As filed with the Securities and Exchange Commission on February 1, 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. [89] [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [44] [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)
Neuberger Berman Equity Funds is a "master/feeder fund." This
Post-Effective Amendment No. 89 includes a signature page for the master fund,
Equity Managers Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 89 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 89 on Form N-1A
Neuberger Berman Technology Fund
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibit Index
No change is intended to be made by this Post-Effective Amendment No. 89
to the prospectus or statement of additional information of any other series of
Neuberger Berman Equity Funds.
2
<PAGE>
SUBJECT TO COMPLETION _____________, 2000
Neuberger Berman
Technology Fund
- --------------------------------------------------------------------------------
Prospectus [April __, 2000]
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 PRELIMINARY 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 PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
CONTENTS
NEUBERGER BERMAN EQUITY FUNDS
Technology Fund
YOUR INVESTMENT
Share Prices
Privileges and Services
Distributions and Taxes
Maintaining Your Account
Buying Shares
Selling Shares
The "Neuberger Berman" name and logo are service marks of
Neuberger Berman, LLC. "Neuberger Berman Management Inc." and
the individual fund name in this prospectus are either service
marks or registered trademarks of Neuberger Berman Management
Inc. (C) 2000 Neuberger Berman Management Inc.
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THIS FUND:
o is designed for investors seeking long-term growth of capital
o offers you the opportunity to participate in financial markets through
a professionally managed stock portfolio
o uses a master/feeder structure in its portfolio; see page __ for
information on how it works
o is a mutual fund, not a bank deposit, and is not guaranteed or insured by
the FDIC or any other government agency
[SIDEBAR]
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than
$____ billion in total assets (as of _________, 1999) and continue an asset
management history that began in 1939.
[SIDEBAR]
RISK INFORMATION
This prospectus discusses principal risks of investment in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
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Neuberger Berman
Technology Fund
- --------------------------------------------------------------------------------
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<PAGE>
GOAL AND STRATEGY
THE FUND SEEKS LONG TERM GROWTH OF CAPITAL.
To pursue this goal, the fund invests at least 65% of its assets in common
stocks of companies substantially engaged in offering, using or developing
products, processes or services that provide or that benefit significantly from
technological advances, or are expected to do so. The fund may invest in
companies of any capitalization size, and may invest up to 20% of its assets in
foreign companies.
Some of the businesses that are, from time to time, likely to make up a
significant portion of the portfolio, either individually or in the aggregate
are:
-computer products, software and electronic components
-computer services
-telecommunications
-networking
-Internet
-biotechnology, pharmaceuticals or medical technology
The managers take a growth approach to selecting stocks, looking for new
companies that are in the developmental stage as well as older companies that
appear poised to grow because of new products, technology or management. Factors
in identifying these firms may include surprises in the company's fundamentals
relative to the market's expectations, financial strength, a strong position
relative to competitors and a stock price that is reasonable relative to its
growth rate.
The managers follow a disciplined selling strategy and may sell a stock from the
portfolio when it is not likely to exceed the market's expectations, fails to
perform as expected, or appears substantially less desirable than another stock.
The fund may use active trading at certain times to take advantage of industries
that are benefiting from recent innovations or attractive changes in stock
prices.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
[Sidebars]
TECHNOLOGY STOCKS
Technology companies are those whose processes, products or services may be
expected to significantly benefit from technological developments and the
application of technological advances. Therefore, these companies may be found
in virtually any industry. Because the managers seek companies that benefit from
innovations, there may be times when a significant portion of the portfolio
consists of small- and mid-cap companies.
GROWTH INVESTING
For growth investors, the aim is to invest in companies that are already
successful but could be even more so. In certain rapidly-emerging industries,
such as the Internet, success may be measured in market share rather than
profits. Often, growth stocks are in emerging or rapidly growing industries and
may not yet have reached their full potential. The growth investor looks for
indications of continued success.
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[Sidebars]
FOREIGN SECURITIES
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for excess
cash holdings, the fund increases its risk of loss.
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.
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 behavior, the value of your investment will rise and fall, and you could
lose money.
By focusing on technology stocks, the fund is subject to their risks, including
the risk its holdings may:
- - fluctuate more widely and rapidly in price than the market as a whole
- - underperform other types of stocks or be difficult to sell when the economy
is not robust, during market downturns, or when technology stocks are out
of favor.
- - be subject to the risk that a particular group of stocks of companies in
inter-related industries will decline in price due to sector specific
developments.
- - be affected by the obsolescence of existing technology, expired patents,
short product cycles, price competition, market saturation and new market
entrants.
To the extent that the fund invests in a type of stock, it takes on the risks
associated with that type. For instance, mid-cap and small- cap stocks tend to
be less liquid and more volatile than large-cap stocks. Smaller companies tend
to be unseasoned issuers with new products and less experienced management.
Also, because the prices of most growth stocks are based on future expectations,
these stocks tend to be more sensitive than value stocks to bad economic news
and negative earnings surprises. Growth stocks in particular may underperform
during periods when the market favors value stocks. The fund's performance may
also suffer if certain stocks do not perform as the portfolio management team
expected.
Through active trading, the fund may have a high portfolio turnover rate, which
can mean higher taxable distributions and lower performance due to increased
brokerage costs.
PERFORMANCE - Because the fund is in its first calendar year of operations,
performance charts are not included.
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INVESTOR EXPENSES
The fund does not charge you any fees for buying, selling or exchanging shares,
or for maintaining your account. Your only fund cost is your share or 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 1.11
Plus: Distribution (12b-1) fees None
Other Expenses** X.XX
----
Equals: Total Annual Operating Expenses X.XX
Minus: Expense Reimbursement X.XX
----
Equals: Net Expenses 2.00
*Neuberger Berman Management has contractually agreed to reimburse certain
expenses of the fund through x/xx/xx, so that the total annual operating
expenses of the fund are limited to 2.00% of average net assets. In addition,
the arrangement does not cover interest, taxes, brokerage commissions, and
extraordinary expenses. The fund has agreed to repay Neuberger Berman Management
for expenses reimbursed to the fund provided that the repayment does not cause
the fund's annual operating expenses to exceed 2.00% of its average net assets.
Any such repayment must be made within three years after the year in which
Neuberger Berman Management incurred the expense. The table includes costs paid
by the fund and its share of master portfolio costs. For more information on
master/feeder funds, see "Fund Structure" on page xx.
** 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 you
shares or continued to hole them at the end of each period. Actual performance
and expenses may be lower or higher.
1 Year 3 Years
Expenses
[Sidebar]
MANAGEMENT
The fund is managed by a team of investment professionals led by Jennifer
Silver, Vice President of Neuberger Berman Management and Managing Director of
Neuberger Berman, LLC. This team is part of the Growth Equity Group at Neuberger
Berman, and has managed the fund's assets since April 2000.
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 services, the fund
will pay Neuberger Berman Management a fee at the annual rate of 0.85% of
average net assets.
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<PAGE>
YOUR INVESTMENT
[Sidebar]
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its liabilities,
divided by the total number of shares. Because the value of the fund's
securities changes every business day, the share price usually changes as well.
When valuing portfolio securities, the fund use market prices. However, in rare
cases, events that occur after certain markets have closed may render these
prices unreliable.
When the fund believes a market price does not reflect a security's true value,
the fund may substitute for the market price a fair-value estimate made
according to methods approved by its trustees. The fund may also use these
methods to value certain types of illiquid securities.
SHARE PRICES
Because the fund does not have sales charges, the price you pay for each share
of the fund is the fund's net asset value per share. Similarly, because there
are no fees for selling shares, the fund pays you the full share price when you
sell shares.
The 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. 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.
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 fund shares. Remember, though, any purchase or sale takes
place at the next share price calculated after your order is received.
-6-
<PAGE>
PRIVILEGES
AND SERVICES
As a Neuberger Berman fund shareholder, you have access to a range of services
to make investing easier:
SYSTEMATIC INVESTMENTS -- This plan lets you take advantage of dollar-cost
averaging by establishing periodic investments of $100 a month or more. You
choose the schedule and amount. Your investment money may come from a Neuberger
Berman money market fund or your bank account.
SYSTEMATIC WITHDRAWALS -- This plan lets you arrange withdrawals from a
Neuberger Berman fund of at least $100 on a periodic schedule. You can also set
up payments to distribute the full value of an account over a given time. While
this service can be helpful to many investors, be aware that it could generate
capital gains or losses.
ELECTRONIC BANK TRANSFERS -- When you sell fund shares, you can have the money
sent to your bank account electronically rather than mailed to you as a check.
Please note that your bank must be a member of the Automated Clearing House, or
ACH, system. This service is not available for retirement accounts.
INTERNET ACCESS -- At www.nbfunds.com, you can make transactions, check your
account, and access a wealth of information.
FUNDfone(R) -- 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.
[Sidebar]
DOLLAR-COST AVERAGING
Systematic investing allows you to take advantage of the principle of
dollar-cost averaging. When you make regular investments of a given amount --
say, $100 a month -- you will end up investing at different share prices over
time. When the share price is high, your $100 buys fewer shares; when the share
price is low, your $100 buys more shares. Over time, this can help lower the
average price you pay per share.
Dollar-cost averaging cannot guarantee you a profit or protect you from losses
in a declining market. But it can be beneficial over the long term.
-7-
<PAGE>
[Sidebar]
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected in
its share price until the fund makes a distribution. At that time, the amount of
the distribution is deducted from the share price. The amount of the
distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares of the fund just before the fund makes a
distribution, you'll end up getting some of your investment back as a taxable
distribution. You can avoid this situation by waiting to invest until after the
distribution has been made.
Generally, if you're investing in a tax-advantaged account, there are no tax
consequences to you.
DISTRIBUTIONS
AND TAXES
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund makes these distributions once a year (in
December).
Unless you tell us otherwise, your income and capital gain distributions from
the fund will be reinvested in the fund. However, if you prefer you may:
o receive all distributions in cash
o reinvest capital gain distributions, but receive income distributions in
cash
To take advantage of one of these options, please indicate your choice on your
application.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts 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.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar on facing page) will help clarify
this for you.
-8-
<PAGE>
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 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.
[Sidebar]
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with many
factors, such as your tax bracket, how long you held your shares, and whether
you owe alternative minimum tax.
How can you figure out your tax liability on fund distributions and
transactions? One helpful tool is the tax statement that we send you every
January. It details the distributions you received during the past year and
shows their tax status. A separate statement covers your 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.
-9-
<PAGE>
BACKUP WITHHOLDING
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.
MAINTAINING YOUR
ACCOUNT
WHEN YOU BUY SHARES -- Instructions for buying shares are on pages 46 and 47.
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 -- Instructions for selling shares are on pages 48 and 49.
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:
o in unusual circumstances where the law allows additional time if needed
o if a check you wrote to buy shares hasn't cleared by the time you sell
those shares
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.
-10-
<PAGE>
In some cases, you will have to place your order to sell shares in writing, and
you will need a signature guarantee (see sidebar). These cases include:
o when selling more than $50,000 worth of shares
o 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
o when you want the proceeds sent by wire or electronic transfer to a bank
account you have not designated in advance
When selling shares in an account that you do not intend to close, be sure to
leave at least $1,000 worth of shares in the account. Otherwise, the fund has
the right to request that you bring the balance back up to the minimum level. If
you have not done so within 60 days, we may close your account and send you the
proceeds by mail.
UNCASHED CHECKS --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 a 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).
SIGNATURE GUARANTEES
A signature guarantee is a guarantee that your signature is authentic.
Most banks, brokers, and other financial institutions can provide you with one.
Some may charge a fee; others may not, particularly if you are a customer of
theirs.
A notarized signature from a notary public is not a signature guarantee.
-11-
<PAGE>
[Sidebar]
FUND STRUCTURE
The fund uses a "master-feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds. In
this prospectus, we have used the word "fund" to mean a feeder fund and its
master portfolio.
For reasons relating to costs or a change in investment goal, among others, a
feeder fund could switch to another master portfolio or decide to manage its
assets itself.
MAINTAINING YOUR
ACCOUNT continued
WHEN YOU EXCHANGE SHARES -- You can move money from one Neuberger Berman fund to
another through an exchange of shares. There are three things to remember when
making an exchange:
o both accounts must have the same registration
o you will need to observe the minimum investment and minimum account balance
requirements for the fund accounts involved
o because an exchange is a sale for tax purposes, consider any tax
consequences before placing your order
The exchange program is available to all shareholders in the funds, but can be
withdrawn from any investor that we believe is trying to "time the market" or is
otherwise making exchanges that we judge to be excessive. Frequent exchanges can
interfere with fund management and affect costs and performance for other
shareholders.
PLACING ORDERS BY TELEPHONE -- Neuberger Berman fund investors have the option
of placing telephone orders to buy, sell, or exchange shares. On non-retirement
accounts, this option is available to you unless you indicate on your account
application (or in a subsequent letter to us or to State Street Bank and Trust
Company) that you don't want it.
Whenever we receive a telephone order, we take steps to make sure the order is
legitimate. These may include asking for identifying information and recording
the call. As long as a fund and its representatives take reasonable measures to
-12-
<PAGE>
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:
o suspend the offering of shares
o reject any exchange or investment order
o change, suspend, or revoke the exchange privilege
o suspend the telephone order privilege
o satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
o 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
o change its investment minimums or other requirements for buying and
selling, or waive any minimums or requirements for certain investors
[Sidebar]
CONVERSION TO THE EURO
Like other mutual funds, the fund 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 fund's portfolio will be affected by this
issue.
At the same time, it is impossible to know whether the ongoing conversion
problem, which could disrupt fund operations and investments if problems arise,
has been adequately addressed until the conversion is completed.
-13-
<PAGE>
BUYING SHARES
Method Things to know
Sending us a check Your first investment must be at least $1,000
Additional investments can be as little as $100
We cannot accept cash, money orders, 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 A wire for a first investment must be for at least
$1,000
Exchanging from An exchange for a first investment must be for at
another fund least $1,000
Both accounts involved must be registered in the
same name, address and tax ID number
An exchange order cannot be canceled or changed
once it has been placed
Calling in your order All phone investment orders must be for at least
(with follow-up payment) $1,000
The money for your shares must be received within
three days after you place your order, or your
order may be canceled
You will be responsible for any losses or fees
resulting from a canceled order; if necessary, we
may sell other shares belonging to you in order to
cover these losses
Not available on retirement accounts
Setting up systematic All investments must be at least $100
investments
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<PAGE>
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(R), call 800-335-9366
Call 800-877-9700 to place your order
Follow up with a wire, electronic transfer, or check
(via express delivery)
To add shares to an existing account using FUNDfone(R), call 800-335-9366
Call 800-877-9700 for instructions
[Sidebar]
RETIREMENT PLANS
We offer investors a number of tax-advantaged plans for retirement saving:
TRADITIONAL IRAs allow money to grow tax-deferred until you take it out at
retirement. Contributions are deductible for some investors, but even when
they're not, an IRA can be beneficial.
ROTH IRAs offer tax-free growth like a traditional IRA, but instead of
tax-deductible contributions, the withdrawals are tax-free for investors who
meet certain requirements.
Also available: SEP-IRA, SIMPLE, Keogh, and other types of plans. Consult your
tax professional to find out which types of plans may be beneficial for you,
then call 800-877-9700 for information on any Neuberger Berman retirement plan.
-15-
<PAGE>
SELLING SHARES
Method Things to know
Sending us a letter Unless you tell us otherwise, we will mail your
proceeds by check to the address of record,
payable to the registered owner(s)
If you have designated a bank account on your
application, you can request that we wire the
proceeds to this account; if the total balance in
all of your Neuberger Berman fund accounts is less
than $200,000, you will be charged an $8.00 fee
You can also request that we send the proceeds to
your designated bank account by electronic
transfer without fee
You may need a signature guarantee
Sending us a fax For amounts of up to $50,000
Not available if you have changed the address on
the account by phone, fax, or postal address
change in the past 15 days
Calling in your order All phone orders to sell shares must be for at
least $1,000, unless you are closing out an
account
Not available if you have declined the phone
option or are selling shares in a retirement
account
Not available if you have changed the address on
the account by phone, fax, or postal address
change in the past 15 days
Exchanging into All exchanges must be for at least $1,000
another fund
Both accounts involved must be registered in the
same name, address and tax ID number
An exchange order cannot be canceled 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
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<PAGE>
INSTRUCTIONS
Send us a letter requesting us to sell shares signed by all registered owners;
include your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions
If regular first-class mail, send to:
Neuberger Berman Funds
Boston Service Center
P.O Box 8403
Boston, MA 02266-8403
If express delivery, registered mail, or certified mail, send to:
Neuberger Berman Funds
C/O State Street Bank and Trust Company
66 Brooks Drive
Braintree, MA 02184-3839
Write a request to sell shares as described above
Fax it to 212-476-8848
Call 800-877-9700 to make sure your fax arrived and is in order
Call 800-877-9700 to place your order
Give your name, account number, the fund name, the dollar amount or number of
shares you want to sell, and any other instructions
To place an order using FUNDfone(R), call 800-335-9366
Call 800-877-9700 to place your order
To place an order using FUNDfone(R), call 800-335-9366
Call 800-877-9700 for instructions
[Sidebar]
INTERNET CONNECTION
Investors with Internet access can enjoy many valuable and time-saving features
by visiting us on the World Wide Web at www.nbfunds.com.
The site offers complete information on our funds, current performance data, and
an Investment Education Center with interactive worksheets for college and
retirement planning. Also available are relevant news items, tax information,
portfolio manager interviews, and related articles.
As a Neuberger Berman funds shareholder, you can use the web site to access
account information and even make secure transactions -- 24 hours a day.
-17-
<PAGE>
NOTES
-18-
<PAGE>
OBTAINING INFORMATION
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]
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
NEUBERGER BERMAN TECHNOLOGY FUND
o No load
o No sales charges
o No 12b-1 fees
If you'd like further details about 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:
o a discussion by the portfolio manager(s) about strategies and market
conditions
o fund performance data and financial statements
o complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information on the fund, including:
o various types of securities and practices, and their risks
o investment limitations and additional policies
o information about the fund's management and business structure
The SAI is incorporated by reference into this prospectus, making it legally
part of the prospectus.
Investment manager:
Neuberger Berman Management Inc.
Sub-adviser:
Neuberger Berman, LLC
NEUBERGER BERMAN
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
[RECYCLE LOGO] NMLRR1030299 SEC file number: 811-582
-19-
<PAGE>
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION ____________, 2000
NEUBERGER BERMAN TECHNOLOGY FUND AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL , 2000
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger Berman Technology Fund ("Fund"), a series of
Neuberger Berman Equity Funds ("Trust"), is a no-load mutual fund that offers
shares pursuant to a Prospectus dated April , 2000. The Fund invests all of its
net investable assets in Neuberger Berman Technology Portfolio ("Portfolio").
The Fund's Prospectus provides basic information that an
investor should know before investing. You may obtain 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.
This Statement of Additional Information ("SAI") is not a
prospectus and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to
make any representations not contained in the Prospectus or in this SAI in
connection 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 and
portfolio names in this SAI are either service marks or registered trademarks of
Neuberger Berman Management Inc. (C)2000 Neuberger Berman Management Inc.
THE INFORMATION IS THIS SAI IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES EXCHANGE COMMISSION IS EFFECTIVE. THIS SAI IS NOT A
PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
INVESTMENT INFORMATION.........................................................1
Investment Policies and Limitations...................................1
Investment Insight....................................................3
Additional Investment Information.....................................4
PERFORMANCE INFORMATION.......................................................19
Total Return Computations............................................19
Comparative Information..............................................20
Other Performance Information........................................20
CERTAIN RISK CONSIDERATIONS...................................................21
TRUSTEES AND OFFICERS.........................................................21
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.............................27
Investment Manager and Administrator.................................27
Management and Administration Fees...................................28
Sub-Adviser..........................................................29
Investment Companies Managed.........................................29
Management and Control of NB Management..............................32
DISTRIBUTION ARRANGEMENTS.....................................................32
ADDITIONAL PURCHASE INFORMATION...............................................33
Share Prices and Net Asset Value.....................................33
Automatic Investing and Dollar Cost Averaging........................33
ADDITIONAL EXCHANGE INFORMATION...............................................34
ADDITIONAL REDEMPTION INFORMATION.............................................37
Suspension of Redemptions............................................37
Redemptions in Kind..................................................38
DIVIDENDS AND OTHER DISTRIBUTIONS.............................................38
ADDITIONAL TAX INFORMATION....................................................39
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Page
----
Taxation of the Fund.................................................39
Taxation of the Portfolio............................................39
Taxation of the Fund's Shareholders..................................42
PORTFOLIO TRANSACTIONS........................................................43
Portfolio Turnover...................................................45
REPORTS TO SHAREHOLDERS.......................................................45
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS................................46
CUSTODIAN AND TRANSFER AGENT..................................................48
INDEPENDENT AUDITORS..........................................................48
LEGAL COUNSEL.................................................................48
APPENDIX A...................................................................A-1
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.....................A-1
ii
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a
Delaware business trust that is registered with the Securities and Exchange
Commission ("SEC") as a diversified open-end management investment company. The
Fund seeks its investment objective by investing all of its net investable
assets in the Portfolio, a series of Equity Managers Trust ("Managers Trust")
that has an investment objective identical to that of the Fund. The Portfolio,
in turn, invests in securities in accordance with an investment objective,
policies, and limitations identical to those of the Fund. (The Trust and
Managers Trust, which is an open-end management investment company managed by NB
Management, are together referred to below as the "Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares")
of the Fund or Portfolio represented at a meeting at which more than 50% of the
outstanding Fund or Portfolio shares are represented; or
(2) a majority of the outstanding shares of the Fund or
Portfolio.
These percentages are required by the Investment Company Act
of 1940 ("1940 Act") and are referred to in this SAI as a "1940 Act majority
vote." Whenever the Fund is called upon to vote on a change in a fundamental
investment policy or limitation of the Portfolio, the Fund casts its votes in
proportion to the votes of its shareholders at a meeting thereof called for that
purpose.
Investment Policies and Limitations
- -----------------------------------
The Fund has the following fundamental investment policy, to
enable it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the
Fund may invest all of its investable assets (cash,
securities, and receivables relating to securities) in an
open-end management investment company having substantially
the same investment objective, policies, and limitations as
the Fund.
All other fundamental investment policies and limitations and
the non-fundamental investment policies and limitations of the Fund are
identical to those of the Portfolio. Therefore, although the following discusses
the investment policies and limitations of the Portfolio, it applies equally to
the Fund.
1
<PAGE>
Except for the limitation on borrowing, any investment policy
or limitation that involves a maximum percentage of securities or assets will
not be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and
limitations are as follows:
1. BORROWING. The Portfolio may not borrow money, except that
the Portfolio may (i) borrow money from banks for temporary or emergency
purposes and not for leveraging or investment and (ii) enter into reverse
repurchase agreements for any purpose; provided that (i) and (ii) in combination
do not exceed 33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). If at any time borrowings
exceed 33-1/3% of the value of the Portfolio's total assets, the Portfolio will
reduce its borrowings within three days (excluding Sundays and holidays) to the
extent necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical
commodities or contracts thereon, unless acquired as a result of the ownership
of securities or instruments, but this restriction shall not prohibit the
Portfolio from purchasing futures contracts or options (including options on
futures contracts, but excluding options or futures contracts on physical
commodities) or from investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio 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) if, as a result, (i) more than 5% of the value of
the Portfolio's total assets would be invested in the securities of that issuer
or (ii) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio 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
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
5. LENDING. The Portfolio 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 Portfolio may not purchase real estate
unless acquired as a result of the ownership of securities or instruments, but
this restriction shall not prohibit the Portfolio from purchasing securities
issued by entities or investment vehicles that own or deal in real estate or
interests therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior
securities, except as permitted under the 1940 Act.
2
<PAGE>
8. UNDERWRITING. The Portfolio may not underwrite securities
of other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolio
does not consider foreign currencies or forward contracts to be physical
commodities.
The Portfolio's non-fundamental investment policies and
limitations are as follows:
1. BORROWING. The Portfolio 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 Portfolio may not make any loans other
than securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase
securities on margin from brokers or other lenders, except that the Portfolio
may obtain such short-term credits as are necessary for the clearance of
securities transactions. Margin payments in connection with transactions in
futures contracts and options on futures contracts shall not constitute the
purchase of securities on margin and shall not be deemed to violate the
foregoing limitation.
4. FOREIGN SECURITIES. The Portfolio 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 Portfolio 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 Portfolio has valued the securities, such as repurchase
agreements maturing in more than seven days.
Although the Portfolio does not have policies limiting its
investment in warrants, the Portfolio does not currently intend to invest in
warrants unless acquired in units or attached to securities.
TEMPORARY DEFENSIVE POSITION. For temporary defensive
purposes, the Portfolio may invest up to 100% of its total assets in cash and
cash equivalents, U.S. Government and Agency Securities, commercial paper and
certain other money market instruments, as well as repurchase agreements
collateralized by the foregoing.
Investment Insight
- ------------------
Neuberger Berman's commitment to its asset management approach
is reflected in the more than $______ million the organization's employees and
their families invested in the Neuberger Berman mutual funds.
[TO BE ADDED].
3
<PAGE>
Additional Investment Information
- ---------------------------------
The Portfolio may make the following investments, among
others, although it may not buy all of the types of securities or use all of the
investment techniques that are described.
TECHNOLOGY SECURITIES. These include the securities of
companies substantially engaged in offering, using or developing products,
processes or services that provide, or that benefit significantly from,
technological advances or that are expected to do so. Technology-related
businesses include, among others: computer products, software and electronic
components; computer services; telecommunications; networking; internet; and
biotechnology, pharmaceuticals or medical technology. Although the Portfolio
will not invest 25% or more of its total assets in the securities of issuers
having their principal business activities in the same industry, the Portfolio
may invest in companies in inter-related industries that may react similarly to
economic or competitive pressures. The products or services offered by issuers
of technology securities quickly may become obsolete in the face of
technological developments. The economic outlook of such companies may fluctuate
dramatically due to changes in regulatory or competitive environments. In
addition, technology companies often progress at an accelerated rate, and these
companies may be subject to short product cycles and aggressive pricing which
may increase their volatility. Competitive pressures in the technology-related
industries also may have a significant effect on the performance of technology
securities.
The issuers of technology securities also may be smaller or
newer companies, which may lack depth of management, be unable to generate funds
necessary for growth or potential development, or be developing or marketing new
products or services for which markets are not yet established and may never
become established. In addition, such companies may be subject to intense
competition from larger or more established companies.
POLICIES AND LIMITATIONS. The Portfolio must invest at least
65% of its total assets in technology securities. The Portfolio may not invest
25% or more its total assets in the securities of issuers having their principal
business activities in the same industry.
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 of Managers Trust, determines they are liquid.
Generally, foreign securities freely tradable in their principal market are not
4
<PAGE>
considered restricted or illiquid. Illiquid securities may be difficult for the
Portfolio to value or dispose of due to the absence of an active trading market.
The sale of some illiquid securities by the Portfolio may be subject to legal
restrictions which could be costly to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 15%
of its net assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the
Portfolio 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 Portfolio at a higher price on a designated future date.
Repurchase agreements generally are for a short period of time, usually less
than a week. Costs, delays, or losses could result if the selling party to a
repurchase agreement becomes bankrupt or 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
Portfolio 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 Portfolio may enter into a repurchase agreement only if (1) the underlying
securities are of a type that the Portfolio's investment policies and
limitations would allow it to purchase directly, (2) the market value of the
underlying securities, including accrued interest, at all times equals or
exceeds the repurchase price, and (3) payment for the underlying securities is
made only upon satisfactory evidence that the securities are being held for the
Portfolio's account by its custodian or a bank acting as the Portfolio's agent.
SECURITIES LOANS. The Portfolio 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 Portfolio. The Portfolio may invest the cash collateral and
earn income, or it may receive an agreed upon amount of interest income from a
borrower who has delivered equivalent collateral. During the time securities are
on loan, the borrower will pay the Portfolio an amount equivalent to any
dividends or interest paid on such securities. These loans are subject to
termination at the option of the Portfolio or the borrower. The Portfolio may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Portfolio does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
NB Management believes the risk of loss on these transactions is slight because,
if a borrower were to default for any reason, the collateral should satisfy the
obligation. However, as with other extensions of secured credit, loans of
portfolio securities involve some risk of loss of rights in the collateral
should the borrower fail financially.
POLICIES AND LIMITATIONS. The Portfolio may lend portfolio
securities with a value not exceeding 33-1/3% of its total assets to banks,
brokerage firms, or other institutional investors judged creditworthy by NB
Management. Borrowers are required continuously to secure their obligations to
return securities on loan from the Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
5
<PAGE>
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 Portfolio
may invest in restricted securities, which are securities that may not be sold
to the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
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
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
Where registration is required, the Portfolio may be obligated
to pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. Restricted
securities for which no market exists are priced by a method that the Portfolio
Trustees believe accurately reflects fair value.
POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to the Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase
agreement, the Portfolio sells portfolio securities subject to its agreement to
repurchase the securities at a later date for a fixed price reflecting a market
rate of interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are
considered borrowings for purposes of the Portfolio's investment policies and
limitations concerning borrowings. While a reverse repurchase agreement is
outstanding, the Portfolio will deposit in a segregated account with its
custodian cash or appropriate liquid securities, marked to market daily, in an
amount at least equal to the Portfolio's obligations under the agreement.
FOREIGN SECURITIES. The Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
6
<PAGE>
commercial paper. While investments in foreign securities are intended to reduce
risk by providing further diversification, such investments involve sovereign
and other risks, in addition to the credit and market risks normally associated
with domestic securities. These additional risks include the possibility of
adverse political and economic developments (including political instability,
nationalization, expropriation, or 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 Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities (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 Portfolio endeavors to achieve the most favorable net
results on portfolio transactions.
Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the
prices of foreign securities and exchange rates for foreign currencies. Local
factors, including the strength of the local economy, the demand for borrowing,
the government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
7
<PAGE>
The Portfolio may invest in ADRs, EDRs, GDRs, and IDRs. ADRs
(sponsored or unsponsored) are receipts typically issued by a U.S. bank or trust
company evidencing its ownership of the underlying foreign securities. Most ADRs
are denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers
of the securities underlying sponsored ADRs, but not unsponsored ADRs, are
contractually obligated to disclose material information in the United States.
Therefore, the market value of unsponsored ADRs may not reflect the effect of
such information. EDRs and IDRs are receipts typically issued by a European bank
or trust company evidencing its ownership of the underlying foreign securities.
GDRs are receipts issued by either a U.S. or non-U.S. banking institution
evidencing its ownership of the underlying foreign securities and are often
denominated in U.S. dollars.
POLICIES AND LIMITATIONS. In order to limit the risks inherent
in investing in foreign currency denominated securities, the Portfolio may not
purchase any such security if, as a result, more than 20% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio 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 Portfolio's quality standards. The Portfolio 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, "Hedging Instruments")
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may
purchase and sell interest rate futures contracts, stock and bond index futures
contracts, and foreign currency futures contracts and may purchase and sell
options thereon in an attempt to hedge against changes in the prices of
securities or, in the case of foreign currency futures and options thereon, to
hedge against changes in prevailing currency exchange rates. Because the futures
markets may be more liquid than the cash markets, the use of futures contracts
permits the Portfolio to enhance portfolio liquidity and maintain a defensive
position without having to sell portfolio securities. The Portfolio views
investment in (i) interest rate and securities index futures and options thereon
as a maturity management device and/or a device to reduce risk or preserve total
return in an adverse environment for the hedged securities, and (ii) foreign
currency futures and options thereon as a means of establishing more definitely
the effective return on, or the purchase price of, securities denominated in
foreign currencies that are held or intended to be acquired by the Portfolio.
The Portfolio may purchase and sell stock index futures
contracts, and may purchase and sell options thereon. For purposes of managing
cash flow, the managers may use such futures and options to increase the
Portfolio's exposure to the performance of a recognized securities index, such
as the S&P "500" 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
8
<PAGE>
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.
"Margin" with respect to a futures contract is the amount of
assets that must be deposited by the Portfolio with, or for the benefit of, a
futures commission merchant in order to initiate and maintain the Portfolio's
futures positions. The margin deposit made by the Portfolio when it enters into
a futures contract ("initial margin") is intended to assure its performance of
the contract. If the price of the futures contract changes -- increases in the
case of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
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 Portfolio believes that the use of futures
contracts will benefit it, if NB Management's judgment about the general
direction of the markets or about interest rate or currency exchange rate trends
is incorrect, the Portfolio's overall return would be lower than if it had not
entered into any such contracts. The prices of futures contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest or currency exchange rates, which in turn are affected by fiscal and
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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 Portfolio's futures position and the securities
held by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in
the price of a futures contract or option thereon during a single trading day;
once the daily limit has been reached, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell
stock index futures contracts, and may purchase and sell options thereon. For
purposes of managing cash flow, the managers may use such futures and options to
increase the Portfolio's exposure to the performance of a recognized securities
index, such as the S&P "500" Index.
The Portfolio may also 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 Portfolio does
not engage in transactions in futures and options on futures for speculation.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered
call options and may purchase call options on securities. It may also write
covered call options and may purchase call options in related closing
transactions. The purpose of writing call options is to hedge (i.e., to reduce,
at least in part, the effect of price fluctuations of securities held by the
Portfolio on the Portfolio's and the Fund's net asset values ("NAVs")) or to
earn premium income. Portfolio securities on which call options may be written
and purchased by the Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective.
When the Portfolio writes a call option, it is obligated to
sell a security to a purchaser at a specified price at any time until a certain
date if the purchaser decides to exercise the option. The Portfolio receives a
premium for writing the call option. So long as the obligation of the call
option continues, the Portfolio may be assigned an exercise notice, requiring it
to deliver the underlying security against payment of the exercise price. The
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Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
The writing of covered call options is a conservative
investment technique that is believed to involve relatively little risk but is
capable of enhancing the Portfolio's total return. When writing a covered call
option, the Portfolio, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline.
If a call option that the Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium;
however, that gain may be offset by a decline in the market value of the
underlying security during the option period. If the call option is exercised,
the Portfolio will realize a gain or loss from the sale of the underlying
security.
When the Portfolio purchases a call option, it pays a premium
for the right to purchase a security from the writer at a specified price until
a specified date.
POLICIES AND LIMITATIONS. The Portfolio may write covered call
options and may purchase call options on securities. It may also write covered
call options and may purchase call options in related closing transactions. The
Portfolio writes only "covered" call options on securities it owns (in contrast
to the writing of "naked" or uncovered call options, which the Portfolio will
not do). The Portfolio would purchase a call option to offset a previously
written call option or to protect against an increase in the price of the
securities it intends to purchase.
PUT OPTIONS ON SECURITIES. The Portfolio may write and
purchase put options on securities. The Portfolio will receive a premium for
writing a put option, which obligates the Portfolio to acquire a security at a
certain price at any time until a certain date if the purchaser decides to
exercise the option. The Portfolio may be obligated to purchase the underlying
security at more than its current value.
When the Portfolio purchases a put option, it pays a premium
to the writer for the right to sell a security to the writer for a specified
amount at any time until a certain date. The Portfolio 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 Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective. When
writing a put option, the Portfolio, in return for the premium, takes the risk
that it must purchase the underlying security at a price that may be higher than
the current market price of the security. If a put option that the Portfolio has
written expires unexercised, the Portfolio will realize a gain in the amount of
the premium.
POLICIES AND LIMITATIONS. The Portfolio 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
Portfolio on the Portfolio's and its corresponding Fund's NAVs).
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GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise
price of an option may be below, equal to, or above the market value of the
underlying security at the time the option is written. Options normally have
expiration dates between three and nine months from the date written.
American-style options are exercisable at any time prior to their expiration
date. The obligation under any option written by the Portfolio terminates upon
expiration of the option or, at an earlier time, when the Portfolio offsets the
option by entering into a "closing purchase transaction" to purchase an option
of the same series. If an option is purchased by the Portfolio and is never
exercised or closed out, the Portfolio will lose the entire amount of the
premium paid.
Options are traded both on U.S. national securities exchanges
and in the over-the-counter ("OTC") market. Exchange-traded options in the
United States 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 Portfolio and a counter-party, with no clearing
organization guarantee. Thus, when the Portfolio writes an OTC option, it
generally will be able to "close out" the option prior to its expiration only by
entering into a closing purchase transaction with the dealer to whom the
Portfolio originally sold the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. NB Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
The premium received (or paid) by the Portfolio when it writes
(or purchases) an option is the amount at which the option is currently traded
on the applicable market. The premium may reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to the market price, the historical price volatility of the
underlying security, the length of the option period, the general supply of and
demand for credit, and the interest rate environment. The premium received by
the Portfolio for writing an option is recorded as a liability on the
Portfolio's statement of assets and liabilities. This liability is adjusted
daily to the option's current market value.
Closing transactions are effected in order to realize a profit
(or minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
There is, of course, no assurance that the Portfolio will be able to effect
closing transactions at favorable prices. If the Portfolio cannot enter into
such a transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at market risk on the
security.
The Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than the
premium received from writing the call 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 Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
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The Portfolio pays brokerage commissions or spreads in
connection with purchasing or writing options, including those used to close out
existing positions.
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 Portfolio may use American-style
options. The assets used as cover (or held in a segregated account) for OTC
options written by the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
PUT AND CALL OPTIONS ON SECURITIES INDICES. For purposes of
managing cash flow, the Portfolio may purchase put and call options on
securities indices to increase the Portfolio's exposure to the performance of a
recognized securities index, such as the S&P "500" Index. Unlike a securities
option, which gives the holder the right to purchase or sell a specified
security at a specified price, an option on a securities index gives the holder
the right to receive a cash "exercise settlement amount" equal to (1) the
difference between the exercise price of the option and the value of the
underlying securities index on the exercise date (2) multiplied by a fixed
"index multiplier." A securities index fluctuates with changes in the market
values of the securities included in the index. Options on stock indices are
currently traded on the Chicago Board Options Exchange, the New York Stock
Exchange ("NYSE"), the American Stock Exchange, and other U.S. and foreign
exchanges.
The effectiveness of hedging through the purchase of
securities index options will depend upon the extent to which price movements in
the securities being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by the Portfolio will not exactly match the composition
of the securities indices on which options are available.
Securities index options have characteristics and risks
similar to those of securities options, as discussed herein.
POLICIES AND LIMITATIONS. For purposes of managing cash flow,
the Portfolio may purchase put and call options on securities indices to
increase the Portfolio's exposure to the performance of a recognized securities
index, such as the S&P "500" Index. All securities index options purchased by
the Portfolio will be listed and traded on an exchange.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolio 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.
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The Portfolio enters into forward contracts in an attempt to
hedge against changes in prevailing currency exchange rates. The Portfolio 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 Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency,
the Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency
hedging techniques, including "proxy-hedges," can provide significant protection
of NAV in the event of a general rise in the U.S. dollar against foreign
currencies. For example, the return available from securities denominated in a
particular foreign currency would diminish if the value of the U.S. dollar
increased against that currency. Such a decline could be partially or completely
offset by an increase in value of a hedge involving a forward contract to sell
that foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and if NB Management is incorrect in its judgment
of future exchange rate relationships, the Portfolio could be in a less
advantageous position than if such a hedge had not been established. If the
Portfolio uses proxy-hedging, it may experience losses on both the currency in
which it has invested and the currency used for hedging if the two currencies do
not vary with the expected degree of correlation. Using forward contracts to
protect the value of the Portfolio'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 Portfolio may experience
delays in the settlement of its foreign currency transactions.
POLICIES AND LIMITATIONS. The Portfolio may enter into forward
contracts for the purpose of hedging and not for speculation.
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OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and
purchase covered call and put options on foreign currencies. Currency options
have characteristics and risks similar to those of securities options, as
discussed herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in the
case of exchange-traded currency options.
POLICIES AND LIMITATIONS. The Portfolio would use options on
foreign currencies to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired or to protect the U.S. dollar equivalent of dividends, interest, or
other payments on those securities.
REGULATORY LIMITATIONS ON USING HEDGING INSTRUMENTS. To the
extent the Portfolio sells or purchases futures contracts or writes options
thereon or options on foreign currencies that are traded on an exchange
regulated by the CFTC other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums on those positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the Portfolio's net assets.
COVER FOR HEDGING INSTRUMENTS. Securities held in a segregated
account cannot be sold while the futures, options or forward strategy covered by
those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options or
forward position; this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio 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 HEDGING INSTRUMENTS. The primary risks in
using Hedging 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 Portfolio and the prices of Hedging Instruments; (2) possible
lack of a liquid secondary market for Hedging Instruments and the resulting
inability to close out Hedging Instruments when desired; (3) the fact that the
skills needed to use Hedging Instruments are different from those needed to
select the Portfolio's securities; (4) the fact that, although use of Hedging
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 Portfolio to purchase or sell a portfolio security at a time that would
otherwise be favorable for it to do so, or the possible need for the Portfolio
to sell a portfolio security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of Hedging
Instruments. There can be no assurance that the Portfolio's use of Hedging
Instruments will be successful.
The Portfolio's use of Hedging 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." Hedging
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Instruments may not be available with respect to some currencies, especially
those of so-called emerging market countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the
risk of imperfect correlation by investing only in Hedging Instruments whose
behavior is expected to resemble or offset that of the Portfolio's underlying
securities or currency. NB Management intends to reduce the risk that the
Portfolio will be unable to close out Hedging Instruments by entering into such
transactions only if NB Management believes there will be an active and liquid
secondary market.
FIXED INCOME SECURITIES. While the emphasis of the Portfolio'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 Portfolio may invest in investment grade
corporate bonds and debentures and 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 Portfolio may rely on the ratings of any
NRSRO, the Portfolio 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
Portfolio may invest is likely to decline in times of rising market interest
rates. Conversely, when rates fall, the value of the Portfolio's fixed income
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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 Portfolio warrants exposure to the additional level of risk.
POLICIES AND LIMITATIONS. The Portfolio normally may invest up
to 35% of its total assets in debt securities. The Portfolio may invest up to
15% of its net assets in corporate debt securities rated below investment grade
or Comparable Unrated Securities. Subsequent to its purchase by the Portfolio,
an issue of debt securities may cease to be rated or its rating may be reduced,
so that the securities would no longer be eligible for purchase by the
Portfolio. In such a case, the Portfolio will engage in an orderly disposition
of the downgraded securities to the extent necessary to ensure that the
Portfolio's holdings of securities rated below investment grade and Comparable
Unrated Securities will not exceed 15% of its net assets.
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 Portfolio may invest in commercial paper that cannot be
resold to the public without an effective registration statement under the 1933
Act. While restricted commercial paper normally is deemed illiquid, NB
Management may in certain cases determine that such paper is liquid, pursuant to
guidelines established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolio may invest in
commercial paper only if it has received the highest rating from S&P (A-1) or
Moody's (P-1) or deemed by NB Management to be of comparable quality.
ZERO COUPON SECURITIES. The Portfolio may invest in zero
coupon securities, which are debt obligations that do not entitle the holder to
any periodic payment of interest prior to maturity or that specify a future date
when the securities begin to pay current interest. Zero coupon securities are
issued and traded at a discount from their face amount or par value. This
discount varies depending on prevailing interest rates, the time remaining until
cash payments begin, the liquidity of the security, and the perceived credit
quality of the issuer.
The discount on zero coupon securities ("original issue discount") must
be taken into income ratably by the Portfolio prior to the receipt of any actual
payments. Because the Fund must distribute substantially all of its net income
(including its share of the Portfolio's accrued original issue discount) to its
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shareholders each year for income and excise tax purposes, the Portfolio may
have to dispose of portfolio securities under disadvantageous circumstances to
generate cash, or may be required to borrow, to satisfy the Fund's distribution
requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically. Zero
coupon securities are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having a similar maturity and
credit quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in
convertible securities. A convertible security is a bond, debenture, note,
preferred stock, or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities generally have features of both common stocks and debt securities. A
convertible security entitles the holder to receive the interest paid or accrued
on debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, such
securities ordinarily provide a stream of income with generally higher yields
than common stocks of the same or similar issuers, but lower than the yield on
non-convertible debt. Convertible securities are usually subordinated to
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 Portfolio
is called for redemption, the Portfolio will be required to convert it into the
underlying common stock, sell it to a third party or permit the issuer to redeem
the security. Any of these actions could have an adverse effect on the
Portfolio's and the Fund's ability to achieve their investment objectives.
POLICIES AND LIMITATIONS. Convertible debt securities are
subject to the Portfolio's investment policies and limitations concerning fixed
income securities.
PREFERRED STOCK. The Portfolio may invest in preferred stock.
Unlike interest payments on debt securities, dividends on preferred stock are
generally payable at the discretion of the issuer's board of directors.
Preferred shareholders may have certain rights if dividends are not paid but
generally have no legal recourse against the issuer. Shareholders may suffer a
loss of value if dividends are not paid. The market prices of preferred stocks
are generally more sensitive to changes in the issuer's creditworthiness than
are the prices of debt securities.
SWAP AGREEMENTS. The portfolio may enter into swap agreements
to manage or gain exposure to particular types of investments (including equity
securities or indices of equity securities in which the Portfolio otherwise
could not invest efficiently). In a swap agreement, one party agrees to make
18
<PAGE>
regular payments equal to a floating rate on a specified amount in exchange for
payments equal to a fixed rate, or a different floating rate, on the same amount
for a specific period.
Swap agreements may involve leverage and may be highly
volatile; depending on how they are used, they may have a considerable impact on
the Portfolio's performance. The risks of swap agreements depend upon the other
party's creditworthiness and ability to perform, as well as the Portfolio's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. Swap agreements may be illiquid. The swap market is
relatively new and largely unregulated.
POLICIES AND LIMITATIONS. In accordance with SEC staff
requirements, the Portfolio will segregate cash or appropriate liquid securities
in an amount equal to its obligations under swap agreements; when an agreement
provides for netting of the payments by the two parties, the Portfolio will
segregate only the amount of its net obligation, if any.
OTHER INVESTMENT COMPANIES. The Portfolio at times may invest
in instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P "500" Index. As a
shareholder in an investment company, the Portfolio would bear its pro rata
share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. The Portfolio 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. The Portfolio's investment in such
securities is limited to (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Portfolio's total assets with respect to any one
investment company and (iii) 10% of the Portfolio's total assets in the
aggregate.
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. As of the date of this
SAI, the Fund was new and had no performance history.
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.
19
<PAGE>
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"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell
2000 Stock Index, Russell Midcap Value 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 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 $35 million to
$6.1 billion, with an average of $572 million. The S&P 400 Index
measures mid-sized companies that have an average market capitalization
of $2.1 billion. Each assumes reinvestment of distributions and is
calculated without regard to tax consequences or the costs of
investing. The Portfolio may invest in different types of securities
from those included in some of the above indices.
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 Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the Fund. This information may include the Portfolio's
portfolio 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.
20
<PAGE>
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 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 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 Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance the Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the
trustees and officers of the Trusts, including their addresses and principal
business experience during the past five years. Some persons named as trustees
and officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman, LLC ("Neuberger Berman").
21
<PAGE>
Positions Held With
Name, Age, and Address(1) the Trusts Principal Occupation(s)(2)
- ------------------------- ---------- --------------------------
Claudia A. Brandon (42) Secretary of each Trust Employee of Neuberger
Berman; Secretary of nine
other mutual funds for
which NB Management acts
as investment manager or
administrator.
Faith Colish (64) Trustee of each Trust Attorney at Law, Faith
63 Wall Street Colish, A Professional
24th Floor Corporation.
New York, NY 10005
Stacy Cooper-Shugrue (36) Assistant Secretary of Employee of Neuberger
each Trust Berman; Assistant
Secretary of nine other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Barbara DiGiorgio (40) Assistant Treasurer of Employee of NB Management;
each Trust Assistant Treasurer since
1996 of nine other mutual
funds for which NB
Management acts as
investment manager or
administrator.
Michael M. Kassen* (46) President and Trustee Executive Vice President,
of each Trust Chief Investment Officer
and Director of Neuberger
Berman, Inc. (holding
company); Executive Vice
President, Chief
Investment Officer and
Director of NB Management;
President and Trustee of
six other mutual funds for
which NB Management acts
as investment manager or
administrator.
Howard A. Mileaf (62) Trustee of each Trust Vice President and Special
WHX Corporation Counsel to WHX Corpora-
110 East 59th Street tion (holding company)
30th Floor since 1992; Director of
New York, NY 10022 Kevlin Corporation (manu-
facturer of microwave and
other products).
22
<PAGE>
Positions Held With
Name, Age, and Address(1) the Trusts Principal Occupation(s)(2)
- ------------------------- ---------- --------------------------
Edward I. O'Brien* (71) Trustee of each Trust Until 1993, President of
12 Woods Lane the Securities Industry
Scarsdale, NY 10583 Association ("SIA")
(securities industry's
representative in
government relations and
regulatory matters at the
federal and state levels);
until November 1993,
employee of the SIA;
Director of Legg Mason,
Inc.
John T. Patterson, Jr. (71) Trustee of each Trust Retired. Formerly, Presi-
7082 Siena Court dent of SOBRO (South Bronx
Boca Raton, FL 33433 Overall Economic Develop-
ment Corporation).
C. Carl Randolph (61) Assistant Secretary of General Counsel and
each Trust Secretary of Neuberger
Berman, Inc. holding)
company); Assistant
Secretary of nine other
mutual funds for which NB
Management acts as
investment manager or
administrator.
John P. Rosenthal (66) Trustee of each Trust Senior Vice President of
Burnham Securities Inc. Burnham Securities Inc. (a
Burnham Asset Management Corp. registered broker-dealer)
1325 Avenue of the Americas since 1991; Director,
17th Floor Cancer Treatment Holdings,
New York, NY 10019 Inc.
Richard Russell (52) Treasurer and Principal Employee of NB Management
Accounting Officer of since 1993; Treasurer and
each Trust Principal Accounting
Officer of nine other
mutual funds for which NB
Management acts as
investment manager or
administrator.
Cornelius T. Ryan (68) Trustee of each Trust General Partner of Oxford
Oxford Bioscience Partners Partners and Oxford
315 Post Road West Bioscience Partners
Westport, CT 06880 (venture capital partner-
ships) and President of
Oxford Venture
Corporation; Director of
Capital Cash Management
Trust (money market fund)
and Prime Cash Fund.
23
<PAGE>
Positions Held With
Name, Age, and Address(1) the Trusts Principal Occupation(s)(2)
- ------------------------- ---------- --------------------------
Gustave H. Shubert (70) Trustee of each Trust Senior Fellow/Corporate
13838 Sunset Boulevard Advisor and Advisory
Pacific Palisades, CA 90272 Trustee of Rand (a
non-profit public interest
research institution)
since 1989; Honorary
Member of the Board of
Overseers of the Institute
for Civil Justice, the
Policy Advisory Committee
of the Clinical Scholars
Program at the University
of California, the
American Association for
the Advancement of
Science, the Counsel 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.
Daniel J. Sullivan (59) Vice President of each Senior Vice President of
Trust NB Management since 1992;
Vice President of nine
other mutual funds for
which NB Management acts
as investment manager or
administrator.
Peter E. Sundman* (40) Chairman of the Board, Executive Vice President
Chief Executive Officer and Director of and
of each Trust Trustee Neuberger Berman,
Inc. (holding company);
President and Director of
NB Management; Chairman of
the Board, Chief Executive
Officer and Trustee of
nine other mutual funds
for which NB Management
acts as investment manager
or administrator.
24
<PAGE>
Positions Held With
Name, Age, and Address(1) the Trusts Principal Occupation(s)(2)
- ------------------------- ---------- --------------------------
Michael J. Weiner (51) Vice President and Senior Vice President of
Principal Financial NB Management since 1992;
Officer of each Trust Principal of Neuberger
Berman, LLC 1998-99;
Treasurer of NB Management
from 1992 to 1996; Vice
President and Principal
Financial Officer of nine
other mutual funds for
which NB Management acts
as investment manager or
administrator.
Celeste Wischerth (38) Assistant Treasurer of Employee of NB Manage-
each Trust ment; Assistant Treasurer
since 1996 of nine other
mutual funds for which NB
Management acts as
investment manager or
administrator.
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" within the meaning
of the 1940 Act. Mr. Sundman and Mr. Kassen are interested persons of each Trust
by virtue of the fact that they are officers and/or directors of NB Management
and Managing Directors of Neuberger Berman. Mr. O'Brien is an interested person
of the Trust and Managers Trust by virtue of the fact that he is a director of
Legg Mason, Inc., a wholly owned subsidiary of which, from time to time, serves
as a broker or dealer to the Portfolio and other funds for which NB Management
serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration
of Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
25
<PAGE>
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger Berman Funds
has any retirement plan for its trustees.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/99
-----------------------------
Total Compensation from
Aggregate Investment Companies in
Compensation the Neuberger Berman Fund
Name and Position with the Trust from the Trust Complex Paid to Trustees
- -------------------------------- -------------- --------------------------
Faith Colish $21,602 $96,500
Trustee (5 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief (9 other investment
Executive Officer, and Trustee companies)
Howard A. Mileaf $22,433 $64,250
Trustee (4 other investment
companies)
Edward I. O'Brien $23,069 $61,750
Trustee (3 other investment
companies)
John T. Patterson, Jr. $23,341 $66,500
Trustee (4 other investment
companies)
John P. Rosenthal $22,429 $64,250
Trustee (4 other investment
companies)
Cornelius T. Ryan $19,771 $52,750
Trustee (3 other investment
companies)
Gustave H. Shubert $22,251 $59,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
26
<PAGE>
At __________, 2000, the trustees and officers of the Trusts,
as a group, owned beneficially or of record less than 1% of the outstanding
shares of the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager and Administrator
- ------------------------------------
Because all of the Fund's net investable assets are invested
in the Portfolio, the Fund does not need an investment manager. NB Management
serves as the Portfolio's investment manager pursuant to a management agreement
with Managers Trust, dated as of August 2, 1993 ("Management Agreement"). The
Portfolio was authorized by the Board of Trustees to become subject to the
Management Agreement on January 27, 2000 and became subject to it on
___________, 2000. The Management Agreement was approved by the holders of the
interests in the Portfolio on ___________, 2000.
The Management Agreement provides, in substance, that NB
Management will make and implement investment decisions for the Portfolio in its
discretion and will continuously develop an investment program for the
Portfolio's assets. The Management Agreement permits NB Management to effect
securities transactions on behalf of the Portfolio 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 Portfolio, although NB Management has no
current plans to pay a material amount of such compensation.
NB Management provides to the Portfolio, without separate
cost, office space, equipment, and facilities and the personnel necessary to
perform executive, administrative, and clerical functions. NB Management pays
all salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of NB Management. Two
directors of NB Management (one of whom is an officer of Neuberger Berman and NB
Management), presently serve as trustees and officers of the Trusts. See
"Trustees and Officers." The Portfolio pays NB Management a management fee based
on the Portfolio's average daily net assets, as described below.
NB Management provides facilities, services, and personnel to
the Fund pursuant to an administration agreement with the Trust, dated August 3,
1993, as amended on August 2, 1996. ("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 specified in the Administration Agreement, assists the shareholder
servicing agent in the development and implementation of specified programs and
systems to enhance overall shareholder servicing capabilities, solicits and
gathers shareholder proxies, performs services connected with the qualification
of the Fund's shares for sale in various states, and furnishes other services
the parties agree from time to time should be provided under the Administration
Agreement.
27
<PAGE>
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-dealer or third party a per account fee or a fee based
on a percentage of the aggregate net asset value of Fund shares purchased by the
broker-dealer or third party on behalf of its customers, in payment for
administrative and other services rendered to such customers.
Management and Administration Fees
- ----------------------------------
For investment management services, the Portfolio pays NB
Management a fee at the annual rate of 0.85% of the Portfolio's average daily
net assets.
NB Management provides administrative services to the Fund
that includes 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 0.26% 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 Trustees who are not interested persons of the Trust or of NB
Management, and periodic reports to the Board of Trustees on actual expenses.
With the Fund's consent NB Management may subcontract to third parties some of
its responsibilities to the Fund under the Administration Agreement. In
addition, the Fund may compensate third parties for accounting and other
services.
NB Management has contractually undertaken to reimburse the
Fund for its total operating expenses (excluding interest, taxes, brokerage
commissions and extraordinary expenses) which exceed, in the aggregate, 2.00%
per annum of the Fund's average daily net assets. [This undertaking lasts until
December 31, 2003. The Fund has contractually undertaken to reimburse NB
Management, until December 31, 2006, for the excess expenses paid by NB
Management, provided the reimbursements do not cause the Fund's total operating
expenses (exclusive of taxes, interest, brokerage commissions, and extraordinary
expenses) to exceed an annual rate of 2.00% of average net assets and the
reimbursements are made within three years after the year in which NB Management
incurred the expense.]
The Management Agreement continues until August 2, 2000. The
Management Agreement is renewable thereafter from year to year with respect to
the Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of NB Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in the Portfolio. The Administration
Agreement continues until August 2, 2000. 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 Fund Trustees
who are not "interested persons" of NB Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval, and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in the Fund.
28
<PAGE>
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by NB Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by NB Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
Sub-Adviser
- -----------
NB Management retains Neuberger Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Portfolio was authorized by the Board of Trustees to become subject to the
Sub-Advisory Agreement on January 27, 2000 and became subject to it on
____________, 2000. The Sub-Advisory Agreement was approved by the holders of
the interests in the Portfolio on ___________, 2000.
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 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 August 2, 2000 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 Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
Portfolio, 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 Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger Berman
organization have at least fifteen years experience. Neuberger Berman and NB
Management employ experienced professionals that work in a competitive
environment.
Investment Companies Managed
- ----------------------------
As of December 31, 1999, the investment companies managed by
NB Management had aggregate net assets of approximately $___ billion. NB
Management currently serves as investment manager of the following investment
companies:
29
<PAGE>
Approximate Net Assets at
Name December 31, 1999
---- -----------------
Neuberger Berman Cash Reserves Portfolio.........................$ 1,067,386,621
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio........................$ 496,244,470
(investment portfolio for Neuberger Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio..........................$ 17,717,320
(investment portfolio for Neuberger Berman High Yield Bond Fund)
Neuberger Berman Limited Maturity Bond Portfolio...................$ 264,519,644
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund and
Neuberger Berman Limited Maturity Bond Trust)
Neuberger Berman Municipal Money Portfolio.........................$ 301,713,416
(investment portfolio for Neuberger Berman Municipal Money Fund)
Neuberger Berman Municipal Securities Portfolio.....................$ 32,652,269
(investment portfolio for Neuberger Berman Municipal Securities Trust)
Neuberger Berman Century Portfolio..................................$ 12,994,259
(investment portfolio for Neuberger Berman Century Fund and Neuberger
Berman Century Trust)
Neuberger Berman Focus Portfolio.................................$ 1,772,136,921
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman
Focus Trust, and Neuberger Berman Focus Assets)
Neuberger Berman Genesis Portfolio...............................$ 1,619,248,797
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman
Genesis Trust, Neuberger Berman Genesis Assets and Neuberger Berman
Genesis Institutional)
Neuberger Berman Guardian Portfolio..............................$ 4,406,419,837
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger Berman
Guardian Trust, and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio...........................$ 195,064,579
(investment portfolio for Neuberger Berman International Fund and
Neuberger Berman International Trust)
Neuberger Berman Manhattan Portfolio...............................$ 901,991,808
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
Berman Manhattan Trust, and Neuberger Berman Manhattan Assets)
30
<PAGE>
Neuberger Berman Millennium Portfolio..............................$ 214,859,495
(investment portfolio for Neuberger Berman Millennium Fund, Neuberger
Berman Millennium Trust and Neuberger Berman Millennium Assets)
Neuberger Berman Partners Portfolio..............................$ 3,489,710,309
(investment portfolio for Neuberger Berman Partners Fund, Neuberger Berman
Partners Trust, and Neuberger Berman Partners Assets)
Neuberger Berman Regency Portfolio..................................$ 33,586,640
(investment portfolio for Neuberger Berman Regency Fund and Neuberger
Berman Regency Trust)
Neuberger Berman Socially Responsive Portfolio.....................$ 146,960,016
(investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive Trust, and Neuberger Berman Socially
Responsive Assets)
Advisers Managers Trust (seven series)..........................$ 2,442,187,166
The investment decisions concerning the Portfolio 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
Portfolio. Even where the investment objectives are similar, however, the
methods used by the Other NB Funds and the Portfolio to achieve their objectives
may differ. The investment results achieved by all of the mutual funds managed
by NB Management have varied from one another in the past and are likely to vary
in the future.
There may be occasions when the Portfolio and one or more of
the Other NB Funds or other accounts managed by Neuberger Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger Berman (including the Portfolio, 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.
31
<PAGE>
Management and Control of NB Management
- ---------------------------------------
The directors and officers of NB Management, all of whom have
offices at the same address as NB Management, are Richard A. Cantor, Chairman;
Theodore P. Giuliano, Vice President; Michael M. Kassen, Executive Vice
President and Chief Investment Officer; Barbara Katersky, Senior Vice President;
Daniel J. Sullivan, Senior Vice President; Philip Ambrosio, Senior Vice
President and Chief Financial Officer; Peter E. Sundman, President; Michael J.
Weiner, Senior Vice President; Brooke A. Cobb, Vice President; Valerie Chang,
Vice President; Robert W. D'Alelio, Vice President; Clara Del Villar, Vice
President; Robert S. Franklin, Vice President; Robert I. Gendelman, Vice
President; Thomas Gengler, Vice President; Josephine P. Mahaney, Vice President;
Michael F. Malouf, Vice President; S. Basu Mullick, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Jennifer K. Silver,
Vice President; Kent C. Simons, Vice President; Judith M. Vale, Vice President;
Catherine Waterworth, Vice President; Allan R. White, III, Vice President;
Robert Conti, Treasurer; Ramesh Babu, Vice President; Robert L. Ladd, Vice
President; Ingrid Saukaitis, Vice President; Benjamin E. Segal, Vice President;
Josephine Velez, Vice President; Ellen Metzger, Secretary. Each person named
above, except Mr. Cantor is an employee of Neuberger Berman.
Mr. Sundman and Mr. Kassen are trustees and officers of the
Trust and Managers Trust. Messrs. Sullivan and Weiner are officers of each
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.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares 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 the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of the Fund's shares without sales commission or other
compensation and bears all advertising and promotion expenses incurred in the
sale of the Fund's shares.
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 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.
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The Trust, on behalf of the Fund, and the Distributor are
parties to a Distribution Agreement that continues until August 2, 2000. The
Distribution Agreement may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreements.
ADDITIONAL PURCHASE INFORMATION
Share Prices and Net Asset Value
- --------------------------------
The Fund's shares are bought or sold at a price that is the
Fund's NAV per share. The NAVs for the Fund and the Portfolio are calculated by
subtracting total liabilities from total assets (in the case of the Portfolio,
the market value of the securities the Portfolio holds plus cash and other
assets; in the case of the Fund, its percentage interest in the Portfolio,
multiplied by the Portfolio's NAV, plus any 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 and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio 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 Portfolio 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 Portfolio's valuation procedures (as described above) does not
represent the amount that the Portfolio reasonably expects to receive on a
current sale of the security, the Portfolio will value the security based on a
method that the trustees of the Managers Trust believe accurately reflects fair
value.
Automatic Investing and Dollar Cost Averaging
- ---------------------------------------------
Shareholders may arrange to have a fixed amount automatically
invested in Fund shares each month. To do so, a shareholder must complete an
application, available from the Distributor, electing to have automatic
investments funded either through (1) redemptions from his or her account in a
money market fund for which NB Management serves as investment manager or (2)
withdrawals from the shareholder's checking account. In either case, the minimum
monthly investment is $100. A shareholder who elects to participate in automatic
investing through his or her checking account must include a voided check with
the completed application. A completed application should be sent to Neuberger
Berman Management Incorporated, 605 Third Avenue, 2nd Floor, New York, NY
10158-0180.
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<PAGE>
Automatic investing enables a shareholder to take advantage of
"dollar cost averaging." As a result of dollar cost averaging, a shareholder's
average cost of Fund shares generally would be lower than if the shareholder
purchased a fixed number of shares at the same pre-set intervals. Additional
information on dollar cost averaging may be obtained from the Distributor.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus
entitled "Maintaining Your Account," shareholders may redeem at least $1,000
worth of a Fund's shares and invest the proceeds in shares of one or more of the
other series of the Trust or the Income and Municipal Funds that are briefly
described below, provided that the minimum investment requirements of the other
fund(s) are met.
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<PAGE>
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 Portfolio normally
makes at least 90% of its
investments in not more than six
sectors of the economy believed by
the portfolio 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 Portfolio's
investment). Portfolio managers
seek to buy the stocks of strong
companies with a history of solid
performance and a proven management
team, which are selling at
attractive prices.
Neuberger Berman Guardian Fund A growth and income fund that
invests primarily in stocks of
established, high-quality companies
that are not well followed on Wall
Street or are temporarily out of
favor.
Neuberger Berman International Fund Seeks long-term capital
appreciation by investing primarily
in foreign stocks of any
capitalization, both in developed
economies and in emerging markets.
Portfolio manager seeks undervalued
companies in countries with strong
potential for growth.
Neuberger Berman Manhattan Fund Invests in securities believed to
have the maximum potential for
long-term capital appreciation.
Portfolio managers seek stocks of
companies that are projected to
grow at above-average rates and
that appear to the managers poised
for a period of accelerated
earnings.
Neuberger Berman Millennium Fund Seeks long-term growth of capital
by investing primarily in common
stocks of small-capitalization
companies, which it defines as
those with a total market value of
no more than $1.5 billion at the
time of initial investment. The
portfolio 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.
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<PAGE>
Neuberger Berman Partners Fund Seeks capital growth through an
approach that is intended to
increase capital with reasonable
risk. Portfolio managers look at
fundamentals, focusing particularly
on cash flow, return on capital,
and asset values.
Neuberger Berman Regency Fund Seeks long-term growth of capital
by investing primarily in common
stocks of mid-capitalization
companies which the manager
believes have solid fundamentals.
Neuberger Berman Socially Seeks long-term capital apprecia-
Responsive Fund tion by investing in common stocks
of companies that meet both
financial and social criteria.
INCOME FUNDS
- ------------
Neuberger Berman A U.S. Government money market fund
Government Money Fund seeking maximum safety and
liquidity and the highest available
current income. The corresponding
portfolio invests only in U.S.
Treasury obligations and other
money market instruments backed by
the full faith and credit of the
United States. It seeks to maintain
a constant purchase and redemption
price of $1.00.
Neuberger Berman A money market fund seeking the
Cash Reserves highest current income consistent
with safety and liquidity. The
corresponding portfolio invests in
high-quality money market
instruments. It seeks to maintain a
constant purchase and redemption
price of $1.00.
Neuberger Berman Seeks the highest current income
Limited Maturity Bond Fund consistent with low risk to
principal and liquidity and,
secondarily, total return. The
corresponding portfolio invests in
debt securities, primarily
investment grade; maximum 10% below
investment grade, but no lower than
B.*/ Maximum average duration of
four years.
Neuberger Berman Seeks high current income and,
High Yield Bond Fund secondarily, capital growth, by
investing primarily in lower-rated
debt securities; also invests in
investment grade income-producing
and non-income-producing debt and
equity securities.
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<PAGE>
MUNICIPAL FUNDS
- ---------------
Neuberger Berman A money market fund seeking the
Municipal Money Fund maximum current income exempt from
federal income tax, consistent with
safety and liquidity. The
corresponding portfolio invests in
high-quality, short-term municipal
securities. It seeks to maintain a
constant purchase and redemption
price of $1.00.
Neuberger Berman Municipal Seeks high current tax-exempt
Securities Trust income with low risk to principal,
limited price fluctuation, and
liquidity and, secondarily, total
return. The corresponding portfolio
invests in investment grade
municipal securities. Maximum
average duration of 10 years.
- ---------------
*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by NB Management to be of comparable quality.
The Fund described herein, and any of the Neuberger Berman
Funds described above, may terminate or modify its exchange privilege in the
future.
Before effecting an exchange, Fund shareholders must obtain
and should review a currently effective prospectus of the fund into which the
exchange is to be made. The Neuberger Berman Income and Municipal Funds share a
prospectus. An exchange is treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be realized.
There can be no assurance that Neuberger Berman Government
Money Fund, Neuberger Berman Cash Reserves, or Neuberger Berman Municipal Money
Fund, each of which is a money market fund that seeks to maintain a constant
purchase and redemption price of $1.00, will be able to maintain that price. An
investment in any of the above-referenced funds, as in any other mutual fund, is
neither insured nor guaranteed by the U.S. Government.
ADDITIONAL REDEMPTION INFORMATION
Suspension of Redemptions
- -------------------------
The right to redeem 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 Portfolio to dispose of
securities it owns or fairly to determine the value of its net assets, or (4)
for such other period as the SEC may by order permit for the protection of the
Fund's shareholders. Applicable SEC rules and regulations shall govern whether
the conditions prescribed in (2) or (3) exist. If the right of redemption is
suspended, shareholders may withdraw their offers of redemption, or they will
receive payment at the NAV per share in effect at the close of business on the
first day the NYSE is open ("Business Day") after termination of the suspension.
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<PAGE>
Redemptions in Kind
- -------------------
The Fund reserves the right, under certain conditions, to
honor any request for redemption (or a combination of requests from the same
shareholder in any 90-day period) exceeding $250,000 or 1% of the net assets,
whichever is less, by making payment in whole or in part in securities valued as
described in "Share Prices and Net Asset Value" above. If payment is made in
securities, a shareholder generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund 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 incurred
directly by the Fund), any net realized capital gains, and any net realized
gains from foreign currency transactions earned or realized by the Portfolio.
The Portfolio's net investment income consists of all income accrued on
portfolio assets less accrued expenses, but does not include capital and foreign
currency gains and losses. Net investment income and realized gains and losses
are reflected in the Portfolio's NAV (and, hence, the 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).
Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, 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"). Shareholders may make a cash election on the original
account application or at a later date by writing to State Street Bank and Trust
Company ("State Street"), c/o Boston Service Center, P.O. Box 8403, Boston, MA
02266-8403. Cash distributions can be paid through an electronic transfer to a
bank account designated in the shareholder's original account application. To
the extent dividends and other distributions are subject to federal, state, or
local income taxation, they are taxable to the shareholders whether received in
cash or reinvested in Fund shares.
A cash election with respect to 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 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.
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<PAGE>
ADDITIONAL TAX INFORMATION
Taxation of the Fund
- --------------------
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 Hedging 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 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.
Certain funds that invest in portfolios managed by NB
Management have received rulings from the Internal Revenue Service ("Service")
that each such fund, as an investor in its corresponding portfolio, will be
deemed to own a proportionate share of the portfolio's assets and income for
purposes of determining whether the fund satisfies all the requirements
described above to qualify as a RIC. Although these rulings may not be relied on
as precedent by the Fund, NB Management believes that the reasoning thereof and,
hence, their conclusion apply to the Fund as well.
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.
See the next section for a discussion of the tax consequences
to the Fund of distributions to it from the Portfolio, investments by the
Portfolio in certain securities, and hedging transactions engaged in by the
Portfolio.
Taxation of the Portfolio
- -------------------------
Certain investment portfolios managed by NB Management have
received rulings from the Service to the effect that, among other things, each
portfolio will be treated as a separate partnership for federal income tax
purposes and will not be a "publicly traded partnership." Although these rulings
may not be relied on as precedent by the Portfolio, NB Management believes the
39
<PAGE>
reasoning thereof and hence, their conclusion apply to the Portfolio as well. As
a result, the Portfolio is not subject to federal income tax; instead, each
investor in the Portfolio, such as the Fund, is required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses, deductions, and credits, without regard to whether it has
received any cash distributions from the Portfolio. The Portfolio also is not
subject to Delaware or New York income or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (1) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (2) the Fund's share of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains
realized by the Portfolio, may be subject to income, withholding, or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax treaties between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital gains
in respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (i.e., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder -- 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 Portfolio holds stock of a PFIC, the Fund (indirectly through its interest
in the Portfolio) will be subject to federal income tax on its share of a
portion of any "excess distribution" received by the Portfolio on the stock or
of any gain on the Portfolio's disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes its share of the
PFIC income as a taxable dividend to its shareholders. The balance of the Fund's
share of the PFIC income will be included in its investment company taxable
income and, accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders.
40
<PAGE>
If the Portfolio 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 share of the Portfolio's pro rata share of
the QEF's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which the Fund most
likely would have to distribute to satisfy the Distribution Requirement and
avoid imposition of the Excise Tax -- even if the Portfolio 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.
A holder of stock in any PFIC may elect to include in ordinary
income each taxable year the excess, if any, of the fair market value of the
stock over the adjusted basis therein as of the end of that year. Pursuant to
the election, a deduction (as an ordinary, not capital, loss) also would be
allowed for the excess, if any, of the holder's adjusted basis in PFIC stock
over the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included in
income for prior taxable years. The adjusted basis in each PFIC's stock subject
to the election would be adjusted to reflect the amounts of income included and
deductions taken thereunder (and under regulations proposed in 1992 that
provided a similar election with respect to the stock of certain PFICs).
The Portfolio's use of hedging strategies, such as writing
(selling) and purchasing options 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 Portfolio realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
Hedging Instruments derived by the Portfolio with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts
and listed options thereon subject to Section 1256 of the Code ("Section 1256
contracts") are required to be marked to market (that is, treated as having been
sold at market value) for federal income tax purposes at the end of the
Portfolio's taxable year. Sixty percent of any net gain or loss recognized as a
result of these "deemed sales," and 60% of any net realized gain or loss from
any actual sales, of Section 1256 contracts are treated as long-term capital
gain or loss; the remainder is treated as short-term capital gain or loss.
Section 1256 contracts also may be marked-to-market for purposes of the Excise
Tax. These rules may operate to increase the amount that a Fund must distribute
to satisfy the Distribution Requirement, which will be taxable to the
shareholders as ordinary income, and to increase the net capital gain recognized
by the Fund, without in either case increasing the cash available to the Fund. A
Fund may elect to exclude certain transactions from the operation of section
1256, although doing so may have the effect of increasing the relative
proportion of net short-term capital gain (taxable as ordinary income) and/or
increasing the amount of dividends that must be distributed 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
same or substantially similar property, the Fund will be treated as having made
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<PAGE>
an actual sale thereof, with the result that gain will be recognized 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 similar
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar 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 similar 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).
The Portfolio may acquire zero coupon securities or other
securities issued with original issue discount ("OID"). As a holder of those
securities, the Portfolio (and, through it, the Fund) must take into income the
OID that accrues on the securities during the taxable year, even if it receives
no corresponding payment on them during the year. Because the Fund annually must
distribute substantially all of its investment company taxable income (including
its share of the Portfolio's accrued OID) to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax, the Fund may be required in
a particular year to distribute as a dividend an amount that is greater than its
share of the total amount of cash the Portfolio actually receives. Those
distributions will be made from the Fund's (or its share of the Portfolio's)
cash assets or, if necessary, from the proceeds of sales of the Portfolio's
securities. The Portfolio may realize capital gains or losses from those sales,
which would increase or decrease the Fund's investment company taxable income
and/or net capital gain.
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 and redeem the remaining shares if
the account balance falls below the specified minimum and the shareholder fails
to reestablish the minimum balance after being given the opportunity to do so.
If an account that is closed pursuant to the foregoing was maintained for an IRA
(including 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
42
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proceeds may result in adverse tax consequences for the accountholder. The
accountholder should consult his or her tax adviser regarding any such
consequences.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as principal broker for the Portfolio in
the purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market) and in connection with the writing of covered call
options on its securities.
Portfolio securities are, from time to time, loaned by the
Portfolio to Neuberger Berman in accordance with the terms and conditions of an
order issued by the SEC. The order exempts such transactions from provisions of
the 1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. In accordance with the order, securities loans made by the Portfolio
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 Portfolio in order
to re-lend them to other Neuberger Berman Portfolios, Neuberger Berman may be
required to pay the Portfolio, 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
Portfolio has indicated a willingness to lend, Neuberger Berman must borrow such
security from the Portfolio, 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 Portfolio. If, in any month, the Portfolio's
expenses exceed its income in any securities loan transaction with Neuberger
Berman, Neuberger Berman must reimburse the Portfolio for such loss.
A committee of Independent Portfolio Trustees from time to
time reviews, among other things, information relating to securities loans by
the Portfolio.
In effecting securities transactions, the Portfolio generally
seeks to obtain the best price and execution of orders. Commission rates, being
a component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolio's
knowledge, no affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its securities transactions.
The use of Neuberger Berman as a broker for the Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers 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).
43
<PAGE>
Under the 1940 Act, commissions paid by the Portfolio to
Neuberger Berman in connection with a purchase or sale of securities on a
securities exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
Berman must, in NB Management's judgment, be (1) at least as favorable as those
charged by other brokers having comparable execution capability and (2) at least
as favorable as commissions contemporaneously charged by Neuberger Berman on
comparable transactions for its most favored unaffiliated customers, except for
accounts for which Neuberger Berman acts as a clearing broker for another
brokerage firm and customers of Neuberger Berman considered by a majority of the
Independent Portfolio Trustees not to be comparable to the Portfolio. The
Portfolio 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 Portfolio unless an
appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to
time reviews, among other things, information relating to the commissions
charged by Neuberger Berman to the Portfolio 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
Portfolio must be reviewed and approved no less often than annually by a
majority of the Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including
the Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will execute a portion of its
transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of NB Management and
employees of Neuberger Berman who are portfolio managers of the Portfolio and
Other NB Funds (collectively, "NB Funds") and some of Neuberger Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
44
<PAGE>
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman
may be higher than the amount another firm might charge if NB Management
determines in good faith that the amount of those commissions is reasonable in
relation to the value of the brokerage and research services provided by the
broker. NB Management believes that those research services benefit the
Portfolio by supplementing the information otherwise available to NB Management.
That research may be used by NB Management in servicing Other NB Funds and, in
some cases, by Neuberger Berman in servicing the Managed Accounts. On the other
hand, research received by NB Management from brokers effecting portfolio
transactions on behalf of the Other NB Funds and by Neuberger Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolio's benefit.
An investment team is primarily responsible for making
decisions as to specific action to be taken with respect to the investment
portfolio of the Portfolio. Each of them has full authority to take action with
respect to portfolio transactions and may or may not consult with other
personnel of NB Management prior to taking such action. The team is made up from
members of the Neuberger Berman Growth Group, headed by Jennifer Silver, Vice
President of Neuberger Berman Management, and Managing Director of Neuberger
Berman, LLC.
Portfolio Turnover
- ------------------
The Portfolio's portfolio turnover rate is calculated by
dividing (1) the lesser of the cost of the securities purchased or the proceeds
from the securities sold by the Portfolio during the fiscal year (other than
securities, including options, whose maturity or expiration date at the time of
acquisition was one year or less) by (2) the month-end average of the value of
such securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual
financial statements, as well as year-end financial statements audited by the
independent auditors for the Fund and Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
45
<PAGE>
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
The Fund
- --------
The Fund is a separate operating 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 ten separate operating series. Each series of the Trust invests all of
its net investable assets in its corresponding Portfolio, in each case receiving
a beneficial interest in that Portfolio. The trustees of the Trust may establish
additional series or classes of shares without the approval of shareholders. The
assets of each series belong only to that series, and the liabilities of each
series are borne solely by that series and no other.
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. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other rights to subscribe to any additional
shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend
to hold annual meetings of shareholders of the Fund. The trustees will call
special meetings of shareholders of the Fund only if required under the 1940 Act
or in their discretion or upon the written request of holders of 10% or more of
the outstanding shares of the Fund entitled to vote.
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.
The Portfolio
- -------------
The Portfolio is a separate operating series of Managers
Trust, a New York common law trust organized as of December 1, 1992. Managers
Trust is registered under the 1940 Act as a diversified, open-end management
investment company. Managers Trust has ten separate Portfolios. The assets of
each Portfolio belong only to that Portfolio, and the liabilities of each
Portfolio are borne solely by that Portfolio and no other.
FUND'S INVESTMENTS IN THE PORTFOLIO. The Fund is a "feeder
fund" that seeks to achieve its investment objective by investing all of its net
investable assets in the Portfolio, which is a "master fund." The Portfolio,
46
<PAGE>
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. Series of three other investment
companies, Neuberger Berman Equity Trust ("Equity Trust"), Neuberger Berman
Equity Assets ("Equity Assets") and Neuberger Berman Equity Series ("Equity
Series"), invest all of their respective net assets in corresponding Portfolios
of Managers Trust. Equity Trust, Equity Assets and Equity Series do not sell
their shares directly to members of the general public.
The Portfolio may also permit other investment companies
and/or other institutional investors to invest in the Portfolio. All investors
will invest in the Portfolio on the same terms and conditions as the Fund and
will pay a proportionate share of the Portfolio's expenses. Other investors in
the Portfolio (including the series of Equity Trust and Equity Assets) are not
required to sell their shares at the same public offering price as the Fund,
could have a different administration fee and expenses than the Fund, and
(except Equity Trust and Equity Assets) might charge a sales commission.
Therefore, Fund shareholders may have different returns than shareholders in
another investment company that invests exclusively in the Portfolio.
Information regarding any fund that invests in the Portfolio is available from
NB Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the
Portfolio by a series of Equity Trust or Equity Assets or by other potential
investors in addition to the Fund may enable the Portfolio to realize economies
of scale that could reduce its operating expenses, thereby producing higher
returns and benefiting all shareholders. However, the Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a large investor in the Portfolio (other than
the Fund) redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio
at any time, if the trustees of the Trust determine that it is in the best
interests of the Fund and its shareholders to do so. The Fund might withdraw,
for example, if there were other investors in the Portfolio with power to, and
who did by a vote of all investors (including the Fund), change the investment
objective, policies, or limitations of the Portfolio in a manner not acceptable
to the trustees of the Trust. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio to the Fund. That distribution could result in a less diversified
portfolio of investments for the Fund and could affect adversely the liquidity
of the Fund's investment portfolio. If the Fund decided to convert those
securities to cash, it usually would incur brokerage fees or other transaction
costs. If the Fund withdrew its investment from the Portfolio, the trustees of
the Trust would consider what actions might be taken, including the investment
of all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.
47
<PAGE>
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not
hold meetings of investors except as required by the 1940 Act. Each investor in
the Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including
the Fund, will be liable for all obligations of the Portfolio. However, the risk
of an investor in the Portfolio incurring financial loss beyond the amount of
its investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA 02110, as custodian for their
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 correspondence should be mailed to Neuberger Berman
Funds, c/o Boston Service Center, P.O. Box 8403, Boston, MA 02266-8403. In
addition, State Street serves as transfer agent for the Portfolio.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected [name of independent
accountants] as the independent accountants who will audit their financial
statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart
LLP, 1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
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 and Portfolio.
48
<PAGE>
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.
49
<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.
<PAGE>
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
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. 89 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.
(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.
(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.
(4) Schedule A - Current Series of Neuberger Berman Equity
Funds. To Be Filed by Amendment.
(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.
(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.
(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.
(d) (1) (i) Management Agreement Between Equity Managers
Trust and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Management Agreement. To
Be Filed by Amendment.
(iii) Schedule B - Schedule of Compensation Under the
Management Agreement. Incorporated by Reference
to Post-Effective Amendment No. 87 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582.
3
<PAGE>
Exhibit Description
Number -----------
------
(2) (i) Sub-Advisory Agreement Between Neuberger Berman
Management Inc. and Neuberger Berman, LLC with
Respect to Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment No. 70 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Sub-Advisory Agreement.
To Be Filed by Amendment.
(3) (i) Management Agreement Between Global Managers
Trust and Neuberger Berman Management Inc..
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(iii) Schedule B - Schedule of Compensation Under the
Management Agreement. Incorporated by Reference
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582.
(4) (i) Sub-Advisory Agreement Between Neuberger Berman
Management Inc. and Neuberger Berman, LLC with
Respect to Global Managers Trust. Incorporated by
Reference to Post-Effective Amendment No. 74 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582.
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Sub-Advisory Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(e) (1) Distribution Agreement Between Neuberger Berman Equity
Funds and Neuberger Berman Management Inc. Incorporated
by Reference to Post-Effective Amendment No. 87 to
Registrant's Registration Statement, File Nos. 2-11357
and 811-582.
(2) Schedule A - Series of Neuberger Berman Equity Funds
Currently Subject to the Distribution Agreement. To Be
Filed by Amendment.
(f) Bonus, Profit Sharing or Pension Plans. 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.
4
<PAGE>
Exhibit Description
Number -----------
------
(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.
(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.
(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.
(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.
(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.
(2) (i) Administration Agreement Between Neuberger Berman
Equity Funds and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(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. Incorporated by
Reference to Post-Effective Amendment No. 87 to
Registrant's Registration Statement, File Nos.
2-11357 and 811-582.
(i) (1) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Equity Funds. Incorporated by Reference to
Post-Effective Amendment No. 77 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(2) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Socially Responsive Fund. Incorporated by Reference to
Post-Effective Amendment No. 77 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
5
<PAGE>
Exhibit Description
Number -----------
------
(3) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
International Fund. Incorporated by Reference to
Post-Effective Amendment No. 77 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(4) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Millennium Fund. Incorporated by Reference to
Post-Effective Amendment No. 81 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(5) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Regency Fund. Incorporated by Reference to
Post-Effective Amendment No. 83 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(6) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Century Fund. Incorporated by Reference to
Post-Effective Amendment No. 87 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(7) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Technology Fund. To Be Filed by Amendment.
(j) Consent of Independent Auditors. None.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedule. Not Applicable.
(o) Plan Pursuant to Rule 18f-3. None.
Item 24. Persons Controlled By or Under Common Control with Registrant.
- ------- -------------------------------------------------------------
No person is controlled by or under common control with the Registrant.
(Registrant is organized in a master/feeder fund structure, and technically may
be considered to control the master funds in which it invests, Equity Managers
Trust and Global Managers Trust.)
Item 25. Indemnification.
- ------- ---------------
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
6
<PAGE>
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, 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 Agreements between Neuberger Berman
Management Inc. ("NB Management") and Equity Managers Trust and Global Managers
Trust (Equity Managers Trust and Global Managers Trust are collectively referred
to as the "Managers Trusts") provide that neither NB Management nor any
director, officer or employee of NB Management performing services for the
series of the Managers Trusts at the direction or request of NB Management in
connection with NB Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relates; provided, that nothing in the Agreements shall be construed
(i) to protect NB Management against any liability to the Managers Trusts or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
disregard of its obligations and duties under the Agreements, or (ii) to protect
any director, officer or employee of NB Management who is or was a trustee or
officer of the Managers Trusts against any liability to the Managers Trusts or
any series thereof or its interest holders to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's office
with Managers Trusts.
Section 1 of the Sub-Advisory Agreements between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Managers Trusts
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties or of reckless disregard of its
duties and obligations under the Agreement, Neuberger Berman will not be subject
to any liability for any act or omission or any loss suffered by any series of
the Managers Trusts or their interest holders in connection with the matters to
which the Agreements relate.
Section 12 of the Administration Agreement between the Registrant and NB
Management provides that NB Management will not be liable to the Registrant for
any action taken or omitted to be 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 the Administration Agreement provides that the Registrant shall indemnify
NB Management and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by NB
Management that result from: (i) any claim, action, suit or proceeding in
connection with NB Management's entry into or performance of the Agreement; or
(ii) any action taken or omission to act committed by NB Management in the
performance of its obligations under the Agreement; or (iii) any action of NB
Management upon instructions believed in good faith by it to have been executed
by a duly authorized officer or representative of a Series; provided, that NB
Management will not be entitled to such indemnification in respect of actions or
omissions constituting negligence or misconduct on the part of NB Management, or
its employees, agents or contractors. Amounts payable by the Registrant under
this provision shall be payable solely out of assets belonging to that Series,
and not from assets belonging to any other Series of the Registrant. Section 14
7
<PAGE>
of the Administration Agreement provides that NB Management will indemnify the
Registrant and hold it harmless from and against any and all losses, damages and
expenses, including reasonable attorneys' fees and expenses, incurred by the
Registrant that result from: (i) NB Management's failure to comply with the
terms of the Agreement; or (ii) NB Management's lack of good faith in performing
its obligations under the Agreement; or (iii) the negligence or misconduct of NB
Management, or its employees, agents or contractors in connection with the
Agreement. The Registrant shall not be entitled to such indemnification in
respect of actions or omissions constituting negligence or misconduct on the
part of the Registrant or its employees, agents or contractors other than NB
Management, unless such negligence or misconduct results from or is accompanied
by negligence or misconduct on the part of NB Management, any affiliated person
of NB Management, or any affiliated person of an affiliated person of NB
Management.
Section 11 of the Distribution Agreement between the Registrant and NB
Management provides that NB Management shall look only to the assets of a Series
for the Registrant's performance of the Agreement by the Registrant 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 each principal of Neuberger Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Philip Ambrosio Senior Vice President and Chief Financial
Senior Vice President and Chief Officer, Neuberger Berman Inc.
Financial Officer,
NB Management
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, International Investors. Senior Vice
NB Management President and Senior Portfolio Manager,
Putnam Investments.(1)
Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President, NB Income Funds; President and Trustee,
Management; Managing Neuberger Berman Income Trust; President and
Director, Neuberger Berman Trustee, Income Managers Trust.
Michael M. Kassen Executive Vice President, Chief Investment
Executive Vice Officer and Director, Neuberger Berman Inc.
President and Chief
Executive Officer,
NB Management
Jeffrey B. Lane President, Chief Executive Officer and
President and Chief Director of Neuberger Berman, Inc.
Executive Officer,
Neuberger Berman
Michael F. Malouf Portfolio Manager, Dresdner
Vice President RCM Global Investors.(2)
NB Management
Robert Matza Executive Vice President,
Executive Vice President and Chief Administrative Officer
Chief Administrative Officer, and Director, Neuberger Berman, Inc.
Neuberger Berman
S. Basu Mullick Portfolio Manager, Ark Asset
Vice President, Management(3)
NB Management
- ---------------------------
1 Until 1997.
2 Until 1998.
3 Until 1998.
9
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
C. Carl Randolph Secretary and General Counsel, Neuberger
Senior Vice President, Berman, Inc. Assistant Secretary,
General Counsel and Secretary, Neuberger Berman Advisers Management Trust;
Neuberger Berman Assistant Secretary, Advisers Managers
Trust; Assistant Secretary, Neuberger Berman
Income Funds; Assistant Secretary, Neuberger
Berman Income Trust; Assistant Secretary,
Neuberger Berman Equity Funds; Assistant
Secretary, Neuberger Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger Berman Equity
Assets; Assistant Secretary, Neuberger Berman
Equity Series.
Ingrid Saukaitis Project Director, Council on Economic
Vice President, NB Priorities.(4)
Management
Heidi L. Schneider Executive Vice President and Director,
Executive Vice President, Neuberger Berman, Inc.
Neuberger Berman
Benjamin E. Segal Assistant Portfolio Manager, GT Global
Vice President, NB Investment Management*/; Consultant,
Management, Managing Bain & Company, Inc.**/
Director, Neuberger Berman
Jennifer K. Silver Portfolio Manager and Director, Putnum
Vice President, NB Investments.(5)
Management, Managing Director,
Neuberger Berman
- --------------------------
4 Until 1997.
* Until 1997.
** Until 1997.
5 Until 1997.
10
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Daniel J. Sullivan Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President,
NB Management Advisers Managers Trust; Vice President,
Neuberger Berman Income Funds; Vice
President, Neuberger Berman Income Trust;
Vice President, Neuberger Berman Equity
Funds; Vice President, Neuberger Berman
Equity Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers Trust;
Vice President, Global Managers Trust; Vice
President, Neuberger Berman Equity Assets;
Vice President, Neuberger Berman Equity
Series.
Peter E. Sundman Executive Vice President and Director,
President, NB Management; Neuberger Berman Inc.
Executive Vice President,
Neuberger Berman
Michael J. Weiner Vice President, Neuberger Berman Advisers
Senior Vice President, Management Trust; Vice President,
NB Management; Senior Vice Advisers Managers Trust; Vice President,
President, Neuberger Neuberger Berman Income Funds; Vice
Berman President, Neuberger Berman Income Trust;
Vice President, Neuberger Berman Equity
Funds; Vice President, Neuberger Berman
Equity Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers Trust;
Vice President, Global Managers Trust; Vice
President, Neuberger Berman Equity Assets;
Vice President, Neuberger Berman Equity
Series.
Allan R. White, III Portfolio Manager, Salomon Asset
Vice President, NB Management; Management.(6)
Managing Director,
Neuberger Berman
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
Item 27. Principal Underwriters.
- ------- ----------------------
(a) NB Management, the principal underwriter distributing securities of
the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Assets
Neuberger Berman Equity Series
- --------------------------
6 Until 1998.
11
<PAGE>
Neuberger Berman Equity Trust
Neuberger Berman Income Funds
Neuberger Berman Income Trust
NB Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and officers
of the Registrant's principal underwriter. The principal business address of
each of the persons listed is 605 Third Avenue, New York, New York 10158-0180,
which is also the address of the Registrant's principal underwriter.
12
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
- ---- WITH UNDERWRITER WITH REGISTRANT
--------------------- ---------------------
Ramesh Babu Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Robert S. Franklin Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Vice President None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Ellen Metzger Secretary None
S. Basu Mullick Vice President None
Janet W. Prindle Vice President None
Kevin L. Risen Vice President None
Ingrid Saukaitis Vice President None
Benjamin Segal Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman President None
Judith M. Vale Vice President None
Josephine Velez Vice President None
Catherine Waterworth Vice President None
Michael J. Weiner Senior Vice President Vice President
and Principal
Financial Officer
Allan R. White, III Vice President None
(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.
13
<PAGE>
Item 28. Location of Accounts and Records.
- ------- --------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for Equity Managers Trust's Declaration of Trust and By-laws, minutes of
meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Global Managers Trust are maintained at the offices of State
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
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.
14
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST has duly caused this
Post-Effective Amendment No. 89 to the Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City and State of
New York on the 1st day of February, 2000.
EQUITY MANAGERS TRUST
By:/s/ Michael M. Kassen
-----------------------
Michael M. Kassen
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 89 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 January 31, 2000
- ----------------------- and Trustee (Chief
Executive Officer)
/s/ Michael M. Kassen President and Trustee January 31, 2000
- -----------------------
Michael M. Kassen
/s/ Michael J. Weiner Vice President January 31, 2000
- ----------------------- (Principal Financial
Michael J. Weiner Officer)
/s/ Richard Russell Treasurer (Principal January 31, 2000
- ----------------------- Accounting Officer)
Richard Russell
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Faith Colish Trustee January 31, 2000
- -----------------------
Faith Colish
/s/ Howard A. Mileaf Trustee January 31, 2000
- -----------------------
Howard A. Mileaf
/s/ Edward I. O'Brien Trustee January 31, 2000
- -----------------------
Edward I. O'Brien
Trustee
- -----------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee January 31, 2000
- -----------------------
John P. Rosenthal
/s/ Cornelius T. Ryan Trustee January 31, 2000
- -----------------------
Cornelius T. Ryan
Trustee
- -----------------------
Gustave H. Shubert
<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. 89 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 1st day of February, 2000.
NEUBERGER BERMAN EQUITY FUNDS
By: /s/ Michael M. Kassen
-----------------------------
Michael M. Kassen
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 89 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 January 31, 2000
- ----------------------- and Trustee (Chief
Peter E. Sundman Executive Officer)
/s/ Michael M. Kassen President and Trustee January 31, 2000
- -----------------------
Michael M. Kassen
/s/ Michael J. Weiner Vice President January 31, 2000
- ----------------------- (Principal Financial
Michael J. Weiner Officer)
/s/ Richard Russell Treasurer (Principal January 31, 2000
- ----------------------- Accounting Officer)
(Richard Russell
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Faith Colish Trustee January 31, 2000
- -----------------------
Faith Colish
/s/ Howard A. Mileaf Trustee January 31, 2000
- -----------------------
Howard A. Mileaf
/s/ Edward I. O'Brien Trustee January 31, 2000
- -----------------------
Edward I. O'Brien
Trustee
- -----------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee January 31, 2000
- -----------------------
John P. Rosenthal
/s/ Cornelius T. Ryan Trustee January 31, 2000
- -----------------------
Cornelius T. Ryan
Trustee
- -----------------------
Gustave H. Shubert
<PAGE>
NEUBERGER BERMAN EQUITY FUNDS
POST-EFFECTIVE AMENDMENT NO. 89 ON FORM N-1A
INDEX TO 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.
(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.
(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.
(4) Schedule A - Current Series of Neuberger Berman Equity
Funds. To Be Filed by Amendment.
(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.
(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.
(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.
(d) (1) (i) Management Agreement Between Equity
Managers Trust and Neuberger Berman
Management Inc. Incorporated by
Reference to Post-Effective Amendment
No. 87 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Management Agreement. To Be Filed by
Amendment.
(iii)Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 87 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, LLC with Respect to Equity
Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. To Be Filed by
Amendment.
15
<PAGE>
Exhibit Description
Number -----------
------
(3) (i) Management Agreement Between Global Managers
Trust and Neuberger Berman Management Inc..
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(4) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger
Berman, LLC with Respect to Global
Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(e) (1) Distribution Agreement Between Neuberger
Berman Equity Funds and Neuberger Berman
Management Inc. Incorporated by Reference to
Post-Effective Amendment No. 87 to
Registrant's Registration Statement, File
Nos. 2-11357 and 811-582.
(2) Schedule A - Series of Neuberger Berman
Equity Funds Currently Subject to the
Distribution Agreement. To Be Filed by
Amendment.
(f) Bonus, Profit Sharing or Pension Plans. 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.
(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.
(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.
16
<PAGE>
Exhibit Description
Number -----------
------
(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.
(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.
(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.
(2) (i) Administration Agreement Between
Neuberger Berman Equity Funds and
Neuberger Berman Management Inc.
Incorporated by Reference to
Post-Effective Amendment No. 87 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(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.
Incorporated by Reference to
Post-Effective Amendment No. 87 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(i) (1) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Equity Funds. Incorporated by Reference to Post-Effective
Amendment No. 77 to Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(2) Opinion and Consent of Kirkpatrick & Lockhart
LLP on Securities Matters with Respect to
Neuberger Berman Socially Responsive Fund.
Incorporated by Reference to Post-Effective
Amendment No. 77 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582.
(3) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
International Fund. Incorporated by Reference to
Post-Effective Amendment No. 77 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
(4) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Millennium Fund. Incorporated by Reference to
Post-Effective Amendment No. 81 to Registrant's
Registration Statement, File Nos. 2-11357 and 811-582.
17
<PAGE>
Exhibit Description
Number -----------
------
(5) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Regency Fund. Incorporated by Reference to Post-Effective
Amendment No. 83 to Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(6) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Century Fund. Incorporated by Reference to Post-Effective
Amendment No. 87 to Registrant's Registration Statement,
File Nos. 2-11357 and 811-582.
(7) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Technology Fund. To Be Filed by Amendment.
(j) Consent of Independent Auditors. None.
(k) Financial Statements Omitted from
Prospectus. None.
(l) Letter of Investment Intent. None.
(m) Plan Pursuant to Rule 12b-1. None.
(n) Financial Data Schedule. Not Applicable.
(o) Plan Pursuant to Rule 18f-3. None.
18
