex-dividend date. To the extent each Fund's
net realized capital gains, if any, can be offset by capital loss
carryforwards ($3,865,978 expiring in 2007 for Genesis, determined as of
August 31, 1999), it is the policy of each Fund not to distribute such gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) ORGANIZATION EXPENSES: Organization expenses incurred by International and
Socially Responsive were fully amortized as of August 31, 1999.
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more Funds are allocated in
B-19
<PAGE>
proportion to the net assets of such Funds, except where a more appropriate
allocation of expenses to each Fund can otherwise be made fairly. Expenses
directly attributable to a Fund are charged to that Fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Management as its administrator under an Administration
Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an
administration fee at the annual rate of 0.26% of that Fund's average daily net
assets. Each Fund indirectly pays for investment management services through its
investment in its corresponding Portfolio (see Note B of Notes to Financial
Statements of the Portfolios).
Management has voluntarily undertaken to reimburse International, Millennium,
and Regency for their operating expenses plus their pro rata portion of their
corresponding Portfolio's operating expenses (including the fees payable to
Management but excluding interest, taxes, brokerage commissions, and
extraordinary expenses) ("Operating Expenses") which exceed, in the aggregate,
1.70%, 1.75%, and 1.50%, respectively, per annum of their average daily net
assets (each an "Expense Limitation"). The undertakings for International and
Millennium are subject to termination by Management upon at least 60 days' prior
written notice to the appropriate Fund. For Regency, Management has
contractually undertaken to reimburse any excess Operating Expenses through
December 31, 2002. For the period ended August 31, 1999, such excess expenses
amounted to $102,478 and $100,634 for Millennium and Regency, respectively.
International had agreed to repay Management through December 31, 1998, for its
excess Operating Expenses previously reimbursed by Management, so long as its
annual Operating Expenses during that period did not exceed its Expense
Limitation. For the period from September 1, 1998 to December 31, 1998,
International reimbursed Management $20,095 under this agreement. At August 31,
1999, International has no remaining contingent liability to Management under
the agreement for any amount not repaid through December 31, 1998. Millennium
has agreed to repay Management through December 31, 2000, for its excess
Operating Expenses that Management reimburses through December 31, 1999, so long
as Millennium's Operating Expenses during that period do not exceed its Expense
Limitation. For the period ended August 31, 1999, Millennium has not reimbursed
Management. Regency has agreed to repay Management through December 31, 2005,
for its excess Operating Expenses previously reimbursed by Management, so long
as its annual Operating Expenses during that period do not
B-20
<PAGE>
exceed its Expense Limitation, and the repayments are made within three years
after the year in which Management issued the reimbursement. For the period
ended August 31, 1999, Regency has not reimbursed Management.
As of August 31, 1999, all of the capital stock of Management is owned by
individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a
member firm of The New York Stock Exchange and sub-adviser to each Portfolio.
Several individuals who are officers and/or trustees of the Trust are also
principals of Neuberger and/or officers and/or directors of Management.
Each Fund also has a distribution agreement with Management. Management
receives no compensation therefor and no commissions for sales or redemptions of
shares of beneficial interest of each Fund.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between each Portfolio and Morgan Stanley & Co. Incorporated
("Morgan"), Morgan had agreed to reimburse each Portfolio for transaction costs
incurred on security lending transactions charged by the custodian through
May 31, 1999. The impact of these arrangements, respectively, reflected in the
Statements of Operations under the caption Expenses from corresponding
Portfolio, was a reduction of $1,006 and $2,017, $383 and $2,572, $1,893 and
$1,288, $784 and $2,295, $895 and $4,161, $672 and $1,545, $2,219 and $1,687,
$74 and $0, and $60 and $134, for Focus, Genesis, Guardian, International,
Manhattan, Millennium, Partners, Regency, and Socially Responsive, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the year ended August 31, 1999, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
ADDITIONS REDUCTIONS
- --------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $16,517,000 $ 231,341,000
GENESIS 19,963,000 441,095,000
GUARDIAN 11,352,000 1,842,088,000
INTERNATIONAL 89,580,000 127,476,000
MANHATTAN 18,520,000 105,299,000
MILLENNIUM 55,068,000 2,730,000
PARTNERS 34,202,000 722,985,000
REGENCY 8,467,000 108,000
SOCIALLY RESPONSIVE 18,431,000 14,038,000
</TABLE>
At August 31, 1999, Neuberger Berman International Portfolio's cost of
investments for U.S. Federal income tax purposes was $84,361,000. Gross
unrealized appreciation of investments was $37,716,000 and gross unrealized
depreciation of investments was $2,829,000, resulting in net unrealized
appreciation of $34,887,000, based on cost for U.S. Federal income tax purposes.
B-21
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Fund(1)(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 27.79 $ 38.89 $ 28.46 $ 28.88 $24.42
--------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .02 .10 .08 .19 .17
Net Gains or Losses on Securities (both realized and
unrealized) 10.50 (6.21) 12.00 .85 5.97
--------------------------------------------------------------------
Total From Investment Operations 10.52 (6.11) 12.08 1.04 6.14
--------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.09) (.06) (.22) (.11) (.20)
Distributions (from net capital gains) (1.97) (4.93) (1.43) (1.35) (1.48)
--------------------------------------------------------------------
Total Distributions (2.06) (4.99) (1.65) (1.46) (1.68)
--------------------------------------------------------------------
Net Asset Value, End of Year $ 36.25 $ 27.79 $ 38.89 $ 28.46 $28.88
--------------------------------------------------------------------
Total Return(3) +38.09% -17.37% +43.92% +3.70% +27.47%
--------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $1,326.6 $1,119.9 $1,411.9 $1,071.4 $956.0
--------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .85% .84% .86% .89% --
--------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets .85% .84% .86% .89% .87%
--------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets .03% .27% .21% .69% .75%
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-22
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Fund(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.47 $ 15.55 $10.91 $ 9.52 $ 8.27
---------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) .11 .11 (.01) (.01) --
Net Gains or Losses on Securities (both
realized and unrealized) 2.27 (3.00) 4.80 1.95 1.56
---------------------------------------------------------------------------
Total From Investment Operations 2.38 (2.89) 4.79 1.94 1.56
---------------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.12) -- -- -- --
Distributions (from net capital gains) (.34) (.19) (.15) (.55) (.31)
---------------------------------------------------------------------------
Total Distributions (.46) (.19) (.15) (.55) (.31)
---------------------------------------------------------------------------
Net Asset Value, End of Year $14.39 $ 12.47 $15.55 $10.91 $ 9.52
---------------------------------------------------------------------------
Total Return(3) +19.20% -18.82% +44.32% +21.32% +19.69%
---------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $851.3 $1,079.1 $718.1 $195.4 $111.5
---------------------------------------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(4) 1.17% 1.11% 1.17% 1.28% --
---------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets 1.17% 1.10%(5) 1.16%(5) 1.28%(5) 1.35%(5)
---------------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to
Average Net Assets .61% .72% (.08%) (.18%) (.16%)
---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-23
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Fund(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 21.32 $ 31.41 $ 23.78 $ 23.61 $ 19.52
--------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .18 .18 .15 .31 .27
Net Gains or Losses on Securities (both realized and
unrealized) 5.29 (6.09) 8.96 .90 4.30
--------------------------------------------------------------------
Total From Investment Operations 5.47 (5.91) 9.11 1.21 4.57
--------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.16) (.18) (.24) (.28) (.25)
Distributions (from net capital gains) (3.91) (4.00) (1.24) (.76) (.23)
--------------------------------------------------------------------
Total Distributions (4.07) (4.18) (1.48) (1.04) (.48)
--------------------------------------------------------------------
Net Asset Value, End of Year $ 22.72 $ 21.32 $ 31.41 $ 23.78 $ 23.61
--------------------------------------------------------------------
Total Return(3) +26.12% -20.80% +39.69% +5.27% +24.06%
--------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $3,441.0 $4,210.8 $6,475.1 $4,905.2 $3,947.5
--------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .82% .79% .80% .82% --
--------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets .82% .79% .80% .82% .80%
--------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets .70% .59% .55% 1.37% 1.40%
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-24
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
International Fund(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.85 $14.83 $11.91 $10.70 $10.46
--------------------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (.08) (.03) -- .01 .06
Net Gains or Losses on Securities (both realized and
unrealized) 3.00 (.81) 2.94 1.24 .21
--------------------------------------------------------------------
Total From Investment Operations 2.92 (.84) 2.94 1.25 .27
--------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) -- -- (.02) (.04) (.03)
Distributions (from net capital gains) (.01) (.14) -- -- --
--------------------------------------------------------------------
Total Distributions (.01) (.14) (.02) (.04) (.03)
--------------------------------------------------------------------
Net Asset Value, End of Year $16.76 $13.85 $14.83 $11.91 $10.70
--------------------------------------------------------------------
Total Return(3) +21.09% -5.69% +24.71% +11.73% +2.60%
--------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $112.5 $125.5 $115.4 $ 57.0 $ 26.4
--------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) 1.61% 1.71% 1.70% 1.70% --
--------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(5) 1.61% 1.70% 1.70% 1.70% 1.70%
--------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net
Assets (.43%) (.24%) (.02%) .24% .73%
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-25
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Fund(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 9.42 $14.51 $11.94 $13.27 $11.28
--------------------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (.06) (.05) (.03) (.04) --
Net Gains or Losses on Securities (both realized and
unrealized) 3.54 (1.20) 4.26 (.33) 2.70
--------------------------------------------------------------------
Total From Investment Operations 3.48 (1.25) 4.23 (.37) 2.70
--------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) -- -- -- -- (.01)
Distributions (from net capital gains) (.83) (3.84) (1.66) (.96) (.70)
--------------------------------------------------------------------
Total Distributions (.83) (3.84) (1.66) (.96) (.71)
--------------------------------------------------------------------
Net Asset Value, End of Year $12.07 $ 9.42 $14.51 $11.94 $13.27
--------------------------------------------------------------------
Total Return(3) +37.40% -11.02% +38.75% -2.91% +26.00%
--------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $566.0 $476.6 $570.4 $516.2 $612.0
--------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) 1.00% .95% .99% .98% --
--------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets 1.00% .94% .98% .98% .98%
--------------------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average Net
Assets (.50%) (.42%) (.20%) (.27%) .03%
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-26
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Millennium Fund(2)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Period from
October 20, 1998(6)
to
August 31,
1999
-------------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
-------------------
Income From Investment Operations
Net Investment Loss (.10)
Net Gains or Losses on Securities (both realized and
unrealized) 9.59
-------------------
Total From Investment Operations 9.49
-------------------
Net Asset Value, End of Period $19.49
-------------------
Total Return(3)(7) +94.90%
-------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 66.4
-------------------
Ratio of Gross Expenses to Average Net Assets(4)(8) 1.76%
-------------------
Ratio of Net Expenses to Average Net Assets(5)(8) 1.75%
-------------------
Ratio of Net Investment Loss to Average Net Assets(8) (1.23%)
-------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-27
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Fund(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 22.97 $ 31.60 $ 23.88 $ 23.72 $ 21.32
--------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .27 .23 .19 .22 .17
Net Gains or Losses on Securities (both realized and
unrealized) 5.59 (2.83) 10.36 2.84 3.94
--------------------------------------------------------------------
Total From Investment Operations 5.86 (2.60) 10.55 3.06 4.11
--------------------------------------------------------------------
Less Distributions
Dividends (from net investment income) -- (.19) (.22) (.20) (.11)
Distributions (from net capital gains) (2.41) (5.84) (2.61) (2.70) (1.60)
--------------------------------------------------------------------
Total Distributions (2.41) (6.03) (2.83) (2.90) (1.71)
--------------------------------------------------------------------
Net Asset Value, End of Year $ 26.42 $ 22.97 $ 31.60 $ 23.88 $ 23.72
--------------------------------------------------------------------
Total Return(3) +26.08% -10.03% +47.11% +13.86% +21.53%
--------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $2,854.4 $2,812.7 $3,103.7 $1,871.9 $1,564.0
--------------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .82% .80% .81% .84% --
--------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets .82% .80% .81% .84% .83%
--------------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets .94% .78% .72% .93% .83%
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-28
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Regency Fund(2)
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Period from
June 1, 1999(6)
to
August 31,
1999
---------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
---------------
Income From Investment Operations
Net Investment Income .01
Net Gains or Losses on Securities (both realized and
unrealized) (.19)
---------------
Total From Investment Operations (.18)
---------------
Net Asset Value, End of Period $ 9.82
---------------
Total Return(3)(7) -1.80%
---------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 7.9
---------------
Ratio of Gross Expenses to Average Net Assets(4)(8) 1.51%
---------------
Ratio of Net Expenses to Average Net Assets(5)(8) 1.50%
---------------
Ratio of Net Investment Income to Average Net Assets(8) .66%
---------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-29
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Fund(2)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 16.32 $17.79 $13.88 $11.84 $10.07
------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .02 .07 .03 .02 .03
Net Gains or Losses on Securities
(both realized and unrealized) 5.94 (1.11) 4.33 2.35 1.76
------------------------------------------------------------------------
Total From Investment Operations 5.96 (1.04) 4.36 2.37 1.79
------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.07) (.03) (.03) (.02) (.02)
Distributions (from net capital
gains) (.88) (.40) (.42) (.31) --
------------------------------------------------------------------------
Total Distributions (.95) (.43) (.45) (.33) (.02)
------------------------------------------------------------------------
Net Asset Value, End of Year $ 21.33 $16.32 $17.79 $13.88 $11.84
------------------------------------------------------------------------
Total Return(3) +37.09% -6.02% +31.96% +20.19% +17.82%
------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 118.9 $ 82.5 $ 59.7 $ 32.9 $ 8.2
------------------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(4) 1.10% 1.10% 1.49% 1.50% --
------------------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets 1.10% 1.10% 1.48%(5) 1.50%(5) 1.51%(5)
------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets .12% .43% .23% .19% .36%
------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-30
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman August 31, 1999
- ----------------------------------------------------------------------
Equity Funds
1) Prior to January 1, 1995, its name was Neuberger&Berman Selected Sectors
Fund.
2) The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
income and expenses.
3) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. For International,
Millennium, Regency, and Socially Responsive, total return would have been
lower if Management had not reimbursed certain expenses. For Genesis, total
return would have been lower if the investment manager had not waived a
portion of the management fee.
4) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
5) Had the investment manager not waived a portion of the management fee borne
directly by Neuberger Berman Genesis Portfolio as described in Note B of
Notes to Financial Statements of the Portfolios the annualized ratios of net
expenses to average daily net assets would have been:
<TABLE>
Year Ended August 31,
1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses 1.12% 1.26% 1.38% 1.38%
-----------------------------------------
</TABLE>
After reimbursement of expenses by Management as described in Note B of
Notes to Financial Statements. Had Management not undertaken such action the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
Year Ended August
31,
INTERNATIONAL 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net Expenses 2.28% 2.31%
-------------------
</TABLE>
B-31
<PAGE>
<TABLE>
Period from
October 20, 1998 to
August 31,
MILLENNIUM 1999
- ------------------------------------------------------------------------------------
<S> <C>
Net Expenses 2.13%
----------------------
</TABLE>
<TABLE>
Period from
June 1, 1999 to
August 31,
REGENCY 1999
- -------------------------------------------------------------------------------
<S> <C>
Net Expenses 8.38%
-----------------
</TABLE>
<TABLE>
Year Ended August
31,
SOCIALLY RESPONSIVE 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net Expenses 1.69% 2.50%
-------------------
</TABLE>
Had International not reimbursed Management, as described in Note B of Notes
to Financial Statements, the annualized ratios of net expenses to average daily
net assets would have been:
<TABLE>
Year Ended August 31,
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.59% 1.61% 1.69%
------------------------------
</TABLE>
Had Socially Responsive not reimbursed Management, the annualized ratios of
net expenses to average daily net assets would have been:
<TABLE>
Year Ended
August 31,
1997
- --------------------------------------------------------------------------
<S> <C>
Net Expenses 1.20%
------------
</TABLE>
6) The date investment operations commenced.
7) Not annualized.
8) Annualized.
B-32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Neuberger Berman Equity Funds and
Shareholders of
Neuberger Berman Manhattan Fund,
Neuberger Berman Millennium Fund,
Neuberger Berman Regency Fund, and
Neuberger Berman Socially Responsive Fund
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger
Berman Regency Fund, and Neuberger Berman Socially Responsive Fund (collectively
the "Funds") at August 31, 1999, and the results of their operations, the
changes in their net assets, and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 1999
B-33
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger Berman Equity Funds and
Shareholders of:
Neuberger Berman Focus Fund
Neuberger Berman Genesis Fund
Neuberger Berman Guardian Fund
Neuberger Berman International Fund and
Neuberger Berman Partners Fund
We have audited the accompanying statements of assets and liabilities of the
Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger Berman
Guardian Fund, Neuberger Berman International Fund, and Neuberger Berman
Partners Fund, five of the series constituting the Neuberger Berman Equity Funds
(the "Trust"), as of August 31, 1999, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Neuberger Berman Equity Funds at August 31,
1999, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 1, 1999
B-34
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Citigroup Inc. 9.1%
2. Chase Manhattan 7.3%
3. Capital One Financial 6.8%
4. Morgan Stanley Dean Witter 5.7%
5. Compuware Corp. 5.1%
6. Countrywide Credit Industries 4.9%
7. Wellpoint Health Networks 4.9%
8. BankBoston Corp. 3.3%
9. Rational Software 3.1%
10. Atmel Corp. 3.1%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (96.6%)
AUTOMOTIVE (3.0%)
705,000 General Motors $ 46,618
----------
FINANCIAL SERVICES (47.1%)
833,000 Bank One 33,424
1,090,000 BankBoston Corp. 50,617
2,767,500 Capital One Financial 104,473
1,355,000 Chase Manhattan 113,397
3,183,375 Citigroup Inc. 141,461
2,381,000 Countrywide Credit Industries 76,490
560,000 Hartford Financial Services
Group 25,445
1,025,000 Morgan Stanley Dean Witter 87,958
568,700 Nationwide Financial Services 20,758
390,000 Providian Financial 30,274
1,243,000 Travelers Property Casualty 44,126
----------
728,423
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
HEALTH CARE (6.4%)
1,865,990 Foundation Health Systems $ 23,791(2)
1,040,000 Wellpoint Health Networks 75,790(2)
----------
99,581
----------
RETAIL (10.8%)
1,800,000 Furniture Brands International 36,113(2)
1,638,400 Jones Apparel Group 42,496(2)
1,048,700 Kmart Corp. 13,174(2)
345,000 Payless ShoeSource 17,207(2)
995,000 Promus Hotel 28,917(2)
1,525,000 Sterling Commerce 29,166(2)
----------
167,073
----------
TECHNOLOGY (29.3%)
1,380,000 3Com Corp. 34,241(2)
1,200,000 Atmel Corp. 47,175(2)
504,000 Autodesk, Inc. 11,592
657,000 BMC Software 35,355(2)
1,185,000 Compaq Computer 27,477(3)
2,594,800 Compuware Corp. 78,331(2)
175,000 Lattice Semiconductor 10,784(2)
605,000 Microchip Technology 33,124(2)
1,150,000 Oracle Corp. 41,975(2)
1,302,500 Photronics, Inc. 31,097(2)(4)
1,795,000 Rational Software 48,577(2)
495,000 Tech Data 18,346(2)
420,000 Texas Instruments 34,466
----------
452,540
----------
TOTAL COMMON STOCKS (COST
$987,085) 1,494,235
----------
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Focus Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.5%)
$22,890,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $22,893,338,
Collateralized by $22,645,000
U.S. Treasury Bonds, 8.25%,
due 5/15/05 (Collateral Value
$23,579,106) (COST $22,890) $ 22,890(5)
----------
SHORT-TERM INVESTMENTS (0.5%)
7,114,402 N&B Securities Lending Quality
Fund, LLC (COST $7,114) 7,114(5)
----------
TOTAL INVESTMENTS (98.6%) (COST
$1,017,089) 1,524,239(6)
Cash, receivables and other
assets, less liabilities (1.4%) 22,159
----------
TOTAL NET ASSETS (100.0%) $1,546,398
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-2
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Alliant Techsystems 2.8%
2. Dallas Semiconductor 2.7%
3. Newport News Shipbuilding 2.4%
4. Zebra Technologies 2.2%
5. AAR Corp. 2.2%
6. AptarGroup Inc. 2.1%
7. Trigon Healthcare 2.0%
8. Webster Financial 1.8%
9. United Stationers 1.7%
10. Cordant Technologies 1.6%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (96.5%)
AEROSPACE (6.7%)
1,771,350 AAR Corp. $ 37,863(4)
1,219,500 Aviall Inc. 13,567(2)(4)
658,700 Cordant Technologies 27,254
478,300 DONCASTERS PLC ADR 6,636(2)(4)
299,850 Ducommun Inc. 3,598(2)
205,400 Howmet International 3,672(2)
425,000 Ladish Co. 2,975(2)
344,700 Moog, Inc. Class A 11,289(2)
471,500 Orbital Sciences 10,461(2)
----------
117,315
----------
AUTOMOTIVE (0.7%)
607,200 Donaldson Co. 11,916
----------
BANKING & FINANCIAL (7.2%)
534,200 Bank United 18,330
573,100 Community First Bankshares 11,766
667,600 Cullen/Frost Bankers 17,441
331,400 Highland Bancorp 6,172(4)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
291,000 Ocean Financial $ 5,202
1,008,300 Peoples Heritage Financial
Group 16,952
116,212 Queens County Bancorp 3,196
726,675 Sterling Bancshares 8,720
300,350 Texas Regional Bancshares 7,678
1,163,400 Webster Financial 31,339
----------
126,796
----------
BASIC MATERIALS (0.5%)
230,200 Lone Star Industries 7,913
----------
BUILDING, CONSTRUCTION & FURNISHING (1.1%)
294,800 Lincoln Electric Holdings 5,970
273,600 Simpson Manufacturing 14,090(2)
----------
20,060
----------
BUSINESS SERVICES (3.0%)
1,075,600 Davox Corp. 14,991(2)(4)
343,500 Fair, Isaac & Co. 9,704
418,300 Navigant Consulting 18,353(2)
209,000 Valassis Communications 9,144(2)
----------
52,192
----------
CONSUMER CYCLICALS (0.4%)
417,600 Coachmen Industries 6,603
----------
CONSUMER PRODUCTS & SERVICES (5.7%)
801,000 Alberto-Culver Class A 17,272
530,637 Block Drug 21,325
101,800 Bush Boake Allen 2,653(2)
521,300 Church & Dwight 24,241
349,800 Matthews International 9,488
1,086,800 Ruddick Corp. 20,174
462,000 The First Years 4,995
----------
100,148
----------
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
DEFENSE (6.1%)
663,200 Alliant Techsystems $ 48,414(2)(4)
1,309,100 Newport News Shipbuilding 41,155
800,400 Primex Technologies 16,708(4)
----------
106,277
----------
DIAGNOSTIC EQUIPMENT (0.3%)
906,500 ADAC Laboratories 5,326
----------
ELECTRONICS (4.9%)
456,900 Benchmark Electronics 16,820(2)
951,900 Dallas Semiconductor 48,071
289,800 Etec Systems 12,751(2)
172,100 SCI Systems 8,573(2)
----------
86,215
----------
ENERGY (1.8%)
692,300 Cabot Oil & Gas 13,197
150,000 Cross Timbers Oil 1,856
808,290 Swift Energy 10,205(2)
875,800 Unit Corp. 6,733(2)
----------
31,991
----------
HEALTH CARE (9.8%)
977,800 Acuson Corp. 15,400(2)
174,600 Arrow International 5,063
275,400 CONMED Corp. 7,711(2)
709,000 DENTSPLY International 17,592
1,207,900 Haemonetics Corp. 23,630(2)
885,300 Mentor Corp. 20,694
389,950 Patterson Dental 15,988(2)
275,000 Respironics, Inc. 2,733(2)
503,700 STAAR Surgical 5,981(2)
940,700 Trigon Healthcare 34,159(2)
679,600 Universal Health Services
Class B 22,682(2)
----------
171,633
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
----------
INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (7.2%)
356,300 BMC Industries $ 4,387
474,900 Brady Corp. 14,247
282,000 Dionex Corp. 11,227(2)
1,261,300 Hussmann International 21,442
369,700 IDEX Corp. 10,929
770,200 Kaydon Corp. 23,636
183,100 Roper Industries 6,557
814,400 SOS Staffing Services 4,835(2)(4)
1,247,400 Wallace Computer Services 26,663
203,750 Woodhead Industries 2,248
----------
126,171
----------
INSURANCE (3.5%)
910,200 Annuity and Life Re 20,138
660,800 FBL Financial Group 13,092
857,900 Scottish Annuity & Life
Holdings 8,365
858,700 W. R. Berkley 19,535
----------
61,130
----------
LODGING (0.5%)
846,000 Prime Hospitality 7,878
----------
MACHINERY & EQUIPMENT (0.8%)
686,600 Gardner Denver Machinery 13,174(2)
----------
OFFICE EQUIPMENT (1.7%)
1,350,900 United Stationers 30,564(2)
----------
OIL SERVICES (9.5%)
390,700 Cal Dive International 14,700(2)
748,600 Friede Goldman International 9,170(2)
1,018,800 Global Industries 11,398(2)
938,100 IRI International 4,397(2)
619,500 Nabors Industries 16,843(2)
1,538,712 National-Oilwell 26,158(2)
793,400 Oceaneering International 15,918(2)
</TABLE>
C-4
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
781,600 Offshore Logistics $ 9,135(2)
777,300 Pride International 11,562(2)
579,400 Smith International 27,051(2)
636,000 Tuboscope Inc. 9,262(2)
513,200 UTI Energy 10,264(2)
----------
165,858
----------
PACKING & CONTAINERS (2.1%)
1,450,100 AptarGroup Inc. 37,340
----------
PUBLISHING & BROADCASTING (2.2%)
155,239 Hearst-Argyle Television 3,929(2)
329,300 Houghton Mifflin 15,724
467,100 Meredith Corp. 16,203
78,866 Pulitzer Inc. 3,455
----------
39,311
----------
RESTAURANTS (1.2%)
890,050 Brinker International 21,361(2)
----------
RETAILING (2.7%)
527,968 99 Cents Only Stores 19,007(2)
471,600 Claire's Stores 8,872
340,000 ShopKo Stores 9,732(2)
273,800 Whole Foods Market 9,840(2)
----------
47,451
----------
TECHNOLOGY (8.0%)
798,700 Analysts International 10,683
242,000 Black Box 11,102(2)
543,600 CACI International 12,231(2)
2,201,600 Inprise Corp. 9,288(2)
322,400 Jack Henry & Associates 10,478
250,000 Keane, Inc. 5,422
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
(2)
1,507,500 Methode Electronics Class A $ 27,135
1,009,900 Wind River Systems 16,095(2)
812,500 Zebra Technologies 38,187(2)
----------
140,621
----------
TRANSPORTATION, SHIPPING & FREIGHT (0.7%)
232,900 Air Express International 5,692
190,900 Circle International Group 4,725
213,600 Maritrans Inc. 1,081
----------
11,498
----------
UTILITIES, ELECTRIC & GAS (8.2%)
834,700 AGL Resources 15,077
326,000 Atmos Energy 8,170
282,500 Central Hudson Gas & Electric 11,936
190,200 Connecticut Energy 7,109
144,300 Eastern Enterprises 6,484
855,200 Montana Power 26,458
173,000 National Fuel Gas 8,142
180,300 NICOR Inc. 6,975
345,900 NUI Corp. 8,864
283,100 ONEOK, Inc. 8,794
213,500 Otter Tail Power 8,500
766,784 Sierra Pacific Resources 18,690
290,000 Washington Gas Light 7,739
----------
142,938
----------
TOTAL COMMON STOCKS (COST
$1,548,759) 1,689,680
----------
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.5%)
$26,740,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.25%, due 9/1/99, dated
8/31/99, Maturity Value
$26,743,900, Collateralized
by $27,405,000 U.S. Treasury
Notes, 5.875%, due 2/15/00
(Collateral Value
$27,543,505) (COST $26,740) $ 26,740(5)
----------
SHORT-TERM INVESTMENTS (3.6%)
10,000,000 American Express Credit Corp.,
5.13%, due 9/3/99 9,997
10,000,000 General Electric Capital
Corp., 5.23%, due 9/8/99 9,990
42,524,723 N&B Securities Lending Quality
Fund, LLC 42,525
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $62,512) 62,512(5)
----------
TOTAL INVESTMENTS (101.6%)
(COST $1,638,011) 1,778,932(6)
Liabilities, less cash,
receivables and other assets
[(1.6%)] (27,828)
----------
TOTAL NET ASSETS (100.0%) $1,751,104
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-6
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Wellpoint Health Networks 4.0%
2. MCI WorldCom 3.1%
3. Aetna Inc. 3.0%
4. Chase Manhattan 2.8%
5. Capital One Financial 2.8%
6. Wells Fargo 2.7%
7. Conseco, Inc. 2.6%
8. IBM 2.2%
9. Xerox Corp. 2.1%
10. Kimberly-Clark 2.1%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (86.0%)
BANKING & FINANCIAL (7.9%)
792,400 Bank of America $ 47,940
1,400,800 BankBoston Corp. 65,049
1,576,100 Chase Manhattan 131,900
3,174,500 Wells Fargo 126,385
----------
371,274
----------
BASIC MATERIALS (3.5%)
2,996,000 Cabot Corp. 69,095
367,500 International Paper 17,295
1,340,200 Lyondell Chemical 19,517
2,603,600 Millennium Chemicals 59,883
----------
165,790
----------
CAPITAL GOODS (2.8%)
425,700 Emerson Electric 26,659
4,176,800 Republic Services 45,423(2)
1,227,900 SCI Systems 61,165(2)
----------
133,247
----------
COMMUNICATION SERVICES (6.4%)
1,818,000 AT&T Corp. 81,810
1,214,700 Bell Atlantic 74,401
1,957,100 MCI WorldCom 148,250(2)
----------
304,461
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
CONSUMER CYCLICALS (7.3%)
479,100 Carnival Corp. $ 21,410
4,123,100 Cendant Corp. 73,958
525,000 Federated Department Stores 24,150(2)
976,400 General Motors 64,564
2,077,600 Lear Corp. 83,494(2)
893,200 Lowe's Cos. 40,417
3,545,300 Office Depot 37,004(2)
----------
344,997
----------
CONSUMER STAPLES (5.7%)
1,106,300 AMFM Inc. 54,485(2)
1,715,500 Kimberly-Clark 97,676
1,378,600 McDonald's Corp. 57,040(3)
1,620,000 Philip Morris 60,649
----------
269,850
----------
ENERGY (9.0%)
868,500 Amerada Hess 53,901
356,400 Chevron Corp. 32,878
602,400 Diamond Offshore Drilling 23,042
1,070,400 Halliburton Co. 49,640
680,100 Mobil Corp. 69,625
390,500 Royal Dutch Petroleum -
NY Shares 24,162
441,400 Schlumberger Ltd. 29,464
787,400 Texaco Inc. 50,000
627,700 Transocean Offshore 21,342
3,843,700 Union Pacific Resources Group 68,946
----------
423,000
----------
FINANCIAL SERVICES (15.6%)
270,000 American International Group 25,026
1,327,300 Associates First Capital 45,543
3,470,800 Capital One Financial 131,023
1,913,300 Citigroup Inc. 85,022
5,175,900 Conseco, Inc. 124,222
1,162,900 Countrywide Credit Industries 37,358
</TABLE>
C-7
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
1,658,200 Hartford Financial Services
Group $ 75,344
3,067,100 IndyMac Mortgage Holdings 41,214
579,500 Morgan Stanley Dean Witter 49,728
502,100 Progressive Corp. 51,214
1,576,000 SLM Holding 69,640
----------
735,334
----------
HEALTH CARE (9.3%)
1,801,200 Aetna Inc. 140,043
2,249,200 American Home Products 93,342
98,064 PacifiCare Health Systems 5,884(2)
200,000 Warner-Lambert 13,250
2,582,996 Wellpoint Health Networks 188,236(2)(3)
----------
440,755
----------
TECHNOLOGY (15.8%)
230,000 Apple Computer 15,008(2)
1,160,200 Computer Associates 65,551
975,000 Compuware Corp. 29,433(2)
381,200 Gateway Inc. 36,953(2)
678,300 Hewlett-Packard 71,476
829,000 IBM 103,262
734,100 Micron Technology 54,736(2)
560,000 Nortel Networks 22,995
1,728,700 Rational Software 46,783(2)
1,366,700 Seagate Technology 45,357(2)
699,700 Sun Microsystems 55,626(2)
469,500 Teradyne, Inc. 31,955(2)(3)
832,400 Texas Instruments 68,309(3)
2,097,800 Xerox Corp. 100,170
----------
747,614
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
TRANSPORTATION (2.7%)
962,200 AMR Corp. $ 56,409(2)
1,031,600 Burlington Northern Santa Fe 29,916
1,005,000 Continental Airlines Class B 41,017(2)
----------
127,342
----------
TOTAL COMMON
STOCKS (COST
$3,473,802) 4,063,664
----------
PREFERRED STOCKS (1.6%)
2,878,900 News Corp. ADR (COST $76,136) 76,111
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ---------------------
- --------------------- ---------------
<C> <S> <C>
U.S. TREASURY SECURITIES (1.0%)
$50,000,000 U.S. Treasury Bills, 4.60%,
due 11/18/99 (COST $49,502) 49,502(5)
----------
U.S. GOVERNMENT AGENCY SECURITIES (1.1%)
50,000,000 Federal Home Loan Bank, Discount
Notes, 5.40%, due 9/1/99
(COST $50,000) 50,000(5)
----------
</TABLE>
C-8
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (2.4%)
$50,000,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $50,007,292,
Collateralized by $47,855,000
U.S. Treasury Bonds, 7.875%,
due 11/15/07 (Collateral Value
$51,503,944) $ 50,000
50,000,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $50,007,292,
Collateralized by $45,880,000
U.S. Treasury Bonds, 7.50%,
due 11/15/16 (Collateral Value
$51,500,300) 50,000
11,170,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $11,171,629,
Collateralized by $11,270,000
U.S. Treasury Notes, 7.750%,
due 12/31/99 (Collateral Value
$11,506,963) 11,170
----------
TOTAL REPURCHASE AGREEMENTS
(COST $111,170) 111,170(5)
----------
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.2%)
$50,000,000 American Express Credit Corp.,
5.23%, due 9/2/99 $ 49,993
50,000,000 General Electric Capital Corp.,
5.10%, due 9/3/99 49,986
50,000,000 Merck & Co., Inc., 5.30%,
due 9/3/99 49,985
50,000,000 Ford Motor Credit Co., 5.28%,
due 9/8/99 49,949
50,000,000 Novartis Finance Corp., 5.25%,
due 9/13/99 49,912
19,057,000 Abbott Laboratories, 5.23%,
due 9/23/99 18,996
24,436,603 N&B Securities Lending Quality
Fund, LLC 24,437
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $293,258) 293,258(5)
----------
TOTAL INVESTMENTS (98.3%) (COST
$4,053,868) 4,643,705(6)
Cash, receivables and other
assets, less liabilities (1.7%) 80,015
----------
TOTAL NET ASSETS (100.0%) $4,723,720
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-9
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
International Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
--------------------------------------------------------------------------------------------------
HOLDING COUNTRY INDUSTRY PERCENTAGE
<C> <S> <C> <C> <C>
1. Takeda Chemical Industries Japan Pharmaceutical 3.3%
2. Datacraft Asia Singapore Telecommunications 3.1%
3. Softbank Corp. Japan Technology 2.9%
4. WPP Group United Kingdom Advertising 2.2%
5. Nokia Corp. ADR Finland Telecommunications 2.0%
6. Mannesmann AG Germany Machinery & Equipment 2.0%
7. NTT Mobile Communication Network Japan Telecommunications 1.9%
8. Barclays PLC United Kingdom Banking & Financial 1.9%
9. British Telecom United Kingdom Telecommunications 1.7%
10. Terumo Corp. Japan Hospital Supplies 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (95.9%)
AUSTRALIA (1.5%)
58,000 Commonwealth Bank
of Australia $ 913
53,000 National Australia
Bank 802
--------
1,715
--------
BELGIUM (1.4%)
15,151 Mobistar SA 721(2)
8,060 Telinfo SA 919
--------
1,640
--------
BERMUDA (0.6%)
27,837 Global Crossing 720(2)
--------
CANADA (1.7%)
43,000 BioChem Pharma 1,115(2)
41,400 CGI Group 773(2)
--------
1,888
--------
DENMARK (2.3%)
65,900 Navision Software 1,639(2)
8,100 Vestas Wind Systems 1,025(2)
--------
2,664
--------
FINLAND (5.5%)
27,900 Nokia Corp. ADR 2,326
89,500 Perlos Oyj 1,278(2)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
19,800 Pohjola Group
Insurance, B
Shares $ 966
50,000 Tietoenator Oyj 1,693
--------
6,263
--------
FRANCE (6.0%)
14,490 BNP 1,110
7,500 Cap Gemini 1,289
30,000 Dassault Systemes
ADR 1,132
37,500 Sanofi-Synthelabo 1,563(2)
22,909 Vivendi 1,772
--------
6,866
--------
GERMANY (2.0%)
15,000 Mannesmann AG 2,304
--------
HONG KONG (0.9%)
365,000 VTech Holdings 1,015
--------
IRELAND (2.3%)
42,920 Allied Irish Banks
ADR 1,110
125,745 Bord Telecom
Eireann 573(2)
44,200 CRH PLC 1,003
--------
2,686
--------
</TABLE>
C-10
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
ITALY (1.5%)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
50,000 ENI SpA $ 301
93,023 Telecom Italia 533
149,600 TIM SpA 872
--------
1,706
--------
JAPAN (29.4%)
10,800 Acom Co. 1,097
8,200 Advantest Corp. 1,114
120,000 Bank of Tokyo-
Mitsubishi 1,794
8,500 Benesse Corp. 1,477
101,000 Chugai
Pharmaceutical 1,118
19,700 FamilyMart Co. 1,013
6,000 Fancl Corp. 1,783
2,300 Internet Initiative
Japan ADR 119(2)
77,000 Minebea Co. 930
89,000 Mitsubishi Trust &
Banking 936
125,000 NSK Ltd. 805
165 NTT Corp. 1,856
130 NTT Mobile
Communication
Network 2,154
18,000 Seven-Eleven Japan 1,319
9,700 Softbank Corp. 3,336
12,800 Sony Corp. 1,660
108,000 Sumitomo Bakelite 1,130
75,000 Takeda Chemical
Industries 3,773
60,000 Terumo Corp. 1,921
31,900 THK Co. 1,047
3 Yahoo Japan 1,707
36,000 Yamanouchi
Pharmaceutical 1,607
--------
33,696
--------
MALAYSIA (1.1%)
215,820 Malaysia WEBS Index
Series 1,214
--------
MEXICO (0.9%)
122,500 Cemex SA, B Shares 542
15,750 Fomento Economico
Mexicano ADR 521
--------
1,063
--------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
NETHERLANDS (4.5%)
16,000 Aegon NV-New York $ 1,389
28,748 Getronics NV 1,409
50,000 Laurus NV 1,124
50,000 Versatel Telecom
International 688(2)
14,000 VNU NV 538
--------
5,148
--------
RUSSIA (0.6%)
19,200 Global TeleSystems
Group 620(2)
--------
SINGAPORE (7.4%)
924,000 Datacraft Asia 3,567
171,000 Natsteel
Electronics 853
220,000 Overseas Union Bank 1,150
150,000 United Overseas
Bank 1,114
78,000 Venture
Manufacturing 746
964,000 Wing Tai Holdings 1,036
--------
8,466
--------
SOUTH KOREA (2.7%)
30,150 Hyundai Securities 712
85,550 Korea Data System 1,178
66,000 Samsung Corp. 1,163(2)
--------
3,053
--------
SPAIN (2.5%)
15,400 Banco Popular
Espanol 1,130
35,748 Telefonica SA ADR 1,722(2)
--------
2,852
--------
SWEDEN (2.1%)
106,900 Assa Abloy 1,129
63,600 Skandia Forsakrings 1,298
--------
2,427
--------
SWITZERLAND (2.1%)
387 Disetronic Holding 1,279
300 Kudelski SA 1,124(2)
--------
2,403
--------
UNITED KINGDOM (16.9%)
159,400 Airtours PLC 1,109
88,815 Alliance &
Leicester 1,215
71,400 Barclays PLC 2,122
63,028 BP Amoco 1,169
130,200 British Telecom 1,994
</TABLE>
C-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
International Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
42,000 COLT Telecom Group $ 913(2)
33,600 Energis PLC 861(2)
30,500 Glaxo Wellcome 801
120,000 Hays PLC 1,276
40,000 Sage Group 1,744
120,000 SEMA Group 1,303
50,000 Serco Group 1,207
57,770 Vodafone AirTouch 1,164
266,000 WPP Group 2,486
--------
19,364
--------
TOTAL COMMON STOCKS
(COST $74,914) 109,773
--------
PREFERRED STOCKS (0.6%)
270 Porsche AG, Germany
(COST $653) 681
--------
</TABLE>
<TABLE>
REPURCHASE AGREEMENTS (3.4%)
<CAPTION>
Principal
Amount
- ---------------------
- --------------------- ---------------
<C> <S> <C>
$3,920,000 State Street Bank
and Trust Co.
Repurchase
Agreement, 5.25%,
due 9/1/99, dated
8/31/99, Maturity
Value $3,920,572,
Collateralized by
$3,210,000 U.S.
Treasury Bonds,
8.875%,
due 8/15/17
(Collateral Value
$4,040,937)
(COST $3,920) 3,920(5)
--------
</TABLE>
<TABLE>
SHORT-TERM INVESTMENTS (4.2%)
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
$4,873,994 N&B Securities
Lending Quality
Fund, LLC
(COST $4,874) $ 4,874(5)
--------
TOTAL INVESTMENTS
(104.1%) (COST
$84,361) 119,248
--------
Liabilities, less
cash, receivables
and other assets
[(4.1%)] (4,732)
--------
TOTAL NET ASSETS
(100.0%) $114,516
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-12
<PAGE>
SUMMARY SCHEDULE OF INVESTMENTS BY INDUSTRY
Neuberger Berman
- --------------------------------------------------------------------------------
International Portfolio
<TABLE>
<CAPTION>
Market
Value(1) Percentage
Industry (000's omitted) of Net Assets
- -------- --------------- -------------
<S> <C> <C>
Telecommunications $ 22,204 19.4%
Banking & Financial 15,205 13.3%
Pharmaceutical 9,976 8.7%
Technology 9,343 8.2%
Electronics 7,790 6.8%
Consumer Goods & Services 5,659 4.9%
Information Technology 5,513 4.8%
Machinery & Equipment 5,506 4.8%
Diversified 5,424 4.7%
Other Assets-Net 4,062 3.5%
Manufacturing 4,042 3.5%
Insurance 3,652 3.2%
Retailing 3,455 3.0%
Hospital Supplies 3,200 2.8%
Advertising 2,486 2.2%
Building Materials 1,546 1.3%
Oil & Gas 1,470 1.3%
Industrial Goods & Services 1,207 1.1%
Holding Companies 1,036 0.9%
Automotive 681 0.6%
Publishing & Broadcasting 538 0.5%
Food & Beverage 521 0.5%
-------- -----
TOTAL NET ASSETS $114,516 100.0%
-------- -----
</TABLE>
C-13
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Citrix Systems 3.0%
2. Sanmina Corp. 2.5%
3. Biogen, Inc. 2.3%
4. TJX Cos. 2.3%
5. NTL Inc. 2.2%
6. Best Buy 2.1%
7. JDS Uniphase 1.9%
8. PMC-Sierra 1.9%
9. Adaptec, Inc. 1.9%
10. VERITAS Software 1.9%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (93.3%)
BUSINESS SERVICES (4.1%)
257,400 Avis Rent A Car $ 5,663(2)
148,800 Navigant Consulting 6,528(2)
206,500 USWeb Corp. 4,027(2)
202,150 Valassis Communications 8,844
--------
25,062
--------
CAPITAL GOODS (1.4%)
128,900 Waters Corp. 8,499(2)
--------
COMMUNICATIONS (9.2%)
126,400 Comverse Technology 9,859(2)
95,700 E-Tek Dynamics 5,425(2)
315,100 Intermedia Communications 8,193(2)
111,900 JDS Uniphase 11,868(2)
245,400 Metromedia Fiber Network 7,224(2)
58,500 RSL Communications 1,196(2)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
76,100 VoiceStream Wireless $ 3,139(2)
184,600 WinStar Communications 9,380(2)
--------
56,284
--------
CONSUMER CYCLICALS (11.1%)
80,000 Adelphia Communications 4,960(2)
212,495 AMFM Inc. 10,465(2)
390,000 Cendant Corp. 6,996
178,700 Fortune Brands 6,701
132,400 Harley-Davidson 7,216
106,000 Jones Intercable Class A 4,651(2)
138,900 NTL Inc. 13,638(2)
237,450 SFX Entertainment 9,780(2)
156,700 Starwood Hotels & Resorts
Worldwide 3,731
--------
68,138
--------
CONSUMER STAPLES (0.9%)
116,500 Estee Lauder 5,352
--------
ELECTRICAL EQUIPMENT (9.7%)
230,000 Altera Corp. 9,689(2)
27,700 Broadcom Corp. 3,566(2)
93,000 Conexant Systems 6,684(2)
102,600 Maxim Integrated Products 6,906(2)
98,300 Micron Technology 7,330
126,600 PMC-Sierra 11,774(2)
81,000 Vitesse Semiconductor 5,508(2)
119,100 Xilinx Inc. 8,330(2)
--------
59,787
--------
ENERGY (3.9%)
211,000 Coastal Corp. 9,139
250,700 Enron Oil & Gas 5,985
477,600 Union Pacific Resources Group 8,567
--------
23,691
--------
</TABLE>
C-14
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
FINANCIAL SERVICES (4.9%)
179,300 Capital One Financial $ 6,769
118,600 Donaldson, Lufkin & Jenrette 5,671
171,900 E*TRADE Group 4,297(2)
95,600 Lehman Brothers Holdings 5,139
105,500 Providian Financial 8,189
--------
30,065
--------
HARDWARE (5.5%)
298,700 Adaptec, Inc. 11,649(2)
106,500 Network Appliance 6,996(2)
202,300 Sanmina Corp. 15,173(2)
--------
33,818
--------
HEALTH CARE (11.7%)
185,400 Biogen, Inc. 14,229(2)
33,700 C. R. Bard 1,571
301,100 Elan Corp. ADR 9,654(2)
151,400 Immunex Corp. 10,191(2)
41,750 MedImmune, Inc. 4,308
75,600 MiniMed Inc. 6,875(2)
80,700 PE Corp.-PE Biosystems Group 5,553
98,600 Sepracor Inc. 7,383(2)
201,900 The Laser Center 6,032(2)
78,500 Wellpoint Health Networks 5,721(2)
--------
71,517
--------
INTERNET (8.4%)
47,200 BroadVision, Inc. 4,699(2)
284,000 CheckFree Holdings 8,307(2)
75,900 Digex, Inc. 2,524(2)
33,600 DoubleClick Inc. 3,356(2)
41,200 Exodus Communications 3,311(2)
22,800 Inktomi Corp. 2,585(2)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
124,200 Intuit Inc. $ 11,124(2)
105,000 Lycos, Inc. 4,266(2)
130,200 PSINet Inc. 6,233(2)
79,300 Safeguard Scientifics 5,333(2)
--------
51,738
--------
RETAIL (11.9%)
202,900 Abercrombie & Fitch 7,076(2)
176,100 Ann Taylor Stores 5,833(2)
180,700 Best Buy 12,694(2)
75,100 Brinker International 1,803(2)
107,200 Circuit City Stores 4,610
197,400 Furniture Brands International 3,960(2)
68,800 Limited, Inc. 2,606
197,500 Linens 'n Things 6,764(2)
324,600 Staples, Inc. 7,060(2)
136,000 Tandy Corp. 6,426
486,200 TJX Cos. 14,039
--------
72,871
--------
SOFTWARE (9.2%)
317,400 Citrix Systems 18,092(2)
129,800 Gemstar International Group 8,956(2)
330,000 Novell, Inc. 7,817(2)
145,300 Siebel Systems 9,980
194,400 VERITAS Software 11,518(2)
--------
56,363
--------
UTILITIES (1.4%)
280,400 Montana Power 8,675
--------
TOTAL COMMON STOCKS (COST
$449,526) 571,860
--------
</TABLE>
C-15
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
U.S. GOVERNMENT AGENCY SECURITIES (0.4%)
$ 2,750,000 Federal Home Loan Bank,
Discount Notes, 5.15%,
due 9/2/99 (COST $2,750) $ 2,750(5)
--------
REPURCHASE AGREEMENTS (2.0%)
12,240,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $12,241,785,
Collateralized by $12,445,000
U.S. Treasury Notes, 5.875%,
due 6/30/00 (Collateral Value
$12,609,013) (COST $12,240) 12,240(5)
--------
SHORT-TERM INVESTMENTS (22.2%)
11,000,000 Ford Motor Credit Co., 5.14% &
5.20%, due 9/2/99 & 9/7/99 10,996
3,000,000 AT&T Corp., 5.18%, due 9/7/99 2,998
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
$ 3,000,000 Emerson Electric Co., 5.30%,
due 9/10/99 $ 2,996
118,910,279 N&B Securities Lending Quality
Fund, LLC 118,910
--------
TOTAL SHORT-TERM INVESTMENTS
(COST $135,900) 135,900(5)
--------
TOTAL INVESTMENTS (117.9%)
(COST $600,416) 722,750(6)
Liabilities, less cash,
receivables and other assets
[(17.9%)] (109,891)
--------
TOTAL NET ASSETS (100.0%) $612,859
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-16
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Millennium Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Peerless Systems 3.8%
2. Navigant Consulting 2.6%
3. Pinnacle Holdings 2.5%
4. Corinthian Colleges 2.4%
5. American Eagle Outfitters 2.3%
6. CSK Auto 2.3%
7. Visual Networks 2.3%
8. Alkermes, Inc. 2.2%
9. Radiant Systems 2.0%
10. Zoran Corp. 2.0%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (91.3%)
BUSINESS SERVICES (12.5%)
30,000 Cambridge Technology Partners $ 410(2)
50,000 Coinstar, Inc. 1,156(2)
78,000 Corinthian Colleges 1,604(2)
26,000 Gilat Communications 390(2)
35,000 Iron Mountain 1,103(2)
22,000 Lason, Inc. 994(2)
41,000 Navigant Consulting 1,799(2)
20,000 ProBusiness Services 535(2)
39,200 Provant, Inc. 539(2)
--------
8,530
--------
CONSUMER CYCLICALS (3.1%)
33,000 SFX Entertainment 1,359(2)
20,500 Speedway Motorsports 765(2)
--------
2,124
--------
ELECTRICAL EQUIPMENT (10.8%)
25,000 Asyst Technologies 781(2)
46,000 Cypress Semiconductor 1,064(2)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
32,000 Helix Technology $ 904
181,000 Peerless Systems 2,602(2)
26,000 Photronics, Inc. 621(2)
41,000 Zoran Corp. 1,363(2)
--------
7,335
--------
ENERGY (1.3%)
25,000 Hanover Compressor 898(2)
--------
FINANCIAL SERVICES (2.4%)
32,000 Affiliated Managers Group 854(2)
20,000 Hambrecht & Quist 764(2)
--------
1,618
--------
HARDWARE (7.4%)
100,000 Artisan Components 975(2)
33,000 DII Group 1,170(2)
18,000 Flextronics International 1,056(2)
10,000 Harmonic Inc. 1,260(2)
8,000 Optical Coating Laboratory 614
--------
5,075
--------
HEALTH CARE (9.0%)
40,000 Alkermes, Inc. 1,485(2)
30,000 Anesta Corp. 345(2)
35,000 Coulter Pharmaceutical 698(2)
33,000 Novoste Corp. 724(2)
30,000 Osteotech, Inc. 619(2)
37,000 Priority Healthcare 1,040(2)
41,500 The Laser Center 1,240(2)
--------
6,151
--------
INTERNET (12.1%)
27,000 CheckFree Holdings 790(2)
34,000 Digex, Inc. 1,130(2)
23,000 Efficient Networks 1,080(2)
39,000 Flycast Communications 902(2)
30,000 Netegrity, Inc. 667(2)
32,000 Netopia, Inc. 884(2)
</TABLE>
C-17
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Millennium Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
35,000 Network Event Theater $ 884(2)
70,000 nFront, Inc. 927(2)
14,000 Pegasus Systems 506(2)
25,000 USWeb Corp. 488(2)
--------
8,258
--------
RETAIL (12.3%)
40,000 American Eagle Outfitters 1,570(2)
65,000 CSK Auto 1,544(2)
36,000 Factory 2-U Stores 1,028(2)
23,000 Insight Enterprises 696(2)
29,000 REX Stores 1,160(2)
40,000 Sonic Automotive 482(2)
75,000 Steven Madden 886(2)
33,000 The Children's Place 1,044(2)
--------
8,410
--------
SOFTWARE (10.3%)
50,000 Be Inc. 312(2)
14,000 Gemstar International Group 966(2)
17,000 Micromuse Inc. 971(2)
20,000 Project Software & Development 879(2)
71,000 Radiant Systems 1,398(2)
62,000 RAVISENT Technologies 992(2)
37,000 Visual Networks 1,536(2)
--------
7,054
--------
TECHNOLOGY (1.0%)
34,000 Integrated Device Technology 663(2)
--------
TELECOMMUNICATIONS (9.1%)
70,000 CAIS Internet 849(2)
34,000 Intermedia Communications 884(2)
67,000 Pinnacle Holdings 1,687(2)
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
60,000 Quanta Services $ 1,346(2)
20,000 RCN Corp. 840(2)
23,000 Time Warner Telecom 621(2)
--------
6,227
--------
TOTAL COMMON STOCKS (COST
$56,226) 62,343
--------
<CAPTION>
Principal
Amount
---------
<C> <S> <C>
U.S. GOVERNMENT AGENCY SECURITIES (3.3%)
$ 2,250,000 Federal Home Loan Bank, Discount
Notes, 5.15% & 5.40%,
due 9/1/99 & 9/2/99 (COST
$2,250) 2,250(5)
--------
REPURCHASE AGREEMENTS (3.1%)
2,090,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $2,090,305,
Collateralized by $1,920,000
U.S. Treasury Bonds, 7.50%,
due 11/15/16 (Collateral Value
$2,155,200) (COST $2,090) 2,090(5)
--------
</TABLE>
C-18
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Millennium Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (21.7%)
$ 1,500,000 Ford Motor Credit Co., 5.21%,
due 9/2/99 $ 1,500
13,306,051 N&B Securities Lending Quality
Fund, LLC 13,306
--------
TOTAL SHORT-TERM INVESTMENTS
(COST $14,806) 14,806(5)
--------
TOTAL INVESTMENTS (119.4%) (COST
$75,372) 81,489(6)
Liabilities, less cash,
receivables and other assets
[(19.4%)] (13,252)
--------
TOTAL NET ASSETS (100.0%) $ 68,237
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-19
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. CIGNA Corp. 3.6%
2. Chase Manhattan 3.5%
3. MCI WorldCom 3.1%
4. Computer Associates 2.9%
5. Xerox Corp. 2.6%
6. The Williams Cos. 2.3%
7. General Motors 2.3%
8. IBM 2.2%
9. News Corp. ADR 2.2%
10. General Motors Class H 2.2%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (92.1%)
AEROSPACE (1.1%)
600,000 Raytheon Co. Class A $ 40,275
----------
AIRLINES (1.9%)
330,900 AMR Corp. 19,399(2)
1,280,000 Continental Airlines Class B 52,240(2)
----------
71,639
----------
AUTOMOBILE MANUFACTURING (2.3%)
1,315,800 General Motors 87,007
----------
AUTO/TRUCK REPLACEMENT PARTS (1.3%)
1,180,000 Lear Corp. 47,421(2)
----------
BANKING & FINANCIAL (11.3%)
1,305,000 Bank of America 78,953
1,945,000 Bank One 78,043
1,143,800 BankBoston Corp. 53,115
1,560,000 Chase Manhattan 130,553
1,337,000 Countrywide Credit Industries 42,951
1,140,000 Household International 43,035
----------
426,650
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
CHEMICALS (1.5%)
765,000 duPont $ 48,482
620,000 Lyondell Chemical 9,029
----------
57,511
----------
COMMUNICATIONS (4.0%)
600,000 Bell Atlantic 36,750
1,520,000 MCI WorldCom 115,140(2)
----------
151,890
----------
DIVERSIFIED (1.8%)
1,658,500 Monsanto Co. 68,102
----------
ELECTRONICS (1.1%)
353,900 Emerson Electric 22,163
275,000 Teradyne, Inc. 18,717(2)
----------
40,880
----------
ENERGY (0.8%)
1,314,600 McDermott International 29,661
----------
FINANCIAL SERVICES (3.0%)
1,070,000 Ceridian Corp. 29,960(2)
330,000 Morgan Stanley Dean Witter 28,318
1,240,000 SLM Holding 54,793
----------
113,071
----------
FOOD & TOBACCO (3.4%)
1,040,000 Anheuser-Busch 80,080
1,209,500 Nabisco Holdings 47,549
----------
127,629
----------
FOOD PRODUCTS (1.7%)
526,100 ConAgra, Inc. 12,889
1,195,800 Diageo PLC ADR 49,551
----------
62,440
----------
GAS (1.7%)
1,347,400 Praxair, Inc. 63,328
----------
HEALTH CARE (12.9%)
475,000 ALZA Corp. 23,928(2)
1,579,500 American Home Products 65,549
870,000 Baxter International 58,345
</TABLE>
C-20
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
1,602,100 Becton, Dickinson & Co. $ 45,059
1,230,000 Centocor, Inc. 73,646(2)
1,498,800 CIGNA Corp. 134,611
669,800 Merck & Co. 45,002
540,000 Wellpoint Health Networks 39,353(2)
----------
485,493
----------
INDUSTRIAL GOODS & SERVICES (2.9%)
845,800 Fort James 27,277
1,055,700 General Dynamics 66,509
637,300 Owens-Illinois 15,773(2)
----------
109,559
----------
INSURANCE (2.8%)
1,599,200 Ace, Ltd. 34,283
370,000 American International Group 34,294
743,494 XL Capital 37,407
----------
105,984
----------
OIL & GAS (6.5%)
304,000 Chevron Corp. 28,044
840,000 Texaco Inc. 53,340
2,042,200 Tosco Corp. 52,076
1,400,200 Transocean Offshore 47,607
2,077,500 USX-Marathon Group 64,662(2)
----------
245,729
----------
RAILROADS (1.1%)
1,461,800 Burlington Northern Santa Fe 42,392
----------
RETAILING (3.4%)
1,620,000 Consolidated Stores 26,123(2)
990,300 Harcourt General 43,388
243,100 Office Depot 2,537(2)
3,052,600 Rite Aid 56,473
----------
128,521
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
STEEL (0.9%)
1,639,400 AK Steel Holding $ 34,427
----------
TECHNOLOGY (18.1%)
2,427,500 Cadence Design Systems 33,075(2)
861,300 Compaq Computer 19,971
1,940,000 Computer Associates 109,610
1,592,400 General Motors Class H 82,009(2)
440,000 Hewlett-Packard 46,365
680,000 IBM 84,702
1,840,000 L.M. Ericsson Telephone, B
Shares ADR 59,915
1,592,600 Nortel Networks 65,396
2,865,000 Parametric Technology 40,110(2)
537,000 Texas Instruments 44,068
2,038,900 Xerox Corp. 97,357
----------
682,578
----------
TELECOMMUNICATIONS (2.4%)
1,540,000 AT&T Corp.- Liberty Media Group
Class A 49,280(2)
600,000 GTE Corp. 41,175
----------
90,455
----------
UTILITIES (3.3%)
2,130,000 The Williams Cos. 87,863
952,400 Unicom Corp. 36,786
----------
124,649
----------
WASTE MANAGEMENT (0.9%)
2,598,200 Allied Waste Industries 33,127(2)
----------
TOTAL COMMON STOCKS (COST
$3,107,009) 3,470,418
----------
PREFERRED STOCKS (2.2%)
3,123,800 News Corp. ADR (COST $86,104) 82,586
----------
</TABLE>
C-21
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
REPURCHASE AGREEMENTS (1.7%)
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
$ 50,000,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $50,007,292,
Collateralized by $40,915,000
U.S. Treasury Bonds, 8.875%,
due 8/15/17 (Collateral Value
$51,506,216) $ 50,000
13,300,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $13,301,940,
Collateralized by $13,635,000
U.S. Treasury Notes, 5.875%,
due 2/15/00 (Collateral Value
$13,703,911) 13,300
----------
TOTAL REPURCHASE AGREEMENTS
(COST $63,300) 63,300(5)
----------
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.9%)
$ 50,000,000 Ford Motor Credit Co., 5.21%,
due 9/2/99 $ 49,993
20,200,000 Novartis Finance Corp., 5.27%,
due 9/7/99 20,182
50,000,000 American Express Credit Corp.,
5.31%, due 9/8/99 49,948
139,642,039 N&B Securities Lending Quality
Fund, LLC 139,642
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $259,765) 259,765(5)
----------
TOTAL INVESTMENTS (102.9%)
(COST $3,516,178) 3,876,069(6)
Liabilities, less cash,
receivables and other assets
[(2.9%)] (107,329)
----------
TOTAL NET ASSETS (100.0%) $3,768,740
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-22
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman August 31, 1999
- --------------------------------------------------------------------------------
Regency Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. BankBoston Corp. 2.7%
2. General Dynamics 2.5%
3. Comdisco, Inc. 2.5%
4. Bear Stearns 2.4%
5. W.R. Grace 2.3%
6. Food Lion Class A 2.2%
7. The Williams Cos. 2.1%
8. Galileo International 2.1%
9. SPX Corp. 2.0%
10. USX-Marathon Group 2.0%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (87.0%)
AIRLINES (1.3%)
2,700 Continental Airlines Class B $ 110(2)
------
AUTOMOTIVE (2.6%)
3,700 Lear Corp. 149(2)
1,400 Navistar International 68(2)
------
217
------
BANKING & FINANCIAL (5.6%)
4,800 BankBoston Corp. 223
1,900 Countrywide Credit Industries 61
8,600 IndyMac Mortgage Holdings 115
2,600 Valley National Bancorp 68
------
467
------
CHEMICALS (1.1%)
6,400 Lyondell Chemical 93
------
CONSUMER CYCLICALS (1.7%)
1,800 Lexmark International Group 142(2)
------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
CONSUMER PRODUCTS & SERVICES (1.5%)
7,400 American National Can Group $ 121(2)
------
ELECTRICAL & ELECTRONICS (1.1%)
6,200 Niagara Mohawk Holdings 94(2)
------
ENERGY (2.7%)
3,500 Coastal Corp. 152
3,300 McDermott International 74
------
226
------
ENTERTAINMENT (1.0%)
6,500 Mirage Resorts 85(2)
------
FINANCIAL SERVICES (10.7%)
1,600 Ambac Financial Group 85
4,700 Bear Stearns 196
5,500 Ceridian Corp. 154(2)
4,200 Dun & Bradstreet 110
2,900 FINOVA Group 110
1,600 Kansas City Southern Industries 74
3,600 SLM Holding 159
------
888
------
GAS (1.8%)
3,200 Praxair, Inc. 150
------
HEALTH CARE (3.4%)
4,900 Becton, Dickinson & Co. 138
2,000 Wellpoint Health Networks 146(2)
------
284
------
INDUSTRIAL GOODS & SERVICES (8.1%)
4,200 Fort James 135
3,300 General Dynamics 208
1,000 Reynolds Metals 63
4,500 Sherwin-Williams 110
6,200 UCAR International 151(2)
------
667
------
</TABLE>
C-23
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Regency Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
INSURANCE (3.2%)
6,300 Ace, Ltd. $ 135
700 CIGNA Corp. 63
1,700 Cincinnati Financial 67
------
265
------
MACHINERY & EQUIPMENT (2.7%)
1,300 Grainger, Inc. 57
2,000 SPX Corp. 169(2)
------
226
------
MEDIA (0.7%)
1,200 E.W. Scripps 58
------
OIL & GAS (7.3%)
3,000 Apache Corp. 136
3,600 Noble Drilling 89(2)
4,400 Tosco Corp. 112
3,000 Transocean Offshore 102
5,200 USX-Marathon Group 162
------
601
------
RAILROADS (1.4%)
3,900 Burlington Northern Santa Fe 113
------
RETAILING (8.1%)
5,700 Consolidated Stores 92(2)
22,800 Food Lion Class A 180
2,200 Harcourt General 96
6,100 Rite Aid 113
9,800 W.R. Grace 188(2)
------
669
------
STEEL (0.9%)
3,600 AK Steel Holding 76
------
TECHNOLOGY (9.7%)
9,900 Cadence Design Systems 135(2)
9,800 Comdisco, Inc. 206
1,000 Computer Associates 57
5,900 Engelhard Corp. 118
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
3,100 General Motors Class H $ 160(2)
8,800 Parametric Technology 123(2)
------
799
------
TELECOMMUNICATIONS (4.2%)
7,700 A.H. Belo 146
5,600 American Tower 127(2)
2,300 AT&T Corp.- Liberty Media Group
Class A 74(2)
------
347
------
TRANSPORTATION (2.1%)
3,500 Galileo International 170
------
UTILITIES (2.2%)
4,300 The Williams Cos. 177
------
WASTE MANAGEMENT (1.9%)
12,000 Allied Waste Industries 153(2)
------
TOTAL COMMON STOCKS (COST $7,700) 7,198
------
PREFERRED STOCKS (1.2%)
3,800 News Corp. ADR (COST $116) 100
------
</TABLE>
<TABLE>
U.S. GOVERNMENT AGENCY SECURITIES (4.5%)
<CAPTION>
Principal
Amount
- ---------------------
- --------------------- ---------------
<C> <S> <C>
$200,000 Federal Home Loan Bank, Discount
Notes, 5.40%, due 9/1/99 200
175,000 Federal Farm Credit Bank, Discount
Notes, 5.09%, due 9/2/99 175
------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $375) 375(5)
------
</TABLE>
C-24
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Regency Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (4.5%)
$370,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $370,054,
Collateralized by $350,000 U.S.
Treasury Bonds, 7.25%,
due 8/15/22 (Collateral Value
$382,375) (COST $370) $ 370(5)
------
SHORT-TERM INVESTMENTS (0.6%)
50,488 N&B Securities Lending Quality
Fund, LLC (COST $50) 50(5)
------
TOTAL INVESTMENTS (97.8%) (COST
$8,611) 8,093(6)
Cash, receivables and other assets,
less liabilities (2.2%) 185
------
TOTAL NET ASSETS (100.0%) $8,278
------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-25
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Intel Corp. 3.3%
2. Biogen, Inc. 3.3%
3. Unisys Corp. 3.2%
4. Hewlett-Packard 3.2%
5. Citigroup Inc. 3.1%
6. Tyco International 3.1%
7. MCI WorldCom 2.9%
8. ALZA Corp. 2.8%
9. True North Communications 2.7%
10. Circuit City Stores 2.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (93.9%)
ADVERTISING (2.7%)
330,000 True North Communications $ 10,869
--------
AUTOMOTIVE (1.6%)
137,200 Borg-Warner Automotive 6,500
--------
CHEMICALS (1.3%)
100,000 Minerals Technologies 4,950
--------
CONSUMER GOODS & SERVICES (2.2%)
150,000 Kimberly-Clark 8,541
--------
DIVERSIFIED (3.1%)
120,000 Tyco International 12,157
--------
ENERGY (2.3%)
100,000 Chevron Corp. 9,225
--------
ENTERTAINMENT (2.0%)
350,000 Fox Entertainment Group 8,072(2)
--------
FINANCIAL SERVICES (9.8%)
150,000 Ambac Financial Group 7,922
276,750 Citigroup Inc. 12,298
275,000 Conseco, Inc. 6,600
200,000 Dun & Bradstreet 5,238
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
100,000 Fannie Mae $ 6,212
9,300 Goldman Sachs 556
--------
38,826
--------
FURNISHINGS (2.2%)
400,000 Leggett & Platt 8,850
--------
HEALTH CARE (15.8%)
220,000 ALZA Corp. 11,082(2)
170,000 Biogen, Inc. 13,047(2)
260,000 Invacare Corp. 4,859
90,000 Johnson & Johnson 9,203
220,000 McKesson HBOC 6,848
135,000 Warner-Lambert 8,944
118,000 Wellpoint Health Networks 8,599(2)
--------
62,582
--------
HOSPITAL SUPPLIES (2.4%)
200,000 C. R. Bard 9,325
--------
INSURANCE (3.7%)
380,000 ESG Re 5,130
210,000 ReliaStar Financial 9,463
--------
14,593
--------
OIL & GAS (4.3%)
220,000 Anadarko Petroleum 7,480
230,000 Cooper Cameron 9,574(2)
--------
17,054
--------
PAPER & FOREST PRODUCTS (2.2%)
238,000 Mead Corp. 8,880
--------
PUBLISHING & BROADCASTING (2.5%)
225,000 Valassis Communications 9,844
--------
RECYCLING (0.7%)
187,500 IMCO Recycling 2,941
--------
RETAIL GROCERY (1.7%)
140,000 Albertson's Inc. 6,711
--------
RETAIL STORES (6.1%)
250,000 Circuit City Stores 10,750
120,000 Dayton Hudson 6,960
145,000 Federated Department Stores 6,670(2)
--------
24,380
--------
RETAILING (2.0%)
179,000 Wal-Mart Stores 7,932
--------
</TABLE>
C-26
<PAGE>
August 31, 1999
- --------------------------------------------------------------------------------
Socially Responsive Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
TECHNOLOGY (17.9%)
374,000 Compaq Computer $ 8,672
150,000 Electronic Data Systems 8,419
120,000 Hewlett-Packard 12,645
160,000 Intel Corp. 13,150
400,000 Quantum Corp. - DLT & Storage
Systems 7,325(2)
200,000 Quantum Corp. - Hard Disk Drive 1,425(2)
300,000 Unisys Corp. 12,900(2)
140,000 Xerox Corp. 6,685
--------
71,221
--------
TELECOMMUNICATIONS (3.7%)
150,000 MCI WorldCom 11,363(2)
503,200 Metromedia International Group 3,176
--------
14,539
--------
TRANSPORTATION (2.1%)
140,000 AMR Corp. 8,208(2)
--------
WASTE MANAGEMENT (1.6%)
350,000 Azurix Corp. 6,497(2)
--------
TOTAL COMMON STOCKS (COST
$274,738) 372,697
--------
</TABLE>
<TABLE>
U.S. GOVERNMENT AGENCY SECURITIES (2.3%)
<CAPTION>
Principal
Amount
- ---------------------
- --------------------- ---------------
<C> <S> <C>
$4,000,000 Fannie Mae, Discount Notes,
5.15%, due 9/3/99 3,999
5,000,000 Freddie Mac, Discount Notes,
5.18% & 5.23%, due 9/9/99 &
9/10/99 4,994
--------
<CAPTION>
Principal
Amount
- ---------------------
<C> <S> <C>
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES (COST $8,993) 8,993(5)
--------
</TABLE>
<TABLE>
REPURCHASE AGREEMENTS (2.1%)
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
$8,370,000 State Street Bank and Trust Co.
Repurchase Agreement, 5.25%,
due 9/1/99, dated 8/31/99,
Maturity Value $8,371,221,
Collateralized by $8,495,000
U.S. Treasury Notes, 5.625%,
due 5/15/01 (Collateral Value
$8,621,966) (COST $8,370) $ 8,370(5)
--------
SHORT-TERM INVESTMENTS (0.6%)
100,000 Community Capital Bank, 4.05%,
due 9/29/99 100
100,000 Self Help Credit Union, 4.71%,
due 11/24/99 100
2,340,353 N&B Securities Lending Quality
Fund, LLC 2,340
--------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,540) 2,540(5)
--------
TOTAL INVESTMENTS (98.9%) (COST
$294,641) 392,600(6)
Cash, receivables and other
assets, less liabilities (1.1%) 4,513
--------
TOTAL NET ASSETS (100.0%) $397,113
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-27
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust and Global Managers Trust
1) Investment securities of each Portfolio are valued at the latest sales price;
securities for which no sales were reported, unless otherwise noted, are
valued at the mean between the closing bid and asked prices, with the
exception of securities held by Neuberger Berman International Portfolio,
which are valued at the last available bid price. The Portfolios value all
other securities by a method the trustees of Equity Managers Trust or Global
Managers Trust believe accurately reflects fair value. Foreign security
prices are furnished by independent quotation services expressed in local
currency values. Foreign security prices are translated from the local
currency into U.S. dollars using current exchange rates. Short-term debt
securities with less than 60 days until maturity may be valued at cost which,
when combined with interest earned, approximates market value.
2) Non-income producing security.
3) The following securities were held in escrow at August 31, 1999, to cover
outstanding call options written:
<TABLE>
<CAPTION>
SECURITIES AND MARKET VALUE PREMIUM ON MARKET VALUE
NEUBERGER BERMAN SHARES OPTIONS OF SECURITIES OPTIONS OF OPTIONS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOCUS PORTFOLIO 300,000 Compaq Computer $ 6,956,000 $ 441,000 $ 244,000
Corp.
October 1999 @ 25
GUARDIAN PORTFOLIO 1,025,000 McDonald's Corp. 42,409,000 3,379,000 2,563,000
December 1999 @ 42.50
450,000 Teradyne Inc. 30,628,000 5,073,000 2,137,000
October 1999 @ 70
400,000 Texas Instruments 32,825,000 4,009,000 6,375,000
October 1999 @
67.50
500,000 Wellpoint Health 36,438,000 2,985,000 1,781,000
Networks
October 1999 @ 75
</TABLE>
4) Affiliated issuer (see Note E of Notes to Financial Statements).
5) At cost, which approximates market value.
C-28
<PAGE>
6) At August 31, 1999, selected Portfolio information on a U.S. Federal income
tax basis was as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
NEUBERGER BERMAN COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS PORTFOLIO $1,022,500,000 $ 548,009,000 $46,270,000 $ 501,739,000
GENESIS PORTFOLIO 1,638,468,000 249,706,000 109,242,000 140,464,000
GUARDIAN PORTFOLIO 4,064,568,000 890,616,000 311,479,000 579,137,000
MANHATTAN PORTFOLIO 601,413,000 147,595,000 26,258,000 121,337,000
MILLENNIUM PORTFOLIO 75,573,000 8,908,000 2,992,000 5,916,000
PARTNERS PORTFOLIO 3,530,723,000 499,471,000 154,125,000 345,346,000
REGENCY PORTFOLIO 8,647,000 143,000 697,000 (554,000)
SOCIALLY RESPONSIVE PORTFOLIO 294,682,000 115,095,000 17,177,000 97,918,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-29
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
------------------------------------------------
FOCUS GENESIS GUARDIAN
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at market
value* (Notes A & E) -- see Schedule
of Investments:
Unaffiliated issuers $ 1,493,142 $ 1,629,745 $ 4,643,705
Non-controlled affiliated issuers 31,097 149,187 --
------------------------------------------------
1,524,239 1,778,932 4,643,705
Cash 304 8 8
Dividends and interest receivable 1,570 3,940 8,995
Prepaid expenses and other assets 34 57 158
Receivable for securities sold 34,235 16,148 115,060
------------------------------------------------
1,560,382 1,799,085 4,767,926
------------------------------------------------
LIABILITIES
Option contracts written, at market
value (Note A) 244 -- 12,856
Payable for collateral on securities
loaned (Note A) 7,114 42,525 24,437
Payable for securities purchased 4,813 2,023 --
Payable for variation margin (Note A) -- -- 1,930
Payable to investment manager (Note B) 670 1,103 1,881
Accrued expenses and other payables 1,143 2,330 3,102
------------------------------------------------
13,984 47,981 44,206
------------------------------------------------
NET ASSETS Applicable to Investors'
Beneficial Interests $ 1,546,398 $ 1,751,104 $ 4,723,720
------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 1,039,051 $ 1,610,183 $ 4,142,799
Net unrealized appreciation
(depreciation) in value of investment
securities, financial futures
contracts, and option contracts 507,347 140,921 580,921
------------------------------------------------
NET ASSETS $ 1,546,398 $ 1,751,104 $ 4,723,720
------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 993,477 $ 1,490,335 $ 4,053,868
Non-controlled affiliated issuers 23,612 147,676 --
------------------------------------------------
Total cost of investments $ 1,017,089 $ 1,638,011 $ 4,053,868
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-30
<PAGE>
August 31, 1999
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
MANAGERS EQUITY MANAGERS TRUST
TRUST --------------------------------------------------------------
---------- SOCIALLY
INTERNATIONAL MANHATTAN MILLENNIUM PARTNERS REGENCY RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 119,248 $ 722,750 $ 81,489 $ 3,876,069 $ 8,093 $ 392,600
Non-controlled affiliated issuers -- -- -- -- -- --
---------------------------------------------------------------------------
119,248 722,750 81,489 3,876,069 8,093 392,600
Cash 3 2 5 36 3 --
Dividends and interest receivable 730 5,002 238 9,703 9 758
Prepaid expenses and other assets 14 56 3 106 2 10
Receivable for securities sold -- 11,968 1,965 92,109 337 6,779
---------------------------------------------------------------------------
119,995 739,778 83,700 3,978,023 8,444 400,147
---------------------------------------------------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) -- -- -- -- -- --
Payable for collateral on securities loaned
(Note A) 4,874 118,910 13,306 139,642 50 2,340
Payable for securities purchased -- 2,773 1,846 62,299 91 --
Payable for variation margin (Note A) -- -- -- -- -- --
Payable to investment manager (Note B) 82 274 45 1,486 4 185
Accrued expenses and other payables 523 4,962 266 5,856 21 509
---------------------------------------------------------------------------
5,479 126,919 15,463 209,283 166 3,034
---------------------------------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 114,516 $ 612,859 $ 68,237 $ 3,768,740 $ 8,278 $ 397,113
---------------------------------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 79,630 $ 490,525 $ 62,120 $ 3,408,849 $ 8,796 $ 299,154
Net unrealized appreciation (depreciation) in
value of investment securities, financial
futures contracts, and option contracts 34,886 122,334 6,117 359,891 (518) 97,959
---------------------------------------------------------------------------
NET ASSETS $ 114,516 $ 612,859 $ 68,237 $ 3,768,740 $ 8,278 $ 397,113
---------------------------------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 84,361 $ 600,416 $ 75,372 $ 3,516,178 $ 8,611 $ 294,641
Non-controlled affiliated issuers -- -- -- -- -- --
---------------------------------------------------------------------------
Total cost of investments $ 84,361 $ 600,416 $ 75,372 $ 3,516,178 $ 8,611 $ 294,641
---------------------------------------------------------------------------
</TABLE>
C-31
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS TRUST
------------------------------------------
FOCUS GENESIS GUARDIAN
PORTFOLIO PORTFOLIO PORTFOLIO
For the For the For the
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
(000'S OMITTED) 1999 1999 1999
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 13,017 $ 25,981 $ 58,766
Dividend income -- non-controlled affiliated
issuers -- 1,078 --
Interest income 1,237 5,441 28,189
Foreign taxes withheld (Note A) (37) -- (800)
------------------------------------------
Total income 14,217 32,500 86,155
------------------------------------------
Expenses:
Investment management fee (Note B) 7,855 13,245 25,003
Accounting fees 10 10 10
Amortization of deferred organization and
initial offering expenses (Note A) -- -- --
Auditing fees 45 46 48
Custodian fees (Note B) 273 342 826
Insurance expense 19 26 88
Legal fees 25 27 28
Trustees' fees and expenses 23 25 69
Miscellaneous -- 45 --
------------------------------------------
Total expenses 8,250 13,766 26,072
Expenses reduced by custodian fee expense
offset arrangement (Note B) (4) (5) (4)
------------------------------------------
Total net expenses 8,246 13,761 26,068
------------------------------------------
Net investment income (loss) 5,971 18,739 60,087
------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold in unaffiliated issuers 203,017 (111,789) 853,341
Net realized gain on investment securities
sold in non-controlled affiliated issuers 36 1,399 --
Net realized gain on option contracts
(Note A) 54 -- 7,672
Net realized gain (loss) on financial futures
contracts (Note A) -- -- 130,832
Net realized loss on foreign currency
transactions (Note A) -- -- --
Net realized loss on equity swap contracts
(Note A) -- -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, option
contracts, equity swap contracts,
translation of assets and liabilities in
foreign currencies, and foreign currency
contracts (Note A) 283,206 413,682 406,548
------------------------------------------
Net gain (loss) on investments 486,313 303,292 1,398,393
------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 492,284 $ 322,031 $ 1,458,480
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-32
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL
MANAGERS
TRUST EQUITY MANAGERS TRUST
------------ ------------------------------------------------------------------------
MILLENNIUM
PORTFOLIO REGENCY
PORTFOLIO
For the
INTERNATIONAL MANHATTAN Period from PARTNERS For the SOCIALLY
PORTFOLIO PORTFOLIO October 20, PORTFOLIO Period from RESPONSIVE
1998 June 1, 1999 PORTFOLIO
(Commencement (Commencement
For the For the of For the of For the
Year Year Operations) Year Operations) Year
Ended Ended to Ended to Ended
August 31, August 31, August 31, August 31, August 31, August 31,
1999 1999 1999 1999 1999 1999
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated
issuers $ 1,079 $ 1,091 $ 1 $ 66,443 $ 16 $ 3,639
Dividend income -- non-controlled
affiliated issuers -- -- -- -- -- --
Interest income 509 1,979 144 4,684 17 775
Foreign taxes withheld (Note A) (170) -- -- (209) -- --
---------------------------------------------------------------------------------------
Total income 1,418 3,070 145 70,918 33 4,414
---------------------------------------------------------------------------------------
Expenses:
Investment management fee
(Note B) 1,019 3,282 236 18,165 8 1,956
Accounting fees 10 10 9 10 3 10
Amortization of deferred
organization and initial
offering expenses (Note A) 9 -- -- -- -- 4
Auditing fees 33 54 20 47 15 34
Custodian fees (Note B) 208 177 48 617 9 109
Insurance expense 2 8 -- 48 -- 4
Legal fees 30 20 15 18 5 18
Trustees' fees and expenses 11 12 4 50 -- 9
Miscellaneous 3 15 1 -- -- --
---------------------------------------------------------------------------------------
Total expenses 1,325 3,578 333 18,955 40 2,144
Expenses reduced by custodian fee
expense offset arrangement
(Note B) (3) (6) (2) (5) -- (1)
---------------------------------------------------------------------------------------
Total net expenses 1,322 3,572 331 18,950 40 2,143
---------------------------------------------------------------------------------------
Net investment income (loss) 96 (502) (186) 51,968 (7) 2,271
---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on
investment securities sold in
unaffiliated issuers 15,646 57,698 8,249 353,820 75 22,484
Net realized gain on investment
securities sold in non-controlled
affiliated issuers -- -- -- -- -- --
Net realized gain on option
contracts (Note A) -- -- -- -- -- --
Net realized gain (loss) on
financial futures contracts
(Note A) (1,384) -- -- -- -- --
Net realized loss on foreign
currency transactions (Note A) (2,208) -- -- -- -- --
Net realized loss on equity swap
contracts (Note A) (274) -- -- -- -- --
Change in net unrealized
appreciation (depreciation) of
investment securities, financial
futures contracts, option
contracts, equity swap contracts,
translation of assets and
liabilities in foreign currencies,
and foreign currency contracts
(Note A) 12,624 135,208 6,117 531,136 (518) 81,446
---------------------------------------------------------------------------------------
Net gain (loss) on investments 24,404 192,906 14,366 884,956 (443) 103,930
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations $ 24,500 $ 192,404 $ 14,180 $ 936,924 $ (450) $ 106,201
---------------------------------------------------------------------------------------
</TABLE>
C-33
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS
TRUST
FOCUS GENESIS
PORTFOLIO PORTFOLIO
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1999 1998 1999 1998
---------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 5,971 $ 10,123 $ 18,739 $ 23,438
Net realized gain (loss) on
investments 203,107 74,686 (110,390) 35,406
Change in net unrealized
appreciation (depreciation) of
investments 283,206 (360,086) 413,682 (545,041)
---------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 492,284 (275,277) 322,031 (486,197)
---------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 50,568 178,065 528,302 1,557,053
Reductions (313,932) (158,751) (911,584) (342,152)
---------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (263,364) 19,314 (383,282) 1,214,901
---------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 228,920 (255,963) (61,251) 728,704
NET ASSETS:
Beginning of year 1,317,478 1,573,441 1,812,355 1,083,651
---------------------------------------------------------
End of year $ 1,546,398 $ 1,317,478 $ 1,751,104 $ 1,812,355
---------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-34
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS GLOBAL MANAGERS EQUITY MANAGERS
TRUST TRUST TRUST
GUARDIAN INTERNATIONAL MANHATTAN
PORTFOLIO PORTFOLIO PORTFOLIO
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1999 1998 1999 1998 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 60,087 $ 78,026 $ 96 $ 391 $ (502) $ (343)
Net realized gain (loss) on
investments 991,845 893,833 11,780 (10,675) 57,698 45,585
Change in net unrealized
appreciation (depreciation) of
investments 406,548 (2,420,985) 12,624 (596) 135,208 (106,156)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 1,458,480 (1,449,126) 24,500 (10,880) 192,404 (60,914)
---------------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 164,857 391,142 91,521 91,654 47,432 53,069
Reductions (2,687,422) (1,912,418) (129,327) (68,216) (150,336) (90,539)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (2,522,565) (1,521,276) (37,806) 23,438 (102,904) (37,470)
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (1,064,085) (2,970,402) (13,306) 12,558 89,500 (98,384)
NET ASSETS:
Beginning of year 5,787,805 8,758,207 127,822 115,264 523,359 621,743
---------------------------------------------------------------------------------------
End of year $ 4,723,720 $ 5,787,805 $ 114,516 $ 127,822 $ 612,859 $ 523,359
---------------------------------------------------------------------------------------
</TABLE>
C-35
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY
MANAGERS
TRUST
MILLENNIUM
PORTFOLIO
Period from
October 20,
1998
(Commencement
of
Operations)
to
August 31,
(000'S OMITTED) 1999
-------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (186)
Net realized gain (loss) on
investments 8,249
Change in net unrealized
appreciation (depreciation) of
investments 6,117
-------------
Net increase (decrease) in net
assets resulting from operations 14,180
-------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 57,892
Reductions (3,835)
-------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests 54,057
-------------
NET INCREASE (DECREASE) IN NET ASSETS 68,237
NET ASSETS:
Beginning of year --
-------------
End of year $ 68,237
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-36
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY MANAGERS
TRUST
REGENCY
PORTFOLIO
Period from SOCIALLY
PARTNERS June 1, 1999 RESPONSIVE
PORTFOLIO (Commencement PORTFOLIO
of
Year Operations) Year
Ended to Ended
August 31, August 31, August 31,
1999 1998 1999 1999 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 51,968 $ 46,344 $ (7) $ 2,271 $ 2,863
Net realized gain (loss) on
investments 353,820 408,784 75 22,484 26,331
Change in net unrealized
appreciation (depreciation) of
investments 531,136 (872,798) (518) 81,446 (50,773)
------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 936,924 (417,670) (450) 106,201 (21,579)
------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 230,354 743,583 8,958 53,231 71,633
Reductions (979,875) (320,149) (230) (45,169) (23,485)
------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (749,521) 423,434 8,728 8,062 48,148
------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 187,403 5,764 8,278 114,263 26,569
NET ASSETS:
Beginning of year 3,581,337 3,575,573 -- 282,850 256,281
------------------------------------------------------------------------
End of year $ 3,768,740 $ 3,581,337 $ 8,278 $ 397,113 $ 282,850
------------------------------------------------------------------------
</TABLE>
C-37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
- ----------------------------------------------------------------------
Equity Managers Trust and Global Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Portfolio ("Focus"), Neuberger Berman Genesis
Portfolio ("Genesis"), Neuberger Berman Guardian Portfolio ("Guardian"),
Neuberger Berman Manhattan Portfolio ("Manhattan"), Neuberger Berman
Millennium Portfolio ("Millennium"), Neuberger Berman Partners Portfolio
("Partners"), Neuberger Berman Regency Portfolio ("Regency"), and Neuberger
Berman Socially Responsive Portfolio ("Socially Responsive") are separate
operating series of Equity Managers Trust ("Managers Trust"), a New York
common law trust organized as of December 1, 1992. Neuberger Berman
International Portfolio ("International") is a separate operating series of
Global Managers Trust ("Global"), a New York common law trust organized as of
March 18, 1994, with its principal office in the Cayman Islands. These nine
aforementioned series are collectively referred to as the "Portfolios."
Managers Trust and Global (collectively, the "Trusts") are registered as
diversified, open-end management investment companies under the Investment
Company Act of 1940, as amended. Millennium and Regency had no operations
until October 20, 1998 and June 1, 1999, respectively, other than matters
relating to their organization and registration as series' of Managers Trust.
Other regulated investment companies sponsored by Neuberger Berman Management
Inc. ("Management"), whose financial statements are not presented herein,
also invest in the Trusts. Global currently has only one 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.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolios' Schedule of Investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange of such currency against the U.S.
dollar to determine the value of investments, other assets and liabilities.
Purchase and sale prices of securities, and income and expenses are
translated into U.S. dollars at the prevailing rate of exchange on the
respective dates of such transactions.
4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date or, for certain foreign dividends, as soon as the Portfolio
becomes aware of the dividends. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income,
C-38
<PAGE>
including accretion of original issue discount, where applicable, and
accretion of discount on short-term investments, is recorded on the accrual
basis. Realized gains and losses from securities transactions and foreign
currency transactions are recorded on the basis of identified cost.
5) FORWARD FOREIGN CURRENCY CONTRACTS: The Portfolios may enter into forward
foreign currency contracts ("contracts") in connection with planned purchases
or sales of securities to hedge the U.S. dollar value of portfolio securities
denominated in a foreign currency. International may also enter into such
contracts to increase or decrease its exposure to a currency other than U.S.
dollars. The gain or loss arising from the difference between the original
contract price and the closing price of such contract is included in net
realized gains or losses on foreign currency transactions. Fluctuations in
the value of forward foreign currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by each Portfolio. The
Portfolios have no specific limitation on the percentage of assets which may
be committed to these types of contracts. The Portfolios could be exposed to
risks if a counterparty to a contract were unable to meet the terms of its
contract or if the value of the foreign currency changes unfavorably. The
U.S. dollar value of foreign currency underlying all contractual commitments
held by each Portfolio is determined using forward foreign currency exchange
rates supplied by an independent pricing service.
6) TAXES: Managers Trust intends to comply with the requirements of the Internal
Revenue Code. Each Portfolio of the Trusts also intends to conduct its
operations so that each of its investors (in the case of Global, its U.S.
investors) will be able to qualify as a regulated investment company. Each
Portfolio will be treated as a partnership for U.S. Federal income tax
purposes and is therefore not subject to U.S. Federal income tax. There is,
at present, no direct taxation in the Cayman Islands, and therefore interest,
dividends, and capital gains derived by Global are not subject to taxes in
that jurisdiction.
7) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign
tax authorities, net of refunds recoverable.
8) ORGANIZATION EXPENSES: Organization expenses incurred by International and
Socially Responsive were fully amortized as of August 31, 1999.
9) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by each of the Trusts with respect to any two or more
Portfolios are allocated in proportion to the net assets of such Portfolios,
except where a more appropriate allocation of expenses to each Portfolio can
otherwise be made fairly. Expenses directly attributable to a Portfolio are
charged to that Portfolio.
10) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered
call option are recorded in the liability section of each Portfolio's
Statement of Assets and Liabilities and are subsequently adjusted to the
current market value. When
C-39
<PAGE>
an option is exercised, closed, or expired, the Portfolio realizes a gain or
loss and the liability is eliminated. A Portfolio bears the risk of a
decline in the price of the security during the period, although any
potential loss during the period would be reduced by the amount of the
option premium received. In general, written covered call options may serve
as a partial hedge against decreases in value in the underlying securities
to the extent of the premium received. All securities covering outstanding
options are held in escrow by the custodian bank.
Summary of option transactions for the year ended August 31, 1999:
<TABLE>
VALUE
WHEN
FOCUS NUMBER WRITTEN
- -----------------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/98 0 $ 0
CONTRACTS WRITTEN 13,180 3,866,000
CONTRACTS EXPIRED (1,880) (920,000)
CONTRACTS EXERCISED (3,525) (870,000)
CONTRACTS CLOSED (4,775) (1,635,000)
---------------------
CONTRACTS OUTSTANDING 8/31/99 3,000 $ 441,000
---------------------
</TABLE>
<TABLE>
VALUE
WHEN
GUARDIAN NUMBER WRITTEN
- -------------------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/98 7,018 $ 3,498,000
CONTRACTS WRITTEN 87,950 45,460,000
CONTRACTS EXPIRED (12,518) (5,082,000)
CONTRACTS EXERCISED (20,000) (10,046,000)
CONTRACTS CLOSED (38,700) (18,384,000)
-----------------------
CONTRACTS OUTSTANDING 8/31/99 23,750 $ 15,446,000
-----------------------
</TABLE>
11) FINANCIAL FUTURES CONTRACTS: International, Millennium, and Socially
Responsive may each buy and sell financial futures contracts to hedge
against a possible decline in the value of their portfolio securities. Also,
Focus, Guardian, and Regency may each buy and sell stock index futures
contracts for purposes of managing cash flow. International may also buy and
sell financial futures contracts for non-hedging purposes. At the time a
Portfolio enters into a financial futures contract, it is required to
deposit with its custodian a specified amount of cash or liquid securities,
known as "initial margin," ranging upward from 1.1% of the value of the
financial futures contract being traded. Each day, the futures contract is
valued at the official settlement price of the board of trade or U.S.
commodity exchange on which such futures contract is traded. Subsequent
payments, known as "variation margin," to and from the broker are made on a
daily basis as the
C-40
<PAGE>
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the
Portfolios as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of
matching financial futures contracts. When the contracts are closed, a
Portfolio recognizes a gain or loss. Risks of entering into futures
contracts include the possibility there may be an illiquid market and/or a
change in the value of the contract may not correlate with changes in the
value of the underlying securities.
For U.S. Federal income tax purposes, the futures transactions undertaken
by a Portfolio may cause that Portfolio to recognize gains or losses from
marking to market even though its positions have not been sold or
terminated, may affect the character of the gains or losses recognized as
long-term or short-term, and may affect the timing of some capital gains and
losses realized by the Portfolios. Also, a Portfolio's losses on
transactions involving futures contracts may be deferred rather than being
taken into account currently in calculating such Portfolio's taxable income.
During the period ended August 31, 1999, Focus, Millennium, Regency, and
Socially Responsive did not enter into any financial futures contracts.
During the year ended August 31, 1999, International had entered into
various financial futures contracts. At August 31, 1999, there were no open
positions.
At August 31, 1999, open positions in financial futures contracts for
Guardian were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION DEPRECIATION
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
SEPTEMBER 1999 1,245 S&P 500 FUTURES LONG $11,506,000
</TABLE>
At August 31, 1999, Guardian had the following securities deposited in a
segregated account to cover margin requirements on open financial futures
contracts:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY
- ------------------------------------------------------------------
<C> <S>
$34,200,000 U.S. Treasury Bills, 4.60%, due 11/18/1999
</TABLE>
12) SECURITY LENDING: Securities loans involve certain risks in the event a
borrower should fail financially, including delays or inability to recover
the lent securities or foreclose against the collateral. The investment
manager, under the general supervision of the Trusts' Boards of Trustees,
monitors the creditworthiness of the parties to whom the Portfolios make
security loans. The Portfolios will not lend
C-41
<PAGE>
securities on which covered call options have been written, or lend
securities on terms which would prevent each of their investors from
qualifying as a regulated investment company. The Portfolios entered into a
Securities Lending Agreement with Morgan Stanley & Co. Incorporated
("Morgan"). The Portfolios receive cash collateral equal to at least 100% of
the current market value of the loaned securities. The Portfolios invest the
cash collateral in the N&B Securities Lending Quality Fund, LLC ("investment
vehicle"), which is managed by State Street Bank and Trust Company ("State
Street") pursuant to guidelines approved by the Trusts' investment manager.
Income earned on the investment vehicle is paid to Morgan monthly. The
Portfolios receive a fee, payable monthly, negotiated by the Portfolios and
Morgan, based on the number and duration of the lending transactions. At
August 31, 1999, the value of the securities loaned and the value of the
collateral were as follows:
<TABLE>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
- -------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 6,975,000 $ 7,114,000
GENESIS 41,691,000 42,525,000
GUARDIAN 23,957,000 24,437,000
INTERNATIONAL 4,778,000 4,874,000
MANHATTAN 116,579,000 118,910,000
MILLENNIUM 13,045,000 13,306,000
PARTNERS 136,904,000 139,642,000
REGENCY 50,000 50,000
SOCIALLY RESPONSIVE 2,294,000 2,340,000
</TABLE>
13) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
with institutions that the Portfolio's investment manager has determined are
creditworthy. Each repurchase agreement is recorded at cost. A Portfolio
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable a Portfolio to
obtain those securities in the event of a default under the repurchase
agreement. A Portfolio monitors, on a daily basis, the value of the
securities transferred to ensure that their value, including accrued
interest, is greater than amounts owed to a Portfolio under each such
repurchase agreement.
14) SWAPS: International has entered into equity swap contracts to gain exposure
to specific foreign equities. A swap is an agreement that obligates two
parties to exchange a series of cash flows at specified intervals based upon
or calculated by
C-42
<PAGE>
reference to changes in specified security prices or interest rates. The
payment flows are usually netted against each other, with the difference
being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net payment to be
received by the Portfolio and/or the termination value at the end of the
contract. Therefore, International considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates
or in the value of the underlying equities.
International records a net receivable or payable for the amount expected
to be received or paid under the contract. The fluctuation in the market
value of the underlying security is recorded as unrealized
appreciation/depreciation of investments. Premium payments made to enter
into a swap contract are capitalized and amortized over the life of the swap
contract. Management periodically reviews the value of the unamortized
balance of the premium payment and may accelerate the amortization. At
August 31, 1999, International had no outstanding equity swap contracts.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
(except Genesis, International, and Millennium) pays Management a fee at the
annual rate of 0.55% of the first $250 million of that Portfolio's average daily
net assets, 0.525% of the next $250 million, 0.50% of the next $250 million,
0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of
average daily net assets in excess of $1.5 billion. Genesis and Millennium pay
Management a fee for investment management services at the annual rate of 0.85%
of the first $250 million of that Portfolio's average daily net assets, 0.80% of
the next $250 million, 0.75% of the next $250 million, 0.70% of the next $250
million, and 0.65% of average daily net assets in excess of $1 billion. Prior to
December 15, 1997, Management had voluntarily agreed to waive a portion of the
management fee borne directly by Genesis and indirectly by any entity that
invested in Genesis to reduce the annual fee by 0.10% per annum of average daily
net assets of Genesis. Effective December 15, 1997, the above waiver was
terminated. International pays Management a fee for investment management
services at the annual rate of 0.85% of the first $250 million of that
Portfolio's average daily net assets, 0.825% of the next $250 million, 0.80% of
the next $250 million, 0.775% of the next $250 million, 0.75% of the next $500
million, and 0.725% of average daily net assets in excess of $1.5 billion.
C-43
<PAGE>
As of August 31, 1999, all of the capital stock of Management is owned by
individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a
member firm of The New York Stock Exchange and sub-adviser to each Portfolio.
Neuberger is retained by Management to furnish it with investment
recommendations and research information without added cost to each Portfolio.
Several individuals who are officers and/or trustees of the Trusts are also
principals of Neuberger and/ or officers and/or directors of Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between each Portfolio and Morgan, Morgan had agreed to reimburse each
Portfolio for transaction costs incurred on security lending transactions
charged by the custodian through May 31, 1999. The impact of these arrangements,
respectively, reflected in the Statements of Operations under the caption
Custodian fees, was a reduction of $1,177 and $2,359, $699 and $4,592, $2,599
and $1,768, $798 and $2,336, $978 and $4,544, $696 and $1,600, $2,894 and
$2,200, $76 and $0, and $200 and $448, for Focus, Genesis, Guardian,
International, Manhattan, Millennium, Partners, Regency, and Socially
Responsive, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended August 31, 1999, there were purchase and sale
transactions (excluding short-term securities, financial futures contracts,
forward foreign currency contracts, option contracts, and equity swap contracts)
as follows:
<TABLE>
PURCHASES SALES
- --------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 898,828,000 $1,171,958,000
GENESIS 573,691,000 868,673,000
GUARDIAN 3,678,666,000 6,448,039,000
INTERNATIONAL 105,866,000 140,526,000
MANHATTAN 677,511,000 795,813,000
MILLENNIUM 108,650,000 60,657,000
PARTNERS 5,124,066,000 5,825,740,000
REGENCY 9,701,000 1,960,000
SOCIALLY RESPONSIVE 186,150,000 182,832,000
</TABLE>
During the year ended August 31, 1999, International had entered into various
contracts to deliver currencies at specified future dates. At August 31, 1999,
there were no open contracts.
C-44
<PAGE>
During the year ended August 31, 1999, there were brokerage commissions on
securities paid to Neuberger and other brokers as follows:
<TABLE>
OTHER
NEUBERGER BROKERS TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOCUS $ 984,000 $ 988,000 $ 1,972,000
GENESIS 1,035,000 1,115,000 2,150,000
GUARDIAN 3,975,000 6,818,000 10,793,000
INTERNATIONAL 5,000 712,000 717,000
MANHATTAN 495,000 660,000 1,155,000
MILLENNIUM 28,000 23,000 51,000
PARTNERS 7,694,000 6,523,000 14,217,000
REGENCY 15,000 2,000 17,000
SOCIALLY RESPONSIVE 330,000 155,000 485,000
</TABLE>
NOTE D -- LINE OF CREDIT:
At August 31, 1999, Genesis, Manhattan, and Millennium were three of the
holders of a single committed, unsecured $100,000,000 line of credit with State
Street, to be used only for temporary or emergency purposes. Interest is charged
on borrowings under this agreement at the overnight Federal Funds Rate plus
0.75% per annum. A facility fee of 0.07% (0.09% effective September 1, 1999) per
annum of the available line of credit is charged, of which Genesis, Manhattan,
and Millennium each has agreed to pay its pro rata share, based on the ratio of
its individual net assets to the net assets of all the participants at the time
the fee is due and payable. The fee is paid quarterly in arrears. No
compensating balance is required. Other investment companies managed by
Management also participate in this line of credit on the same terms. Because
several investment companies participate, there is no assurance that an
individual Portfolio will have access to the entire $100,000,000 at any
particular time. Genesis, Manhattan, and Millennium had no loans outstanding
pursuant to this line of credit at August 31, 1999. During the year ended
August 31, 1999, Genesis, Manhattan, and Millennium did not utilize this line of
credit.
At August 31, 1999, International was one of two holders of a single
$20,000,000 uncommitted, secured line of credit with State Street to be used for
temporary or emergency purposes or for leverage. Interest is charged at LIBOR,
or the overnight Federal Funds Rate, plus a spread to be determined at the time
of borrowing. Another investment company managed by Management also participates
in this line of credit on the same terms. Because another investment company
participates, there is no assurance that an individual Portfolio will have
access to the entire $20,000,000 at any particular time. International had no
loans outstanding pursuant to this line of credit at August 31, 1999, nor had it
utilized this line of credit at any time prior to that date.
C-45
<PAGE>
NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
FOCUS
<TABLE>
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVANTA Corp.
Class A** 948,694 0 948,694 0 $ 0
ADVANTA Corp.
Class B** 910,000 0 910,000 0 0
Photronics Inc. 940,000 447,500 85,000 1,302,500 31,097,000
Sierra Health
Services** 1,360,000 0 1,360,000 0 0
</TABLE>
GENESIS
<TABLE>
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAR Corp. 1,748,650 60,900 38,200 1,771,350 $37,863,000
ADAC Laboratories** 1,003,100 42,200 138,800 906,500 5,326,000
Alliant Techsystems 648,500 110,900 96,200 663,200 48,414,000
Aviall Inc. 1,194,100 50,400 25,000 1,219,500 13,567,000
Davox Corp. 0 1,075,600 0 1,075,600 14,991,000
DONCASTERS PLC ADR 468,300 10,000 0 478,300 6,636,000
Eltron
International** 420,000 0 420,000 0 0
Highland Bancorp 0 331,400 0 331,400 6,172,000
Inprise Corp.** 2,606,300 0 404,700 2,201,600 9,288,000
Pameco Corp.** 281,800 0 281,800 0 0
Primex Technologies 235,000 565,400 0 800,400 16,708,000
SOS Staffing Services 641,900 172,500 0 814,400 4,835,000
</TABLE>
C-46
<PAGE>
GUARDIAN
<TABLE>
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cabot Corp.** 3,841,000 0 845,000 2,996,000 $ 69,095,000
Capital One
Financial** 3,087,900 2,599,100 2,216,200 3,470,800 131,023,000
Coltec Industries** 4,863,900 0 4,863,900 0 0
Countrywide Credit
Industries** 6,590,000 0 5,427,100 1,162,900 37,358,000
Foundation Health
Systems** 9,939,900 0 9,939,900 0 0
Mark IV Industries** 2,942,081 0 2,942,081 0 0
PacifiCare Health
Systems Class B** 1,988,564 7,000 1,995,564 0 0
UCAR International** 2,176,200 0 2,176,200 0 0
Wellpoint Health
Networks** 3,674,996 25,000 1,117,000 2,582,996 188,236,000
</TABLE>
* AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE
PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES.
**AT AUGUST 31, 1999, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED
WITH THE PORTFOLIO.
C-47
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .51% .51% .53% .54% --
--------------------------------------------------------------------
Net Expenses .51% .51% .53% .54% .57%
--------------------------------------------------------------------
Net Investment Income .37% .59% .54% 1.04% 1.05%
--------------------------------------------------------------------
Portfolio Turnover Rate 57% 64% 63% 39% 36%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $1,546.4 $1,317.5 $1,573.4 $1,122.4 $969.2
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-48
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
Year Ended August 31,
1999 1998 1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .75% .72% .77% .85% --
-------------------------------------------------------------
Net Expenses .75% .72%(2) .77%(2) .85%(2) .94%(2)
-------------------------------------------------------------
Net Investment Income 1.02% 1.13% .32% .27% .25%
-------------------------------------------------------------
Portfolio Turnover Rate 33% 18% 18% 21% 37%
-------------------------------------------------------------
Net Assets, End of Year (in millions) $1,751.1 $1,812.4 $1,083.7 $259.9 $142.2
-------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Had the investment manager not waived a portion of the management fee, the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------
Net Expenses .74% .87% .95% .97%
</TABLE>
C-49
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .46% .46% .46% .46% --
--------------------------------------------------------------------
Net Expenses .46% .46% .46% .46% .48%
--------------------------------------------------------------------
Net Investment Income 1.06% .92% .89% 1.72% 1.72%
--------------------------------------------------------------------
Portfolio Turnover Rate 73% 60% 50% 37% 26%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $4,723.7 $5,787.8 $8,758.2 $6,232.5 $4,613.2
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-50
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
International Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) 1.11% 1.18% 1.21% 1.37% --
------------------------------------------------------------------
Net Expenses 1.10% 1.18% 1.21% 1.37%(2) .70%(2)
------------------------------------------------------------------
Net Investment Income .08% .29% .47% .58% 1.74%
------------------------------------------------------------------
Portfolio Turnover Rate 94% 46% 37% 45% 41%
------------------------------------------------------------------
Net Assets, End of Year (in millions) $114.5 $127.8 $115.3 $57.0 $26.4
------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) After reimbursement of expenses by the investment adviser. Had the investment
adviser not undertaken such action, the annualized ratios of net expenses to
average daily net assets would have been:
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
1996 1995
<S> <C> <C>
- ---------------------------------------------
Net Expenses 1.49% 2.24%
</TABLE>
C-51
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .58% .57% .59% .58% --
--------------------------------------------------------------------
Net Expenses .58% .57% .59% .58% .59%
--------------------------------------------------------------------
Net Investment Income (Loss) (.08%) (.05%) .20% .13% .42%
--------------------------------------------------------------------
Portfolio Turnover Rate 115% 90% 89% 53% 44%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $612.9 $523.4 $621.7 $567.4 $645.4
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-52
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Millennium Portfolio
<TABLE>
Period from
October 20, 1998(1)
to
August 31,
1999
-------------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2)(3) 1.20%
-------------------
Net Expenses(3) 1.19%
-------------------
Net Investment Loss(3) (.67%)
-------------------
Portfolio Turnover Rate 208%
-------------------
Net Assets, End of Period (in millions) $68.2
-------------------
</TABLE>
1) The date investment operations commenced.
2) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
3) Annualized.
C-53
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .47% .47% .48% .51% --
--------------------------------------------------------------------
Net Expenses .47% .47% .48% .51% .53%
--------------------------------------------------------------------
Net Investment Income 1.29% 1.11% 1.05% 1.26% 1.13%
--------------------------------------------------------------------
Portfolio Turnover Rate 132% 109% 77% 96% 98%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $3,768.7 $3,581.3 $3,575.6 $1,999.6 $1,623.5
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-54
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Regency Portfolio
<TABLE>
Period from
June 1, 1999(1)
to
August 31,
1999
---------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2)(3) 2.65%
---------------
Net Expenses(3) 2.64%
---------------
Net Investment Loss(3) (.48%)
---------------
Portfolio Turnover Rate 42%
---------------
Net Assets, End of Period (in millions) $8.3
---------------
</TABLE>
1) The date investment operations commenced.
2) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
3) Annualized.
C-55
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
Year Ended August 31,
1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .59% .60% .63% .65% --
--------------------------------------------------------------------
Net Expenses .59% .60% .63% .65% .68%
--------------------------------------------------------------------
Net Investment Income .63% .92% 1.08% 1.02% 1.18%
--------------------------------------------------------------------
Portfolio Turnover Rate 53% 47% 51% 53% 58%
--------------------------------------------------------------------
Net Assets, End of Year (in millions) $397.1 $282.9 $256.3 $158.5 $96.7
--------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
C-56
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Manhattan Portfolio,
Neuberger Berman Millennium Portfolio,
Neuberger Berman Regency Portfolio, and
Neuberger Berman Socially Responsive Portfolio
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Neuberger Berman Manhattan
Portfolio, Neuberger Berman Millennium Portfolio, Neuberger Berman Regency
Portfolio, and Neuberger Berman Socially Responsive Portfolio (collectively the
"Portfolios") at August 31, 1999, and the results of their operations, the
changes in their net assets, and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolios' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1999 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewatehouseCoopers LLP
Boston, Massachusetts
October 8, 1999
C-57
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman Focus Portfolio
Neuberger Berman Genesis Portfolio
Neuberger Berman Guardian Portfolio and
Neuberger Berman Partners Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger Berman Focus Portfolio,
Neuberger Berman Genesis Portfolio, Neuberger Berman Guardian Portfolio, and
Neuberger Berman Partners Portfolio, four of the series constituting Equity
Managers Trust (the "Trust"), as of August 31, 1999, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999, by correspondence with the custodian and
brokers or other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Equity Managers Trust at August 31, 1999, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
October 1, 1999
C-58
<PAGE>
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS
To the Board of Trustees
Global Managers Trust and
Owners of Beneficial Interest of
Neuberger Berman International Portfolio
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Neuberger Berman International
Portfolio, the only series constituting Global Managers Trust (the "Trust"), as
of August 31, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Neuberger Berman International Portfolio of Global Managers Trust at August 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
[SIGNATURE]
/s/ ERNST & YOUNG LLP
Grand Cayman, Cayman Islands
October 1, 1999
C-59
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Institutional Services 800.366.6264
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger Berman Funds
Boston Service Center
P.O. Box 8403
Boston, MA 02266-8403
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT ACCOUNTANTS/AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Ernst & Young
One Capital Place
Shedden Road
George Town
Grand Cayman, Cayman Islands
- -C- 1999 Neuberger Berman Management Inc.
D-1
<PAGE>
OFFICERS AND TRUSTEES
EQUITY MANAGERS TRUST/
NEUBERGER BERMAN EQUITY FUNDS
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Lawrence Zicklin
PRESIDENT AND TRUSTEE
Faith Colish
TRUSTEE
Howard A. Mileaf
TRUSTEE
Edward I. O'Brien
TRUSTEE
John T. Patterson, Jr.
TRUSTEE
John P. Rosenthal
TRUSTEE
Cornelius T. Ryan
TRUSTEE
Gustave H. Shubert
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
GLOBAL MANAGERS TRUST
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Lawrence Zicklin
PRESIDENT
Howard A. Mileaf
TRUSTEE
John T. Patterson, Jr.
TRUSTEE
John P. Rosenthal
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Jacqueline Henning
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
Lenore Joan McCabe
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
Notice to Shareholders (Unaudited)
For Neuberger Berman Guardian Fund 90% of the dividends distributed during
the fiscal year ended August 31, 1999 qualifies for the dividend received
deduction for corporate shareholders. The Fund will notify shareholders in
January 2000 of the applicable percentage of qualifying dividends for corporate
shareholders for use in preparing 1999 income tax returns.
D-2
<PAGE>
Statistics and projections in this report are
derived from sources deemed to be reliable
but cannot be regarded as a representation
of future results of the Funds. This report
is prepared for the general information of
shareholders and is not an offer of shares
of the Funds. Shares are sold only through
the currently effective prospectus, which
must precede or accompany this report.
[LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
WWW.NBFUNDS.COM
NMAAR9610899
