As filed with the Securities and Exchange Commission on December 5, 1996
1933 Act Registration No. 33-64368
1940 Act Registration No. 811-7784
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. [_10_] [_X_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_X_]
Amendment No. [_8_] [_X_]
(Check appropriate box or boxes)
NEUBERGER & BERMAN EQUITY TRUST
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger & Berman Equity Trust
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) _X_ on December 6,
1996 pursuant to paragraph (b) ___ 60 days after filing pursuant to
paragraph (a)(1) ___ on _______________, pursuant to paragraph (a)(1) ___
75 days after filing pursuant to paragraph (a)(2) ___ on __________,
pursuant to paragraph (a)(2)
Registrant has filed a declaration pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended, and filed the notice
required by such rule for its 1996 fiscal year on October 25, 1996.
Neuberger & Berman Equity Trust is a "master/feeder fund." This
Post-Effective Amendment No. 10 includes a signature page for the master
fund, Equity Managers Trust, and appropriate officers and trustees thereof.
Page _______ of _______
Exhibit Index Begins on
Page _______
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 10 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 10 on Form N-1A
Cross Reference Sheet
Neuberger & Berman Focus Trust
Neuberger & Berman Genesis Trust
Neuberger & Berman Guardian Trust
Neuberger & Berman Manhattan Trust
Neuberger & Berman Partners Trust
---------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Neuberger & Berman Guardian Trust
---------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Neuberger & Berman NYCDC Socially Responsive Trust
--------------------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 10 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for
Neuberger & Berman Focus Trust, Neuberger & Berman Genesis Trust,
Neuberger & Berman Guardian Trust, Neuberger & Berman Manhattan Trust,
and Neuberger & Berman Partners Trust
<TABLE>
<CAPTION>
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Information Financial Highlights; Performance Information
Item 4. General Description of Registrant Investment Programs; Description of Investments;
Special Information Regarding Organization,
Capitalization, and Other Matters
Item 5. Management of the Fund Management and Administration; Other Information;
Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other Distributions, and
Securities Taxes; Special Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Being Shareholder Services; Share Prices and Net Asset
Offered Value; Management and Administration
Item 8. Redemption or Repurchase Shareholder Services; Share Prices and Net Asset
Value
Item 9. Pending Legal Proceedings Not Applicable
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 12. General Information and History Organization
Item 13. Investment Objectives and Investment Information; Certain Risk Considerations
Policies
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Principal Control Persons and Principal Holders of Securities
Holders of Securities
Item 16. Investment Advisory and Other Investment Management and Administration Services;
Services Trustees And Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And Transfer
Agent; Independent Auditors/Accountants
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional Redemption
Securities Information; Dividends and Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional Exchange
Information; Additional Redemption Information
Item 20. Tax Status Dividends and Other Distributions; Additional Tax
Information
Item 21. Underwriters Investment Management and Administration Services;
Distribution Arrangements
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE>
Prospectus and Statement of Additional Information
for Neuberger & Berman Guardian Trust
<TABLE>
<CAPTION>
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Information Financial Highlights; Performance Information
Item 4. General Description of Registrant Investment Program; Description of Investments; Special
Information Regarding Organization, Capitalization, and
Other Matters
Item 5. Management of the Fund Management and Administration; Directory; Back Cover
Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other Distributions, and
Securities Taxes; Special Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Being How to Buy Shares; Share Prices and Net Asset Value;
Offered Management and Administration
Item 8. Redemption or Repurchase How to Sell Shares; Share Prices and Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Investment Information; Certain Risk Considerations
Policies
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Principal Control Persons and Principal Holders of Securities
Holders of Securities
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 16. Investment Advisory and Other Investment Management and Administration Services;
Services Trustees And Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And Transfer Agent;
Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional Redemption
Securities Information; Dividends and Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional Redemption
Information
Item 20. Tax Status Dividends and Other Distributions; Additional Tax
Information
Item 21. Underwriters Investment Management and Administration Services;
Distribution Arrangements
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE>
Prospectus and Statement of Additional Information
for Neuberger & Berman NYCDC Socially Responsive Trust
<TABLE>
<CAPTION>
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Information Financial Highlights; Performance Information
Item 4. General Description of Registrant Investment Program; Description of Investments; Special
Information Regarding Organization, Capitalization, and
Other Matters
Item 5. Management of the Fund Management and Administration; Directory; Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other Distributions, and Taxes;
Securities Special Information Regarding Organization, Capitalization,
and Other Matters
Item 7. Purchase of Securities Being How to Buy and Sell Shares; Share Prices and Net Asset
Offered Value; Management and Administration
Item 8. Redemption or Repurchase How to Buy and Sell Shares; Share Prices and Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Investment Information; Certain Risk Considerations
Policies
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Principal Control Persons and Principal Holders of Securities
Holders of Securities
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 16. Investment Advisory and Other Investment Management and Administration Services; Trustees
Services And Officers; Distribution Arrangements; Reports To
Shareholders; Custodian And Transfer Agent; Independent
Accountants
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional Redemption Information;
Securities Dividends and Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional Redemption Information
Item 20. Tax Status Dividends and Other Distributions; Additional Tax
Information
Item 21. Underwriters Investment Management and Administration Services;
Distribution Arrangements
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Post-Effective
Amendment No. 10.
<PAGE>
<PAGE>
PROSPECTUS
- --------------------------------------------------
December 6, 1996
NEUBERGER&BERMAN
EQUITY TRUST -Registered Trademark-
Neuberger&Berman
FOCUS TRUST
Neuberger&Berman
GENESIS TRUST
Neuberger&Berman
GUARDIAN TRUST
Neuberger&Berman
MANHATTAN TRUST
Neuberger&Berman
PARTNERS TRUST
No Sales Charges
No Redemption Fees
No 12b-1 Fees
<PAGE>
Neuberger&Berman
EQUITY TRUST
No-Load Equity Funds
- ----------------------------------------------------------------------
Neuberger&Berman FOCUS TRUST Neuberger&Berman MANHATTAN TRUST
Neuberger&Berman GENESIS TRUST Neuberger&Berman PARTNERS TRUST
Neuberger&Berman GUARDIAN TRUST
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A PENSION
PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN "INSTITUTION")
THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND
THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT
INCORPORATED ("N&B MANAGEMENT").
- ----------------------------------------------------------------------
EACH OF THE ABOVE-NAMED FUNDS (A "FUND") INVESTS ALL OF ITS NET INVESTABLE
ASSETS IN ITS CORRESPONDING PORTFOLIO (A "PORTFOLIO") OF EQUITY MANAGERS TRUST
("MANAGERS TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY N&B
MANAGEMENT. EACH PORTFOLIO INVESTS IN SECURITIES IN ACCORDANCE WITH AN
INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS IDENTICAL TO THOSE OF ITS
CORRESPONDING FUND. THE INVESTMENT PERFORMANCE OF EACH FUND DIRECTLY CORRESPONDS
WITH THE INVESTMENT PERFORMANCE OF ITS CORRESPONDING PORTFOLIO. THIS
"MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT
COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES.
FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE
"SUMMARY" ON PAGE 3, AND "SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS" ON PAGE 25.
Please read this Prospectus before investing in any of the Funds and keep it
for future reference. It contains information about the Funds that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Funds and Portfolios, dated December 6, 1996, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED DECEMBER 6, 1996
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Funds and Portfolios;
Risk Factors 3
Management 5
The Neuberger&Berman Investment Approach 5
EXPENSE INFORMATION 7
Shareholder Transaction Expenses for Each Fund 7
Annual Fund Operating Expenses 7
Example 9
FINANCIAL HIGHLIGHTS 10
Focus Trust 11
Genesis Trust 12
Guardian Trust 13
Manhattan Trust 14
Partners Trust 15
INVESTMENT PROGRAMS 18
Focus Portfolio 18
Genesis Portfolio 19
Guardian Portfolio 20
Manhattan Portfolio 20
Partners Portfolio 21
Short-Term Trading; Portfolio Turnover 21
Borrowings 22
Other Investments 22
PERFORMANCE INFORMATION 23
Total Return Information 24
SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS 25
The Funds 25
The Portfolios 26
SHAREHOLDER SERVICES 28
How to Buy Shares 28
How to Sell Shares 28
Exchanging Shares 29
SHARE PRICES AND NET ASSET VALUE 30
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES 31
Distribution Options 31
Taxes 31
MANAGEMENT AND ADMINISTRATION 33
Trustees and Officers 33
Investment Manager, Administrator,
Distributor, and Sub-Adviser 33
Expenses 35
Transfer Agent 37
DESCRIPTION OF INVESTMENTS 38
USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION 41
OTHER INFORMATION 42
Directory 42
Funds Eligible For Exchange 42
</TABLE>
<PAGE>
SUMMARY
The Funds and Portfolios; Risk Factors
- ----------------------------------------------------------------------
Each Fund is a series of Neuberger&Berman Equity Trust (the "Trust") and
invests in its corresponding Portfolio which, in turn, invests in securities in
accordance with an investment objective, policies, and limitations that are
identical to those of the Fund. This is sometimes called a master/feeder fund
structure, because each Fund "feeds" shareholders' investments into its
corresponding Portfolio, a "master" fund. The structure looks like this:
-------------------------
SHAREHOLDERS
-------------------------
(down arrow) BUY SHARES IN
-------------------------
FUNDS
-------------------------
(down arrow) INVEST IN
-------------------------
PORTFOLIOS
-------------------------
(down arrow) INVEST IN
-------------------------
STOCKS & OTHER SECURITIES
-------------------------
The trustees who oversee the Funds believe that this structure may benefit
shareholders; investment in a Portfolio by investors in addition to a Fund may
enable the Portfolio to achieve economies of scale that could reduce expenses.
For more information about the organization of the Funds and the Portfolios,
including certain features of the master/feeder fund structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" on page
25. An investment in any Fund involves certain risks, depending upon the types
of investments made by its corresponding Portfolio. For more details about each
Portfolio, its investments and their risks, see "Investment Programs" on page 18
and "Description of Investments" on page 38.
The following table is a summary highlighting features of the Funds and their
corresponding Portfolios. You may want to invest in a variety of Funds to fit
your particular investment needs. Of course, there can be no assurance that a
Fund will meet its investment objective.
3
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PORTFOLIO
EQUITY TRUST STYLE CHARACTERISTICS
<S> <C> <C>
GUARDIAN TRUST Broadly diversified, A growth and income fund that
large-cap value fund. invests primarily in stocks
of established, high-quality
companies that are not well
followed on Wall Street or
are temporarily out of favor.
FOCUS TRUST Large-cap value fund, more Invests principally in common
concentrated portfolio than stocks selected from 13
Guardian. 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
believed by the portfolio
managers to be undervalued.
GENESIS TRUST Broadly diversified, Invests primarily in stocks
small-cap value fund. of companies with small
market capitalizations
(usually up to $1.5 billion).
Portfolio manager seeks to
buy the stocks of strong
companies with a history of
solid performance and a
proven management team, which
are selling at attractive
prices.
MANHATTAN TRUST Broadly diversified, small-, Invests in securities
medium- and large-cap growth believed to have the maximum
fund. potential for long-term
capital appreciation.
Portfolio manager follows a
"growth at a reasonable
price" philosophy and
searches for financially
sound, growing companies with
a special competitive
advantage or a product that
makes their stocks
attractive.
PARTNERS TRUST Broadly diversified, medium- Seeks capital growth through
to large-cap value fund. 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.
</TABLE>
4
<PAGE>
Management
- ----------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolios. N&B
Management also provides administrative services to the Portfolios and the Funds
and acts as distributor of Fund shares. See "Management and Administration" on
page 33. If you want to know how to buy and sell shares of the Funds or exchange
them for shares of other Neuberger&Berman Funds-Registered Trademark- made
available through an Institution, see "Shareholder Services -- How to Buy
Shares" on page 28, "Shareholder Services -- How to Sell Shares" on page 28,
"Shareholder Services -- Exchanging Shares" on page 29, and the policies of the
Institution through which you are purchasing shares.
The Neuberger&Berman Investment Approach
- ----------------------------------------------------------------------
While each Portfolio has its own investment objective, policies, and
limitations, each Portfolio is managed using one of two basic investment
approaches -- value or growth.
A value-oriented portfolio manager buys stocks that are selling for less than
their perceived market values. These include stocks that are currently
under-researched or are temporarily out of favor on Wall Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets).
While a value approach concentrates on securities that are undervalued in
relation to their fundamental economic values, a growth approach seeks stocks of
companies that are projected to grow at above-average rates and may appear
poised for a period of accelerated earnings.
The growth portfolio manager is willing to pay a higher share price in the
hope that the stock's earnings momentum will carry its price higher. As a
stock's price increases based on strong earnings, the stock's original price
appears low in relation to the growth rate of its earnings. Sometimes this
happens when a particular company or industry is temporarily out of favor with
the market or under-researched. This strategy is called "growth at a reasonable
price."
Neuberger&Berman believes that, over time, securities that are undervalued
are more likely to appreciate in price and be subject to less risk of price
decline than securities whose market prices have already reached their perceived
economic values. This approach also contemplates selling portfolio securities
when they are considered to have reached their potential.
5
<PAGE>
In general, Neuberger&Berman FOCUS, Neuberger&Berman GENESIS,
Neuberger&Berman GUARDIAN, and Neuberger&Berman PARTNERS Portfolios adhere to a
value-oriented investment approach. Neuberger&Berman MANHATTAN Portfolio places
a greater emphasis on finding securities whose measures of fundamental value are
low in relation to the growth rates of their future earnings and cash flows, as
projected by the portfolio manager. Neuberger&Berman MANHATTAN Portfolio is
therefore willing to invest in securities with prices that have somewhat higher
multiples of earnings than securities purchased by the other Portfolios.
6
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of each Fund
and its corresponding Portfolio. See "Performance Information" for important
facts about the investment performance of each Fund, after taking expenses into
account.
Shareholder Transaction Expenses for Each Fund
- ----------------------------------------------------------------------
As shown by this table, the Funds impose no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
Annual Fund Operating Expenses
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------------------
The following table shows annual Total Operating Expenses for each Fund,
which are paid out of the assets of the Fund and which include the Fund's pro
rata portion of the Operating Expenses of its corresponding Portfolio. Each Fund
pays N&B Management an administration fee based on the Fund's average daily net
assets. Each Portfolio pays N&B Management a management fee based on the
Portfolio's average daily net assets; a pro rata portion of this fee is borne
indirectly by the corresponding Fund. Therefore, the table combines management
and administration fees. The Funds and Portfolios also incur other expenses for
things such as accounting and legal fees, maintaining shareholder records, and
furnishing shareholder statements and Fund reports. "Operating Expenses" exclude
interest, taxes, brokerage commissions, and extraordinary expenses. The Funds'
expenses are factored into their share prices and dividends and are not charged
directly to Fund shareholders. For more information, see "Management and
Administration" and the SAI.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES EXPENSES EXPENSES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS TRUST 0.63%* None 0.36% 0.99%*
GENESIS TRUST 0.98%+* None 0.40% 1.38%+*
GUARDIAN TRUST 0.84% None 0.08% 0.92%
MANHATTAN TRUST 0.76%* None 0.32% 1.08%*
PARTNERS TRUST 0.76%* None 0.18% 0.94%*
</TABLE>
*(REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW)
+(REFLECTS N&B MANAGEMENT'S WAIVER OF CERTAIN MANAGEMENT FEES DESCRIBED BELOW)
7
<PAGE>
Total Operating Expenses for each Fund are based upon administration fees
incurred by the Fund and management fees incurred by its corresponding Portfolio
during the past fiscal year and the current expense reimbursement undertakings
(and, in the case of Neuberger&Berman GENESIS Trust, the current fee waiver).
"Other Expenses" are based on each Fund's and Portfolio's expenses for the past
fiscal year. The trustees of the Trust believe that the aggregate per share
expenses of each Fund and its corresponding Portfolio will be approximately
equal to the expenses the Fund would incur if its assets were invested directly
in the type of securities held by its corresponding Portfolio. The trustees of
the Trust also believe that investment in a Portfolio by investors in addition
to a Fund may enable the Portfolio to achieve economies of scale which could
reduce expenses. The expenses and, accordingly, the returns of other funds that
may invest in the Portfolios may differ from those of the Funds.
Five mutual funds that are series of Neuberger&Berman Equity Funds ("N&B
Equity Funds") and are administered by N&B Management, each of which has a name
similar to a Fund and the same investment objective, policies, and limitations
as that Fund ("Sister Fund"), also invest in the five Portfolios described
herein. The previous table reflects N&B Management's voluntary undertaking to
reimburse each Fund for its Operating Expenses and its pro rata share of its
corresponding Portfolio's Operating Expenses so that each Fund's expense ratio
per annum will not exceed the expense ratio per annum of its Sister Fund by more
than 0.10% of the Fund's average daily net assets. A Fund's per annum "expense
ratio" is the sum of the Fund's Operating Expenses and its pro rata share of its
corresponding Portfolio's Operating Expenses, divided by that Fund's average
daily net assets for the year. Each undertaking can be terminated by N&B
Management by giving a Fund at least 60 days' prior written notice.
The expense ratios of the Sister Funds of Neuberger&Berman FOCUS Trust,
Neuberger&Berman GENESIS Trust, Neuberger&Berman MANHATTAN Trust and
Neuberger&Berman PARTNERS Trust are anticipated to be, respectively, 0.89%,
1.28%, 0.98%, and 0.84% per annum of such Sister Fund's average daily net
assets. Based on those expectations, the expense ratios of Neuberger&Berman
FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger&Berman MANHATTAN Trust
and Neuberger&Berman PARTNERS Trust are not anticipated to exceed 0.99%, 1.38%,
1.08%, and 0.94% per annum, respectively. The above ratios and the previous
table reflect N&B Management's voluntary waiver of a portion of the management
fee borne directly by Neuberger&Berman GENESIS Portfolio and indirectly by
Neuberger&Berman GENESIS Trust to reduce that fee by 0.10% per annum of the
average daily net assets of Neuberger&Berman GENESIS Portfolio. Absent the
reimbursement and fee waiver, Management and Administration Fees would be 0.91%,
1.25%, 0.93%, and 0.88% per annum and Total Operating Expenses would be 1.27%,
8
<PAGE>
1.65%, 1.25%, and 1.06% per annum of the average daily net assets of Neuberger&
Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger&Berman MANHATTAN
Trust, and Neuberger&Berman PARTNERS Trust, respectively.
For more information about the current expense reimbursement undertakings and
fee waiver, see "Expenses" on page 35.
Example
- ----------------------------------------------------------------------
To illustrate the effect of Operating Expenses, let's assume that each Fund's
annual return is 5% and that it had Total Operating Expenses described in the
table above. For every $1,000 you invested in each Fund, you would have paid the
following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN 1 3 5 10
EQUITY TRUST YEAR YEARS YEARS YEARS
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS TRUST $10 $32 $55 $121
GENESIS TRUST $14 $44 $76 $166
GUARDIAN TRUST $ 9 $29 $51 $113
MANHATTAN TRUST $11 $34 $60 $132
PARTNERS TRUST $10 $30 $52 $115
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
9
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
- ----------------------------------------------------------------------
The financial information in the following tables is for each Fund as of
August 31, 1996 and prior periods. This information has been audited by the
Funds' respective independent auditors/accountants. You may obtain, at no cost,
further information about the performance of the Funds in their annual report to
shareholders. The auditors'/accountants' reports are incorporated in the SAI by
reference to the annual report. Please call 800-877-9700 for a free copy of the
annual report and for up-to-date information. Also, see "Performance
Information."
10
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Focus Trust(1)
- ----------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 30, 1993(2)
to
Year Ended August 31, August 31,
1996 1995 1994 1993
---------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 14.41 $ 11.36 $ 10.03 $ 10.00
---------------------------------------------
Income From Investment Operations
Net Investment Income .06 .05 .05 --
Net Gains or Losses on
Securities (both realized and
unrealized) .46 3.05 1.31 .03
---------------------------------------------
Total From Investment
Operations .52 3.10 1.36 .03
---------------------------------------------
Less Distributions
Dividends (from net investment
income) (.02) (.05) (.02) --
Distributions (from capital
gains) (.08) -- (.01) --
---------------------------------------------
Total Distributions (.10) (.05) (.03) --
---------------------------------------------
Net Asset Value, End of Year $ 14.83 $ 14.41 $ 11.36 $ 10.03
---------------------------------------------
Total Return+ +3.62% +27.44% +13.58% +0.30%(3)
---------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 55.6 $ 14.5 $ 1.6 $ --
---------------------------------------------
Ratio of Expenses to Average
Net Assets(4) .99% .96% .85% .92%(5)
---------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(4) .63% .67% .92% .05%(5)
---------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
11
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Genesis Trust
- ----------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 26, 1993(2)
Year Ended August 31, to August 31,
1996 1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.65 $ 10.59 $ 10.05 $ 10.00
--------------------------------------------------------------
Income From Investment Operations
Net Investment Loss (.02) (.01) (.01) --
Net Gains or Losses on
Securities (both realized and
unrealized) 2.68 2.08 .56 .05
--------------------------------------------------------------
Total From Investment
Operations 2.66 2.07 .55 .05
--------------------------------------------------------------
Less Distributions
Distributions (from capital
gains) (.32) (.01) (.01) --
--------------------------------------------------------------
Net Asset Value, End of Year $ 14.99 $ 12.65 $ 10.59 $ 10.05
--------------------------------------------------------------
Total Return+ +21.44% +19.51% +5.47% +0.50%(3)
--------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 65.2 $ 30.6 $ 3.1 $ --
--------------------------------------------------------------
Ratio of Expenses to Average
Net Assets(4) 1.38% 1.42% 1.36% 1.51%(5)
--------------------------------------------------------------
Ratio of Net Investment Loss to
Average Net Assets(4) (.27%) (.24%) (.21%) (.44%)(5)
--------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
12
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Guardian Trust
- ----------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 3, 1993(2)
Year Ended August 31, to August 31,
1996 1995 1994 1993
--------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.83 $ 11.27 $ 10.27 $ 10.00
--------------------------------------------
Income From Investment Operations
Net Investment Income .16 .13 .09 --
Net Gains or Losses on
Securities (both realized and
unrealized) .55 2.55 .99 .27
--------------------------------------------
Total From Investment
Operations .71 2.68 1.08 .27
--------------------------------------------
Less Distributions
Dividends (from net investment
income) (.14) (.12) (.07) --
Distributions (from capital
gains) (.16) -- (.01) --
--------------------------------------------
Total Distributions (.30) (.12) (.08) --
--------------------------------------------
Net Asset Value, End of Year $ 14.24 $ 13.83 $ 11.27 $ 10.27
--------------------------------------------
Total Return+ +5.19% +24.01% +10.57% +2.70%(3)
--------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $1,340.1 $ 683.1 $ 75.8 $ --
--------------------------------------------
Ratio of Expenses to Average
Net Assets(4) .92% .90% .80% .81%(5)
--------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(4) 1.26% 1.35% 1.50% 1.00%(5)
--------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
13
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Manhattan Trust
- ----------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 30,
1993(2)
Year Ended August 31, to August 31,
1996 1995 1994 1993
--------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.99 $ 10.37 $ 10.01 $ 10.00
--------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (.04) -- .01 --
Net Gains or Losses on
Securities (both realized and
unrealized) (.34) 2.67 .36 .01
--------------------------------------------
Total From Investment
Operations (.38) 2.67 .37 .01
--------------------------------------------
Less Distributions
Dividends (from net investment
income) -- (.01) (.01) --
Distributions (from capital
gains) (.43) (.04) -- --
--------------------------------------------
Total Distributions (.43) (.05) (.01) --
--------------------------------------------
Net Asset Value, End of Year $ 12.18 $ 12.99 $ 10.37 $ 10.01
--------------------------------------------
Total Return+ -2.98% +25.90% +3.70% +0.10%(3)
--------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 48.2 $ 35.6 $ 12.1 $ --
--------------------------------------------
Ratio of Expenses to Average
Net Assets(4) 1.08% 1.06% .96% 1.04%(5)
--------------------------------------------
Ratio of Net Investment Income
(Loss) to Average Net
Assets(4) (.38%) (.03%) .16% 5.48%(5)
--------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
14
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Partners Trust
- ----------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 30,
1993(2)
Year Ended August 31, to August 31,
1996 1995 1994 1993
--------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.68 $ 10.54 $ 10.01 $ 10.00
--------------------------------------------
Income From Investment Operations
Net Investment Income .08 .05 .03 --
Net Gains or Losses on
Securities (both realized and
unrealized) 1.59 2.19 .53 .01
--------------------------------------------
Total From Investment
Operations 1.67 2.24 .56 .01
--------------------------------------------
Less Distributions
Dividends (from net investment
income) (.07) (.02) (.01) --
Distributions (from capital
gains) (.89) (.08) (.02) --
--------------------------------------------
Total Distributions (.96) (.10) (.03) --
--------------------------------------------
Net Asset Value, End of Year $ 13.39 $ 12.68 $ 10.54 $ 10.01
--------------------------------------------
Total Return+ +13.76% +21.52% +5.61% +0.10%(3)
--------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in
millions) $ 128.5 $ 61.3 $ 4.7 $ --
--------------------------------------------
Ratio of Expenses to Average
Net Assets(4) .94% .92% .81% .84%(5)
--------------------------------------------
Ratio of Net Investment Income
to Average Net Assets(4) .84% .81% .47% 2.65%(5)
--------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
15
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1)Prior to January 1, 1995, the name of Neuberger&Berman FOCUS Trust was
Neuberger&Berman Selected Sectors Trust.
2)The date investment operations commenced.
3)Not annualized.
4)After reimbursement of expenses by N&B Management. Had N&B Management
not undertaken such action the annualized ratios to average daily net assets
would have been:
<TABLE>
<CAPTION>
PERIOD FROM
NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 30, 1993
FOCUS TRUST 1996 1995 1994 TO AUGUST 31, 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Expenses 1.27% 2.50% 2.50% 2.50%
-------------------------------------------------------------
Net Investment Income (Loss) .35% (.87%) (.73%) (1.53%)
-------------------------------------------------------------
<CAPTION>
PERIOD FROM
NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 3, 1993
GUARDIAN TRUST 1996 1995 1994 TO AUGUST 31, 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Expenses .92% .96% 1.52% 2.50%
-------------------------------------------------------------
Net Investment Income (Loss) 1.26% 1.29% .78% (.69%)
-------------------------------------------------------------
<CAPTION>
PERIOD FROM
NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 30, 1993
MANHATTAN TRUST 1996 1995 1994 TO AUGUST 31, 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Expenses 1.25% 1.46% 2.50% 2.50%
-------------------------------------------------------------
Net Investment Income (Loss) (.55%) (.43%) (1.38%) 4.02%
-------------------------------------------------------------
<CAPTION>
PERIOD FROM
NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 30, 1993
PARTNERS TRUST 1996 1995 1994 TO AUGUST 31, 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Expenses 1.06% 1.24% 2.50% 2.50%
-------------------------------------------------------------
Net Investment Income (Loss) .72% .49% (1.22%) .99%
-------------------------------------------------------------
</TABLE>
After reimbursement of expenses by N&B Management and the waiver of a portion
of the management fee borne directly by Neuberger&Berman GENESIS Portfolio and
indirectly by Neuberger&Berman GENESIS Trust. Had N&B Management not undertaken
such action the annualized ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
PERIOD FROM
NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 26, 1993
GENESIS TRUST 1996 1995 1994 TO AUGUST 31, 1993
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Expenses 1.65% 1.78% 2.50% 2.50%
-------------------------------------------------------------
Net Investment Loss (.54%) (.60%) (1.35%) (1.43%)
-------------------------------------------------------------
</TABLE>
5)Annualized.
16
<PAGE>
6)Because each Fund invests only in its corresponding Portfolio and that
Portfolio (rather than the Fund) engages in securities transactions, no Fund
calculates a portfolio turnover rate or pays any brokerage commissions. The
portfolio turnover rates for each Portfolio were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, PERIOD FROM
AUGUST 2, 1993
1996 1995 1994 TO AUGUST 31, 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Neuberger&Berman FOCUS Portfolio 39% 36% 52% 4%
- ------------------------------------------------------------------------------------------------
Neuberger&Berman GENESIS Portfolio 21% 37% 63% 3%
- ------------------------------------------------------------------------------------------------
Neuberger&Berman GUARDIAN Portfolio 37% 26% 24% 3%
- ------------------------------------------------------------------------------------------------
Neuberger&Berman MANHATTAN Portfolio 53% 44% 50% 3%
- ------------------------------------------------------------------------------------------------
Neuberger&Berman PARTNERS Portfolio 96% 98% 75% 8%
- ------------------------------------------------------------------------------------------------
</TABLE>
The average commission rates paid by each Portfolio were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
1996
- ---------------------------------------------------------------------
<S> <C>
Neuberger&Berman FOCUS Portfolio $0.0578
- ---------------------------------------------------------------------
Neuberger&Berman GENESIS Portfolio $0.0576
- ---------------------------------------------------------------------
Neuberger&Berman GUARDIAN Portfolio $0.0580
- ---------------------------------------------------------------------
Neuberger&Berman MANHATTAN Portfolio $0.0373
- ---------------------------------------------------------------------
Neuberger&Berman PARTNERS Portfolio $0.0494
- ---------------------------------------------------------------------
</TABLE>
+ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would have been lower if
N&B Management had not reimbursed certain expenses and, for Neuberger&Berman
GENESIS Trust, waived a portion of its corresponding Portfolio's management
fee.
17
<PAGE>
INVESTMENT PROGRAMS
The investment policies and limitations of each Fund are identical to those
of its corresponding Portfolio. Each Fund invests only in its corresponding
Portfolio. Therefore, the following shows you the kinds of securities in which
each Portfolio invests. For an explanation of some types of investments, see
"Description of Investments" on page 38.
Investment policies and limitations of the Funds and Portfolios are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
The investment objectives of the Funds and Portfolios are not fundamental.
There can be no assurance that the Funds or Portfolios will achieve their
objectives. Each Fund, by itself, does not represent a comprehensive investment
program.
Additional investment techniques, features, and limitations concerning the
Portfolios' investment programs are described in the SAI.
Neuberger&Berman Focus Portfolio
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman FOCUS Portfolio and
Neuberger&Berman FOCUS Trust is to seek long-term capital appreciation.
Neuberger&Berman FOCUS Portfolio invests principally in common stocks
selected from the following 13 multi-industry sectors of the economy:
<TABLE>
<S> <C> <C>
/ / Autos & Housing / / Health Care / / Technology
/ / Consumer Goods & Services / / Heavy Industry / / Transportation
/ / Defense & Aerospace / / Machinery & Equipment / / Utilities
/ / Energy / / Media & Entertainment
/ / Financial Services / / Retailing
</TABLE>
To maximize potential return, the Portfolio normally makes at least 90% of
its investments in not more than six sectors it identifies as undervalued. Where
a particular industry may fall within more than one sector, N&B Management uses
its judgment and experience to determine the placement of that industry within a
sector. The Portfolio uses the value-oriented investment approach to identify
stocks believed to be undervalued, including stocks that are temporarily out of
favor in the market. The Portfolio then focuses its investments in the sectors
in which the undervalued stocks are clustered. These sectors are believed to
offer the greatest potential for capital growth. This investment approach is
different from that of most other mutual funds that emphasize sector investment.
Those funds either invest in only a single economic sector or choose a number of
sectors by analyzing general economic trends. Further information on the
Portfolio's securities holdings and their allocation by sector as of
18
<PAGE>
the end of the Fund's most recent fiscal year is included in the Fund's annual
report to shareholders, which is available at no cost upon request. The sectors
are more fully described in the SAI.
The Portfolio may be affected more by any single economic, political, or
regulatory development than a more diversified mutual fund. The risk of decline
in the Portfolio's asset value due to an adverse development may be partially
offset by the value-oriented investment approach. To further reduce this risk,
the Portfolio may not purchase any security if, as a result, (1) more than 50%
of its total assets would be invested in any one sector, (2) 25% or more of its
total assets would be invested in the securities of companies having their
principal business activities in any one industry (this policy is fundamental),
or (3) more than 5% of its total assets would be invested in the securities of
any one company.
Neuberger&Berman Genesis Portfolio
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman GENESIS Portfolio and
Neuberger&Berman GENESIS Trust is to seek capital appreciation.
Neuberger&Berman GENESIS Portfolio invests primarily in common stocks of
companies with small market capitalizations ("small-cap companies"). Market
capitalization means the total market value of a company's outstanding common
stock. The Portfolio regards companies with market capitalizations of up to $1.5
billion at the time of the Portfolio's investment as small-cap companies.
Companies whose market capitalizations exceed $1.5 billion after purchase
continue to be considered small-cap companies for purposes of the Portfolio's
investment policies. There is no necessary correlation between market
capitalization and the financial attributes -- such as levels of assets,
revenues, or income -- commonly used to measure the size of a company.
Studies indicate that the market values of small-cap company stocks, such as
those included in the Russell 2000 Index and the Wilshire 1750 Index or quoted
on Nasdaq, have a cyclical relationship with larger capitalization stocks. Over
the last 30 years, small-cap company stocks have outperformed larger
capitalization stocks about two-thirds of the time, even though small-cap stocks
have usually declined more than larger capitalization stocks in declining
markets. There can be no assurance that this pattern will continue.
Small-cap company stocks generally are considered to offer greater potential
for appreciation than securities of companies with larger market
capitalizations. Most small-cap company stocks pay low or no dividends, and the
Portfolio seeks long-term appreciation, rather than income. Small-cap company
stocks also have higher risk and volatility, because most are not as broadly
traded as stocks of companies with larger capitalizations and their prices thus
may fluctuate more widely and abruptly. Small-cap company securities are also
less researched and often overlooked and undervalued in the market.
19
<PAGE>
The Portfolio tries to enhance the potential for appreciation and limit the
risk of decline in the value of its securities by employing the value-oriented
investment approach. The Portfolio seeks securities that appear to be
underpriced and are issued by companies with proven management, sound finances,
and strong potential for market growth. To reduce risk, the Portfolio
diversifies its holdings among many companies and industries. The Portfolio
focuses on the fundamentals of each small-cap company, instead of trying to
anticipate what changes might occur in the stock market, the economy, or the
political environment. This approach differs from that used by many other funds
investing in small-cap company stocks. Those funds often buy stocks of companies
they believe will have above-average earnings growth, based on anticipated
future developments. In contrast, the Portfolio's securities are generally
selected with the belief that they are currently undervalued, based on EXISTING
conditions.
Neuberger&Berman Guardian Portfolio
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman GUARDIAN Portfolio and
Neuberger&Berman GUARDIAN Trust is to seek capital appreciation and,
secondarily, current income.
Neuberger&Berman GUARDIAN Portfolio invests primarily in common stocks of
long-established, high-quality companies. The Portfolio uses the value-oriented
investment approach in selecting securities. Thus, N&B Management looks for such
factors as low price-to-earnings ratios, strong balance sheets, solid
managements, and consistent earnings.
Neuberger&Berman GUARDIAN Trust, its Sister Fund and the Sister Fund's
predecessor have paid their shareholders an income dividend every quarter and a
capital gain distribution every year since the predecessor's inception in 1950.
Of course, this past record does not necessarily predict the Fund's future
practices.
Neuberger&Berman Manhattan Portfolio
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman MANHATTAN Portfolio and
Neuberger&Berman MANHATTAN Trust is to seek capital appreciation without regard
to income.
Neuberger&Berman MANHATTAN Portfolio generally invests in securities of
small-, medium-, and large-capitalization companies believed to have the maximum
potential for long-term capital appreciation. It does not seek to invest in
securities that pay dividends or interest, and any such income is incidental.
The Portfolio uses a "growth at a reasonable price" investment approach. When
N&B Management believes that particular securities have greater potential for
long-term capital appreciation, the Portfolio may purchase such securities at
prices with
20
<PAGE>
relatively higher multiples to measures of economic value (such as earnings or
cash flow) than other Portfolios. The Portfolio focuses on companies with strong
balance sheets and reasonable valuations relative to their growth rates. It also
diversifies its investments among many companies and industries.
The Portfolio's growth investment program involves greater risks and share
price volatility than programs that invest in more undervalued securities.
Small-cap company stocks are subject to the risks described with respect to the
investment program of Neuberger&Berman GENESIS Portfolio. Moreover, the
Portfolio does not follow a policy of active trading for short-term profits.
Accordingly, the Portfolio may be more appropriate for investors with a
longer-range perspective.
Neuberger&Berman Partners Portfolio
- ----------------------------------------------------------------------
The investment objective of Neuberger&Berman PARTNERS Portfolio and
Neuberger&Berman PARTNERS Trust is to seek capital growth.
Neuberger&Berman PARTNERS Portfolio invests principally in common stocks of
medium- to large-capitalization established companies, using the value-oriented
investment approach. The Portfolio seeks capital growth through an investment
approach that is designed to increase capital with reasonable risk. N&B
Management looks for securities believed to be undervalued based on strong
fundamentals, including a low price-to-earnings ratio, consistent cash flow, and
the company's track record through all parts of the market cycle.
The Portfolio considers additional factors when selecting securities,
including ownership by a company's management of the company's stock and the
dominance of a company in its particular field.
Short-Term Trading; Portfolio Turnover
- ----------------------------------------------------------------------
Although none of the Portfolios purchases securities with the intention of
profiting from short-term trading, each Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. The portfolio
turnover rates of each Portfolio for 1996 and earlier years are set forth under
"Notes to Financial Highlights." It is anticipated that the annual turnover rate
of Neuberger&Berman MANHATTAN Portfolio and of Neuberger&Berman PARTNERS
Portfolio may exceed 100% in some fiscal years. Turnover rates in excess of 100%
generally result in higher transaction costs (which are borne directly by the
Portfolio) and a possible increase in realized short-term capital gains or
losses. See "Dividends, Other Distributions, and Taxes" on page 31 and the SAI.
21
<PAGE>
Borrowings
- ----------------------------------------------------------------------
Each Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
None of the Portfolios expects to borrow money or to enter into reverse
repurchase agreements. As a non-fundamental policy, none of the Portfolios may
purchase portfolio securities if its outstanding borrowings, including reverse
repurchase agreements, exceed 5% of its total assets.
Other Investments
- ----------------------------------------------------------------------
For temporary defensive purposes, each 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.
22
<PAGE>
PERFORMANCE INFORMATION
The performance of the Funds is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This smooths out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
The Funds commenced operations in August 1993, and their first fiscal year
ended August 31, 1993. The following table shows the average annual total
returns of each Fund for the 1-year, 5-year, and 10-year periods ended August
31, 1996. Returns for periods prior to each Fund's inception represent the
performance of the respective Sister Fund and its predecessor. The table also
shows a comparison with the S&P "500" Index for each Fund (except
Neuberger&Berman GENESIS Trust, which is compared with the Russell 2000 Index)
and its respective Sister Fund and that Sister Fund's predecessor. The S&P "500"
Index is the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index generally considered to be representative of overall stock market
activity. The Russell 2000 is an unmanaged index of the securities of the 2,000
issuers having the smallest capitalization in the Russell 3000 Index,
representing about 11% of the Russell 3000's total market capitalization. Please
note that indices do not take into account any fees or expenses of investing in
the individual securities that they track. Further information regarding the
Funds' performance is presented in their annual report to shareholders, which is
available without charge by calling 800-877-9700.
23
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS
ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SINCE INCEPTION
EQUITY TRUST 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOCUS TRUST +3.62% +16.54% +13.71% +11.82% 10/19/55
GUARDIAN TRUST +5.19% +15.07% +13.31% +12.92% 6/1/50
MANHATTAN TRUST -2.98% +11.12% +11.12% +16.39% 3/1/79+
PARTNERS TRUST +13.76% +15.21% +12.59% +17.50% 1/20/75+
S&P "500" +18.70% +13.59% +13.35% N/A N/A
GENESIS TRUST +21.44% +14.83% N/A +13.69% 9/27/88
RUSSELL 2000 +10.82% +15.05% N/A N/A N/A
</TABLE>
+THE DATES WHEN N&B MANAGEMENT BECAME INVESTMENT ADVISER TO THE PREDECESSORS OF
THE SISTER FUNDS.
Prior to November 1991, the investment policies of the predecessor of
Neuberger&Berman FOCUS Trust's Sister Fund required that a substantial
percentage of its assets be invested in the energy field; accordingly,
performance results prior to that time do not necessarily reflect the level of
performance that might have been achieved had the Fund's current policies been
in effect during that period. Had N&B Management not reimbursed certain expenses
or waived certain fees since the Funds began operations in August 1993, the
total returns of the Funds would have been lower. The total returns for periods
prior to the Funds' inception would have been lower had they reflected the
higher fees of the Funds as compared to those of the Sister Funds and their
predecessors.
The following table lets you take a closer look at how each Fund and its
respective Sister Fund and that Sister Fund's predecessor performed year by
year, in terms of an annual per share total return for each calendar year
(ending December 31). Please note that the previous chart reflects information
for periods ended on the Funds' last fiscal year-end (that is, as of August 31,
1996).
TOTAL RETURNS FOR CALENDAR YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUST 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOCUS TRUST +10.1% +0.6% +16.5% +29.8% -5.9% +24.7% +21.1% +19.6% +0.9% +36.0%
GUARDIAN TRUST +11.9 -1.0 +28.0 +21.5 -4.7 +34.3 +19.0 +13.5 +1.5 +32.0%
MANHATTAN TRUST +16.8 +0.4 +18.3 +29.1 -8.1 +30.9 +17.8 +10.0 -3.4 +30.8%
PARTNERS TRUST +17.3 +4.3 +15.5 +22.8 -5.1 +22.4 +17.5 +15.5 -1.0 +35.2%
S&P "500" +18.6 +5.2 +16.5 +31.6 -3.1 +30.3 +7.6 +10.0 +1.4 +37.5%
GENESIS TRUST N/A N/A N/A +17.3 -16.2 +41.6 +15.6 +14.4 -1.7 +27.2%
RUSSELL 2000 N/A N/A N/A +16.3 -19.5 +46.0 +18.4 +18.9 -1.8 +28.5%
</TABLE>
TOTAL RETURN INFORMATION. You can obtain current performance information
about each Fund by calling N&B Management at 800-877-9700.
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<PAGE>
SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS
The Funds
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Each Fund is a separate operating series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of May 6, 1993. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as
a diversified, open-end management investment company, commonly known as a
mutual fund. The Trust has six separate series. Each Fund invests all of its net
investable assets in its corresponding Portfolio, in each case receiving a
beneficial interest in that Portfolio. The trustees of the Trust may establish
additional series or classes of shares without the approval of shareholders. The
assets of each series belong only to that series, and the liabilities of each
series are borne solely by that series and no other.
DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of each
Fund represent equal proportionate interests in the assets of that Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual
meetings of shareholders of the Funds. The trustees will call special meetings
of shareholders of a Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders
of a Fund will not be personally liable for the obligations of any Fund; a
shareholder is entitled to the same limitation of personal liability extended to
shareholders of a corporation. To guard against the risk that Delaware law might
not be applied in other states, the Trust Instrument requires that every written
obligation of the Trust or a Fund contain a statement that such obligation may
be enforced only against the assets of the Trust or Fund and provides for
indemnification out of Trust or Fund property of any shareholder nevertheless
held personally liable for Trust or Fund obligations, respectively.
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<PAGE>
The Portfolios
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Each 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 six 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.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that seeks to
achieve its investment objective by investing all of its net investable assets
in its corresponding Portfolio, which is a "master fund." The Portfolio, which
has the same investment objective, policies, and limitations as the Fund, in
turn invests in securities; its corresponding Fund thus acquires an indirect
interest in those securities. This "master/feeder fund" structure is depicted in
the "Summary" on page 3.
Each Fund's investment in its corresponding Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in a Portfolio. The five Sister Funds that are series
of N&B Equity Funds invest all of their respective net investable assets in five
corresponding Portfolios of Managers Trust. Four mutual funds that are series of
Neuberger&Berman Equity Assets ("N&B Equity Assets") invest all of their
respective net investable assets in four corresponding Portfolios of Managers
Trust. The shares of each series of N&B Equity Funds (but not of N&B Equity
Assets) are available for purchase by members of the general public. Each
Portfolio may also permit other investment companies and/or other institutional
investors to invest in the Portfolio. All investors will invest in a Portfolio
on the same terms and conditions as a Fund and will pay a proportionate share of
the Portfolio's expenses. The Trust does not sell its shares directly to members
of the general public. Other investors in a Portfolio (including the series of
N&B Equity Funds and N&B Equity Assets) are not required to sell their shares at
the same public offering price as a Fund, could have a different administration
fee and expenses than a Fund, and (except N&B Equity Funds and N&B 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 may invest in
a Portfolio in the future will be available from N&B Management by calling
800-877-9700.
The trustees of the Trust believe that investment in a Portfolio by a series
of N&B Equity Funds or N&B Equity Assets or by other potential investors in
addition to a Fund may enable the Portfolio to realize economies of scale that
could reduce its operating expenses, thereby producing higher returns and
benefitting all shareholders. However, a Fund's investment in its corresponding
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a large investor
26
<PAGE>
in a Portfolio (other than a Fund) redeemed its interest in the Portfolio, the
Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.
Each Fund may withdraw its entire investment from its corresponding Portfolio
at any time, if the trustees of the Trust determine that it is in the best
interests of the Fund and its shareholders to do so. A Fund might withdraw, for
example, if there were other investors in a Portfolio with power to, and who did
by a vote of all investors (including the Fund), change the investment
objective, policies, or limitations of the Portfolio in a manner not acceptable
to the trustees of the Trust. A withdrawal could result in a distribution in
kind of portfolio securities (as opposed to a cash distribution) by the
Portfolio to the Fund. That distribution could result in a less diversified
portfolio of investments for the Fund and could affect adversely the liquidity
of the Fund's investment portfolio. If the Fund decided to convert those
securities to cash, it usually would incur brokerage fees or other transaction
costs. If a Fund withdrew its investment from a Portfolio, the trustees of the
Trust would consider what actions might be taken, including the investment of
all of the Fund's net investable assets in another pooled investment entity
having substantially the same investment objective as the Fund or the retention
by the Fund of its own investment manager to manage its assets in accordance
with its investment objective, policies, and limitations. The inability of the
Fund to find a suitable replacement could have a significant impact on
shareholders.
INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in a Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, a Fund will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in a Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all Portfolio investors; indeed, if other investors
hold a majority interest in a Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in a Portfolio, including a Fund, will be
liable for all obligations of the Portfolio. However, the risk of an investor in
a Portfolio incurring financial loss beyond the amount of its investment on
account of such liability would be limited to circumstances in which the
Portfolio had inadequate insurance and was unable to meet its obligations out of
its assets. Upon liquidation of a Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
27
<PAGE>
SHAREHOLDER SERVICES
How to Buy Shares
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YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION
THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND
THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH N&B MANAGEMENT. N&B
Management and the Funds do not recommend, endorse, or receive payments from any
Institution. N&B Management compensates Institutions for services they provide
under an administrative services agreement. N&B Management does not provide
investment advice to any Institution or its clients or make decisions regarding
their investments.
Each Institution will establish its own procedures for the purchase of Fund
shares, including minimum initial and additional investments for shares of each
Fund and the acceptable methods of payment for shares. Shares are purchased at
the next price calculated on a day the New York Stock Exchange ("NYSE") is open,
after a purchase order is received and accepted by an Institution. Prices for
shares of all Funds are usually calculated as of 4 p.m. Eastern time. Your
Institution may be closed on days when the NYSE is open. As a result, prices for
Fund shares may be significantly affected on days when you have no access to
your Institution to buy shares.
Other Information:
/ / An Institution must pay for shares it purchases in U.S. dollars.
/ / Each Fund has the right to suspend the offering of its shares for a
period of time. Each Fund also has the right to accept or reject a
purchase order in its sole discretion, including certain purchase orders
using an exchange of shares. See "Shareholder Services -- Exchanging
Shares."
/ / The Funds will not issue a certificate for your shares.
/ / Some Institutions may charge their clients a fee in connection with
purchases of shares of the Funds.
How to Sell Shares
- ----------------------------------------------------------------------
You can sell (redeem) all or some of your Fund shares only through an account
with an Institution. Each Institution will establish its own procedures for the
sale of Fund shares. Shares are sold at the next price calculated on a day the
NYSE is open, after a sales order is received and accepted by an Institution.
Prices for shares of all Funds are usually calculated as of 4 p.m. Eastern time.
Your Institution may be closed on days when the NYSE is open. As a result,
prices for Fund shares may be significantly affected on days when you have no
access to your Institution to sell shares.
28
<PAGE>
Other Information:
/ / Redemption proceeds will be paid to Institutions as agreed with N&B
Management, but in any case within three business days (under unusual
circumstances a Fund may take longer, as permitted by law).
/ / Each Fund may suspend redemptions or postpone payments on days when the
NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
/ / Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Funds.
Exchanging Shares
- ----------------------------------------------------------------------
Through an account with an Institution, you may be able to exchange shares of
a Fund for shares of another Neuberger&Berman Fund. Each Institution will
establish its own exchange policy and procedures. Shares are exchanged at the
next price calculated on a day the NYSE is open, after an exchange order is
received and accepted by an Institution.
/ / Shares can be exchanged ONLY between accounts registered in the same
name, address, and taxpayer ID number of the Institution.
/ / An exchange can be made only into a fund whose shares are eligible for
sale in the state where the Institution is located.
/ / An exchange may have tax consequences.
/ / Each Fund may refuse any exchange orders from any Institution if, for any
reason, they are deemed not to be in the best interests of the Fund and
its shareholders.
/ / Each Fund may impose other restrictions on the exchange privilege, or
modify or terminate the privilege, but will try to give each Institution
advance notice whenever it can reasonably do so.
29
<PAGE>
SHARE PRICES AND NET ASSET VALUE
Each Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for each Fund and its corresponding Portfolio
are calculated by subtracting liabilities from total assets (in the case of a
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of a Fund, its percentage interest in its
corresponding Portfolio, multiplied by the Portfolio's NAV, plus any other
assets). Each Fund's per share NAV is calculated by dividing its NAV by the
number of Fund shares outstanding and rounding the result to the nearest full
cent. Each Fund and its corresponding Portfolio calculate their NAVs as of the
close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day
the NYSE is open.
Each Portfolio values securities (including options) listed on the NYSE, the
American Stock Exchange, or other national securities exchanges or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices. The Portfolios value all other
securities and assets, including restricted securities, by a method that the
trustees of Managers Trust believe accurately reflects fair value.
30
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
Each Fund distributes, normally in December, substantially all of its share
of any net investment income (net of the Fund's expenses), net realized capital
gains, and net realized gains from foreign currency transactions earned or
realized by its corresponding Portfolio. In addition, Neuberger&Berman GUARDIAN
Trust distributes substantially all of its share of Neuberger&Berman GUARDIAN
Portfolio's net investment income, if any, near the end of each calendar
quarter.
Distribution Options
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REINVESTMENT IN SHARES. All dividends and other distributions paid on shares
of a Fund are automatically reinvested in additional shares of that Fund, unless
an Institution elects to receive them in cash. Dividends and other distributions
are reinvested at the Fund's per share NAV, usually as of the date the dividend
or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
Taxes
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Each Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be relieved
of federal income tax on that part of its taxable income and realized gains that
it distributes to its shareholders.
An investment has certain tax consequences, depending on the type of account
in which you invest. IF YOU HAVE AN ACCOUNT UNDER A QUALIFIED RETIREMENT PLAN OR
AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and
may also be subject to state and local income taxes. Distributions are taxable
when they are paid, whether in cash or by reinvestment in additional Fund
shares, except that distributions declared in December to shareholders of record
on a date in that month and paid in the following January are taxable as if they
were paid on December 31 of the year in which the distributions were declared.
Investors who buy Fund shares just before a Fund deducts a dividend or other
distribution from its NAV will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares in December (or, in
the case of Neuberger&Berman GUARDIAN Trust, near the end of a calendar quarter)
should take this into account.
31
<PAGE>
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally taxed as long-term capital gain, no matter how long you have
owned your shares. Distributions of net capital gain may include gains from the
sale of portfolio securities that appreciated in value before you bought your
shares.
Every January, each Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid (or deemed paid) in
the previous year. Information accompanying that statement will show the
portion, if any, of those distributions that generally are not taxable in
certain states.
TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares,
including redemptions in connection with exchanges to other Neuberger&Berman
Funds, are subject to tax. A capital gain or loss is the difference between the
amount paid for shares (including the amount of any dividends and other
distributions that were reinvested) and the amount received when shares are
sold.
When an Institution sells shares, it will receive a confirmation statement
showing the number of shares sold and the price. Every January, Institutions
will also receive a consolidated transaction statement for the previous year.
Each Institution is required annually to send investors in its accounts
statements showing distribution and transaction information for the previous
year.
The foregoing is only a summary of some of the important income tax
considerations affecting each Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
32
<PAGE>
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
- ----------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of each Fund and each Portfolio, respectively. The SAI contains general
background information about each trustee and officer of the Trust and of
Managers Trust. The trustees and officers of the Trust and of Managers Trust who
are officers and/or directors of N&B Management and/or principals of
Neuberger&Berman serve without compensation from the Funds or the Portfolios.
The trustees of the Trust and of Managers Trust, including a majority of those
trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust or Managers Trust, have adopted written procedures reasonably appropriate
to deal with potential conflicts of interest between the Trust and Managers
Trust, including, if necessary, creating a separate board of trustees of
Managers Trust.
Investment Manager, Administrator,
Distributor, and Sub-Adviser
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N&B Management serves as the investment manager of each Portfolio, as
administrator of each Fund, and as distributor of the shares of each Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the five Portfolios, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolios and other mutual
funds managed by N&B Management, also serves as investment adviser of three
other investment companies. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $13.9 billion as of
September 30, 1996.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolios.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
acts as the Portfolios' principal broker in the purchase and sale of their
securities. Neuberger&Berman and its affiliates, including N&B Management,
manage securities accounts that had approximately $42.9 billion of assets as of
September 30, 1996. All of the voting stock of N&B Management is owned by
individuals who are principals of Neuberger&Berman.
The following is information about the individuals who are primarily
responsible for the day-to-day management of the Portfolios:
Neuberger&Berman FOCUS Portfolio and Neuberger&Berman GUARDIAN
Portfolio -- Kent C. Simons, Lawrence Marx III, and Kevin L. Risen. Mr. Simons
and
33
<PAGE>
Mr. Marx are Vice Presidents of N&B Management and principals of Neuberger&
Berman. Mr. Simons has had responsibility for Neuberger&Berman FOCUS Portfolio
and Neuberger&Berman FOCUS Trust's Sister Fund's predecessor since 1988, and for
Neuberger&Berman GUARDIAN Portfolio and Neuberger&Berman GUARDIAN Trust's Sister
Fund's predecessor since 1983. Mr. Marx has had those responsibilities since
1988. Mr. Risen has had those responsibilities since 1996. Mr. Risen has been an
Assistant Vice President of N&B Management since May 1996 and a portfolio
manager for Neuberger&Berman since 1995. He was a research analyst at
Neuberger&Berman from 1992 to 1995; from 1990 to 1992, he was a research analyst
at another prominent financial services firm.
Neuberger&Berman GENESIS Portfolio -- Judith M. Vale. Ms. Vale has been a
member of Neuberger&Berman's Small Cap Group since 1992, a Vice President of N&B
Management since November 1994 and a principal of Neuberger&Berman since July
1996. She has been primarily responsible for the day-to-day management of
Neuberger&Berman GENESIS Portfolio since February 1994. Ms. Vale was a portfolio
manager for another investment management group from 1990 to 1992.
Neuberger&Berman MANHATTAN Portfolio -- Mark R. Goldstein and Susan Switzer.
Mr. Goldstein is a Vice President of N&B Management and a principal of
Neuberger&Berman. Previously he was a securities analyst and portfolio manager
with that firm. He has had responsibility for Neuberger&Berman MANHATTAN
Portfolio and Neuberger&Berman MANHATTAN Trust's Sister Fund's predecessor since
June 1992. Ms. Switzer has been an Assistant Vice President of N&B Management
since March 1995 and a portfolio manager for Neuberger&Berman since January
1995. Ms. Switzer was a research analyst and assistant portfolio manager for
another money management firm from 1989 to 1994.
Neuberger&Berman PARTNERS Portfolio -- Michael M. Kassen and Robert I.
Gendelman. Mr. Kassen is a Vice President of N&B Management and a principal of
Neuberger&Berman. He has had responsibility for Neuberger&Berman PARTNERS
Portfolio and Neuberger&Berman PARTNERS Trust's Sister Fund's predecessor since
June 1990. Mr. Kassen was an employee of N&B Management from 1990 to December
1992. Mr. Gendelman is a senior portfolio manager for Neuberger&Berman and an
Assistant Vice President of N&B Management. Mr. Gendelman has had responsibility
for Neuberger&Berman PARTNERS Portfolio since October 1994. He was a portfolio
manager for another mutual fund manager from 1992 to 1993 and was managing
partner of an investment partnership from 1988 to 1992.
Neuberger&Berman acts as the principal broker for the Portfolios in the
purchase and sale of portfolio securities and in the sale of covered call
options, and for those services receives brokerage commissions. In effecting
securities transactions, each Portfolio seeks to obtain the best price and
execution of orders. For more information, see the SAI.
34
<PAGE>
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds.
To mitigate the possibility that a Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger& Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
Expenses
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N&B Management provides investment management services to each Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. N&B
Management provides administrative services to each Fund that include furnishing
similar facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services for Institutions and their accounts. For such
administrative services, each Fund pays N&B Management a fee at the annual rate
of 0.40% of that Fund's average daily net assets. With a Fund's consent, N&B
Management may subcontract to Institutions some of its responsibilities to that
Fund under the administration agreement and may compensate each Institution that
provides such services at an annual rate of no more than 0.25% of the value of
Fund shares held through that Institution. For investment management services,
each Portfolio (except Neuberger&Berman GENESIS Portfolio) pays N&B Management a
fee at the annual rate of 0.55% of the first $250 million of that Portfolio's
average daily net assets, 0.525% of the next $250 million, 0.50% of the next
$250 million, 0.475% of the next $250 million, 0.45% of the next $500 million,
and 0.425% of average daily net assets in excess of $1.5 billion.
Neuberger&Berman GENESIS Portfolio pays N&B Management a fee for investment
management services at the annual rate of 0.85% of the first $250 million of the
Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75% of
the next $250 million, 0.70% of the next $250 million, and 0.65% of average
daily net assets in excess of $1 billion.
35
<PAGE>
During its 1996 fiscal year, each Fund accrued administration fees and a pro
rata portion of the corresponding Portfolio's management fees (prior to any
expense reimbursement or fee waiver), as a percentage of the Fund's average
daily net assets, as follows:
<TABLE>
<S> <C>
Neuberger&Berman FOCUS Trust 0.91%
Neuberger&Berman GENESIS Trust 1.25%
Neuberger&Berman GUARDIAN Trust 0.84%
Neuberger&Berman MANHATTAN Trust 0.93%
Neuberger&Berman PARTNERS Trust 0.88%
</TABLE>
Each Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. Each
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Funds and Portfolios, legal and accounting fees and
compensation for trustees who are not affiliated with N&B Management; for the
Funds, transfer agent fees and the cost of printing and sending reports and
proxy materials to shareholders; and for the Portfolios, custodial fees for
securities.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
During its 1996 fiscal year, each Fund bore total operating expenses as a
percentage of its average daily net assets (after taking into consideration N&B
Management's expense reimbursement for each Fund and N&B Management's waiver of
a portion of the management fee borne indirectly by Neuberger&Berman GENESIS
Trust), as follows:
<TABLE>
<S> <C>
Neuberger&Berman FOCUS Trust 0.99%
Neuberger&Berman GENESIS Trust 1.38%
Neuberger&Berman GUARDIAN Trust 0.92%
Neuberger&Berman MANHATTAN Trust 1.08%
Neuberger&Berman PARTNERS Trust 0.94%
</TABLE>
N&B Management has voluntarily undertaken to reimburse each Fund for its
Operating Expenses and its pro rata share of its corresponding Portfolio's
Operating Expenses so that each Fund's expense ratio per annum will not exceed
the expense ratio per annum of its Sister Fund by more than 0.10% of the Fund's
average daily net assets. A Fund's per annum "expense ratio" is the sum of the
Fund's Operating Expenses and its pro rata share of its corresponding
Portfolio's Operating Expenses, divided by that Fund's average daily net assets
for the year. N&B Management may terminate this undertaking to any Fund by
giving at least 60 days' prior written notice to the Fund. In addition, N&B
Management has voluntarily agreed to waive a portion
36
<PAGE>
of the management fee borne directly by Neuberger&Berman GENESIS Portfolio and
indirectly by Neuberger&Berman GENESIS Trust to reduce that fee by 0.10% per
annum of the average daily net assets of Neuberger&Berman GENESIS Portfolio. The
effect of reimbursement or a waiver by N&B Management is to reduce a Fund's
expenses and thereby increase its total return.
Transfer Agent
- ----------------------------------------------------------------------
The Funds' transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to the
Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180.
37
<PAGE>
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in "Investment
Programs" herein, each Portfolio may make the following investments, among
others, individually or in combination, although it may not necessarily buy all
of the types of securities or use all of the investment techniques that are
described. For additional information on the following investments and on other
types of investments which the Portfolios may make, see the SAI.
ILLIQUID SECURITIES. Each Portfolio may invest up to 10% of its net assets
(5% in the case of Neuberger&Berman GENESIS Portfolio) in illiquid securities,
which are securities that cannot be expected to be sold within seven days at
approximately the price at which they are valued. Due to the absence of an
active trading market, a Portfolio may experience difficulty in valuing or
disposing of illiquid securities. N&B Management determines the liquidity of the
Portfolios' securities, under general supervision of the trustees of Managers
Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. Each Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933 ("1933
Act"). Unless registered for sale, these securities can be sold only in
privately negotiated transactions or pursuant to an exemption from registration.
Rule 144A securities, although not registered, may be resold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S under
the 1933 Act. Foreign securities that are freely tradeable in their principal
market are not considered restricted securities even if they are not registered
for sale in the United States. Restricted securities are generally considered
illiquid. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted or Rule 144A
securities are liquid.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and
doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities. Each Portfolio may invest up
to 10% of the value of its total assets in foreign securities. The 10%
limitation does not apply to foreign securities that are denominated in U.S.
dollars, including American Depositary Receipts ("ADRs"). Foreign securities
(including those denominated in U.S. dollars and ADRs) are affected by political
and economic developments in foreign countries. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations. In
addition, foreign markets may be less liquid and more volatile than U.S. markets
and may offer less protection to investors. Investments in foreign securities
that are not denominated in U.S. dollars (including those made
38
<PAGE>
through ADRs) may be subject to special risks, such as governmental regulation
of foreign exchange transactions and changes in rates of exchange with the U.S.
dollar, irrespective of the performance of the underlying investment.
COVERED CALL OPTIONS. Each Portfolio may try to reduce the risk of
securities price changes (hedge) or generate income by writing (selling) covered
call options against portfolio securities having a market value not exceeding
10% of its net assets and may purchase call options in related closing
transactions. The purchaser of a call option acquires the right to buy a
portfolio security at a fixed price during a specified period. The maximum price
the Portfolio may realize on the security during the option period is the fixed
price; the Portfolio continues to bear the risk of a decline in the security's
price, although this risk is reduced, at least in part, by the premium received
for writing the option.
The primary risks in using call options are (1) possible lack of a liquid
secondary market for options and the resulting inability to close out options
when desired; (2) the fact that use of options is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of a
Portfolio's securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, by offsetting favorable price movements in hedged
investments; and (4) the possible inability of a Portfolio to sell a security at
a time that would otherwise be favorable for it to do so, or the possible need
for a Portfolio to sell a security at a disadvantageous time, due to its need to
maintain "cover" in connection with its use of these instruments. Options are
considered "derivatives."
SHORT SALES AGAINST-THE-BOX. Each Portfolio may make short sales
against-the-box, in which it sells securities short only if it owns or has the
right to obtain without payment of additional consideration an equal amount of
the same type of securities sold. Short selling against-the-box may defer
recognition of gains or losses to a later tax period.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, a
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations. Each Portfolio
also may lend portfolio securities to banks, brokerage firms, or institutional
investors to earn income. Costs, delays, or losses could result if the selling
party to a repurchase agreement or the borrower of portfolio securities becomes
bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
OTHER INVESTMENTS. Although each Portfolio invests primarily in common
stocks, when market conditions warrant it may invest in preferred stocks,
securities
39
<PAGE>
convertible into or exchangeable for common stocks, U.S. Government and Agency
Securities, investment grade debt securities, or money market instruments, or
may retain assets in cash or cash equivalents.
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,
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Student Loan Marketing Association, and Tennessee Valley Authority. Some U.S.
Government Agency Securities are supported by the full faith and credit of the
United States, while others may be 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 mortgage-backed securities. The market prices of U.S. Government
Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed comparable by N&B Management to
such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest category (Baa) or Comparable Unrated Securities
may be deemed to have speculative characteristics. The value of the fixed income
securities in which a Portfolio may invest is likely to decline in times of
rising market interest rates. Conversely, when rates fall, the value of a
Portfolio's fixed income investments is likely to rise.
Neuberger&Berman PARTNERS Portfolio may invest up to 15% of its net assets in
debt securities rated below investment grade and Comparable Unrated Securities.
Such securities may be considered predominantly speculative, although, as debt
securities, they generally have priority over equity securities of the same
issuer and are generally better secured. 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.
Neuberger&Berman PARTNERS Portfolio will invest in such securities only when N&B
Management concludes that the anticipated return to the Portfolio on such an
investment warrants exposure to the additional level of risk. A further
description of Moody's and S&P's ratings is included in the Appendix to the SAI.
40
<PAGE>
USE OF JOINT PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION
Each Fund and its corresponding Portfolio acknowledges that it is solely
responsible for all information or lack of information about that Fund and
Portfolio in this Prospectus or in the SAI, and no other Fund or Portfolio is
responsible therefor. The trustees of the Trust and of Managers Trust have
considered this factor in approving each Fund's use of a single combined
Prospectus and combined SAI.
41
<PAGE>
OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue
2nd Floor
New York, NY 10158-0180
800-877-9700
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
FUNDS ELIGIBLE FOR EXCHANGE
EQUITY TRUST
Neuberger&Berman Focus Trust
Neuberger&Berman Genesis Trust
Neuberger&Berman Guardian
Trust
Neuberger&Berman Manhattan
Trust
Neuberger&Berman Partners Trust
INCOME TRUST
Neuberger&Berman Ultra Short
Bond Trust
Neuberger&Berman Limited
Maturity Bond Trust
42
<PAGE>
Neuberger&Berman, Neuberger&Berman Management Inc., and the above-named Funds
are registered trademarks or service marks of Neuberger&Berman Management Inc.
- -C- 1996 Neuberger&Berman Management Inc.
43
<PAGE>
(This page has been left intentionally blank.)
<PAGE>
(This page has been left intentionally blank.)
<PAGE>
Neuberger&Berman Management Inc. -Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
This wrapper is not part of the prospectus.
[recycle logo] PRINTED ON RECYCLED PAPER
NBETP0001296
<PAGE>
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NEUBERGER & BERMAN EQUITY TRUST AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 6, 1996
Neuberger & Berman Neuberger & Berman
Manhattan Trust Genesis Trust
(and Neuberger & Berman (and Neuberger & Berman
Manhattan Portfolio) Genesis Portfolio)
Neuberger & Berman Neuberger & Berman
Focus Trust Guardian Trust
(and Neuberger & Berman (and Neuberger & Berman
Focus Portfolio) Guardian Portfolio)
Neuberger & Berman
Partners Trust
(and Neuberger & Berman Partners Portfolio)
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
-----------------------------------------------------------------
Neuberger & Berman MANHATTAN Trust, Neuberger & Berman GENESIS
Trust, Neuberger & Berman FOCUS Trust, Neuberger & Berman GUARDIAN Trust, and
Neuberger & Berman PARTNERS Trust (each a "Fund") are no-load mutual funds that
offer shares pursuant to a Prospectus dated December 6, 1996. The Funds invest
all of their net investable assets in Neuberger & Berman MANHATTAN Portfolio,
Neuberger & Berman GENESIS Portfolio, Neuberger & Berman FOCUS Portfolio,
Neuberger & Berman GUARDIAN Portfolio, and Neuberger & Berman PARTNERS Portfolio
(each a "Portfolio"), respectively.
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN
ACCOUNT WITH A PENSION PLAN ADMINISTRATOR, BROKER- DEALER, OR OTHER INSTITUTION
(EACH AN "INSTITUTION") THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER
SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH
NEUBERGER & BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT").
The Funds' Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained,
<PAGE>
without charge, from N&B Management, Institutional Services, 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 a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION...................................................... 1
Investment Policies and Limitations................................... 1
Mark R. Goldstein, Portfolio Manager of Neuberger & Berman
MANHATTAN Portfolio.......................................... 6
Judith M. Vale, Portfolio Manager of Neuberger & Berman
GENESIS Portfolio............................................ 6
Kent C. Simons, Lawrence Marx III, and Kevin L. Risen,
Portfolio Co-Managers of Neuberger & Berman FOCUS
and Neuberger & Berman GUARDIAN Portfolios.................. 9
Michael M. Kassen and Robert I. Gendelman, Portfolio
Co-Managers of Neuberger & Berman PARTNERS Portfolio........ 10
Additional Investment Information..................................... 11
Neuberger & Berman FOCUS Portfolio - Description of
Economic Sectors............................................. 22
PERFORMANCE INFORMATION.....................................................25
Total Return Computations............................................. 26
Other Performance Information......................................... 28
CERTAIN RISK CONSIDERATIONS.................................................29
TRUSTEES AND OFFICERS.......................................................29
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................37
Investment Manager and Administrator.................................. 37
Sub-Adviser........................................................... 39
Investment Companies Managed.......................................... 40
Management and Control of N&B Management.............................. 43
DISTRIBUTION ARRANGEMENTS...................................................44
ADDITIONAL EXCHANGE INFORMATION.............................................45
ADDITIONAL REDEMPTION INFORMATION...........................................46
Suspension of Redemptions............................................. 46
Redemptions in Kind................................................... 46
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................47
ADDITIONAL TAX INFORMATION..................................................47
Taxation of the Funds................................................. 47
Taxation of the Portfolios............................................ 48
Taxation of the Funds' Shareholders................................... 51
PORTFOLIO TRANSACTIONS......................................................51
Portfolio Turnover.................................................... 59
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PAGE
REPORTS TO SHAREHOLDERS.....................................................59
ORGANIZATION............................................................... 59
CUSTODIAN AND TRANSFER AGENT................................................59
INDEPENDENT AUDITORS/ACCOUNTANTS............................................59
LEGAL COUNSEL...............................................................60
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................60
REGISTRATION STATEMENT......................................................64
FINANCIAL STATEMENTS........................................................65
Appendix A..................................................................66
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER....................... 66
Appendix B..................................................................69
THE ART OF INVESTMENT:
A CONVERSATION WITH ROY NEUBERGER...........................69
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<PAGE>
INVESTMENT INFORMATION
Each Fund is a separate operating series of Neuberger & Berman Equity
Trust ("Trust"), a Delaware business trust that is registered with the
Securities and Exchange Commission ("SEC") as an open-end management investment
company. Each Fund seeks its investment objective by investing all of its net
investable assets in a Portfolio of Equity Managers Trust ("Managers Trust")
that has an investment objective identical to, and a name similar to, that of
the Fund. Each Portfolio, in turn, invests in securities in accordance with an
investment objective, policies, and limitations identical to those of its
corresponding Fund. (The Trust and Managers Trust, which is an open-end
management investment company managed by N&B 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 each Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of each Fund and Portfolio are not
fundamental. Any investment 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 a Fund or a Portfolio may not be changed without the
approval of the lesser of (1) 67% of the total units of beneficial interest
("shares") of the Fund or Portfolio represented at a meeting at which more than
50% of the outstanding Fund or Portfolio shares are represented or (2) a
majority of the outstanding shares of the Fund or Portfolio. These percentages
are required by the Investment Company Act of 1940 ("1940 Act") and are referred
to in this SAI as a "1940 Act majority vote." Whenever a Fund is called upon to
vote on a change in a fundamental investment policy or limitation of its
corresponding Portfolio, the Fund casts its votes in proportion to the votes of
its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
Each Fund has the following fundamental investment policy, to enable it
to invest in its corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
<PAGE>
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.
Except for the limitation on borrowing and the limitation on ownership
of portfolio securities by officers and trustees, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Portfolio.
The following fundamental investment policies and limitations apply to
all Portfolios:
1. BORROWING. No Portfolio may borrow money, except that a Portfolio
may (i) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (ii) enter into reverse repurchase agreements for
any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
(other than borrowings). If at any time borrowings exceed 33-1/3% of the value
of a Portfolio's total assets, that Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to comply
with the 33-1/3% limitation.
2. COMMODITIES. No Portfolio may purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit a Portfolio from purchasing
futures contracts or options (including options on futures contracts, but
excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. No Portfolio may, with respect to 75% of the value
of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. No Portfolio may purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumental- ities.
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<PAGE>
5. LENDING. No Portfolio may lend any security or make any other loan
if, as a result, more than 33-1/3% of its total assets (taken at current value)
would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. No Portfolio may purchase real estate unless acquired
as a result of the ownership of securities or instruments, but this restriction
shall not prohibit a Portfolio from purchasing securities issued by entities or
investment vehicles that own or deal in real estate or interests therein or
instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. No Portfolio may issue senior securities, except
as permitted under the 1940 Act.
8. UNDERWRITING. No Portfolio may underwrite securi- ties of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an under- writer within the meaning of the
Securities Act of 1933 ("1933 Act").
The following non-fundamental investment policies and limitations apply
to all Portfolios:
1. BORROWING. No Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agree- ments, exceed 5% of its
total assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, no Portfolio may make any loans other than securities
loans.
3. INVESTMENTS IN OTHER INVESTMENT COMPANIES. No Portfolio may purchase
securities of other investment companies, except to the extent permitted by the
1940 Act and in the open market at no more than customary brokerage commission
rates. This limitation does not apply to securities received or acquired as
dividends, through offers of exchange, or as a result of a reorganization,
consolidation, or merger.
4. MARGIN TRANSACTIONS. No Portfolio may purchase securities on margin
from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
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<PAGE>
5. SHORT SALES. No Portfolio may sell securities short unless it owns,
or has the right to obtain without payment of additional consideration,
securities equivalent in kind and amount to the securities sold. Transactions in
forward contracts, futures contracts and options shall not constitute selling
securities short.
6. OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES. No
Portfolio may purchase or retain the securities of any issuer if, to the
knowledge of N&B Management, those officers and trustees of Managers Trust and
officers and directors of N&B Management who each owns individually more than
1/2 of 1% of the outstanding securities of such issuer, together own more than
5% of such securities.
7. UNSEASONED ISSUERS. No Portfolio may purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three years
of continuous operation. For purposes of this limitation, pass-through entities
and other special purpose vehicles or pools of financial assets are not
considered to be business enterprises.
8. PUTS, CALLS, STRADDLES, OR SPREADS. No Portfolio may invest in puts,
calls, straddles, spreads, or any combination thereof, except that each
Portfolio may (i) write (sell) covered call options against portfolio securities
having a market value not exceeding 10% of its net assets and (ii) purchase call
options in related closing transactions. The Portfolios do not construe the
foregoing limitation to preclude them from purchasing or writing options on
futures contracts or from purchasing securities with rights to put the
securities to the issuer or a guarantor.
9. ILLIQUID SECURITIES. No Portfolio may purchase any security if, as a
result, more than 10% (5% in the case of Neuberger & Berman GENESIS Portfolio)
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.
10. FOREIGN SECURITIES. No Portfolio may invest more than 10% of the
value of its total assets in securities of foreign issuers, provided that this
limitation shall not apply to foreign securities denominated in U.S. dollars,
including American Depositary Receipts ("ADRs").
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<PAGE>
11. OIL AND GAS PROGRAMS. No Portfolio may invest in participations or
other direct interests in oil, gas, or other mineral leases or exploration or
development programs, but each Portfolio may purchase securities of companies
that own interests in any of the foregoing.
12. REAL ESTATE. No Portfolio may purchase or sell real property
(including partnership or similar interests in real estate limited partnerships,
but excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies that invest in real estate); provided
that no Portfolio may purchase any security if, as a result, more than 10% of
its total assets would be invested in securities of real estate investment
trusts.
In addition to the foregoing non-fundamental investment policies and
limitations, which apply to each Portfolio, the following non-fundamental
investment policies and limitations apply to the indicated Portfolios:
13. INVESTMENTS IN ANY ONE ISSUER (NEUBERGER & BERMAN GENESIS,
NEUBERGER & BERMAN FOCUS, AND NEUBERGER & BERMAN GUARDIAN PORTFOLIOS). None of
these Portfolios may purchase the securities of any one issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, more than 5% of the Portfolio's total assets
would be invested in the securities of that issuer.
14. WARRANTS (NEUBERGER & BERMAN GENESIS, NEUBERGER & BERMAN FOCUS, AND
NEUBERGER & BERMAN GUARDIAN PORTFOLIOS). None of these Portfolios may invest
more than 5% of its net assets in warrants, including warrants that are listed
on the New York Stock Exchange ("NYSE") or American Stock Exchange, or more than
2% of its net assets in warrants that are not so listed. For purposes of this
limitation, warrants are valued at the lower of cost or market value, and
warrants acquired by a Portfolio in units or attached to securities may be
deemed to be without value.
15. PLEDGING (NEUBERGER & BERMAN GENESIS AND NEUBERGER & BERMAN
GUARDIAN PORTFOLIOS). Neither of these Portfolios may pledge or hypothecate any
of its assets, except that (i) for Neuberger & Berman GENESIS Portfolio, this
limitation does not apply to the deposit of portfolio securities as collateral
in connection with short sales against-the-box, and the Portfolio may pledge or
hypothecate up to 15% of its total assets to collateralize a borrowing permitted
under fundamental policy 1 above or a letter of credit issued for a purpose set
forth in that policy and (ii) each Portfolio may pledge or hypothecate up to 5%
of its total assets in connection with its entry into any agreement or
arrangement pursuant to which a bank furnishes a letter of credit to
collateralize a capital commitment made by the Portfolio to a mutual insurance
company of which the Portfolio is a member. The other Portfolios are not subject
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<PAGE>
to any restrictions on their ability to pledge or hypothecate assets and may do
so in connection with permitted borrowings.
16. SECTOR CONCENTRATION (NEUBERGER & BERMAN FOCUS PORTFOLIO). This
Portfolio may not invest more than 50% of its total assets in any one economic
sector.
Each Portfolio, as an operating policy, does not intend to invest in
futures contracts and options thereon during the coming year.
MARK R. GOLDSTEIN, PORTFOLIO MANAGER OF NEUBERGER & BERMAN
MANHATTAN PORTFOLIO
Neuberger & Berman MANHATTAN Portfolio's objective is capital
appreciation, without regard to income. "The Portfolio differs from the other
Portfolios in its willingness to invest in stocks with price/earnings ratios or
price-to-cash-flow ratios that are reasonable relative to a company's growth
prospects and that of the general market," says Mark Goldstein, its portfolio
manager. Mr. Goldstein has consistently followed this approach as a portfolio
manager at N&B Management. He looks for stocks of financially sound companies
with a special market capability, a competitive advantage or a product that
makes them particularly attractive over the long term, but likes to purchase
them at a reasonable price relative to their growth rate. Mr. Goldstein calls
this approach "GARP" -- growth at a reasonable price. "An investor shouldn't try
to beat the market by trading funds like stocks. The hardest thing to do -- but
the best thing to do -- is to put in some money when the market is down and keep
it there. That's how one really builds wealth over the long term. A mutual fund
can be a great long-term investment."
"We view value on both a relative and an absolute basis, so we may buy
stocks with somewhat above-market historical growth rates," Mr. Goldstein
explains. "We tend to stay more fully invested when we think the market is
attractive for quality growth companies. But we will get out of stocks and into
cash when we think there are no reasonable values available."
JUDITH M. VALE, PORTFOLIO MANAGER OF NEUBERGER & BERMAN GENESIS
PORTFOLIO
The predecessor of Neuberger & Berman GENESIS Fund (which, like
Neuberger & Berman GENESIS Trust, invests all of its net investable assets in
Neuberger & Berman GENESIS Portfolio) was established in 1988. A fund dedicated
to small-capitalization stocks (companies with total market value of outstanding
common stock of up to $1.5 billion at the time the Portfolio invests), Neuberger
& Berman GENESIS Portfolio is devoted to the same value principles as the other
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<PAGE>
equity funds managed by N&B Management. "I buy small-cap stocks with solid
earnings today, not just promises for tomorrow," says its portfolio manager
Judith Vale.
"Many people think that small-capitalization stock funds are
predominantly invested in high-risk companies. That is not necessarily the case.
Neuberger & Berman GENESIS Portfolio looks for the same fundamentals in
small-capitalization stocks as our other funds look for in stocks of larger
companies. We stick to the areas we understand. I'm looking for the most
persistent earnings growth at the lowest multiple." Ms. Vale looks for
well-established companies with entrepreneurial management and sound finances.
She also looks for catalysts to exposing value, such as management changes and
new product lines. Often, these are firms that have suffered temporary setbacks
or undergone a restructuring.
"Our motto is 'boring is beautiful,'" explains Ms. Vale. "Instead of
investing in trendy, high-priced stocks that tend to hurt shareholders on the
downside, we look for little-known, solid, growing companies whose stocks we
believe are wonderful bargains."
AN INTERVIEW WITH JUDITH VALE
Q: If I already own a large-cap stock fund, why should I consider
investing in a small-cap fund as well?
A: Look at how fast a sapling grows compared to, say, a mature
tree. Much of the same can be true about companies. It's
possible for a smaller company to grow 50% faster than an IBM
or a Coca-Cola.
So, many small-cap stocks offer superior growth potential. Consider the
cereal you eat, the detergent you use, the coffee you drink -- and
imagine if you had invested in these products BEFORE they became
household names. If you had invested only in the blue-chip companies of
the day, you would have missed out on these opportunities.
Of course, I'm not advocating investing in a portfolio consisting only
of small-cap stock funds. It pays to diversify. Let's look back 25
years. While past performance cannot indicate future performance,
small-cap stocks have outperformed larger-cap stocks 16 out of the 25
years. Which means larger-cap stocks have done better the rest of the
time.*
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* Results are on a total return basis and include reinvestment of all dividends
and capital gain distributions. Small-cap stocks are represented by the fifth
capitalization quintile of stocks on the NYSE from 1971 to 1981 and performance
of the Dimensional Fund Advisors (DFA) Small Company Fund from 1982 to present.
Larger-cap stocks are represented by the S&P "500" Index, an unmanaged group of
stocks. Please note that indices do not take into account any fees or expenses
of investing in the individual securities that they track. Data about these
indices are prepared or obtained by N&B Management. The Portfolio may invest in
many securities not included in the above-described indices. Source: STOCKS,
BONDS, BILL AND INFLATION 1996 YEARBOOKTM, Ibbotson Associates, Chicago
(annually updates work by Roger G. Ibbotson and Rex A. Sinquefield). Used with
permission. All rights reserved.
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Q: Neuberger & Berman GENESIS Trust is classified as a "small-cap value
fund." To many people, "small-cap value" is an oxymoron. Can you
clarify the Portfolio's investment approach?
A: I understand the confusion. After all, a lot of people equate
"small-cap" with "growth." They also equate "value" with "cheap." At
Neuberger & Berman GENESIS Portfolio, I'm 100% behind finding GROWING
small-cap companies -- what I believe are highly profitable companies
with solid records and promising futures. So where do I part company
with managers who follow a "small-cap growth" style? It comes down to
how much growth and at what price. Small-cap growth investors seem
willing to pay a premium for vastly superior growth. This results in
two problems: a) growth tends to be discounted by the premium
valuations, and b) the growth expectations are so high as to be
unsustainable. In my opinion, superior yet more stable returns can be
purchased at significant discounts. They may be found in mundane,
perhaps even boring, industries. Remember, the same glamorous appeal
that attracts so many growth investors also attracts competitors.
In that respect, I'm a "value" manager. Yet I'd like to make this point
clear: Low price-to-earnings multiples, in and of themselves, cannot
justify a "buy" decision. When I search for growing, high-quality
small-cap companies selling at what I feel are bargain prices, I ask
myself: Is the company cheap for a good reason? Or, does it have the
financial muscle and the management talent to make it into the big
leagues?
Q: Let's turn to specifics. What criteria do you use to decide which
small-cap companies make the cut -- and which ones don't?
A: Over the course of my involvement with small-cap companies for 16
years, I've seen hundreds that flourished and just as many that failed
to deliver on their early promises. What made the
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difference? While every case is unique, here are a few important traits
of the winners.
First of all, a successful small-cap company normally produces high
returns. In practice, this means the business has a number of barriers
to entry. Perhaps the company has a technology that's hard to
duplicate. Or maybe it can make a product at a substantially lower cost
than anyone else. Unlike most businesses, it has an advantage that
allows it to continue earning above-market returns.
In addition to having a competitive edge, a successful small- cap
company should generate healthy cash flow. With excess cash, a company
has the ability to finance its own growth without diluting the
ownership stake of existing stockholders by issuing more shares.
No small-cap company can grow without having the right people on board.
That's why I spend so much time meeting the CEOs and CFOs of small-cap
companies. While I question the managers about future plans and
strategies, I spend as much time evaluating them as people. Do they
seem honest and capable? Or do they puff up their case? Making
portfolio decisions is a lot about making character judgments -- who
has the stuff to manage a growing company, and who doesn't.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS
PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH
IN THE PROSPECTUS.
KENT C. SIMONS, LAWRENCE MARX III, AND KEVIN L. RISEN, PORTFOLIO
CO-MANAGERS OF NEUBERGER & BERMAN FOCUS AND NEUBERGER & BERMAN
GUARDIAN PORTFOLIOS
Neuberger & Berman FOCUS Portfolio's investment objective is long-term
capital appreciation. Like the other Portfolios that use a value-oriented
investment approach, it seeks to buy undervalued securities that offer
opportunities for growth, but then it focuses its assets in those sectors where
undervalued stocks are clustered. "We begin by looking for stocks that are
selling for less than we think they're worth, a 'bottom-up approach'" says Mr.
Simons. "More often than not, such stocks are in a few economic sectors that are
out of favor and are undervalued as a group. We think 90% of cheap stocks
deserve to be cheap. Our job is to find the 10% that don't."
"We don't pick sectors for Neuberger & Berman FOCUS Portfolio based on our
perception of how the economy is going to do. Nor do we engage in making
economic or currency predictions. We look for stocks with either low relative or
low absolute valuations," explains Mr. Marx. "Often, these stocks will be found
in a particular sector, but we didn't start out being bullish on that sector.
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It's just where we happened to find the values. We find that if one company
comes under a cloud, it tends to happen to its whole industry. If an investment
manager rotates the sectors in a portfolio by buying sectors when they are
undervalued and selling them when they become fully valued, the manager would be
able to achieve above-average performance."
Neuberger & Berman GUARDIAN Portfolio subscribes to the same
stock-picking philosophy followed since 1950, when Roy R. Neuberger founded the
predecessor of Neuberger & Berman GUARDIAN Fund, which, like Neuberger & Berman
GUARDIAN Trust, invests all of its net investable assets in Neuberger & Berman
GUARDIAN Portfolio.
It's no great trick for a mutual fund to make money when the market is
rising. The tide that lifts stock values will carry most funds along. The true
test of management is its ability to make money even when the market is flat or
declining. By that measure, the Fund, Neuberger & Berman GUARDIAN Fund and its
predecessor have served shareholders well and have paid a dividend every quarter
and a capital gain distribution EVERY YEAR since 1950. Of course, there can be
no assurance that this trend will continue.
Messrs. Simons, Marx and Risen place a high premium on being
knowledgeable about the companies whose stocks they buy. That knowledge is
important, because sometimes it takes courage to buy stocks that the rest of the
market has forsaken. Says Mr. Marx, "We're usually early in and early out. We'd
rather buy an undervalued stock because we expect it to become fairly valued
than buy one fairly valued and hope it becomes overvalued. We like a stock
'under a rock' or with a cloud over it; you are not going to get great companies
at great valuations when the market perception is great."
"People who switch around a lot are not going to benefit from our
approach. They're following the market -- we're looking at fundamentals."
MICHAEL M. KASSEN AND ROBERT I. GENDELMAN, PORTFOLIO CO-MANAGERS OF
NEUBERGER & BERMAN PARTNERS PORTFOLIO
"Neuberger & Berman PARTNERS Portfolio's objective is capital growth,"
say its portfolio co-managers Michael Kassen and Robert Gendelman. "We want to
make money in good markets and not give up those gains during rough times."
"Our investors seek consistent performance and have a moderate risk
tolerance. They do know, however, that stock investments can provide the
long-term upside potential essential to meeting their long-term investment
goals, particularly a comfortable retirement and planning for a college
education."
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<PAGE>
"We look for stocks that are undervalued in the marketplace either in
relation to strong current fundamentals, such as a low price-to-earnings ratio,
consistent cash flow, and support from asset values, or in relation to our
projection of the growth of their future earnings. If the market goes down,
those stocks we elect to hold, historically, go down less."
The portfolio co-managers monitor stocks of medium- to large-sized
companies that often are not closely scrutinized by other investors. The
managers research these companies in order to determine if they are likely to
produce a new product, become an acquisition target, or undergo a financial
restructuring.
What else catches Mr. Kassen's and Mr. Gendelman's eyes? "We like
managements that own their own stock. These companies usually seek to build
shareholder wealth by buying back shares or making acquisitions that have a
swift and positive impact on the bottom line."
To increase the upside potential, the managers zero in on companies
that dominate their industries or their specialized niches. The managers'
reasoning? "Market leaders tend to earn higher levels of profits."
Neuberger & Berman PARTNERS Portfolio invests in a wide array of
stocks, and no single stock makes up more than a small fraction of the
Portfolio's total assets. Of course, the Portfolio's holdings are subject to
change.
ADDITIONAL INVESTMENT INFORMATION
Some or all of the Portfolios, as indicated below, may make the
following investments, among others, although they may not buy all of the types
of securities or use all of the investment techniques that are described.
REPURCHASE AGREEMENTS (ALL PORTFOLIOS). In a repurchase agreement, a Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or 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. Repurchase
agreements with a maturity of more than seven days are considered to be illiquid
securities. No Portfolio may enter into such a repurchase agreement if, as a
result, more than 10% (5% in the case of Neuberger & Berman GENESIS Portfolio)
of the value of its net assets would then be invested in such repurchase
agreements and other illiquid securities. A Portfolio may enter into a
repurchase agreement only if (1) the underlying securities are of a type that
the Portfolio's investment policies and limitations would allow it to purchase
directly, (2) the market value of the underlying securities, including accrued
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<PAGE>
interest, at all times equals or exceeds the repurchase price, and (3) payment
for the underlying securities is made only upon satisfactory evidence that the
securities are being held for the Portfolio's account by its custodian or a bank
acting as the Portfolio's agent.
SECURITIES LOANS (ALL PORTFOLIOS). In order to realize income, each
Portfolio may lend portfolio securities with a value not exceeding 33-1/3% of
its total assets to banks, brokerage firms, or other institutional investors
judged creditworthy by N&B Management. Borrowers are required continuously to
secure their obligations to return securities on loan from a Portfolio by
depositing collateral in a form determined to be satisfactory by the Portfolio
Trustees. The collateral, which must be marked to market daily, must be equal to
at least 100% of the market value of the loaned securities, which will also be
marked to market daily. N&B 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.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS). Each
Portfolio may invest in restricted securities, which are securities that may not
be sold to the public without an effective registration statement under the 1933
Act. Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of a Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradeable in
their principal market are not considered to be restricted. Regulation S under
the 1933 Act permits the sale abroad of securities that are not registered for
sale in the United States.
Where registration is required, a Portfolio may be obligated to pay all
or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
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<PAGE>
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. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases thereof will
be subject to each Portfolio's 10% (5% in the case of Neuberger & Berman GENESIS
Portfolio) limit on investments in illiquid securities. Restricted securities
for which no market exists are priced by a method that the Portfolio Trustees
believe accurately reflects fair value.
REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS). In a reverse repurchase
agreement, a Portfolio sells portfolio securities subject to its agreement to
repurchase the securities at a later date for a fixed price reflecting a market
rate of interest; these agreements are considered borrowings for purposes of
each Portfolio's investment policies and limitations concerning borrowings.
While a reverse repurchase agreement is outstanding, a Portfolio will deposit in
a segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to the Portfolio's
obligations under the agreement. 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.
FOREIGN SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. These investments are subject to each Portfolio's quality
standards. 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) and the
potentially adverse effects of unavailability of public information regarding
issuers, less governmental supervision and regulation of financial markets,
reduced liquidity of certain financial markets, and the lack of uniform
accounting, auditing, and financial reporting standards or the application of
standards that are different or less stringent than those applied in the United
States.
Each Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
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<PAGE>
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, (2)
nationalization, expropriation, or confiscatory taxation, and (3) adverse
changes in investment or exchange control regulations (which could prevent cash
from being brought back to the United States). Additionally, dividends and
interest payable on foreign securities may be subject to foreign taxes,
including taxes withheld from those payments. Commissions on foreign securities
exchanges are often at fixed rates and are generally higher than negotiated
commissions on U.S. exchanges, although the Portfolios endeavor to achieve the
most favorable net results on portfolio transactions. Each Portfolio may invest
only in securities of issuers in countries whose governments are considered
stable by N&B Management.
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of a Portfolio are uninvested and
no return is earned thereon. The inability of a Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a Portfolio due
to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
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<PAGE>
In order to limit the risks inherent in investing in foreign currency
denominated securities, a Portfolio may not purchase any such security if, as a
result, more than 10% of its total assets (taken at market value) would be
invested in foreign currency denominated securities. Within that limitation,
however, no Portfolio is restricted in the amount it may invest in securities
denominated in any one foreign currency.
COVERED CALL OPTIONS (ALL PORTFOLIOS). Each Portfolio may write covered
call options on portfolio securities valued at up to 10% of its net assets and
may purchase call options in related closing transactions. Generally, the
purpose of writing and purchasing these options is 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 net asset values ("NAVs"). Portfolio
securities on which call options may be written and purchased by a Portfolio are
purchased solely on the basis of investment considerations consistent with the
Portfolio's investment objective.
When a Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price, thereby giving up any additional gain on the security.
Each Portfolio writes only "covered" call options on securities it
owns. The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk (in contrast to the writing
of "naked" or uncovered call options, which the Portfolios will not do) but is
capable of enhancing the Portfolios' total return. When writing a covered call
option, a Portfolio, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline.
If a call option that a Portfolio has written expires unexercised, the
Portfolio will realize a gain in the amount of the premium; however, that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
When a Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
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specified date. A Portfolio would purchase a call option to offset a previously
written call option.
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. The obligation under any option terminates upon expiration of the
option or, at an earlier time, when the writer offsets the option by entering
into a "closing purchase transaction" to purchase an option of the same series.
If an option is purchased by a Portfolio and is never exercised, the Portfolio
will lose the entire amount of the premium paid.
Options are traded both on 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 a
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when a 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 a Portfolio is able to effect a
closing purchase transaction in a covered OTC call option it has written, it
will not be able to liquidate securities used as cover until the option expires
or is exercised or until different cover is substituted. In the event of the
counter-party's insolvency, a Portfolio may be unable to liquidate its options
position and the associated cover. N&B Management monitors the creditworthiness
of dealers with which a Portfolio may engage in OTC options transactions, and
limits the Portfolios' counter-parties in such transactions to dealers with a
net worth of at least $20 million as reported in their latest financial
statements.
The assets used as cover for OTC options written by a Portfolio will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement. The cover
for an OTC call option written subject to this procedure will be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.
The premium received (or paid) by a Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable exchange, less (or plus) a commission. The premium may reflect,
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among other things, the current market price of the underlying security, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security, the length of the option period, the
general supply of and demand for credit, and the interest rate environment. The
premium received by a Portfolio for writing an option is recorded as a liability
on the Portfolio's statement of assets and liabilities. This liability is
adjusted daily to the option's current market value, which is the last sales
price on the day the option is being valued or, in the absence of any trades
thereof on that day, the mean between the closing bid and asked prices.
Closing transactions are effected in order to realize a profit on an
outstanding option, to prevent an underlying security from being called, or to
permit the sale or the put of the underlying security. If a Portfolio desires to
sell a security on which it has written a call option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security.
There is, of course, no assurance that a Portfolio will be able to effect
closing transactions at favorable prices. If a Portfolio cannot enter into such
a transaction, it may be required to hold a security that it might otherwise
have sold, in which case it would continue to be at market risk on the security.
A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call 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.
A Portfolio pays brokerage commissions in connection with purchasing or
writing options, including those used to close out existing positions. These
brokerage commissions normally are higher than those applicable to purchases and
sales of portfolio securities.
FORWARD FOREIGN CURRENCY CONTRACTS (ALL PORTFOLIOS). Each Portfolio may
enter into contracts for the purchase or sale of a specific currency at a future
date at a fixed price ("forward contracts") in amounts not exceeding 5% of its
net assets. The Portfolios enter into forward contracts in an attempt to hedge
against changes in prevailing currency exchange rates. The Portfolios do not
engage in transactions in forward contracts for speculation; they view
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
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currencies that are held or intended to be acquired by them. Forward contract
transactions include forward sales or purchases of foreign currencies for the
purpose of protecting the U.S. dollar value of securities held or to be acquired
by a Portfolio or protecting the U.S. dollar equivalent of dividends, interest,
or other payments on those securities.
N&B 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 and which is available on
more advantageous terms. However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and, if N&B Management is incorrect in its
judgment of future exchange rate relationships, a Portfolio could be in a less
advantageous position than if such a hedge had not been established. If a
Portfolio uses proxy- hedging, it may experience losses on both the currency in
which it has invested and the currency used for hedging if the two currencies do
not vary with the expected degree of correlation. Because forward contracts are
not traded on an exchange, the assets used to cover such contracts may be
illiquid.
OPTIONS ON FOREIGN CURRENCIES (ALL PORTFOLIOS). Each Portfolio may
write and purchase covered call and put options on foreign currencies in amounts
not exceeding 5% of its net assets. A Portfolio would engage in such
transactions 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. As with other types of options, however, writing an option
on foreign currency constitutes only a partial hedge, up to the amount of the
premium received. A Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
risks of currency options are similar to the risks of other 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. To the extent a Portfolio writes
options on foreign currencies that are traded on an exchange regulated by the
Commodity Futures Trading Commission ("CFTC") other than for BONA FIDE hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums on
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those positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the Portfolio's net assets.
COVER FOR OPTIONS AND FORWARD CONTRACTS (COLLECTIVELY, "HEDGING
INSTRUMENTS") (ALL PORTFOLIOS). Each 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. Securities held in a segregated account cannot
be sold while the options or forward strategy covered by those securities is
outstanding, unless they are replaced with other suitable assets. As a result,
segregation of a large percentage of a Portfolio's assets could impede portfolio
management or the Portfolio's ability to meet current obligations. A Portfolio
may be unable promptly to dispose of assets which cover, or are segregated with
respect to, an illiquid options or forward position; this inability may result
in a loss to the Portfolio.
GENERAL RISKS OF HEDGING INSTRUMENTS (ALL PORTFOLIOS). 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 a 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 a Portfolio's securities; (4) the fact that, although use of
these instruments for hedging purposes can reduce the risk of loss, they also
can reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments; and (5) the possible inability
of a Portfolio to purchase or sell a portfolio security at a time that would
otherwise be favorable for it to do so, or the possible need for a Portfolio to
sell a portfolio security at a disadvantageous time, due to its need to maintain
cover or to segregate securities in connection with its use of Hedging
Instruments. N&B Management intends to reduce the risk of imperfect correlation
by investing only in Hedging Instruments whose behavior is expected to resemble
or offset that of a Portfolio's underlying securities or currency. N&B
Management intends to reduce the risk that a Portfolio will be unable to close
out Hedging Instruments by entering into such transactions only if N&B
Management believes there will be an active and liquid secondary market. Hedging
Instruments used by the Portfolios are generally considered "derivatives." There
can be no assurance that a Portfolio's use of Hedging Instruments will be
successful.
Each Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
- 19 -
<PAGE>
it must comply if its corresponding Fund is to continue to qualify as a
regulated investment company ("RIC"). See "Additional Tax Information."
FIXED INCOME SECURITIES (ALL PORTFOLIOS). While the emphasis of the
Portfolios' investment programs is on common stocks and other equity securities,
the Portfolios may also invest in money market instruments, U.S. Government and
Agency Securities, and other fixed income securities. Each Portfolio may invest
in corporate bonds and debentures receiving one of the four highest ratings from
Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any
other nationally recognized statistical rating organization ("NRSRO") or, if not
rated by any NRSRO, deemed comparable by N&B Management to such rated securities
("Comparable Unrated Securities"). In addition, Neuberger & Berman PARTNERS
Portfolio may invest up to 15% of its net assets in corporate debt securities
rated below investment grade or Comparable Unrated Securities.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolios may rely on the ratings of any NRSRO,
the Portfolios primarily refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). 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. N&B Management will invest in lower-rated
securities only when it concludes that the anticipated return on such an
investment to Neuberger & Berman PARTNERS Portfolio warrants exposure to the
additional level of risk.
Subsequent to its purchase by a Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
- 20 -
<PAGE>
no longer be eligible for purchase by that Portfolio. In such a case, each
Portfolio will engage in an orderly disposition of the downgraded securities to
the extent necessary to ensure that the Portfolio's holdings of securities rated
below investment grade and Comparable Unrated Securities will not exceed 5% of
its net assets (15% in the case of Neuberger & Berman PARTNERS Portfolio).
COMMERCIAL PAPER (ALL PORTFOLIOS). Commercial paper is a short-term
debt security issued by a corporation or bank, usually for purposes such as
financing current operations. The Portfolios may invest only in commercial paper
receiving the highest rating from S&P (A-1) or Moody's (P-1) or deemed by N&B
Management to be of comparable quality.
Each Portfolio may invest in commercial paper that cannot be resold to
the public without an effective registration statement under the 1933 Act. While
restricted commercial paper normally is deemed illiquid, N&B Management may in
certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
ZERO COUPON SECURITIES (NEUBERGER & BERMAN PARTNERS PORTFOLIO). This
Portfolio may invest up to 5% of its net assets 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") is
taken into account ratably by the Portfolio prior to the receipt of any actual
payments. Because Neuberger & Berman PARTNERS Trust must distribute
substantially all of its net income (including its share of the Portfolio's
original issue discount) to its 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 that 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 similar maturity and credit
quality.
CONVERTIBLE SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in
convertible securities. A convertible security entitles the holder to receive
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<PAGE>
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 yields 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.
Convertible debt securities are subject to each Portfolio's investment
policies and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by a Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and its corresponding Fund's ability to achieve their investment objective.
PREFERRED STOCK (ALL PORTFOLIOS). Each Portfolio may invest in
preferred stock. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's board of
directors. Preferred shareholders may have certain rights if dividends are not
paid but generally have no legal recourse against the issuer. Shareholders may
suffer a loss of value if dividends are not paid. The market prices of preferred
stocks are generally more sensitive to changes in the issuer's creditworthiness
than are the prices of debt securities.
NEUBERGER & BERMAN FOCUS PORTFOLIO - DESCRIPTION OF ECONOMIC
SECTORS.
Neuberger & Berman FOCUS Portfolio seeks to achieve its investment
objective by investing principally in common stocks in the following thirteen
multi-industry economic sectors, normally making at least 90% of its investments
in not more than six such sectors:
(1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production,
or sale of automobiles, automobile parts, mobile homes, or related products
- 22 -
<PAGE>
("automobile industries") or design, construction, renovation, or refurbishing
of residential dwellings. The value of securities of companies in the automobile
industries is affected by, among other things, foreign competition, the level of
consumer confidence and consumer debt, and installment loan rates. The housing
construction industry may be affected by the level of consumer confidence and
consumer debt, mortgage rates, tax laws, and the inflation outlook.
(2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing
consumer goods or services, including design, processing, production, sale, or
storage of packaged, canned, bottled, or frozen foods and beverages and design,
production, or sale of home furnishings, appliances, clothing, accessories,
cosmetics, or perfumes. Certain of these companies are subject to government
regulation affecting the use of various food additives and production methods,
which could affect profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns, health concerns,
and other factors affecting supply and demand.
(3) DEFENSE AND AEROSPACE SECTOR: Companies engaged in research,
manufacture, or sale of products or services related to the defense or aerospace
industries, including air transport; data processing or computer-related
services; communications systems; military weapons or transportation; general
aviation equipment, missiles, space launch vehicles, or spacecraft; machinery
for guidance, propulsion, or control of flight vehicles; and airborne or
ground-based equipment essential to the test, operation, or maintenance of
flight vehicles. Because these companies rely largely on U.S. (and foreign)
governmental demand for their products and services, their financial conditions
are heavily influenced by defense spending policies.
(4) ENERGY SECTOR: Companies involved in the production, transmission,
or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal,
oil shale, or solar sources of energy (but excluding public utility companies).
Also included are companies that provide component products or services for
those activities. The value of these companies' securities varies based on the
price and supply of energy fuels and may be affected by international politics,
energy conservation, the success of exploration projects, environmental
considerations, and the tax and other regulatory policies of various
governments.
(5) FINANCIAL SERVICES SECTOR: Companies providing financial services
to consumers or industry, including commercial banks and savings and loan
associations, consumer and industrial finance companies, securities brokerage
companies, leasing companies, and insurance companies. These companies are
subject to extensive governmental regulations. Their profitability may fluctuate
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<PAGE>
significantly as a result of volatile interest rates, concerns about particular
banks and savings institutions, and general economic conditions.
(6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or
sale of products or services used in connection with the provision of health
care, including pharmaceutical companies; firms that design, manufacture, sell,
or supply medical, dental, or optical products, hardware, or services; companies
involved in biotechnology, medical diagnostic, or biochemical research and
development; and companies that operate health care facilities. Many of these
companies are subject to government regulation and potential health care
reforms, which could affect the price and availability of their products and
services. Also, products and services of these companies could quickly become
obsolete.
(7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development,
manufacture, or marketing of products, processes, or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals, steel,
or pollution control industries, including synthetic and natural materials (for
example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or
fragrances), paper, wood products, steel, and cement. Certain of these companies
are subject to state and federal regulation, which could require alteration or
cessation of production of a product, payment of fines, or cleaning of a
disposal site. Furthermore, because some of the materials and processes used by
these companies involve hazardous components, there are additional risks
associated with their production, handling, and disposal. The risk of product
obsolescence also is present.
(8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research,
development, or manufacture of products, processes, or services relating to
electrical equipment, machinery, pollution control, or construction services,
including transformers, motors, turbines, hand tools, earth-moving equipment,
and waste disposal services. The profitability of most of these companies may
fluctuate significantly in response to capital spending and general economic
conditions. As is the case for the heavy industry sector, there are risks
associated with the production, handling, and disposal of materials and
processes that involve hazardous components and the risk of product
obsolescence.
(9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design,
production, or distribution of goods or services for the media industries
(including television or radio broadcasting or manufacturing, publishing,
recordings and musical instruments, motion pictures, and photography) and the
entertainment industries (including sports arenas, amusement and theme parks,
gaming casinos, sporting goods, camping and recreational equipment, toys and
games, travel-related services, hotels and motels, and fast food and other
restaurants). Many products produced by companies in this sector -- for example,
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<PAGE>
video and electronic games -- may become obsolete quickly. Additionally,
companies engaged in tele- vision and radio broadcast are subject to government
regulation.
(10) RETAILING SECTOR: Companies engaged in retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products, or
other consumer goods, including department stores, supermarkets, and retail
chains specializing in particular items such as shoes, toys, or pharmaceuticals.
The value of these companies' securities fluctuates based on consumer spending
patterns, which depend on inflation and interest rates, the level of consumer
debt, and seasonal shopping habits. The success or failure of a company in this
highly competitive sector depends on its ability to predict rapidly changing
consumer tastes.
(11) TECHNOLOGY SECTOR: Companies that are expected to have or develop
products, processes, or services that will provide, or will benefit
significantly from, technological advances and improvements or future automation
trends, including semiconductors, computers and peripheral equipment, scientific
instruments, computer software, telecommunications equipment, and electronic
components, instruments, and systems. These companies are sensitive to foreign
competition and import tariffs. Also, many of their products may become obsolete
quickly.
(12) TRANSPORTATION SECTOR: Companies involved in providing
transportation of people and products, including airlines, rail-
roads, and trucking firms. Revenues of these companies are
affected by fluctuations in fuel prices and government regulation
of fares.
(13) UTILITIES SECTOR: Companies in the public utilities industry and
companies that derive a substantial majority of their revenues through supplying
public utilities (including companies engaged in the manufacture, production,
generation, transmission, or sale of gas and electric energy) and that provide
telephone, telegraph, satellite, microwave, and other communication facilities
to the public. The gas and electric public utilities industries are subject to
various uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear power
facilities.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and are
not intended to indicate future performance. The share price and total return of
each Fund will vary, and an investment in a Fund, when redeemed, may be worth
more or less than an investor's original cost.
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<PAGE>
TOTAL RETURN COMPUTATIONS
Each Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)(SUPERSCRIPT)n = ERV
Average annual total return smooths out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
Although none of the Funds commenced operations until August 1993, each
Fund's investment objective, policies, and limitations are the same as those of
another mutual fund that is a series of Neuberger & Berman Equity Funds and that
has a name similar to the Fund's and invests in the same Portfolio ("Sister
Fund"). Each Sister Fund had a predecessor. The following total return data is
for each Fund since its inception and, for periods prior to each Fund's
inception, its Sister Fund and that Sister Fund's predecessor. The total returns
for periods prior to the Funds' inception would have been lower had they
reflected the higher fees of the Funds, as compared to those of the Sister Funds
and their predecessors.
The average annual total returns for Neuberger & Berman MANHATTAN
Trust, its Sister Fund, and that Sister Fund's predecessor for the one-, five-,
and ten-year periods ended August 31, 1996, were -2.98%, +11.12%, and +11.12%,
respectively. If an investor had invested $10,000 in that predecessor's shares
on March 1, 1979 and had reinvested all income dividends and other
distributions, the NAV of that investor's holdings would have been $142,762 on
August 31, 1996.
The average annual total returns for Neuberger & Berman GENESIS Trust,
its Sister Fund, and that Sister Fund's predecessor for the one- and five-year
periods ended August 31, 1996, and for the period from September 27, 1988
(commencement of operations), through August 31, 1996, were +21.44%, +14.83%,
and +13.69%, respectively. If an investor had invested $10,000 in that
predecessor's shares on September 27, 1988 and had reinvested all income
dividends and other distributions, the NAV of that investor's holdings would
have been $27,664 on August 31, 1996.
The average annual total returns for Neuberger & Berman FOCUS Trust,
its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and
ten-year periods ended August 31, 1996, were +3.62%, +16.54%, and +13.71%,
respectively. If an investor had invested $10,000 in that predecessor's shares
on October 19, 1955 and had reinvested all income dividends and other
- 26 -
<PAGE>
distributions, the NAV of that investor's holdings would have been $965,812 on
August 31, 1996.
The average annual total returns for Neuberger & Berman GUARDIAN Trust,
its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and
ten-year periods ended August 31, 1996, were +5.19%, +15.07%, and +13.31%,
respectively. If an investor had invested $10,000 in that predecessor's shares
on June 1, 1950 and had reinvested all income dividends and other distributions,
the NAV of that investor's holdings would have been $2,765,779 on August 31,
1996.
The average annual total returns for Neuberger & Berman PARTNERS Trust,
its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and
ten-year periods ended August 31, 1996, were +13.76%, +15.21%, and +12.59%,
respectively. If an investor had invested $10,000 in that predecessor's shares
on January 20, 1975 and had reinvested all income dividends and other
distributions, the NAV of that investor's holdings would have been $327,023 on
August 31, 1996.
Prior to January 5, 1989, the investment policies of the predecessor of
Neuberger & Berman FOCUS Trust's Sister Fund required that at least 80% of its
investments normally be in energy-related investments; prior to November 1,
1991, those investment policies required that at least 25% of its investments
normally be in the energy sector. Neuberger & Berman FOCUS Trust may be
required, under applicable law, to include information reflecting the Sister
Fund's predecessor's performance and expenses for periods before November 1,
1991, in its advertisements, sales literature, financial statements, and other
documents filed with the SEC and/or provided to current and prospective
shareholders. Investors should be aware that such information may not accurately
reflect the level of performance and expenses that would have been experienced
had the Sister Fund's predecessor been operating under the Fund's current
investment policies.
COMPARATIVE INFORMATION
From time to time each Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings)
published by independent services or publications (including
newspapers, newsletters, and financial periodicals) that monitor the
performance of mutual funds, such as Lipper Analytical Services, Inc.,
C.D.A. Investment Technologies, Inc., Wiesenberger Investment Companies
Service, Investment Company Data Inc., Morningstar, Inc., Micropal
Incorporated, and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World Report
- 27 -
<PAGE>
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, Dow Jones Industrial Average ("DJIA"), Wilshire 1750
Index, Nasdaq Composite 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 $40 million to $2.3 billion, with an average of $451
million. The S&P 400 Index measures mid-sized companies that have an
average market capitalization of $1.6 billion. Each assumes
reinvestment of distributions and is calculated without regard to tax
consequences or the costs of investing. Each Portfolio may invest in
different types of securities from those included in some of the above
indices.
Evaluations of the Funds' performance, their total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about a Portfolio's portfolio allocation
and holdings as of a particular date may be included in Advertisements for the
corresponding Fund. This information may include the Portfolio's portfolio
diversification by asset type. 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.
N&B 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
- 28 -
<PAGE>
facing retirement, (2) receiving or expecting to receive lump-sum distributions
from individual retirement accounts ("IRAs"), self-employed individual
retirement plans ("Keogh plans"), or other retirement plans, (3) anticipating
rollovers of CDs or IRAs, Keogh plans, or other retirement plans, and (4)
receiving a significant amount of money as a result of inheritance, sale of a
business, or termination of employment.
Investors who may find Neuberger & Berman PARTNERS Trust, Neuberger &
Berman GUARDIAN Trust or Neuberger & Berman FOCUS Trust 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.)
From time to time the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Funds' Advertisements. This
philosophy is described in further detail in "The Art of Investing: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
CERTAIN RISK CONSIDERATIONS
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance any Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman, LLC ("Neuberger & Berman").
<TABLE>
<CAPTION>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
- -------------- --------------- --------------------------
<S> <C> <C>
Faith Colish (61) Trustee of each Attorney at Law, Faith
63 Wall Street Trust Colish, A Professional
24th Floor Corporation.
New York, NY 10005
Donald M. Cox (74) Trustee of each Retired. Formerly Senior
435 East 52nd Street Trust Vice President and Direc-
New York, NY 10022 tor of Exxon Corporation;
Director of Emigrant Sav-
ings Bank.
Stanley Egener* (62) Chairman of the Principal of Neuberger &
Board, Chief Berman; President and
Executive Offi- Director of N&B Manage-
cer, and Trustee ment; Chairman of the
of each Trust Board, Chief Executive
Officer and Trustee of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Alan R. Gruber (69) Trustee of each Chairman and Chief Execu-
Orion Capital Trust tive Officer of Orion
Corporation Capital Corporation (prop-
600 Fifth Avenue erty and casualty insur-
24th Floor ance); Director of Tren-
New York, NY 10020 wick Group, Inc. (property
and casualty reinsurance);
Chairman of the Board and
Director of Guaranty
National Corporation
(property and casualty
insurance); formerly
Director of Ketema, Inc.
(diversified manufac-
turer).
- 29 -
<PAGE>
Howard A. Mileaf (59) Trustee of each Vice President and Special
WHX Corporation Trust Counsel to WHX Corporation
110 East 59th Street (holding company) since
30th Floor 1992; formerly Vice Presi-
New York, NY 10022 dent and General Counsel
of Keene Corporation (manufacturer
of industrial products);
Director of Kevlin Corporation
(manufacturer of microwave
and other products).
Edward I. O'Brien* Trustee of each Until 1993, President of
(68) Trust the Securities Industry
12 Woods Lane Association ("SIA")
Scarsdale, NY 10583 (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. Trustee of each Retired. Formerly,
(68) Trust President of SOBRO (South
183 Ledge Drive Bronx Overall Economic
Torrington, CT 06790 Development Corporation).
John P. Rosenthal (63) Trustee of each Senior Vice President of
Burnham Securities Trust Burnham Securities Inc. (a
Inc. registered broker-dealer)
Burnham Asset since 1991; formerly
Management Corp. Partner of Silberberg,
1325 Avenue of the Rosenthal & Co. (member of
Americas National Association of
17th Floor Securities Dealers, Inc.);
New York, NY 10019 Director, Cancer Treatment
Holdings, Inc.
- 30 -
<PAGE>
Cornelius T. Ryan (65) Trustee of each General Partner of Oxford
Oxford Bioscience Trust Partners and Oxford Bio-
Partners science Partners (venture
315 Post Road West capital partnerships) and
Westport, CT 06880 President of Oxford Ven-
ture Corporation; Director
of Capital Cash Management
Trust (money market fund)
and Prime Cash Fund.
Gustave H. Shubert Trustee of each Senior Fellow/Corporate
(67) Trust Advisor and Advisory Trus-
13838 Sunset Boulevard tee of Rand (a non-profit
Pacific Palisades, CA public interest research
90272 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.
Lawrence Zicklin* (60) President and Principal of Neuberger &
Trustee of each Berman; Director of N&B
Trust Management; President and/or
Trustee of five other mutual
funds for which N&B Management
acts as investment manager
or administrator.
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<PAGE>
Daniel J. Sullivan Vice President of Senior Vice President of
(56) each Trust N&B Management since 1992;
prior thereto, Vice President
of N&B Management; Vice President
of eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Michael J. Weiner (49) Vice President Senior Vice President of
and Principal N&B Management since 1992;
Financial Officer Treasurer of N&B
of each Trust Management from 1992 to
1996; prior thereto,
Vice President and
Treasurer of N&B
Management and Treasurer
of certain mutual funds
for which N&B Management
acted as investment
adviser; Vice President
and Principal Financial
Officer of eight other
mutual funds for which
N&B Management acts as
investment manager or
administrator.
Claudia A. Brandon Secretary of each Vice President of N&B Man-
(40) Trust agement; Secretary of eight
other mutual funds for
which N&B Management acts
as investment manager or
administrator.
Richard Russell (49) Treasurer and Vice President of N&B
Principal Ac- Management since 1993;
counting Officer prior thereto, Assistant
of each Trust Vice President of N&B
Management; Treasurer
and Principal Accounting
Officer of eight other
mutual funds for which
N&B Management acts as
investment manager or
administrator.
- 32 -
<PAGE>
Stacy Cooper-Shugrue Assistant Secre- Assistant Vice President
(33) tary of each of N&B Management since
Trust 1993; prior thereto,
employee of N&B Man-
agement; Assistant
Secretary of eight other
mutual funds for which N&B
Management acts as
investment manager or
administrator.
C. Carl Randolph (59) Assistant Secre- Principal of Neuberger &
tary of each Berman since 1992; prior
Trust thereto, employee of
Neuberger & Berman;
Assistant Secretary of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Barbara DiGiorgio (37) Assistant Assistant Vice President
Treasurer of each of N&B Management since
Trust 1993; prior thereto,
employee of N&B Management;
Assistant Treasurer of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator since 1996.
Celeste Wischerth (35) Assistant Assistant Vice President
Treasurer of each of N&B Management since
Trust 1994; prior thereto,
employee of N&B
Management; Assistant
Treasurer of eight other
mutual funds for which
N&B Management acts as
investment manager or
administrator since 1996.
</TABLE>
- 33 -
<PAGE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of N&B Management and
principals of Neuberger & Berman. Mr. O'Brien is an interested person by virtue
of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary
of which, from time to time, serves as a broker or dealer to the Portfolios and
other funds for which N&B 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 such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
For the fiscal year ended August 31, 1996, each Fund and Portfolio paid
and accrued the following fees and expenses to Fund and Portfolio Trustees who
were not affiliated with N&B Management or Neuberger & Berman: Neuberger &
Berman MANHATTAN Trust and Portfolio - $1,826; Neuberger & Berman GENESIS Trust
and Portfolio - $2,980; Neuberger & Berman FOCUS Trust and Portfolio - $1,335;
Neuberger & Berman GUARDIAN Trust and Portfolio - $26,813; and Neuberger &
Berman PARTNERS Trust and Portfolio - $2,594.
The following table sets forth information concerning the compensation
of the trustees and officers of the Trust. None of the Neuberger & Berman
Funds(R) has any retirement plan for its trustees or officers.
- 34 -
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/96
Aggregate Total Compensation from
Compensation Trusts in the Neuberger
Name and Position with from the & Berman Fund Complex
the Trust Trust Paid to Trustees
- ---------------------- ------------- ------------------------
Faith Colish $ 2,320 $ 38,500
Trustee (5 other investment
companies)
Donald M. Cox $ 2,320 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive companies)
Officer, and Trustee
Alan R. Gruber $ 2,143 $ 28,000
Trustee (3 other investment
companies)
Howard A. Mileaf $ 2,350 $ 37,000
Trustee (4 other investment
companies)
Edward I. O'Brien $ 2,409 $ 31,500
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 2,587 $ 40,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,320 $ 36,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,350 $ 30,500
Trustee (3 other investment
companies)
Gustave H. Shubert $ 2,350 $ 30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
At November 20, 1996, the trustees and officers of the Trusts, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
each Fund.
- 35 -
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Funds' net investable assets are invested in their
corresponding Portfolios, the Funds do not need an investment manager. N&B
Management serves as the Portfolios' investment manager pursuant to a management
agreement with Managers Trust, dated as of August 2, 1993 ("Management
Agreement"). The Management Agreement was approved for each Portfolio by the
Portfolio Trustees, including a majority of the Portfolio Trustees who were not
"interested persons" of N&B Management or Managers Trust ("Independent Portfolio
Trustees"), on July 15, 1993, and was approved by the holders of the interests
in all the Portfolios on August 2, 1993.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolios in its
discretion and will continuously develop an investment program for the
Portfolios' assets. The Management Agreement permits N&B Management to effect
securities transactions on behalf of each Portfolio through associated persons
of N&B Management. The Management Agreement also specifically permits N&B
Management to compensate, through higher commissions, brokers and dealers who
provide investment research and analysis to the Portfolios, although N&B
Management has no current plans to pay a material amount of such compensation.
N&B Management provides to each Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts. See "Trustees and Officers." Each Portfolio pays N&B
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
N&B Management provides similar facilities, services and personnel, as
well as accounting, recordkeeping, and other services, to each Fund pursuant to
an administration agreement with the Trust, dated August 3, 1993
("Administration Agreement"). For such administrative services, each Fund pays
N&B Management a fee based on the Fund's average daily net assets, as described
in the Prospectus. N&B Management enters into administrative services agreements
with Institutions, pursuant to which it compensates Institutions for accounting,
recordkeeping and other services that they provide to investors who purchase
shares of the Funds.
- 36 -
<PAGE>
During the fiscal years ended August 31, 1996, 1995 and 1994, each Fund
accrued management and administration fees as follows: Neuberger & Berman
MANHATTAN Trust - $420,605, $202,729, and $49,957; Neuberger & Berman GENESIS
Trust - $487,514, $274,709, and $14,462; Neuberger & Berman FOCUS Trust -
$329,609, $43,330, and $4,624; Neuberger & Berman GUARDIAN Trust - $8,821,718,
$2,417,586, and $142,142; and Neuberger & Berman PARTNERS Trust - $755,623,
$292,161, and $17,299, respectively. During the fiscal year ended August 31,
1996 and the period from May 1, 1995 to August 31, 1995, N&B Management waived
$39,014 and $9,217, respectively, of management fees that otherwise would have
been borne indirectly by Neuberger & Berman GENESIS Trust.
N&B Management has voluntarily undertaken to reimburse each Fund for
its Operating Expenses and its pro rata share of its corresponding Portfolio's
Operating Expenses so that each Fund's expense ratio per annum will not exceed
the expense ratio of its Sister Fund by more than 0.10% of the Fund's average
daily net assets. "Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses. Each undertaking can be terminated by
N&B Management by giving a Fund at least 60 days' prior written notice. During
the period from August 1993 (commencement of operations of each Fund) to
December 31, 1994, N&B Management voluntarily undertook to reimburse each Fund
for its Operating Expenses and its pro rata share of its corresponding
Portfolio's Operating Expenses so that each Fund's expense ratio per annum would
not exceed the expense ratio of its Sister Fund. During the fiscal years ended
August 31, 1996, 1995 and 1994, N&B Management reimbursed each Fund the
following amounts of expenses under the above arrangements: Neuberger & Berman
MANHATTAN Trust, $78,810, $87,443 and $88,693, respectively; Neuberger & Berman
GENESIS Trust, $66,139, $69,047 and $73,439, respectively; Neuberger & Berman
FOCUS Trust, $104,689, $92,687 and $68,285, respectively; Neuberger & Berman
GUARDIAN Trust, $69,266, $171,796 and $116,354, respectively; and Neuberger &
Berman PARTNERS Trust, $109,574, $102,400 and $75,492, respectively.
The Management Agreement continues with respect to each Portfolio for a
period of two years after the date the Portfolio became subject thereto. The
Management Agreement is renewable thereafter from year to year with respect to
each Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the 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 that Portfolio. The Administration Agreement continues
with respect to each Fund for a period of two years after the date the Fund
became subject thereto. The Administration Agreement is renewable from year to
year with respect to a Fund, so long as its continuance is approved at least
annually (1) by the vote of a majority of the Fund Trustees who are not
- 37 -
<PAGE>
"interested persons" of N&B Management or the Trust ("Independent Fund
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval, and (2) by the vote of a majority of the Fund Trustees or by a 1940
Act majority vote of the outstanding shares in that Fund.
The Management Agreement is terminable, without penalty, with respect
to a Portfolio on 60 days' written notice either by Managers Trust or by N&B
Management. The Administration Agreement is terminable, without penalty, with
respect to a Fund on 60 days' written notice either by N&B Management or by the
Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
N&B Management retains Neuberger & Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to each Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the Portfolio Trustees, including a
majority of the Independent Portfolio Trustees, on July 15, 1993 and was
approved by the holders of the interests in the Portfolios on August 2, 1993.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B 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 approximately
fourteen 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 N&B Management. The Sub-Advisory Agreement
provides that N&B 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 N&B Management.
The Sub-Advisory Agreement continues with respect to each Portfolio for
a period of two years after the date the Portfolio became subject thereto 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 each Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in that
Portfolio, by N&B Management, or by Neuberger & Berman on not less than 30 nor
more than 60 days' written notice. The Sub- Advisory Agreement also terminates
- 38 -
<PAGE>
automatically with respect to each Portfolio if it is assigned or if the
Management Agreement terminates with respect to that Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
N&B Management currently serves as investment manager of the following
investment companies. As of September 30, 1996, these companies, along with
three other investment companies advised by Neuberger & Berman, had aggregate
net assets of approximately $13.9 billion, as shown in the following list:
Approximate
Net Assets at
September 30,
NAME 1996
---- --------------
Neuberger & Berman Cash $527,447,493
Reserves Portfolio
(investment portfolio for
Neuberger & Berman Cash
Reserves)
Neuberger & Berman Government $319,705,018
Money Portfolio
(investment portfolio for
Neuberger & Berman
Government Money Fund)
Neuberger & Berman Limited $268,892,148
Maturity Bond Portfolio
(investment portfolio for
Neuberger & Berman
Limited Maturity Bond
Fund and Neuberger &
Berman Limited Maturity
Bond Trust)
Neuberger & Berman Municipal $141,116,062
Money Portfolio
(investment portfolio for
Neuberger & Berman
Municipal Money Fund)
- 39 -
<PAGE>
Neuberger & Berman Municipal $ 38,416,801
Securities Portfolio
(investment portfolio for
Neuberger & Berman
Municipal Securities
Trust)
Neuberger & Berman New York $ 9,575,489
Insured Intermediate Portfolio
(investment portfolio for
Neuberger & Berman New
York Insured Intermediate
Fund)
Neuberger & Berman Ultra Short $ 96,306,004
Bond Portfolio
(investment portfolio for
Neuberger & Berman Ultra
Short Bond Fund and
Neuberger & Berman Ultra
Short Bond Trust)
Neuberger & Berman Focus $1,174,138,341
Portfolio
(investment portfolio for
Neuberger & Berman Focus
Fund, Neuberger & Berman
Focus Trust and Neuberger
& Berman Focus Assets)
Neuberger & Berman Genesis $287,653,131
Portfolio
(investment portfolio for
Neuberger & Berman
Genesis Fund and
Neuberger & Berman
Genesis Trust)
Neuberger & Berman Guardian $6,513,577,557
Portfolio
(investment portfolio for
Neuberger & Berman
Guardian Fund, Neuberger
& Berman Guardian Trust
and Neuberger & Berman
Guardian Assets)
- 40 -
<PAGE>
Neuberger & Berman $ 59,969,278
International Portfolio
(investment portfolio for
Neuberger & Berman
International Fund)
Neuberger & Berman Manhattan $592,681,290
Portfolio
(investment portfolio for
Neuberger & Berman
Manhattan Fund, Neuberger
& Berman Manhattan Trust
and Neuberger & Berman
Manhattan Assets)
Neuberger & Berman Partners $2,112,475,324
Portfolio
(investment portfolio for
Neuberger & Berman
Partners Fund, Neuberger
& Berman Partners Trust
and Neuberger & Berman
Partners Assets)
Neuberger & Berman Socially $167,005,429
Responsive Portfolio
(investment portfolio for
Neuberger & Berman
Socially Responsive Fund
and Neuberger & Berman
NYCDC Socially Responsive
Trust)
Advisers Managers Trust $1,468,727,224
(six series)
In addition, Neuberger & Berman serves as investment adviser to three
investment companies, Plan Investment Fund, Inc., AHA Investment Fund, Inc., and
AHA Full Maturity, with assets of $61,738,329, $77,498,236, and $26,954,887,
respectively, at September 30, 1996.
The investment decisions concerning the Portfolios and the other mutual
funds managed by N&B Management (collectively, "Other N&B Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other N&B Funds differ from the Portfolios.
- 41 -
<PAGE>
Even where the investment objectives are similar, however, the methods used by
the Other N&B Funds and the Portfolios to achieve their objectives may differ.
The investment results achieved by all of the mutual funds managed by N&B
Management have varied from one another in the past and are likely to vary in
the future.
There may be occasions when a Portfolio and one or more of the Other
N&B Funds or other accounts managed by Neuberger & Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolios are subject to certain limitations imposed on all
advisory clients of Neuberger & Berman (including the Portfolios, the Other N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have offices
at the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, Presi- dent and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; William Cunningham, Vice President; Clara Del
Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce Haboucha,
Vice President; Michael Lamberti, Vice President; Josephine P. Mahaney, Vice
President; Lawrence Marx III, Vice President; Ellen Metzger, Vice President and
Secretary; Janet W. Prindle, Vice President; Felix Rovelli, Vice President;
Richard Russell, Vice President; Kent C. Simons, Vice President; Frederick B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice President of
Marketing; Robert Conti, Treasurer; Stacy Cooper-Shugrue, Assistant Vice
- 42 -
<PAGE>
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Roberta D'Orio, Assistant Vice President; Joseph G. Galli,
Assistant Vice President; Robert I. Gendelman, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Paul Metzger, Assistant
Vice President; Joseph S. Quirk, Assistant Vice President; Kevin L. Risen,
Assistant Vice President; Susan Switzer, Assistant Vice President; Celeste
Wischerth, Assistant Vice President; KimMarie Zamot, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Giuliano,
Lainoff, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Prindle and Vale
are principals of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper- Shugrue, DiGiorgio, and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of each Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, each Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of each Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Funds' shares.
The Distributor or one of its affiliates may, from time to time, deem
it desirable to offer to shareholders of the Funds, through use of their
shareholder lists, the shares of other mutual funds for which the Distributor
acts as distributor or other products or services. Any such use of the Funds'
shareholder lists, however, will be made subject to terms and conditions, if
any, approved by a majority of the Independent Fund Trustees. These lists will
not be used to offer the Funds' shareholders any investment products or services
other than those managed or distributed by N&B Management or Neuberger & Berman.
- 43 -
<PAGE>
From time to time, N&B Management may enter into arrangements pursuant
to which it compensates a registered broker-dealer or other third party for
services in connection with the distribution of Fund shares.
The Trust, on behalf of each Fund, and the Distributor are parties to a
Distribution Agreement that continues until August 3, 1997. 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
Agreement.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Exchanging Shares," an Institution may exchange shares of any Fund for shares
of one or more of the other Funds or the income funds that are briefly described
below ("Income Funds").
INCOME FUNDS
Neuberger & Berman Seeks current income with minimal risk
Ultra Short Bond Trust to principal and liquidity. The
corresponding portfolio invests in
money market instruments and
investment grade debt securities of
government and non-government issuers.
Maximum average duration of two years.
Neuberger & Berman Seeks the highest current income con-
Limited Maturity Bond sistent with low risk to principal and
Trust 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.
Any Fund described herein, and either of the Income Funds, may
terminate or modify its exchange privilege in the future.
- ---------------------
* As rated by Moody's or S&P or, if unrated by either of those entities,
determined by N&B Management to be of comparable quality.
- 44 -
<PAGE>
Fund shareholders who are considering exchanging shares into either of
the Income Funds should note that each such fund (1) is a series of a Delaware
business trust (named "Neuberger & Berman Income Trust") that is registered with
the SEC as an open-end management investment company, and (2) invests all of its
net investable assets in a corresponding portfolio that has an investment
objective, policies, and limitations identical to those of the fund.
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 Income Funds share a prospectus. An exchange is treated as a
sale for federal income tax purposes and, depending on the circumstances, a
short- or long-term capital gain or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the NYSE is closed (other than weekend and
holiday closings), (2) when trading on the NYSE is restricted, (3) when an
emergency exists as a result of which it is not reasonably practicable for its
corresponding Portfolio to dispose of securities it owns or fairly to determine
the value of its net assets, or (4) for such other period as the SEC may by
order permit for the protection of the Fund's shareholders. Applicable SEC rules
and regulations shall govern whether the conditions prescribed in (2) or (3)
exist. If the right of redemption is suspended, shareholders may withdraw their
offers of redemption, or they will receive payment at the NAV per share in
effect at the close of business on the first day the NYSE is open ("Business
Day") after termination of the suspension.
REDEMPTIONS IN KIND
Each Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, a shareholder generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Funds do not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of a
Fund's shareholders as a whole.
- 45 -
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders amounts equal to
substantially all of its share of any net investment income (after deducting
expenses incurred directly by the Fund), any net realized capital gains (both
long-term and short-term), and any net realized gains from foreign currency
transactions earned or realized by its corresponding Portfolio. Each Fund
calculates its net investment income and NAV per share as of the close of
regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern
time).
A Portfolio's net investment income consists of all income accrued on
portfolio assets less accrued expenses, but does not include capital and foreign
currency gains and losses. Net investment income and realized gains and losses
are reflected in a Portfolio's NAV (and, hence, its corresponding Fund's NAV)
until they are distributed. Dividends from net investment income and
distributions of net realized capital and foreign currency gains, if any,
normally are paid once annually, in December, except that Neuberger & Berman
GUARDIAN Trust distributes substantially all of its share of Neuberger & Berman
GUARDIAN Portfolio's net investment income, if any, near the end of each
calendar quarter.
Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the Institution elects to
receive them in cash ("cash election"). To the extent dividends and other
distributions are subject to federal, state, or local income taxation, they are
taxable to the shareholders whether received in cash or reinvested in Fund
shares. A cash election with respect to any Fund remains in effect until the
Institution notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUNDS
In order to continue to qualify for treatment as a RIC under the Code,
each Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
income, net short- term capital gain, and net gains from certain foreign
currency transactions) ("Distribution Requirement") and must meet several
additional requirements. With respect to each Fund, these require- ments 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
- 46 -
<PAGE>
("Income Requirement"); (2) the Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of securities, or
any of the following, that were held for less than three months -- (i) options
(other than those on foreign currencies), or (ii) foreign currencies or Hedging
Instruments thereon that are not directly related to the Fund's principal
business of investing in securities (or options with respect thereto)
("Short-Short Limitation"); and (3) 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.
Certain funds that invest in portfolios managed by N&B Management,
including the Sister Funds, have received rulings from the Internal Revenue
Service ("Service") that each such fund, as an investor in its corresponding
portfolio, will be deemed to own a proportionate share of the portfolio's assets
and income for purposes of determining whether the fund satisfies all the
requirements described above to qualify as a RIC. Although these rulings may not
be relied on as precedent by the Funds, N&B Management believes that the
reasoning thereof and, hence, their conclusion apply to the Funds as well.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the
Funds of distributions to them from the Portfolios, investments by the
Portfolios in certain securities, and hedging transactions engaged in by the
Portfolios.
TAXATION OF THE PORTFOLIOS
The Portfolios 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." As a result, no Portfolio is subject to federal income tax;
instead, each investor in a Portfolio, such as a Fund, is required to take into
account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, and credits, without regard to
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<PAGE>
whether it has received any cash distributions from the Portfolio. Each
Portfolio also is not subject to Delaware or New York income or franchise tax.
Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund qualifies as a RIC, each Portfolio intends to continue to conduct its
operations so that its corresponding Fund will be able to continue to satisfy
all those requirements.
Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. A Fund's basis for its interest in its
corresponding 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 a Portfolio may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield 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.
A Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if a Portfolio holds
stock of a PFIC, its corresponding Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
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<PAGE>
If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of its corresponding Fund's incurring
the foregoing tax and interest obligation, the Fund would be required to include
in income each year its share of the Portfolio's pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Funds,
would be entitled to elect to mark to market their stock in certain PFICs.
Marking to market, in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
The Portfolios' 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 character and timing of
recognition of the gains and losses the Portfolios realize in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from Hedging
Instruments derived by the Portfolio with respect to its business of investing
in securities or foreign currencies, will qualify as permissible income for its
corresponding Fund under the Income Requirement. However, income from the
disposition by a Portfolio of options (other than those on foreign currencies)
will be subject to the Short-Short Limitation for its corresponding Fund if they
are held for less than three months. Income from the disposition of foreign
currencies, and Hedging Instruments on foreign currencies, that are not directly
related to a Portfolio's principal business of investing in securities (or
options with respect thereto) also will be subject to the Short-Short Limitation
for its corresponding Fund if they are held for less than three months.
If a Portfolio satisfies certain requirements, any increase in value of
a position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether its corresponding Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. Each Portfolio will consider whether it should seek to satisfy those
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<PAGE>
requirements to enable its corresponding Fund to qualify for this treatment for
hedging transactions. To the extent a Portfolio does not do so, it may be forced
to defer the closing out of certain Hedging Instruments or foreign currency
positions beyond the time when it otherwise would be advantageous to do so, in
order for its corresponding Fund to continue to qualify as a RIC.
Neuberger & Berman PARTNERS 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, Neuberger & Berman
PARTNERS Trust) must take into account the OID that accrues on the securities
during the taxable year, even if it receives no corresponding payment on the
securities during the year. Because 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 Neuberger & Berman PARTNERS 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 Neuberger & Berman PARTNERS
Trust's investment company taxable income and/or net capital gain. In addition,
any such gains may be realized on the disposition of securities held for less
than three months. Because of the Short-Short Limitation, any such gains would
reduce Neuberger & Berman PARTNERS Portfolio's ability to sell other securities,
or certain Hedging Instruments or foreign currency positions, held for less than
three months that it might wish to sell in the ordinary course of its portfolio
management.
TAXATION OF THE FUNDS' SHAREHOLDERS
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as each Portfolio's principal broker in the
purchase and sale of its portfolio securities (other than the substantial
portion of the portfolio transactions of Neuberger & Berman GENESIS Portfolio
that involves securities traded on the OTC market; that Portfolio purchases and
sells OTC securities in principal transactions with dealers who are the
principal market makers for such securities) and in connection with the writing
of covered call options on its securities.
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<PAGE>
During the fiscal year ended August 31, 1994, Neuberger & Berman
MANHATTAN Portfolio paid brokerage commissions of $655,640, of which $525,610
was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995,
that Portfolio paid brokerage commissions of $654,982, of which $436,568 was
paid to Neuberger & Berman.
During the fiscal year ended August 31, 1996, Neuberger & Berman
MANHATTAN Portfolio paid brokerage commissions of $940,324, of which $543,020
was paid to Neuberger & Berman. Transactions in which that Portfolio used
Neuberger & Berman as broker comprised 65.36% of the aggregate dollar amount of
transactions involving the payment of commissions, and 57.75% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1996. 85.38% of the $397,304 paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $144,595,529) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1996, that
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act) ("Regular B/Ds"): Bear Stearns & Co. Inc.,
Exxon Credit Corp., General Electric Capital Corp., and Morgan Stanley & Co.,
Inc.; at that date, that Portfolio held the securities of its Regular B/Ds with
an aggregate value as follows: Bear Stearns & Co. Inc., $5,142,500 and Morgan
Stanley & Co., Inc., $10,266,250.
During the fiscal year ended August 31, 1994, Neuberger & Berman
GENESIS Portfolio paid brokerage commissions of $287,587, of which $170,883 was
paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, that
Portfolio paid brokerage commissions of $199,718, of which $118,014 was paid to
Neuberger & Berman.
During the fiscal year ended August 31, 1996, Neuberger & Berman
GENESIS Portfolio paid brokerage commissions of $206,150, of which $95,999 was
paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger
& Berman as broker comprised 47.65% of the aggregate dollar amount of
transactions involving the payment of commissions, and 46.57% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1996. 85.22% of the $110,151 paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $32,575,132) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1996, that
Portfolio acquired securities of the following of its Regular B/Ds: Exxon Credit
Corp., General Electric Capital Corp., and State Street Bank and Trust Company,
N.A.; at that date, that Portfolio held the securities of its Regular B/Ds with
an aggregate value as follows: General Electric Capital Corp., $2,200,000.
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<PAGE>
During the fiscal year ended August 31, 1994, Neuberger & Berman FOCUS
Portfolio paid brokerage commissions of $719,994, of which $567,972 was paid to
Neuberger & Berman. During the fiscal year ended August 31, 1995, that Portfolio
paid brokerage commissions of $1,031,245, of which $617,957 was paid to
Neuberger & Berman.
During the fiscal year ended August 31, 1996, Neuberger & Berman FOCUS
Portfolio paid brokerage commissions of $1,165,851, of which $583,212 was paid
to Neuberger & Berman. Transactions in which that Portfolio used Neuberger &
Berman as broker comprised 56.27% of the aggregate dollar amount of transactions
involving the payment of commissions, and 50.02% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1996.
89.49% of the $582,639 paid to other brokers by that Portfolio during that
fiscal year (representing commissions on transactions involving approximately
$257,981,759) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1996, that Portfolio acquired
securities of the following of its Regular B/Ds: Exxon Credit Corp., General
Electric Capital Corp., and State Street Bank and Trust Company, N.A.; at that
date, that Portfolio held the securities of its Regular B/Ds with an aggregate
value as follows: Merrill Lynch, Pierce, Fenner & Smith, Inc., $15,312,000 and
General Electric Capital Corp., $29,400,000.
During the fiscal year ended August 31, 1994, Neuberger & Berman
GUARDIAN Portfolio paid brokerage commissions of $2,207,401, of which $1,647,807
was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995,
that Portfolio paid brokerage commissions of $3,751,206, of which $2,521,523 was
paid to Neuberger & Berman.
During the fiscal year ended August 31, 1996, Neuberger & Berman
GUARDIAN Portfolio paid brokerage commissions of $6,886,590, of which $3,542,127
was paid to Neuberger & Berman. Transactions in which that Portfolio used
Neuberger & Berman as broker comprised 54.13% of the aggregate dollar amount of
transactions involving the payment of commissions, and 51.44% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1996. 83.78% of the $3,344,463 paid to other brokers by that Portfolio
during that fiscal year (representing commissions on transactions involving
approximately $1,568,004,886) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1996, that
Portfolio acquired securities of the following of its Regular B/Ds: General
Electric Capital Corp., Merrill Lynch, Pierce, Fenner & Smith, Inc., and State
Street Bank and Trust Company, N.A.; at that date, that Portfolio held the
securities of its Regular B/Ds with an aggregate value as follows: Merrill
Lynch, Pierce, Fenner & Smith, Inc., $76,562,500.
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<PAGE>
During the fiscal year ended August 31, 1994, Neuberger & Berman
PARTNERS Portfolio paid brokerage commissions of $2,994,540, of which $2,031,570
was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995,
that Portfolio paid brokerage commissions of $4,608,156, of which $3,092,789 was
paid to Neuberger & Berman.
During the fiscal year ended August 31, 1996, Neuberger & Berman
PARTNERS Portfolio paid brokerage commissions of $4,697,854, of which $2,741,666
was paid to Neuberger & Berman. Transactions in which that Portfolio used
Neuberger & Berman as broker comprised 61.16% of the aggregate dollar amount of
transactions involving the payment of commissions, and 58.36% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1996. 93.84% of the $1,956,188 paid to other brokers by that Portfolio
during that fiscal year (representing commissions on transactions involving
approximately $1,078,447,908) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1996, that
Portfolio acquired securities of the following of its Regular B/Ds: Exxon Credit
Corp., General Electric Capital Corp., and State Street Bank and Trust Company,
N.A.; at that date, that Portfolio held the securities of its Regular B/Ds with
an aggregate value as follows: General Electric Capital Corp., $30,000,000.
Insofar as portfolio transactions of Neuberger & Berman PARTNERS
Portfolio result from active management of equity securities, and insofar as
portfolio transactions of Neuberger & Berman MANHATTAN Portfolio result from
seeking capital appreciation by selling securities whenever sales are deemed
advisable without regard to the length of time the securities may have been
held, it may be expected that the aggregate brokerage commissions paid by those
Portfolios to brokers (including Neuberger & Berman where it acts in that
capacity) may be greater than if securities were selected solely on a long-term
basis.
Portfolio securities are, from time to time, loaned by a Portfolio to
Neuberger & Berman in accordance with the terms and conditions of an order
issued by the SEC. The order exempts such transactions from provisions of the
1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. Among the conditions of the order, securities loans made by a
Portfolio to Neuberger & Berman must be fully secured by cash collateral. The
portion of the income on the cash collateral which may be shared with Neuberger
& Berman is determined by reference to concurrent arrangements between Neuberger
& Berman and non-affiliated lenders with which it engages in similar
transactions. In addition, where Neuberger & Berman borrows securities from a
Portfolio in order to re-lend them to others, Neuberger & Berman is required to
pay that Portfolio, on a quarterly basis, certain "excess earnings" that
Neuberger & Berman otherwise has derived from the re-lending of the borrowed
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securities. When Neuberger & Berman desires to borrow a security that a
Portfolio has indicated a willingness to lend, Neuberger & Berman must borrow
such security from that 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 that Portfolio. If a
Portfolio's expenses exceed its income in any securities loan transaction with
Neuberger & Berman, Neuberger & Berman must reimburse that Portfolio for such
loss.
During the fiscal years ended August 31, 1996, 1995 and 1994, the
Portfolios earned the following amounts of interest income from the
collateralization of securities loans, from which Neuberger & Berman was paid
the indicated amounts:
<TABLE>
<CAPTION>
Neuberger Neuberger Neuberger Neuberger Neuberger
& Berman & Berman & Berman & Berman & Berman
GUARDIAN FOCUS PARTNERS GENESIS MANHATTAN
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994
- ----
Interest $ 147,103 38,627 16,085 0 0
Payment to N&B $ 119,620 33,225 13,880 0 0
1995
- ----
Interest $1,430,672 327,447 52,410 0 507,239
Payment to N&B $1,252,190 291,207 48,736 0 270,594
1996
- ----
Interest $2,427,096 368,663 173,908 0 301,788
Payment to N&B $2,129,341 330,001 118,041 0 186,163
</TABLE>
Each Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B 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
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<PAGE>
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.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolios.
In effecting securities transactions, each Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. Each
Portfolio plans to continue to use Neuberger & Berman as its principal broker
where, in the judgment of N&B Management (the Portfolio's investment manager and
an affiliate of Neuberger & Berman), that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolios'
knowledge, no affiliate of any Portfolio receives give-ups or reciprocal
business in connection with their securities transactions.
The use of Neuberger & Berman as a broker for each Portfolio is subject
to the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. The Portfolio Trustees have expressly authorized
Neuberger & Berman to retain such compensation, and Neuberger & Berman complies
with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by a Portfolio to Neuberger &
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is each Portfolio's policy that the commissions paid to
Neuberger & Berman must, in N&B Management's judgment, be (1) at least as
favorable as those charged by other brokers having comparable execution
capability and (2) at least as favorable as commissions contemporaneously
charged by Neuberger & Berman on comparable transactions for its most favored
unaffiliated customers, except for accounts for which Neuberger & Berman acts as
a clearing broker for another brokerage firm and customers of Neuberger & Berman
considered by a majority of the Independent Portfolio Trustees not to be
comparable to the Portfolio. The Portfolios do not deem it practicable and in
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their best interests to solicit competitive bids for commissions on each
transaction effected by Neuberger & Berman. However, consideration regularly is
given to information concerning the prevailing level of commissions charged by
other brokers on comparable transactions during comparable periods of time. The
1940 Act generally prohibits Neuberger & Berman from acting as principal in the
purchase of portfolio securities from, or the sale of portfolio securities to, a
Portfolio unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolios and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolios must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including a
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders simultaneously placed by the other accounts, subject to
de minimis exceptions. All participating accounts will pay or receive the same
price.
Each Portfolio expects that it will continue to execute a portion of
its transactions through brokers other than Neuberger & Berman. In selecting
those brokers, N&B 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 N&B Management and principals of
Neuberger & Berman who are portfolio managers of some of the Portfolios and
Other N&B Funds (collectively, "N&B 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
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large portion of the brokerage transactions for the N&B Funds and the Managed
Accounts that are not effected by Neuberger & Berman. However, in any
semi-annual period, brokers not on the list may be used, and the relative
amounts of brokerage commissions paid to the brokers on the list may vary
substantially from the projected rankings. These variations reflect the
following factors, among others: (1) brokers not on the list or ranking below
other brokers on the list may be selected for particular transactions because
they provide better price and/or execution, which is the primary consideration
in allocating brokerage; (2) adjustments may be required because of periodic
changes in the execution capabilities of or research provided by particular
brokers or in the execution or research needs of the N&B Funds and/or the
Managed Accounts; and (3) the aggregate amount of brokerage commissions
generated by transactions for the N&B 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 N&B 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. N&B
Management believes that those research services benefit the Portfolios by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolios' benefit.
Mark R. Goldstein; Judith M. Vale; Lawrence Marx III, Kent C. Simons,
and Kevin L. Risen; and Michael M. Kassen and Robert I. Gendelman, each of whom
is a Vice President of N&B Management (except for Mr. Risen and Mr. Gendelman,
who are Assistant Vice Presidents) and a principal of Neuberger & Berman (except
for Mr. Risen and Mr. Gendelman), are the persons primarily responsible for
making decisions as to specific action to be taken with respect to the
investment portfolios of Neuberger & Berman MANHATTAN, Neuberger & Berman
GENESIS, Neuberger & Berman FOCUS and Neuberger & Berman GUARDIAN, and Neuberger
& Berman PARTNERS Portfolios, respectively. Each of them has full authority to
take action with respect to portfolio transactions and may or may not consult
with other personnel of N&B Management prior to taking such action. If Mr.
Goldstein is unavailable to perform his responsibilities, Susan Switzer, who is
an Assistant Vice President of N&B Management, will assume responsibility for
the portfolio of Neuberger & Berman MANHATTAN Portfolio.
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PORTFOLIO TURNOVER
A Portfolio's portfolio turnover rate is calculated by dividing (1) the
lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors or independent accountants for the Fund and its corresponding
Portfolio. Each Fund's statements show the investments owned by its
corresponding Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in its corresponding Portfolio.
ORGANIZATION
Prior to January 1, 1995, the names of Neuberger and Berman FOCUS Trust
and Neuberger & Berman FOCUS Portfolio were Neuberger & Berman Selected Sectors
Trust and Neuberger & Berman Selected Sectors Portfolio, respectively.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian
for its securities and cash. State Street also serves as each Fund's transfer
agent, administering purchases, redemptions, and transfers of Fund shares with
respect to Institutions and the payment of dividends and other distributions to
Institutions. All correspondence should be mailed to Neuberger & Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. In
addition, State Street serves as transfer agent for each Portfolio.
INDEPENDENT AUDITORS/ACCOUNTANTS
Each Fund and Portfolio (other than Neuberger & Berman MANHATTAN Trust
and Portfolio) has selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA
02116, as the independent auditors who will audit its financial statements.
- 58 -
<PAGE>
Neuberger & Berman MANHATTAN Trust and Portfolio have selected Coopers & Lybrand
L.L.P., One Post Office Square, Boston, MA 02109, as the independent accountants
who will audit their financial statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal
counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at November 20, 1996:
<TABLE>
<CAPTION>
Percentage of
Ownership at
Name and Address November 20, 1996
---------------- -----------------
<S> <C> <C>
Neuberger & Berman MAC & Co. 40.09%
MANHATTAN Trust A/C 195-643
AEOF 1956432
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
The Northern Trust Co., 28.91%
Trustee
FBO Case Corporation
22-75833
Attn: Ken King
P.O. Box 92956
Chicago, IL 60675-2956
Riggs National Bank of 8.15%
Washington DC Retirement Plan
for Employees of Professional
100 Avenue of the Champions
Palm Beach Gardens, FL 33418-
3653
- 59 -
<PAGE>
Neuberger & Berman PRC Inc. 31.85%
PARTNERS Trust c/o T. Rowe Price Financial
Attn: Asset Recon.
P.O. Box 17215
Baltimore, MD 21297-0354
National Financial Services
Corp.* 17.68%
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Nationwide Life Insurance
QPVA
c/o IPO Portfolio Accounting 16.78%
P.O. Box 182029
Columbus, OH 43218-2029
The Bank of NY, Trustee
for various plans
Attn: Greg Tyrka
Master Trust/Master Custody 11.74%
P.O. Box 11010
New York, NY 10286-1010
- 60 -
<PAGE>
Neuberger & Berman The Northern Trust Co., 16.90%
GUARDIAN Trust Trustee
Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-2956
MAC & Co.
A/C 195-643 13.37%
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
National Financial Services
Corp.* 10.10%
P.O. Box 3908
Church Street Station
New York, NY 100008-3908
Wachovia Bank of NC
Master Trustee
FBO Akzo Nobel Inc. 6.20%
Incentive Savings Plan
Attn: Cindy Martin
301 N. Main St., MC-NC 32213
Winston Salem, NC 27150-0001
- 61 -
<PAGE>
Neuberger & Berman National Financial Services 22.18%
FOCUS Trust Corp.*
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Emjayco 11.14%
Omnibus Account
P.O. Box 17909
Milwaukee, WI 53217-0909
American Express Trust Co. 11.09%
Benefit of American Express
Trust Retirement Service
Plans
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
Aetna Life Insurance &
Annuity Co. 9.72%
ACES - Separate Account F
Attn: Michael Weiner - RTAL
15 Farmington Ave.
Hartford, CT 06156-0001
MAC & Co.
A/C 195-643 8.93%
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
Dreyfus Trust Co.
EBY Brown PS and 401k 5.05%
DTD 1-1-96
Future Investment Accounts
144 Glenn Curriss Blvd.
6th Floor
Uniondale, NY 11556-0001
- 62 -
<PAGE>
Neuberger & Berman Profit Sharing Plan for 54.01%
GENESIS Trust Partners & Principals of
Price Waterhouse
3109 W. Dr. Martin Luther
King Drive
Tampa, FL 33607
MAC & Co. 18.72%
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
Smith Barney Inc.
Book Entry Account 8.59%
333 West 34th Street
7th Floor
Mutual Funds Dept.
New York, NY 10001-2402
Vanguard Fiduciary Trust Co.
FBO Petry Media Corp. Profit
Share 401k Plan 5.43%
Vanguard Group
P.O. Box 2600 VM 421
Valley Forge, PA 19482-2600
National Financial Services
Corp.*
P.O. Box 3908
Church Street Station 5.35%
New York, NY 100008-3908
=========================================================================================
</TABLE>
* National Financial Services Corp. holds these shares of record for
the account of certain of its clients and has informed the Funds of its policy
to maintain the confidentiality of holdings in its client accounts unless
disclosure is expressly required by law.
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
- 63 -
<PAGE>
Prospectus. The registration statement, including the exhibits filed therewith,
may be examined at the SEC's offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Funds' Annual Report to shareholders
for the fiscal year ended August 31, 1996:
The audited financial statements of the Funds and Portfolios and notes
thereto for the fiscal year ended August 31, 1996, and the reports of
Ernst & Young LLP, independent auditors, with respect to such audited
financial statements of Neuberger & Berman GENESIS Trust and Portfolio,
Neuberger & Berman FOCUS Trust and Portfolio, Neuberger & Berman
GUARDIAN Trust and Portfolio, and Neuberger & Berman PARTNERS Trust and
Portfolio, and the report of Coopers & Lybrand L.L.P., independent
accountants, with respect to such audited financial statements of
Neuberger & Berman MANHATTAN Trust and Portfolio.
- 64 -
<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
rating 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
- 65 -
<PAGE>
changes that can be visualized are most unlikely to impair the fundamentally
strong position of the issuer.
AA - Bonds rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
"high-grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in AAA-rated securities, fluctuation of
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
- 66 -
<PAGE>
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
--------------------------------
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.
- 67 -
<PAGE>
Appendix B
THE ART OF INVESTMENT:
A CONVERSATION WITH ROY NEUBERGER
- 68 -
<PAGE>
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
- 1 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your
make sure that some of your investments, make sure that some of your
principal is kept safe, and principal is kept safe, and try to increase
try to increase your income your income as well as your capital.
as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
- 2 -
<PAGE>
Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
- 3 -
<PAGE>
One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a particular
book, the last thing to security. It is after all just a sheet of paper
fall in love with is a indicating a part ownership in a corporation
particular security." and its use is purely mercenary. If you must
love a security, stay in love with it until
it gets overvalued; then let somebody else
fall in love
[PICTURE OF ROY NEUBERGER]
- 4 -
<PAGE>
ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL INVESTING
STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
- 5 -
<PAGE>
The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR INVESTING
STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
- 6 -
<PAGE>
Both are an art, although picking stocks is a
minor art compared with painting, sculpture or
"When things look bad, I literature. I started buying art in the 30s,
become optimistic. When and in the 40s it was a daily, almost hourly
everything looks rosy, and occurrence. My inclination to buy the works of
the crowd is optimistic, I living artists comes from Van Gogh, who sold
like to be a seller." only one painting during his lifetime. He died
in poverty, only then to become a legend and
have his work sold for millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
- 7 -
<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
- 8 -
<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
- 9 -
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
- 10 -
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
</TABLE>
===============================================================================
- 11 -
<PAGE>
<PAGE>
- ----------------------------------------------------------------------
PROSPECTUS
December 6, 1996
Neuberger&Berman
EQUITY TRUST -Registered Trademark-
Neuberger&Berman
GUARDIAN TRUST
No Sales Charges
No Redemption Fees
No 12b - 1 Fees
<PAGE>
Neuberger&Berman
GUARDIAN TRUST-SM-
A No-Load Equity Fund
- ----------------------------------------------------------------------
Neuberger&Berman GUARDIAN TRUST (the "Fund") is a growth and income fund that
emphasizes investments in stocks of established, high-quality companies
considered by the portfolio managers to be undervalued in comparison to stocks
of similar
companies.
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A PENSION
PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN "INSTITUTION")
THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND
THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER& BERMAN MANAGEMENT
INCORPORATED ("N&B MANAGEMENT").
- ----------------------------------------------------------------------
THE FUND, WHICH IS A SERIES OF NEUBERGER&BERMAN EQUITY TRUST (THE "TRUST"),
INVESTS ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER&BERMAN GUARDIAN PORTFOLIO
(THE "PORTFOLIO") OF EQUITY MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END
MANAGEMENT INVESTMENT COMPANY MANAGED BY N&B MANAGEMENT. THE PORTFOLIO INVESTS
IN SECURITIES IN ACCORDANCE WITH AN INVESTMENT OBJECTIVE, POLICIES, AND
LIMITATIONS IDENTICAL TO THOSE OF THE FUND. THE INVESTMENT PERFORMANCE OF THE
FUND DIRECTLY CORRESPONDS WITH THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. THIS
"MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT
COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES.
FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE
"SUMMARY" ON PAGE 3, AND "SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS" ON PAGE 13.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 6, 1996, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED DECEMBER 6, 1996.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY 3
The Fund and Portfolio;
Risk Factors 3
Management 4
The Neuberger&Berman
Investment Approach 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses 5
Annual Fund Operating
Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
INVESTMENT PROGRAM 10
Short-Term Trading;
Portfolio Turnover 11
Borrowings 11
Other Investments 11
PERFORMANCE
INFORMATION 12
Total Return Information 12
SPECIAL INFORMATION
REGARDING
ORGANIZATION,
CAPITALIZATION, AND
OTHER MATTERS 13
The Fund 13
The Portfolio 14
HOW TO BUY SHARES 16
HOW TO SELL SHARES 17
SHARE PRICES AND NET
ASSET VALUE 18
DIVIDENDS, OTHER
DISTRIBUTIONS, AND
TAXES 19
Distribution Options 19
Taxes 19
MANAGEMENT AND
ADMINISTRATION 21
Trustees and Officers 21
Investment Manager,
Administrator,
Distributor, and
Sub-Adviser 21
Expenses 22
Transfer Agent 23
DESCRIPTION OF
INVESTMENTS 24
DIRECTORY 27
</TABLE>
<PAGE>
SUMMARY
The Fund and Portfolio; Risk Factors
- ----------------------------------------------------------------------
The Fund is a series of the Trust and invests in the Portfolio which, in
turn, invests in securities in accordance with an investment objective,
policies, and limitations that are identical to those of the Fund. This is
sometimes called a master/feeder fund structure, because the Fund "feeds"
shareholders' investments into the Portfolio, a "master" fund. The structure
looks like this:
-------------------------
SHAREHOLDERS
-------------------------
(down arrow) BUY SHARES IN
-------------------------
FUND
-------------------------
(down arrow) INVESTS IN
-------------------------
PORTFOLIO
-------------------------
(down arrow) INVESTS IN
-------------------------
STOCKS & OTHER SECURITIES
-------------------------
The trustees who oversee the Fund believe that this structure may benefit
shareholders; investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale that could reduce
expenses. For more information about the organization of the Fund and the
Portfolio, including certain features of the master/feeder fund structure, see
"Special Information Regarding Organization, Capitalization, and Other Matters"
on page 13. An investment in the Fund involves certain risks, depending upon the
types of investments made by the Portfolio. For more details about the
Portfolio, its investments and their risks, see "Investment Program" on page 10
and "Description of Investments" on page 24.
3
<PAGE>
Here is a summary highlighting features of the Fund and the Portfolio. Of
course, there can be no assurance that the Fund will meet its investment
objective.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PORTFOLIO
EQUITY TRUST STYLE CHARACTERISTICS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
GUARDIAN TRUST Broadly diversified, large-cap A growth and income fund that
value fund. invests primarily in stocks of
established, high-quality companies
that are not well followed on Wall
Street or are temporarily out of
favor.
</TABLE>
Management
- ----------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page 21. If you want to know how to buy and sell shares of the Fund, see "How to
Buy Shares" on page 16 and "How to Sell Shares" on page 17, and the policies of
the Institution through which you are purchasing shares.
The Neuberger&Berman Investment Approach
- ----------------------------------------------------------------------
In general, the Portfolio adheres to a value-oriented investment approach. A
value-oriented portfolio manager buys stocks that are selling for less than
their perceived market values. These include stocks that are currently
under-researched or are temporarily out of favor on Wall Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets).
Neuberger&Berman believes that, over time, securities that are undervalued
are more likely to appreciate in price and be subject to less risk of price
decline than securities whose market prices have already reached their perceived
economic values. This approach also contemplates selling portfolio securities
when they are considered to have reached their potential.
4
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund and
the Portfolio. See "Performance Information" for important facts about the
investment performance of the Fund, after taking expenses into account.
Shareholder Transaction Expenses
- ----------------------------------------------------------------------
As shown by this table, the Fund imposes no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
Annual Fund Operating Expenses
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------------------
The following table shows annual Total Operating Expenses for the Fund, which
are paid out of the assets of the Fund and which include the Fund's pro rata
portion of the Operating Expenses of the Portfolio. The Fund pays N&B Management
an administration fee based on the Fund's average daily net assets. The
Portfolio pays N&B Management a management fee based on the Portfolio's average
daily net assets; a pro rata portion of this fee is borne indirectly by the
Fund. Therefore, the table combines management and administration fees. The Fund
and Portfolio also incur other expenses for things such as accounting and legal
fees, maintaining shareholder records, and furnishing shareholder statements and
Fund reports. "Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses. The Fund's expenses are factored into
its share price and dividends and are not charged directly to Fund shareholders.
For more information, see "Management and Administration" and the SAI.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES EXPENSES EXPENSES
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GUARDIAN TRUST 0.84% None 0.08% 0.92%
</TABLE>
Total Operating Expenses for the Fund are based upon administration fees
incurred by the Fund and management fees incurred by the Portfolio during the
past fiscal year and the current expense reimbursement undertaking. "Other
Expenses" are based on the Fund's and Portfolio's expenses for the past fiscal
year. The trustees of the Trust believe that the aggregate per share expenses of
the Fund and the Portfolio will be approximately equal to the expenses the Fund
would incur if its assets were invested directly in the type of securities held
by the Portfolio. The trustees of the Trust also
5
<PAGE>
believe that investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale which could reduce
expenses. The expenses and, accordingly, the returns of other funds that may
invest in the Portfolio may differ from those of the Fund.
A mutual fund that is a series of Neuberger&Berman Equity Funds ("N&B Equity
Funds") and is administered by N&B Management, which has a name similar to the
Fund and the same investment objective, policies, and limitations as the Fund
("Sister Fund"), also invests in the Portfolio. The previous table reflects N&B
Management's voluntary undertaking to reimburse the Fund for its Operating
Expenses and its pro rata share of the Portfolio's Operating Expenses so that
the Fund's expense ratio per annum will not exceed the expense ratio per annum
of the Sister Fund by more than 0.10% of the Fund's average daily net assets.
The Fund's per annum "expense ratio" is the sum of the Fund's Operating Expenses
and its pro rata share of the Portfolio's Operating Expenses, divided by the
Fund's average daily net assets for the year. This undertaking can be terminated
by N&B Management by giving the Fund at least 60 days' prior written notice.
For more information about the current expense reimbursement undertaking, see
"Expenses" on page 22.
Example
- ----------------------------------------------------------------------
To illustrate the effect of Operating Expenses, let's assume that the Fund's
annual return is 5% and that it had Total Operating Expenses described in the
table above. For every $1,000 you invested in the Fund, you would have paid the
following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN 10
EQUITY TRUST 1 YEAR 3 YEARS 5 YEARS YEARS
- --------------------------------------------------------
<S> <C> <C> <C> <C>
GUARDIAN TRUST $ 9 $ 29 $ 51 $ 113
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
6
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios
- ----------------------------------------------------------------------
The financial information in the following table is for the Fund as of August
31, 1996 and prior periods. This information has been audited by the Fund's
independent auditors. You may obtain, at no cost, further information about the
performance of the Fund in its annual report to shareholders. The auditors'
report is incorporated in the SAI by reference to the annual report. Please call
800-877-9700 for a free copy of the annual report and for up-to-date
information. Also, see "Performance Information."
7
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
Guardian Trust
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of the Portfolio's income and
expenses. It should be read in conjunction with the Portfolio's Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 3,
1993(1)
Year Ended August 31, to August 31,
1996 1995 1994 1993
--------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 13.83 $ 11.27 $ 10.27 $ 10.00
--------------------------------------------------
Income From Investment Operations
Net Investment Income .16 .13 .09 --
Net Gains or Losses on Securities (both
realized and unrealized) .55 2.55 .99 .27
--------------------------------------------------
Total From Investment Operations .71 2.68 1.08 .27
--------------------------------------------------
Less Distributions
Dividends (from net investment income) (.14) (.12) (.07) --
Distributions (from capital gains) (.16) -- (.01) --
--------------------------------------------------
Total Distributions (.30) (.12) (.08) --
--------------------------------------------------
Net Asset Value, End of Year $ 14.24 $ 13.83 $ 11.27 $ 10.27
--------------------------------------------------
Total Return+ +5.19% +24.01% +10.57% +2.70%(2)
--------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $1,340.1 $ 683.1 $ 75.8 $ --
--------------------------------------------------
Ratio of Expenses to Average Net Assets(4) .92% .90% .80% .81%(3)
--------------------------------------------------
Ratio of Net Investment Income to Average Net
Assets(4) 1.26% 1.35% 1.50% 1.00%(3)
--------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
8
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1)The date investment operations commenced.
2)Not annualized.
3)Annualized.
4)After reimbursement of expenses by N&B Management. Had N&B Management
not undertaken such action, the annualized ratios to average daily net assets
would have been:
<TABLE>
<CAPTION>
Period from
August 3, 1993
Year Ended August 31, to August 31,
1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses .92% .96% 1.52% 2.50%
Net Investment Income (Loss) 1.26% 1.29% .78% (.69%)
</TABLE>
5)Because the Fund invests only in the Portfolio and the Portfolio (rather than
the Fund) engages in securities transactions, the Fund does not calculate a
portfolio turnover rate or pay any brokerage commissions. The portfolio
turnover rates for the Portfolio for the period from August 2, 1993 to August
31, 1993 and the years ended August 31, 1994, 1995, and 1996 were 3%, 24%,
26%, and 37%, respectively. The average commission rate paid by the Portfolio
for the year ended August 31, 1996 was $0.0580.
+ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each fiscal
period, and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Had N&B Management not
reimbursed certain expenses of the Fund, total return would have been lower.
9
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those of
the Portfolio. The Fund invests only in the Portfolio. Therefore, the following
shows you the kinds of securities in which the Portfolio invests. For an
explanation of some types of investments, see "Description of Investments" on
page 24.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
The investment objective of the Fund and Portfolio is to seek capital
appreciation and, secondarily, current income. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
The Portfolio invests primarily in common stocks of long-established, high-
quality companies. The Portfolio uses the value-oriented investment approach in
selecting securities. Thus, N&B Management looks for such factors as low
price-to-earnings ratios, strong balance sheets, solid managements, and
consistent earnings.
The Fund, the Sister Fund and the Sister Fund's predecessor have paid their
shareholders an income dividend every quarter and a capital gain distribution
every year since the predecessor's inception in 1950. Of course, this past
record does not necessarily predict the Fund's future practices.
10
<PAGE>
Short-Term Trading; Portfolio Turnover
- ----------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. The portfolio
turnover rate of the Portfolio for 1996 and earlier years is set forth under
"Notes to Financial Highlights."
Borrowings
- ----------------------------------------------------------------------
The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
The Portfolio does not expect to borrow money or to enter into reverse
repurchase agreements. As a non-fundamental policy, the Portfolio may not
purchase portfolio securities if its outstanding borrowings, including reverse
repurchase agreements, exceed 5% of its total assets.
Other Investments
- ----------------------------------------------------------------------
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.
11
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This smooths out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
The Fund commenced operations in August 1993, and its first fiscal year ended
August 31, 1993. The following table shows the average annual total returns of
the Fund for the 1-year, 5-year, and 10-year periods ended August 31, 1996.
Returns for periods prior to the Fund's inception represent the performance of
the Sister Fund and its predecessor. The table also shows a comparison with the
S&P "500" Index. The S&P "500" Index is the Standard & Poor's 500 Composite
Stock Price Index, an unmanaged index generally considered to be representative
of overall stock market activity. Please note that an index does not take into
account any fees or expenses of investing in the individual securities that it
tracks. Further information regarding the Fund's performance is presented in its
annual report to shareholders, which is available without charge by calling
800-877-9700.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS
ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SINCE INCEPTION
EQUITY TRUST 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
<S> <C> <C> <C> <C> <C>
GUARDIAN TRUST +5.19% +15.07% +13.31% +12.92% 6/1/50
S&P "500" +18.70% +13.59% +13.35% N/A N/A
</TABLE>
Had N&B Management not reimbursed certain expenses since the Fund began
operations in August 1993, the total return of the Fund would have been lower.
The total returns for periods prior to the Fund's inception would have been
lower had they reflected the higher fees of the Fund, as compared to those of
the Sister Fund and its predecessor.
The following table lets you take a closer look at how the Fund, the Sister
Fund, and the Sister Fund's predecessor performed year by year, in terms of an
annual per share total return for each calendar year (ending December 31).
Please note that the previous chart reflects information for periods ended on
the Fund's last fiscal year-end (that is, as of August 31, 1996).
TOTAL RETURNS FOR CALENDAR YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUST 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GUARDIAN TRUST +11.9% -1.0% +28.0% +21.5% -4.7% +34.3% +19.0% +13.5% +1.5% +32.0%
S&P "500" +18.6 +5.2 +16.5 +31.6 -3.1 +30.3 +7.6 +10.0 +1.4 +37.5
</TABLE>
TOTAL RETURN INFORMATION. You can obtain current performance information
about the Fund by calling N&B Management at 800-877-9700.
12
<PAGE>
SPECIAL INFORMATION REGARDING 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 May 6, 1993. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as
a diversified, open-end management investment company, commonly known as a
mutual fund. The Trust has six separate series. The Fund invests all of its net
investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
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.
13
<PAGE>
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 six separate portfolios. The assets of the Portfolio belong
only to the Portfolio, and the liabilities of the Portfolio are borne solely by
the Portfolio and no other.
FUND'S INVESTMENT IN 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, 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.
This "master/feeder fund" structure is depicted in the "Summary" on page 3.
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. The Sister Fund, a series of N&B Equity Funds,
invests all of its net investable assets in the Portfolio. A mutual fund that is
a series of Neuberger&Berman Equity Assets ("N&B Equity Assets") invests all of
its net investable assets in the Portfolio. The shares of the series of N&B
Equity Funds (but not of N&B Equity Assets) are available for purchase by
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. The Fund
does not sell its shares directly to members of the general public. Other
investors in the Portfolio (including the series of N&B Equity Funds and N&B
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 the series of N&B Equity Funds and N&B 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 may invest in the
Portfolio in the future will be available from N&B Management by calling
800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by the
series of N&B Equity Funds or N&B 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
benefitting 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
14
<PAGE>
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.
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.
15
<PAGE>
HOW TO BUY SHARES
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION
THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND
THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH N&B MANAGEMENT. N&B
Management and the Fund do not recommend, endorse, or receive payments from any
Institution. N&B Management compensates Institutions for services they provide
under an administrative services agreement. N&B Management does not provide
investment advice to any Institution or its clients or make decisions regarding
their investments.
Each Institution will establish its own procedures for the purchase of Fund
shares, including minimum initial and additional investments for shares of the
Fund and the acceptable methods of payment for shares. Shares are purchased at
the next price calculated on a day the New York Stock Exchange ("NYSE") is open,
after a purchase order is received and accepted by an Institution. Prices for
Fund shares are usually calculated as of 4 p.m. Eastern time. Your Institution
may be closed on days when the NYSE is open. As a result, prices for Fund shares
may be significantly affected on days when you have no access to your
Institution to buy shares.
Other Information
- ----------------------------------------------------------------------
/ / An Institution must pay for shares it purchases in U.S. dollars.
/ / The Fund has the right to suspend the offering of its shares for a period
of time. The Fund also has the right to accept or reject a purchase order
in its sole discretion.
/ / The Fund will not issue a certificate for your shares.
/ / Some Institutions may charge their clients a fee in connection with
purchases of shares of the Fund.
16
<PAGE>
HOW TO SELL SHARES
You can sell (redeem) all or some of your Fund shares only through an account
with an Institution. Each Institution will establish its own procedures for the
sale of Fund shares. Shares are sold at the next price calculated on a day the
NYSE is open, after a sales order is received and accepted by an Institution.
Prices for Fund shares are usually calculated as of 4 p.m. Eastern time. Your
Institution may be closed on days when the NYSE is open. As a result, prices for
Fund shares may be significantly affected on days when you have no access to
your Institution to sell shares.
Other Information
- ----------------------------------------------------------------------
/ / Redemption proceeds will be paid to Institutions as agreed with N&B
Management, but in any case within three business days (under unusual
circumstances the Fund may take longer, as permitted by law).
/ / The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
/ / Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Fund.
17
<PAGE>
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated
by subtracting 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
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices. The Portfolio values all other
securities and assets, including restricted securities, by a method that the
trustees of Managers Trust believe accurately reflects fair value.
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<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes substantially all of its share of any net investment
income (net of the Fund's expenses) earned by the Portfolio near the end of each
calendar quarter. The Fund distributes substantially all of its share of the
Portfolio's net realized capital gains and net realized gains from foreign
currency transactions, if any, normally in December.
Distribution Options
- ----------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions paid on shares
of the Fund are automatically reinvested in additional shares of the Fund,
unless an Institution elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
Taxes
- ----------------------------------------------------------------------
The Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will be relieved
of federal income tax on that part of its taxable income and realized gains that
it distributes to its shareholders.
An investment has certain tax consequences, depending on the type of account
in which you invest. IF YOU HAVE AN ACCOUNT UNDER A QUALIFIED RETIREMENT PLAN OR
AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and
may also be subject to state and local income taxes. Distributions are taxable
when they are paid, whether in cash or by reinvestment in additional Fund
shares, except that distributions declared in December to shareholders of record
on a date in that month and paid in the following January are taxable as if they
were paid on December 31 of the year in which the distributions were declared.
Investors who buy Fund shares just before the Fund deducts a dividend or other
distribution from its NAV will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares near the end of a
calendar quarter should take this into account.
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital
19
<PAGE>
gain over net short-term capital loss), when designated as such, are generally
taxed as long-term capital gain, no matter how long you have owned your shares.
Distributions of net capital gain may include gains from the sale of portfolio
securities that appreciated in value before you bought your shares.
Every January, the Fund will send each Institution that is a shareholder a
statement showing the amount of distributions paid (or deemed paid) in the
previous year. Information accompanying that statement will show the portion, if
any, of those distributions that generally are not taxable in certain states.
TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares
are subject to tax. A capital gain or loss is the difference between the amount
paid for shares (including the amount of any dividends and other distributions
that were reinvested) and the amount received when shares are sold.
When an Institution sells shares, it will receive a confirmation statement
showing the number of shares sold and the price. Every January, Institutions
will also receive a consolidated transaction statement for the previous year.
Each Institution is required annually to send investors in its accounts
statements showing distribution and transaction information for the previous
year.
The foregoing is only a summary of some of the important income tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
20
<PAGE>
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
- ----------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of the Fund and Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The trustees and officers of the Trust and of Managers Trust who are officers
and/or directors of N&B Management and/or principals of Neuberger&Berman serve
without compensation from the Fund or the Portfolio. The trustees of the Trust
and of Managers Trust, including a majority of those trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust or Managers
Trust, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest between the Trust and Managers Trust, including,
if necessary, creating a separate board of trustees of Managers Trust.
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- ----------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolio and other mutual
funds managed by N&B Management, also serves as investment adviser of three
other investment companies. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $13.9 billion as of
September 30, 1996.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
acts as the Portfolio's principal broker in the purchase and sale of its
securities. Neuberger&Berman and its affiliates, including N&B Management,
manage securities accounts that had approximately $42.9 billion of assets as of
September 30, 1996. All of the voting stock of N&B Management is owned by
individuals who are principals of Neuberger&Berman.
Kent C. Simons, Lawrence Marx III, and Kevin L. Risen are primarily
responsible for the day-to-day management of the Portfolio. Mr. Simons and Mr.
Marx are Vice Presidents of N&B Management and principals of Neuberger&Berman.
Mr. Simons has had responsibility for the Portfolio and the Fund's Sister Fund's
predecessor since
21
<PAGE>
1983. Mr. Marx has had those responsibilities since 1988. Mr. Risen has had
responsibily for the Portfolio since 1996. Mr. Risen has been an Assistant Vice
President of N&B Management since May 1996 and a portfolio manager for
Neuberger&Berman since 1995. He was a research analyst at Neuberger&Berman from
1992 to 1995; from 1990 to 1992, he was a research analyst at another prominent
financial services firm.
Neuberger&Berman acts as the principal broker for the Portfolio in the
purchase and sale of portfolio securities and in the sale of covered call
options, and for those services receives brokerage commissions. In effecting
securities transactions, the Portfolio seeks to obtain the best price and
execution of orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds-Registered Trademark-.
To mitigate the possibility that the Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
Expenses
- ----------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. N&B
Management provides administrative services to the Fund that include furnishing
similar facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services for Institutions and their accounts. For such
administrative services, the Fund pays N&B Management a fee at the annual rate
of 0.40% of the Fund's average daily net assets. With the Fund's consent, N&B
Management may subcontract to Institutions some of its responsibilities to the
Fund under the administration agreement and may compensate each Institution that
provides such services at an annual rate of no more than 0.25% of the value of
Fund shares held through that Institution. For investment management services,
the Portfolio pays N&B Management a fee at the annual rate of 0.55% of the first
$250 million of the Portfolio's average daily net assets, 0.525% of the next
$250 million, 0.50% of the next $250 million, 0.475% of the next $250 million,
0.45% of the next $500 million, and 0.425% of average daily net assets in excess
of $1.5 billion. During its 1996 fiscal year, the Fund accrued administration
fees and a pro rata portion of the Portfolio's management fees (prior to the
expense reimbursement), as a percentage of the Fund's average daily net assets,
of 0.84%.
22
<PAGE>
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Fund and Portfolio, legal and accounting fees and
compensation for trustees who are not affiliated with N&B Management; for the
Fund, transfer agent fees and the cost of printing and sending reports and proxy
materials to shareholders; and for the Portfolio, custodial fees for securities.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
During its 1996 fiscal year, the Fund bore total operating expenses as a
percentage of its average daily net assets, after taking into consideration N&B
Management's expense reimbursement, of 0.92% per annum.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Operating Expenses and its pro rata share of the Portfolio's Operating Expenses
so that the Fund's expense ratio per annum will not exceed the expense ratio per
annum of its Sister Fund by more than 0.10% of the Fund's average daily net
assets. The Fund's per annum "expense ratio" is the sum of the Fund's Operating
Expenses and its pro rata share of the Portfolio's Operating Expenses, divided
by the Fund's average daily net assets for the year. N&B Management may
terminate this undertaking to the Fund by giving at least 60 days' prior written
notice to the Fund. The effect of reimbursement by N&B Management is to reduce
the Fund's expenses and thereby increase its total return.
Transfer Agent
- ----------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to
Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180.
23
<PAGE>
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in "Investment
Program" herein, the Portfolio may make the following investments, among others,
individually or in combination, although it may not necessarily buy all of the
types of securities or use all of the investment techniques that are described.
For additional information on the following investments and on other types of
investments which the Portfolio may make, see the SAI.
ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net assets in
illiquid securities, which are securities that cannot be expected to be sold
within seven days at approximately the price at which they are valued. Due to
the absence of an active trading market, the Portfolio may experience difficulty
in valuing or disposing of illiquid securities. N&B Management determines the
liquidity of the Portfolio's securities, under general supervision of the
trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933 ("1933
Act"). Unless registered for sale, these securities can be sold only in
privately negotiated transactions or pursuant to an exemption from registration.
Rule 144A securities, although not registered, may be resold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S under
the 1933 Act. Foreign securities that are freely tradeable in their principal
market are not considered restricted securities even if they are not registered
for sale in the United States. Restricted securities are generally considered
illiquid. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted or Rule 144A
securities are liquid.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and
doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities. The Portfolio may invest up
to 10% of the value of its total assets in foreign securities. The 10%
limitation does not apply to foreign securities that are denominated in U.S.
dollars, including American Depositary Receipts ("ADRs"). Foreign securities
(including those denominated in U.S. dollars and ADRs) are affected by political
and economic developments in foreign countries. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations. In
addition, foreign markets may be less liquid and more volatile than U.S. markets
and may offer less protection to investors. Investments in foreign securities
that are not denominated in U.S. dollars (including those made
24
<PAGE>
through ADRs) may be subject to special risks, such as governmental regulation
of foreign exchange transactions and changes in rates of exchange with the U.S.
dollar, irrespective of the performance of the underlying investment.
COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of securities
price changes (hedge) or generate income by writing (selling) covered call
options against portfolio securities having a market value not exceeding 10% of
its net assets and may purchase call options in related closing transactions.
The purchaser of a call option acquires the right to buy a portfolio security at
a fixed price during a specified period. The maximum price the Portfolio may
realize on the security during the option period is the fixed price; the
Portfolio continues to bear the risk of a decline in the security's price,
although this risk is reduced, at least in part, by the premium received for
writing the option.
The primary risks in using call options are (1) possible lack of a liquid
secondary market for options and the resulting inability to close out options
when desired; (2) the fact that use of options is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of the
Portfolio's securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain by offsetting favorable price movements in hedged
investments; and (4) the possible inability of the Portfolio to sell a security
at a time that would otherwise be favorable for it to do so, or the possible
need for the Portfolio to sell a security at a disadvantageous time, due to its
need to maintain "cover" in connection with its use of these instruments.
Options are considered "derivatives."
SHORT SALES AGAINST-THE-BOX. The Portfolio may make short sales against-the-
box, in which it sells securities short only if it owns or has the right to
obtain without payment of additional consideration an equal amount of the same
type of securities sold. Short selling against-the-box may defer recognition of
gains or losses to a later tax period.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations. The Portfolio
also may lend portfolio securities to banks, brokerage firms, or institutional
investors to earn income. Costs, delays, or losses could result if the selling
party to a repurchase agreement or the borrower of portfolio securities becomes
bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
25
<PAGE>
OTHER INVESTMENTS. Although the Portfolio invests primarily in common
stocks, when market conditions warrant it may invest in preferred stocks,
securities convertible into or exchangeable for common stocks, U.S. Government
and Agency Securities, investment grade debt securities, or money market
instruments, or may retain assets in cash or cash equivalents.
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,
Federal National Mortgage Association, Federal Home Loan Mortgage Corporation,
Student Loan Marketing Association, and Tennessee Valley Authority. Some U.S.
Government Agency Securities are supported by the full faith and credit of the
United States, while others may be 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 mortgage-backed securities. The market prices of U.S. Government
Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's, or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed comparable by N&B Management to
such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest category (Baa) or Comparable Unrated Securities
may be deemed to have speculative characteristics. 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 investments is likely to rise.
26
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
(800) 877-9700
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman, Neuberger&Berman Management Inc., and Neuberger&Berman
Guardian Trust are registered trademarks or service marks of Neuberger&Berman
Management Inc.
- -C- 1996 Neuberger&Berman Management Inc.
27
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Neuberger&Berman Management Inc. -Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
This wrapper is not part of the prospectus.
PRINTED ON RECYCLED PAPER
(recycle logo) NBEP00061296
WITH SOY BASED INKS
<PAGE>
_______________________________________________________________________________
NEUBERGER & BERMAN GUARDIAN TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 6, 1996
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
_______________________________________________________________________________
Neuberger & Berman GUARDIAN Trust ("Fund"), a series of Neuberger &
Berman Equity Trust ("Trust"), is a no-load mutual fund that offers shares
pursuant to a Prospectus dated December 6, 1996. The Fund invests all of its net
investable assets in Neuberger & Berman GUARDIAN Portfolio ("Portfolio").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH A PENSION PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN
"INSTITUTION") THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO
INVESTORS AND THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER &
BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from N&B Management, Institutional Services, 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.
<PAGE>
TABLE OF CONTENTS
INVESTMENT INFORMATION..................................................... 1
Investment Policies and Limitations............................... 1
Kent C. Simons, Lawrence Marx III, and Kevin L. Risen,
Portfolio Co-Managers of the Portfolio................... 5
Additional Investment Information................................. 6
PERFORMANCE INFORMATION.................................................... 16
Total Return Computations......................................... 16
Comparative Information........................................... 17
Other Performance Information..................................... 18
CERTAIN RISK CONSIDERATIONS................................................ 19
TRUSTEES AND OFFICERS...................................................... 19
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES.......................... 26
Investment Manager and Administrator.............................. 26
Sub-Adviser....................................................... 28
Investment Companies Managed...................................... 29
Management and Control of N&B Management.......................... 33
DISTRIBUTION ARRANGEMENTS.................................................. 34
ADDITIONAL REDEMPTION INFORMATION.......................................... 35
Suspension of Redemptions......................................... 35
Redemptions in Kind............................................... 35
DIVIDENDS AND OTHER DISTRIBUTIONS.......................................... 35
ADDITIONAL TAX INFORMATION................................................. 36
Taxation of the Fund.............................................. 36
Taxation of the Portfolio......................................... 37
Taxation of the Fund's Shareholders............................... 39
PORTFOLIO TRANSACTIONS..................................................... 39
Portfolio Turnover................................................ 44
REPORTS TO SHAREHOLDERS.................................................... 44
CUSTODIAN AND TRANSFER AGENT............................................... 44
INDEPENDENT AUDITORS....................................................... 44
LEGAL COUNSEL.............................................................. 45
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........................ 45
REGISTRATION STATEMENT..................................................... 46
- i -
<PAGE>
PAGE
FINANCIAL STATEMENTS....................................................... 46
Appendix A................................................................. 47
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER................... 47
Appendix B................................................................. 50
THE ART OF INVESTMENT:
A CONVERSATION WITH ROY NEUBERGER................... 50
- 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 an 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 N&B 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 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.
Except for the limitation on borrowing and the limitation on ownership
of portfolio securities by officers and trustees, any investment policy or
<PAGE>
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
- 2 -
<PAGE>
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.
8. UNDERWRITING. The Portfolio may not underwrite securi- ties 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").
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. INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may not
purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and in the open market at no more than customary
brokerage commission rates. This limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a result of
a reorganization, consolidation, or merger.
4. 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.
5. SHORT SALES. The Portfolio may not sell securities short unless it
owns, or has the right to obtain without payment of additional consideration,
securities equivalent in kind and amount to the securities sold. Transactions in
forward contracts, futures contracts and options shall not constitute selling
securities short.
6. OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES. The
Portfolio may not purchase or retain the securities of any issuer if, to the
knowledge of N&B Management, those officers and trustees of Managers Trust and
officers and directors of N&B Management who each owns individually more than
1/2 of 1% of the outstanding securities of such issuer, together own more than
5% of such securities.
7. UNSEASONED ISSUERS. The Portfolio may not purchase the securities of
any issuer (other than securities issued or guaranteed by domestic or foreign
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governments or political subdivisions thereof) if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three years
of continuous operation. For purposes of this limitation, pass-through entities
and other special purpose vehicles or pools of financial assets are not
considered to be business enterprises.
8. PUTS, CALLS, STRADDLES, OR SPREADS. The Portfolio may not invest in
puts, calls, straddles, spreads, or any combination thereof, except that the
Portfolio may (i) write (sell) covered call options against portfolio securities
having a market value not exceeding 10% of its net assets and (ii) purchase call
options in related closing transactions. The Portfolio does not construe the
foregoing limitation to preclude it from purchasing or writing options on
futures contracts or from purchasing securities with rights to put the
securities to the issuer or a guarantor.
9. ILLIQUID SECURITIES. The Portfolio may not purchase any security if,
as a result, more than 10% 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.
10. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of
the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
11. OIL AND GAS PROGRAMS. The Portfolio may not invest in
participations or other direct interests in oil, gas, or other mineral leases or
exploration or development programs, but the Portfolio may purchase securities
of companies that own interests in any of the foregoing.
12. REAL ESTATE. The Portfolio may not purchase or sell real property
(including partnership or similar interests in real estate limited partnerships,
but excluding readily marketable interests in real estate investment trusts and
readily marketable securities of companies that invest in real estate); provided
that the Portfolio may not purchase any security if, as a result, more than 10%
of its total assets would be invested in securities of real estate investment
trusts.
13. INVESTMENTS IN ANY ONE ISSUER. The Portfolio may not purchase the
securities of any one issuer (other than securities issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities) if, as a result,
more than 5% of the Portfolio's total assets would be invested in the securities
of that issuer.
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14. WARRANTS. The Portfolio may not invest more than 5% of its net
assets in warrants, including warrants that are listed on the New York Stock
Exchange ("NYSE") or American Stock Exchange, or more than 2% of its net assets
in warrants that are not so listed. For purposes of this limitation, warrants
are valued at the lower of cost or market value, and warrants acquired by the
Portfolio in units or attached to securities may be deemed to be without value.
15. PLEDGING. The Portfolio may not pledge or hypothecate any of its
assets, except that the Portfolio may pledge or hypothecate up to 5% of its
total assets in connection with its entry into any agreement or arrangement
pursuant to which a bank furnishes a letter of credit to collateralize a capital
commitment made by the Portfolio to a mutual insurance company of which the
Portfolio is a member.
The Portfolio, as an operating policy, does not intend to invest in
futures contracts and options thereon during the coming year.
KENT C. SIMONS, LAWRENCE MARX III, AND KEVIN L. RISEN, PORTFOLIO CO-
MANAGERS OF THE PORTFOLIO
The Portfolio subscribes to the same stock-picking philosophy followed
since 1950, when Roy R. Neuberger founded the predecessor of Neuberger & Berman
GUARDIAN Fund, which, like the Fund, invests all of its net investable assets in
the Portfolio.
It's no great trick for a mutual fund to make money when the market is
rising. The tide that lifts stock values will carry most funds along. The true
test of management is its ability to make money even when the market is flat or
declining. By that measure, the Fund, Neuberger & Berman GUARDIAN Fund and its
predecessor have served shareholders well and have paid a dividend every quarter
and a capital gain distribution EVERY YEAR since 1950. Of course, there can be
no assurance that this trend will continue.
Messrs. Simons, Marx, and Risen place a high premium on being
knowledgeable about the companies whose stocks they buy. That knowledge is
important, because sometimes it takes courage to buy stocks that the rest of the
market has forsaken. Says Mr. Marx, "We're usually early in and early out. We'd
rather buy an undervalued stock because we expect it to become fairly valued
than buy one fairly valued and hope it becomes overvalued. We like a stock
'under a rock' or with a cloud over it; you are not going to get great companies
at great valuations when the market perception is great."
"People who switch around a lot are not going to benefit from our
approach. They're following the market -- we're looking at fundamentals."
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ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others. It may
not buy all of the types of securities or use all of the investment techniques
that are described.
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. Repurchase
agreements with a maturity of more than seven days are considered to be illiquid
securities. The Portfolio may not enter into such a repurchase agreement if, as
a result, more than 10% 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. In order to realize income, 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
N&B 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 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. N&B 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.
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
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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. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradeable in
their principal market are not considered to be restricted. 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. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases thereof will
be subject to the Portfolio's 10% limit on investments in illiquid securities.
Restricted securities for which no market exists are priced by a method that the
Portfolio Trustees believe accurately reflects fair value.
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; these 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. 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.
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 commercial
paper. These investments are subject to the Portfolio's quality standards. 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) 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
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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, (2)
nationalization, expropriation, or confiscatory taxation, and (3) adverse
changes in investment or exchange control regulations (which could prevent cash
from being brought back to the United States). Additionally, dividends and
interest payable on foreign securities may be subject to foreign taxes,
including taxes withheld from those payments. Commissions on foreign securities
exchanges are often at fixed rates and are generally higher than negotiated
commissions on U.S. exchanges, although the Portfolio endeavors to achieve the
most favorable net results on portfolio transactions. The Portfolio may invest
only in securities of issuers in countries whose governments are considered
stable by N&B Management.
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
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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.
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 10% 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.
COVERED CALL OPTIONS. The Portfolio may write covered call options on
portfolio securities valued at up to 10% of its net assets and may purchase call
options in related closing transactions. Generally, the purpose of writing and
purchasing these options is 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"). 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
Portfolio may be obligated to deliver securities underlying an option at less
than the market price, thereby giving up any additional gain on the security.
The Portfolio writes only "covered" call options on securities it owns.
The writing of covered call options is a conservative investment technique that
is believed to involve relatively little risk (in contrast to the writing of
"naked" or uncovered call options, which the Portfolio will not do) 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
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specified date. A Portfolio would purchase a call option to offset a previously
written call option.
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. The obligation under any option terminates upon expiration of the
option or, at an earlier time, when the writer 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, the Portfolio
will lose the entire amount of the premium paid.
Options are traded both on 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. N&B Management monitors the creditworthiness
of dealers with which the Portfolio may engage in OTC options transactions, and
limits the Portfolio's counter-parties in such transactions to dealers with a
net worth of at least $20 million as reported in their latest financial
statements.
The assets used as cover 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.
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 exchange, less (or plus) a commission. 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
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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, which is the last sales
price on the day the option is being valued or, in the absence of any trades
thereof on that day, the mean between the closing bid and asked prices.
Closing transactions are effected in order to realize a profit on an
outstanding option, to prevent an underlying security from being called, or to
permit the sale or the put of the underlying security. If the Portfolio desires
to sell a security on which it has written a call option, it will seek to effect
a closing transaction prior to, or concurrently with, the sale of the 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.
The Portfolio pays brokerage commissions in connection with purchasing
or writing options, including those used to close out existing positions. These
brokerage commissions normally are higher than those applicable to purchases and
sales of portfolio securities.
FORWARD FOREIGN CURRENCY CONTRACTS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date at a
fixed price ("forward contracts") in amounts not exceeding 5% of its net assets.
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 that are held or intended to be acquired by it. 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.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
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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 and which is available on
more advantageous terms. However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and if N&B 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. Because forward contracts are
not traded on an exchange, the assets used to cover such contracts may be
illiquid.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies in amounts not exceeding 5%
of its net assets. The Portfolio would engage in such transactions 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.
As with other types of options, however, writing an option on foreign currency
constitutes only a partial hedge, up to the amount of the premium received. The
Portfolio could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The risks of currency
options are similar to the risks of other 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. To the extent the Portfolio writes options on foreign currencies that
are traded on an exchange regulated by the Commodity Futures Trading Commission
("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 OPTIONS AND FORWARD CONTRACTS (COLLECTIVELY, "HEDGING
INSTRUMENTS"). 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. Securities held in a segregated account cannot be
sold while the 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
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segregated with respect to, an illiquid options or forward position; this
inability may result in a loss to the Portfolio.
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 these 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.
N&B 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. N&B Management
intends to reduce the risk that the Portfolio will be unable to close out
Hedging Instruments by entering into such transactions only if N&B Management
believes there will be an active and liquid secondary market. Hedging
Instruments used by the Portfolio are generally considered "derivatives." 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."
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 corporate bonds and
debentures receiving one of the four highest ratings from Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally
recognized statistical rating organization ("NRSRO") or, if not rated by any
NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable
Unrated Securities"). 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.
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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"). 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. 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 such securities
will not exceed 5% 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 only in commercial paper receiving the
highest rating from S&P (A-1) or Moody's (P-1), or deemed by N&B Management to
be of comparable quality.
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, N&B Management may in
certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
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 yields 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.
Convertible debt securities are subject to the Portfolio's investment
policies and limitations concerning fixed income securities.
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
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<PAGE>
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objective.
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.
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.
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)(SUPERSCRIPT)n = ERV
Average annual total return smooths out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
Although the Fund commenced operations in August 1993, the Fund's
investment objective, policies, and limitations are the same as those of
Neuberger & Berman GUARDIAN Fund, a mutual fund that is a series of Neuberger &
Berman Equity Funds and that invests in the Portfolio ("Sister Fund"). The
Sister Fund had a predecessor. The following total return data is for the Fund
since its inception and, for periods prior to the Fund's inception, the Sister
Fund and the Sister Fund's predecessor. The total returns for periods prior to
the Fund's inception would have been lower had they reflected the higher fees of
the Fund, as compared to those of the Sister Fund and its predecessor.
The average annual total returns for the Fund, the Sister Fund, and the
Sister Fund's predecessor for the one-, five-, and ten-year periods ended August
31, 1996, were +5.19%, +15.07%, and +13.31%, respectively. If an investor had
invested $10,000 in the predecessor's shares on June 1, 1950 and had reinvested
- 15 -
<PAGE>
all income dividends and other distributions, the NAV of that investor's
holdings would have been $2,765,779 on August 31, 1996.
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, Dow Jones Industrial Average ("DJIA"), Wilshire 1750
Index, Nasdaq Composite 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 $40 million to $2.3 billion, with an average of $451
million. The S&P 400 Index measures mid-sized companies that have an
average market capitalization of $1.6 billion. 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.
- 16 -
<PAGE>
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.
N&B 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.
>/R>
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.)
From time to time, the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Fund's Advertisements. This
philosophy is described in further detail in "The Art of Investing: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
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.
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<PAGE>
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 N&B Management and Neuberger
& Berman, LLC. ("Neuberger & Berman").
<TABLE>
<CAPTION>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
- -------------- --------------- --------------------------
<S> <C> <C>
Faith Colish (61) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (74) Trustee of each Trust Retired. Formerly Senior Vice President
435 East 52nd Street and Director of Exxon Corporation;
New York, NY 10022 Director of Emigrant Savings Bank.
Stanley Egener* (62) Chairman of the Board, Principal of Neuberger & Berman; President
Chief Executive Officer, and Director of N&B Management; Chairman
and Trustee of each Trust of the Board, Chief Executive Officer and
Trustee of eight other mutual funds for
which N&B Management acts as investment
manager or administrator.
Alan R. Gruber (69) Trustee of each Trust Chairman and Chief Executive Officer of
Orion Capital Corporation Orion Capital Corporation (property and
600 Fifth Avenue casualty insurance); Director of Trenwick
24th Floor Group, Inc. (property and casualty
New York, NY 10020 reinsurance); Chairman of the Board and
Director of Guaranty National Corporation
(property and casualty insurance);
formerly Director of Ketema, Inc.
(diversified manufacturer).
Howard A. Mileaf (59) Trustee of each Trust Vice President and Special Counsel to WHX
WHX Corporation Corporation (holding company) since 1992;
110 East 59th Street formerly Vice President and General
30th Floor Counsel of Keene Corporation (manufacturer
New York, NY 10022 of industrial products); Director of Kevlin
Corporation (manufacturer of microwave
and other products).
- 18 -
<PAGE>
Edward I. O'Brien* (68) Trustee of each Trust Until 1993, President of the Securities
12 Woods Lane Industry Association ("SIA") (securities
Scarsdale, NY 10583 industry's representative in government
relations and regulatory matters at the
federal and state levels); until November
1993, employee of the SIA; Director of
Legg Mason, Inc.
John T. Patterson, Jr. (68) Trustee of each Trust Retired. Formerly, President of SOBRO
183 Ledge Drive (South Bronx Overall Economic Development
Torrington, CT 06790 Corporation).
John P. Rosenthal (63) Trustee of each Trust Senior Vice President of Burnham
Burnham Securities Inc. Securities Inc. (a registered broker-
Burnham Asset Management Corp. dealer) since 1991; formerly Partner of
1325 Avenue of the Americas Silberberg, Rosenthal & Co. (member of
17th Floor National Association of Securities
New York, NY 10019 Dealers, Inc.); Director, Cancer Treatment
Holdings, Inc.
Cornelius T. Ryan (65) Trustee of each Trust General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture
315 Post Road West capital partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation; Director of
Capital Cash Management Trust (money
market fund) and Prime Cash Fund.
Gustave H. Shubert (67) Trustee of each Trust Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard Advisory Trustee of Rand (a non-profit
Pacific Palisades, CA 90272 public interest research institution)
since 1989; 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.
Lawrence Zicklin* (60) President and Trustee of Principal of Neuberger & Berman; Director
each Trust of N&B Management; President of five other
mutual funds for which N&B Management acts
as investment manager or administrator.
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<PAGE>
Daniel J. Sullivan (56) Vice President of each Senior Vice President of N&B Management
Trust since 1992; prior thereto, Vice President
of N&B Management; Vice President of eight
other mutual funds for which N&B
Management acts as investment manager or
administrator.
Michael J. Weiner (49) Vice President and Senior Vice President and Treasurer of N&B
Principal Financial Management since 1992; Treasurer of N&B
Officer of each Trust Management from 1992 to 1996; prior
thereto, Vice President and Treasurer
of N&B Management and Treasurer of certain
mutual funds for which N&B Management
acted as investment adviser; Vice President
and Principal Financial Officer of eight
other mutual funds for which N&B Management
acts as investment manager or administrator.
Claudia A. Brandon (40) Secretary of each Trust Vice President of N&B Management;
Secretary of eight other mutual funds for
which N&B Management acts as investment
manager or administrator.
Richard Russell (49) Treasurer and Principal Vice President of N&B Management since
Accounting Officer of 1993; prior thereto, Assistant Vice
each Trust President of N&B Management; Treasurer
and Principal Accounting Officer of
eight other mutual funds for which N&B
Management acts as investment manager
or administrator.
Stacy Cooper-Shugrue (33) Assistant Secretary of Assistant Vice President of N&B Management
each Trust since 1993; prior thereto, employee of N&B
Management; Assistant Secretary of eight
other mutual funds for which N&B Management
acts as investment manager or administrator.
C. Carl Randolph (59) Assistant Secretary of Principal of Neuberger & Berman since
each Trust 1992; prior thereto, employee of Neuberger
& Berman; Assistant Secretary of eight
other mutual funds for which N&B Management
acts as investment manager or administrator.
- 20 -
<PAGE>
Barbara DiGiorgio (37) Assistant Assistant Vice President of N&B Management
Treasurer of each Trust since 1993; prior thereto, employee of N&B
Management; Assistant Treasurer of eight
other mutual funds for which N&B Management
acts as investment manager of administrator
since 1996.
Celeste Wischerth (35) Assistant Assistant Vice President of N&B Management
Treasurer of each Trust since 1994; prior thereto, employee of N&B
Management; Assistant Treasurer of eight
other mutual funds for which N&B Management
acts as investment manager of administrator
since 1996.
</TABLE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of N&B Management and
principals of Neuberger & Berman. Mr. O'Brien is an interested person 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 N&B Management serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provides that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (a) engaged in bad faith, willful misfeasance, gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices, or (b) did not act in good faith in the reasonable belief that their
action was in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined (by a court
or other body approving the settlement or other disposition, by a majority of
disinterested trustees based upon a review of readily available facts, or in a
written opinion of independent counsel) that such officers or trustees have not
engaged in willful misfeasance, bad faith, gross negligence, or reckless
disregard of their duties.
For the fiscal year ended August 31, 1996, the Fund and Portfolio paid
and accrued fees and expenses of $26,813 to the Fund and Portfolio Trustees who
were not affiliated with N&B Management or Neuberger & Berman.
- 21 -
<PAGE>
The following table sets forth information concerning the compensation
of the trustees and officers of the Trust. None of the Neuberger & Berman
Funds(R) has any retirement plan for its trustees or officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/96
-----------------------------
Total Compensation
Aggregate from Trusts in the
Compensation Neuberger & Berman
Name and Position from the Fund Complex Paid
with the Trust Trust to Trustees
- ----------------- ------------ -------------------
Faith Colish $ 2,320 $ 38,500
Trustee (5 other investment
companies)
Donald M. Cox $ 2,320 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive companies)
Officer, and Trustee
Alan R. Gruber $ 2,143 $ 28,000
Trustee (3 other investment
companies)
Howard A. Mileaf $ 2,350 $ 37,000
Trustee (4 other investment
companies)
Edward I. O'Brien $ 2,409 $ 31,500
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 2,587 $ 40,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,320 $ 36,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,350 $ 30,500
Trustee (3 other investment
companies)
- 22 -
<PAGE>
Gustave H. Shubert $ 2,350 $ 30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
At November 20, 1996, 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. N&B 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
- 23 -
<PAGE>
Management Agreement was approved for the Portfolio by the Portfolio Trustees,
including a majority of the Portfolio Trustees who were not "interested persons"
of N&B Management or Managers Trust ("Independent Portfolio Trustees"), on July
15, 1993, and was approved by the holders of the interests in the Portfolio on
August 2, 1993.
The Management Agreement provides, in substance, that N&B 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 N&B Management to effect securities
transactions on behalf of the Portfolio through associated persons of N&B
Management. The Management Agreement also specifically permits N&B Management to
compensate, through higher commissions, brokers and dealers who provide
investment research and analysis to the Portfolio, although N&B Management has
no current plans to pay a material amount of such compensation.
N&B Management provides to the Portfolio, without separate cost, office
space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts. See "Trustees and Officers." Each Portfolio pays N&B
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
N&B Management provides similar facilities, services and personnel, as
well as accounting, recordkeeping, and other services, to the Fund pursuant to
an administration agreement with the Trust, dated August 3, 1993
("Administration Agreement"). For such administrative services, the Fund pays
N&B Management a fee based on the Fund's average daily net assets, as described
in the Prospectus. N&B Management enters into administrative services agreements
with Institutions, pursuant to which it compensates Institutions for accounting,
recordkeeping, and other services that they provide to investors who purchase
shares of the Fund.
During the fiscal years ended August 31, 1996, 1995 and 1994,
the Fund accrued management and administration fees of $8,821,718, $2,417,586,
and $142,142, respectively.
N&B Management has voluntarily undertaken to reimburse the
Fund for its Operating Expenses and its pro rata share of the Portfolio's
Operating Expenses so that the Fund's expense ratio per annum will not exceed
the expense ratio of its Sister Fund by more than 0.10% of the Fund's average
daily net assets. "Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses. This undertaking can be terminated by
N&B Management by giving the Fund at least 60 days' prior written notice. During
the period from August 3, 1993 (commencement of operations of the Fund) to
- 24 -
<PAGE>
December 31, 1994, N&B Management voluntarily undertook to reimburse the Fund
for its Operating Expenses and its pro rata share of the Portfolio's Operating
Expenses so that the Fund's expense ratio per annum would not exceed the expense
ratio of the Sister Fund. During the fiscal years ended August 31, 1996, 1995,
and 1994, N&B Management reimbursed the Fund $69,266, $171,796, and $116,354,
respectively, of expenses, under this arrangement.
The Management Agreement continues with respect to the Portfolio for a
period of two years after the date the Portfolio became subject thereto. 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 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
with respect to the Fund for a period of two years after the date the Fund
became subject thereto. 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 N&B 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.
The Management Agreement is terminable, without penalty, with respect
to the Portfolio on 60 days' written notice either by Managers Trust or by N&B
Management. The Administration Agreement is terminable, without penalty, with
respect to the Fund on 60 days' written notice either by N&B Management or by
the Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
N&B 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
Sub-Advisory Agreement was approved by the Portfolio Trustees, including a
majority of the Independent Portfolio Trustees, on July 15, 1993 and was
approved by the holders of the interests in the Portfolio on August 2, 1993.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B 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 approximately
fourteen investment analysts, each of whom specializes in studying one or more
- 25 -
<PAGE>
industries, under the supervision of the Director of Research, who is also
available for consultation with N&B Management. The Sub-Advisory Agreement
provides that N&B 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 N&B Management.
The Sub-Advisory Agreement continues with respect to the Portfolio for
a period of two years after the date the Portfolio became subject thereto 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 N&B 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 N&B Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
N&B Management currently serves as investment manager of the following
investment companies. As of September 30, 1996, these companies, along with
three other investment companies advised by Neuberger & Berman, had aggregate
net assets of approximately $13.9 billion, as shown in the following list:
Approximate Net
Assets at
September 30,
NAME 1996
Neuberger & Berman Cash Reserves Portfolio
(investment portfolio for Neuberger &
Berman Cash Reserves) $ 527,447,493
Neuberger & Berman Government Money Portfolio
(investment portfolio for Neuberger &
Berman Government Money Fund) $ 319,705,018
Neuberger & Berman Limited Maturity Bond Portfolio
(investment portfolio for Neuberger &
Berman Limited Maturity Bond Fund and
Neuberger & Berman Limited Maturity Bond
Trust) $ 268,892,148
- 26 -
<PAGE>
Neuberger & Berman Municipal Money Portfolio
(investment portfolio for Neuberger &
Berman Municipal Money Fund) $ 141,116,062
Neuberger & Berman Municipal Securities Portfolio
(investment portfolio for Neuberger &
Berman Municipal Securities Trust) $ 38,416,801
Neuberger & Berman New York Insured Intermediate
Portfolio
(investment portfolio for Neuberger &
Berman New York Insured Intermediate Fund) $ 9,575,489
Neuberger & Berman Ultra Short Bond Portfolio
(investment portfolio for Neuberger &
Berman Ultra Short Bond Fund and Neuberger
& Berman Ultra Short Bond Trust) $ 96,306,004
Neuberger & Berman Focus Portfolio
(investment portfolio for Neuberger & Berman Focus
Fund, Neuberger & Berman Focus Trust, and
Neuberger & Berman Focus Assets) $1,174,138,341
Neuberger & Berman Genesis Portfolio
(investment portfolio for Neuberger &
Berman Genesis Fund and Neuberger & Berman
Genesis Trust) $ 287,653,131
Neuberger & Berman Guardian Portfolio
(investment portfolio for Neuberger &
Berman Guardian Fund, Neuberger & Berman
Guardian Trust and Neuberger & Berman
Guardian Assets) $6,513,577,557
Neuberger & Berman International Portfolio
(investment portfolio for Neuberger &
Berman International Fund) $ 59,969,278
Neuberger & Berman Manhattan Portfolio
(investment portfolio for Neuberger &
Berman Manhattan Fund, Neuberger & Berman
Manhattan Trust and Neuberger & Berman
Manhattan Assets) $ 592,681,290
Neuberger & Berman Partners Portfolio
(investment portfolio for Neuberger &
Berman Partners Fund,
Neuberger & Berman Partners Trust and
Neuberger & Berman Partners Assets) $2,112,475,324
- 27 -
<PAGE>
Neuberger & Berman Socially Responsive Portfolio
(investment portfolio for Neuberger &
Berman Socially Responsive Fund and
Neuberger & Berman NYCDC Socially
Responsive Trust) $ 167,005,429
Advisers Managers Trust
(six series) $1,468,727,224
In addition, Neuberger & Berman serves as investment adviser to three
investment companies, Plan Investment Fund, Inc., AHA Investment Fund, Inc., and
AHA Full Maturity, with assets of $61,738,329, $77,498,236, and $26,954,887,
respectively, at September 30, 1996.
The investment decisions concerning the Portfolio and the other mutual
funds managed by N&B Management (collectively, "Other N&B Funds") have been and
will continue to be made independently of one another. In terms of their
investment objectives, most of the Other N&B Funds differ from the Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other N&B Funds and the Portfolio to achieve their objectives may differ.
The investment results achieved by all of the mutual funds managed by N&B
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
N&B 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 N&B 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 N&B 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.
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MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have offices
at the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; William Cunningham, Vice President; Clara Del
Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce Haboucha,
Vice President; Michael Lamberti, Vice President; Josephine P. Mahaney, Vice
President; Lawrence Marx III, Vice President; Ellen Metzger, Vice President and
Secretary; Janet W. Prindle, Vice President; Felix Rovelli, Vice President;
Richard Russell, Vice President; Kent C. Simons, Vice President; Frederick B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice President of
Marketing; Robert Conti, Treasurer; Stacy Cooper-Shugrue, Assistant Vice
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Roberta D'Orio, Assistant Vice President; Joseph G. Galli,
Assistant Vice President; Robert I. Gendelman, Assistant Vice President; Leslie
Holliday- Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Paul Metzger, Assistant
Vice President; Joseph S. Quirk, Assistant Vice President; Kevin L. Risen,
Assistant Vice President; Susan Switzer, Assistant Vice President; Celeste
Wischerth, Assistant Vice President; KimMarie Zamot, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Giuliano,
Lainoff, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Prindle and Vale
are principals of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of the Fund's shares on a no-load basis to Institutions. 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
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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 to Institutions 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 its
shareholder list, 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 N&B Management or Neuberger & Berman.
The Trust, on behalf of the Fund, and the Distributor are parties to a
Distribution Agreement that continues until August 3, 1997. 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
Agreement.
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 (other than weekend
and holiday closings), (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.
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 of the Fund,
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whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. 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 amounts equal to substantially
all of its share of any net investment income (after deducting expenses incurred
directly by the Fund), any net realized capital gains (both long-term and
short-term), and any net realized gains from foreign currency transactions
earned or realized by the Portfolio. The Fund calculates its net investment
income and NAV per share as of the close of regular trading on the NYSE on each
Business Day (usually 4:00 p.m. Eastern time).
The 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 generally distributes substantially all of its share of
the Portfolio's net investment income, if any, near the end of each calendar
quarter. 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 Institution elects to receive them in
cash ("cash election"). 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 Institution
notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the Code,
the Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
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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"); (2) the Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months -- (i) options (other than those on foreign currencies),
or (ii) foreign currencies or Hedging Instruments thereon that are not directly
related to the Fund's principal business of investing in securities (or options
with respect thereto) ("Short-Short Limitation"); and (3) 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.
Certain funds that invest in portfolios managed by N&B Management,
including the Sister Fund, 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, N&B 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
The Portfolio has received a ruling from the Service to the effect
that, among other things, the Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." 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
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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
qualifies 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 may be subject to
income, withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield 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 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.
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If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," 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 qualified electing
fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to mark to market their stock in certain PFICs.
Marking to market, in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
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 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. However, income from the disposition by the
Portfolio of options (other than those on foreign currencies) will be subject to
the Short-Short Limitation for the Fund if they are held for less than three
months. Income from the disposition of foreign currencies, and Hedging
Instruments on foreign currencies, that are not directly related to the
Portfolio's principal business of investing in securities (or options with
respect thereto) also will be subject to the Short-Short Limitation for the Fund
if they are held for less than three months.
If the Portfolio satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging position
during the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. The Portfolio will consider whether it should seek to satisfy those
requirements to enable the Fund to qualify for this treatment for hedging
transactions. To the extent the Portfolio does not do so, it may be forced to
defer the closing out of certain Hedging Instruments or foreign currency
positions beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
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<PAGE>
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.
PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as the Portfolio's principal broker in the
purchase and sale of its portfolio securities and in connection with the writing
of covered call options on its securities.
During the fiscal year ended August 31, 1994, the Portfolio paid
brokerage commissions of $2,207,401, of which $1,647,807 was paid to Neuberger &
Berman. During the fiscal year ended August 31, 1995, the Portfolio paid
brokerage commissions of $3,751,206, of which $2,521,523 was paid to Neuberger &
Berman.
During the fiscal year ended August 31, 1996, Neuberger & Berman
GUARDIAN Portfolio paid brokerage commissions of $6,886,590, of which $3,542,127
was paid to Neuberger & Berman. Transactions in which the Portfolio used
Neuberger & Berman as broker comprised 54.13% of the aggregate dollar amount of
transactions involving the payment of commissions, and 51.44% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1996. 83.78% of the $3,344,463 paid to other brokers by the Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $1,568,004,886) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1996, the
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act) ("Regular B/Ds"): General Electric Capital
Corp., Merrill Lynch, Pierce, Fenner & Smith, Inc., and State Street Bank and
Trust Company, N.A.; at that date, the Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: Merrill Lynch, Pierce, Fenner &
Smith, Inc., $76,562,500.
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. Among the conditions of the order, securities loans made by the
Portfolio to Neuberger & Berman must be fully secured by cash collateral. The
portion of the income on the cash collateral which may be shared with Neuberger
& Berman is 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 others, Neuberger & Berman is required to
pay the Portfolio, on a quarterly basis, certain "excess earnings" that
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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 the
Portfolio's expenses exceed its income in any securities loan transaction with
Neuberger & Berman, Neuberger & Berman must reimburse the Portfolio for such
loss.
During the fiscal years ended August 31, 1996, 1995 and 1994, the
Portfolio earned $2,427,096, $1,430,672 and $147,103, respectively in interest
income from the collateralization of securities loans, from which Neuberger &
Berman was paid $2,129,341, $1,252,190 and $119,620, respectively.
The Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B 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.
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 N&B Management (the Portfolio's investment manager and
an affiliate of Neuberger & Berman), 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
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compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. The Portfolio Trustees have expressly authorized
Neuberger & Berman to retain such compensation, and Neuberger & Berman complies
with the reporting requirements of Section 11(a).
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 N&B 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 simultaneously placed by the other accounts, subject to
de minimis exceptions. All participating accounts will pay or receive the same
price.
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The Portfolio expects that it will continue to execute a portion of its
transactions through brokers other than Neuberger & Berman. In selecting those
brokers, N&B 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 N&B Management and principals of
Neuberger & Berman who are portfolio managers of the Portfolio and Other N&B
Funds (collectively, "N&B 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 N&B Funds and the Managed Accounts
that are not effected by Neuberger & Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the N&B Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the N&B
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 N&B 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. N&B
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolio's benefit.
Lawrence Marx III, and Kent C. Simons, each of whom is a Vice President
of N&B Management and a principal of Neuberger & Berman, and Kevin L. Risen, who
is an Assistant Vice President of N&B Management, are the persons primarily
responsible for making decisions as to specific action to be taken with respect
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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 N&B Management prior to taking such action.
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.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian
for their respective securities and cash. State Street also serves as the Fund's
transfer agent, administering purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be mailed to Neuberger
& Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York,
NY 10158-0180. In addition, State Street serves as transfer agent for the
Portfolio.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected Ernst & Young LLP, 200 Clarendon
Street, Boston, MA 02116, as the independent auditors 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.
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by the Fund to own beneficially or of
record 5% or more of the Fund's outstanding shares at November 20, 1996:
Percentage of
Ownership at
Name and Address November 20, 1996
---------------- -----------------
Neuberger & Berman The Northern Trust Co., 16.90%
GUARDIAN Trust Trustee
Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-2956
MAC & Co. 13.37%
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
National Financial Services 10.10%
Corp.*
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Wachovia Bank of NC 6.20%
Master Trustee
FBO Akzo Nobel Inc.
Incentive Savings Plan
Attn: Cindy Martin
301 N. Main St. MC-NC 32213
Winston Salem, NC 27150-0001
* National Financial Services Corp. holds these shares of record
for the account of certain of its clients and has informed the Fund of its
policy to maintain the confidentiality of holdings in its client accounts
unless disclosure is expressly required by law.
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
- 40 -
<PAGE>
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.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Fund's Annual Report to shareholders
for the fiscal year ended August 31, 1996:
The audited financial statements of the Fund and Portfolio and
notes thereto for the fiscal year ended August 31, 1996, and the
reports of Ernst & Young LLP, independent auditors, with respect to
such audited financial statements.
- 41 -
<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
rating 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.
- 42 -
<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.
- 43 -
<PAGE>
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated PRIME-1 (or related supporting institutions), also known
as P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- 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.
- 44 -
<PAGE>
Appendix B
THE ART OF INVESTMENT:
A CONVERSATION WITH ROY NEUBERGER
- 45 -
<PAGE>
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
- 1 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your
make sure that some of your investments, make sure that some of your
principal is kept safe, and principal is kept safe, and try to increase
try to increase your income your income as well as your capital.
as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
- 2 -
<PAGE>
Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
- 3 -
<PAGE>
One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a particular
book, the last thing to security. It is after all just a sheet of paper
fall in love with is a indicating a part ownership in a corporation
particular security." and its use is purely mercenary. If you must
love a security, stay in love with it until
it gets overvalued; then let somebody else
fall in love
[PICTURE OF ROY NEUBERGER]
- 4 -
<PAGE>
ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL INVESTING
STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
- 5 -
<PAGE>
The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR INVESTING
STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
- 6 -
<PAGE>
Both are an art, although picking stocks is a
minor art compared with painting, sculpture or
"When things look bad, I literature. I started buying art in the 30s,
become optimistic. When and in the 40s it was a daily, almost hourly
everything looks rosy, and occurrence. My inclination to buy the works of
the crowd is optimistic, I living artists comes from Van Gogh, who sold
like to be a seller." only one painting during his lifetime. He died
in poverty, only then to become a legend and
have his work sold for millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
- 7 -
<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
- 8 -
<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
- 9 -
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
- 10 -
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
</TABLE>
===============================================================================
- 11 -
<PAGE>
<PAGE>
- ----------------------------------------------------------------------
PROSPECTUS
December 6, 1996
Neuberger&Berman
EQUITY TRUST -Registered Trademark-
Neuberger&Berman
NYCDC SOCIALLY RESPONSIVE TRUST
No Sales Charges
No Redemption Fees
No 12b - 1 Fees
<PAGE>
Neuberger&Berman
NYCDC SOCIALLY RESPONSIVE TRUST-SM-
A No-Load Equity Fund
- ------------------------------------------------------------------------------
Neuberger&Berman NYCDC SOCIALLY RESPONSIVE TRUST (the "Fund") is an equity
fund that seeks long-term capital appreciation through investments primarily in
securities of companies that meet both financial and social criteria.
The Fund was created as an investment vehicle for participants in the
Deferred Compensation Plan of the City of New York and Related Agencies and
Instrumentalities ("Plan") who are concerned about the relationship between
business and society and are seeking to invest their assets in a manner
consistent with their social sensibilities.
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH THE PLAN.
- ------------------------------------------------------------------------------
THE FUND, WHICH IS A SERIES OF NEUBERGER&BERMAN EQUITY TRUST (THE "TRUST"),
INVESTS ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER&BERMAN SOCIALLY RESPONSIVE
PORTFOLIO (THE "PORTFOLIO") OF EQUITY MANAGERS TRUST ("MANAGERS TRUST"), AN
OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY NEUBERGER&BERMAN MANAGEMENT
INCORPORATED ("N&B MANAGEMENT"). THE PORTFOLIO INVESTS IN SECURITIES IN
ACCORDANCE WITH AN INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS IDENTICAL TO
THOSE OF THE FUND. THE INVESTMENT PERFORMANCE OF THE FUND DIRECTLY CORRESPONDS
WITH THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. THIS "MASTER/FEEDER FUND"
STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT COMPANIES WHICH
DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES. FOR MORE
INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SUMMARY" ON
PAGE 3 AND "SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND
OTHER MATTERS" ON PAGE 14.
The Portfolio seeks to achieve its objective by investing in securities
considered by N&B Management to be undervalued in relation to recognized
measures of their fundamental economic values, such as earnings, cash flow,
tangible book value, and asset value. For a description of the investment
policies and techniques of the Portfolio, see "Investment Program" and
"Description of Investments."
The Fund is a no-load mutual fund, so you pay no sales commissions or other
charges when you buy or redeem shares. The Fund does not pay "12b-1 fees" to
promote or distribute its shares.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 6, 1996, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling the Plan at (212) 306-7760.
PROSPECTUS DATED DECEMBER 6, 1996
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Fund and Portfolio;
Risk Factors 3
Management 4
The Neuberger&Berman Investment
Approach 4
EXPENSE INFORMATION 5
Shareholder Transaction Expenses 5
Annual Fund Operating Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
INVESTMENT PROGRAM 9
Social Policy 10
Short-Term Trading; Portfolio
Turnover 11
Borrowings 12
PERFORMANCE INFORMATION 13
Total Return Information 13
SPECIAL INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS 14
The Fund 14
The Portfolio 15
HOW TO BUY SHARES AND SELL
SHARES 17
SHARE PRICES AND NET ASSET VALUE 18
DIVIDENDS, OTHER
DISTRIBUTIONS, AND TAXES 19
Distribution Options 19
Taxes 19
MANAGEMENT AND ADMINISTRATION 20
Trustees and Officers 20
Investment Manager, Administrator,
Distributor, and Sub-Adviser 20
Expenses 21
Transfer Agent 22
DESCRIPTION OF INVESTMENTS 23
DIRECTORY 26
</TABLE>
<PAGE>
SUMMARY
The Fund and Portfolio; Risk Factors
- ----------------------------------------------------------------------
The Fund is a series of the Trust and invests in the Portfolio which, in
turn, invests in securities in accordance with an investment objective, policies
and limitations that are identical to those of the Fund. This is sometimes
called a master/feeder fund structure, because the Fund "feeds" shareholders'
investments into the Portfolio, a "master" fund. The structure looks like this:
-------------------------
SHAREHOLDERS
-------------------------
(down arrow) BUY SHARES IN
-------------------------
FUND
-------------------------
(down arrow) INVESTS IN
-------------------------
PORTFOLIO
-------------------------
(down arrow) INVESTS IN
-------------------------
STOCKS & OTHER SECURITIES
-------------------------
The trustees who oversee the Fund believe that this structure may benefit
shareholders; investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale that could reduce
expenses. The Portfolio seeks long-term capital appreciation by investing
primarily in securities considered by N&B Management to be undervalued relative
to the market as a whole and whose issuers meet certain social criteria
established by N&B Management ("Social Policy"). N&B Management evaluates
companies to determine if they meet the Social Policy in the following major
areas of concern: environment, and workplace diversity and employment. Companies
are further evaluated to determine if they meet other aspects of the Social
Policy, such as public health, type of products, and corporate citizenship. The
Portfolio does not invest in companies which derive a significant portion of
their total annual revenue from the following industries: nuclear power,
tobacco, alcohol,
3
<PAGE>
gambling, or weapons. The Portfolio will seek to dispose of a security as soon
as reasonably practicable if the issuer no longer meets the Social Policy, even
though a sale at that time might not be desirable from a purely financial
standpoint.
For more information about the organization of the Fund and the Portfolio,
including certain features of the master/feeder fund structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" on page
14. An investment in the Fund involves certain risks, depending upon the types
of investments made by the Portfolio. For more details about the Portfolio, its
investments and their risks, see "Investment Program" on page 9, "Social Policy"
on page 10, and "Description of Investments" on page 23.
INVESTMENT STYLE: Broadly diversified, large-cap value fund.
PORTFOLIO CHARACTERISTICS: Seeks long-term capital appreciation by investing
in common stocks of companies that meet both financial and social criteria.
Management
- ----------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page 20. If you want to know how to buy and sell shares of the Fund, see "How to
Buy and Sell Shares" on page 17, and the policies set forth in the Plan.
The Neuberger&Berman Investment Approach
- ----------------------------------------------------------------------
In general, the Portfolio adheres to a value-oriented investment approach. A
value-oriented portfolio manager buys stocks that are selling for less than
their perceived market values. These include stocks that are currently
under-researched or are temporarily out of favor on Wall Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets).
Neuberger&Berman believes that, over time, securities that are undervalued
are more likely to appreciate in price and be subject to less risk of price
decline than securities whose market prices have already reached their perceived
economic values. This approach also contemplates selling portfolio securities
when they are considered to have reached their potential.
4
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund and
the Portfolio. See "Performance Information" for important facts about the
investment performance of the Fund, after taking expenses into account.
Shareholder Transaction Expenses
- ----------------------------------------------------------------------
As shown by this table, the Fund imposes no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
Annual Fund Operating Expenses
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------------------
The following table shows annual Total Operating Expenses for the Fund, which
are paid out of the assets of the Fund and which include the Fund's pro rata
portion of the Operating Expenses of the Portfolio. The Fund pays N&B Management
an administration fee based on the Fund's average daily net assets. The
Portfolio pays N&B Management a management fee based on the Portfolio's average
daily net assets; a pro rata portion of this fee is borne indirectly by the
Fund. Therefore, the table combines management and administration fees. The Fund
and Portfolio also incur other expenses for things such as accounting and legal
fees, maintaining shareholder records, and furnishing shareholder statements and
Fund reports. "Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses. The Fund's expenses are factored into
its share price and dividends and are not charged directly to Fund shareholders.
For more information, see "Management and Administration" and the SAI.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES EXPENSES EXPENSES
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NYCDC SOCIALLY RESPONSIVE 0.55% NONE 0.05% 0.60%
TRUST*
</TABLE>
* (REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW)
Total Operating Expenses for the Fund are based upon administration fees
incurred by the Fund and management fees incurred by the Portfolio during the
past fiscal year and the current expense reimbursement undertaking. "Other
Expenses" are based on the Fund's and Portfolio's expenses for the past fiscal
year. The trustees of the Trust believe that the aggregate per share expenses of
the Fund and the Portfolio will be approximately equal to the expenses the Fund
would incur if its assets were invested
5
<PAGE>
directly in the type of securities held by the Portfolio. The trustees of the
Trust also believe that investment in the Portfolio by investors in addition to
the Fund may enable the Portfolio to achieve economies of scale which could
reduce expenses. The expenses and, accordingly, the returns of other funds that
may invest in the Portfolio may differ from those of the Fund.
The previous table reflects N&B Management's voluntary undertaking to
reimburse the Fund for its Operating Expenses and its pro rata share of the
Portfolio's Operating Expenses which, in the aggregate, exceed 0.60% per annum
of the Fund's average daily net assets. Absent the reimbursement, Management and
Administration Fees, Other Expenses, and Total Operating Expenses would be
0.60%, 0.20%, and 0.80%, respectively, per annum of the average daily net assets
of the Fund.
Example
- ----------------------------------------------------------------------
To illustrate the effect of Operating Expenses, let's assume that the Fund's
annual return is 5% and that it had Total Operating Expenses described in the
table above. For every $1,000 you invested in the Fund, you would have paid the
following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------
NYCDC SOCIALLY
RESPONSIVE TRUST $6 $19 $33 $75
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
6
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
NYCDC Socially Responsive Trust
- --------------------------------------------------------------------------------
The financial information in the following table is for the Fund as of August
31, 1996 and prior periods. This information has been audited by the Fund's
independent accountants. You may obtain, at no cost, further information about
the performance of the Fund in its annual report to shareholders, which may be
obtained by calling (212) 306-7760. The accountants' report is incorporated in
the SAI by reference to the annual report. Also, see "Performance Information."
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of the Portfolio's income and
expenses. It should be read in conjunction with the Portfolio's Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 14, 1994(1)
Year Ended August to
31, August 31,
1996 1995 1994
------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.27 $ 10.43 $ 10.20
------------------------------------------
Income From Investment Operations
Net Investment Income .14 .13 .06
Net Gains or Losses on Securities
(both realized and unrealized) 2.44 1.82 .17
------------------------------------------
Total From Investment Operations 2.58 1.95 .23
------------------------------------------
Less Distributions
Dividends (from net investment income) (.12) (.11) --
Distributions (from capital gains) (.31) -- --
------------------------------------------
Total Distributions (.43) (.11) --
------------------------------------------
Net Asset Value, End of Year $ 14.42 $ 12.27 $ 10.43
------------------------------------------
Total Return+ +21.27% +18.95% +2.26%(2)
------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 125.6 $ 88.5 $ 68.6
------------------------------------------
Ratio of Expenses to Average Net
Assets(4) .60% .60% .60%(3)
------------------------------------------
Ratio of Net Investment Income to Average
Net Assets(4) 1.06% 1.26% 1.42%(3)
------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS.
7
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
1)The date investment operations commenced.
2)Not annualized.
3)Annualized.
4)After reimbursement of expenses by N&B Management. Had N&B Management
not undertaken such action the annualized ratios to average daily net assets
would have been:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
AUGUST 31, MARCH 14, 1994 TO
1996 1995 AUGUST 31, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses .80% .85% .84%
- --------------------------------------------------------------------------------
Net Investment Income .86% 1.01% 1.18%
- --------------------------------------------------------------------------------
</TABLE>
5)Because the Fund invests only in the Portfolio and the Portfolio (rather than
the Fund) engages in securities transactions, the Fund does not calculate a
portfolio turnover rate or pay any brokerage commissions. The portfolio
turnover rates for the Portfolio for the period from March 14, 1994 to August
31, 1994 and the years ended August 31, 1995 and 1996 were 14%, 58%, and 53%,
respectively. The average commission rate paid by the Portfolio for the year
ended August 31, 1996 was $0.0587.
+ Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each fiscal
period and assumes dividends and other distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would have been lower if
N&B Management had not reimbursed certain expenses.
8
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those of
the Portfolio. The Fund invests only in the Portfolio. Therefore, the following
shows you the kinds of securities in which the Portfolio invests. For an
explanation of some types of investments, see "Description of Investments," on
page 23.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
The investment objective of the Fund and Portfolio is to seek long-term
capital appreciation by investing primarily in securities of companies that meet
both financial criteria and the Social Policy. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
In seeking capital appreciation, the Portfolio generally follows a
value-oriented investment approach to the selection of individual securities.
Prospective investments are first subjected to detailed financial analysis and
are not studied further unless N&B Management believes that they are currently
undervalued relative to the issuer's assets and potential earning power.
The Portfolio expects to be nearly fully invested at all times, primarily in
common stock. It may also invest in convertible securities and preferred stock
and in foreign securities and American Depositary Receipts ("ADRs") of foreign
companies that meet the Social Policy. On occasion, deposits with community
banks and credit unions may be considered for investment. However, any part of
the Portfolio's assets may be retained temporarily in investment grade fixed
income securities of non-governmental issuers, U.S. Government and Agency
Securities, repurchase agreements, money market instruments, commercial paper,
and cash and cash equivalents when N&B Management believes that significant
adverse market, economic, political, or other circumstances require prompt
action to avoid losses. In addition, the feeder funds that invest in the
Portfolio deal with large institutional investors, and the Portfolio may hold
such instruments pending investment or payout when the Portfolio has received a
large influx of cash due to sales of Fund shares, or shares of another fund that
invests in the Portfolio, or when it anticipates a substantial redemption.
Generally, the foregoing temporary investments are selected with a concern for
the social impact of each investment. Under normal conditions, at least 65% of
the Portfolio's total assets are invested in accordance with the Social Policy,
and at least 65% of its total assets are invested in equity securities.
9
<PAGE>
The Portfolio may also engage in portfolio management techniques that are not
subject to the Social Policy, such as selling short against-the-box, lending
securities, and purchasing and selling put and call options on securities and
currencies, futures contracts, options on futures contracts, and forward
contracts.
Social Policy
- ----------------------------------------------------------------------
Companies deemed acceptable from a financial standpoint are evaluated by N&B
Management using a database that Neuberger&Berman has designed to develop and
monitor information on companies in various categories of social criteria. N&B
Management seeks to invest in issuers that show leadership in the following
major areas of social impact: environment, and workplace diversity and
employment. N&B Management also evaluates investments based on companies'
records in other areas of concern: public health, type of products, and
corporate citizenship.
The Portfolio's social orientation is predicated in part on the belief that
good corporate citizenship is good business; that is, good policies with respect
to such social criteria as employment and environmental practices may often have
a positive impact on the company's "bottom line." N&B Management recognizes,
however, that many social criteria represent goals rather than achievements and
that goals are often difficult to quantify. In each area, N&B Management seeks
to elicit and understand management's vision of the company's social role and,
in making investment decisions, gives weight to enlightened, progressive
policies. The information used by N&B Management in evaluating prospective
investments for conformity with the Social Policy is obtained primarily from
services that specialize in reporting information from issuers or from agencies
that oversee issuers' activities or compliance with laws and regulations.
Additionally, the information may come from public interest groups and from N&B
Management's discussions with company representatives. N&B Management attempts
to assess the objectivity of all information that it receives. However,
decisions made by N&B Management inevitably involve some level of subjective
judgment.
The Portfolio seeks to invest in companies that show leadership in addressing
environmental problems effectively and in promoting progressive workplace
policies, especially as they affect women and minorities. N&B Management seeks
to identify companies committed to improving their environmental performance by
examining their policies and programs in such areas as energy conservation,
pollution reduction and control, waste management, recycling, and careful
stewardship of natural resources. In a similar manner, N&B Management seeks to
identify companies whose policies and practices recognize the importance of
human resources to corporate productivity and the centrality of the work
experience to the quality of life of all employees. The Portfolio seeks to
invest in companies that demonstrate leadership in such areas as providing and
promoting equal opportunity, investing in the training and
10
<PAGE>
re-training of workers, promoting a safe working environment, providing
family-oriented flexible benefits, and involving workers in job and workflow
engineering.
In making investment decisions, N&B Management takes into account a company's
record as a member of the various communities of which it is a part and its
commitment to product quality and value. Currently, the Social Policy screens
out any company that derives more than (i) 5% of its total annual revenue from
manufacturing and selling alcohol and/or tobacco, (ii) 5% of its total annual
revenue from sales in or services related to gambling, or (iii) 10% of its total
annual revenue from the manufacturing of weapons systems. Additionally, the
Portfolio does not invest in any company that derives its total annual revenue
primarily from non-consumer sales to the military or that owns or operates one
or more nuclear power facilities or is a major supplier of nuclear power
services.
Not every issuer selected by N&B Management will demonstrate leadership in
each category of the Social Policy. The social records of most companies are
written in shades of gray. For example, a company may have a progressive record
in employee relations and community affairs but a poor one on product marketing
issues. Another company may have a mixed record within a single area. Finally,
it is often difficult to distinguish between a substantive commitment and public
relations. This principle works both ways: there are many companies with
excellent records on social issues that maintain a low profile for one reason or
another. Taking these factors into consideration, N&B Management emphasizes the
overall approach that companies take toward the areas of social impact and pays
particular attention to progress achieved toward the goals of the Social Policy.
If securities held by the Portfolio no longer satisfy the Social Policy, the
Portfolio will seek to dispose of the securities as soon as reasonably
practicable, which may cause the Portfolio to sell the securities at a time not
desirable from a purely financial standpoint.
Short-Term Trading; Portfolio Turnover
- ----------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. The portfolio
turnover rate of the Portfolio for 1996 and earlier years is set forth under
"Notes to Financial Highlights."
11
<PAGE>
Borrowings
- ----------------------------------------------------------------------
The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
The Portfolio does not expect to borrow money or to enter into reverse
repurchase agreements. As a non-fundamental policy, the Portfolio may not
purchase portfolio securities if its outstanding borrowings, including reverse
repurchase agreements, exceed 5% of its total assets.
12
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This smooths out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
The Fund's average annual total returns for the one-year period ended August
31, 1996 and for the period from its inception through August 31, 1996 were
+21.27% and +16.99%, respectively. Had N&B Management not reimbursed certain
expenses, total return would have been lower. Further information regarding the
Fund's performance is presented in its annual report to shareholders, which is
available without charge by calling the Plan at (212) 306-7760.
Total Return Information
- ----------------------------------------------------------------------
You can obtain current performance information about the Fund by calling the
Plan at (212) 306-7760.
13
<PAGE>
SPECIAL INFORMATION REGARDING 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 May 6, 1993. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as
a diversified, open-end management investment company, commonly known as a
mutual fund. The Trust has six separate series. The Fund invests all of its net
investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
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 the Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
14
<PAGE>
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 six separate portfolios. The assets of the Portfolio belong
only to the Portfolio, and the liabilities of the Portfolio are borne solely by
the Portfolio and no other.
FUND'S INVESTMENT 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, 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. This "master/feeder fund" structure is depicted in the "Summary" on
page 3.
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. Neuberger&Berman Socially Responsive Fund, a mutual
fund that is a series of Neuberger&Berman Equity Funds ("N&B Equity Funds"),
invests all of its net investable assets in the Portfolio. The shares of
Neuberger&Berman Socially Responsive Fund are available for purchase by 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. The Fund does not
sell its shares directly to members of the general public. Other investors in
the Portfolio (including the series of N&B Equity Funds) that might sell shares
to members of the general public 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 the series of N&B Equity Funds)
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 may invest in the
Portfolio in the future will be available from N&B Management by calling
800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by the
series of N&B Equity Funds 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 benefitting 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.
15
<PAGE>
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.
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.
16
<PAGE>
HOW TO BUY AND SELL SHARES
YOU CAN BUY AND SELL (REDEEM) SHARES OF THE FUND ONLY AS SET FORTH IN THE
PLAN. Shares are purchased and sold at the next price calculated on a day the
New York Stock Exchange ("NYSE") is open, after a purchase or sales order is
received and accepted by the trustee of the Plan as set forth in the Plan.
Prices for shares of the Fund are usually calculated as of 4 p.m. Eastern time.
The Plan may be closed on days when the NYSE is open. As a result, prices for
Fund shares may be significantly affected on days when you have no access to the
Plan to buy or sell shares.
Other Information
- ----------------------------------------------------------------------
/ / The Plan must pay for shares it purchases in U.S. dollars.
/ / The Fund has the right to suspend the offering of its shares for a period
of time. The Fund also has the right to accept or reject a purchase order
in its sole discretion.
/ / Redemption proceeds will be paid to the Plan in the manner and at the
times agreed with N&B Management, but in any case within three business
days (under unusual circumstances the Fund may take longer, as permitted
by law).
/ / The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed (besides weekends and holidays), when trading on the NYSE
is restricted, or as permitted by the SEC.
17
<PAGE>
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated
by subtracting 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
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices. The Portfolio values all other
securities and assets, including restricted securities, by a method that the
trustees of Managers Trust believe accurately reflects fair value.
18
<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes, normally in December, substantially all of its share of
any net investment income (net of the Fund's expenses), net realized capital
gains, and net realized gains from foreign currency transactions earned or
realized by the Portfolio.
Distribution Options
- ----------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions paid on shares
of the Fund are automatically reinvested in additional shares of the Fund,
unless the Plan elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. The Plan may elect to receive dividends in cash, with
other distributions being reinvested in additional Fund shares, or to receive
all dividends and other distributions in cash.
Taxes
- ----------------------------------------------------------------------
The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended ("Code"),
so that it will be relieved of federal income tax on that part of its taxable
income and realized gains that it distributes to the Plan.
Fund shares currently are offered only to the trustee of the Plan acting on
behalf of the participants in the Plan. Because the Plan is an eligible deferred
compensation plan under section 457 of the Code, taxes on distributions from the
Fund to the Plan are deferred. Individual participants in the Plan should
consult the Plan documents and their own tax advisers for information on the tax
consequences associated with participating in an investment in the Fund through
the Plan. See the SAI for additional tax information.
19
<PAGE>
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
- ----------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of the Fund and the Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The trustees and officers of the Trust and of Managers Trust who are officers
and/or directors of N&B Management and/or principals of Neuberger&Berman serve
without compensation from the Fund or the Portfolio. The trustees of the Trust
and of Managers Trust, including a majority of those trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust or Managers
Trust, have adopted written procedures reasonably appropriate to deal with
potential conflicts of interest between the Trust and Managers Trust, including,
if necessary, creating a separate board of trustees of Managers Trust.
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- ----------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolio and other mutual
funds managed by N&B Management, also serves as investment adviser of three
other investment companies. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $13.9 billion as of
September 30, 1996.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio.
Neuberger&Berman has advised clients in selecting socially responsive
investments since 1990. Neuberger&Berman is a member firm of the NYSE and other
principal exchanges and acts as the Portfolio's principal broker in the purchase
and sale of its securities. Neuberger&Berman and its affiliates, including N&B
Management, manage securities accounts that had approximately $42.9 billion of
assets as of September 30, 1996. All of the voting stock of N&B Management is
owned by individuals who are principals of Neuberger&Berman.
Janet Prindle is primarily responsible for the day-to-day management of the
Portfolio. Ms. Prindle, a Vice President of N&B Management since November 1993,
has been a principal of Neuberger&Berman since 1983. Ms. Prindle is Director of
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Socially Responsive Investment Services at Neuberger&Berman and has been
researching and developing corporate responsibility criteria as they apply to
investments since 1989. She has been managing money using these criteria since
1990. Ms. Prindle has been responsible for the Portfolio since its inception in
March 1994.
Neuberger&Berman acts as the principal broker for the Portfolio in the
purchase and sale of portfolio securities and in the sale of covered call
options, and for those services receives brokerage commissions. In effecting
securities transactions, the Portfolio seeks to obtain the best price and
execution of orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds-Registered Trademark-.
To mitigate the possibility that the Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
Expenses
- ----------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. N&B
Management provides administrative services to the Fund that include furnishing
similar facilities and personnel for the Fund. For such administrative services,
the Fund pays N&B Management a fee at the annual rate of 0.05% of the Fund's
average daily net assets. With the Fund's consent, N&B Management may
subcontract to third parties some of its responsibilities to the Fund under the
administration agreement. For investment management services, the Portfolio pays
N&B Management a fee at the annual rate of 0.55% of the first $250 million of
the Portfolio's average daily net assets, 0.525% of the next $250 million, 0.50%
of the next $250 million, 0.475% of the next $250 million, 0.45% of the next
$500 million, and 0.425% of average daily net assets in excess of $1.5 billion.
During its 1996 fiscal year, the Fund accrued administration fees and a pro rata
portion of the Portfolio's management fees (prior to the expense reimbursement)
as a percentage of the Fund's average daily net assets, of 0.60%.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Fund and Portfolio, legal and accounting fees, and
compensation for trustees
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<PAGE>
who are not affiliated with N&B Management; for the Fund, transfer agent fees
and the cost of printing and sending reports and proxy materials to
shareholders; and for the Portfolio, custodial fees for securities.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
N&B Management has voluntarily undertaken until December 31, 1999 to
reimburse the Fund for its Operating Expenses and its pro rata share of the
Portfolio's Operating Expenses which exceed, in the aggregate, 0.60% per annum
of the Fund's average daily net assets. N&B Management may terminate this
undertaking to the Fund by giving at least 60 days' prior written notice to the
Fund. The effect of reimbursement by N&B Management is to reduce the Fund's
expenses and thereby increase its total return.
During its 1996 fiscal year, the Fund bore total operating expenses as a
percentage of its average daily net assets, after taking into consideration N&B
Management's expense reimbursement, of 0.60%.
Transfer Agent
- ----------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to the Plan and the payment of dividends and other
distributions to the Plan. Questions should be directed to the Plan's address.
22
<PAGE>
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in "Investment
Program" herein, the Portfolio may make the following investments, among others,
individually or in combination, although it may not necessarily buy all of the
types of securities or use all of the investment techniques that are described.
For additional information on the following investments and on other types of
investments which the Portfolio may make, see the SAI.
ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net assets in
illiquid securities, which are securities that cannot be expected to be sold
within seven days at approximately the price at which they are valued. Due to
the absence of an active trading market, the Portfolio may experience difficulty
in valuing or disposing of illiquid securities. N&B Management determines the
liquidity of the Portfolio's securities, under general supervision of the
trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933 ("1933
Act"). Unless registered for sale, these securities can be sold only in
privately negotiated transactions or pursuant to an exemption from registration.
Rule 144A securities, although not registered, may be resold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S under
the 1933 Act. Foreign securities that are freely tradeable in their principal
market are not considered restricted securities even if they are not registered
for sale in the United States. Restricted securities are generally considered
illiquid. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted or Rule 144A
securities are liquid.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and
doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities. The Portfolio may invest up
to 10% of the value of its total assets in foreign securities. The 10%
limitation does not apply to foreign securities that are denominated in U.S.
dollars, including ADRs. Foreign securities (including those denominated in U.S.
dollars, such as ADRs) are affected by political and economic developments in
foreign countries. Foreign companies may not be subject to accounting standards
or governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. In addition, foreign markets may be
less liquid and more volatile than U.S. markets and may offer less protection to
investors. Investments in foreign securities that are not denominated in U.S.
dollars (including those made through ADRs) may be subject to special risks,
23
<PAGE>
such as governmental regulation of foreign exchange transactions and changes in
rates of exchange with the U.S. dollar, irrespective of the performance of the
underlying investment.
COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of securities
price changes (hedge) or generate income by writing (selling) covered call
options against portfolio securities having a market value not exceeding 10% of
its net assets and may purchase call options in related closing transactions.
The purchaser of a call option acquires the right to buy a portfolio security at
a fixed price during a specified period. The maximum price the Portfolio may
realize on the security during the option period is the fixed price; the
Portfolio continues to bear the risk of a decline in the security's price,
although this risk is reduced, at least in part, by the premium received for
writing the option.
The primary risks in using call options are (1) possible lack of a liquid
secondary market for options and the resulting inability to close out options
when desired; (2) the fact that use of options is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of the
Portfolio's securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain by offsetting favorable price movements in hedged
investments; and (4) the possible inability of the Portfolio to purchase or sell
a security at a time that would otherwise be favorable for it to do so, or the
possible need for the Portfolio to sell a security at a disadvantageous time,
due to its need to maintain "cover" in connection with its use of these
instruments. Options are considered "derivatives."
FIXED INCOME SECURITIES. "Investment grade" debt securities are those
receiving one of the four highest ratings from Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's, or another nationally recognized statistical
rating organization ("NRSRO") or, if unrated by any NRSRO, deemed by N&B
Management to be of comparable quality to such rated securities ("Comparable
Unrated Securities"). Securities rated by Moody's in its fourth highest category
(Baa) or Comparable Unrated Securities may be deemed to have speculative
characteristics. 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
investments is likely to rise.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets
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
24
<PAGE>
time at a specified price or formula. Convertible securities generally have
features of both common stocks and debt securities. The Portfolio does not
intend to purchase any convertible securities that are not investment grade.
U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may purchase U.S.
Government and Agency Securities. 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 ("GNMA"), Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Student Loan
Mortgage Association, and Tennessee Valley Authority. Some U.S. Government
Agency Securities are supported by the full faith and credit of the United
States, while others may be 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 mortgage-backed securities. The market prices of U.S. Government
Securities are not guaranteed by the Government.
SHORT SALES AGAINST-THE-BOX. The Portfolio may make short sales against-the-
box, in which it sells securities short only if it owns or has the right to
obtain without payment of additional consideration an equal amount of the same
type of securities sold. Short selling against-the-box may defer recognition of
gains or losses to a later tax period.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations. The Portfolio
also may lend portfolio securities to banks, brokerage firms, or institutional
investors to earn income. Costs, delays, or losses could result if the selling
party to a repurchase agreement or the borrower of portfolio securities becomes
bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
25
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
PLAN
Deferred Compensation Plan of the
City of New York and Related Agencies
and Instrumentalities
40 Rector Street, 3rd Floor
New York, NY 10006
(212) 306-7760
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Correspondence should be sent to:
Deferred Compensation Plan of the
City of New York and Related Agencies
and Instrumentalities
40 Rector Street, 3rd Floor
New York, NY 10006
(212) 306-7760
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman NYCDC Socially Responsive Trust is a service mark of
Neuberger&Berman Management Inc.
- -C- 1996 Neuberger&Berman Management Inc.
26
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Neuberger&Berman Management Inc. -Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
DEFERRED COMPENSATION PLAN
OF THE CITY OF NEW YORK
AND RELATED AGENCIES
AND INSTRUMENTALITIES
212.306.7760
This wrapper is not part of the prospectus.
PRINTED ON RECYCLED PAPER
(recycle logo) NBEP00061296
WITH SOY BASED INKS
<PAGE>
-----------------------------------------------------------------
NEUBERGER & BERMAN NYCDC SOCIALLY RESPONSIVE TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 6, 1996
A NO-LOAD MUTUAL FUND
605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NY 10158-0180
-----------------------------------------------------------------
NEUBERGER & BERMAN NYCDC SOCIALLY RESPONSIVE TRUST ("FUND"), A
SERIES OF NEUBERGER & BERMAN EQUITY TRUST ("TRUST"), IS A NO-LOAD MUTUAL FUND
THAT OFFERS SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER 6, 1996. THE FUND
INVESTS ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER & BERMAN SOCIALLY
RESPONSIVE PORTFOLIO ("PORTFOLIO"). YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY
THROUGH THE DEFERRED COMPENSATION PLAN OF THE CITY OF NEW YORK AND RELATED
AGENCIES AND INSTRUMENTALITIES ("PLAN").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from the Plan by calling 212-306-7760.
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.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION................................................. 1
Investment Policies and Limitations............................ 1
Janet W. Prindle, Portfolio Manager of the Portfolio........... 5
Background Information on Socially Responsive
Investing............................................... 7
The Socially Responsive Database............................... 8
Implementation of Social Policy................................ 10
Additional Investment Information.............................. 11
PERFORMANCE INFORMATION................................................ 24
Total Return Computations...................................... 25
Comparative Information........................................ 25
Other Performance Information.................................. 26
CERTAIN RISK CONSIDERATIONS............................................ 27
TRUSTEES AND OFFICERS.................................................. 27
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...................... 34
Investment Manager and Administrator........................... 34
Sub-Adviser.................................................... 35
Investment Companies Managed................................... 36
Management and Control of N&B Management....................... 39
DISTRIBUTION ARRANGEMENTS.............................................. 40
ADDITIONAL REDEMPTION INFORMATION...................................... 40
Suspension of Redemptions...................................... 40
Redemptions in Kind............................................ 41
DIVIDENDS AND OTHER DISTRIBUTIONS...................................... 41
ADDITIONAL TAX INFORMATION............................................. 42
Taxation of the Fund........................................... 42
Taxation of the Portfolio...................................... 43
PORTFOLIO TRANSACTIONS................................................. 46
Portfolio Turnover............................................. 50
REPORTS TO SHAREHOLDERS................................................ 50
CUSTODIAN AND TRANSFER AGENT........................................... 50
INDEPENDENT ACCOUNTANTS................................................ 51
LEGAL COUNSEL.......................................................... 51
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................... 51
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REGISTRATION STATEMENT................................................. 51
FINANCIAL STATEMENTS................................................... 51
Appendix A............................................................. 53
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER................ 53
Appendix B............................................................. 56
THE ART OF INVESTMENT: A CONVERSATION WITH ROY
NEUBERGER............................................... 56
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<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 an 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 Neuberger & Berman
Management Incorporated ("N&B 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 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 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 and the limitation on
ownership of portfolio securities by officers and trustees, 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
instrumental- ities.
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
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<PAGE>
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.
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").
The Portfolio's non-fundamental investment policies and
limitations are as follows:
1. BORROWING. The Portfolio may not purchase securi- ties 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. INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may
not purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and in the open market at no more than customary
brokerage commission rates. This limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a result of
a reorganization, consolidation, or merger.
4. 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.
5. SHORT SALES. The Portfolio may not sell securities short
unless it owns, or has the right to obtain without payment of additional
consideration, securities equivalent in kind and amount to the securities sold.
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<PAGE>
Transactions in forward contracts, futures contracts and options shall not
constitute selling securities short.
6. OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES.
The Portfolio may not purchase or retain the securities of any issuer if, to the
knowledge of N&B Management, those officers and trustees of Managers Trust and
officers and directors of N&B Management who each owns individually more than
1/2 of 1% of the outstanding securities of such issuer, together own more than
5% of such securities.
7. UNSEASONED ISSUERS. The Portfolio may not purchase the
securities of any issuer (other than securities issued or guaranteed by domestic
or foreign governments or political subdivisions thereof) if, as a result, more
than 5% of the Portfolio's total assets would be invested in the securities of
business enterprises that, including predecessors, have a record of less than
three years of continuous operation. For purposes of this limitation,
pass-through entities and other special purpose vehicles or pools of financial
assets are not considered to be business enterprises.
8. ILLIQUID SECURITIES. The Portfolio may not purchase any
security if, as a result, more than 10% 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.
9. FOREIGN SECURITIES. The Portfolio may not invest more than 10%
of the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
10. OIL AND GAS PROGRAMS. The Portfolio may not invest in
participations or other direct interests in oil, gas, or other mineral leases or
exploration or development programs, but the Portfolio may purchase securities
of companies that own interests in any of the foregoing.
11. REAL ESTATE. The Portfolio may not invest in partnership or
similar interests in real estate limited partnerships.
12. WARRANTS. The Portfolio does not intend to invest in warrants
(but may hold warrants obtained in units or attached to securities).
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<PAGE>
JANET W. PRINDLE, PORTFOLIO MANAGER OF THE PORTFOLIO
How does Janet Prindle manage the Portfolio? "We select
securities through a two-phase detection process. The first is financial. We
analyze a universe of companies according to N&B Management's value-oriented
philosophy and look for stocks which are undervalued for any number of reasons.
We focus on financial fundamentals including balance sheet ratios and cash flow
analysis, and we meet with company management in an effort to understand how
those unrecognized values might be realized in the market.
"The second part of the process is social screening. Our social
research is based on the same kind of philosophy that governs our financial
approach: we believe that first-hand knowledge and experience are our most
important tools. Utilizing a database, we do careful, in-depth tracking, and we
analyze a large number of companies on some eighty issues in six broad social
categories. We use a wide variety of sources to determine company practices and
policies in these areas, and we analyze performance in light of our knowledge of
the issues and of the best practices in each industry.
"We understand that, for many issues and in many industries,
absolute standards are elusive and often counterproductive. Thus, in addition to
quantitative measurements, we place value on such indicators as management
commitment, progress, direction, and industry leadership."
AN INTERVIEW WITH JANET PRINDLE
Q: First things first. How do you begin your stock
selection process?
A: Our first question is always: On financial grounds
alone, is a company a smart investment? For a company's stock to
meet our financial test, it must pass a number of hurdles.
We look for bargains, just like the portfolio managers of the
other portfolios managed by N&B Management. More specifically, we search for
companies that we believe have terrific products, excellent customer service,
and solid balance sheets -- but because they may have missed quarterly earnings
expectations by a few pennies, because their sectors are currently out of favor,
because Wall Street overreacted to a temporary setback, or because the company's
merits aren't widely known, their stocks are selling at a discount.
While we look at the stock's fundamentals carefully, that's not
all we examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger & Berman each year, and I'm also frequently on the
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<PAGE>
road visiting dozens of corporations. From the Fund's inception, we've met with
representatives of every company we own.
When I'm face to face with a CEO, I'm searching for answers to
two crucial questions: "Does the company have a vision of where it wants to go?"
and "Can the management team make it happen?" I've analyzed companies for over
three decades, and I always look for companies that have both clear strategies
and management talent.
Q: When you evaluate a company's balance sheet, what
matters the most to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending. Or
increase its dividend payments.
When a company generates lots of excess cash flow, it has growth
capital at its disposal. It can invest for higher profits down the line and
improve shareholder value. Determining exactly HOW a company intends to spend
its excess cash is an entirely different matter -- and that's where the
information learned in our company meetings comes in. Still, you've got to have
the extra cash in the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet
and its management. After a company passes your financial test,
what do you do next?
A: After we're convinced of a company's merits on
financial grounds alone, we review its record as a corporate
citizen. In particular, we look for evidence of leadership in
three key areas: concern for the environment, workplace diversity,
and enlightened employment practices.
It should be clear that our social screening always takes place
after we search far and wide for what we believe are the best investment
opportunities available. This is a crucial point, and I'll use an analogy to
explain it. Let's assume you're looking to fill a vital position in your
company. What you'd pay attention to first is the candidate's competence: Can he
or she do the job? So after interviewing a number of candidates, you'd narrow
your list to those that are highly qualified. To choose from this smaller group,
you might look at the candidate's personality: Can he or she get along with
everyone in your group?
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Obviously, you wouldn't hire an unqualified person simply because
he or she is likable. What you'd probably do is give the job to a highly
qualified person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts.
How do we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of
looking for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to the Fund?
A: Our shareholders are looking to invest for the future in more
ways than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship
between business and society, socially responsive investing ("SRI") is a
mechanism for assuring that investors' social values are reflected in their
investment decisions. As such, SRI is a direct descendent of the successful
effort begun in the early 1970's to encourage companies to divest their South
African operations and subscribe to the Sullivan Principles.
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Today, a growing number of individuals and institutions are applying similar
strategies to a broad range of problems.
Although there are many strategies available to the socially
responsive investor, including proxy activism, below-market loans to community
projects, and venture capital, the SRI strategies used by the Portfolio
generally fall into two categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to
avoid holding securities of companies whose products or policies are seen as
being at odds with the social good. The most common exclusions historically have
involved tobacco companies and weapons manufacturers.
LEADERSHIP INVESTING. A growing number of investors actively look
for companies with progressive programs that are exemplary or companies which
make it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have
surprised Adam Smith, who was, first and foremost, a moral philosopher. THE
WEALTH OF NATIONS is firmly rooted in the Enlightenment conviction that the
purpose of capital is the social good and the related belief that idle capital
is both wasteful and unethical. But, what very likely would have surprised Smith
is the sheer complexity of the social issues we face today and the diversity of
our attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger & Berman, LLC ("Neuberger & Berman"), the Portfolio's
sub-adviser, maintains a database of information about the social impact of the
companies it follows. N&B Management uses the database to evaluate social issues
after it deems a stock acceptable from a financial standpoint for acquisition by
the Portfolio. The aim of the database is to be as comprehensive as possible,
given that much of the information concerning corporate responsibility comes
from subjective sources. Information for the database is gathered by Neuberger &
Berman in many categories and then analyzed by N&B Management in the following
six categories of corporate responsibility:
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WORKPLACE DIVERSITY AND EMPLOYMENT. N&B Management looks for
companies that show leadership in areas such as employee training and promotion
policies and benefits, such as flextime, generous profit sharing, and parental
leave. N&B Management looks for active programs to promote women and minorities
and takes into account their representation among the officers of an issuer and
members of its board of directors. As a basis for exclusion, N&B Management
looks for Equal Employment Opportunity Act infractions and Occupational Safety
and Health Act violations; examines each case in terms of severity, frequency,
and time elapsed since the incident; and considers actions taken by the company
since the violation. N&B Management also monitors companies' progress and
attitudes toward these issues.
ENVIRONMENT. A company's impact on the environment depends
largely on the industry. Therefore, N&B Management examines a company's
environmental record vis-a-vis those of its peers in the industry. All companies
operating in an industry with inherently high environmental risks are likely to
have had problems in such areas as toxic chemical emissions, federal and state
fines, and Superfund sites. For these companies, N&B Management examines their
problems in terms of severity, frequency, and elapsed time. N&B Management then
balances the record against whatever leadership the company may have
demonstrated in terms of environmental policies, procedures, and practices. N&B
Management defines an environmental leadership company as one that puts into
place strong affirmative programs to minimize emissions, promote safety, reduce
waste at the source, insure energy conservation, protect natural resources, and
incorporate recycling into its processes and products. N&B Management looks for
the commitment and active involvement of senior management in all these areas.
Several major manufacturers which still produce substantial amounts of pollution
are among the leaders in developing outstanding waste source reduction and
remediation programs.
PRODUCT. N&B Management considers company announcements, press
reports, and public interest publications relating to the health, safety,
quality, labeling, advertising, and promotion of both consumer and industrial
products. N&B Management takes note of companies with a strong commitment to
quality and with marketing practices which are ethical and consumer-friendly.
N&B Management pays particular attention to companies whose products and
services promote progressive solutions to social problems.
PUBLIC HEALTH. N&B Management measures the participation of
companies in such industries and markets as alcohol, tobacco, gambling and
nuclear power. N&B Management also considers the impact of products and
marketing activities related to those products on nutritional and other health
concerns, both domestically and in foreign markets.
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WEAPONS. N&B Management keeps track of domestic military sales
and, whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. N&B Management gathers information about a
company's participation in community affairs, its policies with respect to
charitable contributions, and its support of education and the arts. N&B
Management looks for companies with a focus, dealing with issues not just by
making financial contributions, but also by asking the questions: What can we do
to help? What do we have to offer? Volunteerism, high- school mentoring
programs, scholarships and grants, and in-kind donations to specific groups are
just a few ways that companies have responded to these questions.
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by N&B Management from a financial
standpoint are analyzed using Neuberger & Berman's database. The companies are
then evaluated by the portfolio managers to determine if the companies'
policies, practices, products, and services withstand scrutiny in the following
major areas of concern: the environment and workplace diversity and employment.
Companies are then further evaluated to determine their track record in issues
and areas of concern such as public health, weapons, product, and corporate
citizenship.
The issues and areas of concern that are tracked lend themselves
to objective analysis in varying degrees. Few, however, can be resolved entirely
on the basis of scientifically demonstrable facts. Moreover, a substantial
amount of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend upon Neuberger & Berman's ability to tap a wide variety of
sources and on the experience and judgment of the people at N&B Management who
interpret the information.
In applying the information in the database to stock selection
for the Portfolio, N&B Management considers several factors. N&B Management
examines the severity and frequency of various infractions, as well as the time
elapsed since their occurrence. N&B Management also takes into account any
remedial action which has been taken by the company relating to these
infractions. N&B Management notes any quality innovations made by the company in
its effort to create positive change and looks at the company's overall approach
to social issues.
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ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others.
It may not buy all of the types of securities or use all of the investment
techniques that are described.
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. Repurchase
agreements with a maturity of more than seven days are considered to be illiquid
securities. The Portfolio may not enter into such a repurchase agreement if, as
a result, more than 10% 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. In order to realize income, 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 N&B 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 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. N&B 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.
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
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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. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradeable in
their principal market are not considered to be restricted. 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. To the extent
restricted securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 10% limit on investments in illiquid
securities. Restricted securities for which no market exists are priced by a
method that the Portfolio Trustees believe accurately reflects fair value.
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; these 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. 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.
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 depo- sit ("CDs"), bankers' acceptances and
commercial paper. These investments are subject to the Portfolio's quality
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standards. 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) 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, (2)
nationalization, expropriation, or confiscatory taxation, and (3) adverse
changes in investment or exchange control regulations (which could prevent cash
from being brought back to the United States). Additionally, dividends and
interest payable on foreign securities may be subject to foreign taxes,
including taxes withheld from those payments. Commissions on foreign securities
exchanges are often at fixed rates and are generally higher than negotiated
commissions on U.S. exchanges, although the Portfolio endeavors to achieve the
most favorable net results on portfolio transactions. The Portfolio may invest
only in securities of issuers in countries whose governments are considered
stable by N&B Management.
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
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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.
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 10% 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.
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 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 does not engage in transactions in
futures or options on futures for speculation. 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.
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
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time. A "purchase" of a futures contract (or a "long" futures position) entails
the assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are
traded on exchanges that have been designated as "contract markets" by the
Commodity Futures Trading Commission ("CFTC"); futures transactions must be
executed through a futures commission merchant that is a member of the relevant
contract market. The 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, without the parties having to make or take delivery of the
assets. 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.
"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
daily net asset value ("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. 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
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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.
Although the Portfolio believes that the use of futures contracts
will benefit it, if N&B Management's judgment about the general direction of the
markets is incorrect, the Portfolio's overall return would be lower than if it
had not entered into any such contracts. The prices of futures contracts are
volatile and are influenced by, among other things, actual and anticipated
changes in interest or currency exchange rates, which in turn are affected by
fiscal and monetary policies and by national and international political and
economic events. At best, the correlation between changes in prices of futures
contracts and of the securities and currencies being hedged can be only
approximate. Decisions regarding whether, when, and how to hedge involve skill
and judgment. Even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest rate or currency exchange rate
trends or lack of correlation between the futures markets and the securities
markets. 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.
PUT AND CALL OPTIONS. The Portfolio may write and purchase put
and call options on securities. Generally, the purpose of writing and purchasing
these options is 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 NAVs. The
Portfolio may also write covered call options to earn premium income. Portfolio
securities on which call and put options may be written and purchased by the
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Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective.
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 of the option 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.
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. The Portfolio intends to write only
"covered" call options on securities it owns. So long as the obligation of the
call option continues, the Portfolio may be assigned an exercise notice,
requiring it to deliver the underlying security against payment of the exercise
price. The Portfolio may be obligated to deliver securities underlying a call
option at less than the market price, thereby giving up any additional gain on
the 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. The Portfolio would purchase a call option in order to protect
against an increase in the price of securities it intends to purchase or to
offset a previously written call option.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk (in contrast to the
writing of "naked" or uncovered call options, which the Portfolio will not do)
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. 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 call or put option
that the Portfolio has written expires unexercised, the Portfolio will realize a
gain in the amount of the premium; however, in the case of a call option, that
gain may be offset by a decline in the market value of the underlying security
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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.
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. The obligation under any option terminates upon expiration of the
option or, at an earlier time, when the writer 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, the Portfolio
will lose the entire amount of the premium paid.
Options are traded both on 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 sells (or purchases) an OTC
option, it generally will be able to "close out" the option prior to its
expiration only by entering into a closing transaction with the dealer to whom
(or from whom) the Portfolio originally sold (or purchased) the option. There
can be no assurance that the Portfolio would be able to liquidate an OTC option
at any time prior to expiration. Unless 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. N&B Management monitors the
creditworthiness of dealers with which the Portfolio may engage in OTC options
transactions, and limits the Portfolio's counter- parties in such transactions
to dealers with a net worth of at least $20 million as reported in their latest
financial statements.
The assets used as cover 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.
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
- 18 -
<PAGE>
on the applicable exchange, less (or plus) a commission. 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, which is
the last sales price on the day the option is being valued or, in the absence of
any trades thereof on that day, the mean between the closing bid and asked
prices.
Closing transactions are effected in order to realize a profit on
an outstanding option, to prevent an underlying security from being called, or
to permit the sale or the put of the underlying security. Furthermore, effecting
a closing transaction permits the Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or both.
If the Portfolio desires to sell a security on which it has written a call
option, it will seek to effect a closing transaction prior to, or concurrently
with, the sale of the 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 (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than the
premium received from writing the call or put option. Because increases in the
market price of a call option generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase of a call option
is 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.
The Portfolio pays brokerage commissions in connection with
purchasing or writing options, including those used to close out existing
positions. These brokerage commissions normally are higher than those applicable
to purchases and sales of portfolio securities. From time to time, the Portfolio
may purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering the security from
its portfolio. In those cases, additional brokerage commissions are incurred.
- 19 -
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date at a
fixed price ("forward contracts") in amounts not exceeding 5% of its net assets.
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 that are held or intended to be acquired by it. 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.
N&B 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 and which is available on
more advantageous terms. However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and, if N&B 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. Because forward contracts are
not traded on an exchange, the assets used to cover such contracts may be
illiquid.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and
purchase covered call and put options on foreign currencies in amounts not
exceeding 5% of its net assets. The Portfolio would engage in such transactions
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. As with other types of options, however, writing an option on
foreign currency constitutes only a partial hedge, up to the amount of the
premium received. The Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
risks of currency options are similar to the risks of other options, as
- 20 -
<PAGE>
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.
REGULATORY LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES,
OPTIONS ON SECURITIES, FORWARD CONTRACTS, AND OPTIONS ON FOREIGN CURRENCIES
(COLLECTIVELY, "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.
In addition, (1) the aggregate premiums paid by the Portfolio on
all options (both exchange-traded and OTC) held by it at any time may not exceed
20% of its net assets, and (2) the aggregate margin deposits required on all
exchange-traded futures contracts and related options held by the Portfolio at
any time may not exceed 5% of its total assets. The Portfolio does not currently
intend to purchase puts, calls, straddles, spreads, or any combination thereof
if, by reason of such purchase, the value of its aggregate investment in such
instruments will exceed 5% of its total assets.
COVER FOR HEDGING INSTRUMENTS. 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. 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.
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 these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
- 21 -
<PAGE>
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.
N&B 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. N&B Management
intends to reduce the risk that the Portfolio will be unable to close out
Hedging Instruments by entering into such transactions only if N&B Management
believes there will be an active and liquid secondary market. Hedging
Instruments used by the Portfolio are generally considered "derivatives." 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."
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 corporate bonds and
debentures receiving one of the four highest ratings from Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally
recognized statistical rating organization ("NRSRO") or, if not rated by any
NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable
Unrated Securities").
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"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
- 22 -
<PAGE>
securities, which react primarily to movements in the general level of interest
rates. 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.
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 only in commercial paper receiving the
highest rating from S&P (A-1) or Moody's (P-1) or deemed by N&B Management to be
of comparable quality.
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, N&B
Management may in certain cases determine that such paper is liquid, pursuant to
guidelines established by the Portfolio Trustees.
ZERO COUPON SECURITIES. The Portfolio may invest up to 5% of its
net assets 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") is taken into account 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 original issue discount)
to the Plan 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 similar maturity and
credit quality.
- 23 -
<PAGE>
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
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 yields 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.
Convertible debt securities are subject to the Portfolio's investment policies
and limitations concerning fixed income securities.
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 objective.
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.
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.
- 24 -
<PAGE>
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An
average annual compounded rate of return ("T") may be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of time ("n") according to the
formula:
P(1+T)(SUPERSCRIPT)n = ERV
Average annual total return smooths out year-to-year variations
in performance and, in that respect, differs from actual year-to-year results.
The average annual total returns for the Fund for the one-year
period ended August 31, 1996, and for the period from March 14, 1994
(commencement of operations) through August 31, 1996 were +21.27% and +16.99%,
respectively. Had N&B Management not reimbursed certain expenses, total return
would have been lower.
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, Dow Jones Industrial Average ("DJIA"), Wilshire 1750 Index,
Nasdaq Composite 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
- 25 -
<PAGE>
market value from $40 million to $2.3 billion, with an average of $451
million. The S&P 400 Index measures mid-sized companies that have an
average market capitalization of $1.6 billion. 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.
The Fund's performance may also be compared to various socially
responsive indices. These include The Domini Social Index and the indices
developed by the quantitative department of Prudential Securities, such as that
department's Large and Mid-Cap portfolio indices for various breakdowns ("Sin"
Stock Free, Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Fund's performance, its total return 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. This information may include the Portfolio's portfolio
diversification by asset type or by the social characteristics of companies
owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
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.)
From time to time the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Fund's Advertisements. This
philosophy is described in further detail in "The Art of Investing: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
- 26 -
<PAGE>
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 N&B Management and Neuberger
& Berman.
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
- ---------- --------------- --------------------------
<S> <C> <C>
Faith Colish (61) Trustee of each Attorney at Law, Faith
63 Wall Street Trust Colish, A Professional
24th Floor Corporation.
New York, NY 10005
Donald M. Cox (74) Trustee of each Retired. Formerly Senior
435 East 52nd Trust Vice President and
Street Director of Exxon
New York, NY 10022 Corporation; Director of
Emigrant Savings Bank.
Stanley Egener* Chairman of the Principal of Neuberger &
(62) Board, Chief Berman; President and
Executive Director of N&B
Officer, and Management; Chairman of
Trustee of each the Board, Chief Executive
Trust Officer, and Trustee of
eight other mutual
funds for which N&B
Management acts as
investment manager or
administrator.
- 27 -
<PAGE>
Alan R. Gruber (69) Trustee of each Chairman and Chief
Orion Capital Trust Executive Officer of Orion
Corporation Capital Corporation
600 Fifth Avenue (property and casualty
24th Floor insurance); Director of
New York, NY 10020 Trenwick Group, Inc.
(property and casualty
reinsurance); Chairman of
the Board and Director of
Guaranty National
Corporation (property and
casualty insurance);
formerly Director of
Ketema, Inc. (diversified
manufacturer).
Howard A. Mileaf Trustee of each Vice President and Special
(59) Trust Counsel to WHX Corporation
WHX Corporation (holding company) since
110 East 59th 1992; formerly Vice
Street President and General
30th Floor Counsel of Keene
New York, NY 10022 Corporation (manufacturer
of industrial products);
Director of Kevlin
Corporation (manufacturer
of microwave and other
products).
Edward I. O'Brien* Trustee of each Until 1993, President of
(68) Trust the Securities Industry
12 Woods Lane Association ("SIA")
Scarsdale, NY (securities industry's
10583 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, Trustee of each Retired. Formerly
Jr. (68) Trust President of SOBRO (South
183 Ledge Drive Bronx Overall Economic
Torrington, CT Development Corporation).
06790
- 28 -
<PAGE>
John P. Rosenthal Trustee of each Senior Vice President of
(63) Trust Burnham Securities Inc. (a
Burnham Securities registered broker-dealer)
Inc. since 1991; formerly
Burnham Asset Partner of Silberberg,
Management Corp. Rosenthal & Co. (member of
1325 Avenue of the National Association of
Americas Securities Dealers, Inc.);
17th Floor Director, Cancer Treatment
New York, NY 10019 Holdings, Inc.
Cornelius T. Ryan Trustee of each General Partner of Oxford
(65) Trust Partners and Oxford
Oxford Bioscience Bioscience Partners
Partners (venture capital
315 Post Road West partnerships) and
Westport, CT 06880 President of Oxford
Venture Corporation;
Director of Capital
Cash Management Trust
(money market fund)
and Prime Cash Fund.
Gustave H. Shubert Trustee of each Senior Fellow/Corporate
(67) Trust Advisor and Advisory
13838 Sunset Trustee of Rand (a non-
Boulevard profit public interest
Pacific Palisades, research institution)
CA 90272 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.
- 29 -
<PAGE>
Lawrence Zicklin* President and Principal of Neuberger &
(60) Trustee of each Berman; Director of N&B
Trust Management; President
and/or Trustee of
five other mutual
funds for which N&B
Management acts as
investment manager or
administrator.
Daniel J. Sullivan Vice President Senior Vice President of
(56) of each Trust N&B Management since 1992;
prior thereto, Vice
President of N&B
Management; Vice
President of eight
other mutual funds
for which N&B
Management acts as
investment manager or
administrator.
Michael J. Weiner Vice President Senior Vice President of
(49) and Principal N&B Management since 1992;
Financial Treasurer of N&B
Officer of each Management from 1992 to
Trust 1996; prior thereto, Vice
President and Treasurer of
N&B Management and
Treasurer of certain
mutual funds for which N&B
Management acted as
investment adviser; Vice
President and Principal
Financial Officer of eight
other mutual funds for
which N&B Management acts
as investment manager or
administrator.
Claudia A. Brandon Secretary of Vice President of N&B
(40) each Trust Management; Secretary of
eight other mutual
funds for which N&B
Management acts as
investment manager or
administrator.
- 30 -
<PAGE>
Richard Russell Treasurer and Vice President of N&B
(49) Principal Management since 1993;
Accounting prior thereto, Assistant
Officer of each Vice President of N&B
Trust Management; Treasurer and
Principal Accounting
Officer of eight
other mutual funds
for which N&B
Management acts as
investment manager or
administrator.
Stacy Cooper- Assistant Assistant Vice President
Shugrue (33) Secretary of of N&B Management since
each Trust 1993; prior thereto,
employee of N&B
Management; Assistant
Secretary of eight other
mutual funds for which N&B
Management acts as
investment manager or
administrator.
C. Carl Randolph Assistant Principal of Neuberger &
(59) Secretary of Berman since 1992; prior
each Trust thereto, employee of
Neuberger & Berman;
Assistant Secretary of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Barbara DiGiorgio Assistant Assistant Vice President
(37) Treasurer of of N&B Management since
each Trust 1993; prior thereto,
employee of N&B
Management; Assistant
Treasurer of eight other
mutual funds for which N&B
Management acts as
investment manager or
administrator since 1996.
- 31 -
<PAGE>
Celeste Wischerth Assistant Assistant Vice President
(35) Treasurer of of N&B Management since
each Trust 1994; prior thereto,
employee of N&B
Management; Assistant
Treasurer of eight other
mutual funds for which N&B
Management acts as
investment manager or
administrator since 1996.
</TABLE>
- --------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of N&B Management and
principals of Neuberger & Berman. Mr. O'Brien is an interested person 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 N&B 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
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
- 32 -
<PAGE>
For the fiscal year ended August 31, 1996, the Fund and Portfolio
paid and accrued fees and expenses of $11,231 to those Fund and Portfolio
Trustees who were not affiliated with N&B Management or Neuberger & Berman.
The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the Neuberger &
Berman Funds(R) has any retirement plan for its trustees or officers.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/96
Total Compensation
Aggregate from Trusts in the
Compensation Neuberger & Berman
Name and Position with from the Fund Complex Paid
the Trust Trust To Trustees
- ---------------------- ------------- --------------------
<S> <C> <C>
Faith Colish $ 2,320 $ 38,500
Trustee (5 other investment
companies)
Donald M. Cox $ 2,320 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive Officer, companies)
and Trustee
Alan R. Gruber $ 2,143 $ 28,000
Trustee (3 other investment
companies)
Howard A. Mileaf $ 2,350 $ 37,000
Trustee (4 other investment
companies)
Edward I. O'Brien $ 2,409 $ 31,500
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 2,587 $ 40,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,320 $ 36,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,350 $ 30,500
Trustee (3 other investment
companies)
- 33 -
<PAGE>
Gustave H. Shubert $ 2,350 $ 30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
</TABLE>
At November 20, 1996, 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. N&B Management
serves as the investment manager to the Portfolio pursuant to a management
agreement with Managers Trust, on behalf of the Portfolio, dated as of August 2,
1993 ("Management Agreement"). The Management Agreement was approved by the
holders of the interests in the Portfolio on March 9, 1994. The Portfolio was
authorized to become subject to the Management Agreement by vote of the
Portfolio Trustees on October 20, 1993, and became subject to it on March 14,
1994.
The Management Agreement provides, in substance, that N&B
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 N&B Management to effect
securities transactions on behalf of the Portfolio through associated persons of
N&B Management. The Management Agreement also specifically permits N&B
Management to compensate, through higher commissions, brokers and dealers who
provide investment research and analysis to the Portfolio, although N&B
Management has no current plans to pay a material amount of such compensation.
N&B Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts. See "Trustees and Officers." The Portfolio pays N&B
- 34 -
<PAGE>
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
N&B Management provides similar facilities, services, and
personnel to the Fund pursuant to an administration agreement with the Trust,
dated August 3, 1993 ("Administration Agreement"). The Fund was authorized to
become subject to the Administration Agreement by vote of the Fund Trustees on
October 20, 1993, and became subject to it on March 14, 1994. For such
administrative services, the Fund pays N&B Management a fee based on the Fund's
average daily net assets, as described in the Prospectus.
During the fiscal years ended August 31, 1996 and 1995 and the
period from March 14, 1994 (commencement of operations) to August 31, 1994, the
Fund accrued management and administration fees of $660,441, $440,649 and
$179,578, respectively. During those same periods, N&B Management reimbursed the
Fund for $224,030, $186,559 and $70,891, respectively, of expenses.
The Management Agreement continues with respect to the Portfolio
for a period of two years after the date the Portfolio became subject thereto.
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 N&B 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 with respect to the Fund for a period of two years after the
date the Fund became subject thereto. 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 N&B 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.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by N&B Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by N&B Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
N&B Management retains Neuberger & Berman, 605 Third Avenue, New
York, NY 10158-3698, as a sub-adviser with respect to the Portfolio pursuant to
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<PAGE>
a sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolio on March 9, 1994. The Portfolio was authorized to become subject to
the Sub-Advisory Agreement by vote of the Portfolio Trustees on October 20,
1993, and became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B 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 approximately
fourteen 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 N&B Management. The Sub-Advisory Agreement
provides that N&B 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 N&B Management.
The Sub-Advisory Agreement continues with respect to the
Portfolio for a period of two years after the Portfolio became subject thereto
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 N&B 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 N&B
Management employ experienced professionals that work in a competitive
environment.
INVESTMENT COMPANIES MANAGED
N&B Management currently serves as investment manager of the
following investment companies. As of September 30, 1996, these companies, along
with three other investment companies advised by Neuberger & Berman, had
aggregate net assets of approximately $13.9 billion, as shown in the following
list:
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<PAGE>
<TABLE>
<CAPTION>
Approximate
Net Assets at
Name September 30, 1996
- ---- ------------------
<S> <C>
Neuberger & Berman Cash Reserves Portfolio........................................$527,447,493
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio.....................................$319,705,018
(investment portfolio for Neuberger & Berman Government Money
Fund)
Neuberger & Berman Limited Maturity Bond Portfolio................................$268,892,148
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio......................................$141,116,062
(investment portfolio for Neuberger & Berman Municipal Money
Fund)
Neuberger & Berman Municipal Securities Portfolio..................................$38,416,801
(investment portfolio for Neuberger & Berman Municipal
Securities Trust)
Neuberger & Berman New York Insured Intermediate
Portfolio .....................................................................$9,575,489
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Ultra Short Bond Portfolio......................................$96,306,004
(investment portfolio for Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Focus Portfolio..............................................$1,174,138,341
(investment portfolio for Neuberger & Berman Focus Fund,
Neuberger & Berman Focus Trust and Neuberger & Berman Focus
Assets)
Neuberger & Berman Genesis Portfolio..............................................$287,653,131
(investment portfolio for Neuberger & Berman Genesis Fund and
Neuberger & Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio......................................... $6,513,577,557
(investment portfolio for Neuberger & Berman Guardian Fund,
Neuberger & Berman Guardian Trust and Neuberger & Berman
Guardian Assets)
Neuberger & Berman International Portfolio.........................................$59,969,278
(investment portfolio for Neuberger & Berman International Fund)
- 37 -
<PAGE>
Neuberger & Berman Manhattan Portfolio............................................$592,681,290
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust and Neuberger & Berman
Manhattan Assets)
Neuberger & Berman Partners Portfolio...........................................$2,112,475,324
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust and Neuberger & Berman
Partners Assets)
Neuberger & Berman Socially Responsive
Portfolio ..................................................................$167,005,429
(investment portfolio for Neuberger & Berman Socially Responsive
Fund and Neuberger & Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust
(six series)...............................................................$1,468,727,224
</TABLE>
In addition, Neuberger & Berman serves as investment adviser to
three investment companies, Plan Investment Fund, Inc., AHA Investment Fund,
Inc., and AHA Full Maturity, with assets of $61,738,329, $77,498,236, and
$26,954,887, respectively, at September 30, 1996.
The investment decisions concerning the Portfolio and the other
mutual funds managed by N&B Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolio. Even where the investment objectives are similar, however, the
methods used by the Other N&B Funds and the Portfolio to achieve their
objectives may differ. The investment results achieved by all of the mutual
funds managed by N&B 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 N&B 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
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<PAGE>
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with N&B 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 N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have
offices at the same address as N&B Management, are Richard A. Cantor, Chairman
of the Board and director; Stanley Egener, Presi- dent and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; William Cunningham, Vice President; Clara Del
Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce Haboucha,
Vice President; Michael Lamberti, Vice President; Josephine P. Mahaney, Vice
President; Lawrence Marx III, Vice President; Ellen Metzger, Vice President and
Secretary; Janet W. Prindle, Vice President; Felix Rovelli, Vice President;
Richard Russell, Vice President; Kent C. Simons, Vice President; Frederick B.
Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice President of
Marketing; Robert Conti, Treasurer; Stacy Cooper-Shugrue, Assistant Vice
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Roberta D'Orio, Assistant Vice President; Joseph G. Galli,
Assistant Vice President; Robert I. Gendelman, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Paul Metzger, Assistant
Vice President; Joseph S. Quirk, Assistant Vice President; Kevin L. Risen,
Assistant Vice President; Susan Switzer, Assistant Vice President; Celeste
Wischerth, Assistant Vice President; KimMarie Zamot, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Giuliano,
Lainoff, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Prindle and Vale
are principals of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper- Shugrue, DiGiorgio, and
- 39 -
<PAGE>
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to the
Plan. 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 to the Plan without sales commission
or other compensation and bears all advertising and promotion expenses incurred
in the sale of the Fund's shares.
The Trust, on behalf of the Fund, and the Distributor are parties
to a Distribution Agreement that continues until August 3, 1997. 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
Agreement.
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 New York Stock Exchange ("NYSE")
is closed (other than weekend and holiday closings), (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, the
- 40 -
<PAGE>
Plan may withdraw its offers of redemption, or it will receive payment at the
NAV per share in effect at the close of business on the first day the NYSE is
open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
The Fund reserves the right, under certain conditions, to honor
any request for redemption (or a combination of requests from the Plan in any
90-day period) exceeding $250,000 or 1% of the net assets of the Fund, whichever
is less, by making payment in whole or in part by securities valued as described
under "Share Prices and Net Asset Value" in the Prospectus. If payment is made
in securities, the Plan 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 interest of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to the Plan amounts equal to substantially
all of its share of any net investment income (after deducting expenses incurred
directly by the Fund), any net realized capital gains (both long-term and
short-term), and any net realized gains from foreign currency transactions
earned or realized by the Portfolio. The Fund calculates its net investment
income and NAV per share as of the close of regular trading on the NYSE on each
Business Day (usually 4:00 p.m. Eastern time).
The 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. 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 and until the Plan elects to receive them
in cash ("cash election"). A cash election remains in effect until the Plan
notifies the Fund in writing to discontinue the election.
- 41 -
<PAGE>
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the
Code, the Fund must distribute to the Plan 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"); (2) the Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months -- Hedging Instruments (other than those on foreign
currencies), or foreign currencies (or Hedging Instruments thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short- Short Limitation"); and (3)
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.
Certain funds that invest in portfolios managed by N&B 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, N&B 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.
- 42 -
<PAGE>
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 portfolios managed by N&B Management, including the other
portfolios of Managers Trust, have received rulings from the Service to the
effect that, among other things, each such portfolio will be treated as a
separate partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as precedent by
the Portfolio, N&B Management believes the 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
qualifies 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, (3) loss will be recognized if
a liquidation distribution consists solely of cash and/or unrealized
receivables, and (4) gain or loss may be recognized on a distribution to the
Fund of property other than money. The Fund's basis for its interest in the
Portfolio generally equals the amount of cash and the basis of any property the
Fund invests in the Portfolio, increased by the Fund's share of the Portfolio's
net income and capital gains and decreased by (1) the amount of cash and the
basis of any property the Portfolio distributes to the Fund and (2) the Fund's
share of the Portfolio's losses.
Dividends and interest received by the Portfolio may be subject
to income, withholding, or other taxes imposed by foreign countries and U.S.
- 43 -
<PAGE>
possessions that would reduce the yield 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 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 the Plan. 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 the Plan.
If the Portfolio invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," 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 qualified
electing fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the
Fund, would be entitled to elect to mark to market their stock in certain PFICs.
Marking to market, in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
The Portfolio's use of hedging strategies, such as writing
(selling) and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the 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
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<PAGE>
business of investing in securities or foreign currencies, will qualify as
permissible income for the Fund under the Income Requirement. However, income
from the disposition by the Portfolio of Hedging Instruments (other than those
on foreign currencies) will be subject to the Short-Short Limitation for the
Fund if they are held for less than three months. Income from the disposition of
foreign currencies, and Hedging Instruments on foreign currencies, that are not
directly related to the Portfolio's principal business of investing in
securities (or options and futures with respect thereto) also will be subject to
the Short-Short Limitation for the Fund if they are held for less than three
months.
If the Portfolio satisfies certain requirements, any increase in
value of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging position
during the period of the hedge for purposes of determining whether the Fund
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. The Portfolio will consider whether it should seek to satisfy those
requirements to enable the Fund to qualify for this treatment for hedging
transactions. To the extent the Portfolio does not do so, it may be forced to
defer the closing out of certain Hedging Instruments or foreign currency
positions beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
Exchange-traded futures contracts and listed options thereon
("Section 1256 contracts") are required to be marked to market (that is, treated
as having been sold at market value) at the end of the Portfolio's taxable year.
Sixty percent of any 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.
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 account the
OID that accrues on the securities during the taxable year, even if it receives
no corresponding payment on the securities during the year. Because 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
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<PAGE>
those sales, which would increase or decrease the Fund's investment company
taxable income and/or net capital gain. In addition, any such gains may be
realized on the disposition of securities held for less than three months.
Because of the Short-Short Limitation, any such gains would reduce the
Portfolio's ability to sell other securities, or certain Hedging Instruments or
foreign currency positions, held for less than three months that it might wish
to sell in the ordinary course of its portfolio management.
PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as the Portfolio's principal broker in
the purchase and sale of its portfolio securities and in connection with the
purchase and sale of options on its securities.
During the period from March 14, 1994 (commencement of
operations) through August 31, 1994, and the fiscal years ended August 31, 1995
and 1996, the Portfolio paid brokerage commissions of $46,374, $138,378, and
$208,834, respectively, of which $46,050, $95,964, and $124,879, respectively,
were paid to Neuberger & Berman. Transactions in which the Portfolio used
Neuberger & Berman as broker comprised 59.67% of the aggregate dollar amount of
transactions involving the payment of commissions, and 59.80% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1996. 90.09% of the $83,955 paid to other brokers by the Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $38,877,483) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1996, the
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act) ("Regular B/Ds"): None; at that date, the
Portfolio held the securities of its Regular B/Ds with an aggregate value as
follows: None.
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. Among the conditions of the order, securities loans made by
the Portfolio to Neuberger & Berman must be fully secured by cash collateral.
The portion of the income on cash collateral which may be shared with Neuberger
& Berman is 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 others, Neuberger & Berman is required to
pay the Portfolio, on a quarterly basis, certain "excess 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
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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 the
Portfolio's expenses exceed its income in any securities loan transaction with
Neuberger & Berman, Neuberger & Berman must reimburse the Portfolio for such
loss.
During the fiscal years ended August 31, 1996 and 1995, and the
period March 14, 1994 (commencement of operations) to August 31, 1994, the
Portfolio earned no interest income from the collateralization of securities
loans.
The Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B 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.
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 N&B Management (the Portfolio's investment manager and
an affiliate of the broker), 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
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1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. The Portfolio Trustees have expressly authorized
Neuberger & Berman to retain such compensation, and Neuberger & Berman complies
with the reporting requirements of Section 11(a).
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 to be paid to
Neuberger & Berman must, in N&B 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 interest 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
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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 simultaneously 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 continue to execute a portion
of its transactions through brokers other than Neuberger & Berman. In selecting
those brokers, N&B 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 those brokers.
A committee comprised of officers of N&B Management and
principals of Neuberger & Berman who are portfolio managers of the Portfolio
and/or Other N&B Funds (collectively, "N&B 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 N&B
Funds and the Managed Accounts that are not effected by Neuberger & Berman.
However, in any semi-annual period, brokers not on the list may be used, and the
relative amounts of brokerage commissions paid to the brokers on the list may
vary substantially from the projected rankings. These variations reflect the
following factors, among others: (1) brokers not on the list or ranking below
other brokers on the list may be selected for particular transactions because
they provide better price and/or execution, which is the primary consideration
in allocating brokerage; (2) adjustments may be required because of periodic
changes in the execution capabilities of or research provided by particular
brokers or in the execution or research needs of the N&B Funds and/or the
Managed Accounts; and (3) the aggregate amount of brokerage commissions
generated by transactions for the N&B 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 N&B 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. N&B Management believes that those research services benefit the
Portfolio by supplementing the information otherwise available to N&B
Management. That research may be used by N&B Management in servicing Other N&B
Funds and, in some cases, by Neuberger & Berman in servicing the Managed
Accounts. On the other hand, research received by N&B Management from brokers
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effecting portfolio transactions on behalf of the Other N&B Funds and by
Neuberger & Berman from brokers effecting portfolio transactions on behalf of
the Managed Accounts may be used for the Portfolio's benefit.
Janet Prindle, a Vice President of N&B Management and a principal
of Neuberger & Berman, is the person primarily responsible for making decisions
as to specific action to be taken with respect to the investment portfolio of
the Portfolio. She has full authority to take action with respect to portfolio
transactions and may or may not consult with other personnel of N&B Management
prior to taking such action.
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
accountants 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.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for
their securities and cash. State Street also serves as the Fund's transfer
agent, administering purchases, redemptions, and transfers of Fund shares and
the payment of dividends and other distributions to the Plan. All correspondence
should be mailed to the Plan, 40 Rector Street, 3rd Floor, New York, NY 10006.
In addition, State Street serves as transfer agent for the Portfolio.
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INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected Coopers & Lybrand L.L.P.,
One Post Office Square, Boston, MA 02109, as the independent accountants who
will audit their financial statements.
LEGAL COUNSEL
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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 20, 1996, the Deferred Compensation Plan of the
City of New York and Related Agencies and Instrumentalities, 40 Rector Street,
3rd Floor, New York, New York 10006, owned 100% of the outstanding shares of the
Fund; and the Fund held 77.81% of the interests in the Portfolio.
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.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Fund's Annual Report to shareholders
for the fiscal year ended August 31, 1996:
The audited financial statements of the Fund and Portfolio and
notes thereto for the fiscal year ended August 31, 1996, and the
reports of Coopers & Lybrand L.L.P., independent accountants,
with respect to such audited financial statements of the Fund and
the Portfolio.
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Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only in small
degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
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 issue.
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 considered to be as upper medium grade obligations. Factors giving
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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.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for issues
designated A-1.
MOODY'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
- Well-established access to a range of financial
markets and assured sources of alternate liquidity.
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Issuers rated PRIME-2 (or related supporting institutions), also
known as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
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Appendix B
THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER
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The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
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<TABLE>
<CAPTION>
<S> <C>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your
make sure that some of your investments, make sure that some of your
principal is kept safe, and principal is kept safe, and try to increase
try to increase your income your income as well as your capital.
as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
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Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
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One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a particular
book, the last thing to security. It is after all just a sheet of paper
fall in love with is a indicating a part ownership in a corporation
particular security." and its use is purely mercenary. If you must
love a security, stay in love with it until
it gets overvalued; then let somebody else
fall in love
[PICTURE OF ROY NEUBERGER]
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ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL INVESTING
STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
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The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR INVESTING
STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
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Both are an art, although picking stocks is a
minor art compared with painting, sculpture or
"When things look bad, I literature. I started buying art in the 30s,
become optimistic. When and in the 40s it was a daily, almost hourly
everything looks rosy, and occurrence. My inclination to buy the works of
the crowd is optimistic, I living artists comes from Van Gogh, who sold
like to be a seller." only one painting during his lifetime. He died
in poverty, only then to become a legend and
have his work sold for millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
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<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
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<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
- 9 -
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
- 10 -
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
</TABLE>
===============================================================================
- 11 -
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 10 ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
-------- ---------------------------------
(a) Financial Statements:
The audited financial statements contained in the Annual Reports
to Shareholders of the Registrant for the fiscal year ended August 31, 1996
for Neuberger & Berman Equity Trust (with respect to Neuberger & Berman
Focus Trust, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian
Trust, Neuberger & Berman Manhattan Trust, Neuberger & Berman Partners
Trust, and Neuberger & Berman NYCDC Socially Responsive Trust) and Equity
Managers Trust (with respect to Neuberger & Berman Focus Portfolio,
Neuberger & Berman Genesis Portfolio, Neuberger & Berman Guardian
Portfolio, Neuberger & Berman Manhattan Portfolio, Neuberger & Berman
Partners Portfolio, and Neuberger & Berman Socially Responsive Portfolio)
and the reports of the independent auditors/accountants are incorporated
into the Statement of Additional Information by reference.
Included in Part A of this Post-Effective Amendment:
FINANCIAL HIGHLIGHTS for Neuberger & Berman Focus Trust,
Neuberger & Berman Genesis Trust, Neuberger & Berman
Guardian Trust, Neuberger & Berman Manhattan Trust,
Neuberger & Berman Partners Trust, and the Neuberger &
Berman NYCDC Socially Responsive Trust, for the periods
indicated therein.
(b) Exhibits:
Exhibit
Number Description
------- -----------
(1) (a) Certificate of Trust. Incorporated by Reference
to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No. 0000898432-95-
000427.
C-1
<PAGE>
Exhibit
Number Description
------- -----------
(b) Trust Instrument of Neuberger & Berman Equity
Trust. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger &
Berman Equity Trust. Filed Herewith.
(2) By-laws of Neuberger & Berman Equity Trust.
Incorporated by Reference to Post-Effective No.
8 to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(3) Voting Trust Agreement. None.
(4) (a) Trust Instrument of Neuberger & Berman Equity
Trust, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(b) Bylaws of Neuberger & Berman Equity Trust,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(5) (a) (i) Management Agreement Between Equity
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated
by Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
C-2
<PAGE>
Exhibit
Number Description
------- -----------
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(b) (i) Sub-Advisory Agreement Between Neuberger
& Berman Management Incorporated and
Neuberger & Berman, LLC with Respect to
Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(ii) Series of Equity Managers Trust
Currently Subject to the Sub-Advisory
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(6) (a) Distribution Agreement Between Neuberger &
Berman Equity Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
C-3
<PAGE>
Exhibit
Number Description
------- -----------
(b) Schedule A - Series of Neuberger & Berman Equity
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger & Berman
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(b) Schedule A - Approved Foreign Banking
Institutions and Securities Depositories Under
the Custodian Contract. To Be Filed by
Amendment.
(c) Schedule of Compensation under the Custodian
Contract. Filed Herewith.
(9) (a) (i) Transfer Agency and Service Agreement
Between Neuberger & Berman Equity Trust
and State Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-
64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(ii) Agreement Between Neuberger & Berman
Equity Trust and State Street Bank and
Trust Company Adding Neuberger & Berman
NYCDC Socially Responsive Trust as a
Portfolio Governed by the Transfer
Agency Agreement. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
C-4
<PAGE>
Exhibit
Number Description
------- -----------
(iii) First Amendment to Transfer Agency and
Service Agreement between Equity Trust
and State Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-
64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(iv) Schedule of Compensation under the
Transfer Agency and Service Agreement.
Filed Herewith.
(b) (i) Administration Agreement Between
Neuberger & Berman Equity Trust and
Neuberger & Berman Management
Incorporated. Incorporated by Reference
to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-
64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(ii) Schedule A - Series of Neuberger &
Berman Equity Trust Currently Subject to
the Administration Agreement.
Incorporated by Reference to Post-
Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-
64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(iii) Schedule B - Schedule of Compensation
Under the Administration Agreement.
Incorporated by Reference to Post-
Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-
64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters. Incorporated by Reference to
Registrant's Rule 24f-2 Notice for the Fiscal Year
Ended August 31, 1996, File Nos. 2-11357 and 811-582,
Edgar Accession No. 0000898432-96-000465.
C-5
<PAGE>
Exhibit
Number Description
------- -----------
(11) (a) Consent of Ernst & Young LLP, Independent
Auditors. Filed Herewith.
(b) Consent of Coopers & Lybrand L.L.P., Independent
Accountants. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance Quotations.
Incorporated by Reference to Post-Effective Amendment
No. 4 to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(17) Financial Data Schedule. Filed Herewith.
(18) Plan Pursuant to Rule 18f-3. None
Item 25. 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 fund in which it
invests, Equity Managers Trust.)
Item 26. Number of Holders of Securities.
-------- --------------------------------
The following information is given as of October 31, 1996.
Number of
Title of Class Record Holders
-------------- --------------
Shares of beneficial interest, $0.001 par value, of:
Neuberger & Berman Focus Trust 73
Neuberger & Berman Genesis Trust 32
C-6
<PAGE>
Neuberger & Berman Guardian Trust 333
Neuberger & Berman Manhattan Trust 41
Neuberger & Berman Partners Trust 64
Neuberger & Berman NYCDC Socially Responsive Trust 3
Item 27. Indemnification.
-------- ---------------
A Delaware business trust may provide in its governing instrument
for indemnification of its officers and trustees from and against any and
all claims and demands whatsoever. Article IX, Section 2 of the Trust
Instrument provides that the Registrant shall indemnify any present or
former trustee, officer, employee or agent of the Registrant ("Covered
Person") to the fullest extent permitted by law against liability and all
expenses reasonably incurred or paid by him or her in connection with any
claim, action, suit or proceeding ("Action") in which he or she becomes
involved as a party or otherwise by virtue of his or her being or having
been a Covered Person and against amounts paid or incurred by him or her in
settlement thereof. Indemnification will not be provided to a person
adjudged by a court or other body to be liable to the Registrant or its
shareholders by reason of "willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office"
("Disabling Conduct"), or not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the Registrant.
In the event of a settlement, no indemnification may be provided unless
there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the
settlement; (ii) by at least a majority of those trustees who are neither
interested persons, as that term is defined in the Investment Company Act
of 1940, of the Registrant ("Independent Trustees"), nor are 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 10 of the Management Agreement between Equity Managers
Trust and Neuberger and Berman Management Incorporated ("N&B Management")
provides that neither N&B Management nor any director, officer or employee
of N&B Management performing services for any series of Equity Managers
C-7
<PAGE>
Trust (each a "Portfolio") at the direction or request of N&B Management in
connection with N&B Management's discharge of its obligations under the
Agreement shall be liable for any error of judgment or mistake of law or
for any loss suffered by a Portfolio in connection with any matter to which
the Agreement relates; provided, that nothing in the Agreement shall be
construed (i) to protect N&B Management against any liability to Equity
Managers Trust or a Portfolio of Equity Managers Trust or its
interestholders to which N&B Management would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of N&B Management's duties, or by reason of N&B Management's
reckless disregard of its obligations and duties under the Agreement, or
(ii) to protect any director, officer or employee of N&B Management who is
or was a Trustee or officer of Equity Managers Trust against any liability
to Equity Managers Trust or a Portfolio or its interestholders 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 Equity Managers Trust.
Section 1 of the Sub-Advisory Agreement between Equity Managers
Trust and Neuberger & Berman, LLC ("Sub-Adviser") 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, the Sub-Adviser will not be subject to
liability for any act or omission or any loss suffered by any Portfolio of
Equity Managers Trust or its interestholders in connection with the matters
to which the Agreement relates.
Section 11 of the Distribution Agreement between the Registrant
and N&B Management provides that N&B 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 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.
C-8
<PAGE>
Item 28. 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 N&B Management and each principal of the Sub-Adviser
is, or at any time during the past two years has been, engaged for his or
her own account or in the capacity of director, officer, employee, partner
or trustee.
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
<S> <C>
Claudia A. Brandon Secretary, Neuberger & Berman Advisers Management
Vice President, N&B Trust (Delaware business trust); Secretary,
Management Advisers Managers Trust; Secretary, Neuberger &
Berman Advisers Management Trust (Massachusetts
business trust) (1); Secretary, Neuberger & Berman
Income Funds; Secretary, Neuberger & Berman Income
Trust; Secretary, Neuberger & Berman Equity Funds;
Secretary, Neuberger & Berman Equity Trust;
Secretary, Income Managers Trust; Secretary, Equity
Managers Trust; Secretary, Global Managers Trust;
Secretary, Neuberger & Berman Equity Assets.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); 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.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global Asset
Assistant Vice President, Management L.P. (joint venture of Neuberger &
N&B Management Berman and Banque Nationale de Paris) (2).
C-9
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger & Berman
Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds;
Assistant Treasurer, Neuberger & Berman
Equity Trust; Assistant Treasurer, Income
Managers Trust; Assistant Treasurer,
Equity Managers Trust; Assistant
Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Stanley Egener Chairman of the Board and Trustee, Neuberger &
President and Director, Berman Advisers Management Trust (Delaware business
N&B Management; Principal, trust); Chairman of the Board and Trustee, Advisers
Neuberger & Berman Managers Trust; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Chairman of the
Board and Trustee, Neuberger & Berman Income Funds;
Chairman of the Board and Trustee, Neuberger &
Berman Income Trust; Chairman of the Board and
Trustee, Neuberger & Berman Equity Funds; Chairman
of the Board and Trustee, Neuberger & Berman Equity
Trust; Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and Trustee,
Equity Managers Trust; Chairman of the Board and
Trustee, Global Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Equity
Assets.
Theodore P. Giuliano President and Trustee, Neuberger & Berman Income
Vice President and Funds; President and Trustee, Neuberger & Berman
Director, N&B Management; Income Trust; President and Trustee, Income
Principal, Neuberger & Berman Managers Trust.
C-10
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
C. Carl Randolph Assistant Secretary, Neuberger & Berman Advisers
Principal, Neuberger & Berman Management Trust (Delaware business trust);
Assistant Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); 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.
Felix Rovelli Senior Vice President-Senior Equity Portfolio
Vice President, Manager, BNP-N&B Global Asset Management L.P.
N&B Management (joint venture of Neuberger & Berman and Banque
Nationale de Paris) (2).
Richard Russell Treasurer, Neuberger & Berman Advisers Management
Vice President, Trust (Delaware business trust); Treasurer,
N&B Management Advisers Managers Trust; Treasurer, Neuberger &
Berman Advisers Management Trust (Massachusetts
business trust) (1); Treasurer, Neuberger & Berman
Income Funds; Treasurer, Neuberger & Berman Income
Trust; Treasurer, Neuberger & Berman Equity Funds;
Treasurer, Neuberger & Berman Equity Trust;
Treasurer, Income Managers Trust; Treasurer, Equity
Managers Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger & Berman Equity Assets.
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust); Vice
N&B Management President, Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); 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.
C-11
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Susan Switzer Portfolio Manager, Mitchell Hutchins Asset
Assistant Vice President, Management Inc., 1285 Avenue of the Americas, New
N&B Management York, New York 10019 (3).
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust); Vice
N&B Management President, Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Vice President,
Neuberger & Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice President,
Neuberger & Berman Equity Trust; Vice President,
Income Managers Trust; Vice President, Equity
Managers Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman Equity
Assets.
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger & Berman
Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds;
Assistant Treasurer, Neuberger & Berman
Equity Trust; Assistant Treasurer, Income
Managers Trust; Assistant Treasurer,
Equity Managers Trust; Assistant
Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman Advisers
Director, N&B Management; Management Trust (Delaware business trust);
Principal, Neuberger & Berman President and Trustee, Advisers Managers Trust;
President and Trustee, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); President and Trustee, Neuberger & Berman
Equity Funds; President and Trustee, Neuberger &
Berman Equity Trust; President and Trustee, Equity
Managers Trust; President, Global Managers Trust;
President and Trustee, Neuberger & Berman Equity
Assets.
</TABLE>
C-12
<PAGE>
The principal address of N&B Management, Neuberger & Berman, LLC,
and of each of the investment companies named above, is 605 Third Avenue,
New York, New York 10158.
-----------------
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until 1994.
Item 29. Principal Underwriters.
-------- -----------------------
(a) N&B 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 Funds
Neuberger & Berman Equity Assets
Neuberger & Berman Income Funds
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the master funds
in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New
York 10158-0180, which is also the address of the Registrant's principal
underwriter.
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
---- WITH UNDERWRITER WITH REGISTRANT
---------------------- ---------------------
<S> <C> <C>
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board and None
Director
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
C-13
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
---- WITH UNDERWRITER WITH REGISTRANT
---------------------- ---------------------
Robert Cresci Assistant Vice President None
William Cunningham Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the Board of
Trustees
(Chief Executive Officer)
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Assistant Vice President None
Mark R. Goldstein Vice President None
Theodore P. Giuliano Vice President and Director None
Farha-Joyce Haboucha Vice President None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Irwin Lainoff Director None
Michael Lamberti Vice President None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Lawrence Marx III Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Assistant Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
C-14
<PAGE>
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Assistant Vice President None
Felix Rovelli Vice President None
Richard Russell Vice President Treasurer (Principal
Accounting Officer)
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Susan Switzer Assistant Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President
(Principal Financial Officer)
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
KimMarie Zamot Assistant Vice President None
Lawrence Zicklin Director Trustee and President
</TABLE>
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
Item 30. Location of Accounts and Records.
-------- ---------------------------------
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940, 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,
C-15
<PAGE>
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 Investment Company Act of 1940, 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 the 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.
Item 31. Management Services
-------- -------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings
-------- ------------
Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of Registrant's latest annual report to
shareholders of Neuberger & Berman Focus, Neuberger & Berman Genesis,
Neuberger & Berman Guardian, Neuberger & Berman Manhattan, and Neuberger &
Berman Partners Trusts and/or a copy of Registrant's latest annual report
to shareholders of Neuberger & Berman NYCDC Socially Responsive Trust, upon
request and without charge.
C-16
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY TRUST
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 10 to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment 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
4th day of December, 1996.
NEUBERGER & BERMAN EQUITY TRUST
/s/ Lawrence Zicklin
By:______________________
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 10 has been signed below by the following persons
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/Faith Colish
____________________ Trustee December 4, 1996
Faith Colish
/s/Donald M. Cox
____________________ Trustee December 4, 1996
Donald M. Cox
/s/Stanley Egener Chairman of the Board
____________________ and Trustee (Chief December 4, 1996
Stanley Egener Executive Officer)
/s/Howard A. Mileaf
____________________ Trustee December 4, 1996
Howard A. Mileaf
/s/Edward I. O'Brien
____________________ Trustee December 4, 1996
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/John T. Patterson, Jr.
_________________________ Trustee December 4, 1996
John T. Patterson, Jr.
/s/John P. Rosenthal
_________________________ Trustee December 4, 1996
John P. Rosenthal
/s/Cornelius T. Ryan
________________________ Trustee December 4, 1996
Cornelius T. Ryan
/s/Gustave H. Shubert
________________________ Trustee1 December 4, 1996
Gustave H. Shubert
/s/Alan R. Gruber
________________________ Trustee December 4, 1996
Alan R. Gruber
/s/Lawrence Zicklin
________________________ President and Trustee December 4, 1996
Lawrence Zicklin
/s/Michael J. Weiner Vice President
_______________________ (Principal December 4, 1996
Michael J. Weiner Financial Officer)
/s/Richard Russell Treasurer (Principal
____________________ Accounting Officer) December 4, 1996
Richard Russell
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of the Post-Effective Amendment No. 10
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment 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 4th day of December, 1996.
EQUITY MANAGERS TRUST
/s/ Lawrence Zicklin
By:______________________
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 10 has been signed below by the following persons
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Faith Colish
___________________ Trustee December 4, 1996
Faith Colish
/s/Donald M. Cox
___________________ Trustee December 4, 1996
Donald M. Cox
/s/Stanley Egener
___________________ Chairman of the December 4, 1996
Stanley Egener Board and Trustee
(Chief Executive
Officer)
/s/Howard A. Mileaf
___________________ Trustee December 4, 1996
Howard A. Mileaf
/s/Edward I. O'Brien
___________________ Trustee December 4, 1996
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/John T. Patterson, Jr.
___________________ Trustee December 4, 1996
John T. Patterson, Jr.
/s/John P. Rosenthal
___________________ Trustee December 4, 1996
John P. Rosenthal
/s/Cornelius T. Ryan
___________________ Trustee December 4, 1996
Cornelius T. Ryan
/s/Gustave H. Shubert
___________________ Trustee December 4, 1996
Gustave H. Shubert
/s/Alan R. Gruber
___________________ Trustee December 4, 1996
Alan R. Gruber
/s/Lawrence Zicklin
___________________ President and December 4, 1996
Lawrence Zicklin Trustee
/s/Michael J. Weiner
___________________ Vice President December 4, 1996
Michael J. Weiner (Principal
Financial Officer)
/s/Richard Russell
___________________ Treasurer (Principal December 4, 1996
Richard Russell Accounting Officer)
</TABLE>
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 10 ON FORM N-1A
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Page
Exhibit Description ----------
Number -----------
<S> <C> <C>
(1) (a) Certificate of Trust. Incorporated by Reference N.A.
to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No. 0000898432-95-
000427.
(b) Trust Instrument of Neuberger & Berman Equity N.A.
Trust. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger & Berman ____
Equity Trust. Filed Herewith.
(2) By-laws of Neuberger & Berman Equity Trust. Incorporated N.A.
by Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(3) Voting Trust Agreement. None. N.A.
(4) (a) Trust Instrument of Neuberger & Berman Equity N.A.
Trust, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No. 0000898432-95-
000427.
(b) Bylaws of Neuberger & Berman Equity Trust,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No. 0000898432-95-
000427.
<PAGE>
Sequentially
Numbered
Page
Exhibit Description ----------
Number -----------
(5) (a) (i) Management Agreement Between Equity N.A.
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898432-
000314.
(ii) Schedule A - Series of Neuberger & Berman N.A.
Equity Managers Trust Currently Subject to
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898432-
000314.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898432-
000314.
(b) (i) Sub-Advisory Agreement Between Neuberger & N.A.
Berman Management Incorporated and
Neuberger & Berman, LLC with Respect to
Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and
811-582, Edgar Accession No. 0000898432-
000314.
(ii) Schedule A - Series of Neuberger & Berman N.A.
Equity Managers Trust Currently Subject to
the Sub-Advisory Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File Nos.
2-11357 and 811-582, Edgar Accession No.
0000898432-000314.
<PAGE>
Sequentially
Numbered
Page
Exhibit Description ----------
Number -----------
(6) (a) Distribution Agreement Between Neuberger & Berman N.A.
Equity Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(b) Schedule A - Series of Neuberger & Berman Equity N.A.
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Neuberger & Berman N.A.
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(b) Schedule A - Approved Foreign Banking Institutions N.A.
and Securities Depositories Under the Custodian
Contract. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(c) Schedule of Compensation Under the Custodian ___
Contract. Filed Herewith.
(9) (a) (i) Transfer Agency and Service Agreement N.A.
Between Neuberger & Berman Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
<PAGE>
Sequentially
Numbered
Page
Exhibit Description ----------
Number -----------
(ii) Agreement Between Neuberger & Berman Equity N.A.
Trust and State Street Bank and Trust
Company Adding Neuberger & Berman NYCDC
Socially Responsive Trust as a Portfolio
Governed by the Transfer Agency Agreement.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(iii) First Amendment to Transfer Agency and N.A.
Service Agreement between Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(iv) Schedule of Compensation under the Transfer ___
Agency and Service Agreement. Filed
Herewith.
(b) (i) Administration Agreement Between Neuberger N.A.
& Berman Equity Trust and Neuberger &
Berman Management Incorporated.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(ii) Schedule A - Series of Neuberger & Berman N.A.
Equity Trust Currently Subject to the
Administration Agreement. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Administration Agreement. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
<PAGE>
Sequentially
Numbered
Page
Exhibit Description ----------
Number -----------
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP on N.A.
Securities Matters. Incorporated by Reference to
Registrant's Rule 24f-2 Notice for the Fiscal Year Ended
August 31, 1996, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-96-000465.
(11) (a) Consent of Ernst & Young LLP, Independent _____
Auditors. Filed Herewith.
(b) Consent of Coopers & Lybrand L.L.P., Independent _____
Accountants. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance Quotations. N.A.
Incorporated by Reference to Post-Effective Amendment
No. 4 to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(17) Financial Data Schedule. Filed Herewith. _____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
</TABLE>
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
SCHEDULE A
Initial Series
--------------
Neuberger & Berman Focus Trust
Neuberger & Berman Genesis Trust
Neuberger & Berman Guardian Trust
Neuberger & Berman Manhattan Trust
Neuberger & Berman Partners Trust
Additional Series
-----------------
Neuberger & Berman NYCDC Socially Responsive Trust
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
NEUBERGER AND BERMAN FUND COMPLEX
Equity Managers Trust:
---------------------
. Neuberger and Berman Focus Portfolio
. Neuberger and Berman Genesis Portfolio
. Neuberger and Berman Guardian Portfolio
. Neuberger and Berman Manhattan Portfolio
. Neuberger and Berman Partners Portfolio
. Neuberger and Berman Socially Responsive Portfolio
Income Managers Trust:
---------------------
. Neuberger and Berman Cash Reserves Portfolio
. Neuberger and Berman Government Money Portfolio
. Neuberger and Berman Limited Maturity Bond Portfolio
. Neuberger and Berman Municipal Money Portfolio
. Neuberger and Berman Municipal Securities Portfolio
. Neuberger and Berman New York Insured Intermediate Portfolio
Neuberger and Berman Ultra Short Bond
Advisers Managers Trust:
-----------------------
. AMT Balanced Investments
. AMT Government Income Investments
. AMT Growth Investments
. AMT International Investments
. AMT Limited Maturity Bond Investments
. AMT Liquid Asset Investments
. AMT Partners Investments
I. ADMINISTRATION
Custody, Portfolio and Fund Accounting Service: Maintain custody
of fund assets. Settle portfolio purchase and sales. Report buy
and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Maintain investment
ledgers, provide selected portfolio transactions, position and
income reports. Maintain general ledger and capital stock
accounts. Prepare daily trial balance. Calculate net asset value
daily. Provide selected general ledger reports. Securities yield
or market value quotations will be provided to State Street by
sources authorized by the funds.
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 2
The administration fee shown below is an annual charge, billed and
payable monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
-------------------------
Custody, Portfolio
Fund Net Assets and Fund Accounting
--------------- -------------------
$ 0 - $ 20 million .075%
$ 20 - $100 million .037%
$100 - $200 million .028%
$200 - $500 million .014%
Over $500 million .013%
II. GLOBAL CUSTODY
These fees are divided into two categories: Transaction Charges
and Holdings Charges which are calculated based on the following
country groups:
A. Country Grouping
----------------
<TABLE>
<CAPTION>
Group A Group B Group C Group D Group E Group F
<S> <C> <C> <C> <C> <C>
USA Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Malaysia Bangladesh
Euroclear Hong Kong France Philippines Brazil
Germany Netherlands Ireland Portugal Chile
Japan New Zealand Italy So. Korea China
Singapore Luxembourg Spain Columbia
Switzerland Mexico Sri Lanka Czech Republic
Norway Sweden Cyprus
Thailand Taiwan Greece
U.K. Hungary
India
Israel
Morocco
Pakistan
Peru
Poland
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 3
Group A Group B Group C Group D Group E Group F
So. Africa
Turkey
Uruguay
Venezuela
</TABLE>
B. Transactions Charges
--------------------
<TABLE>
<CAPTION>
Group A Group B Group C Group D Group E Group F
<S> <C> <C> <C> <C> <C>
State Street Bank $25 $50 $60 $70 $150
Repos or Euros - $7.00
DTC or Fed Book
Entry - $12.00
All Other - $25.00
</TABLE>
C. Holdings Charges
----------------
<TABLE>
<CAPTION>
Group A Group B Group C Group D Group E Group F
<S> <C> <C> <C> <C> <C>
1.5 5.0 6.0 10.0 25.0 40.0
</TABLE>
III. Portfolio Trades - For Each Line Item Processed
State Street Bank Repos $ 7.00
DTC of Fed Book Entry $ 12.00
New York Physical Settlements $ 25.00
Maturity Collection (NY Physical Items Only) $ 8.00
All Other Trades $ 16.00
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 4
IV. Options
Option charge for each option written or closing
contract, per issue, per broker $25.00
Option expiration charge, per issue, per broker $15.00
Option exercised charge, per issue, per broker $15.00
V. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned
securities $15.00
Deliver securities collateral versus receipt of loaned
securities $25.00
Loan administration mark-to-market per day, per loan $ 3.00
VI. Interest Rate Futures
Transactions no security movement $ 8.00
VII. Pricing Service
Monthly Quote Charge (based on average number of
positions in portfolio) $ 6.00
VIII. Holding Charge
For each issue maintained - monthly charge $ 5.00
IX. Principal Reduction Payments
Per Paydown $10.00
X. Dividend/Interest Collection Charges
For items held at the request of traders over record
date in street form $50.00
XI. Spoke Configuration
Annual fee of $10,000 per each series in each Spoke Entity
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 5
Spoke Entities:
--------------
Neuberger and Berman Equity Funds (except N & B International
Fund) Neuberger and Berman Equity Trust Neuberger and Berman
Income Funds Neuberger and Berman Income Trust Neuberger and
Berman Advisers Management Trust Neuberger and Berman Equity
Assets
XII. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security
shipments and the preparation of special reports will be subject
to negotiation. Yield calculation and other special items will be
negotiated separately.
XIII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses
will be made as of the end of each month. Out-of-pocket expenses
include, but are not limited to the following:
. Wire charges relative to custodian functions ($5.25 per wire in
and $5.00 out)
. Postage and Insurance
. Courier Service
. Duplicating
. Legal fees in jointly agreed upon situations
. Supplies related to fund records
. Rush transfer -- $8.00 each
. Transfer fees
. Sub-custodian charges
. Price Waterhouse audit letter
. Federal Reserve fee for return check items over $2,500 - $4.25
. GNMA Transfer - $15 each
XIV. Payment and Earnings Credit
The above fees will be charged against the fund's custodian
checking account five (5) days after the invoice is mailed to the
fund's offices, contingent on fund approval.
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 6
An earnings credit of 75% of the 90 Day T-Bill rate will be
applied for fund balances.
NEUBERGER & BERMAN FUND COMPLEX STATE STREET BANK AND TRUST CO.
By: /s/ Michael J. Weiner By: /s/ K. Griffin
------------------------------- --------------------------
Title: Vice President Neuberger &
Berman Equity Trust Title: Vice President
------------------------------- --------------------------
Date: 7-31-96 Date: July 31, 1996
------------------------------- -----------------------
<PAGE>
FEE SCHEDULE
FOR
TRANSFER AGENCY AGREEMENT
BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
NEUBERGER & BERMAN EQUITY TRUST
The Portfolios within the Neuberger & Berman Equity Trust will be charged
an annual fund minimum of $16,500 for the first three years, and following
that period an annual fee of $7.30 per account:
NYCDC Socially Responsive Trust
Genesis Trust
Guardian Trust
Partners Trust
Manhattan Trust
Focus Trust
There will be an Account Charge of $1.00 per closed account or zero
balance, and out of pocket expenses which will be billed on a monthly basis
as incurred, and determined by product and related expense. The Fund
minimum will be waived for the first nine months after seed money has been
received by the Bank. This minimum will be guaranteed for three years.
NEUBERGER & BERMAN STATE STREET BANK AND
EQUITY TRUST TRUST COMPANY
Name: /s/ Michael J. Weiner Name: /s/ Ronald E. Logue
--------------------- -----------------------------
Title: Vice President Title: Executive Vice President
-------------------- --------------------------
Date: 9-10-96 Date: 9-16-96
--------------------- --------------------------
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in each Prospectus and "Reports to Shareholders",
"Independent Auditors/Accountants" and "Financial Statements" in each
Statement of Additional Information in Post-Effective Amendment Number
10 to the Registration Statement (Form N-1A No. 33-64368) of Neuberger
& Berman Equity Trust, and to the incorporation by reference of our
reports dated October 3, 1996 on the Neuberger & Berman Genesis Trust,
Neuberger & Berman Focus Trust, Neuberger & Berman Guardian Trust and
Neuberger & Berman Partners Trust, four of the series comprising
Neuberger & Berman Equity Trust, and on Neuberger & Berman Genesis
Portfolio, Neuberger & Berman Focus Portfolio, Neuberger & Berman
Guardian Portfolio and Neuberger & Berman Partners Portfolio, four of
the series comprising Equity Managers Trust, included in the 1996
Annual Report to Shareholders of Neuberger & Berman Equity Trust.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Boston, Massachusetts
December 3, 1996
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Neuberger & Berman Equity Trust and Equity Managers Trust
We consent to the incorporation by reference in Part B. Statement of
Additional Information in Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A of Neuberger & Berman Equity Trust of
our reports dated October 4, 1996, on our audits of the financial
statements and financial highlights of the Neuberger & Berman Manhattan
Trust and Portfolio and Neuberger & Berman NYCDC Socially Responsive Trust
and Portfolio which reports are included in the Annual Reports to
Shareholders for the fiscal year ended August 31, 1996.
We also consent to the reference to our Firm with respect to the Neuberger
& Berman Manhattan Trust and Portfolio and Neuberger & Berman NYCDC
Socially Responsive Trust and Portfolio under the captions "Independent
Auditors/Accountants" and "Financial Statements" in Part B of the
Registration Statement.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 2, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Focus Trust Annual Report and is qualified in its entirety
by reference to such document.
</LEGEND>
<CIK> 0000906926
<NAME> NEUBERGER&BERMAN EQUITY TRUST
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN FOCUS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 54,165
<RECEIVABLES> 1,528
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,712
<PAYABLE-FOR-SECURITIES> 48
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51
<TOTAL-LIABILITIES> 99
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,522
<SHARES-COMMON-STOCK> 3,750
<SHARES-COMMON-PRIOR> 1,004
<ACCUMULATED-NII-CURRENT> 203
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (213)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,101
<NET-ASSETS> 55,613
<DIVIDEND-INCOME> 539
<INTEREST-INCOME> 49
<OTHER-INCOME> 0
<EXPENSES-NET> (358)
<NET-INVESTMENT-INCOME> 230
<REALIZED-GAINS-CURRENT> (313)
<APPREC-INCREASE-CURRENT> 488
<NET-CHANGE-FROM-OPS> 405
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33)
<DISTRIBUTIONS-OF-GAINS> (133)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,038
<NUMBER-OF-SHARES-REDEEMED> (1,303)
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 41,142
<ACCUMULATED-NII-PRIOR> 25
<ACCUMULATED-GAINS-PRIOR> 115
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 463
<AVERAGE-NET-ASSETS> 36,291
<PER-SHARE-NAV-BEGIN> 14.41
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> .46
<PER-SHARE-DIVIDEND> (.02)
<PER-SHARE-DISTRIBUTIONS> (.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.83
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Guardian Trust Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000906926
<NAME> NEUBERGER&BERMAN EQUITY TRUST
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GUARDIAN TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1,334,613
<RECEIVABLES> 6,653
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,341,285
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,197
<TOTAL-LIABILITIES> 1,197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,215,854
<SHARES-COMMON-STOCK> 94,130
<SHARES-COMMON-PRIOR> 49,401
<ACCUMULATED-NII-CURRENT> 3,980
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21,966
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 98,288
<NET-ASSETS> 1,340,088
<DIVIDEND-INCOME> 15,512
<INTEREST-INCOME> 7,306
<OTHER-INCOME> 0
<EXPENSES-NET> (9,585)
<NET-INVESTMENT-INCOME> 13,233
<REALIZED-GAINS-CURRENT> 24,032
<APPREC-INCREASE-CURRENT> 8,398
<NET-CHANGE-FROM-OPS> 45,663
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,999)
<DISTRIBUTIONS-OF-GAINS> (10,557)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 60,492
<NUMBER-OF-SHARES-REDEEMED> (17,232)
<SHARES-REINVESTED> 1,469
<NET-CHANGE-IN-ASSETS> 657,022
<ACCUMULATED-NII-PRIOR> 1,392
<ACCUMULATED-GAINS-PRIOR> 6,187
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,654
<AVERAGE-NET-ASSETS> 1,046,330
<PER-SHARE-NAV-BEGIN> 13.83
<PER-SHARE-NII> .16
<PER-SHARE-GAIN-APPREC> .55
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> (.16)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.24
<EXPENSE-RATIO> .92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Manhattan Trust Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000906926
<NAME> NEUBERGER&BERMAN EQUITY TRUST
<SERIES>
<NUMBER> 02
<NAME> NEUBERGER&BERMAN MANHATTAN TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 50,212
<RECEIVABLES> 42
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,273
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,075
<TOTAL-LIABILITIES> 2,075
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,013
<SHARES-COMMON-STOCK> 3,956
<SHARES-COMMON-PRIOR> 2,738
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,635
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,550
<NET-ASSETS> 48,198
<DIVIDEND-INCOME> 299
<INTEREST-INCOME> 16
<OTHER-INCOME> 0
<EXPENSES-NET> (487)
<NET-INVESTMENT-INCOME> (172)
<REALIZED-GAINS-CURRENT> 1,705
<APPREC-INCREASE-CURRENT> (3,356)
<NET-CHANGE-FROM-OPS> (1,823)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,370)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,900
<NUMBER-OF-SHARES-REDEEMED> (792)
<SHARES-REINVESTED> 110
<NET-CHANGE-IN-ASSETS> 12,617
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 896
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 566
<AVERAGE-NET-ASSETS> 45,206
<PER-SHARE-NAV-BEGIN> 12.99
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> (.34)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.43)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.18
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Partners Trust Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000906926
<NAME> NEUBERGER&BERMAN EQUITY TRUST
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN PARTNERS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 128,513
<RECEIVABLES> 173
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128,705
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 254
<TOTAL-LIABILITIES> 254
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 113,840
<SHARES-COMMON-STOCK> 9,592
<SHARES-COMMON-PRIOR> 4,838
<ACCUMULATED-NII-CURRENT> 603
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,282
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,726
<NET-ASSETS> 128,451
<DIVIDEND-INCOME> 1,349
<INTEREST-INCOME> 181
<OTHER-INCOME> 0
<EXPENSES-NET> (804)
<NET-INVESTMENT-INCOME> 726
<REALIZED-GAINS-CURRENT> 7,827
<APPREC-INCREASE-CURRENT> 212
<NET-CHANGE-FROM-OPS> 8,765
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (364)
<DISTRIBUTIONS-OF-GAINS> (4,629)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,647
<NUMBER-OF-SHARES-REDEEMED> (1,287)
<SHARES-REINVESTED> 394
<NET-CHANGE-IN-ASSETS> 67,117
<ACCUMULATED-NII-PRIOR> 241
<ACCUMULATED-GAINS-PRIOR> 3,012
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 913
<AVERAGE-NET-ASSETS> 85,913
<PER-SHARE-NAV-BEGIN> 12.68
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 1.59
<PER-SHARE-DIVIDEND> (.07)
<PER-SHARE-DISTRIBUTIONS> (.89)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.39
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman NYCDC Socially Responsive Trust Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<CIK> 0000906926
<NAME> NEUBERGER&BERMAN EQUITY TRUST
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN NYCDC SOCIALLY RESPONSIVE TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 125,629
<RECEIVABLES> 39
<ASSETS-OTHER> 24
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125,692
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56
<TOTAL-LIABILITIES> 56
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94,567
<SHARES-COMMON-STOCK> 8,712
<SHARES-COMMON-PRIOR> 7,219
<ACCUMULATED-NII-CURRENT> 887
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,918
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,264
<NET-ASSETS> 125,636
<DIVIDEND-INCOME> 1,556
<INTEREST-INCOME> 278
<OTHER-INCOME> 0
<EXPENSES-NET> (661)
<NET-INVESTMENT-INCOME> 1,173
<REALIZED-GAINS-CURRENT> 10,311
<APPREC-INCREASE-CURRENT> 8,073
<NET-CHANGE-FROM-OPS> 19,557
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (895)
<DISTRIBUTIONS-OF-GAINS> (2,312)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,332
<NUMBER-OF-SHARES-REDEEMED> (1,077)
<SHARES-REINVESTED> 238
<NET-CHANGE-IN-ASSETS> 37,093
<ACCUMULATED-NII-PRIOR> 609
<ACCUMULATED-GAINS-PRIOR> 932
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 885
<AVERAGE-NET-ASSETS> 110,144
<PER-SHARE-NAV-BEGIN> 12.27
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> 2.44
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> (.31)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.42
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Genesis Trust Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000906926
<NAME> NEUBERGER & BERMAN EQUITY TRUST
<SERIES>
<NUMBER> 03
<NAME> NEUBERGER&BERMAN GENESIS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 65,186
<RECEIVABLES> 91
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65,296
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60
<TOTAL-LIABILITIES> 60
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,926
<SHARES-COMMON-STOCK> 4,353
<SHARES-COMMON-PRIOR> 2,421
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 764
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,546
<NET-ASSETS> 65,236
<DIVIDEND-INCOME> 377
<INTEREST-INCOME> 57
<OTHER-INCOME> 0
<EXPENSES-NET> (538)
<NET-INVESTMENT-INCOME> (104)
<REALIZED-GAINS-CURRENT> 1,183
<APPREC-INCREASE-CURRENT> 6,518
<NET-CHANGE-FROM-OPS> 597
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (822)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,095
<NUMBER-OF-SHARES-REDEEMED> (227)
<SHARES-REINVESTED> 64
<NET-CHANGE-IN-ASSETS> 34,599
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 523
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 604
<AVERAGE-NET-ASSETS> 38,973
<PER-SHARE-NAV-BEGIN> 12.65
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 2.68
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.32)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.99
<EXPENSE-RATIO> 1.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Focus Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN FOCUS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 838,502
<INVESTMENTS-AT-VALUE> 1,124,592
<RECEIVABLES> 2,059
<ASSETS-OTHER> 52
<OTHER-ITEMS-ASSETS> 95
<TOTAL-ASSETS> 1,126,798
<PAYABLE-FOR-SECURITIES> 3,863
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 564
<TOTAL-LIABILITIES> 4,427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 669,742
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26,529
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 140,010
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 286,090
<NET-ASSETS> 1,122,371
<DIVIDEND-INCOME> 15,705
<INTEREST-INCOME> 1,599
<OTHER-INCOME> 0
<EXPENSES-NET> (5,914)
<NET-INVESTMENT-INCOME> 11,390
<REALIZED-GAINS-CURRENT> 51,701
<APPREC-INCREASE-CURRENT> (21,728)
<NET-CHANGE-FROM-OPS> 41,363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 153,198
<ACCUMULATED-NII-PRIOR> 15,139
<ACCUMULATED-GAINS-PRIOR> 88,309
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,565
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,914
<AVERAGE-NET-ASSETS> 1,097,714
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Guardian Portfolio Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GUARDIAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 5,252,479
<INVESTMENTS-AT-VALUE> 6,277,499
<RECEIVABLES> 10,961
<ASSETS-OTHER> 229
<OTHER-ITEMS-ASSETS> 69
<TOTAL-ASSETS> 6,288,758
<PAYABLE-FOR-SECURITIES> 18,006
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,210
<TOTAL-LIABILITIES> 56,216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,562,830
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 189,659
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 455,033
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,025,020
<NET-ASSETS> 6,232,542
<DIVIDEND-INCOME> 83,718
<INTEREST-INCOME> 40,556
<OTHER-INCOME> 0
<EXPENSES-NET> (26,340)
<NET-INVESTMENT-INCOME> 97,934
<REALIZED-GAINS-CURRENT> 307,410
<APPREC-INCREASE-CURRENT> (111,192)
<NET-CHANGE-FROM-OPS> 294,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,619,347
<ACCUMULATED-NII-PRIOR> 91,725
<ACCUMULATED-GAINS-PRIOR> 147,623
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,172
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 26,340
<AVERAGE-NET-ASSETS> 5,687,441
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Manhattan Portfolio Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 02
<NAME> NEUBERGER&BERMAN MANHATTAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 497,389
<INVESTMENTS-AT-VALUE> 580,025
<RECEIVABLES> 133
<ASSETS-OTHER> 41
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 580,199
<PAYABLE-FOR-SECURITIES> 1,618
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 365
<TOTAL-LIABILITIES> 10,790
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342,686
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6,019
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 136,085
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 82,636
<NET-ASSETS> 567,426
<DIVIDEND-INCOME> 4,288
<INTEREST-INCOME> 246
<OTHER-INCOME> 0
<EXPENSES-NET> (3,705)
<NET-INVESTMENT-INCOME> 829
<REALIZED-GAINS-CURRENT> 59,509
<APPREC-INCREASE-CURRENT> (74,167)
<NET-CHANGE-FROM-OPS> (13,829)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (77,980)
<ACCUMULATED-NII-PRIOR> 5,190
<ACCUMULATED-GAINS-PRIOR> 76,576
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,402
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,705
<AVERAGE-NET-ASSETS> 642,838
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Partners Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN PARTNERS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 1,776,910
<INVESTMENTS-AT-VALUE> 2,004,866
<RECEIVABLES> 5,471
<ASSETS-OTHER> 107
<OTHER-ITEMS-ASSETS> 49
<TOTAL-ASSETS> 2,010,493
<PAYABLE-FOR-SECURITIES> 9,975
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 915
<TOTAL-LIABILITIES> 10,890
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,211,965
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 49,438
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 510,244
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 227,956
<NET-ASSETS> 1,999,603
<DIVIDEND-INCOME> 29,211
<INTEREST-INCOME> 3,659
<OTHER-INCOME> 0
<EXPENSES-NET> (9,376)
<NET-INVESTMENT-INCOME> 23,394
<REALIZED-GAINS-CURRENT> 240,765
<APPREC-INCREASE-CURRENT> (30,217)
<NET-CHANGE-FROM-OPS> 233,942
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 376,077
<ACCUMULATED-NII-PRIOR> 26,044
<ACCUMULATED-GAINS-PRIOR> 269,479
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,868
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,376
<AVERAGE-NET-ASSETS> 1,851,251
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Socially Responsive Portfolio Annual Report and is
qualified in its qualified in its entirety by reference to such document.
</LEGEND>
<RESTATED>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN SOCIALLY RESPONSIVE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 135,153
<INVESTMENTS-AT-VALUE> 158,396
<RECEIVABLES> 168
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 8
<TOTAL-ASSETS> 158,592
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107
<TOTAL-LIABILITIES> 107
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,157
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,637
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,448
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,243
<NET-ASSETS> 158,485
<DIVIDEND-INCOME> 1,814
<INTEREST-INCOME> 325
<OTHER-INCOME> 0
<EXPENSES-NET> (832)
<NET-INVESTMENT-INCOME> 1,307
<REALIZED-GAINS-CURRENT> 11,385
<APPREC-INCREASE-CURRENT> 9,035
<NET-CHANGE-FROM-OPS> 21,727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 61,738
<ACCUMULATED-NII-PRIOR> 1,330
<ACCUMULATED-GAINS-PRIOR> 1,063
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 704
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 832
<AVERAGE-NET-ASSETS> 128,052
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Genesis Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITYI MANAGERS TRUST
<SERIES>
<NUMBER> 03
<NAME> NEUBERGER&BERMAN GENESIS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 199,197
<INVESTMENTS-AT-VALUE> 260,418
<RECEIVABLES> 904
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 50
<TOTAL-ASSETS> 261,385
<PAYABLE-FOR-SECURITIES> 1,319
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 202
<TOTAL-LIABILITIES> 1,521
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 179,304
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 61,221
<NET-ASSETS> 259,864
<DIVIDEND-INCOME> 1,711
<INTEREST-INCOME> 263
<OTHER-INCOME> 0
<EXPENSES-NET> (1,503)
<NET-INVESTMENT-INCOME> 471
<REALIZED-GAINS-CURRENT> 5,660
<APPREC-INCREASE-CURRENT> 27,635
<NET-CHANGE-FROM-OPS> 33,766
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 117,704
<ACCUMULATED-NII-PRIOR> 601
<ACCUMULATED-GAINS-PRIOR> 12,607
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,506
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,680
<AVERAGE-NET-ASSETS> 177,201
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
