NEUBERGER BERMAN EQUITY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
Investor Class Shares, Advisor Class Shares, Trust Class Shares,
and Institutional Class Shares
DATED December 16, 2000
Neuberger Berman Century Fund Neuberger Berman Focus Fund
Neuberger Berman Genesis Fund Neuberger Berman Guardian Fund
Neuberger Berman International Fund Neuberger Berman Manhattan Fund
Neuberger Berman Millennium Fund Neuberger Berman Partners Fund
Neuberger Berman Regency Fund Neuberger Berman Socially Responsive Fund
Neuberger Berman Technology Fund
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605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
Neuberger Berman Century Fund, Neuberger Berman Focus Fund, Neuberger
Berman Genesis Fund, Neuberger Berman Guardian Fund, Neuberger Berman
International Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium
Fund, Neuberger Berman Partners Fund, Neuberger Berman Regency Fund, Neuberger
Berman Socially Responsive Fund, and Neuberger Berman Technology Fund (each a
"Fund") are mutual funds that offer shares pursuant to a Prospectus dated
December 16, 2000.
The Prospectus for your share class provides more information about the
Funds that an investor should know before investing. You can get a free copy of
the Prospectus from Neuberger Berman Management Inc. ("NB Management"), 605
Third Avenue, 2nd Floor, New York, NY 10158-0180, or by calling 800-877-9700.
You should read the prospectus carefully before investing.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus for your share class.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
The "Neuberger Berman" name and logo are service marks of Neuberger
Berman, LLC. "Neuberger Berman Management Inc." and the fund names in this SAI
are either service marks or registered trademarks of NB Management.(C)2000
Neuberger Berman Management Inc.
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TABLE OF CONTENTS
Page
INVESTMENT INFORMATION.........................................................1
Investment Policies and Limitations.......................................1
Cash Management and Temporary Defensive Positions.........................5
Investment Insight........................................................5
Neuberger Berman Century Fund....................................5
Neuberger Berman Focus Fund......................................7
Neuberger Berman Genesis Fund....................................8
Neuberger Berman Guardian Fund..................................10
Neuberger Berman International Fund.............................11
Neuberger Berman Manhattan Fund.................................13
Neuberger Berman Millennium Fund................................14
Neuberger Berman Partners Fund..................................16
Neuberger Berman Regency Fund...................................17
Neuberger Berman Socially Responsive Fund.......................19
Neuberger Berman Technology Fund................................20
Additional Investment Information........................................21
Neuberger Berman Focus Fund - Description of Economic Sectors............43
Neuberger Berman Socially Responsive Fund - Description of Social
Policy................................................................45
PERFORMANCE INFORMATION.......................................................48
Total Return Computations................................................48
Comparative Information..................................................51
Other Performance Information............................................52
CERTAIN RISK CONSIDERATIONS...................................................53
TRUSTEES AND OFFICERS.........................................................53
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................61
Investment Manager and Administrator.....................................61
Sub-Adviser..............................................................70
Investment Companies Managed.............................................71
Codes of Ethics..........................................................72
Management and Control of NB Management and Neuberger Berman.............72
DISTRIBUTION ARRANGEMENTS.....................................................73
Distribution and Shareholder Services Plan...........................74
ADDITIONAL PURCHASE INFORMATION...............................................76
Share Prices and Net Asset Value.....................................76
Automatic Investing and Dollar Cost Averaging........................77
ADDITIONAL EXCHANGE INFORMATION...............................................78
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ADDITIONAL REDEMPTION INFORMATION.............................................81
Suspension of Redemptions............................................81
Redemptions in Kind..................................................81
DIVIDENDS AND OTHER DISTRIBUTIONS.............................................82
ADDITIONAL TAX INFORMATION....................................................82
Taxation of the Funds................................................82
Taxation of the Funds' Shareholders..................................85
FUND TRANSACTIONS.............................................................86
Portfolio Turnover...................................................94
REPORTS TO SHAREHOLDERS.......................................................94
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS................................94
CUSTODIAN AND TRANSFER AGENT..................................................95
INDEPENDENT AUDITORS/ACCOUNTANTS..............................................96
LEGAL COUNSEL.................................................................96
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................96
REGISTRATION STATEMENT.......................................................106
FINANCIAL STATEMENTS.........................................................107
Appendix A...................................................................A-1
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.....................A-1
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INVESTMENT INFORMATION
Each Fund is a separate operating series of Neuberger Berman Equity
Funds ("Trust"), a Delaware business trust that is registered with the
Securities and Exchange Commission ("SEC") as a diversified, open-end management
investment company.
Through December 15, 2000 the Funds' Advisor Class, Investor Class,
Trust Class, and Institutional Class shares were organized as feeder funds in a
master-feeder structure rather than a multiple-class structure. As feeder funds
their names were Neuberger Berman Equity Assets, Neuberger Berman Equity Funds,
Neuberger Berman Equity Trust, and Neuberger Berman Equity Series, respectively.
Financial and performance information in this SAI is that of the predecessor
feeder funds.
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of each Fund. The
investment objective and, unless otherwise specified, the investment policies
and limitations of each Fund are not fundamental. Any investment objective,
policy, or limitation that is not fundamental may be changed by the trustees of
the Trust ("Fund Trustees") without shareholder approval. The fundamental
investment policies and limitations of a Fund may not be changed without the
approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of the
Fund represented at a meeting at which more than 50% of the outstanding
Fund shares are represented, or
(2) a majority of the outstanding shares of the Fund.
These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
INVESTMENT POLICIES AND LIMITATIONS
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered exceeded unless the percentage limitation is exceeded immediately
after, and because of, a transaction by a Fund.
The following investment policies and limitations are fundamental and
apply to all Funds unless otherwise indicated:
1. BORROWING (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND). No
Fund may borrow money, except that a Fund may (i) borrow money from banks for
temporary or emergency purposes and not for leveraging or investment and (ii)
enter into reverse repurchase agreements for any purpose; provided that (i) and
(ii) in combination do not exceed 33-1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings). If at
any time borrowings exceed 33-1/3% of the value of a Fund's total assets, that
Fund will reduce its borrowings within three days (excluding Sundays and
holidays) to the extent necessary to comply with the 33-1/3% limitation.
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BORROWING (NEUBERGER BERMAN INTERNATIONAL FUND). The Fund may not
borrow money, except that the Fund may (i) borrow money from banks for temporary
or emergency purposes and for leveraging or investment and (ii) enter into
reverse repurchase agreements for any purpose; provided that (i) and (ii) in
combination do not exceed 33-1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). If at any time
borrowings exceed 33-1/3% of the value of the Fund's total assets, the Fund will
reduce its borrowings within three days (excluding Sundays and holidays) to the
extent necessary to comply with the 33-1/3% limitation.
2. COMMODITIES (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND).
No Fund may purchase physical commodities or contracts thereon, unless acquired
as a result of the ownership of securities or instruments, but this restriction
shall not prohibit a Fund from purchasing futures contracts or options
(including options on futures contracts, but excluding options or futures
contracts on physical commodities) or from investing in securities of any kind.
COMMODITIES (NEUBERGER BERMAN INTERNATIONAL FUND). The Fund may not
purchase physical commodities or contracts thereon, unless acquired as a result
of the ownership of securities or instruments, but this restriction shall not
prohibit the Fund from purchasing futures contracts, options (including options
on futures contracts, but excluding options or futures contracts on physical
commodities), foreign currencies or forward contracts, or from investing in
securities of any kind.
3. DIVERSIFICATION. No Fund may, with respect to 75% of the value of
its total assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities ("U.S. Government and Agency Securities"), or securities
issued by other investment companies) if, as a result, (i) more than 5% of the
value of the Fund's total assets would be invested in the securities of that
issuer or (ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. INDUSTRY CONCENTRATION. No Fund may purchase any security if, as a
result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
5. LENDING. No Fund may lend any security or make any other loan if, as
a result, more than 33-1/3% of its total assets (taken at current value) would
be lent to other parties, except, in accordance with its investment objective,
policies, and limitations, (i) through the purchase of a portion of an issue of
debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND).
No Fund may purchase real estate unless acquired as a result of the ownership of
securities or instruments, but this restriction shall not prohibit a Fund from
purchasing securities issued by entities or investment vehicles that own or deal
in real estate or interests therein or instruments secured by real estate or
interests therein.
REAL ESTATE (NEUBERGER BERMAN INTERNATIONAL FUND). The Fund may not
invest any part of its total assets in real estate or interests in real estate
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unless acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit the Fund from purchasing readily marketable
securities issued by entities or investment vehicles that own or deal in real
estate or interests therein or instruments secured by real estate or interests
therein.
7. SENIOR SECURITIES. No Fund may issue senior securities, except as
permitted under the 1940 Act.
8. UNDERWRITING. No Fund may underwrite securities of other issuers,
except to the extent that a Fund, in disposing of portfolio securities, may be
deemed to be an underwriter within the meaning of the Securities Act of 1933
("1933 Act").
For purposes of the limitation on commodities, the Funds do not
consider foreign currencies or forward contracts to be physical commodities.
Each Fund (except Neuberger Berman International, Neuberger Berman
Millennium, and Neuberger Berman Socially Responsive Funds) has the following
fundamental investment policy:
Notwithstanding any other investment policy of the Fund, the
Fund may invest all of its investable assets (cash,
securities, and receivables relating to securities) in an
open-end management investment company having substantially
the same investment objective, policies, and limitations as
the Fund.
Neuberger Berman Millennium Fund and Neuberger Berman Socially
Responsive Fund have the following fundamental investment policy:
Notwithstanding any other investment policy of the Fund, the
Fund may invest all of its net investable assets (cash,
securities, and receivables relating to securities) in an
open-end management investment company having substantially
the same investment objective, policies, and limitations as
the Fund.
Neuberger Berman International Fund has the following fundamental
investment policy:
Notwithstanding any other investment policy of the Fund, the
Fund may invest all of its net investable assets in an
open-end management investment company having substantially
the same investment objective, policies, and limitations as
the Fund.
The following investment policies and limitations are non-fundamental
and apply to all Funds unless otherwise indicated:
1. BORROWING (ALL FUNDS EXCEPT NEUBERGER BERMAN INTERNATIONAL FUND).
None of these Funds may purchase securities if outstanding borrowings, including
any reverse repurchase agreements, exceed 5% of its total assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, no Fund may make any loans other than securities loans.
3. MARGIN TRANSACTIONS. No Fund may purchase securities on margin from
brokers or other lenders, except that a Fund may obtain such short-term credits
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as are necessary for the clearance of securities transactions. Margin payments
in connection with transactions in futures contracts and options on futures
contracts shall not constitute the purchase of securities on margin and shall
not be deemed to violate the foregoing limitation.
4. FOREIGN SECURITIES (ALL FUNDS EXCEPT NEUBERGER BERMAN CENTURY,
NEUBERGER BERMAN INTERNATIONAL, NEUBERGER BERMAN MILLENNIUM, AND NEUBERGER
BERMAN TECHNOLOGY FUNDS). None of these Funds may invest more than 10% of the
value of its total assets in securities of foreign issuers, provided that this
limitation shall not apply to foreign securities denominated in U.S. dollars,
including American Depositary Receipts ("ADRs").
FOREIGN SECURITIES (NEUBERGER BERMAN CENTURY, NEUBERGER BERMAN
MILLENNIUM, AND NEUBERGER BERMAN TECHNOLOGY FUNDS). None of these Funds may
invest more than 20% of the value of its total assets in securities of foreign
issuers, provided that this limitation shall not apply to foreign securities
denominated in U.S. dollars, including ADRs.
5. ILLIQUID SECURITIES. No Fund may purchase any security if, as a
result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Fund has valued the securities, such as repurchase agreements maturing
in more than seven days.
6. PLEDGING (NEUBERGER BERMAN GENESIS AND NEUBERGER BERMAN GUARDIAN
FUNDS). Neither of these Funds may pledge or hypothecate any of its assets,
except that (i) Neuberger Berman Genesis Fund may pledge or hypothecate up to
15% of its total assets to collateralize a borrowing permitted under fundamental
policy 1 above or a letter of credit issued for a purpose set forth in that
policy and (ii) each Fund may pledge or hypothecate up to 5% of its total assets
in connection with its entry into any agreement or arrangement pursuant to which
a bank furnishes a letter of credit to collateralize a capital commitment made
by the Fund to a mutual insurance company of which the Fund is a member. The
other Funds are not subject to any restrictions on their ability to pledge or
hypothecate assets and may do so in connection with permitted borrowings.
7. SECTOR CONCENTRATION (NEUBERGER BERMAN FOCUS FUND). The Fund may not
invest more than 50% of its total assets in any one economic sector.
8. INVESTMENTS IN ANY ONE ISSUER (NEUBERGER BERMAN INTERNATIONAL FUND).
At the close of each quarter of the Fund's taxable year, (i) no more than 25% of
its total assets may be invested in the securities of a single issuer and (ii)
with regard to 50% of its total assets, no more than 5% of its total assets may
be invested in the securities of a single issuer. These limitations do not apply
to U.S. Government securities, as defined for tax purposes, or securities of
another regulated investment company ("RIC").
9. SOCIAL POLICY (NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND). The Fund
may not purchase securities of issuers who derive more than 5% of their total
revenue from alcohol, tobacco, gambling, or weapons or that are involved in
nuclear power.
Although the Funds do not have policies limiting their investment in
warrants, no Fund currently intends to invest in warrants unless acquired in
units or attached to securities.
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CASH MANAGEMENT AND TEMPORARY DEFENSIVE POSITIONS. For temporary
defensive purposes, or to manage cash pending investment or payout, each Fund
(except Neuberger Berman Socially Responsive Fund and Neuberger Berman
International Fund) may invest up to 100% of its total assets in cash and cash
equivalents, U.S. Government and Agency Securities, commercial paper, and
certain other money market instruments, as well as repurchase agreements
collateralized by the foregoing.
For temporary defensive purposes, or to manage cash pending investment
or payout, any part of Neuberger Berman Socially Responsive Fund's assets may be
retained temporarily in U.S. Government and Agency Securities, investment grade
fixed income securities of non-governmental issuers, repurchase agreements,
money market instruments, commercial paper, and cash and cash equivalents.
Generally, the foregoing temporary investments for Neuberger Berman Socially
Responsive Fund are selected with a concern for the social impact of each
investment.
For temporary defensive purposes, or to manage cash pending investment
or payout, Neuberger Berman International Fund may invest up to 100% of its
total assets in short-term foreign and U.S. investments, such as cash or cash
equivalents, commercial paper, short-term bank obligations, U.S. Government and
Agency Securities, and repurchase agreements. Neuberger Berman International
Fund may also invest in such instruments to increase liquidity or to provide
collateral to be held in segregated accounts.
Pursuant to an exemptive order received from the SEC, each Fund also
may invest up to 25% of its total assets in shares of a money market fund
managed by NB Management, to manage uninvested cash and cash collateral received
in connection with securities lending. The money market fund does not invest in
accordance with Socially Responsive Fund's Social Policy.
INVESTMENT INSIGHT
Neuberger Berman's commitment to its asset management approach is
reflected in the more than $125 million the organization's employees and their
families have invested in the Neuberger Berman mutual funds.
In advertisements, each Fund's allocation to a particular market
sector(s) may be discussed as a way to demonstrate how the fund managers uncover
stocks that they perceive to fit the Fund's investment parameters. These
discussions may include references to current or former holdings of a Fund.
NEUBERGER BERMAN CENTURY FUND
INVESTMENT PROGRAM
The Fund seeks long-term growth of capital; dividend income is a
secondary goal. The Fund invests mainly in common stocks of large capitalization
companies with strong earnings growth and the potential for higher earnings,
priced at attractive levels relative to their growth rates.
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INVESTMENT PROCESS
Using both quantitative and qualitative research, the Fund manager
seeks to build a portfolio of companies with high earnings growth rates and a
median market capitalization that exceeds $10 billion. Stocks that meet his
initial screens are then ranked according to factors that have historically
enhanced performance, such as positive earnings surprises, upward earnings
revisions, and low price/earnings to projected earnings growth rates (PEG
ratios). Companies that rank in the top quintile of the remaining universe are
targeted for further qualitative analysis. Before purchasing a stock, the Fund
manager meets with companies' top managers. He uses these meetings to determine
whether he believes the companies can sustain earnings growth and can continue
to exceed consensus earnings projections. He also seeks input from Neuberger
Berman's Boston-based Growth Equity Group, the 16-member New York-based research
department, and guidance from other leading Wall Street analysts.
1. Initial Focus Screens
2. Proprietary Ranking System
3. Top Quintile of Remaining Companies
4. Fundamental Research
5. Construct Fund
PORTFOLIO CONSTRUCTION AND RISK MANAGEMENT
The Fund manager believes that portfolio construction is as important
to the investment process as stock selection. The portfolio spans numerous
industry groups and includes many different kinds of companies. He also manages
risk by identifying and controlling risk relative to the fund's benchmarks.
SELL DISCIPLINE
The Fund manager's dispassionate sell discipline quickly eliminates
positions in companies with deteriorating fundamentals or that fail to meet his
expectations. He also reduces positions when they have done so well that in his
opinion, downside risk exceeds upside potential.
CENTURY INVESTORS CAN EXPECT:
o Experienced portfolio management
o Companies we believe have the potential to become the next-generation
growth leaders
o Established large-cap companies with the potential for continued
growth
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INVESTMENT INSIGHT
The investment approach for Century Fund is to focus on large companies
whose earnings have consistently grown, because they may have a competitive
advantage. Such a company may have a dominant market share, superior management
or expanded on the strength of innovative products. Continued earnings growth is
never guaranteed, but a track record of strong earnings growth warrants further
investigation.
NEUBERGER BERMAN FOCUS FUND
INVESTMENT PROGRAM
The Fund seeks long-term growth of capital and invests principally in
common stocks selected from 13 multi-industry sectors of the economy. To
maximize potential return, the Fund normally makes at least 90% or more of its
investments in not more than six sectors it identifies as undervalued.
EMPHASIS ON QUALITY, UNDERVALUED COMPANIES OF ALL MARKET
CAPITALIZATIONS
The Fund manager selects companies with solid fundamentals that he
considers undervalued by the marketplace. Specifically, he looks for industry
leaders with above-average earnings, established market niches, and sound future
business prospects. He believes these types of organizations come in all sizes;
therefore, he does not limit his selections to any particular capitalization
range.
A CONCENTRATED FUND
In addition to his value bias, the Fund manager concentrates his
efforts on six out of 13 possible economic sectors. Although the Fund is built
one stock at a time, he has found that the conditions leading to an individual
stock being undervalued similarly affect other companies in the same industries
or sectors. Thus, an emphasis on relatively few sectors is a natural outgrowth
of the fund's stock selection process. The Fund manager will dedicate no more
than 50% of assets to any one sector and no more than 25% of assets to any one
industry.
BOTTOM-UP, VALUE-ORIENTED STOCK SELECTION PROCESS
The Fund manager's bottom-up approach focuses on stocks that are
currently out of favor, due to temporary setbacks. He also likes stocks that
have been largely ignored by Wall Street, but that he believes still offer good
long-term growth potential. He prefers to buy companies that are industry
leaders, not those that he believes are undervalued for good reasons such as
poor management or limited growth prospects. Ideal investment candidates are
financially sound companies that have little or no debt and exhibit high returns
on equity.
THOROUGH RESEARCH EFFORT
The Fund manager believes it's the management teams that drive
companies and how they react to changes in their respective industries. As he
explains, "The only way to come to those conclusions is to meet with the people
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behind the stocks we like." Furthermore, he does not rely on a company's initial
merits after its stock has been purchased. Instead, he prefers to revisit its
fundamentals regularly and then, as a reality check, look back at the company's
performance to see if it's consistently delivering.
INVESTMENT PROCESS
Qualitative Analysis
o Meeting with Company Executives One-on-One
Monitor Exposure to Economic Conditions
o Interest Rate Changes
Sector Analysis
Stock Universe
o Quantitative Analysis
FOCUS INVESTORS CAN EXPECT:
o Emphasis on quality, undervalued companies of all market
capitalizations
o Focus on a few sectors at a time
o Bottom-up, value-oriented stock selection process
o Thorough research efforts
INVESTMENT INSIGHT
The investment approach for the Focus Fund involves looking for
companies that have low price-to-earnings ratios, solid balance sheets, and
strong management. The Fund manager often finds that these companies are
concentrated in certain sectors of the economy, which prompts him to look
further within these sectors for other companies that meet his criteria.
NEUBERGER BERMAN GENESIS FUND
INVESTMENT PROGRAM
The Fund invests mainly in common stocks of small-capitalization
companies and seeks undervalued companies whose current product lines and
balance sheets are strong. The Fund regards companies with market
capitalizations of up to $1.5 billion at the time of investment as small-cap
companies.
A SMALL-CAP VALUE BIAS
The Fund co-managers employ a value bias in their stock selection
process. They comb the universe of small-cap stocks specifically looking for
those they consider cheap compared to the market as a whole. Depending on
current market conditions, they sometimes find stocks that are cheap on an
absolute basis as well. They primarily choose from a universe of small-cap
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companies whose total market valuation is less than $1.5 billion at the time of
initial investment. The characteristics they look for may include above average
returns, established market niches, high barriers to entry, strong capital
bases, and sound future business prospects.
A PHILOSOPHY THAT CONTRADICTS POPULAR INVESTMENT TRENDS
The Fund co-managers focus on strong companies in industry niches that
are often overlooked by investors because they lack an exciting new product or
innovation. They aren't interested in buying experimental or cutting-edge
technology names that often trade on high future expectations but have no
established record of earnings. The rationale behind their approach is that
companies in what may be considered "unexciting" industries to some, such as
utilities and oil services, are a safer point of entry into the small-cap
universe because, as they put it, "if there's not a lot of expectation built
into a company, then it tends not to disappoint."
SMALL COMPANIES, POTENTIALLY BIG OPPORTUNITIES
The Fund co-managers favor the small-cap arena because they think it
abounds with opportunities for the long-term investor, specifically small-caps'
potential ability to grow earnings dramatically over time. According to one Fund
co-manager, "Unlike large-cap stocks, small-cap companies are starting from a
very low base and therefore may have the ability to grow dramatically."
INVESTMENT PROCESS
Qualitative Analysis
Meetings with Company Executives One-on-One
o 300 Face-to-Face Meetings per Year
o Heavy Phone Contact
Quantitative Characteristics
o Low Price-to-Earnings Ratio
o Low Price-to-Cash Flow Ratio
GENESIS INVESTORS CAN EXPECT:
o A small-cap value bias
o A philosophy that contradicts popular investment trends
o Small companies, potentially big opportunities
INVESTMENT INSIGHT
The Fund co-managers seek out small companies that are not well known
and often found in unglamorous industries. Future growth is one area they focus
on, but equally important to them is evidence of solid performance and a proven
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management team. As value investors, they look for stocks that are selling at
attractive prices.
NEUBERGER BERMAN GUARDIAN FUND
INVESTMENT PROGRAM
The Fund seeks long-term growth of capital and, secondarily, current
income. The Fund invests primarily in stocks of long-established companies
considered to be undervalued in comparison to stocks of similar companies. Using
a value-oriented investment approach in selecting securities, the Fund looks for
such factors as low price-to-earnings ratios, strong balance sheets, solid
management, and consistent earnings.
DISCIPLINED, LARGE-CAP VALUE ORIENTATION
As part of its stock selection process, the Fund pursues a disciplined,
value-driven investment style, which is Neuberger Berman's historic strength.
Specifically, the Fund co-managers seek large-capitalization companies whose
stock prices are substantially undervalued. Characteristics of these firms may
include: solid balance sheets, above-average returns, low valuations, and
consistent earnings.
BOTTOM-UP APPROACH TO STOCK SELECTION
According to one of the Fund co-managers, "Cheap stocks are plentiful,
but true investment bargains are a rare find." To uncover them, the Fund
co-managers scour a universe of stocks consisting of the bottom 20% of the
market in terms of valuation. Those deemed by the managers as inexpensive and
poised for a turnaround are placed under consideration. They look for
financially sound, well-managed companies that are undervalued relative to their
earnings potential and the market as a whole.
A BROAD VIEW OF RISK MANAGEMENT
Managing risk involves carefully monitoring the way the stocks in the
Fund react to one another as well as to outside factors. Companies that are in
completely different sectors may in fact react similarly to certain economic,
market, or international events. In their efforts to consider these
relationships, the Fund co-managers use quantitative analysis to evaluate these
factors and their impact on the overall Fund. It is a process they believe is a
crucial component in controlling risk and one that evolves over time as new
holdings are introduced to the Fund.
A STRONG SELL DISCIPLINE
The Fund co-managers will generally make an initial investment in a
stock of between 1-4% of total net assets. A higher weighting indicates that
they believe their research gives them an "edge" over Wall Street analysts, or
they believe the stock has an undiscovered value that others may have
overlooked. Once a stock grows beyond the high side of that range, gains are
harvested and the holding is reduced to about 3% of total net assets.
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INVESTMENT PROCESS
Fund Risk Management
o Monitor Fund's Exposure
Selection Criteria
o Improving Financials
o Superior Management
o Discount Valuations to the Market
Stock Universe
o Large-Cap Value
Guardian Investors Can Expect:
o Disciplined, large-cap value orientation
o Bottom-up approach to stock selection
o Broad view of risk management
o Strong sell discipline
INVESTMENT INSIGHT
The Fund co-managers look for established companies whose intrinsic
value, by their measure, is undiscovered among the majority of investors. In
managing overall risk, a conscious effort is made to determine the risk/reward
scenario of each individual holding as well as its impact at the Fund level.
NEUBERGER BERMAN INTERNATIONAL FUND
INVESTMENT PROGRAM
The Fund seeks long-term growth of capital by investing primarily in
common stocks of foreign companies of any capitalization, including companies in
developed and emerging industrialized markets. The Fund invests in well-managed
companies that show potential for above-average growth or whose stock price is
undervalued.
A BOTTOM-UP APPROACH THAT PUTS COMPANY FUNDAMENTALS IN PERSPECTIVE
The Fund co-managers' bottom-up approach seeks well-managed companies
that exhibit strong fundamentals, such as attractive cash flows, strong balance
sheets, and solid earnings growth. While their bottom-up style drives the
overall investment process, they also believe it's important to put a company's
fundamentals in perspective. To do this, the Fund co-managers' factor in the
economic, political, and market landscape of investment candidates' home
markets. As one fund manager explains, "We are value-added investors, not
'closet' indexers. We will overweight the portfolio compared to our benchmark,
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the EAFE Index, with securities from countries we believe have the best
investment potential and underweight those we think have limited prospects."
A BLEND OF GROWTH AND VALUE INVESTMENT STYLES
The Fund co-managers use a blend of styles to reduce the risk of
significant losses when a particular style falls out of favor with investors.
The growth component highlights rapidly growing companies in niche industries
with unique products or services, while the value component focuses on
undervalued, out-of-favor companies that they believe are poised for a
turnaround.
HIGH POTENTIAL REWARDS WITH COMMENSURATE RISKS
The Fund primarily invests in equity securities of developed countries,
but will consider selected emerging markets as well. While the potential rewards
are high, so are the associated risks. Foreign markets are often less developed
and foreign governments and economic infrastructures may not be as stable
compared to the United States. Other international risks, such as currency
exchange rate and interest rate fluctuations, could result in greater volatility
than domestic funds.
AN ADDED LEVEL OF DIVERSIFICATION
Domestic and foreign markets generally do not all move in the same
direction at the same time and are subject to different sets of risk factors.
Investors with exposure to more than a single market can potentially offset
losses in one market with gains in another. While foreign markets can be
inherently risky, investors who include international securities in their
portfolios can benefit from an additional layer of diversification along with
the potential for long-term growth.
INTERNATIONAL INVESTORS CAN EXPECT:
o A bottom-up approach that puts company fundamentals in perspective
o A blend of growth and value investment styles
o High potential rewards with commensurate risks
o An added level of portfolio diversification
INVESTMENT INSIGHT
To choose attractive stocks from among the many thousands available
outside the United States, it's important to have a clear strategy.
International Fund's bottom-up approach evaluates stocks on their fundamentals,
using both growth and value criteria, while also considering larger scale
economic factors.
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NEUBERGER BERMAN MANHATTAN FUND
INVESTMENT PROGRAM
The Fund invests in common stocks of mid-capitalization companies that
are in new or rapidly evolving industries. The Fund seeks growth of capital by
investing in companies with financial strength, above-average growth of
earnings, earnings that have exceeded analysts' expectations, a strong position
relative to competitors, and a stock price that is reasonable in light of its
growth rate.
MID-CAP GROWTH STOCK INVESTMENTS
The Fund co-managers consider themselves growth stock investors in the
purest sense of the term. By that, they mean they want to own the stocks of
companies that are growing earnings faster than the average American business
and, ideally, faster than the competitors in their respective industries. Their
exhaustive research efforts are focused on the mid-cap universe and,
specifically, stocks that are in new or rapidly evolving industries. The kind of
fast-growth companies the Fund co-managers favor generally do not trade at below
market average price-to-earnings ratios. However, they do look for companies
trading at reasonable levels compared to their growth rates. They believe that
attractive valuations in the mid-cap range have been created as a result of the
large-cap area performing well for several years, relative to other
capitalization ranges.
AN INTENSIVE RESEARCH EFFORT
The Fund co-managers love stocks with positive earnings surprises.
Their extensive research has revealed that the stocks of companies that have
consistently beaten Wall Street earnings estimates have also tended to offer
greater potential for long-term capital appreciation. To find these companies
they scour the mid-cap growth stock universe to isolate stocks whose most recent
earnings have beaten consensus expectations. Then, the real work begins, where
through diligent fundamental research they strive to identify those companies
most likely to record a string of positive earnings surprises. Their ultimate
goal is to invest today in the fast growing mid-sized companies that they
believe are poised to become tomorrow's Fortune 500.
A DISCIPLINED SELL PROCESS
"We are dispassionate sellers," says one Fund co-manager. "If a stock
does not live up to our earnings expectations or if we believe its valuation has
become excessive, we will sell and direct the assets to another opportunity we
find more attractive." A stock will also be sold when it reaches its target
price. They prefer to broadly diversify the Fund's assets among many different
companies and industries rather than heavily concentrating its holdings in just
a few of the fastest growing industry sectors. Broad diversification helps to
manage the overall risk inherent in a Fund of equity securities. Nevertheless,
the managers acknowledge that currently there are positive growth opportunities
in the technology sector, particularly biotechnology and Internet-related
companies. One Fund co-manager adds, "We believe that we are on the verge of a
technology-induced industrial revolution, and there may be an opportunity for
investors to build capital by focusing in this area."
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INVESTMENT PROCESS
Active Risk Management
Better Mid-Cap Growth Stocks
o Fundamental Verification
Mid-Cap Growth Universe
o Proprietary Quantitive Evaluation
Stock Universe
o Focus Screens
Manhattan Investors Can Expect:
o Mid-cap growth stock investments
o An intensive research effort
o A disciplined sell process
NEUBERGER BERMAN MILLENNIUM FUND
INVESTMENT PROGRAM
The Fund invests primarily in equity securities of small-sized domestic
companies (up to $1.5 billion in market capitalization at time of investment).
The Fund seeks growth of capital and looks for new companies that are in the
developmental stage as well as older companies that appear poised to grow
because of new products, markets, or management.
DISCIPLINED STOCK SELECTION PROCESS
The Fund co-managers employ a three-tiered disciplined investment
process. It begins with a search for fast growing, small companies that exhibit
sustainable earnings growth of at least 15%. Next, they assess a company's
financial and managerial wherewithal to capitalize on opportunities and grow its
business, despite occasional setbacks. Finally, the managers determine whether
or not a stock's price is reasonable. Their analysis attempts to avoid companies
considered overvalued relative to their earnings growth rate.
LONG-TERM GROWTH POTENTIAL OF SMALL-CAP STOCKS
Simply put, a small company might become a mid-sized one rapidly with
the launch of a single blockbuster product. And, since the potential growth of a
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small company is often uninhibited by several layers of management, it might be
able to bring new products or services to the market quickly. What adds to the
attractiveness of small-cap stocks is the fact that they're generally less
researched than large-caps, which presents the managers with more opportunities
to find good companies that are not yet recognized by many investors.
Small-caps, however, are more risky than other securities due to their
volatility and greater sensitivity to market trends, company news and industry
developments.
RISK MANAGEMENT
"We abide by three rules for managing risk: pay only reasonable prices,
remain emotionally detached, and stay diversified", says one of the Fund
managers about their risk-management strategy. First, the Fund focuses on
rapidly growing companies that are selling at reasonable prices relative to
their growth prospects. This is done in an effort to avoid those stocks whose
valuations are out of line with their growth rates because we believe they are
often the most susceptible to steep declines caused by fundamental
disappointments or during a market downturn. Second, our Fund co-managers remain
emotionally detached from their stock picks. When deteriorating fundamentals are
discovered in a company, the Fund co-managers take quick and decisive action to
eliminate it from the Fund. And third, to limit downside risk, the Fund
co-managers expect to invest in a diversified Fund across an array of sectors
and industries. Nevertheless, the managers acknowledge that currently there are
positive growth opportunities in the technology sector, particularly
biotechnology and Internet-related companies. No single stock represents more
than 5% of total assets, measured at the time of investment.
INVESTMENT PROCESS
SCREENS
Price Is this stock price reasonable?
Utility Can the company go the distance?
Financial Strength
Management Depth and Talent
Growth Are earnings growing rapidly?
15%+ Annual Growth Rates
Positive Earnings Surprises
MILLENNIUM INVESTORS CAN EXPECT:
o Disciplined stock selection process
o Long-term growth potential of small-cap stocks
o Risk management
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INVESTMENT INSIGHT
The Fund co-managers of the Millennium Fund make it their business to
track down promising small-cap companies wherever they may exist. As a result,
this fund enables investors who can accept the risks of small-cap stocks to
pursue the potential for long-term growth that small-caps may provide.
NEUBERGER BERMAN PARTNERS FUND
INVESTMENT PROGRAM
The Fund invests principally in common stocks of established companies,
using the value-oriented investment approach and seeks growth of capital through
an investment approach that is designed to increase capital with reasonable
risk. The Fund seeks securities believed to be undervalued based on strong
fundamentals such as a low price-to-earnings ratio, consistent cash flow, and a
company's sound track record through all phases of the market cycle.
UNDISCOVERED VALUES IN THE MID- TO LARGE-CAP ARENA
The Fund manager combs the universe of mid- and large-cap stocks in
search of those that have yet to be "discovered" by the majority of investors.
He generally shies away from big, well-known companies because he believes it is
harder to gain a competitive edge in a stock that is covered by many analysts.
The manager prefers to focus his efforts outside of the Fortune 100, where he
thinks many investment bargains abound.
STRONG COMPANIES AT REASONABLE PRICES
Like many of his value-oriented peers, the manager tries to buy quality
stocks for substantially less than their estimated market values. However, he
differs in his approach by applying another layer of analysis to his value
strategy. For example, in addition to searching for stocks trading at below
market price-to-earnings ratios, he also focuses on companies with strong
fundamentals, consistent cash flows, sound track records through all phases of
the market cycle and those selling at the low end of their trading ranges. He is
not interested in buying cheap stocks if they don't meet these other measures of
value as well.
SOLID RESEARCH
The Fund manager believes that through "exhaustive research efforts,
good companies selling for less than their true worth can be identified." To do
this the Fund manager spends a lot of time interviewing senior company managers.
His philosophy is that when he sits across the table from a CEO or CFO and
questions him or her about the company, he gets to know it quite well. He finds
that there's simply no substitute for that kind of firsthand knowledge. In
addition, the Fund manager carefully examines a company's financial statements
and contacts its suppliers and competitors. While this type of analysis requires
a lot of extra legwork, he believes it's worth the effort.
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INVESTMENT PROCESS
Executive Management Team Evaluation
o Proven Track Record
o Strategic Plan
o Inside Ownership
Value Stock Universe
o Qualitative Evaluation: Catalyst for Change
Stock Universe
o Quantitative Analysis
PARTNERS INVESTORS CAN EXPECT:
o mid- to large-cap growth stock investments
o diversification among companies and industries
o emphasis on well-managed companies with undervalued stock prices
o Solid research
INVESTMENT INSIGHT
The Fund manager seeks companies he believes are undervalued relative
to their earnings potential--where there is a gap between the actual price of a
stock and its intrinsic value in the marketplace. When a company grows in value
or the valuation gap closes, the success of their strategy is realized.
NEUBERGER BERMAN REGENCY FUND
INVESTMENT PROGRAM
The Fund seeks growth of capital by investing mainly in common stocks
of mid-capitalization companies. The Fund seeks to reduce risk by diversifying
among different companies and industries.
MID-CAP COMPANIES WITH MARKET LEADERSHIP
The Fund manager searches the mid-cap stock universe for companies with
a dominant market share in their industry. Historically, businesses with market
leadership have delivered significant returns for shareholders over the long
term. While this may not always be the case, discovering such middleweight
champions before the rest of Wall Street can yield substantial payoffs for
investors. Of course, there can be no assurance that the manager will select the
right stocks every time. Remember that the stocks of mid-cap companies may be
more volatile, and entail more risk, than the stocks of larger companies.
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BOTTOM-UP APPROACH TO STOCK SELECTION
The Fund manager's extensive bottom-up approach begins with financial
screens that are used to search for undervalued securities with compelling
fundamentals. Then, in-depth company and industry analyses are conducted,
followed by interviews with company managements and their competitors,
customers, and suppliers. In this stage, reviewing strategic plans and
evaluating management are critical steps. After applying these financial and
qualitative screens the Fund manager then seeks to identify a catalyst for
change that could improve a stock's valuation. These catalysts are generally
managerial, operational, structural, or financial in nature and include changes
in company management, new corporate strategies, changes in the business mix,
and improving financials, among others. The remaining candidates are then ranked
on a risk/reward basis. Stocks with the most compelling risk/reward ratios are
placed in the Fund, while stocks that are currently not a good Fund fit, are
placed on a monitor list for further evaluation.
BROAD VIEW OF RISK MANAGEMENT
In order to reduce risk on the buy side, the manager looks for
reasonably priced stocks, diversifies investments across an array of industries,
and avoids making large sector bets. On the sell side, stocks are sold when they
reach their price target, do not perform as expected, or are considered less
attractive than other opportunities.
INVESTMENT PROCESS
STOCK UNIVERSE
o Financial Analysis
Value Stock Universe
o Qualitative Evaluation
o Catalyst for change
EXECUTIVE MANAGEMENT TEAM EVALUATION
o Proven Track Record
o Strategic Plan
o Inside Ownership
REGENCY INVESTORS CAN EXPECT:
o Mid-cap companies with market leadership
o Bottom-up approach to stock selection
o Broad view of risk management
INVESTMENT INSIGHT
The Fund manager's ultimate goal is to find undervalued companies that
have not yet been discovered by the majority of investors, or better yet, to buy
"great companies at a great price." He attempts to do this by focusing on the
mid-cap segment of the market because it tends to be less followed than the
large-cap segment by Wall Street analysts.
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NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND
INVESTMENT PROGRAM
The Fund seeks long-term capital appreciation by investing at least 80%
of total assets in equity securities, all of which are selected based on both
financial criteria and social policy. The Fund co-managers initially screen
companies using a value investing criteria, then look for companies that show
leadership in major areas of social impact such as the environment, workplace
diversity, and employment.
FINANCIALLY SOUND COMPANIES WITH A SOCIAL CONSCIENCE
The Fund co-managers look for the stocks of mid- to large-cap companies
that first meet their stringent financial criteria. Their social screens are
then applied to these stocks. The ones considered worthy from a financial
standpoint are then evaluated using a proprietary database that develops and
monitors information on companies in various categories of social criteria.
Ideal investment candidates are companies that show leadership in the areas of
the environment, workplace diversity, and employment. Other considerations are
based on companies' records in other areas of concern, including public health,
type of products, and corporate citizenship.
A TRADITIONAL VALUE APPROACH
The Fund manager's initial financial screens select companies using a
traditional value approach. They look for undervalued companies with solid
balance sheets, strong management, consistent cash flows, and other
value-related factors, such as low price-to-earnings and low price-to-book
ratios. Their value approach examines these companies, searching for those that
may rise in price before other investors realize their worth. They strongly
believe in helping investors put their money to work, while supporting companies
that follow principles of good corporate citizenship.
AN EVER-EVOLVING JOURNEY ON THE PATH TO GOOD CORPORATE CITIZENSHIP
The Fund co-managers believe that most socially responsive investors
are not utopians. They do not expect instant perfection, but rather look for
signs that a company is evolving and moving toward a corporate commitment to
excellence. As they put it, "Good corporate citizenship is one of those things
that is a journey, not a destination. We've been working in this field for some
time, and know that the social records of most companies are written in shades
of gray. We are pleased to see that more and more companies are coming to
realize that change is a positive force for them."
INVESTMENT PROCESS
Social Policy
Quantitative Financial Criteria
o Low Price-to-Earnings Ratio (relative & absolute)
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o Strong Balance Sheet
o Free Cash Flow
o Risk Management
Stock Universe
o Focus Screens
SOCIALLY RESPONSIVE INVESTORS CAN EXPECT:
o Financially sound companies with a social conscience
o A traditional value approach
o An ever-evolving journey on the path to good corporate
citizenship
INVESTMENT INSIGHT
The Fund co-managers believe that sound practices in areas like
employment and the environment can have a positive impact on a company's bottom
line. They look for companies that meet value-investing criteria and also show a
commitment to uphold or improve their standards of corporate citizenship.
NEUBERGER BERMAN TECHNOLOGY FUND
SEEKS TOMORROW'S OPPORTUNITIES TODAY
Neuberger Berman provides another way for investors to take advantage
of the intensive research and management expertise of our Boston-based growth
group. The portfolio management team of this fund will seek long-term capital
growth by investing in the stocks of dynamic technology and tech-related
companies of all sizes -- from new innovative firms to established market
leaders.
IDENTIFYING TECH STOCKS WITH MERIT
The team employs quantitative and qualitative research screens in a
three-part investment process to select those stocks with the most merit. First,
the screening process looks for rapidly growing companies with positive
fundamental surprises, such as revenue/earnings gains that are beating Wall
Street estimates.
Second, the screening process focuses on a company's strengths and
qualities to determine whether it can continue to surpass expectations. These
strengths may include factors such as multi-industry applications for products,
a strong position relative to competitors, new business alliances, the
development or use of innovative technology, and/or financial strength.
Third, the portfolio management team seeks growth at a reasonable
price, refusing to overpay for a company's earnings growth. That's why so much
of their time is spent examining a company's financials and researching its
competitors, suppliers, and customers.
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RIGOROUS, DISPASSIONATE SELL DISCIPLINE
The fast-paced technology sector compels investors to be open-minded
and ready to scrutinize which companies are best -- on a daily basis. That
objectivity is an important part of the team's management style. If a company or
its stock indicates any fundamental weakening, the team will eliminate it. An
investment concentrated in one area inevitably carries greater risk. In the
fast-developing technology sector, proactive and diligent fundamental research
is critical. While in-depth analysis guides stock selection, careful portfolio
construction helps reduce volatility. In seeking to achieve more consistent
performance, the management team pays close attention to sector, industry and
individual stock diversification.
FUND SNAPSHOT
Primary Investments: U.S. technology and tech-related companies of all
capitalizations
Investing Style: Growth
Benchmark Index: Russell 1000(R) Growth Index
INVESTMENT PROCESS
o Start with all-cap universe of technology and tech-related companies
o Growth
Positive fundamental surprises
o Quality
Company strengths
o Price
Reasonable relative valuations
* * * * *
Each Fund invests in a wide array of stocks, and no single stock makes
up more than a small fraction of any Fund's total assets. Of course, each Fund's
holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
Some or all of the Funds, as indicated below, may make the following
investments, among others; some of which are part of the Fund's principal
investment strategies and some of which are not. The principal risks of each
Fund's principal strategies are discussed in the Prospectus. They may not buy
all of the types of securities or use all of the investment techniques that are
described.
ILLIQUID SECURITIES (ALL FUNDS). Illiquid securities are securities
that cannot be expected to be sold within seven days at approximately the price
at which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
1933 Act, as amended, and Rule 144A securities (restricted securities that may
be traded freely among qualified institutional buyers pursuant to an exemption
from the registration requirements of the securities laws); these securities are
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considered illiquid unless NB Management, acting pursuant to guidelines
established by the trustees of the Trust, determines they are liquid. Generally,
foreign securities freely tradable in their principal market are not considered
restricted or illiquid. Illiquid securities may be difficult for a Fund to value
or dispose of due to the absence of an active trading market. The sale of some
illiquid securities by the Funds may be subject to legal restrictions which
could be costly to the Funds.
POLICIES AND LIMITATIONS. Each Fund may invest up to 15% of its net
assets in illiquid securities.
REPURCHASE AGREEMENTS (ALL FUNDS). In a repurchase agreement, a Fund
purchases securities from a bank that is a member of the Federal Reserve System
(or, in the case of Neuberger Berman International Fund, also from a foreign
bank or a U.S. branch or agency of a foreign bank) or from a securities dealer
that agrees to repurchase the securities from the Fund at a higher price on a
designated future date. Repurchase agreements generally are for a short period
of time, usually less than a week. Costs, delays, or losses could result if the
selling party to a repurchase agreement becomes bankrupt or otherwise defaults.
NB Management monitors the creditworthiness of sellers. If Neuberger Berman
International Fund enters into a repurchase agreement subject to foreign law and
the counter-party defaults, that Fund may not enjoy protections comparable to
those provided to certain repurchase agreements under U.S. bankruptcy law and
may suffer delays and losses in disposing of the collateral as a result.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. No Fund may enter into
a repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of the value of its net assets would then be invested in such
repurchase agreements and other illiquid securities. A Fund may enter into a
repurchase agreement only if (1) the underlying securities are of a type that
the Fund's investment policies and limitations would allow it to purchase
directly, (2) the market value of the underlying securities, including accrued
interest, at all times equals or exceeds the repurchase price, and (3) payment
for the underlying securities is made only upon satisfactory evidence that the
securities are being held for the Fund's account by its custodian or a bank
acting as the Fund's agent.
SECURITIES LOANS (ALL FUNDS). Each Fund may lend securities to banks,
brokerage firms, and other institutional investors judged creditworthy by NB
Management, provided that cash or equivalent collateral, equal to at least 100%
of the market value of the loaned securities, is continuously maintained by the
borrower with the Fund. The Fund may invest the cash collateral and earn income,
or it may receive an agreed upon amount of interest income from a borrower who
has delivered equivalent collateral. During the time securities are on loan, the
borrower will pay the Fund an amount equivalent to any dividends or interest
paid on such securities. These loans are subject to termination at the option of
the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment. NB Management believes the risk of
loss on these transactions is slight because, if a borrower were to default for
any reason, the collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of Fund securities involve some risk of loss
of rights in the collateral should the borrower fail financially.
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POLICIES AND LIMITATIONS. Each Fund may lend Fund securities with a
value not exceeding 33-1/3% of its total assets to banks, brokerage firms, or
other institutional investors judged creditworthy by NB Management. Borrowers
are required continuously to secure their obligations to return securities on
loan from a Fund by depositing collateral in a form determined to be
satisfactory by the Fund Trustees. The collateral, which must be marked to
market daily, must be equal to at least 100% of the market value of the loaned
securities, which will also be marked to market daily. Securities lending by
Neuberger Berman Socially Responsive Fund is not subject to the Social Policy.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL FUNDS). Each Fund
may invest in restricted securities, which are securities that may not be sold
to the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a Fund
qualify under Rule 144A and an institutional market develops for those
securities, the Fund likely will be able to dispose of the securities without
registering them under the 1933 Act. To the extent that institutional buyers
become, for a time, uninterested in purchasing these securities, investing in
Rule 144A securities could increase the level of a Fund's illiquidity. NB
Management, acting under guidelines established by the Fund Trustees, may
determine that certain securities qualified for trading under Rule 144A are
liquid. Regulation S under the 1933 Act permits the sale abroad of securities
that are not registered for sale in the United States.
Where registration is required, a Fund may be obligated to pay all or
part of the registration expenses, and a considerable period may elapse between
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell. Restricted securities for which no
market exists are priced by a method that the Fund Trustees believe accurately
reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to each Fund's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS (ALL FUNDS). In a reverse repurchase
agreement, a Fund sells Fund securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Fund.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of each Fund's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, a
Fund will deposit in a segregated account with its custodian cash or appropriate
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liquid securities, marked to market daily, in an amount at least equal to the
Fund's obligations under the agreement.
LEVERAGE (NEUBERGER BERMAN INTERNATIONAL FUND). The Fund may make
investments while borrowings are outstanding. Leverage creates an opportunity
for increased total return but, at the same time, creates special risk
considerations. For example, leverage may amplify changes in the Fund's net
asset value ("NAV"). Although the principal of such borrowings will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. Leverage from borrowing creates interest expenses for the Fund. To
the extent the income derived from securities purchased with borrowed funds
exceeds the interest the Fund will have to pay, the Fund's total return will be
greater than it would be if leverage were not used. Conversely, if the income
from the assets obtained with borrowed funds is not sufficient to cover the cost
of leveraging, the net income of the Fund will be less than it would be if
leverage were not used, and therefore the amount available for distribution to
the Fund's shareholders as dividends will be reduced. Reverse repurchase
agreements create leverage and are considered borrowings for purposes of the
Fund's investment limitations.
POLICIES AND LIMITATIONS. Generally, the Fund does not intend to use
leverage for investment purposes. It may, however, use leverage to purchase
securities needed to close out short sales entered into for hedging purposes and
to facilitate other hedging transactions.
FOREIGN SECURITIES (ALL FUNDS). Each Fund may invest in U.S.
dollar-denominated securities of foreign issuers and foreign branches of U.S.
banks, including negotiable certificates of deposit ("CDs"), bankers'
acceptances, and commercial paper. Foreign issuers are issuers organized and
doing business principally outside the United States and include banks, non-U.S.
governments, and quasi-governmental organizations. While investments in foreign
securities are intended to reduce risk by providing further diversification,
such investments involve sovereign and other risks, in addition to the credit
and market risks normally associated with domestic securities. These additional
risks include the possibility of adverse political and economic developments
(including political instability, nationalization, expropriation, or
confiscatory taxation) and the potentially adverse effects of unavailability of
public information regarding issuers, less governmental supervision and
regulation of financial markets, reduced liquidity of certain financial markets,
and the lack of uniform accounting, auditing, and financial reporting standards
or the application of standards that are different or less stringent than those
applied in the United States.
Each Fund also may invest in equity, debt, or other income-producing
securities that are denominated in or indexed to foreign currencies, including
(1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits,
and bankers' acceptances issued by foreign banks, (3) obligations of other
corporations, and (4) obligations of foreign governments and their subdivisions,
agencies, and instrumentalities, international agencies, and supranational
entities. Investing in foreign currency denominated securities involves the
special risks associated with investing in non-U.S. issuers, as described in the
preceding paragraph, and the additional risks of (1) adverse changes in foreign
exchange rates and (2) adverse changes in investment or exchange control
regulations (which could prevent cash from being brought back to the United
States). Additionally, dividends and interest payable on foreign securities (and
gains realized on disposition thereof) may be subject to foreign taxes,
including taxes withheld from those payments. Commissions on foreign securities
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exchanges are often at fixed rates and are generally higher than negotiated
commissions on U.S. exchanges, although the Funds endeavor to achieve the most
favorable net results on Fund transactions.
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of a Fund is uninvested and no
return is earned thereon. The inability of a Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of Fund securities due to
settlement problems could result in losses to a Fund due to subsequent declines
in value of the securities or, if the Fund has entered into a contract to sell
the securities, could result in possible liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
The Funds may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or
unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. However, if
the underlying security is denominated in a foreign currency, the ADR is subject
to currency risk. Issuers of the securities underlying sponsored ADRs, but not
unsponsored ADRs, are contractually obligated to disclose material information
in the United States. Therefore, the market value of unsponsored ADRs may not
reflect the effect of such information. EDRs and IDRs are receipts typically
issued by a European bank or trust company evidencing its ownership of the
underlying foreign securities. GDRs are receipts issued by either a U.S. or
non-U.S. banking institution evidencing its ownership of the underlying foreign
securities and are often denominated in U.S. dollars.
POLICIES AND LIMITATIONS. To limit the risks inherent in investing in
foreign currency denominated securities, a Fund (except Neuberger Berman
Century, Neuberger Berman International, Neuberger Berman Millennium, and
Neuberger Berman Technology Funds) may not purchase any such security if, as a
result, more than 10% of its total assets (taken at market value) would be
invested in foreign currency denominated securities. Each of Neuberger Berman
Century, Neuberger Berman Millennium, and Neuberger Berman Technology Funds may
not purchase foreign currency denominated securities if, as a result, more than
20% of its total assets (taken at market value) would be invested in such
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securities. Within those limitations, however, none of these Funds is restricted
in the amount it may invest in securities denominated in any one foreign
currency. Neuberger Berman International Fund invests primarily in foreign
securities.
Investments in securities of foreign issuers are subject to each Fund's
quality standards. Each Fund (except Neuberger Berman International Fund) may
invest only in securities of issuers in countries whose governments are
considered stable by NB Management.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES (NEUBERGER BERMAN
INTERNATIONAL FUND). The Fund may purchase securities on a when-issued basis and
may purchase or sell securities on a forward commitment basis. These
transactions involve a commitment by the Fund to purchase or sell securities at
a future date (ordinarily within two months, although the Fund may agree to a
longer settlement period). The price of the underlying securities (usually
expressed in terms of yield) and the date when the securities will be delivered
and paid for (the settlement date) are fixed at the time the transaction is
negotiated. When-issued purchases and forward commitment transactions are
negotiated directly with the other party, and such commitments are not traded on
exchanges.
When-issued purchases and forward commitment transactions enable the
Fund to "lock in" what NB Management believes to be an attractive price or yield
on a particular security for a period of time, regardless of future changes in
interest rates. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities it owns on a forward commitment basis to
limit its exposure to falling prices. In periods of falling interest rates and
rising prices, the Fund might purchase a security on a when-issued or forward
commitment basis and sell a similar security to settle such purchase, thereby
obtaining the benefit of currently higher yields. If the seller fails to
complete the sale, the Fund may lose the opportunity to obtain a favorable
price.
The value of securities purchased on a when-issued or forward
commitment basis and any subsequent fluctuations in their value are reflected in
the computation of the Fund's NAV starting on the date of the agreement to
purchase the securities. Because the Fund has not yet paid for the securities,
this produces an effect similar to leverage. The Fund does not earn interest on
securities it has committed to purchase until the securities are paid for and
delivered on the settlement date. When the Fund makes a forward commitment to
sell securities it owns, the proceeds to be received upon settlement are
included in the Fund's assets. Fluctuations in the market value of the
underlying securities are not reflected in the Fund's NAV as long as the
commitment to sell remains in effect.
POLICIES AND LIMITATIONS. The Fund will purchase securities on a
when-issued basis or purchase or sell securities on a forward commitment basis
only with the intention of completing the transaction and actually purchasing or
selling the securities. If deemed advisable as a matter of investment strategy,
however, the Fund may dispose of or renegotiate a commitment after it has been
entered into. The Fund also may sell securities it has committed to purchase
before those securities are delivered to the Fund on the settlement date. The
Fund may realize capital gains or losses in connection with these transactions.
When the Fund purchases securities on a when-issued or forward
commitment basis, the Fund will deposit in a segregated account with its
custodian, until payment is made, appropriate liquid securities having a value
(determined daily) at least equal to the amount of the Fund's purchase
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commitments. In the case of a forward commitment to sell Fund securities, the
custodian will hold the Fund securities themselves in a segregated account while
the commitment is outstanding. These procedures are designed to ensure that the
Fund maintains sufficient assets at all times to cover its obligations under
when-issued purchases and forward commitment transactions.
TECHNOLOGY SECURITIES. These include the securities of companies
substantially engaged in offering, using, or developing products, processes, or
services that provide, or that benefit significantly from, technological
advances or that are expected to do so. Technology-related businesses include,
among others: computer products, software, and electronic components; computer
services; telecommunications; networking; Internet; and biotechnology,
pharmaceuticals or medical technology. Although Neuberger Berman Technology Fund
will not invest 25% or more of its total assets in the securities of issuers
having their principal business activities in the same industry, the Fund may
invest in companies in inter-related industries that may react similarly to
economic or competitive pressures. The products or services offered by issuers
of technology securities quickly may become obsolete in the face of
technological developments. The economic outlook of such companies may fluctuate
dramatically due to changes in regulatory or competitive environments. In
addition, technology companies often progress at an accelerated rate, and these
companies may be subject to short product cycles and aggressive pricing which
may increase their volatility. Competitive pressures in the technology-related
industries also may have a significant effect on the performance of technology
securities.
The issuers of technology securities also may be smaller or newer
companies, which may lack depth of management, be unable to generate funds
necessary for growth or potential development, or be developing or marketing new
products or services for which markets are not yet established and may never
become established. In addition, such companies may be subject to intense
competition from larger or more established companies.
POLICIES AND LIMITATIONS. Neuberger Berman Technology Fund normally
invests at least 65% of its total assets in technology securities. The Fund may
not invest 25% or more of its total assets in the securities of issuers having
their principal business activities in the same industry.
Futures Contracts, Options on Futures Contracts, Options on Securities and
Indices, Forward Contracts, and Options on Foreign
Currencies (collectively, "Financial Instruments")
FUTURES CONTRACTS AND OPTIONS THEREON (ALL FUNDS). Each of Neuberger
Berman Century, Neuberger Berman Millennium, Neuberger Berman Socially
Responsive, and Neuberger Berman Technology Funds may purchase and sell interest
rate futures contracts, stock and bond index futures contracts, and foreign
currency futures contracts and may purchase and sell options thereon in an
attempt to hedge against changes in the prices of securities or, in the case of
foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits each Fund to
enhance Fund liquidity and maintain a defensive position without having to sell
Fund securities. These Funds view investment in (i) interest rate and securities
index futures and options thereon as a maturity management device and/or a
device to reduce risk or preserve total return in an adverse environment for the
hedged securities, and (ii) foreign currency futures and options thereon as a
means of establishing more definitely the effective return on, or the purchase
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price of, securities denominated in foreign currencies that are held or intended
to be acquired by the Fund.
Neuberger Berman International Fund may enter into futures contracts on
currencies, debt securities, interest rates, and securities indices that are
traded on exchanges regulated by the Commodity Futures Trading Commission
("CFTC") or on foreign exchanges. Trading on foreign exchanges is subject to the
legal requirements of the jurisdiction in which the exchange is located and to
the rules of such foreign exchange.
Neuberger Berman International Fund may sell futures contracts to
offset a possible decline in the value of its Fund securities. When a futures
contract is sold by the Fund, the value of the contract will tend to rise when
the value of the Fund securities declines and will tend to fall when the value
of such securities increases. The Fund may purchase futures contracts to fix
what NB Management believes to be a favorable price for securities the Fund
intends to purchase. If a futures contract is purchased by the Fund, the value
of the contract will tend to change together with changes in the value of such
securities. To compensate for differences in historical volatility between
positions Neuberger Berman International Fund wishes to hedge and the
standardized futures contracts available to it, the Fund may purchase or sell
futures contracts with a greater or lesser value than the securities it wishes
to hedge.
With respect to currency futures, Neuberger Berman International Fund
may sell a futures contract or a call option, or it may purchase a put option on
such futures contract, if NB Management anticipates that exchange rates for a
particular currency will fall. Such a transaction will be used as a hedge (or,
in the case of a sale of a call option, a partial hedge) against a decrease in
the value of Fund securities denominated in that currency. If NB Management
anticipates that a particular currency will rise, Neuberger Berman International
Fund may purchase a currency futures contract or a call option to protect
against an increase in the price of securities which are denominated in that
currency and which the Fund intends to purchase. The Fund may also purchase a
currency futures contract or a call option thereon for non-hedging purposes when
NB Management anticipates that a particular currency will appreciate in value,
but securities denominated in that currency do not present an attractive
investment and are not included in the Fund.
For purposes of managing cash flow, each Fund may purchase and sell
stock index futures contracts, and may purchase and sell options thereon, to
increase its exposure to the performance of a recognized securities index, such
as the Standard & Poor's 500 Composite Stock Index ("S&P 500 Index").
A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
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U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
While futures contracts entered into by a Fund will usually be liquidated in
this manner, the Fund may instead make or take delivery of underlying securities
whenever it appears economically advantageous for it to do so.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by a Fund with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Fund's futures
positions. The margin deposit made by the Fund when it enters into a futures
contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Fund will be required to make an
additional margin deposit ("variation margin"). However, if favorable price
changes in the futures contract cause the margin deposit to exceed the required
margin, the excess will be paid to the Fund. In computing their NAVs, the Funds
mark to market the value of their open futures positions. Each Fund also must
make margin deposits with respect to options on futures that it has written (but
not with respect to options on futures that it has purchased). If the futures
commission merchant holding the margin deposit goes bankrupt, the Fund could
suffer a delay in recovering its funds and could ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although each Fund believes that the use of futures contracts will
benefit it, if NB Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Fund's overall return would be lower than if it had not entered into any
such contracts. The prices of futures contracts are volatile and are influenced
by, among other things, actual and anticipated changes in interest or currency
exchange rates, which in turn are affected by fiscal and monetary policies and
by national and international political and economic events. At best, the
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correlation between changes in prices of futures contracts and of securities
being hedged can be only approximate due to differences between the futures and
securities markets or differences between the securities or currencies
underlying a Fund's futures position and the securities held by or to be
purchased for the Fund. The currency futures market may be dominated by
short-term traders seeking to profit from changes in exchange rates. This would
reduce the value of such contracts used for hedging purposes over a short-term
period. Such distortions are generally minor and would diminish as the contract
approaches maturity.
Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage; as a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, or
gain, to the investor. Losses that may arise from certain futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by a Fund, it could have an adverse impact on the NAV of the
Fund.
POLICIES AND LIMITATIONS. Neuberger Berman Century, Neuberger Berman
Millennium, Neuberger Berman Socially Responsive, and Neuberger Berman
Technology Funds each may purchase and sell futures contracts and may purchase
and sell options thereon in an attempt to hedge against changes in the prices of
securities or, in the case of foreign currency futures and options thereon, to
hedge against prevailing currency exchange rates. These Funds do not engage in
transactions in futures and options on futures for speculation. The use of
futures and options on futures by Neuberger Berman Socially Responsive Fund is
not subject to the Social Policy.
Neuberger Berman International Fund may purchase and sell futures for
bona fide hedging purposes, as defined in regulations of the CFTC, and for
non-hedging purposes (i.e., in an effort to enhance income). The Fund may also
purchase and write put and call options on such futures contracts for bona fide
hedging and non-hedging purposes.
Each Fund may purchase and sell stock index futures contracts, and may
purchase and sell options thereon. For purposes of managing cash flow, the
managers may use such futures and options to increase the funds' exposure to the
performance of a recognized securities index, such as the S&P 500 Index.
CALL OPTIONS ON SECURITIES (ALL FUNDS). Neuberger Berman Century,
Neuberger Berman International, Neuberger Berman Millennium, Neuberger Berman
Socially Responsive and Neuberger Berman Technology Funds may write covered call
options and may purchase call options on securities. Each of the other Funds may
write covered call options and may purchase call options in related closing
transactions. The purpose of writing call options is to hedge (i.e., to reduce,
at least in part, the effect of price fluctuations of securities held by the
Fund on its NAV) or to earn premium income. Fund securities on which call
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options may be written and purchased by a Fund are purchased solely on the basis
of investment considerations consistent with the Fund's investment objective.
When a Fund writes a call option, it is obligated to sell a security to
a purchaser at a specified price at any time until a certain date if the
purchaser decides to exercise the option. The Fund receives a premium for
writing the call option. So long as the obligation of the call option continues,
the Fund may be assigned an exercise notice, requiring it to deliver the
underlying security against payment of the exercise price. The Fund may be
obligated to deliver securities underlying an option at less than the market
price.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk but is capable of
enhancing the Funds' total return. When writing a covered call option, a Fund,
in return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but conversely
retains the risk of loss should the price of the security decline.
If a call option that a Fund has written expires unexercised, the Fund
will realize a gain in the amount of the premium; however, that gain may be
offset by a decline in the market value of the underlying security during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security.
When a Fund purchases a call option, it pays a premium for the right to
purchase a security from the writer at a specified price until a specified date.
Policies and Limitations. Each Fund may write covered call options and
may purchase call options on securities. Each Fund may also write covered call
options and may purchase call options in related closing transactions. Each Fund
writes only "covered" call options on securities it owns (in contrast to the
writing of "naked" or uncovered call options, which the Funds will not do).
A Fund would purchase a call option to offset a previously written call
option. Each of Neuberger Berman Century, Neuberger Berman Millennium, Neuberger
Berman Socially Responsive, and Neuberger Berman Technology Funds also may
purchase a call option to protect against an increase in the price of the
securities it intends to purchase. The use of call options on securities by
Neuberger Berman Socially Responsive Fund is not subject to the Social Policy.
Neuberger Berman International Fund may purchase call options for hedging or
non-hedging purposes.
PUT OPTIONS ON SECURITIES (NEUBERGER BERMAN CENTURY, NEUBERGER BERMAN
GUARDIAN, NEUBERGER BERMAN INTERNATIONAL, NEUBERGER BERMAN MILLENNIUM, NEUBERGER
BERMAN SOCIALLY RESPONSIVE, AND NEUBERGER BERMAN TECHNOLOGY FUNDS). Each of
these Funds may write and purchase put options on securities. Each of Neuberger
Berman Century, Neuberger Berman Guardian, Neuberger Berman International,
Neuberger Berman Millennium, Neuberger Berman Socially Responsive, and Neuberger
Berman Technology Fund will receive a premium for writing a put option, which
obligates the Fund to acquire a security at a certain price at any time until a
certain date if the purchaser decides to exercise the option. The Fund may be
obligated to purchase the underlying security at more than its current value.
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When Neuberger Berman Century, Neuberger Berman Guardian, Neuberger
Berman International, Neuberger Berman Millennium, Neuberger Berman Socially
Responsive, or Neuberger Berman Technology Fund purchases a put option, it pays
a premium to the writer for the right to sell a security to the writer for a
specified amount at any time until a certain date. The Fund would purchase a put
option in order to protect itself against a decline in the market value of a
security it owns.
Fund securities on which put options may be written and purchased by
Neuberger Berman Century, Neuberger Berman Guardian, Neuberger Berman
International, Neuberger Berman Millennium, Neuberger Berman Socially
Responsive, or Neuberger Berman Technology Fund are purchased solely on the
basis of investment considerations consistent with the Fund's investment
objective. When writing a put option, the Fund, in return for the premium, takes
the risk that it must purchase the underlying security at a price that may be
higher than the current market price of the security. If a put option that the
Fund has written expires unexercised, the Fund will realize a gain in the amount
of the premium.
POLICIES AND LIMITATIONS. Neuberger Berman Century, Neuberger Berman
Guardian, Neuberger Berman International, Neuberger Berman Millennium, Neuberger
Berman Socially Responsive, and Neuberger Berman Technology Fund generally write
and purchase put options on securities for hedging purposes (i.e., to reduce, at
least in part, the effect of price fluctuations of securities held by the Fund
on its NAV). However, Neuberger Berman International Fund also may use put
options for non-hedging purposes. The use of put options on securities by
Neuberger Berman Socially Responsive Fund is not subject to the Social Policy.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. Neuberger
Berman International Fund also may purchase European-style options, which are
exercisable only immediately prior to their expiration date. The obligation
under any option written by a Fund terminates upon expiration of the option or,
at an earlier time, when the Fund offsets the option by entering into a "closing
purchase transaction" to purchase an option of the same series. If an option is
purchased by a Fund and is never exercised or closed out, the Fund will lose the
entire amount of the premium paid.
Options are traded both on U.S. national securities exchanges and in
the over-the-counter ("OTC") market. Neuberger Berman International Fund also
may purchase and sell options that are traded on foreign exchanges.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed; the clearing organization in effect
guarantees completion of every exchange-traded option. In contrast, OTC options
are contracts between a Fund and a counter-party, with no clearing organization
guarantee. Thus, when a Fund sells (or purchases) an OTC option, it generally
will be able to "close out" the option prior to its expiration only by entering
into a closing transaction with the dealer to whom (or from whom) the Fund
originally sold (or purchased) the option. There can be no assurance that the
Fund would be able to liquidate an OTC option at any time prior to expiration.
Unless a Fund is able to effect a closing purchase transaction in a covered OTC
call option it has written, it will not be able to liquidate securities used as
cover until the option expires or is exercised or until different cover is
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substituted. In the event of the counter-party's insolvency, a Fund may be
unable to liquidate its options position and the associated cover. NB Management
monitors the creditworthiness of dealers with which a Fund may engage in OTC
options transactions.
The premium a Fund receives or pays when it writes (or purchases) an
option is the amount at which the option is currently traded on the applicable
market. The premium may reflect, among other things, the current market price of
the underlying security, the relationship of the exercise price to the market
price, the historical price volatility of the underlying security, the length of
the option period, the general supply of and demand for credit, and the interest
rate environment. The premium received by a Fund for writing an option is
recorded as a liability on the Fund's statement of assets and liabilities. This
liability is adjusted daily to the option's current market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits Neuberger Berman Century,
Neuberger Berman International, Neuberger Berman Millennium, Neuberger Berman
Socially Responsive and Neuberger Berman Technology Fund to write another call
option on the underlying security with a different exercise price or expiration
date or both. There is, of course, no assurance that a Fund will be able to
effect closing transactions at favorable prices. If a Fund cannot enter into
such a transaction, it may be required to hold a security that it might
otherwise have sold (or purchase a security that it would not have otherwise
bought), in which case it would continue to be at market risk on the security.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Fund; however, the Fund could be in a less advantageous
position than if it had not written the call option.
A Fund pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. From time to time, Neuberger Berman Century, Neuberger Berman
International, Neuberger Berman Millennium, Neuberger Berman Socially
Responsive, or Neuberger Berman Technology Fund may purchase an underlying
security for delivery in accordance with an exercise notice of a call option
assigned to it, rather than delivering the security from its Fund. In those
cases, additional brokerage commissions are incurred.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
POLICIES AND LIMITATIONS. Each Fund may use American-style options.
Neuberger Berman International Fund may also purchase European-style options and
may purchase and sell options that are traded on foreign exchanges.
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The assets used as cover (or held in a segregated account) for OTC
options written by a Fund will be considered illiquid unless the OTC options are
sold to qualified dealers who agree that the Fund may repurchase any OTC option
it writes at a maximum price to be calculated by a formula set forth in the
option agreement. The cover for an OTC call option written subject to this
procedure will be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
The use of put and call options by Neuberger Berman Socially Responsive
Fund is not subject to the Social Policy.
PUT AND CALL OPTIONS ON SECURITIES INDICES (ALL FUNDS). Neuberger
Berman International Fund may purchase put and call options on securities
indices for the purpose of hedging against the risk of price movements that
would adversely affect the value of the Fund's securities or securities the Fund
intends to buy. The Fund may write securities index options to close out
positions in such options that it has purchased.
For purposes of managing cash flow, each Fund may purchase put and call
options on securities indices to increase the Fund's exposure to the performance
of a recognized securities index, such as the S&P 500 Index.
Unlike a securities option, which gives the holder the right to
purchase or sell a specified security at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (1) the difference between the exercise price of the
option and the value of the underlying securities index on the exercise date (2)
multiplied by a fixed "index multiplier." A securities index fluctuates with
changes in the market values of the securities included in the index. Options on
stock indices are currently traded on the Chicago Board Options Exchange, the
New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S.
and foreign exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Fund will not exactly match the composition of the securities
indices on which options are available.
Securities index options have characteristics and risks similar to
those of securities options, as discussed herein.
POLICIES AND LIMITATIONS. Neuberger Berman International Fund may
purchase put and call options on securities indices for the purpose of hedging.
All securities index options purchased by the Fund will be listed and traded on
an exchange. The Fund currently does not expect to invest a substantial portion
of its assets in securities index options.
For purposes of managing cash flow, each Fund may purchase put and call
options on securities indices to increase the Fund's exposure to the performance
of a recognized securities index, such as the S&P 500 Index. All securities
index options purchased by the Funds will be listed and traded on an exchange.
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FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS). Each Fund may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Funds also may engage in foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market.
The Funds (other than Neuberger Berman International Fund) enter into
forward contracts in an attempt to hedge against changes in prevailing currency
exchange rates. The Funds do not engage in transactions in forward contracts for
speculation; they view investments in forward contracts as a means of
establishing more definitely the effective return on, or the purchase price of,
securities denominated in foreign currencies. Forward contract transactions
include forward sales or purchases of foreign currencies for the purpose of
protecting the U.S. dollar value of securities held or to be acquired by a Fund
or protecting the U.S. dollar equivalent of dividends, interest, or other
payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, a Fund may
either make delivery of the foreign currency or terminate its contractual
obligation to deliver by purchasing an offsetting contract. If the Fund chooses
to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of Fund securities denominated in such currency or
through conversion of other assets of the Fund into such currency. If the Fund
engages in an offsetting transaction, it will incur a gain or a loss to the
extent that there has been a change in forward contract prices. Closing purchase
transactions with respect to forward contracts are usually made with the
currency dealer who is a party to the original forward contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if NB Management is incorrect in its judgment of future
exchange rate relationships, a Fund could be in a less advantageous position
than if such a hedge had not been established. If a Fund uses proxy-hedging, it
may experience losses on both the currency in which it has invested and the
currency used for hedging if the two currencies do not vary with the expected
degree of correlation. Using forward contracts to protect the value of a Fund's
securities against a decline in the value of a currency does not eliminate
fluctuations in the prices of the underlying securities. Because forward
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contracts are not traded on an exchange, the assets used to cover such contracts
may be illiquid. A Fund may experience delays in the settlement of its foreign
currency transactions.
Neuberger Berman International Fund may purchase securities of an
issuer domiciled in a country other than the country in whose currency the
instrument is denominated. The Fund may invest in securities denominated in the
European Currency Unit, commonly referred to as the "Euro" ("ECU"), which is a
"basket" consisting of a specified amount of the currencies of certain of the
member states of the European Union. The specific amounts of currencies
comprising the ECU may be adjusted by the Council of Ministers of the European
Union from time to time to reflect changes in relative values of the underlying
currencies. The market for ECUs may become illiquid at times of uncertainty or
rapid change in the European currency markets, limiting the Fund's ability to
prevent potential losses. In addition, Neuberger Berman International Fund may
invest in securities denominated in other currency baskets.
POLICIES AND LIMITATIONS. The Funds (other than Neuberger Berman
International Fund) may enter into forward contracts for the purpose of hedging
and not for speculation. The use of forward contracts by Neuberger Berman
Socially Responsive Fund is not subject to the Social Policy.
Neuberger Berman International Fund may enter into forward contracts
for hedging or non-hedging purposes. When the Fund engages in foreign currency
transactions for hedging purposes, it will not enter into forward contracts to
sell currency or maintain a net exposure to such contracts if their consummation
would obligate the Fund to deliver an amount of foreign currency materially in
excess of the value of its Fund securities or other assets denominated in that
currency. Neuberger Berman International Fund may also purchase and sell forward
contracts for non-hedging purposes when NB Management anticipates that a foreign
currency will appreciate or depreciate in value, but securities in that currency
do not present attractive investment opportunities and are not held in the
Fund's investment Fund.
OPTIONS ON FOREIGN CURRENCIES (ALL FUNDS). Each Fund may write and
purchase covered call and put options on foreign currencies. Neuberger Berman
International Fund may write (sell) put and covered call options on any currency
in order to realize greater income than would be realized on Fund securities
alone.
Currency options have characteristics and risks similar to those of
securities options, as discussed herein. Certain options on foreign currencies
are traded on the OTC market and involve liquidity and credit risks that may not
be present in the case of exchange-traded currency options.
POLICIES AND LIMITATIONS. A Fund would use options on foreign
currencies to protect against declines in the U.S. dollar value of Fund
securities or increases in the U.S. dollar cost of securities to be acquired or
to protect the U.S. dollar equivalent of dividends, interest, or other payments
on those securities. In addition, Neuberger Berman International Fund may
purchase put and call options on foreign currencies for non-hedging purposes
when NB Management anticipates that a currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not included in the Fund. The use of options on
currencies by Neuberger Berman Socially Responsive Fund is not subject to the
Social Policy.
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REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent a
Fund sells or purchases futures contracts or writes options thereon or options
on foreign currencies that are traded on an exchange regulated by the CFTC other
than for bona fide hedging purposes (as defined by the CFTC), the aggregate
initial margin and premiums on those positions (excluding the amount by which
options are "in-the-money") may not exceed 5% of the Fund's net assets.
COVER FOR FINANCIAL INSTRUMENTS. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of a Fund's assets could
impede Fund management or the Fund's ability to meet current obligations. A Fund
may be unable to promptly dispose of assets which cover, or are segregated with
respect to, an illiquid futures, options, or forward position; this inability
may result in a loss to the Fund.
POLICIES AND LIMITATIONS. Each Fund will comply with SEC guidelines
regarding "cover" for Financial Instruments and, if the guidelines so require,
set aside in a segregated account with its custodian the prescribed amount of
cash or appropriate liquid securities.
GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using
Financial Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by a Fund and the prices of Financial Instruments; (2) possible lack of a liquid
secondary market for Financial Instruments and the resulting inability to close
out Financial Instruments when desired; (3) the fact that the skills needed to
use Financial Instruments are different from those needed to select a Fund's
securities; (4) the fact that, although use of Financial Instruments for hedging
purposes can reduce the risk of loss, they also can reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
hedged investments; and (5) the possible inability of a Fund to purchase or sell
a Fund security at a time that would otherwise be favorable for it to do so, or
the possible need for a Fund to sell a Fund security at a disadvantageous time,
due to its need to maintain cover or to segregate securities in connection with
its use of Financial Instruments. There can be no assurance that a Fund's use of
Financial Instruments will be successful.
Each Fund's use of Financial Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information." Financial Instruments may not
be available with respect to some currencies, especially those of so-called
emerging market countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the risk of
imperfect correlation by investing only in Hedging Instruments whose behavior is
expected to resemble or offset that of a Fund's underlying securities or
currency. NB Management intends to reduce the risk that a Fund will be unable to
close out Hedging Instruments by entering into such transactions only if NB
Management believes there will be an active and liquid secondary market.
SHORT SALES (NEUBERGER BERMAN INTERNATIONAL FUND). Neuberger Berman
International Fund may attempt to limit exposure to a possible decline in the
market value of Fund securities through short sales of securities that NB
Management believes possess volatility characteristics similar to those being
hedged. The Fund also may use short sales in an attempt to realize gain. To
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effect a short sale, the Fund borrows a security from a brokerage firm to make
delivery to the buyer. The Fund then is obliged to replace the borrowed security
by purchasing it at the market price at the time of replacement. Until the
security is replaced, the Fund is required to pay the lender any dividends and
may be required to pay a premium or interest.
Neuberger Berman International Fund will realize a gain if the security
declines in price between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund will incur a loss if the price of
the security increases between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium or
interest the Fund is required to pay in connection with the short sale. A short
position may be adversely affected by imperfect correlation between movements in
the price of the securities sold short and the securities being hedged.
Neuberger Berman International Fund also may make short sales
against-the-box, in which it sells securities short only if it owns or has the
right to obtain without payment of additional consideration an equal amount of
the same type of securities sold.
The effect of short selling on the Fund is similar to the effect of
leverage. Short selling may amplify changes in Neuberger Berman International
Fund's NAV. Short selling may also produce higher than normal Fund turnover,
which may result in increased transaction costs to the Fund.
Policies and Limitations. Under applicable guidelines of the SEC staff,
if the Fund engages in a short sale (other than a short sale against-the-box),
it must put in a segregated account (not with the broker) an amount of cash or
appropriate liquid securities equal to the difference between (1) the market
value of the securities sold short at the time they were sold short and (2) any
cash or securities required to be deposited as collateral with the broker in
connection with the short sale (not including the proceeds from the short sale).
In addition, until the Fund replaces the borrowed security, it must daily
maintain the segregated account at such a level that (1) the amount deposited in
it plus the amount deposited with the broker as collateral equals the current
market value of the securities sold short, and (2) the amount deposited in it
plus the amount deposited with the broker as collateral is not less than the
market value of the securities at the time they were sold short.
FIXED INCOME SECURITIES (ALL FUNDS). While the emphasis of the Funds'
investment programs is on common stocks and other equity securities, the Funds
may also invest in money market instruments, U.S. Government and Agency
Securities, and other fixed income securities. Each Fund may invest in
investment grade corporate bonds and debentures. Neuberger Berman Century,
Neuberger Berman International, Neuberger Berman Partners, and Neuberger Berman
Regency Funds each may invest in corporate debt securities rated below
investment grade.
U.S. Government Securities are obligations of the U.S. Treasury backed
by the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as Ginnie Mae (also known as the
"Government National Mortgage Association"), Fannie Mae (also known as Federal
National Mortgage Association), Freddie Mac (also known as Federal Home Loan
Mortgage Corporation), Student Loan Marketing Association (commonly known as
"Sallie Mae"), and the Tennessee Valley Authority. Some U.S. Government Agency
Securities are supported by the full faith and credit of the United States,
while others may by supported by the issuer's ability to borrow from the U.S.
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Treasury, subject to the Treasury's discretion in certain cases, or only by the
credit of the issuer. U.S. Government Agency Securities include U.S. Government
Agency mortgage-backed securities. The market prices of U.S. Government and
Agency Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed by NB Management to be comparable
to such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest rating category (Baa) or Comparable Unrated
Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Funds may rely on the ratings of any NRSRO, the
Funds primarily refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of the fixed income securities in which a
Fund may invest is likely to decline in times of rising market interest rates.
Conversely, when rates fall, the value of a Fund's fixed income investments is
likely to rise. Foreign debt securities are subject to risks similar to those of
other foreign securities.
Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities, which
react primarily to movements in the general level of interest rates. Debt
securities in the lowest rating categories may involve a substantial risk of
default or may be in default. Changes in economic conditions or developments
regarding the individual issuer are more likely to cause price volatility and
weaken the capacity of the issuer of such securities to make principal and
interest payments than is the case for higher-grade debt securities. An economic
downturn affecting the issuer may result in an increased incidence of default.
The market for lower-rated securities may be thinner and less active than for
higher-rated securities. Pricing of thinly traded securities requires greater
judgment than pricing of securities for which market transactions are regularly
reported. NB Management will invest in lower-rated securities only when it
concludes that the anticipated return on such an investment to Neuberger Berman
Century, Neuberger Berman International, Neuberger Berman Partners or Neuberger
Berman Regency Funds warrants exposure to the additional level of risk.
POLICIES AND LIMITATIONS. Each Fund normally may invest up to 35% of
its total assets in debt securities. Neuberger Berman Century, Neuberger Berman
Partners, and Neuberger Berman Regency Funds each may invest up to 15% of its
net assets in corporate debt securities rated below investment grade or
Comparable Unrated Securities. Neuberger Berman International Fund may invest in
domestic and foreign debt securities of any rating, including those rated below
investment grade and Comparable Unrated Securities.
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Subsequent to its purchase by a Fund, an issue of debt securities may
cease to be rated or its rating may be reduced, so that the securities would no
longer be eligible for purchase by that Fund. In such a case, Neuberger Berman
Socially Responsive Fund and Neuberger Berman Millennium Fund each will engage
in an orderly disposition of the downgraded securities. Each other Fund (except
Neuberger Berman International Fund) will engage in an orderly disposition of
the downgraded securities to the extent necessary to ensure that the Fund's
holdings of securities rated below investment grade and Comparable Unrated
Securities will not exceed 5% of its net assets (15% in the case of Neuberger
Berman Century, Neuberger Berman Partners, and Neuberger Berman Regency Funds).
NB Management will make a determination as to whether Neuberger Berman
International Fund should dispose of the downgraded securities.
COMMERCIAL PAPER (ALL FUNDS). Commercial paper is a short-term debt
security issued by a corporation or bank, usually for purposes such as financing
current operations. Each Fund may invest in commercial paper that cannot be
resold to the public without an effective registration statement under the 1933
Act. While restricted commercial paper normally is deemed illiquid, NB
Management may in certain cases determine that such paper is liquid, pursuant to
guidelines established by the Fund Trustees.
Policies and Limitations. The Funds may invest in commercial paper only
if it has received the highest rating from S&P (A-1) or Moody's (P-1) or is
deemed by NB Management to be of comparable quality. Neuberger Berman
International Fund may invest in such commercial paper as a defensive measure,
to increase liquidity, or as needed for segregated accounts.
ZERO COUPON SECURITIES (NEUBERGER BERMAN CENTURY, NEUBERGER BERMAN
MILLENNIUM, NEUBERGER BERMAN PARTNERS, NEUBERGER BERMAN REGENCY, NEUBERGER
BERMAN SOCIALLY RESPONSIVE, AND NEUBERGER BERMAN TECHNOLOGY FUNDS). Each of
these Funds may invest in zero coupon securities, which are debt obligations
that do not entitle the holder to any periodic payment of interest prior to
maturity or that specify a future date when the securities begin to pay current
interest. Zero coupon securities are issued and traded at a discount from their
face amount or par value. This discount varies depending on prevailing interest
rates, the time remaining until cash payments begin, the liquidity of the
security, and the perceived credit quality of the issuer.
The discount on zero coupon securities ("original issue discount") must
be taken into income ratably by each such Fund prior to the receipt of any
actual payments. Because each such Fund must distribute substantially all of its
net income (including its accrued original issue discount) to its shareholders
each year for income and excise tax purposes, it may have to dispose of Fund
securities under disadvantageous circumstances to generate cash, or may be
required to borrow, to satisfy its distribution requirements. See "Additional
Tax Information."
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically. Zero coupon
securities are likely to respond to changes in interest rates to a greater
degree than other types of debt securities having a similar maturity and credit
quality.
CONVERTIBLE SECURITIES (ALL FUNDS). Each Fund may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
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period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities. A convertible security
entitles the holder to receive the interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks of
the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier
non-convertible securities but rank senior to common stock in a corporation's
capital structure. The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
quality that do not have a conversion privilege and (2) its worth if converted
into the underlying common stock.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by a Fund is called for
redemption, the Fund will be required to convert it into the underlying common
stock, sell it to a third party or permit the issuer to redeem the security. Any
of these actions could have an adverse effect on the Fund's ability to achieve
their investment objectives.
POLICIES AND LIMITATIONS. Neuberger Berman Socially Responsive Fund may
invest up to 20% of its net assets in convertible securities. The Fund does not
intend to purchase any convertible securities that are not investment grade.
Convertible debt securities are subject to each Fund's investment policies and
limitations concerning fixed income securities.
PREFERRED STOCK (ALL FUNDS). Each Fund may invest in preferred stock.
Unlike interest payments on debt securities, dividends on preferred stock are
generally payable at the discretion of the issuer's board of directors.
Preferred shareholders may have certain rights if dividends are not paid but
generally have no legal recourse against the issuer. Shareholders may suffer a
loss of value if dividends are not paid. The market prices of preferred stocks
are generally more sensitive to changes in the issuer's creditworthiness than
are the prices of debt securities.
SWAP AGREEMENTS (NEUBERGER BERMAN CENTURY, NEUBERGER BERMAN
INTERNATIONAL, AND NEUBERGER BERMAN TECHNOLOGY FUNDS). Each of these Funds may
enter into swap agreements to manage or gain exposure to particular types of
investments (including equity securities or indices of equity securities in
which the Fund otherwise could not invest efficiently). In a swap agreement, one
party agrees to make regular payments equal to a floating rate on a specified
amount in exchange for payments equal to a fixed rate, or a different floating
rate, on the same amount for a specified period.
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on the
Fund's performance. The risks of swap agreements depend upon the other party's
creditworthiness and ability to perform, as well as the Fund's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions. Swap agreements may be illiquid. The swap market is relatively new
and is largely unregulated.
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POLICIES AND LIMITATIONS. In accordance with SEC staff requirements,
each of Neuberger Berman Century, Neuberger Berman International, and Neuberger
Berman Technology Funds will segregate cash or appropriate liquid securities in
an amount equal to its obligations under swap agreements; when an agreement
provides for netting of the payments by the two parties, the Fund will segregate
only the amount of its net obligation, if any.
JAPANESE INVESTMENTS (NEUBERGER BERMAN INTERNATIONAL FUND). All of the
Funds may invest in foreign securities, including securities of Japanese
issuers. From time to time, Neuberger Berman International Fund may invest a
significant portion of its assets in securities of Japanese issuers. The
performance of the Fund may therefore be significantly affected by events
influencing the Japanese economy and the exchange rate between the Japanese yen
and the U.S. dollar. Japan has experienced a severe recession, including a
decline in real estate values and other events that adversely affected the
balance sheets of many financial institutions and indicate that there may be
structural weaknesses in the Japanese financial system. The effects of this
economic downturn may be felt for a considerable period and are being
exacerbated by the currency exchange rate. Japan is heavily dependent on foreign
oil. Japan is located in a seismically active area, and severe earthquakes may
damage important elements of the country's infrastructure. Japan's economic
prospects may be affected by the political and military situations of its near
neighbors, notably North and South Korea, China, and Russia.
OTHER INVESTMENT COMPANIES (ALL FUNDS). Neuberger Berman International
Fund may invest in the shares of other investment companies. Such investment may
be the most practical or only manner in which the Fund can participate in
certain foreign markets because of the expenses involved or because other
vehicles for investing in those countries may not be available at the time the
Fund is ready to make an investment. Each Fund at times may invest in
instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P 500 Index.
As a shareholder in an investment company, a Fund would bear its pro
rata share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. The Funds do not intend to invest in such funds unless, in
the judgment of NB Management, the potential benefits of such investment justify
the payment of any applicable premium or sales charge.
POLICIES AND LIMITATIONS. Except for investments in a money market fund
managed by NB Management for cash management purposes, each Fund's investment in
such securities is limited to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's total assets with respect to any one
investment company, and (iii) 10% of the Fund's total assets in the aggregate.
INDEXED SECURITIES (NEUBERGER BERMAN INTERNATIONAL FUND). Neuberger
Berman International Fund may invest in indexed securities whose values are
linked to currencies, interest rates, commodities, indices, or other financial
indicators. Most indexed securities are short- to intermediate-term fixed income
securities whose values at maturity or interest rates rise or fall according to
the change in one or more specified underlying instruments. The value of indexed
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securities may increase or decrease if the underlying instrument appreciates,
and they may have return characteristics similar to direct investment in the
underlying instrument. Indexed securities may be more volatile than the
underlying instrument itself.
NEUBERGER BERMAN FOCUS FUND - DESCRIPTION OF ECONOMIC SECTORS.
Neuberger Berman Focus Fund seeks to achieve its investment objective
by investing principally in common stocks in the following thirteen
multi-industry economic sectors, normally making at least 90% of its investments
in not more than six such sectors:
(1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production,
or sale of automobiles, automobile parts, mobile homes, or related products
("automobile industries") or design, construction, renovation, or refurbishing
of residential dwellings. The value of securities of companies in the automobile
industries is affected by, among other things, foreign competition, the level of
consumer confidence and consumer debt, and installment loan rates. The housing
construction industry may be affected by the level of consumer confidence and
consumer debt, mortgage rates, tax laws, and the inflation outlook.
(2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing
consumer goods or services, including design, processing, production, sale, or
storage of packaged, canned, bottled, or frozen foods and beverages and design,
production, or sale of home furnishings, appliances, clothing, accessories,
cosmetics, or perfumes. Certain of these companies are subject to government
regulation affecting the use of various food additives and production methods,
which could affect profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns, health concerns,
and other factors affecting supply and demand.
(3) DEFENSE AND AEROSPACE SECTOR: Companies engaged in research,
manufacture, or sale of products or services related to the defense or aerospace
industries, including air transport; data processing or computer-related
services; communications systems; military weapons or transportation; general
aviation equipment, missiles, space launch vehicles, or spacecraft; machinery
for guidance, propulsion, or control of flight vehicles; and airborne or
ground-based equipment essential to the test, operation, or maintenance of
flight vehicles. Because these companies rely largely on U.S. (and foreign)
governmental demand for their products and services, their financial conditions
are heavily influenced by defense spending policies.
(4) ENERGY SECTOR: Companies involved in the production, transmission,
or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal,
oil shale, or solar sources of energy (but excluding public utility companies).
Also included are companies that provide component products or services for
those activities. The value of these companies' securities varies based on the
price and supply of energy fuels and may be affected by international politics,
energy conservation, the success of exploration projects, environmental
considerations, and the tax and other regulatory policies of various
governments.
(5) FINANCIAL SERVICES SECTOR: Companies providing financial services
to consumers or industry, including commercial banks and savings and loan
associations, consumer and industrial finance companies, securities brokerage
companies, leasing companies, and insurance companies. These companies are
subject to extensive governmental regulations. Their profitability may fluctuate
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significantly as a result of volatile interest rates, concerns about particular
banks and savings institutions, and general economic conditions.
(6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or
sale of products or services used in connection with the provision of health
care, including pharmaceutical companies; firms that design, manufacture, sell,
or supply medical, dental, or optical products, hardware, or services; companies
involved in biotechnology, medical diagnostic, or biochemical research and
development; and companies that operate health care facilities. Many of these
companies are subject to government regulation and potential health care
reforms, which could affect the price and availability of their products and
services. Also, products and services of these companies could quickly become
obsolete.
(7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development,
manufacture, or marketing of products, processes, or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals, steel,
or pollution control industries, including synthetic and natural materials (for
example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or
fragrances), paper, wood products, steel, and cement. Certain of these companies
are subject to state and federal regulation, which could require alteration or
cessation of production of a product, payment of fines, or cleaning of a
disposal site. Furthermore, because some of the materials and processes used by
these companies involve hazardous components, there are additional risks
associated with their production, handling, and disposal. The risk of product
obsolescence also is present.
(8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research,
development, or manufacture of products, processes, or services relating to
electrical equipment, machinery, pollution control, or construction services,
including transformers, motors, turbines, hand tools, earth-moving equipment,
and waste disposal services. The profitability of most of these companies may
fluctuate significantly in response to capital spending and general economic
conditions. As is the case for the heavy industry sector, there are risks
associated with the production, handling, and disposal of materials and
processes that involve hazardous components and the risk of product
obsolescence.
(9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design,
production, or distribution of goods or services for the media industries
(including television or radio broadcasting or manufacturing, publishing,
recordings and musical instruments, motion pictures, and photography) and the
entertainment industries (including sports arenas, amusement and theme parks,
gaming casinos, sporting goods, camping and recreational equipment, toys and
games, travel-related services, hotels and motels, and fast food and other
restaurants). Many products produced by companies in this sector -- for example,
video and electronic games -- may become obsolete quickly. Additionally,
companies engaged in television and radio broadcast are subject to government
regulation.
(10) RETAILING SECTOR: Companies engaged in retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products, or
other consumer goods, including department stores, supermarkets, and retail
chains specializing in particular items such as shoes, toys, or pharmaceuticals.
The value of these companies' securities fluctuates based on consumer spending
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patterns, which depend on inflation and interest rates, the level of consumer
debt, and seasonal shopping habits. The success or failure of a company in this
highly competitive sector depends on its ability to predict rapidly changing
consumer tastes.
(11) TECHNOLOGY SECTOR: Companies that are expected to have or develop
products, processes, or services that will provide, or will benefit
significantly from, technological advances and improvements or future automation
trends, including semiconductors, computers and peripheral equipment, scientific
instruments, computer software, telecommunications equipment, and electronic
components, instruments, and systems. These companies are sensitive to foreign
competition and import tariffs. Also, many of their products may become obsolete
quickly.
(12) TRANSPORTATION SECTOR: Companies involved in providing
transportation of people and products, including airlines, railroads, and
trucking firms. Revenues of these companies are affected by fluctuations in fuel
prices and government regulation of fares.
(13) UTILITIES SECTOR: Companies in the public utilities industry and
companies that derive a substantial majority of their revenues through supplying
public utilities (including companies engaged in the manufacture, production,
generation, transmission, or sale of gas and electric energy) and that provide
telephone, telegraph, satellite, microwave, and other communication facilities
to the public. The gas and electric public utilities industries are subject to
various uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear power
facilities.
NEUBERGER BERMAN SOCIALLY RESPONSIVE FUND - DESCRIPTION OF SOCIAL POLICY
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship between
business and society, socially responsive investing ("SRI") is a mechanism for
assuring that investors' social values are reflected in their investment
decisions. As such, SRI is a direct descendent of the successful effort begun in
the early 1970's to encourage companies to divest their South African operations
and subscribe to the Sullivan Principles. Today, a growing number of individuals
and institutions are applying similar strategies to a broad range of problems.
Although there are many strategies available to the socially responsive
investor, including proxy activism, below-market loans to community projects,
and venture capital, the SRI strategies used by the Fund generally fall into two
categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to avoid
holding securities of companies whose products or policies are seen as being at
odds with the social good. The most common exclusions historically have involved
tobacco companies and weapons manufacturers.
LEADERSHIP INVESTING. A growing number of investors actively look for
companies with progressive programs that are exemplary or companies which make
it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have
surprised Adam Smith, who was, first and foremost, a moral philosopher. THE
WEALTH OF NATIONS is firmly rooted in the Enlightenment conviction that the
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purpose of capital is the social good and the related belief that idle capital
is both wasteful and unethical. But, what very likely would have surprised Smith
are the sheer complexity of the social issues we face today and the diversity of
our attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger Berman, the Fund's sub-adviser, maintains a database of
information about the social impact of the companies it follows. NB Management
uses the database to evaluate social issues after it deems a stock acceptable
from a financial standpoint for acquisition by the Fund. The aim of the database
is to be as comprehensive as possible, given that much of the information
concerning corporate responsibility comes from subjective sources. Information
for the database is gathered by Neuberger Berman in many categories and then
analyzed by NB Management in the following six categories of corporate
responsibility:
WORKPLACE DIVERSITY AND EMPLOYMENT. NB Management looks for companies
that show leadership in areas such as employee training and promotion policies
and benefits, such as flextime, generous profit sharing, and parental leave. NB
Management looks for active programs to promote women and minorities and takes
into account their representation among the officers of an issuer and members of
its board of directors. As a basis for exclusion, NB Management looks for Equal
Employment Opportunity Act infractions and Occupational Safety and Health Act
violations; examines each case in terms of severity, frequency, and time elapsed
since the incident; and considers actions taken by the company since the
violation. NB Management also monitors companies' progress and attitudes toward
these issues.
ENVIRONMENT. A company's impact on the environment depends largely on
the industry. Therefore, NB Management examines a company's environmental record
vis-a-vis those of its peers in the industry. All companies operating in an
industry with inherently high environmental risks are likely to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies, NB Management examines their problems in
terms of severity, frequency, and elapsed time. NB Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental policies, procedures, and practices. NB Management defines an
environmental leadership company as one that puts into place strong affirmative
programs to minimize emissions, promote safety, reduce waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products. NB Management looks for the commitment and
active involvement of senior management in all these areas. Several major
manufacturers which still produce substantial amounts of pollution are among the
leaders in developing outstanding waste source reduction and remediation
programs.
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<PAGE>
PRODUCT. NB Management considers company announcements, press reports,
and public interest publications relating to the health, safety, quality,
labeling, advertising, and promotion of both consumer and industrial products.
NB Management takes note of companies with a strong commitment to quality and
with marketing practices which are ethical and consumer-friendly. NB Management
pays particular attention to companies whose products and services promote
progressive solutions to social problems.
PUBLIC HEALTH. NB Management measures the participation of companies in
such industries and markets as alcohol, tobacco, gambling and nuclear power. NB
Management also considers the impact of products and marketing activities
related to those products on nutritional and other health concerns, both
domestically and in foreign markets.
WEAPONS. NB Management keeps track of domestic military sales and,
whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. NB Management gathers information about a
company's participation in community affairs, its policies with respect to
charitable contributions, and its support of education and the arts. NB
Management looks for companies with a focus, dealing with issues not just by
making financial contributions, but also by asking the questions: What can we do
to help? What do we have to offer? Volunteerism, high-school mentoring programs,
scholarships and grants, and in-kind donations to specific groups are just a few
ways that companies have responded to these questions.
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by NB Management from a financial
standpoint are analyzed using Neuberger Berman's database. The companies are
then evaluated by the Fund manager to determine if the companies' policies,
practices, products, and services withstand scrutiny in the following major
areas of concern: the environment and workplace diversity and employment.
Companies are then further evaluated to determine their track record in issues
and areas of concern such as public health, weapons, product, and corporate
citizenship.
The issues and areas of concern that are tracked lend themselves to
objective analysis in varying degrees. Few, however, can be resolved entirely on
the basis of scientifically demonstrable facts. Moreover, a substantial amount
of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend on Neuberger Berman's ability to tap a wide variety of sources
and on the experience and judgment of the people at NB Management who interpret
the information.
In applying the information in the database to stock selection for the
Fund, NB Management considers several factors. NB Management examines the
severity and frequency of various infractions, as well as the time elapsed since
their occurrence. NB Management also takes into account any remedial action
which has been taken by the company relating to these infractions. NB Management
notes any quality innovations made by the company in its effort to create
positive change and looks at the company's overall approach to social issues.
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PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The share price and total return of
each Fund will vary, and an investment in a Fund, when redeemed, may be worth
more or less than an investor's original cost.
Total Return Computations
Each Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
n
P(1+T) = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results. As
of the date of this SAI, Neuberger Berman Technology Fund had been in existence
only a very short time and had no meaningful performance history. Neuberger
Berman Century Fund had less than one year of performance history.
Average Annual Total Returns(1)
Investor Class Periods Ended 8/31/2000
One Year Five Years Ten Years Period from
Inception(2)
-------- ---------- --------- ------------
Century N/A N/A N/A N/A
Focus 59.29% 22.09% 20.29% 13.04%
Genesis 25.79% 16.34% 16.79% 14.11%
Guardian 16.84% 11.41% 15.69% 12.92%
International 25.43% 14.82% N/A 13.03%
Manhattan 87.89% 25.35% 21.15% 19.41%
Millennium 96.88% N/A N/A 105.32%
Partners 8.51% 15.57% 15.81% 17.26%
Regency 34.95% N/A N/A 25.15%
Socially
Responsive 2.96% 16.04% N/A 15.19%
Technology N/A N/A N/A N/A
(1) Through December 15, 2000, the Investor Class of each of the Funds was
a feeder fund in a master/feeder structure. Performance results shown
represent the performance of each Investor Class Fund's predecessor
feeder fund, which had an identical investment program and the same
expenses as the corresponding Investor Class Fund.
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(2) The inception dates of the Investor Class of each Fund were as follows:
Neuberger Berman Century Fund, 12/6/99; Neuberger Berman Focus Fund,
10/19/55; Neuberger Berman Genesis Fund, 9/27/88; Neuberger Berman
Guardian Fund, 6/1/50; Neuberger Berman International Fund, 6/15/94;
Neuberger Berman Manhattan Fund, 3/1/79; Neuberger Berman Millennium
Fund, 10/20/98; Neuberger Berman Partners Fund, 1/20/75; Neuberger
Berman Regency Fund, 6/1/99; Neuberger Berman Socially Responsive Fund,
3/16/94; and Neuberger Berman Technology Fund, 5/1/00.
Average Annual Total Returns(1)
Trust Class Periods Ended 8/31/2000
One Year Five Years Ten Years(2) Period from
Inception(3)
-------- ---------- --------- -------------
Century N/A N/A N/A N/A
Focus 59.02% 22.00% 20.59% 13.10%
Genesis 25.76% 16.33% 16.84% 14.15%
Guardian 16.72% 11.32% 15.65% 12.91%
International 26.72% 15.26% N/A 13.38%
Manhattan 87.95% 25.08% 21.03% 19.36%
Millennium 96.66% N/A N/A 105.31%
Partners 8.41% 15.47% 15.76% 17.24%
Regency 34.86% N/A N/A 25.18%
Socially
Responsive 2.76% 15.92% N/A 15.10%
Technology N/A N/A N/A N/A
(1) Through December 15, 2000, each of the Funds was a feeder fund in a
master/feeder structure. For the Trust Class of each Fund except
Neuberger Berman International Fund and Neuberger Berman Socially
Responsive Fund, performance results shown for periods after August
1993 represent the performance of each Trust Class Fund's predecessor
feeder fund, which had an identical investment program and the same
expenses as the corresponding Trust Class Fund. For Neuberger Berman
International and Neuberger Berman Socially Responsive Funds,
performance results shown for periods after June 1998 and March 1997,
respectively, represent the performance of each Trust Class Fund's
predecessor feeder fund.
(2) Performance shown for periods before August 1993 is that of the
corresponding Investor Class of each Fund. Because the Investor Class
of each Fund has moderately lower expenses, its performance should have
been slightly better than the corresponding Trust Class would have had.
(3) The inception dates of the Trust Class of each Fund are as follows:
Neuberger Berman Century Fund, 12/6/99; Neuberger Berman Focus Fund,
8/30/93; Neuberger Berman Genesis Fund, 8/26/93, Neuberger Berman
Guardian Fund 8/3/93, Neuberger Berman International Fund, 6/29/98;
Neuberger Berman Manhattan Fund, 8/30/93, Neuberger Berman Millennium
Fund, 11/03/98, Neuberger Berman Partners Fund, 8/30/93, Neuberger
Berman Regency Fund, 6/10/99; Neuberger Berman Socially Responsive
Fund, 3/3/97; and Neuberger Berman Technology Fund, 5/1/00.
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Average Annual Total Returns(1)
Advisor Class Periods Ended 8/31/2000
One Year Five Years Ten Years(2) Period from
Inception(3)
-------- ---------- --------- ------------
Focus 58.68% 22.65% 20.57% 13.10%
Genesis 25.42% 15.15%` 16.70% 14.03%
Guardian 16.04% 10.79% 15.37% 12.86%
Manhattan 86.04% 24.66% 20.82% 19.26%
Partners 7.99% 15.06% 15.55% 17.16%
(1) Through December 15, 2000, each of the Funds was a feeder fund in a
master/feeder structure. For the Advisor Class of each of Neuberger
Berman Focus, Neuberger Berman Guardian, and Neuberger Berman Manhattan
Fund, performance results shown for periods after September 1996
represent the performance of each Advisor Class Fund's predecessor
feeder fund, which had an identical investment program and the same
expenses as the corresponding Advisor Class Fund. For Neuberger Berman
Genesis and Neuberger Berman Partners Funds, performance results shown
for periods after April 1997 and August 1996, respectively, represent
the performance of each Advisor Class Fund's predecessor feeder fund.
(2) Performance shown for periods before September 1996 for each of
Neuberger Berman Focus, Neuberger Berman Guardian, and Neuberger Berman
Manhattan Funds, and before April 1997 and August 1996 for Neuberger
Berman Genesis and Neuberger Berman Partners Funds, is that of the
corresponding Investor Class of each Fund. Because the Investor Class
of each Fund has moderately lower expenses, its performance should have
been slightly better than the corresponding Advisor Class would have
had.
(3) The inception date of the Advisor Class of each Fund are as follows:
Neuberger Berman Focus Fund, 9/4/96, Neuberger Berman Genesis Fund,
4/2/97, Neuberger Berman Guardian Fund, 9/4/96, Neuberger Berman
Manhattan Fund, 9/4/96, and Neuberger Berman Partners Fund, 8/19/96.
Average Annual Total Returns
Institutional Class Periods Ended 8/31/2000(1)
One Year Five Years(2) Ten Years(2) Period from
Inception(2)
-------- ---------- --------- ------------
Genesis 26.22% 16.44% 16.84% 14.15%
(1) Through December 15, 2000, Neuberger Berman Genesis Fund Institutional
Class was a feeder fund in a master/feeder structure. Performance
results shown after 7/1/99 is that of its predecessor feeder fund,
which had an identical investment program and the same expenses as
Neuberger Berman Genesis Fund Institutional Class.
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<PAGE>
(2) Performance shown for periods before 7/1/99 is that of the
corresponding Investor Class. Because the Institutional Class of
Genesis Fund has lower expenses, its performance should have been
better than the Genesis Fund Investor Class would have had.
(3) The inception date of the Institutional Class of the Neuberger Berman
Genesis Fund was 6/28/99.
Prior to January 5, 1989, the investment policies of Neuberger Berman
Focus Fund required that at least 80% of its investments normally be in
energy-related investments; prior to November 1, 1991, those investment policies
required that at least 25% of its investments normally be in the energy sector.
Neuberger Berman Focus Fund may be required, under applicable law, to include
information reflecting performance and expenses for periods before November 1,
1991, in its advertisements, sales literature, financial statements, and other
documents filed with the SEC and/or provided to current and prospective
shareholders. Investors should be aware that such information may not
necessarily reflect the level of performance and expenses that would have been
experienced had the Fund's current investment policies been in effect.
NB Management may from time to time waive a portion of its fees due
from any Fund or reimburse a Fund for a portion of its expenses. Such action has
the effect of increasing total return. Actual reimbursements and waivers are
described in the Prospectus and in "Investment Management and Administration
Services" below.
COMPARATIVE INFORMATION
From time to time each Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings)
published by independent services or publications (including
newspapers, newsletters, and financial periodicals) that
monitor the performance of mutual funds, such as Lipper
Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment
Company Data Inc., Morningstar, Inc., Micropal Incorporated,
and quarterly mutual fund rankings by Money, Fortune, Forbes,
Business Week, Personal Investor, and U.S. News & World
Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper,
or
(2) recognized stock and other indices, such as the S&P
500 Index, S&P Small Cap 600 Index ("S&P 600 Index"), S&P Mid
Cap 400 Index ("S&P 400 Index"), Russell 2000 Index, Russell
2000 Growth Index, Russell 2000 Value Index, Russell 1000
Value Index, Russell 1000 Growth Index, Russell Midcap(R)
Index, Russell Midcap Value Index, Russell Midcap Growth
Index, Dow Jones Industrial Average ("DJIA"), Wilshire 1750
Index, Nasdaq Composite Index, Montgomery Securities Growth
Stock Index, Value Line Index, U.S. Department of Labor
Consumer Price Index ("Consumer Price Index"), College Board
Annual Survey of Colleges, Kanon Bloch's Family Performance
Index, the Barra Growth Index, the Barra Value Index, the
EAFE(R) Index, the Financial Times World XUS Index, and
various other domestic, international, and global indices.
The S&P 500 Index is a broad index of common stock prices,
while the DJIA represents a narrower segment of industrial
companies. The S&P 600 Index includes stocks that range in
market value from $34 million to $5.2 billion, with an
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<PAGE>
average of $640 million. The S&P 400 Index measures mid-sized
companies that have an average market capitalization of $2.4
billion. The Russell indexes measure the performance of all
capitalization ranges across both growth and value investment
styles. The EAFE(R) Index is an unmanaged index of common
stock prices of more than 1,000 companies from Europe,
Australia, and the Far East translated into U.S. dollars. The
Financial Times World XUS Index is an index of 24
international markets, excluding the U.S. market. Each
assumes reinvestment of distributions and is calculated
without regard to tax consequences or the costs of investing.
Each Fund may invest in different types of securities from
those included in some of the above indexes.
Neuberger Berman Socially Responsive Fund's performance may also be
compared to various socially responsive indices. These include The Domini Social
Index and the indices developed by the quantitative department of Prudential
Securities, such as that department's Large and Mid-Cap Fund indices for various
breakdowns ("Sin" Stock Free, Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Funds' performance, their total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about a Fund's portfolio allocation and
holdings as of a particular date may be included in Advertisements for the Fund.
This information may include the Fund's diversification by asset type or, in the
case of Neuberger Berman Socially Responsive Fund, by the social characteristics
of companies owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
NB Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find Neuberger Berman Century, Neuberger Berman
Focus, Neuberger Berman Guardian, Neuberger Berman Partners, or Neuberger Berman
Regency to be an attractive investment vehicle also include parents saving to
meet college costs for their children. For instance, the cost of a college
education is rapidly approaching the cost of the average family home. Estimates
of total four-year costs (tuition, room and board, books and other expenses) for
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<PAGE>
students starting college in various years may be included in Advertisements,
based on the College Board Annual Survey of Colleges.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information regarding the effects of automatic investing and systematic
withdrawal plans, investing at market highs and/or lows, and investing early
versus late for retirement plans also may be included in Advertisements, if
appropriate.
CERTAIN RISK CONSIDERATIONS
Although each Fund seeks to reduce risk by investing in a diversified
portfolio of securities, diversification does not eliminate all risk. There can,
of course, be no assurance that any Fund will achieve its investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trust, including their addresses and principal business
experience during the past five years. All persons named as trustees and
officers also serve in similar capacities for other Funds administered or
managed by NB Management and Neuberger Berman.
THE TRUST
Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Claudia A. Brandon (44) Secretary Vice President-Mutual Fund
Board Relations since 2000;
Employee of Neuberger
Berman since 1999; Vice
President of NB Management
from 1986 to 1999;
Secretary of four other
mutual funds for which NB
Management acts as
investment manager or
administrator.
John Cannon (70) Trustee Retired. Formerly, Chairman
531 Willow Avenue and Chief Investment
Ambler, PA 19002 Officer of CDC Capital
Management (registered
investment adviser)
(1993-Jan. 1999).
Faith Colish (65) Trustee Attorney at Law, Faith
63 Wall Street Colish, A Professional
24th Floor Corporation.
New York, NY 10005
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Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Robert Conti (44) Vice President Vice President of Neuberger
Berman since 1999; Senior
Vice President of NB
Management since 2000;
Controller of NB Management
until 1996; Treasurer of NB
Management from 1996 until
1999; Vice President of
four other mutual funds for
which NB Management acts as
investment manager or
administrator since 2000.
Stacy Cooper-Shugrue (37) Assistant Secretary Employee of Neuberger
Berman since 1999;
Assistant Vice President of
NB Management from 1993 to
1999; Assistant Secretary
of four other mutual funds
for which NB Management
acts as investment manager
or administrator.
Barbara DiGiorgio (41) Assistant Treasurer Vice President of Neuberger
Berman since 1999;
Assistant Vice President of
NB Management from 1993 to
1999; Assistant Treasurer
since 1996 of four other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Walter G. Ehlers (67) Trustee Consultant, Director of the
6806 Suffolk Place Turner Corporation, A.B.
Harvey Cedars, NJ 08008 Chance Company and Crescent
Jewelry, Inc.
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Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Brian J. Gaffney (47) Vice President Senior Vice President of NB
Management since 2000;
Managing Director of
Neuberger Berman since
1999; Vice President of NB
Management from 1997 until
1999; Vice President of
four other mutual funds for
which NB Management acts as
investment manager or
administrator since 2000.
C. Anne Harvey (63) Trustee Director of American
2555 Pennsylvania Avenue, N.W. Association of Retired
Washington, DC 20037 Persons ("AARP"); Program
Services and Administrator
of AARP Foundation; The
National Rehabilitation
Hospital's Board of
Advisors; Individual
Investors Advisory
Committee to the New York
Stock Exchange Board of
Directors; Steering
Committee for the U.S.
Securities and Exchange
Commission Facts on Saving
and Investing Campaign; and
American Savings Education
Council's Policy Board
(ASEC).
Barry Hirsch (67) Trustee Senior Vice President,
Loews Corporation Secretary, and General
667 Madison Avenue Counsel of Loews
7th Floor Corporation (diversified
New York, NY 10021 financial corporation).
Michael M. Kassen* (47) President and Trustee Executive Vice President,
Chief Investment Officer
and Director of Neuberger
Berman Inc. (holding
company) since 1999;
Executive Vice President
and Chief Investment
Officer of Neuberger Berman
since 1999; Chairman since
May 2000 and Director of NB
Management since January
1996; Vice President from
1990 until 1999; Partner of
Neuberger Berman from 1993
until 1996 when he became a
Principal; President and
Trustee of four other
mutual funds for which NB
Management acts as
investment manager or
administrator since 2000.
Robert A. Kavesh (73) Trustee Professor of Finance and
110 Bleecker Street Economics at Stern School
Apt. 24B of Business, New York
New York, NY 10012 University.
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Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Howard A. Mileaf (63) Trustee Vice President and Special
WHX Corporation Counsel to WHX Corporation
110 East 59th Street (holding company) since
30th Floor 1992; Director of Kevlin
New York, NY 10022 Corporation (manufacturer
of microwave and other
products).
Edward I. O'Brien* (72) Trustee Private Investment
12 Woods Lane Management; President of
Scarsdale, NY 10583 the Securities Industry
Association ("SIA")
(securities industry's
representative in
government relations and
regulatory matters at the
federal and state levels)
from 1974 to 1992; Adviser
to SIA from November 1992
to November 1993; Director
of Legg Mason, Inc.
John P. Rosenthal (68) Trustee Senior Vice President of
Burnham Securities Inc. Burnham Securities Inc. (a
Burnham Asset Management Corp. registered broker-dealer)
1325 Avenue of the Americas since 1991; Director,
26th Floor Cancer Treatment Holdings,
New York, NY 10019 Inc.
William E. Rulon (68) Trustee Retired. Senior Vice
2980 Bayside Walk President of Foodmaker.
San Diego, CA 92109 Inc. (operator and
Franchiser of Restaurants)
until January 1997;
Secretary of Foodmaker,
Inc. until July 1996.
Richard Russell (53) Treasurer and Principal Vice President of Neuberger
Financial and Accounting Berman since 1999; Vice
Officer President of NB Management
from 1993 until 1999;
Treasurer and Principal
Financial and Accounting
Officer of four other
mutual funds for which NB
Management acts as
investment manager or
administrator.
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<PAGE>
Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Cornelius T. Ryan (69) Trustee General Partner of Oxford
Oxford Bioscience Partners Partners and Oxford
315 Post Road West Bioscience Partners
(venture capital
partnerships) and President
of Oxford Westport, CT
06880 Venture Corporation;
Director of Capital Cash
Management Trust (money
market fund) and Prime Cash
Fund.
Tom Decker Seip (50) Trustee General Partner of Seip
30 Ridge Lane Investments LP (a private
Orinda, CA 94563 investment partnership);
Member of the Board of
Directors of Offroad
Capital Inc. and E-Finance
Corporation (pre-public
internet commerce
companies); Trustee of
Hambrecht and Quist Fund
Trust; Member of the Board
of Directors of AmericaOne;
Senior Executive at the
Charles Schwab Corporation
from 1983 to 1999;
including Chief Executive
Officer of Charles Schwab
Investment Management, Inc.
and Trustee of Schwab
Family of Funds and Schwab
Investments from 1997 to
1998; Executive Vice
President-Retail Brokerage
for Charles Schwab
Investment Management from
1994 to 1997.
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<PAGE>
Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Gustave H. Shubert (71) Trustee Senior Fellow/Corporate
13838 Sunset Boulevard Advisor and Advisory
Pacific Palisades, CA 90272 Trustee of Rand
(a non-profit public
interest research
institution) since 1989;
Honorary Member of the
Board of Overseers of the
Institute for Civil
Justice, the Policy
Advisory Committee of the
Clinical Scholars Program
at the University of
California, the American
Association for the
Advancement of Science, the
Council on Foreign
Relations, and the
Institute for Strategic
Studies (London); advisor
to the Program Evaluation
and Methodology Division of
the U.S. General Accounting
Office; formerly Senior
Vice President and Trustee
of Rand.
Frederic B. Soule (54) Vice President Vice President of Neuberger
Berman since 1999; Vice
President of NB Management
from 1995 until 1999; Vice
President of four other
funds for which NB
Management acts as
investment manager or
administrator since 2000.
Candace L. Straight (53) Trustee Private investor and
518 Passaic Avenue consultant specializing
Bloomfield, NJ 07003 in the insurance industry;
Advisory Director of
Securities Capital LLC (a
global private equity
investment firm dedicated
to making investments in
the insurance sector);
Principal of Head &
Company, LLC (limited
liability company providing
investment banking and
consulting services to the
insurance industry) until
March 1996; Director of
Drake Holdings (U.K. motor
insurer) until June 1996.
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<PAGE>
Positions Held
Name, Age, and Address (1) With the Trust Principal Occupation(s)(2)
-------------------------- -------------- ---------------------------
Peter E. Sundman* (41) Chairman of the Board, Executive Vice President
Chief Executive Officer and Director of Neuberger
and Trustee Berman Inc. (holding
company) since 1999;
Executive Vice President of
Neuberger Berman since
1999; Principal of
Neuberger Berman from 1997
until 1999; President and
Director of NB Management
since 1999; Senior Vice
President of NB Management
from 1996 until 1999;
Director of Institutional
Services of NB Management
from 1988 until 1996;
Chairman of the Board and
Trustee of four other
mutual funds for which NB
Management acts as
investment manager or
administrator since 2000.
Peter P. Trapp (55) Trustee Regional Manager for
Ford Motor Credit Company Atlanta Region, Ford Motor
1455 Lincoln Parkway Credit Company since
Atlanta, GA 30346-2209 August, 1997; prior
thereto, President, Ford
Life Insurance Company,
April 1995 until August
1997.
Celeste Wischerth (39) Assistant Treasurer Vice President of Neuberger
Berman since 1999;
Assistant Vice President of
NB Management from 199_ to
1999; Assistant Treasurer
since 1996 of four other
mutual funds for which NB
Management acts as
investment manager or
administrator.
--------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" within the meaning of the
1940 Act. Mr. Sundman and Mr. Kassen are interested persons of the Trust by
virtue of the fact that they are officers and/or directors of NB Management and
Executive Vice Presidents of Neuberger Berman. Mr. O'Brien is an interested
person of the Trust by virtue of the fact that he is a director of Legg Mason,
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Inc., a wholly owned subsidiary of which, from time to time, serves as a broker
or dealer to the Funds and other funds for which NB Management serves as
investment manager.
The Trust's Trust Instrument provides that the Trust will indemnify its
trustees and officers against liabilities and expenses reasonably incurred in
connection with litigation in which they may be involved because of their
offices with the Trust, unless it is adjudicated that they (a) engaged in bad
faith, willful misfeasance, gross negligence, or reckless disregard of the
duties involved in the conduct of their offices, or (b) did not act in good
faith in the reasonable belief that their action was in the best interest of the
Trust. In the case of settlement, such indemnification will not be provided
unless it has been determined (by a court or other body approving the settlement
or other disposition, by a majority of disinterested trustees based upon a
review of readily available facts, or in a written opinion of independent
counsel) that such officers or trustees have not engaged in willful misfeasance,
bad faith, gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the compensation
of the trustees of the Trust. Neuberger Berman Equity Funds does not have any
retirement plan for its trustees.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/00
Total Compensation from
Aggregate Investment Companies in the
Compensation Neuberger Berman
Name and Position with the Trust from the Trust Fund Complex Paid to Trustees
-------------------------------- -------------- -----------------------------
John Cannon $0 $44,000
Trustee
Faith Colish $47,950 $76,500
Trustee (5 other investment companies)
Stanley Egener* $0 $0
Chairman of the Board, Chief (9 other investment companies)
Executive Officer, and Trustee
Walter G. Ehlers $0 $28,000
Trustee
C. Anne Harvey $0 $28,000
Trustee
Barry Hirsch $0 $44,750
Trustee
Michael M. Kassen $0 $0
Trustee
Robert A. Kavesh $0 $44,000
Trustee
Howard A. Mileaf $50,750 $67,417
Trustee (4 other investment companies)
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Total Compensation from
Aggregate Investment Companies in the
Compensation Neuberger Berman
Name and Position with the Trust from the Trust Fund Complex Paid to Trustees
-------------------------------- -------------- -----------------------------
Edward I. O'Brien $47,000 $47,000
Trustee (3 other investment companies)
John T. Patterson, Jr.** $50,200 $50,200
Trustee (4 other investment companies)
John P. Rosenthal $50,700 $50,700
Trustee (4 other investment companies)
William E. Rulon $0 $44,000
Trustee
Cornelius T. Ryan $48,500 $48,500
Trustee (3 other investment companies)
Tom Decker Seip $0 $0
Trustee
Gustave H. Shubert $44,000 $44,000
Trustee (3 other investment companies)
Candace L. Straight $0 $62,667
Trustee
Peter E. Sundman $0 $0
Trustee
Peter P. Trapp $0 $25,500
Trustee
Lawrence Zicklin* $0 $0
President and Trustee (5 other investment companies)
*Retired, October 27, 1999
**Deceased, September 26, 2000
At November 30, 2000, the trustees and officers of the Trust, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
each Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
NB Management serves as the investment manager to all the Funds
pursuant to a management agreement with the Trust, dated December 16, 2000
("Management Agreement").
The Management Agreement provides, in substance, that NB Management
will make and implement investment decisions for the Funds in its discretion and
will continuously develop an investment program for the Funds' assets. The
Management Agreement permits NB Management to effect securities transactions on
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<PAGE>
behalf of each Fund through associated persons of NB Management. The Management
Agreement also specifically permits NB Management to compensate, through higher
commissions, brokers and dealers who provide investment research and analysis to
the Funds, although NB Management has no current plans to pay a material amount
of such compensation.
NB Management provides to each Fund, without separate cost, office
space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of the
Trust who are officers, directors, or employees of NB Management. One director
of NB Management (who is also an officer of Neuberger Berman), who also serves
as an officer of NB Management, presently serves as a trustee and/or officer of
the Trust. See "Trustees and Officers." Each Fund pays NB Management a
management fee based on the Fund's average daily net assets, as described below.
NB Management provides facilities, services, and personnel to each Fund
pursuant to an administration agreement with the Trust, dated December 16, 2000
("Administration Agreement"). For such administrative services, each Fund pays
NB Management a fee based on the Fund's average daily net assets, as described
below.
Under the Administration Agreement for each class of shares, NB
Management also provides to each Fund and its shareholders certain shareholder,
shareholder-related, and other services that are not furnished by the Fund's
shareholder servicing agent. NB Management provides the direct shareholder
services specified in the Administration Agreement, assists the shareholder
servicing agent in the development and implementation of specified programs and
systems to enhance overall shareholder servicing capabilities, solicits and
gathers shareholder proxies, performs services connected with the qualification
of each Fund's shares for sale in various states, and furnishes other services
the parties agree from time to time should be provided under the Administration
Agreement.
From time to time, NB Management or a Fund may enter into arrangements
with registered broker-dealers or other third parties pursuant to which it pays
the broker-dealer or third party a per account fee or a fee based on a
percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.
MANAGEMENT AND ADMINISTRATION FEES
For investment management services, each Fund (except Neuberger Berman
Genesis, Millennium, International and Technology Funds) pays NB Management a
fee at the annual rate of 0.55% of the first $250 million of that Fund'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. Neuberger Berman
Genesis Fund and Neuberger Berman Millennium Fund each pay NB Management a fee
for investment management services at the annual rate of 0.85% of the first $250
million of the Fund'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. Neuberger Berman International
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<PAGE>
Fund pays NB Management a fee for investment management services at the annual
rate of 0.85% of the first $250 million of the Fund'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. Neuberger Berman Technology Fund pays NB
Management a management fee at an annual rate of 0.85% of average net assets.
For administrative services, the Investor Class of each Fund pays NB
Management a fee at the annual rate of 0.26% of that Fund's average daily net
assets, plus certain out-of-pocket expenses for technology used for shareholder
servicing and shareholder communications, subject to the prior approval of an
annual budget by the Trust's Board of Trustees, including a majority of those
Trustees who are not interested persons of the Trust or of NB Management, and
periodic reports to the Board of Trustees on actual expenses. With a Fund's
consent NB Management may subcontract to third parties some of its
responsibilities to that Fund under the Administration Agreement. In addition, a
Fund may compensate such third parties for accounting and other services.
During the fiscal years ended August 31, 2000, 1999 and 1998, the
Investor Class of each Fund accrued management and administration fees as
follows:
Management and Administration Fees
Accrued for Fiscal Years
Investor Class Ended August 31
2000 1999 1998
---- ---- ----
Century $178,122* N/A N/A
Focus $11,557,516 $10,300,241 $11,017,126
Genesis $7,107,528 $9,893,532 $12,686,644
Guardian $20,653,505 $28,897,632 $43,073,250
International $1,997,435 $1,307,781 $ 1,503,496
Manhattan $6,751,263 $4,478,397 $ 4,723,225
Millennium $2,491,722 $296,853** N/A
Partners $17,348,158 $21,997,072 $24,233,862
Regency $70,259 $11,824*** N/A
Socially Responsive $891,800 $863,071 $ 661,068
Technology $55,671**** N/A N/A
* From December 6, 1999 (commencement of operations) to August 31, 2000.
** From October 20, 1998 (commencement of operations) to August 31, 1999.
*** From June 1, 1999 (commencement of operations) to August 31, 1999.
**** From May 1, 2000 (commencement of operations) to August 31, 2000.
For administrative services, the Trust and Advisor Class of each Fund
each pays NB Management a fee at the annual rate of 0.40% of that Fund's average
daily net assets, plus certain out-of-pocket expenses for technology used for
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<PAGE>
shareholder servicing and shareholder communications, subject to the prior
approval of an annual budget by the Trust's Board of Trustees, including a
majority of those Trustees who are not interested persons of the Trust or of NB
Management, and periodic reports to the Board of Trustees on actual expenses.
With a Fund's consent NB Management may subcontract some of its responsibilities
to that Fund under the Administration Agreement and may compensate each
Institution that provides such services. (A portion of this payment may be
derived from the Rule 12b-1 fee paid to NB Management by certain of the Funds;
see "Distribution and Shareholder Services Plan", below.)
During the fiscal years ended August 31, 2000, 1999 and 1998, the Trust
Class of each Fund accrued management and administration fees as follows:
Management and Administration Fees
Accrued for Fiscal Years
Trust Class Ended August 31
2000 1999 1998
---- ---- ----
Century $13,397* N/A N/A
Focus $2,139,521 $2,063,717 $1,953,132
Genesis $6,929,724 $8,235,517 $8,034,410
Guardian $9,634,906 $12,732,406 $19,092,633
International $47,831 $26,186 $ 4,582**
Manhattan $851,534 $480,941 $ 525,466
Millennium $145,269 $12,525*** N/A
Partners $5,936,239 $7,492,692 $6,210,071
Regency $212,513 $532**** N/A
Socially Responsive $250,183 $183,688 $ 111,257
Technology 8,453***** N/A N/A
* From December 6, 1999 (commencement of operations) to August 31, 2000.
** From June 29, 1998 (commencement of operations) to August 31, 1998.
*** From November 4, 1998 (commencement of operations) to August 31, 1999.
**** From June 10, 1999 (commencement of operations) to August 31, 1999.
***** From May 1, 2000 (commencement of operations) to August 31, 2000.
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<PAGE>
During the fiscal years ended August 31, 2000, 1999 and 1998, the
Advisor Class of each Fund accrued management and administration fees as
follows:
Management and Administration Fees
Accrued for Fiscal Years
Advisor Class Ended August 31
2000 1999 1998
---- ---- ----
Focus $47,736 $13,659 $2,762
Genesis $973,066 $643,622 $89,663
Guardian $219,188 $201,255 $141,953
Manhattan $34,543 $4,849 $1, 954
Partners $489,344 $516,328 $170,854
For administrative services, the Institutional Class of Genesis Fund
pays NB Management a fee at the annual rate of 0.15% of that Fund's average
daily net assets, plus out-of-pocket expenses for technology used for
shareholder servicing. In most years, these out-of-pocket expenses are expected
to be a fraction of a basis point. During the fiscal year ended August 31, 2000
the Institutional Class of Genesis Fund accrued $1,882,659 in management and
administration fees.
WAIVERS AND REIMBURSEMENTS
INVESTOR CLASS
Until December 31, 1997, NB Management had voluntarily undertaken to
reimburse the Investor Class of Neuberger Berman Socially Responsive Fund for
its total operating expenses which exceeded 1.50% per annum of the Socially
Responsive Investor Class' average daily net assets. Socially Responsive
Investor Class had in turn agreed to repay NB Management through March 14, 1998
for the excess total operating expenses that NB Management reimbursed to it
through March 14, 1996, so long as the Class' total operating expenses during
that period do not exceed the above expense limitation. During the fiscal year
ended August 31, 1997, Socially Responsive Investor Class repaid NB Management
$131,041 of expenses that NB Management reimbursed to the Fund through March 14,
1996. As of August 31, 1998, Socially Responsive Investor Class has repaid NB
Management for all such expenses.
NB Management has voluntarily undertaken to reimburse the Investor
Class of Neuberger Berman International Fund for its total operating expenses
that exceed 1.70% per annum of International Investor Class' average daily net
assets. NB Management did not reimburse the International Fund Investor Class
pursuant to this arrangement during the last three fiscal years.
International Fund Investor Class has in turn agreed to repay NB
Management through December 31, 1998 for excess total operating expenses that NB
Management reimbursed to it through December 31, 1996, so long as its total
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<PAGE>
operating expenses do not exceed the above expense limitation. NB Management may
terminate this undertaking by giving at least sixty days' prior written notice
to International Fund Investor Class. During the fiscal years ended August 31,
2000, 1999 and 1998, International Fund Investor Class repaid NB Management $0,
$20,095 and $126,741, respectively, of expenses that NB Management reimbursed to
it through December 31, 1996.
NB Management has voluntarily undertaken to reimburse the Investor
Class of Neuberger Berman Millennium Fund for its total operating expenses which
exceed 1.75% of Millennium Investor Class' average daily net assets. Millennium
Fund Investor Class has in turn agreed to repay NB Management through December
31, 2000, for the excess Total Operating Expenses that NB Management reimbursed
to it through December 31, 1999, so long as the Class' Total Operating Expenses
do not exceed the above expense limitation. This undertaking can be terminated
by NB Management by giving Millennium Fund Investor Class at least 60 days'
prior written notice. During the fiscal year ended August 31, 2000, Millennium
Investor Class repaid NB Management $102,478 of expenses that NB Management
reimbursed to the Fund through December 31, 1999. As of August 31, 2000,
Millennium Investor Class has repaid NB Management for all such expenses.
NB Management has contractually undertaken to reimburse the Investor
Class of Neuberger Berman Regency Fund for its total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
which exceed, in the aggregate, 1.50% per annum of the Regency Investor Class'
average daily net assets. This undertaking lasts until December 31, 2010. The
Regency Fund Investor Class has contractually undertaken to reimburse NB
Management for the excess expenses paid by NB Management, provided the
reimbursements do not cause its total operating expenses (exclusive of taxes,
interest, brokerage commissions, and extraordinary expenses) to exceed an annual
rate of 1.50% of average net assets and the reimbursements are made within three
years after the year in which NB Management incurred the expense.
NB Management has contractually undertaken to reimburse the Investor
Class of Neuberger Berman Century Fund for its total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
which exceed, in the aggregate, 1.50% per annum of Century Investor Class'
average daily net assets. This undertaking lasts until December 31, 2010.
Century Fund Investor Class has contractually undertaken to reimburse NB
Management for the excess expenses paid by NB Management, provided the
reimbursements do not cause the Class' total operating expenses (exclusive of
taxes, interest, brokerage commissions, and extraordinary expenses) to exceed an
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annual rate of 1.50% of average net assets and the reimbursements are made
within three years after the year in which NB Management incurred the expense.
NB Management has contractually undertaken to reimburse the Investor
Class of Neuberger Berman Technology Fund for its total operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary expenses)
which exceed, in the aggregate, 2.00% per annum of Technology Investor Class'
average daily net assets. This undertaking lasts until December 31, 2003.
Technology Fund Investor Class has contractually undertaken to reimburse NB
Management for the excess expenses paid by NB Management, provided the
reimbursements do not cause the Class' total operating expenses (exclusive of
taxes, interest, brokerage commissions, and extraordinary expenses) to exceed an
annual rate of 2.00% of average net assets and the reimbursements are made
within three years after the year in which NB Management incurred the expense.
Amount of Total Operating Expenses
Investor Class Reimbursed by NB Management
for Fiscal Years Ended August 31
Fund 2000 1999 1998
---- ---- ---- ----
Century $56,499* N/A N/A
Focus $0 $0 $0
Genesis $0 $0 $0
Guardian $0 $0 $0
International $0 $20,095 $126,741
Manhattan $0 $0 $0
Millennium $0 $102,478** N/A
Partners $0 $0 $0
Regency $62,715 $100,634*** N/A
Socially Responsive $0 $0 $0
Technology $96,162**** N/A N/A
--------------------------------------------------------------------------------
*From December 6, 1999 (commencement of operations) to August 31, 2000.
** From October 20, 1998 (commencement of operations) to August 31, 1999.
***From June 10, 1999 (commencement of operations) to August 31, 1999.
**** From May 1, 2000 (commencement of operations) to August 31, 2000.
TRUST CLASS
NB Management has voluntarily undertaken to reimburse the Trust Class
of each of Neuberger Berman Focus Fund, Neuberger Berman Genesis Fund, Neuberger
Berman Guardian Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Partners
Fund and Neuberger Berman Socially Responsive Fund so that the total operating
expenses of each Trust Class are limited to 1.50% of average net assets. NB
Management has voluntarily undertaken to reimburse the Trust Class of Neuberger
Berman International Fund so that the total operating expenses of its Trust
Class are limited to 2.00% of average net assets. Each undertaking can be
terminated by NB Management by giving a Fund at least 60 days' prior written
notice.
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NB Management has contractually undertaken to reimburse the Trust Class
of Neuberger Berman Millennium Fund through December 31, 2010 so that Millennium
Fund Trust Class' expense ratio per annum will not exceed 1.75% of the Class'
average daily net assets. Millennium Fund Trust Class has in turn agreed to
repay NB Management through December 31, 2000, for the excess total annual
operating expenses that NB Management reimbursed to the Class through December
31, 1999, so long as the Millennium Fund Trust Class' Total Operating Expenses
do not exceed the above expense limitation.
NB Management has contractually undertaken to reimburse certain
expenses of the Trust Class of each of Neuberger Berman Regency Fund and
Neuberger Berman Century Fund through December 31, 2010, so that the total
annual operating expenses of each Trust Class are limited to 1.50% of average
net assets. Regency Fund and Century Fund Trust Class each has in turn agreed to
repay NB Management for expenses reimbursed to that Class, provided that
repayment does not cause the Class' total annual operating expenses to exceed
1.50% of its average net assets and the repayment is made within three years of
the year in which NB Management incurred the expense.
NB Management has contractually undertaken to reimburse the Trust Class
of Neuberger Berman Technology Fund for its total operating expenses (excluding
interest, taxes, brokerage commissions and extraordinary expenses) which exceed,
in the aggregate, 2.00% per annum of Technology Trust Class' average daily net
assets. This undertaking lasts until December 31, 2003. Technology Fund Trust
Class has contractually undertaken to reimburse NB Management for the excess
expenses paid by NB Management, provided the reimbursements do not cause the
Class' total operating expenses (exclusive of taxes, interest, brokerage
commissions, and extraordinary expenses) to exceed an annual rate of 2.00% of
average net assets and the reimbursements are made within three years after the
year in which NB Management incurred the expense.
Amount of Total Operating Expenses
Trust Class Reimbursed by NB Management
for Fiscal Years Ended August 31
Fund 2000 1999 1998
---- ---- ---- ----
Century $85,719* N/A N/A
Focus $29,362 $58,587 $67,257
Genesis $0 $0 $0
Guardian $0 $0 $0
International $103,947 $89,443 $15,821**
Manhattan $55,928 $37,105 $59,281
Millennium $42,558 $115,640*** N/A
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Partners $0 $0 $45,387
Regency $55,331 $72,144**** N/A
Socially Responsive $115,370 $101,048 $100,537
Technology $86,351***** N/A N/A
--------------------------------------------------------------------------------
*From December 6, 1999 (commencement of operations) to August 31, 2000. **From
June 29, 1998 (commencement of operations) to August 31, 1998. *** From November
4, 1998 (commencement of operations) to August 31, 1999. ****From June 10, 1999
(commencement of operations) to August 31, 1999. ***** From May 1, 2000
(commencement of operations) to August 31, 2000.
ADVISOR CLASS
Until December 31, 2010, NB Management has agreed to reimburse the
Advisor Class of each Fund for its total operating expenses which exceed 1.50%
per annum of the Advisor Class' average net assets (excluding interest, taxes,
brokerage commissions and extraordinary expenses).
The table below shows the amounts reimbursed by NB Management pursuant
to these arrangements:
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Amount of Total Operating Expenses
Reimbursed by NB Management
Advisor Class for Fiscal Years Ended August 31
Fund 2000 1999 1998
---- ---- ---- ----
Focus $75,274 $85,679 $82,521
Genesis $73,105 $73,117 $72,484
Guardian $0 $13,221 $21,582
Manhattan $78,337 $96,084 $85,971
Partners $0 $0 $10,825
INSTITUTIONAL CLASS
-------------------
NB Management has contractually undertaken to reimburse Genesis Fund
Institutional Class for its total operating expenses (other than interest,
taxes, brokerage commissions and extraordinary expenses) which exceed, in the
aggregate, 0.85% of Genesis Fund Institutional Class' average daily net assets.
This undertaking lasts until December 31, 2010. During the fiscal years ended
August 31, 2000 and 1999, the amount of total operating expenses reimbursed by
NB Management amounted to $263,954 and $118,939, respectively.
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The Management Agreement continues until June 30, 2001. The Management
Agreement is renewable thereafter from year to year with respect to each Fund,
so long as its continuance is approved at least annually (1) by the vote of a
majority of the Fund Trustees who are not "interested persons" of NB Management
("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of the
Fund Trustees or by a 1940 Act majority vote of the outstanding interests in
that Fund. The Administration Agreement continues until June 30, 2001. The
Administration Agreement is renewable from year to year with respect to a Fund,
so long as its continuance is approved at least annually (1) by the vote of a
majority of the Fund Trustees who are not "interested persons" of NB Management
or the Trust ("Independent Fund Trustees"), cast in person at a meeting called
for the purpose of voting on such approval, and (2) by the vote of a majority of
the Fund Trustees or by a 1940 Act majority vote of the outstanding shares in
that Fund.
The Management Agreement is terminable, without penalty, with respect
to a Fund on 60 days' written notice either by the Trust or by NB Management.
The Administration Agreement is terminable, without penalty, with respect to a
Fund on 60 days' written notice either by NB Management or by the Trust. Each
Agreement terminates automatically if it is assigned.
SUB-ADVISER
NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY
10158-3698, as sub-adviser with respect to each Fund pursuant to a sub-advisory
agreement dated December 16, 2000 ("Sub-Advisory Agreement").
The Sub-Advisory Agreement provides in substance that Neuberger Berman
will furnish to NB Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, NB Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with NB Management. The Sub-Advisory Agreement provides that NB Management will
pay for the services rendered by Neuberger Berman based on the direct and
indirect costs to Neuberger Berman in connection with those services. Neuberger
Berman also serves as sub-adviser for all of the other mutual funds managed by
NB Management.
The Sub-Advisory Agreement continues until June 30, 2001 and is
renewable from year to year, subject to approval of their continuance in the
same manner as the Management Agreement. The Sub-Advisory Agreement is subject
to termination, without penalty, with respect to each Fund by the Fund Trustees
or a 1940 Act majority vote of the outstanding interests in that Fund, by NB
Management, or by Neuberger Berman on not less than 30 nor more than 60 days'
prior written notice. The Sub-Advisory Agreements also terminate automatically
with respect to each Fund if they are assigned or if the Management Agreement
terminates with respect to that Fund.
Most money managers that come to the Neuberger Berman organization have
at least fifteen years experience. Neuberger Berman and NB Management employ
experienced professionals that work in a competitive environment.
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Investment Companies Managed
As of September 30, 2000, the investment companies managed by NB
Management had aggregate net assets of approximately $20.7 billion. NB
Management currently serves as investment manager of the following investment
companies:
Approximate
Net Assets at
Name September 30, 2000
---- ------------------
Neuberger Berman Cash Reserves....................................$1,032,588,729
Neuberger Berman Government Money Fund..............................$298,740,903
Neuberger Berman High Yield Bond Fund................................$13,069,861
Neuberger Berman Institutional Cash Fund ...........................$614,137,910
Neuberger Berman Limited Maturity Bond Fund.........................$209,756,532
Neuberger Berman Municipal Money Fund...............................$249,825,527
Neuberger Berman Municipal Securities Trust..........................$28,921,420
Neuberger Berman Century Fund........................................$40,811,096
Neuberger Berman Focus Fund.......................................$2,281,128,330
Neuberger Berman Genesis Fund.....................................$1,864,536,230
Neuberger Berman Guardian Fund....................................$3,600,872,105
Neuberger Berman International Fund.................................$162,589,812
Neuberger Berman Manhattan Fund...................................$1,297,716,998
Neuberger Berman Millennium Fund....................................$291,746,557
Neuberger Berman Partners Fund....................................$2,720,153,662
Neuberger Berman Regency Fund........................................$36,891,774
Neuberger Berman Socially Responsive Fund...........................$128,352,668
Neuberger Berman Technology Fund.....................................$26,696,757
Advisers Management Trust.........................................$3,027,632,991
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The investment decisions concerning the Funds and the other mutual
funds managed by NB Management (collectively, "Other NB Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Funds. Even
where the investment objectives are similar, however, the methods used by the
Other NB Funds and the Funds to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when a Fund and one or more of the Other NB
Funds or other accounts managed by Neuberger Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Fund, in other cases it
is believed that a Fund's ability to participate in volume transactions may
produce better executions for it. In any case, it is the judgment of the Fund
Trustees that the desirability of the Funds' having their advisory arrangements
with NB Management outweighs any disadvantages that may result from
contemporaneous transactions.
The Funds are subject to certain limitations imposed on all advisory
clients of Neuberger Berman (including the Funds, the Other NB Funds, and other
managed accounts) and personnel of Neuberger Berman and its affiliates. These
include, for example, limits that may be imposed in certain industries or by
certain companies, and policies of Neuberger Berman that limit the aggregate
purchases, by all accounts under management, of the outstanding shares of public
companies.
CODE OF ETHICS
The Funds, NB Management and Neuberger Berman have personal securities
trading policies that restrict the personal securities transactions of
employees, officers, and trustees. Their primary purpose is to ensure that
personal trading by these individuals does not disadvantage any fund managed by
NB Management. The Fund managers and other investment personnel who comply with
the policies' preclearance and disclosure procedures may be permitted to
purchase, sell or hold certain types of securities which also may be or are held
in the funds they advise, but are restricted from trading in close conjunction
with their Funds or taking personal advantage of investment opportunities that
may belong to a Fund.
MANAGEMENT AND CONTROL OF NB MANAGEMENT AND NEUBERGER BERMAN
The directors and officers of NB Management, who are deemed "control
persons," all of whom have offices at the same address as NB Management, are:
Richard A. Cantor, Director; Robert Matza, Director; Theodore P. Giuliano,
Director and Vice President; Michael M. Kassen, Director and Chairman; Barbara
R. Katersky, Senior Vice President; Robert Conti, Senior Vice President; Brian
Gaffney, Senior Vice President; Matthew S. Stadler, Senior Vice President and
Chief Financial Officer; Peter E. Sundman, Director and President; and Lawrence
Zicklin, Director.
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The officers and employees of Neuberger Berman who are deemed "control
persons," all of whom have offices at the same address as Neuberger Berman, are:
Jeffrey B. Lane, President and Chief Executive Officer; Robert Matza, Executive
Vice President and Chief Administrative Officer; Michael M. Kassen, Executive
Vice President and Chief Investment Officer; Heidi L. Schneider, Executive Vice
President; Peter E. Sundman, Executive Vice President; Matthew S. Stadler,
Senior Vice President and Chief Financial Officer; Kevin Handwerker, Senior Vice
President, General Counsel and Secretary; Joseph K. Herlihy, Senior Vice
President and Treasurer; Robert Akeson, Senior Vice President; Steven April,
Senior Vice President; Salvatore A. Buonocore, Senior Vice President; Philip
Callahan, Senior Vice President; Lawrence J. Cohn, Senior Vice President; Joseph
F. Collins III, Senior Vice President; Seth J. Finkel, Senior Vice President;
Robert Firth, Senior Vice President; Brian E. Hahn, Senior Vice President;
Barbara R. Katersky, Senior Vice President; Diane E. Lederman, Senior Vice
President; Peter B. Phelan, Senior Vice President; David Root, Senior Vice
President; Mark Shone, Senior Vice President; Robert H. Splan, Senior Vice
President; Andrea Trachtenberg, Senior Vice President; Marvin C. Schwartz,
Managing Director.
Mr. Sundman and Mr. Kassen are trustees and officers of the Trust. Mr.
Gaffney and Mr. Conti are officers of the Trust.
Neuberger Berman and NB Management are wholly owned subsidiaries of
Neuberger Berman Inc., a publicly owned holding company owned primarily by the
employees of Neuberger Berman. The inside directors and officers of Neuberger
Berman, Inc. are: Jeffrey B. Lane, Director, Chief Executive Officer and
President; Peter E. Sundman, Director and Executive Vice President; Heidi L.
Schneider, Director and Executive Vice President; Michael M. Kassen, Director,
Chief Investment Officer and Executive Vice President; Robert Matza, Director,
Chief Administrative Officer and Executive Vice President; Marvin C. Schwartz,
Director and Vice Chairman; Matthew S. Stadler, Senior Vice President and Chief
Financial Officer; Richard Cantor, Vice Chairman and Director; Lawrence Zicklin,
Director and Vice Chairman; Kevin Handwerker, Senior Vice President, General
Counsel and Secretary; and Joseph K. Herlihy, Treasurer.
DISTRIBUTION ARRANGEMENTS
Each Fund offers at least two classes of shares, known as Investor
Class and Trust Class shares. Neuberger Berman Focus, Neuberger Berman Genesis,
Neuberger Berman Guardian, Neuberger Berman Manhattan, and Neuberger Berman
Partners Funds also offer a third class of shares, known as Advisor Class
shares. Neuberger Berman Genesis Fund offers a fourth class of shares, known as
Institutional Class shares.
DISTRIBUTOR
NB Management serves as the distributor ("Distributor") in connection
with the offering of each Fund's shares. Investor Class, Trust Class and
Institutional Class shares are offered on a no-load basis. Trust Class, Advisor
Class, and Institutional Class are available only through Institutions that have
made arrangements with NB Management for shareholder servicing and
administration.
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In connection with the sale of its shares, each Fund has authorized the
Distributor to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of each Fund's Investor Class and Institutional Class
shares without sales commission or other compensation and bears all advertising
and promotion expenses incurred in the sale of those shares. The Distributor
also acts as agent in arranging for the sale of each Fund's Advisor Class and
Trust Class shares to Institutions and bears all advertising and promotion
expenses incurred in the sale of the Funds' shares.
For each Funds' Investor Class, the Distributor or one of its
affiliates may, from time to time, deem it desirable to offer to shareholders of
the Funds, through use of their shareholder lists, the shares of other mutual
funds for which the Distributor acts as distributor or other products or
services. Any such use of the Funds' shareholder lists, however, will be made
subject to terms and conditions, if any, approved by a majority of the
Independent Fund Trustees. These lists will not be used to offer the Funds'
shareholders any investment products or services other than those managed or
distributed by NB Management or Neuberger Berman.
From time to time, for the Trust Class and Advisor Class, NB Management
may enter into arrangements pursuant to which it compensates a registered
broker-dealer or other third party for services in connection with the
distribution of Fund shares.
The Trust, on behalf of each Fund, and the Distributor are parties to a
Distribution Agreement with respect to the Investor Class, and a Distribution
and Shareholder Services Agreement with respect to the Advisor Class and each
fund of the Trust Class (except the Trust Class of Neuberger Berman Genesis,
Neuberger Berman Manhattan and Neuberger Berman International Funds)
("Distribution Agreements"). The Distribution Agreements continue until August
2, 2001. The Distribution Agreements may be renewed annually if specifically
approved by (1) the vote of a majority of the Fund Trustees or a 1940 Act
majority vote of the Fund's outstanding shares and (2) the vote of a majority of
the Independent Fund Trustees, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreements may be
terminated by either party and will terminate automatically on their assignment,
in the same manner as the Management Agreements.
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN (Trust Class Only)
The Plan provides that the Trust Class of Neuberger Berman Century,
Neuberger Berman Focus, Neuberger Berman Guardian, Neuberger Berman Millennium,
Neuberger Berman Partners, Neuberger Berman Regency, Neuberger Berman Socially
Responsive and Neuberger Berman Technology Fund will compensate NB Management
for administrative and other services provided to the Funds, its activities and
expenses related to the sale and distribution of Fund shares, and ongoing
services to investors in the Funds. Under the Plan, NB Management receives from
the Trust Class of each Fund a fee at the annual rate of 0.10% of that Class's
average daily net assets. NB Management may pay up to the full amount of this
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fee to Institutions that make available Trust Class shares and/or provide
services to the Trust Class and its shareholders. The fee paid to an Institution
is based on the level of such services provided. Institutions may use the
payments for, among other purposes, compensating employees engaged in sales
and/or shareholder servicing. The amount of fees paid by the Trust Class of a
Fund during any year may be more or less than the cost of distribution and other
services provided to that class of the Fund and its investors. NASD rules limit
the amount of annual distribution and service fees that may be paid by a mutual
fund and impose a ceiling on the cumulative distribution fees paid. The Trust
Class's plan complies with these rules.
The table below sets forth the amount of fees accrued for the funds
indicated below:
Trust Class Period Ended August 31,
Fund 2000
---- ----
Century* $1,427
Focus $182,837
Guardian $0
Millennium $8,733
Partners $0
Regency $21,728
Socially Responsive $19,668
Technology** $682
* From December 6, 1999 (commencement of operations) to August 31, 2000.
**From May 1, 2000 (commencement of operations) to August 31, 2000.
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN (Advisor Class Only)
The Plan provides that the Advisor Class of each Fund will compensate
NB Management for administrative and other services provided to the Funds, its
activities and expenses related to the sale and distribution of Fund shares, and
ongoing services to investors in the Funds. Under the Plan, NB Management
receives from the Advisor Class of each Fund a fee at the annual rate of 0.25%
of that Class's average daily net assets. NB Management may pay up to the full
amount of this fee to Institutions that make available Fund shares and/or
provide services to the Advisor Class and its shareholders. The fee paid to an
Institution is based on the level of such services provided. Institutions may
use the payments for, among other purposes, compensating employees engaged in
sales and/or shareholder servicing. The amount of fees paid by the Advisor Class
of a Fund during any year may be more or less than the cost of distribution and
other services provided to that class of the Fund and its investors. NASD rules
limit the amount of annual distribution and service fees that may be paid by a
mutual fund and impose a ceiling on the cumulative distribution fees paid. The
Advisor Class's plan complies with these rules.
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The table below sets forth the amount of fees accrued for the funds
indicated below:
Advisor Class Period Ended August 31,
Fund 2000 1999 1998
---- ---- ---- ----
Focus $13,494 $3,488 $471
Genesis $215,959 $141,456 $20,147
Guardian $64,380 $59,598 $42,298
Manhattan $9,148 $1,011 $213
Partners $142,627 $151,403 $50,214
Each Plan requires that NBMI provide the Fund Trustees for their review
a quarterly written report identifying the amounts expended by each Fund and the
purposes for which such expenditures were made.
Prior to approving the Plans, the Fund Trustees considered various
factors relating to the implementation of each Plan and determined that there is
a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. To the extent the Plans allow the Funds to penetrate markets to
which they would not otherwise have access, the Plans may result in additional
sales of Fund shares; this, in turn, may enable the Funds to achieve economies
of scale that could reduce expenses. In addition, certain on-going shareholder
services may be provided more effectively by Institutions with which
shareholders have an existing relationship.
The Plans continue until June 30, 2001. The Plans are renewable
thereafter from year to year with respect to each Fund, so long as its
continuance is approved at least annually (1) by the vote of a majority of the
Fund Trustees and (2) by a vote of the majority of those Independent Fund
Trustees who have no direct or indirect financial interest in the Distribution
Agreement or the Trust's plans pursuant to Rule 12b-1 under the 1940 Act ("Rule
12b-1 Trustees"), cast in person at a meeting called for the purpose of voting
on such approval. The Plans may not be amended to increase materially the amount
of fees paid by any class of any Fund thereunder unless such amendment is
approved by a 1940 Act majority vote of the outstanding shares of the class and
by the Fund Trustees in the manner described above. The Plan is terminable with
respect to a class of a Fund at any time by a vote of a majority of the Rule
12b-1 Trustees or by a 1940 Act majority vote of the outstanding shares in the
class.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE (All Classes)
Each Fund's shares are bought or sold at a price that is the Fund's NAV
per share. The NAV for each Fund is calculated by subtracting total liabilities
from total assets (the market value of the securities the Fund holds plus cash
and other assets). Each Fund's per share NAV is calculated by dividing its NAV
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by the number of Fund shares outstanding and rounding the result to the nearest
full cent. Each Fund calculates its NAV as of the close of regular trading on
the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open.
Each Fund (except Neuberger Berman International Fund) values
securities (including options) listed on the NYSE, the American Stock Exchange
or other national securities exchanges or quoted on the Nasdaq Stock Market, and
other securities for which market quotations are readily available, at the last
reported sale price on the day the securities are being valued. If there is no
reported sale of such a security on that day, the security is valued at the mean
between its closing bid and asked prices on that day. These Funds value all
other securities and assets, including restricted securities, by a method that
the trustees of the Trust believe accurately reflects fair value.
Neuberger Berman International Fund values equity securities at the
last reported sale price on the principal exchange or in the principal OTC
market in which such securities are traded, as of the close of regular trading
on the NYSE on the day the securities are being valued or, if there are no
sales, at the last available bid price on that day. Debt obligations are valued
at the last available bid price for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality, and type.
Foreign securities are translated from the local currency into U.S. dollars
using current exchange rates. The Fund values all other types of securities and
assets, including restricted securities and securities for which market
quotations are not readily available, by a method that the trustees of the Trust
believe accurately reflects fair value.
Neuberger Berman International Fund's securities are traded primarily
in foreign markets that may be open on days when the NYSE is closed. As a
result, the NAV of Neuberger Berman International Fund may be significantly
affected on days when shareholders have no access to that Fund.
If NB Management believes that the price of a security obtained under a
Fund's valuation procedures (as described above) does not represent the amount
that the Fund reasonably expects to receive on a current sale of the security,
the Fund will value the security based on a method that the trustees of the
Trust believe accurately reflects fair value.
AUTOMATIC INVESTING AND DOLLAR COST AVERAGING
Each Funds' Investor Class shareholders may arrange to have a fixed
amount automatically invested in Fund shares each month. To do so, an Investor
Class shareholder must complete an application, available from the Distributor,
electing to have automatic investments funded either through (1) redemptions
from his or her account in a money market fund for which NB Management serves as
investment manager or (2) withdrawals from the Investor Class shareholder's
checking account. In either case, the minimum monthly investment is $100. An
Investor Class shareholder who elects to participate in automatic investing
through his or her checking account must include a voided check with the
completed application. A completed application should be sent to Neuberger
Berman Funds, Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.
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Automatic investing enables an Investor Class shareholder to take
advantage of "dollar cost averaging." As a result of dollar cost averaging, an
Investor Class shareholder's average cost of Fund shares generally would be
lower than if the Investor Class shareholder purchased a fixed number of shares
at the same pre-set intervals. Additional information on dollar cost averaging
may be obtained from the Distributor.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Maintaining Your Account," each funds' Investor Class shareholders may redeem
at least $1,000 worth of a Fund's shares and invest the proceeds in Investor
Class shares of one or more of the other Funds or the Income and Municipal Funds
that are briefly described below, provided that the minimum investment
requirements of the other fund(s) are met. An Institution may exchange any
Fund's Advisor Class, Trust Class or Institutional Class shares for shares of
one or more of the other Neuberger Berman Funds, if made available through that
Institution.
EQUITY FUNDS
Neuberger Berman Century Fund Invests mainly in common stocks of
large-capitalization companies. The
manager seeks to buy companies with
strong earnings growth and the
potential for higher earnings, priced
at attractive levels relative to
their growth rates.
Neuberger Berman Focus Fund Invests principally in common stocks
selected from 13 multi-industry
sectors of the economy. To maximize
potential return, the Fund normally
makes at least 90% of its investments
in not more than six sectors of the
economy believed by the Fund managers
to be undervalued.
Neuberger Berman Genesis Fund Invests primarily in stocks of
companies with small market
capitalizations (up to $1.5 billion
at the time of the Fund's
investment). Fund managers seek to
buy the stocks of strong companies
with a history of solid performance
and a proven management team, which
are selling at attractive prices.
Neuberger Berman Guardian Fund A growth and income fund that invests
primarily in stocks of established,
high-quality companies that are not
well followed on Wall Street or are
temporarily out of favor.
Neuberger Berman International Fund Seeks long-term capital appreciation
by investing primarily in foreign
stocks of any capitalization, both in
developed economies and in emerging
markets. Fund manager seeks
undervalued companies in countries
with strong potential for growth.
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Neuberger Berman Manhattan Fund Invests in securities believed to
have the maximum potential for
long-term capital appreciation. Fund
managers seek stocks of companies
that are projected to grow at
above-average rates and that appear
to the managers poised for a period
of accelerated earnings.
Neuberger Berman Millennium Fund Seeks long-term growth of capital by
investing primarily in common stocks
of small-capitalization companies,
which it defines as those with a
total market value of no more than
$1.5 billion at the time of initial
investment. The Fund co-managers take
a growth approach to stock selection,
looking for new companies that are in
the developmental stage as well as
older companies that appear poised to
grow because of new products, markets
or management. Factors in identifying
these firms may include financial
strength, a strong position relative
to competitors and a stock price that
is reasonable relative to its growth
rate.
Neuberger Berman Partners Fund Seeks capital growth through an
approach that is intended to increase
capital with reasonable risk. The
fund manager looks at fundamentals,
focusing particularly on cash flow,
return on capital, and asset values.
Neuberger Berman Regency Fund Seeks long-term growth of capital by
investing primarily in common stocks
of mid-capitalization companies which
the manager believes have solid
fundamentals.
Neuberger Berman Socially Responsive Seeks long-term capital appreciation
Fund by investing in common stocks of
companies that meet both financial
and social criteria.
Neuberger Berman Technology Fund Seeks long-term capital growth by
investing in the stocks of dynamic
technology and tech-related companies
of all sizes.
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INCOME FUNDS
------------
Neuberger Berman A U.S. Government money market fund
Government Money Fund seeking maximum safety and liquidity
and the highest available current
income. The Fund invests in
securities issued or guaranteed as to
principal or interest by the U.S.
Government, its agencies and
instrumentalities and repurchase
agreements on such securities. It
seeks to maintain a constant purchase
and redemption price of $1.00.
Neuberger Berman A money market fund seeking the
Cash Reserves highest current income consistent
with safety and liquidity. The Fund
invests in high-quality money market
instruments. It seeks to maintain a
constant purchase and redemption
price of $1.00.
Neuberger Berman Seeks the highest current income
Limited Maturity Bond Fund consistent with low risk to
principal and liquidity and,
secondarily, total return. The Fund
invests in debt securities, primarily
investment grade; maximum 10% below
investment grade, but no lower than
B.*/ Maximum average duration of four
years.
Neuberger Berman In seeking its objective of high
High Yield Bond Fund current income and, secondarily,
capital growth, the fund invests
primarily in lower-rated debt
securities. The fund may also invest
in investment-grade debt securities
and stocks.
MUNICIPAL FUNDS
---------------
Neuberger Berman A money market fund seeking the
Municipal Money Fund maximum current income exempt from
federal income tax, consistent with
safety and liquidity. The Fund
invests in high-quality, short-term
municipal securities. It seeks to
maintain a constant purchase and
redemption price of $1.00.
Neuberger Berman Municipal
Securities Trust Seeks high current tax-exempt income
with low risk to principal, limited
price fluctuation, and liquidity and,
secondarily, total return. The Fund
invests in investment grade municipal
securities with a maximum average
duration of 10 years.
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*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by NB Management to be of comparable quality.
Any Fund described herein, and any of the Income or Municipal Funds,
may terminate or modify its exchange privilege in the future.
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. An exchange is treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be realized.
There can be no assurance that Neuberger Berman Government Money Fund,
Neuberger Berman Cash Reserves, or Neuberger Berman Municipal Money Fund, each
of which is a money market fund that seeks to maintain a constant purchase and
redemption price of $1.00, will be able to maintain that price. An investment in
any of the above-referenced funds, as in any other mutual fund, is neither
insured nor guaranteed by the U.S. Government.
Each Fund may terminate or modify its exchange privilege in the future.
Before effecting an exchange, shareholders should review a currently effective
prospectus of the fund into which the exchange is to be made. An exchange is
treated as a sale for federal income tax purposes and, depending on the
circumstances, a capital gain or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem Fund shares may be suspended or payment of the
redemption price postponed (1) when the NYSE is closed, (2) when trading on the
NYSE is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities it owns or fairly
to determine the value of its net assets, or (4) for such other period as the
SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
Each Fund reserves the right, under certain conditions, to honor any
request for redemption by making payment in whole or in part in securities
valued as described in "Share Prices and Net Asset Value" above. Each Fund may
pay in kind only those requests for redemption (or a combination of requests
from the same shareholder in any 90-day period) exceeding $250,000 or 1% of the
net assets of the Fund, whichever is less. If payment is made in securities, a
shareholder or Institution generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Funds do not redeem in kind under normal circumstances, but would do so when the
Fund Trustees determined that it was in the best interests of a Fund's
shareholders as a whole.
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DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders, by class, substantially all
of its net investment income (after deducting expenses attributable to the
class), net realized capital gains, and net realized gains from foreign currency
transactions earned or realized by the Fund. Timing of capital gain realization
is one factor that a portfolio manager may consider in deciding when to sell a
stock. A Fund's net investment income consists of all income accrued on Fund
assets less accrued expenses, but does not include capital and foreign currency
gains and losses. Net investment income and realized gains and losses are
reflected in a Fund's NAV until they are distributed. Each Fund calculates its
net investment income and NAV per share as of the close of regular trading on
the NYSE on each Business Day (usually 4:00 p.m. Eastern time).
Each Fund normally pays dividends from net investment income and
distributions of net realized capital and foreign currency gains, if any, once
annually, in December, except that Neuberger Berman Guardian Fund distributes
substantially all of its net investment income, if any, near the end of each
calendar quarter.
Each Fund's dividends and other distributions are automatically
reinvested in additional shares of the distributing Fund, unless the shareholder
elects to receive them in cash ("cash election"). Investor Class shareholders
may make a cash election on the original account application or at a later date
by writing to State Street Bank and Trust Company ("State Street"), c/o Boston
Service Center, P.O. Box 8403, Boston, MA 02266-8403. Cash distributions can be
paid by check, through an electronic transfer to a bank account or used to
purchase shares of another Neuberger Berman Fund, designated in the
shareholder's original account application. To the extent dividends and other
distributions are subject to federal, state, or local income taxation, they are
taxable to the shareholders whether received in cash or reinvested in Fund
shares.
A cash election with respect to any Fund remains in effect until the
shareholder (or Institution) notifies State Street in writing to discontinue the
election. If it is determined, however, that the U.S. Postal Service cannot
properly deliver Fund mailings to the shareholder for 180 days, the Fund will
terminate the shareholder's cash election. Thereafter, the shareholder's
dividends and other distributions will automatically be reinvested in additional
Fund shares until the shareholder notifies State Street or the Fund in writing
to request that the cash election be reinstated.
Dividend or other distribution checks that are not cashed or deposited
within 180 days from being issued will be reinvested in additional shares of the
distributing Fund at its NAV per share on the day the check is reinvested. No
interest will accrue on amounts represented by uncashed dividend or other
distribution checks.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUNDS
To continue to qualify for treatment as a RIC under the Code, each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
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taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from Financial Instruments) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); and (2) at the close of each quarter of the Fund's
taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs, and other securities limited, in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's outstanding voting securities,
and (ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer. If a Fund failed to qualify for treatment as a RIC for any
taxable year, it would be taxed on the full amount of its taxable income for
that year without being able to deduct the distributions it makes to its
shareholders and the shareholders would treat all those distributions, including
distributions of net capital gain (the excess of net long-term capital gain over
net short-term capital loss), as dividends (that is, ordinary income) to the
extent of the Fund's earnings and profits.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
Dividends and interest received by a Fund, and gains realized by a
Fund, may be subject to income, withholding, or other taxes imposed by foreign
countries and U.S. possessions ("foreign taxes") that would reduce the total
return on its securities. Tax treaties between certain countries and the United
States may reduce or eliminate foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors.
If more than 50% of the value of Neuberger Berman International Fund's
total assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible to, and may, file an election with the
Internal Revenue Service that will enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign taxes
paid by the Fund. Pursuant to that election, the Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by the shareholder, his or her share
of those taxes, (2) treat his or her share of those taxes and of any dividend
paid by the Fund that represents its income from foreign or U.S. possessions
sources as his or her own income from those sources, and (3) either deduct the
taxes deemed paid by him or her in computing his or her taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against his or her federal income tax. The Fund will report to its
shareholders shortly after each taxable year their respective share of the
Fund's foreign taxes and income from sources within foreign countries and U.S.
possessions if it makes this election. Individual shareholders of the Fund who
have no more than $300 ($600 for married persons filing jointly) of creditable
foreign taxes included on Forms 1099 and all of whose foreign source income is
"qualified passive income" may elect each year to be exempt from the extremely
complicated foreign tax credit limitation and will be able to claim a foreign
tax credit without having to file the detailed Form 1116 that otherwise is
required.
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A Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is any foreign corporation (with certain
exceptions) that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, if a Fund holds stock of a PFIC, it will be subject to federal
income tax on a portion of any "excess distribution" the Fund receives on the
stock or of any gain on its disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes its share of the
PFIC income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent it distributes that income
to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the QEF's annual ordinary earnings and
net capital gain -- which the Fund most likely would have to distribute to
satisfy the Distribution Requirement and avoid imposition of the Excise Tax --
even if the Fund did not receive those earnings and gain from the QEF. In most
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.
Each Fund may elect to "mark-to-market" its stock in any PFIC.
"Marking-to-market," in this context means including in ordinary income for each
taxable year the excess, if any, of the fair market value of the stock over a
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund would also be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of the holder's adjusted basis in PFIC stock over the
fair market value thereof as of the taxable year-end, but only to the extent of
any net mark-to-market gains with respect to that stock included in income for
prior taxable years under the election (and under regulations proposed in 1992
that provided a similar election with respect to the stock of certain PFICs). A
Fund's adjusted basis in each PFIC's stock subject to the election would be
adjusted to reflect the amounts of income included and deductions taken
thereunder.
The Funds' use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward contracts,
involves complex rules that will determine for income tax purposes the amount,
character, and timing of recognition of the gains and losses the Funds realize
in connection therewith. Gains from the disposition of foreign currencies
(except certain gains that may be excluded by future regulations), and gains
from Financial Instruments derived by a Fund with respect to its business of
investing in securities or foreign currencies, will be treated as qualifying
income under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts, and
listed nonequity options (such as those on a securities index) that are subject
to section 1256 of the Code ("Section 1256 contracts") are required to be
"marked-to-market" (that is, treated as having been sold at market value) for
federal income tax purposes at the end of a Fund's taxable year. Sixty percent
of any net gain or loss recognized as a result of these deemed sales, and 60% of
any net realized gain or loss from any actual sales, of Section 1256 contracts
are treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. Section 1256 contracts also may be
marked-to-market for purposes of the Excise Tax. These rules may operate to
increase the amount that a Fund must distribute to satisfy the Distribution
Requirement, which will be taxable to the shareholders as ordinary income, and
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to increase the net capital gain recognized by the Fund, without in either case
increasing the cash available to the Fund. A Fund may elect to exclude certain
transactions from the operation of section 1256, although doing so may have the
effect of increasing the relative proportion of net short-term capital gain
(taxable to its shareholders as ordinary income when distributed to them) and/or
increasing the amount of dividends that Fund must distribute to meet the
Distribution Requirement and avoid imposition of the Excise Tax.
If a Fund has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward contract,
or short sale) with respect to any stock, debt instrument (other than "straight
debt"), or partnership interest the fair market value of which exceeds its
adjusted basis -- and enters into a "constructive sale" of the position, the
Fund will be treated as having made an actual sale thereof, with the result that
it will recognize gain at that time. A constructive sale generally consists of a
short sale, an offsetting notional principal contract, or a futures or forward
contract entered into by a Fund or a related person with respect to the same or
substantially identical property. In addition, if the appreciated financial
position is itself a short sale or such a contract, acquisition of the
underlying property or substantially identical property will be deemed a
constructive sale. The foregoing will not apply, however, to any Fund's
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end of
that year and the Fund holds the appreciated financial position unhedged for 60
days after that closing (i.e., at no time during that 60-day period is the
Fund's risk of loss regarding that position reduced by reason of certain
specified transactions with respect to substantially identical or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale, or granting an option to buy substantially identical
stock or securities).
Each of Neuberger Berman Century, Neuberger Berman Millennium,
Neuberger Berman Partners, Neuberger Berman Regency, and Neuberger Berman
Socially Responsive Funds may acquire zero coupon securities or other securities
issued with original issue discount ("OID"). As a holder of those securities,
each such Fund must take into income the OID that accrues on the securities
during the taxable year, even if it receives no corresponding payment on them
during the year. Because each such Fund annually must distribute substantially
all of its investment company taxable income (including accrued OID) to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax, such a Fund
may be required in a particular year to distribute as a dividend an amount that
is greater than the total amount of cash it actually receives. Those
distributions will be made from a Fund's cash assets or, if necessary, from the
proceeds of sales of its securities. A Fund may realize capital gains or losses
from those sales, which would increase or decrease its investment company
taxable income and/or net capital gain.
TAXATION OF THE FUNDS' SHAREHOLDERS
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other non-corporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
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dividends and other distributions payable to such shareholders who otherwise are
subject to backup withholding.
As described in "Maintaining Your Account" in the Prospectus, a Fund
may close a shareholder's account and redeem the remaining shares if the account
balance falls below the specified minimum and the shareholder fails to
re-establish the minimum balance after being given the opportunity to do so. If
an account that is closed pursuant to the foregoing was maintained for an IRA
(including a Roth IRA) or a qualified retirement plan (including a simplified
employee pension plan, savings incentive match plan for employees, Keogh plan,
corporate profit-sharing and money purchase pension plan, Code section 401(k)
plan, and Code section 403(b)(7) account), the Fund's payment of the redemption
proceeds may result in adverse tax consequences for the accountholder. The
accountholder should consult his or her tax adviser regarding any such
consequences.
FUND TRANSACTIONS
Neuberger Berman acts as principal broker for each Fund (except
Neuberger Berman International Fund) in the purchase and sale of its Fund
securities (other than certain securities traded on the OTC market). Neuberger
Berman may act as broker for Neuberger Berman International Fund. A substantial
portion of the Fund transactions of Neuberger Berman Genesis, Neuberger Berman
Millennium and Neuberger Berman Technology Funds involves securities traded on
the OTC market; those Funds purchase and sell OTC securities in principal
transactions with dealers who are the principal market makers for such
securities. In effecting securities transactions, each Fund seeks to obtain the
best price and execution of orders.
During the fiscal year ended August 31, 1998, Neuberger Berman
Manhattan Fund paid brokerage commissions of $1,132,309, of which $546,227 was
paid to Neuberger Berman. During the fiscal year ended August 31, 1999,
Neuberger Berman Manhattan Fund paid brokerage commissions of $1,155,067, of
which $495,351 was paid to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman
Manhattan Fund paid brokerage commissions of $798,617, of which $198,979, was
paid to Neuberger Berman.1 Transactions in which that Fund used Neuberger Berman
as broker comprised 26.68% of the aggregate dollar amount of transactions
involving the payment of commissions, and 24.92% of the aggregate brokerage
commissions paid by the Fund, during the fiscal year ended August 31, 2000.
95.66% of the $599,639 paid to other brokers by that Fund during that fiscal
year (representing commissions on transactions involving approximately
$471,063,420) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 2000, that Fund acquired
securities of the following of its "regular brokers or dealers" (as defined in
the 1940 Act) ("Regular B/Ds"): American Express Credit Corp., Donaldson, Lufkin
& Jenrette Securities Corp., Ford Motor Credit Co., General Electric Capital
Corp., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan
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Stanley Dean Witter & Co., and State Street Bank and Trust Company; at that
date, that Fund held the securities of its Regular B/Ds with an aggregate value
as follows: State Street Bank & Trust Company, $37,934,000.
During the fiscal year ended August 31, 1998, Neuberger Berman Genesis
Fund paid brokerage commissions of $2,419,159, of which $1,159,143 was paid to
Neuberger Berman. During the fiscal year ended August 31, 1999, Neuberger Berman
Genesis Fund paid brokerage commissions of $2,150,168, of which $1,034,712 was
paid to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman Genesis
Fund paid brokerage commissions of $1,645,632, of which $680,912 was paid to
Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 43.44% of the aggregate dollar amount of transactions involving
the payment of commissions, and 41.38% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 95.62% of the
$964,721 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately $498,523,823)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 2000, that Fund acquired securities of the
following of its Regular B/Ds: American Express Credit Corp., Ford Motor Credit
Co., General Electric Capital Corp., Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Inc., Morgan Stanley Dean Witter & Co., and State Street
Bank and Trust Company; at that date, that Fund held the securities of its
Regular B/Ds with an aggregate value as follows: American Express Credit Corp.,
$29,967,700; and State Street Bank & Trust Company, $42,140,000.
During the fiscal year ended August 31, 1998, Neuberger Berman Focus
Fund paid brokerage commissions of $2,051,007, of which $998,930 was paid to
Neuberger Berman. During the fiscal year ended August 31, 1999, Neuberger Berman
Focus Fund paid brokerage commissions of $1,972,390, of which $983,860 was paid
to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman Focus
Fund paid brokerage commissions of $1,669,792, of which $894,851 was paid to
Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 54.97% of the aggregate dollar amount of transactions involving
the payment of commissions, and 53.59% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 87.75% of the
$774,941 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately $477,161,556)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 2000, that Fund acquired securities of the
following of its Regular B/Ds: Morgan Stanley Dean Witter & Co., and State
Street Bank and Trust Company; at that date, that Fund held the securities of
its Regular B/Ds with an aggregate value as follows: Morgan Stanley Dean Witter
& Co., $174,896,625 and State Street Bank & Trust Company, $28,494,000.
During the fiscal year ended August 31, 1998, Neuberger Berman Guardian
Fund paid brokerage commissions of $11,558,523, of which $5,733,976 was paid to
Neuberger Berman. During the fiscal year ended August 31, 1999, Neuberger Berman
Guardian Fund paid brokerage commissions of $10,793,418, of which $3,975,341 was
paid to Neuberger Berman.
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During the fiscal year ended August 31, 2000, Neuberger Berman Guardian
Fund paid brokerage commissions of $9,118,606, of which $5,140,444 was paid to
Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 59.95% of the aggregate dollar amount of transactions involving
the payment of commissions, and 56.37% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 80.90% of the
$3,978,162 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately
$2,970,900,646) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 2000, that Fund acquired
securities of the following of its Regular B/Ds: American Express Credit Corp.,
Banc of America Securities LLC, Donaldson, Lufkin & Jenrette Securities Corp.,
Ford Motor Credit Co., General Electric Capital Corp., Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley Dean Witter & Co.,
and State Street Bank and Trust Company; at that date, that Fund held the
securities of its Regular B/Ds with an aggregate value as follows: American
Express Credit Corp., $39,863,411; Banc of America Securities LLC, $21,553,550;
Ford Motor Credit Co., $99,892,208; General Electric Capital Corp., $49,882,639;
Morgan Stanley Dean Witter & Co., $65,537,831; and State Street Bank & Trust
Company, $67,823,000.
During the fiscal year ended August 31, 1998, Neuberger Berman Partners
Fund paid brokerage commissions of $10,028,713, of which $6,281,978 was paid to
Neuberger Berman. During the fiscal year ended August 31, 1999, Neuberger Berman
Partners Fund paid brokerage commissions of $14,228,430, of which $7,694,359 was
paid to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman Partners
Fund paid brokerage commissions of $7,100,372 of which $3,901,435 was paid to
Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 54.59% of the aggregate dollar amount of transactions involving
the payment of commissions, and 54.95% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 88.32% of the
$3,198,937 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately
$2,737,466,904) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 2000, that Fund acquired
securities of the following of its Regular B/Ds: American Express Credit Corp.,
Banc of America Securities LLC, Banc One Capital Markets, Inc., General Electric
Capital Corp., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Inc.,
Morgan Stanley Dean Witter & Co., and State Street Bank and Trust Company; at
that date, that Fund held the securities of its Regular B/Ds with an aggregate
value as follows: Morgan Stanley Dean Witter & Co., $30,569,263; and State
Street Bank & Trust Company, $42,017,000.
During the fiscal year ended August 31, 1998, Neuberger Berman Socially
Responsive Fund paid brokerage commissions of $401,601, of which $296,353 was
paid to Neuberger Berman. During the fiscal year ended August 31, 1999,
Neuberger Berman Socially Responsive Fund paid brokerage commissions of
$485,040, of which $329,666 was paid to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman Socially
Responsive Fund paid brokerage commissions of $372,434, of which $261,387 was
paid to Neuberger Berman. Transactions in which that Fund used Neuberger Berman
as broker comprised 67.16% of the aggregate dollar amount of transactions
involving the payment of commissions, and 70.18% of the aggregate brokerage
commissions paid by the Fund, during the fiscal year ended August 31, 2000.
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100.00% of the $111,046 paid to other brokers by that Fund during that fiscal
year (representing commissions on transactions involving approximately
$81,582,172) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 2000, that Fund acquired
securities of the following of its Regular B/Ds: Morgan Stanley Dean Witter &
Co., and State Street Bank and Trust Company; at that date, that Fund held the
securities of its Regular B/Ds with an aggregate value as follows: Morgan
Stanley Dean Witter & Co., $1,721,000; and State Street Bank & Trust Company,
$1,720,000.
During the fiscal year ended August 31, 1998, Neuberger Berman
International Fund paid brokerage commissions of $345,192, of which $3,435 was
paid to Neuberger Berman. During the fiscal year ended August 31, 1999,
Neuberger Berman International Fund paid brokerage commissions of $717,488, of
which $5,632 was paid to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman
International Fund paid brokerage commissions of $590,623, of which $0 was paid
to Neuberger Berman. Transactions in which the Fund used Neuberger Berman as
broker comprised 0.00% of the aggregate dollar amount of transactions involving
the payment of commissions, and 0.00% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 92.28% of the
$590,623 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately $254,605,508)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 2000, that Fund acquired securities of the
following of its Regular B/Ds: American Express Credit Corp., Ford Motor Credit
Co., General Electric Capital Corp., Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Inc., Morgan Stanley Dean Witter & Co., UBS Warburg, LLC,
and State Street Bank and Trust Company; at that date, that Fund held the
securities of its Regular B/Ds with an aggregate value as follows: General
Electric Capital Corp., $3,992,756; and State Street Bank & Trust Company,
$6,880,000.
During the fiscal year ended August 31, 1999, Neuberger Berman
Millennium Fund paid brokerage commissions of $50,656, of which $28,188 was paid
to Neuberger Berman.
During the fiscal year ended August 31, 2000, Neuberger Berman
Millennium Fund paid brokerage commissions of $138,337, of which $57,703 was
paid to Neuberger Berman. Transactions in which that Fund used Neuberger Berman
as broker comprised 41.52% of the aggregate dollar amount of transactions
involving the payment of commissions, and 41.71% of the aggregate brokerage
commissions paid by the Fund, during the fiscal year ended August 31, 2000.
98.13% of the $80,635 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately $47,127,362)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 2000, that Fund acquired securities of the
following of its Regular B/Ds: American Express Credit Corp., Ford Motor Credit
Co., General Electric Capital Corp., Merrill Lynch, Pierce, Fenner & Smith Inc.,
Morgan Stanley Dean Witter & Co., State Street Bank and Trust Company; at that
date, that Fund held the securities of its Regular B/Ds with an aggregate value
as follows: State Street Bank & Trust Company, $3,760,000.
During the fiscal year ended August 31, 1999, Neuberger Berman Regency
Fund paid brokerage commissions of $17,045, of which $15,488 was paid to
Neuberger Berman.
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During the fiscal year ended August 31, 2000, Neuberger Berman Regency
Fund paid brokerage commissions of $192,261, of which $88,526 was paid to
Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 48.41% of the aggregate dollar amount of transactions involving
the payment of commissions, and 46.04% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 96.24% of the
$103,735 paid to other brokers by that Fund during that fiscal year
(representing commissions on transactions involving approximately $55,419,227)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 2000, that Fund acquired securities of the
following of its Regular B/Ds: Bear, Stearns & Co. Inc., and State Street Bank
and Trust Company; at that date, that Fund held the securities of its Regular
B/Ds with an aggregate value as follows: Bear, Stearns & Co. Inc., $248,131; and
State Street Bank & Trust Company, $1,242,000.
During the fiscal year ended August 31, 2000, Neuberger Berman Century
Fund paid brokerage commissions of $28,952, of which $20,706 was paid to
Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 74.57% of the aggregate dollar amount of transactions involving
the payment of commissions, and 71.52% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 94.98% of the
$8,246 paid to other brokers by that Fund during that fiscal year (representing
commissions on transactions involving approximately $9,586,941) was directed to
those brokers because of research services they provided. During the fiscal year
ended August 31, 2000, that Fund acquired securities of the following of its
Regular B/Ds: General Electric Capital Corp., Merrill Lynch, Pierce, Fenner &
Smith Inc., and State Street Bank and Trust Company; at that date, that Fund
held the securities of its Regular B/Ds with an aggregate value as follows:
General Electric Capital Corp., $1,250,044; Merrill Lynch, Pierce, Fenner &
Smith Inc., $710,500; and State Street Bank & Trust Company, $1,393,000.
During the fiscal year ended August 31, 2000, Neuberger Berman
Technology Fund paid brokerage commissions of $2,849, of which $2,230 was paid
to Neuberger Berman. Transactions in which that Fund used Neuberger Berman as
broker comprised 78.12% of the aggregate dollar amount of transactions involving
the payment of commissions, and 78.29% of the aggregate brokerage commissions
paid by the Fund, during the fiscal year ended August 31, 2000. 99.03% of the
$619 paid to other brokers by that Fund during that fiscal year (representing
commissions on transactions involving approximately $901,261) was directed to
those brokers because of research services they provided. During the fiscal year
ended August 31, 2000, that Fund acquired securities of the following of its
Regular B/Ds: American Express Credit Corp. and State Street Bank and Trust
Company; at that date, that Fund held the securities of its Regular B/Ds with an
aggregate value as follows: State Street Bank & Trust Company, $290,000. Insofar
as Fund transactions of Neuberger Berman Partners Fund result from active
management of equity securities, and insofar as Fund transactions of Neuberger
Berman Manhattan Fund result from seeking capital appreciation by selling
securities whenever sales are deemed advisable without regard to the length of
time the securities may have been held, it may be expected that the aggregate
brokerage commissions paid by those Funds to brokers (including Neuberger Berman
where it acts in that capacity) may be greater than if securities were selected
solely on a long-term basis.
Fund securities may, from time to time, be loaned by a Fund to
Neuberger Berman in accordance with the terms and conditions of an order issued
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by the SEC. The order exempts such transactions from provisions of the 1940 Act
that would otherwise prohibit such transactions, subject to certain conditions.
In accordance with the order, securities loans made by a Fund to Neuberger
Berman are fully secured by cash collateral. The portion of the income on the
cash collateral which may be shared with Neuberger Berman is to be determined by
reference to concurrent arrangements between Neuberger Berman and non-affiliated
lenders with which it engages in similar transactions. In addition, where
Neuberger Berman borrows securities from a Fund in order to re-lend them to
others, Neuberger Berman may be required to pay that Fund, on a quarterly basis,
certain of the earnings that Neuberger Berman otherwise has derived from the
re-lending of the borrowed securities. When Neuberger Berman desires to borrow a
security that a Fund has indicated a willingness to lend, Neuberger Berman must
borrow such security from that Fund, rather than from an unaffiliated lender,
unless the unaffiliated lender is willing to lend such security on more
favorable terms (as specified in the order) than that Fund. If, in any month, a
Fund's expenses exceed its income in any securities loan transaction with
Neuberger Berman, Neuberger Berman must reimburse that Fund for such loss.
A committee of Independent Fund Trustees from time to time reviews,
among other things, information relating to securities loans by the Funds. The
following information reflects interest income earned by the Funds from the cash
collateralization of securities loans through Neuberger Berman during the fiscal
year ended 1998. As reflected below, Neuberger Berman received a portion of the
interest income from the cash collateral.
Interest Income from
Collateralization of Amount Paid to
Name of Fund Securities Loans Neuberger Berman
------------ ---------------- ----------------
Neuberger Berman
Manhattan Fund $ 469,745 $ 212,611
--------------------------------------------------------------------------------
Neuberger Berman
Genesis Fund $ 285,737 $ 152,375
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Neuberger Berman
Guardian Fund $1,355,093 $1,035,708
--------------------------------------------------------------------------------
Neuberger Berman
Focus Fund $ 139,877 $ 101,879
--------------------------------------------------------------------------------
Neuberger Berman
Partners Fund $ 280,193 $ 141,707
--------------------------------------------------------------------------------
Neuberger Berman
Socially Responsive Fund $ 20,023 $ 10,803
--------------------------------------------------------------------------------
Neuberger Berman
International Fund $ 31,250 $ 0
In effecting securities transactions, each Fund generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. Each Fund
plans to continue to use Neuberger Berman as its broker where, in the judgment
of NB Management, that firm is able to obtain a price and execution at least as
favorable as other qualified brokers. To the Funds' knowledge, no affiliate of
any Fund receives give-ups or reciprocal business in connection with their
securities transactions.
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The use of Neuberger Berman as a broker for each Fund is subject to the
requirements of Section 11(a) of the Securities Exchange Act of 1934. Section
11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. The Trust and NB Management have expressly authorized
Neuberger Berman to retain such compensation, and Neuberger Berman has agreed to
comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by a Fund to Neuberger Berman in
connection with a purchase or sale of securities on a securities exchange may
not exceed the usual and customary broker's commission. Accordingly, it is each
Fund's policy that the commissions paid to Neuberger Berman must, in NB
Management's judgment, be (1) at least as favorable as those charged by other
brokers having comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by Neuberger Berman on comparable
transactions for its most favored unaffiliated customers, except for accounts
for which Neuberger Berman acts as a clearing broker for another brokerage firm
and customers of Neuberger Berman considered by a majority of the Independent
Fund Trustees not to be comparable to the Fund. The Funds do not deem it
practicable and in their best interests to solicit competitive bids for
commissions on each transaction effected by Neuberger Berman. However,
consideration regularly is given to information concerning the prevailing level
of commissions charged by other brokers on comparable transactions during
comparable periods of time. The 1940 Act generally prohibits Neuberger Berman
from acting as principal in the purchase of Fund securities from, or the sale of
Fund securities to, a Fund unless an appropriate exemption is available.
A committee of Independent Fund Trustees from time to time reviews,
among other things, information relating to the commissions charged by Neuberger
Berman to the Funds and to its other customers and information concerning the
prevailing level of commissions charged by other brokers having comparable
execution capability. In addition, the procedures pursuant to which Neuberger
Berman effects brokerage transactions for the Funds must be reviewed and
approved no less often than annually by a majority of the Independent Fund
Trustees.
To ensure that accounts of all investment clients, including a Fund,
are treated fairly in the event that Neuberger Berman receives transaction
instructions regarding a security for more than one investment account at or
about the same time, Neuberger Berman may combine orders placed on behalf of
clients, including advisory accounts in which affiliated persons have an
investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
Under policies adopted by the Board of Trustees, Neuberger Berman may
enter into agency cross-trades on behalf of a Fund. An agency cross-trade is a
securities transaction in which the same broker acts as agent on both sides of
the trade and the broker or an affiliate has discretion over one of the
participating accounts. In this situation, Neuberger Berman would receive
brokerage commissions from both participants in the trade. The other account
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<PAGE>
participating in an agency cross-trade with a Fund cannot be an account over
which Neuberger Berman exercises investment discretion. A member of the Board of
Trustees who is not affiliated with Neuberger Berman reviews information about
each agency cross-trade that the Funds participate in.
Each Fund expects that it will continue to execute a portion of its
transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
In certain instances Neuberger Berman specifically allocates brokerage
for research services (including research reports on issuers, industries as well
as economic and financial data) which may otherwise be purchased for cash. While
the receipt of such services has not reduced Neuberger Berman's normal internal
research activities, Neuberger Berman's expenses could be materially increased
if it were to generate such additional information internally. To the extent
such research services are provided by others, Neuberger Berman is relieved of
expenses it may otherwise incur. In some cases research services are generated
by third parties but provided to Neuberger Berman by or through broker dealers.
Research obtained in this manner may be used in servicing any or all clients of
Neuberger Berman and may be used in connection with clients other than those
client's whose brokerage commissions are used to acquire the research services
described herein. With regard to allocation of brokerage to acquire research
services described above, Neuberger Berman always considers its best execution
obligation when deciding which broker to utilize.
A committee comprised of officers of NB Management and employees of
Neuberger Berman who are Fund managers of some of the Funds and Other NB Funds
(collectively, "NB Funds") and some of Neuberger Berman's managed accounts
("Managed Accounts") evaluates semi-annually the nature and quality of the
brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may be
higher than the amount another firm might charge if NB Management determines in
good faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Funds by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
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<PAGE>
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting Fund transactions on
behalf of the Other NB Funds and by Neuberger Berman from brokers effecting Fund
transactions on behalf of the Managed Accounts may be used for the Funds'
benefit.
Kent C. Simons; Kevin L. Risen and Allan R. White III; Judith M. Vale
and Robert W. D'Alelio; Valerie Chang and Benjamin E. Segal; Jennifer K. Silver
and Brooke A. Cobb; Michael F. Malouf and Jennifer K. Silver; S. Basu Mullick;
Robert I. Gendelman; Janet W. Prindle; and Brooke A. Cobb, each of whom is a
Vice President of NB Management and a Managing Director of Neuberger Berman, are
the persons primarily responsible for making decisions as to specific action to
be taken with respect to the investments of Neuberger Berman Focus, Neuberger
Berman Guardian, Neuberger Berman Genesis, Neuberger Berman International,
Neuberger Berman Manhattan, Neuberger Berman Millennium, Neuberger Berman
Partners, Neuberger Berman Regency, Neuberger Berman Socially Responsive and
Neuberger Berman Century Funds, respectively. Each of them has full authority to
take action with respect to Fund transactions and may or may not consult with
other personnel of NB Management prior to taking such action. If Ms. Prindle is
unavailable to perform her responsibilities, Robert Ladd and/or Ingrid Dyott,
each of whom is a Vice President of NB Management, and in the case of Mr. Ladd,
also a Managing Director of Neuberger Berman, will assume responsibility for
Neuberger Berman Socially Responsive Fund. Neuberger Berman Technology Fund is
managed by a team of investment professionals led by Jennifer K. Silver.
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate is calculated by dividing (1) the
lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Fund during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Fund during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors or independent accountants for the Fund. Each Fund's statements show
the investments owned by it and the market values thereof and provide other
information about the Fund and its operations.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
Each Fund is a separate ongoing series of the Trust, a Delaware
business trust organized pursuant to a Trust Instrument dated as of December 23,
1992. The Trust is registered under the 1940 Act as a diversified, open-end
management investment company, commonly known as a mutual fund. The Trust has
eleven separate operating series. The trustees of the Trust may establish
additional series or classes of shares without the approval of shareholders. The
assets of each series belong only to that series, and the liabilities of each
series are borne solely by that series and no other.
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<PAGE>
Prior to November 9, 1998, the name of the Trust was "Neuberger &
Berman Equity Funds," and the term "Neuberger Berman" in each Fund's name
(except Neuberger Berman Century, Neuberger Berman Regency, and Neuberger Berman
Technology Funds) was "Neuberger & Berman."
DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
each Fund represent equal proportionate interests in the assets of that Fund
only and have identical voting, dividend, redemption, liquidation, and other
rights except that expenses allocated to a Class may be borne solely by such
Class as determined by the Trustees and a Class may have exclusive voting rights
with respect to matters affecting only that Class. All shares issued are fully
paid and non-assessable, and shareholders have no preemptive or other rights to
subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Funds. The trustees will call special
meetings of shareholders of a Fund or Class only if required under the 1940 Act
or in their discretion or upon the written request of holders of 10% or more of
the outstanding shares of that Fund entitled to vote at the meeting.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of a Fund will not be personally liable for the obligations of any
Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or a Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
OTHER. Because Fund Advisor Class, Trust Class and Institutional Class
shares can be bought, owed and sold only through an account with an Institution,
a client of an Institution may be unable to purchase additional shares and/or
may be required to redeem shares (and possibly incur a tax liability) if the
client no longer has a relationship with the Institution or if the Institution
no longer has a contract with NB Management to perform services. Depending on
the policies of the Institution involved, an investor may be able to transfer an
account from one Institution to another.
CUSTODIAN AND TRANSFER AGENT
Each Fund has selected State Street Bank and Trust Company ("State
Street"), 225 Franklin Street, Boston, MA 02110, as custodian for its securities
and cash. State Street also serves as each Fund's transfer and shareholder
servicing agent, administering purchases, redemptions, and transfers of Fund
shares and the payment of dividends and other distributions through its Boston
Service Center. All Investor Class correspondence should be mailed to Neuberger
Berman Funds, c/o Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.
All correspondence for other classes should be mailed to Neuberger Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180
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<PAGE>
INDEPENDENT AUDITORS/ACCOUNTANTS
Each Fund (other than Neuberger Berman Century Fund, Neuberger Berman
Manhattan Fund, Neuberger Berman Millennium Fund, Neuberger Berman Regency Fund,
Neuberger Berman Socially Responsive Fund, and Neuberger Berman Technology Fund)
has selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116, as the
independent auditors who will audit its financial statements. Neuberger Berman
Century Fund, Neuberger Berman Manhattan Fund, Neuberger Berman Millennium Fund,
Neuberger Berman Regency Fund, Neuberger Berman Socially Responsive Fund, and
Neuberger Berman Technology Fund have selected PricewaterhouseCoopers LLP, 160
Federal Street, Boston, MA 02110, as the independent accountants who will audit
their financial statements.
LEGAL COUNSEL
Each Fund has selected Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 30, 2000, the following are all of the beneficial and
record owners of more than five percent of each fund. Except where indicated
with an asterisk, the owners listed are record owners. These entities hold these
shares of record for the accounts of certain of their clients and have informed
the funds of their policy to maintain the confidentiality of holdings in their
client accounts, unless disclosure is expressly required by law.
Investor Class Name and Address Percentage
-------------- ---------------- ----------
Regency CHARLES SCHWAB & CO INC 27.07%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
NEUBERGER BERMAN LLC* 9.42%
231-01496-18
55 WATER ST
27TH FLOOR
NEW YORK NY 10041-0001
NEUBERGER BERMAN TRUST CO TTEE* 5.12%
NEUBERGER BERMAN EMPLOYEES
PROFIT SHARING PLAN UTD 05/20/71
ATTN AL BOCCARDO
605 THIRD AVE 36TH FLR
NEW YORK NY 10158-0180
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<PAGE>
International CHARLES SCHWAB & CO INC 8.28%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
NEUBERGER BERMAN TRUST CO TTEE* 5.97%
NEUBERGERBERMAN EMPLOYEES
PROFIT SHARING PLAN UTD 05/20/71
ATTN AL BOCCARDO
605 THIRD AVE 36TH FLR
NEW YORK NY 10158-0180
TOWN OF CHESHIRE RETIREMENT PLAN* 5.56%
ATTN MICHAEL A MILONE
DIRECTOR OF FINANCE
TOWN OF CHESHIRE
84 S MAIN ST
CHESHIRE CT 06410-3108
Socially Responsive CHARLES SCHWAB & CO INC 22.24%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
Millennium CHARLES SCHWAB & CO INC 18.02%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
NEUBERGER BERMAN TRUST CO TTEE* 7.66%
NEUBERGER BERMAN EMPLOYEES
PROFIT SHARING PLAN UTD 05/20/71
ATTN AL BOCCARDO
605 THIRD AVE 36TH FLR
NEW YORK NY 10158-0180
Guardian CHARLES SCHWAB & CO INC 18.73%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
Manhattan CHARLES SCHWAB & CO INC 7.22%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
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<PAGE>
Partners CHARLES SCHWAB & CO INC 13.58%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
Genesis CHARLES SCHWAB & CO INC 24.55%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
UNION CENTRAL LIFE 6.30%
INSURANCE CO
ATTN MUTUAL FUNDS DEPT STATION 3
PO BOX 40888
CINCINNATI OH 45240-0888
Focus CHARLES SCHWAB & CO INC 10.40%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
Century NEUBERGER BERMAN 13.95%
ATTN RON STAIB OPS CONTROL
55 WATER ST FL 27
NEW YORK NY 10041-0001
Technology NEUBERGER BERMAN TRUST CO TTEE* 6.71%
NEUBERGER BERMAN EMPLOYEES
PROFIT SHARING PLAN UTD 05/20/71
ATTN AL BOCCARDO
605 THIRD AVE 36TH FLR
NEW YORK NY 10158-0180
Trust Class
-----------
Regency BOSTON SAFE DEPOSIT & TRUST CO TTEE* 95.40%
TWA INC PILOTS DIRECTED ACCT PLAN
& 401K PLAN FOR PILOTS OF TWA INC
ATTN LISA BOVE # 026-0320
135 SANTILLI HWY
EVERETT MA 02149-1906
98
<PAGE>
International CHASE MANHATTAN BANK TTEE 24.98%
VARIOUS RETIREMENT PLANS
UNDER PPI RETIREMENT PROGRAMS
PROFESSIONAL PENSIONS INC
444 FOXON RD
EAST HAVEN CT 06513-2019
FLEET TRUST CORPORATION 20.33%
FBO THIRD PARTY M F ALLIANCES
ATTN DAVID NABB
PO BOX 2197
BOSTON MA 02106-2197
NATIONAL FINANCIAL SERV CORP 20.30%
FOR EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
200 LIBERTY ST - 1 WORLD FIN CTR
ATTN MUTUAL FUNDS DEPT - 5TH FLOOR
NEW YORK NY 10281-1003
SMITH BARNEY INC. 16.27%
00109801250
388 GREENWICH STREET
NEW YORK NY 10013-2339
NEUBERGER AND BERMAN TRUST* 12.01%
T/F LILLIAN VERNON CORP
401K PROFIT SHARING PLAN
1 THEALL RDL
RYE NY 10580-1404
Socially Responsive ICMA RETIREMENT TRUST* 58.84%
777 N CAPITOL ST NE
WASHINGTON DC 20002-4239
CHASE MANHATTAN BANK TTEE* 7.44%
AVON PRODUCTS INC
SVNGS & STOCK OWNERSHIP 12/28/84
1345 AVENUE OF THE AMERICAS
NEW YORK NY 10105-0302
99
<PAGE>
DELAWARE CHARTER GUARANTEE & TRUST* 6.73%
CUST FBO PRINCIPAL MUTUAL LIFE INS
CO DTD 1/1/96
PO BOX 14540
DES MOINES IA 50306-3540
NATIONAL FINANCIAL SERV CORP 5.28%
FOR THE EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
P O BOX 3908
CHURCH STREET STATION
NEW YORK NY 10008-3908
THE UNION CENTRAL LIFE INS CO 5.26%
401K GROUP SEP ACCT
1876 WAYCROSS RD
PO BOX 40888
CINCINNATI OH 45240-0888
Millennium NATIONAL FINANCIAL SERV CORP 88.53%
FOR THE EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
P O BOX 3908
CHURCH STREET STATION
NEW YORK NY 10008-3908
Guardian THE MANUFACTURES LIFE INSURANCE 30.88%
CO U S A
ATTN ROSIE CHUCK PENSION ACCTG
200 BLOOR ST E NT3
TORONTO ON M4W 1E5
CANADA
FIDELITY INVESTMENTS INST OPS 15.30%
CO AS AGENT FOR CERTAIN EE BENEFIT
PL
100 MAGELLON WAY
MAILZONE KWIC
COVINGTON KY 41015-1999
NATIONWIDE LIFE INSURANCE CO 9.54%
QPVA
C/O IPO PORTFOLIO ACCOUNTING
P O BOX 182029
COLUMBUS OH 43218-2029
100
<PAGE>
CONNECTICUT GENERAL LIFE 5.53%
INSURANCE COMPANY
ATTN CARMEN G RIVERA
ONE COMMERCIAL PLAZA
280 TRUMBULL ST H19-B
HARTFORD CT 06103-3509
VARIABLE ANNUITY LIFE INSURANCE 5.49%
COMPANY (VALIC)
2929 ALLEN PARKWAY L7-01
HOUSTON TX 77019-7100
Manhattan THE NORTHERN TRUST CO TTEE* 45.90%
FBO CASE CORPORATION 22-75833
ATTN KEN KING
PO BOX 92956
CHICAGO IL 60675-2956
FIDELITY INVESTMENTS INST OPS 11.71%
CO AS AGENT FOR CERTAIN EE BENEFIT
PL
MAILZONE KWIC
COVINGTON KY 41015
FLEET NATIONAL BANK 11.64%
AETNA/FLEET DIRECTED TRUSTEE
U/A DTD 4/22/96
151 FARMINGTON AVE STE T531
HARTFORD CT 06156-0001
MAC & CO A/C 195-643 9.41%
AEOF1956432
MUTUAL FUNDS OPERATIONS
PO BOX 3198
PITTSBURGH PA 15230-3198
AETNA LIFE INSURANCE & ANNUITY CO 5.96%
ACES-SEPARATE ACCOUNT F
ATTN VALUATION UNIT TS31
151 FARMINGTON AVE
HARTFORD CT 06156-0001
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<PAGE>
Partners NATIONWIDE LIFE INSURANCE 21.53%
QPVA
C/O IPO PORTFOLIO ACCOUNTING
P O BOX 182029
COLUMBUS OH 43218-2029
CONNECTICUT GENERAL LIFE 11.52%
INSURANCE COMPANY
ATTN CARMEN G RIVERA
ONE COMMERCIAL PLAZA
280 TRUMBULL ST H19-B
HARTFORD CT 06103-3509
PRC INC 10.87%
C/O T ROWE PRICE FINANCIAL
ATTN ASSET RECON
PO BOX 17215
BALTIMORE MD 21297-1215
NATIONAL FINANCIAL SERV CORP 8.30%
FOR THE EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
P O BOX 3908
CHURCH STREET STATION
NEW YORK NY 10008-3908
FIDELITY INVESMENTS INSTIT OPER CO 8.04%
AS AGENT FOR CERTAIN BENEFIT PLN
100 MAGELLAN WAY
MAILZONE KWIC
COVINGTON KY 41015-1999
Genesis FIDELITY INVESTMENTS INST OPS 20.84%
CO AS AGENT FOR CERTAIN EE BENEFIT
PL
MAILZONE KWIC
COVINGTON KY 41015
NATIONAL FINANCIAL SERV CORP 14.49%
FOR THE EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
P O BOX 3908
CHURCH STREET STATION
NEW YORK NY 10008-3908
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<PAGE>
SMITH BARNEY INC. 14.11%
00109801250
388 GREENWICH STREET
NEW YORK NY 10013-2339
NATIONWIDE LIFE INSURANCE CO 6.35%
QPVA
C/O IPO PORTFOLIO ACCOUNTING
P O BOX 182029
COLUMBUS OH 43218-2029
AMERICAN EXPRESS TRUST CO FBO 5.48%
OF AMERICAN EXPRESS TRUST
RETIREMENT SERVICE PLANS
ATTN PAT BROWN
50534 AXP FINANCIAL CENTER
MINNEAPOLIS MN 55474-0001
Focus SMITH BARNEY INC 28.66%
00109801250
388 GREENWICH ST
NEW YORK NY 10013-2339
FIDELITY INVESTMENTS INST OPS 12.15%
CO AS AGENT FOR CERTAIN EE BENEFIT
PL
MAILZONE KWIC
COVINGTON KY 41015
AMERICAN EXPRESS TRUST CO 9.58%
BENEFIT OF AMERICAN EXPRESS
TRUST RETIREMENT SERVICE PLANS
ATTN PAT BROWN
50534 AXP FINANCIAL CENTER
MINNEAPOLIS MN 55474-0505
EMJAYCO 7.50%
OMNIBUS ACCOUNT
PO BOX 170910
MILWAUKEE WI 53217-0909
103
<PAGE>
BOSTON SAFE DEPOSIT & TRUST CO TTEE* 6.23%
TWA INC PILOTS DIRECTED ACCT PLAN
& 401K PLAN FOR PILOTS OF TWA INC
ATTN LISA BOVE # 026-0320
135 SANTILLI HWY
EVERETT MA 02149-1906
AETNA LIFE INSURANCE & ANNUITY CO 5.63%
ACES-SEPARATE ACCOUNT F
ATTN VALUATION UNIT TS31
151 FARMINGTON AVE
HARTFORD CT 06156-0001
NATIONAL FINANCIAL SERV CORP 5.54%
FOT THE EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
P O BOX 3908
CHURCH STREET STATION
NEW YORK NY 10008-3908
Century NEUBERGER BERMAN 93.45%
ATTN RON STAIB OPS CONTROL
55 WATER ST FL 27
NEW YORK NY 10041-0001
NATIONAL FINANCIAL SERV CORP 5.28%
FOR THE EXCLUSIVE BENEFIT OF
OUR CUSTOMERS
P O BOX 3908
CHURCH STREET STATION
NEW YORK NY 10008-3908
Technology NEUBERGER BERMAN 97.26%
ATTN RON STAIB OPS CONTROL
55 WATER ST FL 27
NEW YORK NY 10041-0001
Advisor Class
-------------
Guardian TRAVELERS INSURANCE COMPANY #4 97.04%
ATTN BOB IAGROSSI 5MS
SHAREHOLDER ACCOUNTING
ONE TOWER SQUARE
HARTFORD CT 06183-0002
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<PAGE>
Genesis CHARLES SCHWAB & CO INC 37.50%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
KEY TRUST CO* 29.31%
FBO PRISM
4900 TIEDEMAN RD
BROOKLYN OH 44144-2302
FIDELITY INVESTMENTS INSTITUTIONAL 14.63%
OPERATIONS CO INC AS AGENT FOR
VARIOUS RETIREMENT PLANS
Manhattan FISERV SECURITIES INC 72.30%
TRADE HOUSE ACCOUNT
ATTN MUTUAL FUND DEPT
1 COMMERCE SQUARE
2005 MARKET ST
PHILADELPHIA PA 19103-7042
BSC AS AGENT* 12.15%
FBO BBH-SD
1375 PEACHTREE ST NE STE 300
ATLANTA GA 30309-3112
CHARLES SCHWAB & CO INC 6.87%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
Partners TRAVELERS INSURANCE COMPANY #4 57.55%
ATTN ROGER FERLAND
ATTN BOB IAGROSSI 5MS
SHAREHOLDER ACCOUNTING
ONE TOWER SQUARE
HARTFORD CT 06183-0002
BROWN BROTHERS & HARRIMAN 17.14%
40 WATER ST
BOSTON MA 02109-3661
KEY TRUST CO* 13.74%
FBO PRISM
4900 TIEDEMAN RD
BROOKLYN OH 44144-2302
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<PAGE>
Focus SMITH BARNEY CORP TRUST CO TTEE 29.61%
SMITH BARNEY 401K
ADVISOR GROUP TRUST
TWO TOWER CENTER
PO BOX 1063
E BRUNSWICK NJ 08816-1063
FIRST UNION NAT'L BANK TTEE 21.58%
FBO FUNB REINVESTMENT ACCOUNT
A/C# 1080824434
1525 W WT HARRIS BLVD NC-1151
CHARLOTTE NC 28262-8522
MORRIS & CO 12.94%
C/O FIRST SOURCE BANK
ATTN TRUST OPERATIONS
PO BOX 1602
SOUTH BEND IN 46634-1602
CHARLES SCHWAB & CO INC 12.66%
ATTN MUTUAL FUNDS
101 MONTGOMERY ST
SAN FRANCISCO CA 94104-4122
FTC & CO 11.45%
ATTN DATALYNX (HOUSE ACCOUNT)
PO BOX 173736
DENVER CO 80217-3736
KEY TRUST CO NA* 8.48%
FBO PRISM
4900 TIEDEMAN RD
BROOKLYN OH 44144-2338
REGISTRATION STATEMENT
This SAI and the Prospectuses do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectuses. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C. The SEC maintains a Website (http://www.sec.gov)
that contains this SAI, material incorporated by reference, and other
information regarding the Funds.
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Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
Through December 15, 2000 the Funds were organized as feeder funds in a
master-feeder structure rather than a multi-class structure. Pursuant to the
master-feeder structure, each Fund invested all of its net investable assets in
a series ("Portfolio") of another registered investment company called Equity
Managers Trust that had an investment objective identical to, and a name similar
to, that of the Fund. Each Portfolio in turn, invested in securities in
accordance with an investment objective, policies, and limitations identical to
those of its corresponding Fund.
The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to shareholders
for the fiscal year ended August 31, 2000:
The audited financial statements of the series of Neuberger
Berman Equity Funds and each of their corresponding master
funds ("Portfolios") and notes thereto for the fiscal year
ended August 31, 2000, and the reports of Ernst & Young LLP,
independent auditors, with respect to such audited financial
statements of Neuberger Berman Genesis Fund and Portfolio,
Neuberger Berman Guardian Fund and Portfolio, Neuberger
Berman Partners Fund and Portfolio, Neuberger Berman Focus
Fund and Portfolio, and Neuberger Berman International Fund
and Portfolio; and the reports of PricewaterhouseCoopers LLP,
independent accountants, with respect to such audited
financial statements of Neuberger Berman Century Fund and
Portfolio, Neuberger Berman Manhattan Fund and Portfolio,
Neuberger Berman Regency Fund and Portfolio, Neuberger Berman
Millennium Fund and Portfolio, Neuberger Berman Socially
Responsive Fund and Portfolio, and Neuberger Berman
Technology Fund and Portfolio.
The audited financial statements of the series of Neuberger
Berman Equity Trust and their corresponding master fund
("Portfolios") and notes thereto for the fiscal year ended
August 31, 2000, and the reports of Ernst & Young LLP,
independent auditors, with respect to such audited financial
statements of Neuberger Berman Genesis Trust and Portfolio,
Neuberger Berman Focus Trust and Portfolio, Neuberger Berman
Guardian Trust and Portfolio, Neuberger Berman Partners Trust
and Portfolio, and Neuberger Berman International Trust and
Portfolio; and the reports of PricewaterhouseCoopers LLP,
independent accountants, with respect to such audited
financial statements of Neuberger Berman Century Trust and
Portfolio, Neuberger Berman Manhattan Trust and Portfolio,
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Neuberger Berman Regency Trust and Portfolio, Neuberger
Berman Millennium Trust and Portfolio, Neuberger Berman
Socially Responsive Trust and Portfolio, and Neuberger Berman
Technology Trust and Portfolio.
The audited financial statements of the series of Neuberger
Berman Equity Assets and their corresponding master funds
("Portfolios") and notes thereto for the fiscal year ended
August 31, 2000, and the reports of Ernst & Young LLP,
independent auditors, with respect to such audited financial
statements of Neuberger Berman Focus Assets and Portfolio,
Neuberger Berman Genesis Assets and Portfolio and Neuberger
Berman Guardian Assets and Portfolio, and Neuberger Berman
Partners Assets and Portfolio, and the report of
PricewaterhouseCoopers LLP, independent accountants, with
respect to such audited financial statements of Neuberger
Berman Manhattan Assets and Portfolio.
The audited financial statements of Genesis Institutional
Fund and its corresponding master fund (Neuberger Berman
Genesis Portfolio) and notes thereto for the fiscal year
ended August 31, 2000, and the reports of Ernst & Young LLP,
independent auditors, with respect to such audited financial
statements.
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Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
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S&P corporate bond ratings:
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AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no
interest is being paid.
D - Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-) - The ratings above may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
Moody's corporate bond ratings:
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Aaa - Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
A-1
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of protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes
and are considered to be upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
- Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca - Bonds rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Modifiers - Moody's may apply numerical modifiers 1, 2, and 3
in each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
Moody's commercial paper ratings
Issuers rated Prime-1 (or related supporting institutions),
also known as P-1, have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics:
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- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial
markets and assured sources of alternate liquidity.
A-3
