As filed with the Securities and Exchange Commission on December 22, 2000
1933 Act Registration No. 2-11357
1940 Act Registration No. 811-582
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ 93] [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 48] [ X ]
(Check appropriate box or boxes)
NEUBERGER BERMAN EQUITY FUNDS
-----------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Michael M. Kassen, President
Neuberger Berman Equity Funds
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on _____________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on _______________ pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on _______________ pursuant to paragraph (a)(2)
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 93 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 93 on Form N-1A
Neuberger Berman Equity Funds
Neuberger Berman Fasciano Fund
Part A - Investor Class Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS(REGISTERED)
INVESTOR CLASS SHARES
SUBJECT TO COMPLETION
PROSPECTUS DATED: MARCH __, 2001
NEUBERGER BERMAN
FASCIANO FUND
These securities, like the securities of all mutual funds, have not
been approved or disapproved by the Securities and Exchange Commission, and the
Securities and Exchange Commission has not determined if this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
TABLE OF CONTENTS
Page
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NEUBERGER BERMAN FASCIANO FUND.................................................3
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YOUR INVESTMENT................................................................9
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PRIVILEGES AND SERVICES.......................................................10
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DISTRIBUTIONS AND TAXES.......................................................11
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MAINTAINING YOUR ACCOUNT......................................................12
------------------------
BUYING SHARES.................................................................15
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SELLING SHARES................................................................17
--------------
FUND STRUCTURE................................................................19
--------------
The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the individual fund names in this
prospectus are either service marks or registered trademarks of Neuberger Berman
Management Inc.(C)2001 Neuberger Berman Management Inc.
ii
<PAGE>
NEUBERGER BERMAN FASCIANO FUND
THIS FUND
|| is designed for investors with long-term goals in mind
|| offers you the opportunity to participate in financial markets
through a professionally managed stock portfolio
|| also offers the opportunity to diversify your portfolio with a fund
that invests using a combination of a value and growth approach
|| carries certain risks, including the risk that you could lose money
if fund shares are worth less than what you paid
|| is a mutual fund, not a bank deposit, and is not guaranteed or
insured by the FDIC or any other government agency
FUND MANAGEMENT [SIDE BAR]
The Neuberger Berman Fasciano Fund is managed by Neuberger Berman
Management Inc., in conjunction with Neuberger Berman, LLC, as sub-adviser.
Together, the firms manage $___ billion in total assets (as of December 31,
2000) and continue an asset management history that began in 1939.
RISK INFORMATION [SIDE BAR]
This prospectus discusses principal risks of investing in fund shares.
These and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
GOAL AND STRATEGY
The Fund seeks long-term capital growth. The portfolio manager also may
consider a company's potential for current income prior to selecting it for the
Fund.
To pursue this goal, the Fund will invest primarily in the common
stocks of smaller companies, I.E. those with market capitalizations of less than
$1.5 billion at the time the Fund first invests in them. These include
securities having common stock characteristics, such as securities convertible
into common stocks, and rights and warrants to purchase common stocks. The
manager will look for companies with:
|| strong business franchises that are likely to sustain long-term
rates of earnings growth for a three to five year time horizon, and
<PAGE>
|| stock prices that the market has under-valued relative to the
value of similar companies and that offer excellent potential to
appreciate over a three to five year time horizon.
In choosing companies that the manager believes are likely to achieve
the Fund's objective, the manager also will consider the company's overall
business qualities. These qualities include the company's profitability and cash
flow, financial condition, insider ownership, and stock valuation. In selecting
companies that the manager believes may have greater potential to appreciate in
price, the manager will invest the Fund in smaller companies that are
under-followed by major Wall Street brokerage houses and large asset management
firms. However, the Fund may hold the stocks of small companies that grow into
medium-size companies, and those whose market capitalizations grow beyond $1.5
billion.
The Fund may not be suitable for you if you have a short-term
investment horizon or are unwilling to accept fluctuations in share price,
including significant declines over a given period.
Although the Fund primarily will invest in companies on a long-term
basis, from time to time, the Fund may invest on a short-term basis or may sell
within a few months securities that it originally had intended to be a long-term
investment if the security no longer meets the quality or valuation requirements
of the Fund.
The Fund generally will seek to be fully invested in common stocks.
However, at times, the manager may invest a large portion of the Fund's assets
in cash if the manager is unable to locate and invest in a sufficient number of
companies that meet the Fund's quality and valuation requirements.
When a stock no longer meets the Fund's investment criteria, the
manager will consider selling it.
At times, the manager may emphasize certain sectors that he believes
will benefit from market or economic trends.
The Fund has the ability to change its goal without shareholder
approval, although it does not currently intend to do so.
SMALL-CAP STOCKS [SIDE BAR]
Historically, stocks of smaller companies have not always moved in
tandem with those of larger companies. Over the last 40 years, small-caps have
outperformaed large-caps 60% of the time. However, small-caps have often fallen
more severely during market downturns.
GROWTH VS. VALUE INVESTING [SIDE BAR]
Value investors seek stocks trading at below market average prices
based on earnings, book value, or other financial measures before other
investors discover their worth. Growth investors seek companies that are already
successful but may not have reached their full potential.
4
<PAGE>
MAIN RISKS
Most of the Fund's performance depends on what happens in the stock
market. The market's behavior is unpredictable, particularly in the short term.
Because of this, the value of your investment will rise and fall, and you could
lose money.
The smaller companies in which the Fund invests are often more volatile
and less liquid than the stocks of larger companies and
|| may have a shorter history of operations than large companies;
|| may not have as great an ability to raise additional capital;
|| may have a less diversified product line, making them more
susceptible to market pressure.
Small-cap stocks may also:
|| underperform other types of stocks or be difficult to sell when
the economy is not robust, during market downturns, or when
small-cap stocks are out of favor;
|| be more affected than other types of stocks by the underperformance
of a sector that the manager decided to emphasize.
The Fund will combine value and growth styles of investing. Growth
stocks may suffer more than value stocks during market downturns, while value
stocks may remain undervalued if other investors do not recognize their worth.
OTHER RISKS [SIDE BAR]
The Fund may use certain practices and securities involving additional
risks.
Borrowing, securities lending, and derivatives could create leverage,
meaning that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the Fund will increase its risk of loss.
Although they may add diversification, foreign securities can be
riskier, because foreign markets tend to be more volatile and currency exchange
rates fluctuate. There may be less information about foreign issuers than about
domestic issuers.
5
<PAGE>
When the Fund anticipates adverse market, economic, political or other
conditions, it may temporarily depart from its goal and invest substantially in
high-quality short-term investments. This could help the Fund avoid losses but
may mean lost opportunities.
PERFORMANCE
The charts below provide an indication of the risks of investing in
Investor Class shares of the Fund. The bar chart shows how the fund's
performance has varied from year to year. The table below the chart shows what
the return would equal if you averaged out actual performance over various
lengths of time and compares the return with broader measures of market
performance. This information is based on past performance; it's not a
prediction of future results.
BAR CHART
---------------------------------------------------------------------------
Year-By-Year % Returns as of 12/31 each year*
---------------------------------------------------------------------------
1990 -1.18%
---------------------------------------------------------------------------
1991 35.08%
---------------------------------------------------------------------------
1992 7.67%
---------------------------------------------------------------------------
1993 8.08%
---------------------------------------------------------------------------
1994 3.68%
---------------------------------------------------------------------------
1995 31.12%
---------------------------------------------------------------------------
1996 26.54%
---------------------------------------------------------------------------
1997 21.51%
---------------------------------------------------------------------------
1998 7.19%
---------------------------------------------------------------------------
1999 6.16%
---------------------------------------------------------------------------
2000 ____%
---------------------------------------------------------------------------
Best Quarter: Q _, __, ____% Worst Quarter: Q _, __, ____%
---------------------------------------------------------------------------
Year-to-date performance as of __/__/__: ___%
---------------------------------------------------------------------------
[TABLE]
--------------------------------------------------------------------------------
Average Annual Total % Returns as of 12/31/00*
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Fasciano Fund ____% ____% ____%
--------------------------------------------------------------------------------
Russell 2000 Index ____% ____% ____%
--------------------------------------------------------------------------------
The Russell 2000 is an unmanaged index of U.S. small-cap stocks.
--------------------------------------------------------------------------------
6
<PAGE>
* This Fund is the successor to Fasciano Fund, Inc. The year-by-year and total
return data shown for the period prior to March __, 2001 are those of its
predecessor, Fasciano Fund, Inc.
PERFORMANCE MEASURES [SIDE BAR]
The information on this page provides different measures of the Fund's
total return. Total return includes the effect of distributions as well as
changes in share price. The figures assume that all distributions were
reinvested in the Fund.
As a frame of reference, the table includes a broad-based index. The
Fund's performance figures include all of its expenses; the index does not
include costs of investment.
INVESTOR EXPENSES
The Fund does not charge you any fees for buying, selling, or
exchanging Investor Class shares, or for maintaining your account. Your only
fund cost is your share of annual operating expenses. The expense example can
help you compare costs among funds.
FEE TABLE
--------------------------------------------------------------------------------
SHAREHOLDER FEES NONE
--------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
--------------------------------------------------------------------------------
Management fees 1.00%
--------------------------------------------------------------------------------
PLUS: Distribution (12b-1) fees NONE
--------------------------------------------------------------------------------
Other expenses 0.20%*
--------------------------------------------------------------------------------
EQUALS Total Annual Operating Expenses 1.20%
--------------------------------------------------------------------------------
*Other expenses are based on estimated amounts for the current fiscal year.
--------------------------------------------------------------------------------
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the Fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Expenses $ $ $ $
7
<PAGE>
MANAGEMENT [SIDE BAR]
MICHAEL FASCIANO is a Vice President of Neuberger Berman Management and a
Managing Director of Neuberger Berman, LLC and has managed the Fund's assets
since March __, 2001. He managed Fasciano Fund Inc., the Fund's predecessor from
it inception in 1987 to 2001.
NEUBERGER BERMAN MANAGEMENT is the Fund's investment manager, administrator, and
distributor. It engages Neuberger Berman, LLC as sub-adviser to provide
management and related services. For investment management/administration
services, the Fund will pay Neuberger Berman Management a fee at the annual rate
of 1.00% of average net assets.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS*
[TABLE]
----------------------------------------------------------------------------------------------------------------------
Year Ended June 30 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Per Share data ($)
Data apply to a single share throughout each year indicated. You can see what the fund earned (or lost),
what it distributed to investors, and how its share price changed.
----------------------------------------------------------------------------------------------------------------------
Share price (NAV) at beginning of year $20.17 $24.33 $27.53 $34.91 $31.78
----------------------------------------------------------------------------------------------------------------------
PLUS: Income from investment operations
----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.05) (0.03) 0.16 0.40 0.34
----------------------------------------------------------------------------------------------------------------------
Net gains/(losses) - realized and 5.55 3.82 8.71 (2.25) 0.82
unrealized
----------------------------------------------------------------------------------------------------------------------
Subtotal: income from investment 5.50 3.79 8.87 (1.85) 1.16
operations
----------------------------------------------------------------------------------------------------------------------
MINUS: Distributions to shareholders
----------------------------------------------------------------------------------------------------------------------
Income Dividends 0.00 0.00 0.00 (0.03) (0.39)
----------------------------------------------------------------------------------------------------------------------
Capital gain distributions (1.34) (0.59) (1.49) (1.25) 0.00
----------------------------------------------------------------------------------------------------------------------
Subtotal: distributions to shareholders (1.34) (0.59) (1.49) (1.28) (0.39)
----------------------------------------------------------------------------------------------------------------------
EQUALS: Share price (NAV) at end of year $24.33 $27.53 $34.91 $31.78 $32.55
----------------------------------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the Fund's expenses and net investment income - as they actually are as well
as how they would have been if certain expense offset arrangements had not been in effect.
----------------------------------------------------------------------------------------------------------------------
Net expenses - actual 1.5% 1.4% 1.3% 1.2% 1.2%
----------------------------------------------------------------------------------------------------------------------
Expenses1
----------------------------------------------------------------------------------------------------------------------
Net investment income - actual (0.3%) (0.4%) 0.2% 1.8% 1.8%
----------------------------------------------------------------------------------------------------------------------
----------------------------------
1 Shows what expenses would have been if there had been no expense offset
arrangements.
8
<PAGE>
OTHER DATA
Total return shows how an investment in the fund would have performed over each year, assuming all
distributions were reinvested. The turnover rate reflects how actively the fund bought and sold securities.
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Total return % 28.3% 15.8% 33.2% (5.2)% 3.7%
----------------------------------------------------------------------------------------------------------------------
Net assets at end of year (millions of dollars) $29.0 $42.1 $95.0 $418.2 $266.9
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 45.6% 41.0% 49.8% 19.8% 29.4%
----------------------------------------------------------------------------------------------------------------------
*The figures above are from the Fund's predecessor fund, the Fasciano Fund, Inc., and have been
audited by Arthur Anderson, LP, the predecessor fund's independent accountants. Their report along
with full financial statements, appears in the Fasciano Fund's most recent shareholder report (see back cover).
----------------------------------------------------------------------------------------------------------------------
</TABLE>
YOUR INVESTMENT
SHARE PRICES
Because Investor Class Shares of the Fund do not have sales charges,
the price you pay for each share is the Fund's net asset value per share. The
Fund pays you the full share price when you sell shares. If you use an
investment provider, that provider may charge fees which are in addition to
those described in this prospectus.
The Fund is open for business every day the New York Stock Exchange is
open. The Exchange is closed on all national holidays and Good Friday; Fund
shares will not be priced on those days. In general, every buy or sell order you
place will go through at the next share price to be calculated after your order
has been accepted (see "Maintaining Your Account" for instructions on placing
orders). The Fund calculates its share price as of the end of regular trading on
the Exchange on business days, usually 4:00 p.m. eastern time. If you use an
investment provider, depending on when it accepts orders, it's possible that the
Fund's share price could change on days when you are unable to buy or sell
shares.
Because foreign markets may be open on days when U.S. markets are
closed, the value of foreign securities owned by the Fund could change on days
when you can't buy or sell shares. Remember, though, any purchase or sale takes
place at the next share price calculated after your order is accepted.
SHARE PRICE CALCULATIONS [SIDE BAR]
The price of Investor Class Shares of the Fund is the total value of
the assets attributable to Investor Class minus the liabilities attributable to
that class, divided by the total number of Investor Class shares outstanding.
(As of the date of this prospectus, the Fund has no other classes of shares
outstanding). Because the value of the Fund's securities changes every business
day, the share price usually changes as well.
When valuing portfolio securities, the Fund uses market prices.
However, in rare cases, events that occur after certain markets have closed may
9
<PAGE>
render these prices unreliable.
When the Fund believes a market price does not reflect a security's
true value, the Fund may substitute for the market price a fair-value estimate
made according to methods approved by its trustees. The Fund may also use these
methods to value certain types of illiquid securities.
PRIVILEGES AND SERVICES
If you purchase Investor Class shares directly from Neuberger Berman
Management, you have access to the services listed below. If you are purchasing
shares through an investment provider, consult that provider for information
about investment services.
SYSTEMATIC INVESTMENTS - This plan lets you take advantage of
dollar-cost averaging by establishing periodic investments of $100 a month or
more. You choose the schedule and amount. Your investment money may come from a
Neuberger Berman money market fund or your bank account.
SYSTEMATIC WITHDRAWALS - This plan lets you arrange withdrawals of at
least $100 from the Fund on a periodic schedule. You can also set up payments to
distribute the full value of an account over a given time. While this service
can be helpful to many investors, be aware that it could generate capital gains
or losses.
ELECTRONIC BANK TRANSFERS - When you sell Fund shares, you can have the
money sent to your bank account electronically rather than mailed to you as a
check. Please note that your bank must be a member of the Automated Clearing
House, or ACH, system. This service is not available for retirement accounts.
INTERNET ACCESS - At www.nb.com, you can make transactions, check your
account, and access a wealth of information.
FUNDFONE(REGISTERED) - Get up-to-date performance and account
information through our 24-hour automated service by calling 800-335-9366. If
you already have an account with us, you can place orders to buy, sell, or
exchange Fund shares.
DOLLAR-COST AVERAGING [SIDE BAR]
Systematic investing allows you to take advantage of the principle of
dollar-cost averaging. When you make regular investments of a given amount -
say, $100 a month - you will end up investing at different share prices over
time. When the share price is high, your $100 buys fewer shares; when the share
price is low, your $100 buys more shares. Over time, this can help lower the
average price you pay per share.
Dollar-cost averaging cannot guarantee you a profit or protect you from
losses in a declining market. But it can be beneficial over the long term.
9
<PAGE>
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS - The Fund pays out to shareholders any net income and
net capital gains. The Fund makes these distributions once a year (in December).
Unless you designate otherwise, your income and capital gain
distributions from the Fund will be reinvested in the Fund. However, if you
prefer you may:
|| receive all distributions in cash
|| reinvest capital gain distributions, but receive income
distributions in cash
Distributions taken in cash can be sent to you by check, by electronic
transfer to a designated bank account or invested in Investor Class shares of
another NB fund of the same account registration. To take advantage of one of
these options, please indicate your choice on your application. If you use an
investment provider, you must consult its representative about whether your
income and capital gain distributions from the Fund will be reinvested in the
Fund or paid to you in cash.
HOW DISTRIBUTIONS ARE TAXED - Except for tax-advantaged retirement
accounts and other tax-exempt investors, all Fund distributions you receive are
generally taxable to you, regardless of whether you take them in cash or
reinvest them. Fund distributions to Roth IRAs, other individual retirement
accounts and qualified retirement plans generally are tax free. Eventual
withdrawals from a Roth IRA also may be tax free, while withdrawals from other
retirement accounts and plans generally are subject to tax.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous December 31. Your tax statement will help clarify this for you.
Income distributions and net short-term capital gain distributions are
generally taxed as ordinary income. Distributions of other capital gains are
generally taxed as long-term capital gains. The tax treatment of capital gain
distributions depends on how long the Fund held the securities it sold, not when
you bought your shares of the Fund, or whether you reinvested your
distributions.
HOW SHARE TRANSACTIONS ARE TAXED - When you sell or exchange Fund
shares, you generally realize a taxable gain or loss. The exception, once again,
is tax-advantaged retirement accounts.
BUYING SHARES BEFORE A DISTRIBUTION [SIDE BAR]
The money the Fund earns, either as income or as capital gains, is
reflected in its share price until it distributes the money. At that time, the
amount of the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional Fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before the Fund makes a
distribution, you'll end up getting some of your investment back as a taxable
11
<PAGE>
distribution. You can avoid this situation by waiting to invest until after the
record date for the distribution.
Generally, if you're investing in a tax-advantaged account, there are
no tax consequences to you from a distribution.
TAXES AND YOU [SIDE BAR]
The taxes you actually owe on distributions and transactions can vary
with many factors, such as your tax bracket, how long you held your shares, and
whether you owe alternative minimum tax.
How can you figure out your tax liability on Fund distributions and
share transactions? One helpful tool is the tax statement that we or your
investment provider send you every January. It details the distributions you
received during the past year and shows their tax status. A separate statement
covers your share transactions.
Most importantly, consult your tax professional. Everyone's tax
situation is different, and your professional should be able to help you answer
any questions you may have.
MAINTAINING YOUR ACCOUNT
WHEN YOU BUY SHARES - Instructions for buying shares from Neuberger
Berman Management are on page 12. See the sidebars on pages 13 and 14 if you are
buying shares through an investment provider. Whenever you make an initial
investment in the Fund or add to an existing account (except with an automatic
investment), you will be sent a statement confirming your transaction. All
investments must be made in U.S. dollars, and investment checks must be drawn on
a U.S. bank.
WHEN YOU SELL SHARES - If you bought your shares from Neuberger Berman
Management, instructions for selling shares are on pages 16 and 17. See the
sidebars on pages 10 and 13 if you want to sell shares you purchased through an
investment provider. You can place an order to sell some or all of your shares
at any time. The proceeds from the shares you sold are generally sent out the
next business day after your order is executed, and nearly always within three
business days. There are two cases in which proceeds may be delayed beyond this
time:
|| in unusual circumstances where the law allows additional time
if needed
|| if a check you wrote to buy shares hasn't cleared by the time you
sell those shares; clearance may take up to 15 days from the
date of purchase
The Fund does not issue certificates for shares. If you have share
certificates from prior purchases, please note that the only way to redeem share
certificates is by sending in those certificates. Also, if you lose a
certificate, you will be charged a fee to replace it.
If you think you may need to sell shares soon after buying them, you
can avoid the check clearing time (which may be up to 15 days) by investing by
wire or certified check.
12
<PAGE>
In some cases, you will have to place your order to sell shares in
writing, and you will need a signature guarantee. These cases include:
|| when selling more than $50,000 worth of shares
|| when you want the check for the proceeds to be made out to
someone other than an owner of record, or sent somewhere other
than the address of record
|| when you want the proceeds sent by wire or electronic transfer
to a bank account you have not designated in advance
When selling shares in an account that you do not intend to close, be
sure to leave at least $1,000 worth of shares in the account. Otherwise, the
Fund has the right to request that you bring the balance back up to the minimum
level. If you have not done so within 60 days, we may close your account and
send you any proceeds by mail.
UNCASHED CHECKS - We do not pay interest on uncashed checks from Fund
distributions or the sale of Fund shares. We are not responsible for checks
after they are sent to you. After allowing a reasonable time for delivery,
please call us if you have not received an expected check. While we cannot track
a check, we may make arrangements for replacement.
STATEMENTS AND CONFIRMATIONS - Please review your account statements
and confirmations carefully as soon as you receive them. You must contact us
within 30 days if you have any questions or notice any discrepancies. Otherwise,
you may adversely affect your right to make a claim about the transaction(s).
WHEN YOU EXCHANGE SHARES - You can move money from the Fund to another
NB fund through an exchange of shares, or by electing to use your cash
distributions from the Fund to purchase Investor Class shares of another NB
fund. There are three things to remember when making an exchange:
|| both accounts must have the same registration
|| you will need to observe the minimum investment and minimum account
balance requirements for the fund accounts involved
|| because an exchange is a sale for tax purposes, consider any tax
consequences before placing your order
The exchange privilege can be withdrawn from any investor that we
believe is trying to "time the market" or is otherwise making exchanges that we
judge to be excessive. Frequent exchanges can interfere with fund management and
affect costs and performance for other shareholders.
PLACING ORDERS BY TELEPHONE - Fund investors have the option of placing
telephone orders, subject to certain restrictions. On non-retirement accounts,
13
<PAGE>
this option is available to you unless you indicate on your account application
(or in a subsequent letter to us or to State Street Bank and Trust Company) that
you don't want it.
Whenever we receive a telephone order, we take steps to make sure the
order is legitimate. These may include asking for identifying information and
recording the call. As long as the Fund and its representatives take reasonable
measures to verify the authenticity of calls, investors may be responsible for
any losses caused by unauthorized telephone orders.
In unusual circumstances, it may be difficult to place an order by
phone. In these cases, consider sending your order by fax or express delivery.
Other policies - Under certain circumstances, the Fund reserves the
right to:
|| suspend the offering of shares
|| reject any exchange or investment order
|| change, suspend, or revoke the exchange privilege
|| suspend the telephone order privilege
|| satisfy an order to sell fund shares with securities rather than
cash, for certain very large orders
|| suspend or postpone your right to sell fund shares on days when
trading on the New York Stock Exchange is restricted, or as
otherwise permitted by the SEC
|| change its investment minimums or other requirements for buying
and selling, or waive any minimums or requirements for
certain investors
BACKUP WITHHOLDING [SIDE BAR]
When sending in your application, it's important to provide your Social
Security or other taxpayer ID number. If we don't have this number, the IRS
requires the Fund to withhold 31% of all money you receive from the Fund,
whether from selling shares or from distributions. We are also required to
withhold 31% of all money you receive from distributions if the IRS tells us
that you are subject to backup withholding.
If the appropriate ID number has been applied for but is not available
(such as in the case of a custodial account for a newborn), you may open the
account without a number. However, we must receive the number within 60 days in
order to avoid backup withholding. For information on custodial accounts, call
800-877-9700.
14
<PAGE>
SIGNATURE GUARANTEES [SIDE BAR]
A signature guarantee is a guarantee that your signature is authentic.
Most banks, brokers, and other financial institutions can provide you
with one. Some may charge a fee; others may not, particularly if you are a
customer of theirs.
A notarized signature from a notary public is not a signature
guarantee.
INVESTMENT PROVIDERS [SIDE BAR]
The Investor Class shares available in this prospectus may also be
purchased through certain investment providers such as banks, brokerage firms,
workplace retirement programs, and financial advisers.
The fees and policies outlined in this prospectus are set by the Fund
and by Neuberger Berman Management. However, if you use an investment provider,
most of the information you'll need for maintaining your account will come from
that provider. This includes information on how to buy and sell shares, investor
services, and additional policies.
If you use an investment provider, you must contact that provider to
buy or sell shares of the Fund described in this prospectus.
Most investment providers allow you to take advantage of the NB fund
exchange program, which is designed for moving money from one NB fund to another
through an exchange of shares. See page 12 for more information.
BUYING SHARES
Method Things to know
--------------------------------------------------------------------------------
Sending us a check Your first investment must be at least $1,000
Additional investments can be as little as $100
We cannot accept cash, money orders, starter
checks, or travelers checks
You will be responsible for any losses or fees
resulting from a bad check; if necessary, we may
sell other shares belonging to you in order to
cover these losses
All checks must be made out to "Neuberger Berman
Funds;" we cannot accept checks made out to you or
other parties and signed over to us
--------------------------------------------------------------------------------
Wiring money All wires must be for at least $1,000
--------------------------------------------------------------------------------
Exchanging from another All exchanges must be for at least $1,000
fund
15
<PAGE>
Both accounts involved must be registered in the
same name, address and tax ID number
An exchange order cannot be cancelled or changed
once it has been placed
--------------------------------------------------------------------------------
By telephone We do not accept phone orders for a first
investment
Additional investments must be for at least $1,000
Shares will be purchase at the time we receive your
money
Not available on retirement accounts
--------------------------------------------------------------------------------
Setting up systematic All investments must be at least $100
investments
Instructions
--------------------------------------------------------------------------------
Fill out the application and enclose your check
If regular first-class mail, address to:
NEUBERGER BERMAN FUNDS
BOSTON SERVICE CENTER
P.O. BOX 8403
BOSTON, MA 02266-8403
If express delivery, registered mail, or certified mail, send to:
NEUBERGER BERMAN FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
66 BROOKS DRIVE
BRAINTREE, MA 02184-3839
--------------------------------------------------------------------------------
Before wiring any money, call 800-877-9700 for an order confirmation
Have your financial institution send your wire to State Street Bank and Trust
Company
Include your name, the fund name, your account number and other information
as requested
--------------------------------------------------------------------------------
Call 800-877-9700 to place your order
To place an order using FUNDFONE(REGISTERED), call 800-335-9366
--------------------------------------------------------------------------------
Call 800-877-9700 to notify us of your purchase
16
<PAGE>
Immediately follow up with a wire or electronic transfer
To add shares to an existing account using FUNDFONE(R), call 800-335-9366
--------------------------------------------------------------------------------
Call 800-877-9700 for instructions
RETIREMENT PLANS [SIDE BAR]
We offer investors a number of tax-advantaged plans for retirement
saving:
TRADITIONAL IRAS allow money to grow tax-deferred until you take it out
at retirement. Contributions are deductible for some investors, but even when
they're not, an IRA can be beneficial.
ROTH IRAS offer tax-free growth like a traditional IRA, but instead of
tax-deductible contributions, the withdrawals are tax-free for investors who
meet certain requirements.
Also available: SEP-IRA, SIMPLE, Keogh, and other types of plans.
Consult your tax professional to find out which types of plans may be beneficial
for you, then call 800-877-9700 for information on any Neuberger Berman
retirement plan.
SELLING SHARES
Method Things to know
--------------------------------------------------------------------------------
Sending us a letter Unless you tell us otherwise, we will mail your
proceeds by check to the address of record,
payable to the registered owner(s)
If you have designated a bank account on your
application, you can request that we wire the
proceeds to this account; if the total balance in
all of your Neuberger Berman fund accounts is less
than $200,000, you will be charged an $8.00 fee
You can also request that we send the proceeds to
your designated bank account by electronic transfer
without fee
You may need a signature guarantee
--------------------------------------------------------------------------------
Sending us a fax For amounts of up to $50,000
Not available if you have changed the address on
the account by phone, fax, or postal address change
in the past 15 days
--------------------------------------------------------------------------------
17
<PAGE>
Method Things to know
--------------------------------------------------------------------------------
Calling in your order All phone orders to sell shares must be for at
least $1,000, unless you are closing out an account
Not available if you have declined the phone option
or are selling shares in a retirement account
Not available if you have changed the address on
the account by phone, fax, or postal address change
in the past 15 days
--------------------------------------------------------------------------------
Exchanging into another All exchanges must be for at least $1,000
fund
Both accounts involved must be registered in the
same name, address and tax ID number
An exchange order cannot be cancelled or changed
once it has been placed
--------------------------------------------------------------------------------
Setting up systematic For accounts with at least $5,000 worth of shares
withdrawals in them
Withdrawals must be at least $100
--------------------------------------------------------------------------------
Redemption fee There is no redemption fee for Fund shares.
Instructions
--------------------------------------------------------------------------------
Send us a letter requesting us to sell shares signed by all registered owners;
include your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions
If regular first-class mail, address to:
NEUBERGER BERMAN FUNDS
BOSTON SERVICE CENTER
P.O. BOX 8403
BOSTON, MA 02266-8403
If express delivery, registered mail, or certified mail, send to:
NEUBERGER BERMAN FUNDS
C/O STATE STREET BANK AND TRUST COMPANY
66 BROOKS DRIVE
BRAINTREE, MA 02184-3839
--------------------------------------------------------------------------------
Write a request to sell shares as described above
--------------------------------------------------------------------------------
18
<PAGE>
--------------------------------------------------------------------------------
Call 800-877-9700 to obtain the correct fax number
--------------------------------------------------------------------------------
Call 800-877-9700 to place your order
Give your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions
To place an order using FUNDFONE(R), call 800-335-9366
--------------------------------------------------------------------------------
Call 800-877-9700 to place your order
To place an order using FUNDFONE(R), call 800-335-9366
--------------------------------------------------------------------------------
See page 16 or call 800-877-9700 for more information
INTERNET CONNECTION [SIDE BAR]
Investors with Internet access can enjoy many valuable and time-saving
features by visiting us on the World Wide Web at www.nb.com.
The site offers complete information on all NB funds, current
performance data, and an Investment Education Center with interactive worksheets
for college and retirement planning. Also available are relevant news items, tax
information, portfolio manager interviews, and related articles.
As a Neuberger Berman funds shareholder, you can use the web site to
access account information and even make secure transactions - 24 hours a day.
FUND STRUCTURE
The Fund uses a "multiple class" structure. As of the date of this
prospectus, the Fund offers one class of shares, the Investor Class.
CONVERSION TO THE EURO [SIDE BAR]
Like other mutual funds, the NB funds could be affected by problems
relating to the conversion of European currencies into the Euro, which extends
from 1/1/99 to 7/1/02.
At Neuberger Berman, we are taking steps to ensure that our own
computer systems are compliant with Euro issues and to determine that the
systems used by our major service providers are also compliant. We are also
making efforts to determine whether companies in the NB funds' portfolios will
be affected by this issue.
At the same time, it is impossible to know whether the ongoing
conversion, which could disrupt fund operations and investments if problems
arise, has been adequately addressed until the conversion is completed.
19
<PAGE>
NEUBERGER BERMAN FASCIANO FUND
INVESTOR CLASS SHARES
|| No load
|| No sales charges
|| No 12b-1 fees
If you'd like further details on this Fund, you can request a free copy
of the following documents:
SHAREHOLDER REPORTS - Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
|| A discussion by the portfolio manager about strategies and
market conditions
|| Fund performance data and financial statements
|| Complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMTION - The SAI contains more comprehensive
information on this Fund, including:
|| Various types of securities and practices, and their risks
|| Investment limitations and additional policies
|| Information about the Fund's management and business structure
The SAI is hereby incorporated by reference into this prospectus, making it
legally part of the prospectus.
OBTAINING INFORMATION [SIDE BAR]
You can obtain a shareholder report, SAI, and other information from:
NEUBERGER BERMAN MANAGEMENT INC
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
212-476-8800
Web site:
www.nbfunds.com
---------------
Email:
[email protected]
---------------------
20
<PAGE>
You can also request copies of this information from the SEC for the
cost of a duplicating fee by sending an e-mail request to [email protected] or
by writing to the SEC's Public Reference Section, Washington DC 20549-0102. They
are also available from the EDGAR Database on the SEC's website at WWW.SEC.GOV.
You may also view and copy the documents at the SEC's Public Reference
Room in Washington. Call 202-942-8090 for information about the operation of the
Public Reference Room.
Investment Manager:
NEUBERGER BERMAN MANAGEMENT INC.
Sub-Adviser:
NEUBERGER BERMAN, LLC
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SEC file number: 811-582
21
<PAGE>
--------------------------------------------------------------------------------
NEUBERGER BERMAN FASCIANO FUND
STATEMENT OF ADDITIONAL INFORMATION
Investor Class Shares
SUBJECT TO COMPLETION
DATED: MARCH __, 2001
--------------------------------------------------------------------------------
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll Free 800-877-9700
Neuberger Berman FASCIANO Fund ("Fund") is a mutual fund that offers
shares pursuant to a Prospectus dated March __, 2001,
The Prospectus for the investor share class provides more information
about the Fund 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 the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
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)2001
Neuberger Berman Management Inc.
THE INFORMATION IN THIS SAI IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL
THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS SAI IS NOT A PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION.......................................................1
INVESTMENT POLICIES AND LIMITATIONS..........................................1
CASH MANAGEMENT AND TEMPORARY DEFENSIVE POSITIONS.........................3
INVESTMENT INSIGHT........................................................3
PERFORMANCE INFORMATION.....................................................17
COMPARATIVE INFORMATION..................................................18
OTHER PERFORMANCE INFORMATION............................................19
CERTAIN RISK CONSIDERATIONS.................................................20
TRUSTEES AND OFFICERS.......................................................20
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................30
INVESTMENT MANAGER AND ADMINISTRATOR.....................................30
MANAGEMENT AND ADMINISTRATION FEES.......................................31
SUB-ADVISER..............................................................32
INVESTMENT COMPANIES MANAGED.............................................32
CODES OF ETHICS..........................................................34
MANAGEMENT AND CONTROL OF NB MANAGEMENT AND NEUBERGER BERMAN.............34
DISTRIBUTION ARRANGEMENTS...................................................35
ADDITIONAL PURCHASE INFORMATION.............................................36
SHARE PRICES AND NET ASSET VALUE.........................................36
AUTOMATIC INVESTING AND DOLLAR COST AVERAGING............................36
ADDITIONAL EXCHANGE INFORMATION.............................................37
ADDITIONAL REDEMPTION INFORMATION...........................................40
SUSPENSION OF REDEMPTIONS................................................40
REDEMPTIONS IN KIND......................................................40
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................40
ADDITIONAL TAX INFORMATION..................................................41
TAXATION OF THE FUND.....................................................41
TAXATION OF THE FUND'S SHAREHOLDERS......................................43
FUND TRANSACTIONS...........................................................44
PORTFOLIO TURNOVER.......................................................47
REPORTS TO SHAREHOLDERS.....................................................47
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................47
<PAGE>
CUSTODIAN AND TRANSFER AGENT................................................48
INDEPENDENT AUDITORS........................................................48
LEGAL COUNSEL...............................................................48
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................48
FINANCIAL STATEMENTS........................................................49
APPENDIX A: RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER................A-1
ii
<PAGE>
INVESTMENT INFORMATION
The 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.
On March __, 2001, the Fund assumed all the assets and liabilities of the
Fasciano Fund, Inc. Prior to that date, the Neuberger Berman Fasciano Fund had
no operations. Financial and performance information in this SAI is that of the
predecessor fund.
The following information supplements the discussion in the Prospectus of
the investment objective, policies, and limitations of the Fund. The investment
objective and, unless otherwise specified, the investment policies and
limitations of the 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 the 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 the Fund.
The Fund's fundamental investment policies and limitations are as follows:
1. BORROWING. The Fund may not borrow money, except that it 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 the Fund's
total assets, it will reduce its borrowings within three days (excluding Sundays
and holidays) to the extent necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The 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 or options (including options on futures contracts, but
excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
<PAGE>
3. DIVERSIFICATION. The Fund may not, 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 registered 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. The Fund may not purchase any security if, as a
result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to U.S. Government and
Agency Securities.
5. LENDING. The Fund may not 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. The Fund may not purchase real estate unless acquired
as a result of the ownership of securities or instruments, but this restriction
shall not prohibit the 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.
7. SENIOR SECURITIES. The Fund may not issue senior securities, except as
permitted under the 1940 Act.
8. UNDERWRITING. The Fund may not underwrite securities of other
issuers, except to the extent that the 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 Fund does not consider
foreign currencies or forward contracts to be physical commodities.
The 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 (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.
The following investment policies and limitations are non-fundamental:
1. BORROWING. The Fund may not 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, the Fund may not make any loans other than securities
loans.
2
<PAGE>
3. MARGIN TRANSACTIONS. The Fund may not purchase securities on margin
from brokers or other lenders, except that the Fund may obtain such short-term
credits as are necessary for the clearance of securities transactions. Margin
payments in connection with transactions in futures contracts and options on
futures contracts shall not constitute the purchase of securities on margin and
shall not be deemed to violate the foregoing limitation.
4. FOREIGN SECURITIES. The Fund may not 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 American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Fund may not 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.
Although the Fund does not have policies limiting its investment in
warrants, the Fund does not currently intend to invest in warrants unless
acquired in units or attached to securities.
CASH MANAGEMENT AND TEMPORARY DEFENSIVE POSITIONS. For temporary defensive
purposes, or to manage cash pending investment or payout, the 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.
Pursuant to an exemptive order received from the SEC, the 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.
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 invested in the Neuberger Berman mutual funds.
In advertisements, the Fund's allocation to a particular market sector(s)
may be discussed as a way to demonstrate how the fund manager uncovers stocks
that he perceives to fit the Fund's investment parameters. These discussions may
include references to current or former holdings of the Fund.
ADDITIONAL INVESTMENT INFORMATION
The Fund 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 the Fund's principal strategies are discussed in the
Prospectus. It may not buy all of the types of securities or use all of the
investment techniques that are described.
3
<PAGE>
ILLIQUID SECURITIES. 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
considered illiquid unless NB Management, acting pursuant to guidelines
established by the Trustees, 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 the Fund to
value or dispose of due to the absence of an active trading market. The sale of
some illiquid securities by the Fund may be subject to legal restrictions which
could be costly to it.
POLICIES AND LIMITATIONS. The Fund may invest up to 15% of its net assets
in illiquid securities. The Fund has no current intention of investing in
illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund purchases
securities from a bank that is a member of the Federal Reserve System 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.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of more
than seven days are considered to be illiquid securities. The Fund may not 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. The 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. The 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
4
<PAGE>
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.
POLICIES AND LIMITATIONS. The Fund may lend its 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 the Fund by depositing collateral in a form determined to be satisfactory
by the 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.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The 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 the 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 the Fund's illiquidity. NB Management, acting under guidelines
established by the 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, the 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 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 the
Fund's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the Fund
sells portfolio securities subject to its agreement to repurchase the securities
at a later date for a fixed price reflecting a market rate of interest. There is
a risk that the counter-party to a reverse repurchase agreement will be unable
or unwilling to complete the transaction as scheduled, which may result in
losses to the Fund.
5
<PAGE>
POLICIES AND LIMITATIONS. Reverse repurchase agreements are considered
borrowings for purposes of the Fund's investment policies and limitations
concerning borrowings. While a reverse repurchase agreement is outstanding, the
Fund will deposit in a segregated account with its custodian cash or appropriate
liquid securities, marked to market daily, in an amount at least equal to the
Fund's obligations under the agreement.
FOREIGN SECURITIES. The 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 U.S. 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.
The 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
exchanges are often at fixed rates and are generally higher than negotiated
commissions on U.S. exchanges, although the Fund endeavors to achieve the most
favorable net results on its 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 the Fund are uninvested and no return is
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earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause it to miss attractive investment
opportunities. Inability to dispose of Fund securities due to settlement
problems could result in losses to the 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 Fund may invest in American Depositary Receipts (ADRs), European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and International
Depositary Receipts (IDRs). ADRs (sponsored or unsponsored) are receipts
typically issued by a U.S. bank or trust company evidencing its ownership of the
underlying foreign securities. Most ADRs are denominated in U.S. dollars and are
traded on a U.S. stock exchange. Issuers of the securities underlying sponsored
ADRs, but not unsponsored ADRs, are contractually obligated to disclose material
information in the United States. Therefore, the market value of unsponsored
ADRs may not reflect the effect of such information. EDRs and IDRs are receipts
typically issued by a European bank or trust company evidencing its ownership of
the underlying foreign securities. GDRs are receipts issued by either a U.S. or
non-U.S. banking institution evidencing its ownership of the underlying foreign
securities and are often denominated in U.S. dollars.
POLICIES AND LIMITATIONS. To limit the risks inherent in investing in
foreign currency denominated securities, the Fund 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 securities. Within
those limitations, however, the Fund is not restricted in the amount it may
invest in securities denominated in any one foreign currency.
Investments in securities of foreign issuers are subject to the Fund's
quality standards. The Fund may invest only in securities of issuers in
countries whose governments are considered stable by NB Management.
FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES AND INDICES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "FINANCIAL INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON. The Fund may purchase and sell
interest rate futures contracts, stock and bond index futures contracts, and
foreign currency futures contracts and may purchase and sell options thereon in
an attempt to hedge against changes in the prices of securities or, in the case
of foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits the Fund to
enhance portfolio liquidity and maintain a defensive position without having to
sell portfolio securities. The Fund views investment in (i) interest rate and
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securities index futures and options thereon as a maturity management device
and/or a device to reduce risk or preserve total return in an adverse
environment for the hedged securities, and (ii) foreign currency futures and
options thereon as a means of establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies that
are held or intended to be acquired by the portfolio.
For purposes of managing cash flow, the 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
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.
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 the 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 the 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 its NAV, the Fund marks to market the value of
its open futures positions. The 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.
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An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in the contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume a short futures position (if the
option is a call) or a long futures position (if the option is a put). Upon
exercise of the option, the accumulated cash balance in the writer's futures
margin account is delivered to the holder of the option. That balance represents
the amount by which the market price of the futures contract at exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option. Options on futures have characteristics and risks
similar to those of securities options, as discussed herein.
Although the 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
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 the 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. The Fund 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. The Fund
does not engage in transactions in futures and options on futures for
speculation.
The Fund may purchase and sell stock index futures contracts, and may
purchase and sell options thereon. For purposes of managing cash flow, the
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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. The Fund may write covered call options and
may purchase call options on securities. 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. Portfolio
securities on which call options may be written and purchased by the Fund are
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective.
When the 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 Fund's total return. When writing a covered call option, the 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 the 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 the 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. The Fund may write covered call options and may
purchase call options on securities. The Fund may also write covered call
options and may purchase call options in related closing transactions. The Fund
writes only "covered" call options on securities it owns (in contrast to the
writing of "naked" or uncovered call options, which the Fund will not do).
The Fund would purchase a call option to offset a previously written call
option. The Fund also may purchase a call option to protect against an increase
in the price of the securities it intends to purchase.
PUT OPTIONS ON SECURITIES. The Fund may write and purchase put options on
securities. The 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 the 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.
Portfolio securities on which put options may be written and purchased by
the 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. The Fund generally writes and purchases 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).
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. The
obligation under any option written by the 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 the 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. Exchange-traded options are issued by a
clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between the Fund
and a counter-party, with no clearing organization guarantee. Thus, when the
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 the 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 substituted. In the
event of the counter-party's insolvency, the Fund may be unable to liquidate its
options position and the associated cover. NB Management monitors the
creditworthiness of dealers with which the Fund may engage in OTC options
transactions.
The premium received (or paid) by the Fund 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 the Fund for writing
an option is recorded as a liability on the Fund's statement of assets and
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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 the 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 the Fund will be
able to effect closing transactions at favorable prices. If the 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.
The 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.
The 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, the 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 portfolio. In those cases,
additional brokerage commissions are incurred.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the options markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the options markets.
POLICIES AND LIMITATIONS. The Fund may use American-style options. The
assets used as cover (or held in a segregated account) for OTC options written
by the 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.
PUT AND CALL OPTIONS ON SECURITIES INDICES. For purposes of managing cash
flow, the Fund may purchase put and call options on securities indices to
increase its 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
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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. For purposes of managing cash flow, the 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 Fund will be listed and
traded on an exchange.
FOREIGN CURRENCY TRANSACTIONS. The 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
Fund 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 Fund enters into forward contracts in an attempt to hedge against
changes in prevailing currency exchange rates. The Fund does not engage in
transactions in forward contracts for speculation; it views 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 the 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, the 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.
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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, the Fund could be in a less advantageous position
than if such a hedge had not been established. If the 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 the
Fund's securities against a decline in the value of a currency does not
eliminate fluctuations in the prices of underlying securities. Because forward
contracts are not traded on an exchange, the assets used to cover such contracts
may be illiquid. The Fund may experience delays in the settlement of its foreign
currency transactions.
POLICIES AND LIMITATIONS. The Fund may enter into forward contracts for
the purpose of hedging and not for speculation.
COVER FOR FINANCIAL INSTRUMENTS. Securities held in a segregated account
cannot be sold while the 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 the Fund's assets could impede fund
management or the Fund's ability to meet current obligations. The Fund may be
unable promptly to dispose of assets which cover, or are segregated with respect
to, an illiquid forward position; this inability may result in a loss to the
Fund.
POLICIES AND LIMITATIONS. The Fund will comply with SEC guidelines
regarding "cover" for hedging 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 the 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
the 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 the Fund to
purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Fund to sell a portfolio
security at a disadvantageous time, due to its need to maintain cover or to
segregate securities in connection with its use of Financial Instruments. There
can be no assurance that the Fund's use of Financial Instruments will be
successful.
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The 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 Financial Instruments whose behavior
is expected to resemble or offset that of the Fund's underlying securities or
currency. NB Management intends to reduce the risk that the Fund will be unable
to close out Financial Instruments by entering into such transactions only if NB
Management believes there will be an active and liquid secondary market.
REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent the
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.
FIXED INCOME SECURITIES. While the emphasis of the Fund's investment
program is on common stocks and other equity securities, it may also invest in
money market instruments, U.S. Government and Agency Securities, and other fixed
income securities. The Fund may invest in investment grade corporate bonds and
debentures. The Fund may also 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 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.
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 Standard & Poor's ("S&P"), Moody's Investors Service, Inc.
("Moody's"), 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 Fund may rely on the ratings of any NRSRO, the
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Fund primarily refers 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 the
Fund may invest is likely to decline in times of rising market interest rates.
Conversely, when rates fall, the value of the 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 the Fund warrants exposure to the
additional level of risk.
POLICIES AND LIMITATIONS. There are no restrictions as to the ratings of
debt securities the Fund may acquire or the portion of the Fund's assets that
the Fund may invest in debt securities in a particular ratings category.
Although the Fund does not presently intend to invest in debt securities, it may
invest in convertible bonds that the manager believes present a good value
because they are convertible into equity securities and have an attractive
yield.
COMMERCIAL PAPER. Commercial paper is a short-term debt security issued
by a corporation or bank, usually for purposes such as financing current
operations. The 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 Trustees.
POLICIES AND LIMITATIONS. The Fund 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.
CONVERTIBLE SECURITIES. The 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 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
16
<PAGE>
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 the 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 and its ability to
achieve its investment objectives.
POLICIES AND LIMITATIONS. Convertible debt securities are subject to the
Fund's investment policies and limitations concerning fixed income securities.
PREFERRED STOCK. The 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.
OTHER INVESTMENT COMPANIES. The 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, the 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 fund securities. The Fund
does 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, the Fund's investment in
securities of other registered investment companies 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.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and are not
intended to indicate future performance. The share price and total return of the
Fund will vary, and an investment in the Fund, when redeemed, may be worth more
or less than an investor's original cost.
17
<PAGE>
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An average annual
compounded rate of return ("T") may be computed by using the redeemable value at
the end of a specified period ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
Average Annual Total Returns(1)
Periods Ended 6/30/2000
ONE YEAR FIVE YEARS TEN YEARS PERIOD FROM INCEPTION(2)
FASCIANO FUND 3.65% 14.20% 13.03% 13.64%
(1) This Fund had no operations prior to March __, 2001, but is the successor
to Fasciano Fund. Performance results shown for periods prior to March __,
2001 represent the performance of the Fasciano Fund.
(2) The inception date of the Fasciano Fund was 8/1/87.
NB Management may from time to time waive a portion of its fees due from
the Fund or reimburse the 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 the 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
18
<PAGE>
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 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. The Fund may invest in
different types of securities from those included in some of the above
indexes.
Evaluations of the Fund's performance, its total returns, and comparisons
may be used in advertisements and in information furnished to current and
prospective shareholders (collectively, "Advertisements"). The Fund may also be
compared to individual asset classes such as common stocks, small-cap stocks, or
Treasury bonds, based on information supplied by Ibbotson and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about the 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.
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 the Fund to be an attractive investment vehicle
also include parents saving to meet college costs for their children. For
instance, the cost of a college education is rapidly approaching the cost of the
19
<PAGE>
average family home. Estimates of total four-year costs (tuition, room and
board, books and other expenses) for students starting college in various years
may be included in Advertisements, based on the College Board Annual Survey of
Colleges.
Information relating to inflation and its effects on the dollar also may
be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
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 the 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 the 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.
<TABLE>
<CAPTION>
THE TRUST
Positions Held
NAME, AGE, AND ADDRESS (1) WITH THE TRUST PRINCIPAL OCCUPATION(S) (2)
----------------------------- -------------- ---------------------------
<S> <C> <C>
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 and
531 Willow Avenue Chief Investment Officer of CDC
Ambler, PA 19002 Capital Management (registered
investment adviser) (1993-Jan.
1999).
20
<PAGE>
Positions Held
NAME, AGE, AND ADDRESS (1) WITH THE TRUST PRINCIPAL OCCUPATION(S) (2)
----------------------------- -------------- ---------------------------
Faith Colish (65) Trustee Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
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 Turner
6806 Suffolk Place Corporation, A.B. Chance Company
Harvey Cedars, NJ 08008 and Crescent Jewelry, Inc.
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.
21
<PAGE>
Positions Held
NAME, AGE, AND ADDRESS (1) WITH THE TRUST PRINCIPAL OCCUPATION(S) (2)
----------------------------- -------------- ---------------------------
C. Anne Harvey (63) Trustee Director of American Association of
2555 Pennsylvania Avenue, N.W. Retired Persons ("AARP"); Program
Washington, DC 20037 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, Secretary,
Loews Corporation and General Counsel of Loews
667 Madison Avenue Corporation (diversified financial
7th Floor corporation).
New York, NY 10021
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 Economics
110 Bleecker Street at Stern School of Business, New
Apt. 24B York University.
New York, NY 10012
22
<PAGE>
Positions Held
NAME, AGE, AND ADDRESS (1) WITH THE TRUST PRINCIPAL OCCUPATION(S) (2)
----------------------------- -------------- ---------------------------
Howard A. Mileaf (63) Trustee Vice President and Special Counsel
WHX Corporation to WHX Corporation (holding
110 East 59th Street company) since 1992; Director of
30th Floor Kevlin Corporation (manufacturer of
New York, NY 10022 microwave and other products).
Edward I. O'Brien* (72) Trustee Private Investment Management;
12 Woods Lane President of the Securities
Scarsdale, NY 10583 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
Burnham Securities Inc. Securities Inc. (a registered
Burnham Asset Management Corp. broker-dealer) since 1991;
1325 Avenue of the Americas Director, Cancer Treatment
26th Floor Holdings, Inc.
New York, NY 10019
William E. Rulon (68) Trustee Retired. Senior Vice President of
2980 Bayside Walk Foodmaker. Inc. (operator and
San Diego, CA 92109 Franchiser of Restaurants) until
January 1997; Secretary of
Foodmaker, Inc. until July 1996.
Richard Russell (53) Treasurer and Principal Vice President of Neuberger Berman
Financial and Accounting since 1999; Vice President of NB
Officer 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.
23
<PAGE>
Positions Held
NAME, AGE, AND ADDRESS (1) WITH THE TRUST PRINCIPAL OCCUPATION(S) (2)
----------------------------- -------------- ---------------------------
Cornelius T. Ryan (69) Trustee General Partner of Oxford Partners
Oxford Bioscience Partners and Oxford Bioscience Partners
315 Post Road West (venture capital partnerships) and
Westport, CT 06880 President of Oxford Venture
Corporation; Director of Capital
Cash Management Trust (money market
fund) and Prime Cash Fund.
Tom Decker Seip (50) Trustee General Partner of Seip Investments
30 Ridge Lane LP (a private investment
Orinda, CA 94563 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.
24
<PAGE>
Positions Held
NAME, AGE, AND ADDRESS (1) WITH THE TRUST PRINCIPAL OCCUPATION(S) (2)
----------------------------- -------------- ---------------------------
Gustave H. Shubert (71) Trustee Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard Advisory Trustee of Rand (a
Pacific Palisades, CA 90272 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 consultant
518 Passaic Avenue specializing in the insurance
Bloomfield, NJ 07003 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.
25
<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 and
Chief Executive Officer Director of Neuberger Berman Inc.
and Trustee (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 Atlanta
Ford Motor Credit Company Region, Ford Motor Credit Company
1455 Lincoln Parkway since August, 1997; prior thereto,
Atlanta, GA 30346-2209 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.
</TABLE>
--------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates 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,
26
<PAGE>
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.
No Trustee of Neuberger Berman Equity Funds received any compensation from
Neuberger Berman Fasciano Fund or Fasciano Fund, Inc. for any period prior to
the date of this SAI.
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.
27
<PAGE>
<TABLE>
<CAPTION>
FOR CALANDER YEAR ENDED 12/31/00
Total Compensation from
Aggregate Investment Companies in the
Compensation Neuberger Berman Fund
Name and Position With the Trust From the Trust Complex Paid to Trustees
-------------------------------- -------------- ------------------------
<S> <C> <C>
John Cannon $ $
Trustee
Faith Colish $ $
Trustee (5 other investment companies)
Stanley Egener* $ $
Chairman of the Board, Chief (9 other investment companies)
Executive Officer, and Trustee
Walter G. Ehlers $ $
Trustee
C. Anne Harvey $ $
Trustee
Barry Hirsch $ $
Trustee
Michael M. Kassen $ $
Trustee
Robert A. Kavesh $ $
Trustee
Howard A. Mileaf $ $
Trustee (4 other investment companies)
Edward I. O'Brien $ $
Trustee (3 other investment companies)
John T. Patterson, Jr.** $ $
Trustee
(4 other investment companies)
John P. Rosenthal $ $
Trustee (4 other investment companies)
William E. Rulon $ $
Trustee
Cornelius T. Ryan $ $
Trustee (3 other investment companies)
Tom Decker Seip $ $
Trustee
Gustave H. Shubert $ $
Trustee (3 other investment companies)
28
<PAGE>
Total Compensation from
Aggregate Investment Companies in the
Compensation Neuberger Berman Fund
Name and Position With the Trust From the Trust Complex Paid to Trustees
-------------------------------- -------------- ------------------------
Candace L. Straight $ $
Trustee
Peter E. Sundman $ $
Trustee
Peter P. Trapp $ $
Trustee
Lawrence Zicklin* $ $
President and Trustee (5 other investment companies)
</TABLE>
*Retired, October 27, 1999
**Deceased, September 26, 2000
[At February __, 2001, the trustees and officers of the Trust, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
the Fund.]
Effective January 1, 2001, Trustees of the Neuberger Berman Funds who are
not affiliated with NB Management receive from all the Funds in the aggregate a
retainer of $10,000 per quarter plus $7,500 for each regular quarterly Board
meeting attended.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
NB Management serves as the Fund's investment manager pursuant to a
management agreement with the Trust, dated December 16, 2000 and approved with
respect to the Fund on ________ __, 2001 ("Management Agreement").
The Management Agreement provides, in substance, that NB Management will
make and implement investment decisions for the Fund in its discretion and will
continuously develop an investment program for the Fund's assets. The Management
Agreement permits NB Management to effect securities transactions on behalf of
the 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 Fund, although NB Management has no current plans to pay a material amount
of such compensation.
NB Management provides to the 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." The 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, as well as
accounting, recordkeeping, and other services, to the Fund pursuant to an
administration agreement with the Trust, dated December 16, 2000 and approved
29
<PAGE>
with respect to the Fund on ____ __, 2001 ("Administration Agreement"). For such
administrative services, the Fund pays NB Management a fee based on the Fund's
average daily net assets, as described below.
Under the Administration Agreement, NB Management also provides to the
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 provided 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 qualification of the Fund's shares for
sale in various states, and furnishes other services the parties agree to from
time to time should be provided under the Administration Agreement.
From time to time, NB Management or the Fund may enter into arrangements
with registered broker-dealers or other third parties pursuant to which it pays
the broker-dealers or other 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, the Fund pays NB Management a fee at
the annual rate of 0.85% of the Fund's average daily net assets.
NB Management provides administrative services to the Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services. For such administrative services, the Fund
pays NB Management a fee at the annual rate of 0.15% of the 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 who are not interested persons of the Trust or of NB
Management, and periodic reports to the Board of Trustees on actual expenses.
With the Fund's consent NB Management may subcontract some of its
responsibilities to the Fund under the Administration Agreement and may
compensate broker-dealers, banks, third-party administrators and other
institutions that provides such services.
The Management Agreement continues until June 30, 2002. The Management
Agreement is renewable thereafter from year to year with respect to the Fund, so
long as its continuance is approved at least annually (1) by the vote of a
majority of the Trustees who are not "interested persons" of NB Management or
the Trust ("Independent 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
Trustees or by a 1940 Act majority vote of the outstanding interests in the
Fund. The Administration Agreement continues until June 30, 2002. The
Administration Agreement is renewable from year to year with respect to the
Fund, so long as its continuance is approved at least annually (1) by the vote
of a majority of the Independent 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 Trustees or by a 1940 Act majority vote of the outstanding shares in the
Fund.
30
<PAGE>
The Management and Administration Agreements are terminable, without
penalty, with respect to the Fund on 60 days' written notice either by the Trust
or by NB Management. Each Agreement terminates automatically if it is assigned.
Fasciano Company, Inc. acted as the investment adviser to the Fund's
predecessor, Fasciano Fund, from its inception on August 1, 1987 to March __,
2001. For the fiscal year ended June 30, 2000 the Fasciano Fund paid 1.00% for
management and administration services.
During the fiscal years ended June 30, 1998, 1999, and 2000, the Fasciano
Fund paid the following management and administration fees to Fasciano Company
Inc.: $604,499, $2,307,620 and $3,597,288, respectively.
SUB-ADVISER
NB Management retains Neuberger Berman, 605 Third Avenue, New York, NY
10158-3698, as sub-adviser pursuant to a sub-advisory agreement dated December
16, 2000 and approved with respect to the Fund on _____ __, 2001 ("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, 2002 and is renewable
from year to year, subject to approval of its continuance in the same manner as
the Management Agreement. The Sub-Advisory Agreement is subject to termination,
without penalty, with respect to the Fund by the Trustees or a 1940 Act majority
vote of the outstanding interests in the Fund, by NB Management, or by Neuberger
Berman on not less than 30 nor more than 60 days' written notice. The
Sub-Advisory Agreement also terminates automatically with respect to the Fund if
it is assigned or if the Management Agreement terminates with respect to the
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.
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:
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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
The investment decisions concerning the Fund 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 Fund. Even where the
investment objectives are similar, however, the methods used by the Other NB
Funds and the Fund to achieve their objectives may differ. The investment
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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 the 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 the Fund, in other cases
it is believed that the Fund's ability to participate in volume transactions may
produce better executions for it. In any case, it is the judgment of the
Trustees that the desirability of the Fund's having its advisory arrangements
with NB Management outweighs any disadvantages that may result from
contemporaneous transactions.
The Fund is subject to certain limitations imposed on all advisory
clients of Neuberger Berman (including the Fund, 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.
CODES OF ETHICS
The Fund, 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 manager 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 the Fund or taking personal advantage of investment opportunities that may
belong to the 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.
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
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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
The Fund offers one class of shares, known as Investor Class shares.
DISTRIBUTOR
NB Management serves as the distributor ("Distributor") in connection with
the offering of the Fund's shares. Investor Class shares are offered on a
no-load basis.
In connection with the sale of its shares, the Fund has authorized the
Distributor to give only the information, and to make only the statements and
representations, contained in a Prospectus or 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 a 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 the Fund's Investor Class shares without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of those shares.
For the Fund's Investor Class, the Distributor or one of its affiliates
may, from time to time, deem it desirable to offer to shareholders of the Fund,
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
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such use of the Fund's shareholder lists, however, will be made subject to terms
and conditions, if any, approved by a majority of the Independent Fund Trustees.
These lists will not be used to offer the Fund's shareholders any investment
products or services other than those managed or distributed by NB Management or
Neuberger Berman.
The Trust, on behalf of the Fund, and the Distributor are parties to a
Distribution Agreement ("Distribution Agreement"). The Distribution Agreement
continues until June 30, 2002. The Distribution Agreement may be renewed
annually if specifically approved by (1) the vote of a majority of the Trustees
or a 1940 Act majority vote of the Fund's outstanding shares and (2) the vote of
a majority of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on such approval. The Distribution Agreement may be
terminated by either party and will terminate automatically on its assignment,
in the same manner as the Management Agreement.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's NAV
per share. The NAV for the Fund is calculated by subtracting total liabilities
from total assets (the market value of the securities the Fund holds plus cash
and other assets). The Fund's per share NAV is calculated by dividing its NAV by
the number of Fund shares outstanding and rounding the result to the nearest
full cent. The Fund 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.
The 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. The Fund values all other securities and assets, including restricted
securities, by a method that the trustees of the Trust believe accurately
reflects fair value.
If NB Management believes that the price of a security obtained under the
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
The Fund's shareholders may arrange to have a fixed amount automatically
invested in Fund shares each month. To do so, the Fund shareholder must complete
an application, available from the Distributor, electing to have automatic
investments funded either through (1) redemptions from his or her account in a
money market fund for which NB Management serves as investment manager or (2)
withdrawals from the shareholder's checking account. In either case, the minimum
monthly investment is $100. A shareholder who elects to participate in automatic
investing through his or her checking account must include a voided check with
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the completed application. A completed application should be sent to Funds,
Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403.
Automatic investing enables a shareholder to take advantage of "dollar
cost averaging." As a result of dollar cost averaging, a shareholder's average
cost of Fund shares generally would be lower than if the shareholder purchased a
fixed number of shares at the same pre-set intervals. Additional information on
dollar cost averaging may be obtained from the Distributor.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Maintaining Your Account," the Fund's shareholders may redeem at least $1,000
worth of the Fund's shares and invest the proceeds in Investor Class shares of
one or more of the other funds managed by NB Management (Other NB Funds) that
are briefly described below, provided that the minimum investment requirements
of the other fund(s) are met.
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 Seeks long-term capital appreciation by
International Fund 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 Invests in securities believed to have the
Fund 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 Seeks long-term growth of capital by investing
Fund 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 Seeks capital growth through an approach that
Partners Fund is intended to increase capital with
reasonable risk. Fund manager looks at
fundamentals, focusing particularly on cash
flow, return on capital, and asset values.
Neuberger Berman Seeks long-term growth of capital by investing
Regency Fund primarily in common stocks of
mid-capitalization companies which the manager
believes have solid fundamentals.
Neuberger Berman Seeks long-term capital appreciation by
Socially Responsive Fund investing in common stocks of companies that
meet both financial and social criteria.
Neuberger Berman Seeks long-term capital growth by investing in
Technology Fund the stocks of dynamic technology and
tech-related companies of all sizes.
INCOME FUNDS
Neuberger Berman A U.S. Government money market fund seeking
Government Money Fund maximum safety and liquidity and the highest
available current income. The Fund invests
only in U.S. Treasury obligations and other
money market instruments issued or guaranteed
as to principal or interest by the U.S.
Government, its agencies or instrumentalities
and repurchase agreements on such securities.
It seeks to maintain a constant purchase and
redemption price of $1.00.
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Neuberger Berman A money market fund seeking the highest
Cash Reserves 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 consistent
Limited Maturity Bond Fund 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 current
High Yield Bond Fund income and, secondarily, capital growth, the
Fund invests primarily in lower-rated debt
securities. The Fund may also invest in
investment grade income-producing and
non-income producing debt and equity
securities.
MUNICIPAL FUNDS
Neuberger Berman A money market fund seeking the maximum
Municipal Money current Fund 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 Seeks high current tax-exempt income with low
Securities Trust 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.
*/ 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.
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.
Each fund may terminate or modify its exchange privilege in the future.
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
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any of the above-referenced funds, as in any other mutual fund, is neither
insured nor guaranteed by the U.S. Government.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem the Fund's shares may be suspended or payment of the
redemption price postponed (1) when the NYSE is closed, (2) when trading on the
NYSE is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for 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
The 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. If payment is
made in securities, a shareholder generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Fund does not redeem in kind under normal circumstances, but would do
so when the Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of its share of
any net investment income (after deducting expenses attributable to the class),
any net realized capital gains, and any net realized gains from foreign currency
transactions earned or realized by the Fund. The 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. The Fund calculates its net investment income and NAV per share as
of the close of regular trading on the NYSE on each Business Day (usually 4:00
p.m. Eastern time).
The Fund generally distributes substantially all of its share of the
Fund's net investment income (after deducting expenses incurred directly by the
Fund), if any, near the end of each calendar quarter. Distributions of net
realized capital and foreign currency gains, if any, normally are paid once each
year, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the shareholder elects to receive them in
cash ("cash election"). Fund 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,
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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 an Other NB
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 the Fund remains in effect until the
shareholder notifies State Street in writing to discontinue the election. If it
is determined, however, that the U.S. Postal Service cannot properly deliver
Fund mailings to the shareholder for 180 days, the Fund will terminate the
shareholder's cash election. Thereafter, the shareholder's 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 FUND
To continue to qualify for treatment as a RIC under the Code, the 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. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Financial Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer. If the 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.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
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Dividends and interest received by the Fund, and gains realized by the
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.
The 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 the 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 the 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.
The 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 the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the 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).
The 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 Fund's use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward contracts,
involves complex rules that will determine for income tax purposes the amount,
character, and timing of recognition of the gains and losses the Fund realizes
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 the 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 and certain forward contracts, and
listed nonequity options (such as those on a securities index) 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
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federal income tax purposes at the end of the 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 the Fund must distribute to satisfy the Distribution
Requirement, which will be taxable to the shareholders as ordinary income, and
to increase the net capital gain recognized by the Fund, without in either case
increasing the cash available to the Fund. The 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 the Fund must distribute to meet the
Distribution Requirement and avoid imposition of the Excise Tax.
If the 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 a 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 the 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 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).
TAXATION OF THE FUND'S SHAREHOLDERS
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
The Fund is required to withhold 31% of all dividends, capital gain
distributions, and redemption proceeds payable to any individuals and certain
other non-corporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Withholding at that rate also is required from
dividends and other distributions payable to such shareholders who otherwise are
subject to backup withholding.
As described in "Maintaining Your Account" in the Prospectus, the Fund may
close a shareholder's account with the Fund and redeem the remaining shares if
the account balance falls below the specified minimum and the shareholder fails
42
<PAGE>
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
During the fiscal year ended June 30, 1998, 1999 and 2000 the Fund's
predecessor, Fasciano Fund paid brokerage commissions of $66,326, $292,464, and
$263,820, respectively.
Fund securities may, from time to time, be loaned by the Fund to
Neuberger Berman in accordance with the terms and conditions of an order issued
by the SEC. The order exempts such transactions from provisions of the 1940 Act
that would otherwise prohibit such transactions, subject to certain conditions.
In accordance with the order, securities loans made by the 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 the Fund in order to re-lend them to
Other NB Funds, Neuberger Berman may be required to pay the 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 the Fund has indicated a willingness to lend, Neuberger
Berman must borrow such security from the 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 the Fund. If, in any month, the
Fund's expenses exceed its income in any securities loan transaction with
Neuberger Berman, Neuberger Berman must reimburse the Fund for such loss.
A committee of Independent Trustees from time to time reviews, among
other things, information relating to securities loans by the Fund. The Fund
does not presently intend to lend portfolio securities to Neuberger Berman.
In effecting securities transactions, the 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. The Independent
Trustees of the Trust have approved the use of Neuberger Berman as the principal
broker for the other series of the Trust. Although the Trustees have not yet
considered this matter with respect to the Fund, they may do so in 2001 and the
following paragraphs describe the policies with respect to the Trust's use of
Neuberger Berman for brokerage. Series of the Trust may use Neuberger Berman as
broker where, in the judgment of NB Management, Neuberger Berman is able to
obtain a price and execution at least as favorable as other qualified brokers.
To the Trust's
43
<PAGE>
knowledge, no affiliate of the Trust receives give-ups or reciprocal business in
connection with its securities transactions.
The use of Neuberger Berman as a broker for the Trust 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 the Trust 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 the
Trust'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
Trustees not to be comparable to the Trust. The Trust does not deem it
practicable and in its best interests to solicit competitive bids for
commissions on each transaction effected by Neuberger Berman. However,
consideration regularly is given to information concerning the prevailing level
of commissions charged by other brokers on comparable transactions during
comparable periods of time. The 1940 Act generally prohibits Neuberger Berman
from acting as principal in the purchase of portfolio securities from, or the
sale of portfolio securities to, the Trust unless an appropriate exemption is
available.
A committee of Independent Trustees from time to time reviews, among
other things, information relating to the commissions charged by Neuberger
Berman to the Trust 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 Trust must be reviewed and
approved no less often than annually by a majority of the Independent Trustees.
To ensure that accounts of all investment clients, including the Trust,
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 the Trust. An agency cross-trade is
a securities transaction in which the same broker acts as agent on both sides of
44
<PAGE>
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 other participants in the trade. The other account
participating in an agency cross-trade with the Trust 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 confirmation of
each agency cross-trade that the Trust participates in.
The Fund expects that it will execute a portion of its transactions
through brokers other than Neuberger Berman. In selecting those brokers, NB
Management will consider 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 and 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 portfolio managers of several Neuberger Berman mutual
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
45
<PAGE>
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Fund by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting 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 Fund's
benefit.
Michael F. Fasciano, who is a Vice President of NB Management and a
Managing Director of Neuberger Berman, is the person primarily responsible for
making decisions as to specific action to be taken with respect to the
investments of the Fund. He 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.
PORTFOLIO TURNOVER
The Fund's 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 the Fund will receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund. The 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
THE FUND
The 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 twelve
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.
The Trustees have created four classes of shares of the Fund, designated
Investor Class, Advisor Class, Trust Class, and Institutional Class. This SAI
and the accompanying Prospectus describe Investor Class shares. The other
classes of shares are not being offered at this time.
46
<PAGE>
Prior to November 9, 1998, the name of the Trust was "Neuberger & Berman
Equity Funds".
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
the Fund represent equal proportionate interests in the assets of the Fund only
and have identical voting, dividend, redemption, liquidation, and other rights
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 do not intend to hold annual meetings
of shareholders of the Fund. The Trustees will call special meetings of
shareholders of the 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 the Fund entitled to vote at the meeting.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of 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 the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
CUSTODIAN AND TRANSFER AGENT
The 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 the 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 Fund correspondence should be mailed to Funds, c/o Boston
Service Center, P.O. Box 8403, Boston, MA 02266-8403.
INDEPENDENT AUDITORS
The Fund has selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA
02116, as the independent auditors who will audit its financial statements.
LEGAL COUNSEL
The Fund has selected Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal counsel.
47
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February __, 2001, the following are all of the beneficial and
record owners of more than five percent of the Fund. 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 Fund of their policy to maintain
the confidentiality of holdings in their client accounts, unless disclosure is
expressly required by law.
<TABLE>
<CAPTION>
Percentage of Ownership
Name and Address At February __, 2001
---------------- --------------------
<S> <C> <C>
Neuberger Berman FASCIANO
Fund
</TABLE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration statement,
including the exhibits filed therewith, may be examined at the SEC's offices in
Washington, D.C. The SEC maintains a Website (http://www.sec.gov) that contains
this SAI, material incorporated by reference, and other information regarding
the Fund.
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
On March __, 2001 the Fund assumed all the assets and liabilities of the
Fasciano Fund, an open-end fund with substantially identical investment
policies. Prior to that date, the Neuberger Berman Fund had no assets or
investment operations.
The following financial statements and related documents are incorporated
by reference herein and are included in the Fasciano Fund's Annual Report to
shareholders for the fiscal year ended June 30, 2000:
The audited financial statements of the Fasciano Fund and notes thereto
for the fiscal year ended June 30, 2000, and the reports of Arthur
Anderson LLP, independent accountants, with respect to such audited
financial statements.
The following unaudited interim financial statements and related
documents are incorporated by reference herein and are included in the Fasciano
Fund's Semi-Annual Report to shareholders for the period ended December 31,
2000:
The unaudited financial statements for the period ended December 31,
2000.
48
<PAGE>
APPENDIX A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or an exceptionally stable
margin, and principal is secure. Although the various protective elements are
likely to change, the changes that can be visualized are most unlikely to impair
the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
"high-grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa-rated securities, fluctuation of
<PAGE>
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MODIFIERS--Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
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
A-2
<PAGE>
Issuers rated PRIME-1 (or related supporting institutions), also known as
P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
A-3
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 93 ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
------- --------
Exhibit Description
Number -----------
------
(a) (1) Certificate of Trust. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582 (Filed August 30, 1995).
(2) Restated Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 82 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582 (Filed December 21, 1998).
(3) Trust Instrument of Neuberger Berman Equity
Funds. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582 (Filed August 30, 1995).
(4) Schedule A - Current Series of Neuberger Berman
Equity Funds. Incorporated by Reference to
Post-Effective Amendment No. 92 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582 (Filed December 13, 2000).
(b) By-laws of Neuberger Berman Equity Funds.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582 (Filed
August 30, 1995).
(c) (1) Trust Instrument of Neuberger Berman Equity
Funds, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582 (Filed August 30, 1995).
(2) By-Laws of Neuberger Berman Equity Funds,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582 (Filed August 30, 1995).
(d) (1) (i) Management Agreement Between Equity Funds
and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective
Amendment No. 92 to Registrant's
Registration Statement, File Nos. 2-11357
and 811-582 (Filed December 13, 2000).
(ii) Schedule A - Series of Equity Funds
Currently Subject to the Management
Agreement. To Be Filed by Amendment.
<PAGE>
Exhibit Description
Number -----------
------
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. To Be Filed by
Amendment.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, LLC with Respect to Equity Funds. .
Incorporated by Reference to Post-Effective
Amendment No. 92 to Registrant's
Registration Statement, File Nos. 2-11357
and 811-582 (Filed December 13, 2000).
(ii) Schedule A - Series of Equity Funds
Currently Subject to the Sub-Advisory
Agreement. To Be Filed by Amendment.
(e) (1) (i) Distribution Agreement Between Neuberger
Berman Equity Funds and Neuberger Berman
Management Inc. with Respect to Investor
Class Shares. Incorporated by Reference to
Post-Effective Amendment No. 92 to
Registrant's Registration Statement, File
Nos. 2-11357 and 811-582 (Filed December
13, 2000).
(ii) Schedule A - Series of Neuberger Berman
Equity Funds Currently Subject to the
Investor Class Distribution Agreement. To
Be Filed by Amendment.
(f) Bonus or Profit Sharing Contracts. None.
(g) (1) Custodian Contract Between Neuberger Berman
Equity Funds and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective Amendment No. 74 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582 (Filed December 15, 1995).
(2) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 76 to Registrant's
Registration Statement, File Nos. 2-11357 and
811-582 (Filed December 5, 1996).
(h) (1) (i) Transfer Agency and Service Agreement
Between Neuberger Berman Equity Funds and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registrant's
Registration Statement, File Nos. 2-11357
and 811-582 (Filed August 30, 1995).
(ii) First Amendment to Transfer Agency and
Service Agreement Between Neuberger Berman
Equity Funds and State Street Bank and
Trust Company. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File
Nos. 2-11357 and 811-582 (Filed August 30,
1995).
(iii) Second Amendment to Transfer Agency and
Service Agreement between Neuberger Berman
Equity Funds and State Street Bank and
Trust Company. Incorporated by Reference to
Post-Effective Amendment No. 77 to
Registrant's Registration Statement, File
Nos. 2-11357 and 811-582 (Filed December
12, 1997).
(iv) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 76 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582
(Filed December 5, 1996).
<PAGE>
Exhibit Description
Number -----------
------
(2) (i) Administration Agreement Between Neuberger
Berman Equity Funds and Neuberger Berman
Management Inc. with Respect to Investor
Class Shares. Incorporated by Reference to
Post-Effective Amendment No. 92 to
Registrant's Registration Statement, File
Nos. 2-11357 and 811-582 (Filed December
13, 2000).
(ii) Schedule A - Series of Neuberger Berman
Equity Funds Currently Subject to the
Administration Agreement. To Be Filed by
Amendment.
(iii) Schedule B - Schedule of Compensation Under
the Administration Agreement. To be Filed
by Amendment.
(i) Opinion and Consent of Kirkpatrick & Lockhart LLP
with Respect to Securities Matters of the
Registrant. To Be Filed by Amendment.
(j) Consent of Independent Auditors. To Be Filed by
Amendment.
(k) Financial Statements Omitted from Prospectus.
None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Plan Pursuant to Rule 18f-3. Incorporated by
Reference to Post-Effective Amendment No. 92 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582 (Filed December 13, 2000).
(p) Code of Ethics for Registrant, its Investment
Advisers and Principal Underwriters. Incorporated
by Reference to Post-Effective Amendment No. 92
to Registrant's Registration Statement, File Nos.
2-11357 and 811-582 (Filed December 13, 2000).
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
-------- --------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
ITEM 25. INDEMNIFICATION.
-------- ----------------
A Delaware business trust may provide in its governing instrument
for indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article IX, Section 2 of the Trust Instrument
provides that the Registrant shall indemnify any present or former trustee,
officer, employee or agent of the Registrant ("Covered Person") to the fullest
extent permitted by law against liability and all expenses reasonably incurred
or paid by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
<PAGE>
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreement between Neuberger Berman
Management Inc. ("NB Management") and the Registrant provide that neither NB
Management nor any director, officer or employee of NB Management performing
services for the series of the Registrant at the direction or request of NB
Management in connection with NB Management's discharge of its obligations under
the Agreements shall be liable for any error of judgment or mistake of law or
for any loss suffered by a series in connection with any matter to which the
Agreements relates; provided, that nothing in the Agreements shall be construed
(i) to protect NB Management against any liability to the Registrant or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
disregard of its obligations and duties under the Agreements, or (ii) to protect
any director, officer or employee of NB Management who is or was a trustee or
officer of the Registrant against any liability to the Registrant or any series
thereof or its interest holders to which such person would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office with
Registrant.
Section 1 of the Sub-Advisory Agreement between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Registrant
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties or of reckless disregard of its
duties and obligations under the Agreement, Neuberger Berman will not be subject
to any liability for any act or omission or any loss suffered by any series of
the Registrant or their interest holders in connection with the matters to which
the Agreements relate.
Section 12 of the Administration Agreements between the Registrant
and NB Management on behalf of each of the classes of shares of each of the
Registrant's series provides that NB Management will not be liable to the
Registrant for any action taken or omitted to be taken by NB Management or its
employees, agents or contractors in carrying out the provisions of the Agreement
if such action was taken or omitted in good faith and without negligence or
misconduct on the part of NB Management, or its employees, agents or
contractors. Section 13 of each Administration Agreement provides that the
Registrant shall indemnify NB Management and hold it harmless from and against
any and all losses, damages and expenses, including reasonable attorneys' fees
and expenses, incurred by NB Management that result from: (i) any claim, action,
suit or proceeding in connection with NB Management's entry into or performance
of the Agreement; or (ii) any action taken or omission to act committed by NB
Management in the performance of its obligations under the Agreement; or (iii)
any action of NB Management upon instructions believed in good faith by it to
have been executed by a duly authorized officer or representative of a Series;
provided, that NB Management will not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of NB Management, or its employees, agents or contractors. Amounts payable
by the Registrant under this provision shall be payable solely out of assets
belonging to that Series, and not from assets belonging to any other Series of
the Registrant. Section 14 of each Administration Agreement provides that NB
Management will indemnify the Registrant and hold it harmless from and against
any and all losses, damages and expenses, including reasonable attorneys' fees
and expenses, incurred by the Registrant that result from: (i) NB Management's
failure to comply with the terms of the Agreement; or (ii) NB Management's lack
of good faith in performing its obligations under the Agreement; or (iii) the
negligence or misconduct of NB Management, or its employees, agents or
contractors in connection with the Agreement. The Registrant shall not be
entitled to such indemnification in respect of actions or omissions constituting
negligence or misconduct on the part of the Registrant or its employees, agents
or contractors other than NB Management, unless such negligence or misconduct
<PAGE>
results from or is accompanied by negligence or misconduct on the part of NB
Management, any affiliated person of NB Management, or any affiliated person of
an affiliated person of NB Management.
Section 11 of the Distribution Agreements between the Registrant and
NB Management (on behalf of each class of the Registrant) provides that NB
Management shall look only to the assets of a Series for the Registrant's
performance of the Agreement by the Registrant on behalf of such Series, and
neither the Trustees nor any of the Registrant's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("1933 Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF ADVISER AND SUB-ADVISER.
------- ---------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of NB Management and Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
<S> <C>
Claudia Brandon None.
Vice President/Mutual Fund Board
Relations, NB Management Inc.
Valerie Chang Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Brooke Cobb Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Robert Conti Senior Vice President, NB Management Inc.;
Vice President, Vice President, Neuberger Berman Income Funds;
Neuberger Berman Vice President, Neuberger Berman Equity Funds.
Robert D'Alelio Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Ingrid Dyott, Vice President, NB Management Inc.
Vice President,
Neuberger Berman
Robert S. Franklin Vice President, High Yield Fixed Income
Vice President, Analyst, Prudential Insurance Company.(1)
NB Management Inc.
Brian Gaffney Senior Vice President, NB Management Inc.;
Managing Director, Vice President, Neuberger Berman Income Funds;
Neuberger Berman Vice President, Neuberger Berman Equity Funds.
Robert I. Gendelman Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Thomas E. Gengler, Jr. Vice President, NB Management Inc.
Vice President,
Neuberger Berman
Theodore P. Giuliano None.
Vice President and Director, NB
Management Inc.; Managing Director,
Neuberger Berman
Joseph K. Herlihy Treasurer, NB Management Inc.
Senior Vice President, Treasurer,
Neuberger Berman
Michael M. Kassen Executive Vice President, Chief Investment
Executive Vice President, Officer and Director, NB Management Inc.
Neuberger Berman
Barbara R. Katersky Senior Vice President, NB Management Inc.
Senior Vice President,
Neuberger Berman
Robert B. Ladd Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Jeffrey B. Lane Director, Chief Executive Officer and President,
Chief Executive Officer and NB Management Inc.
President, Neuberger Berman
Josephine Mahaney Vice President, NB Management Inc.
Managing Director
Neuberger Berman
-----------------------
(1) Until 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
<S> <C>
Michael F. Malouf Portfolio Manager, Dresdner RCM Global
Vice President, Investors.(2)
NB Management Inc.
Robert Matza Executive Vice President, Chief Administrative
Executive Vice President and Chief Officer and Director, Neuberger Berman, Inc.
Administrative Officer, Neuberger
Berman; Director,
NB Management Inc.
Ellen Metzger Secretary, NB Management Inc.
Vice President,
Neuberger Berman
S. Basu Mullick Portfolio Manager, Ark Asset Management.(3)
Vice President,
NB Management Inc.
Janet Prindle Vice President, NB Management Inc.
Managing Director
Neuberger Berman
Kevin L. Risen Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Benjamin E. Segal Assistant Portfolio Manager, GT Global
Vice President, NB Management Inc., Investment Management(4).
Managing Director, Neuberger Berman
Jennifer Silver Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Kent C. Simons Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Matthew S. Stadler Senior Vice President and Chief Financial
Senior Vice President and Chief Officer, NB Management Inc
Financial Officer,
Neuberger Berman
Peter E. Sundman Executive Vice President and Director,
President, NB Management Inc.; Neuberger Berman Inc.; President and Chief
Executive Vice President, Executive Officer, Neuberger Berman Income
Neuberger Berman Funds.
-----------------------
(2) Until 1998.
(3) Until 1998.
(4) Until 1998.
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Judith M. Vale Vice President, NB Management Inc.
Managing Director,
Neuberger Berman
Catherine Waterworth Managing Director, TCW Group Inc.(5)
Vice President,
NB Management Inc.
Allan R. White, III Portfolio Manager, Salomon Asset
Vice President, NB Management.(6)
Management; Managing Director,
Neuberger Berman
</TABLE>
The principal address of NB Management Inc., Neuberger Berman, and of
each of the investment companies named above, is 605 Third Avenue, New York, New
York 10158.
ITEM 27. PRINCIPAL UNDERWRITERS.
------- ----------------------
(a) NB Management, the principal underwriter distributing securities of
the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Income Funds
NB Management is also the investment manager to the master
funds in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
---- --------------------- ---------------------
WITH UNDERWRITER OFFICES
---------------- -------
WITH REGISTRANT
---------------
<S> <C> <C>
Claudia Brandon Vice President/Mutual Fund Secretary
Board Relations
Valerie Chang Vice President None
Brooke A. Cobb Vice President None
Robert Conti Senior Vice President Vice President
Robert W. D'Alelio Vice President None
Ingrid Dyott Vice President None
Robert S. Franklin Vice President None
-----------------------
(5) Until 1998.
(6) Until 1998.
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
---- --------------------- ---------------------
WITH UNDERWRITER OFFICES
---------------- -------
WITH REGISTRANT
---------------
Brian Gaffney Senior Vice President Vice President
Robert I. Gendelman Vice President None
Thomas E. Gengler, Jr. Vice President None
Theodore P. Giuliano Vice President and Director None
Joseph K. Herlihy Treasurer None
Michael M. Kassen Vice President and Director President
Barbara R. Katersky Senior Vice President None
Robert L. Ladd Vice President None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Robert Matza Director None
Ellen Metzger Secretary None
Basu Mullick Vice President None
Janet W. Prindle Vice President None
Kevin L. Risen Vice President None
Benjamin Segal Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Matthew S. Stadler Senior Vice President and None
Chief Financial Officer
Peter E. Sundman President Trustee and Chairman of
the Board
Judith M. Vale Vice President None
Catherine Waterworth Vice President None
Allan R. White, III Vice President None
</TABLE>
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
-------- ---------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
<PAGE>
ITEM 29. MANAGEMENT SERVICES
-------- -------------------
Other than as set forth in Parts A and B of this Post-Effective
Amendment, the Registrant is not a party to any management-related service
contract.
ITEM 30. UNDERTAKINGS
-------- ------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER BERMAN EQUITY FUNDS
has duly caused this Post-Effective Amendment No. 93 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 21st day of December,
2000.
NEUBERGER BERMAN EQUITY FUNDS
By: /s/ Michael M. Kassen
---------------------
Michael M. Kassen
President
Pursuant to the requirements of the Securities Act of 1933,
Post-Effective Amendment No. 93 has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Peter E. Sundman Chairman of the Board December 21, 2000
------------------------- and Trustee (Chief
Peter E. Sundman Executive Officer)
/s/ Michael M. Kassen President and Trustee December 21, 2000
-------------------------
Michael M. Kassen
/s/ Richard Russell Treasurer
------------------------- (Principal Financial and
Richard Russell Accounting Officer) December 21, 2000
(signatures continued on next page)
<PAGE>
Signature Title Date
--------- ----- ----
/s/ John Cannon Trustee December 21, 2000
-------------------------
John Cannon
/s/ Faith Colish Trustee December 21, 2000
-------------------------
Faith Colish
/s/ Walter G. Ehlers Trustee December 21, 2000
-------------------------
Walter G. Ehlers
/s/ C. Anne Harvey Trustee December 21, 2000
-------------------------
C. Anne Harvey
/s/ Barry Hirsch Trustee December 21, 2000
-------------------------
Barry Hirsch
/s/ Robert A. Kavesh Trustee December 21, 2000
-------------------------
Robert A. Kavesh
/s/ Howard A. Mileaf Trustee December 21, 2000
-------------------------
Howard A. Mileaf
/s/ Edward I. O'Brien Trustee December 21, 2000
-------------------------
Edward I. O'Brien
<PAGE>
/s/ John P. Rosenthal Trustee December 21, 2000
-------------------------
John P. Rosenthal
/s/ William E. Rulon Trustee December 21, 2000
-------------------------
William E. Rulon
/s/ Cornelius T. Ryan Trustee December 21, 2000
-------------------------
Cornelius T. Ryan
/s/ Tom Decker Seip Trustee December 21, 2000
-------------------------
Tom Decker Seip
Trustee
-------------------------
Gustave H. Shubert
/s/ Candace L. Straight Trustee December 21, 2000
-------------------------
Candace L. Straight
/s/ Peter P. Trapp Trustee December 21, 2000
-------------------------
Peter P. Trapp