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_________________________________________________________________
NEUBERGER & BERMAN EQUITY TRUST AND PORTFOLIOS
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 15, 1995
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 15,
1995. The above-named Funds invest all of their net investable assets in
Neuberger & Berman MANHATTAN Portfolio, Neuberger & Berman GENESIS Port-
folio, 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 BROKER-DEALER, PENSION PLAN ADMINISTRATOR, 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, without charge, from Neuberger & Berman Management Incorporated,
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.
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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.
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TABLE OF CONTENTS
Page
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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 and Lawrence Marx III, Portfolio Managers
of Neuberger & Berman FOCUS and Neuberger &
Berman GUARDIAN Portfolios . . . . . . . . . . . . . 7
Michael M. Kassen and Robert I. Gendelman, Portfolio
Managers of Neuberger & Berman PARTNERS Portfolio . 8
Additional Investment Information . . . . . . . . . . . . . 9
Neuberger & Berman FOCUS Portfolio - Description of
Economic Sectors. . . . . . . . . . . . . . . . . . 20
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 23
Total Return Computations . . . . . . . . . . . . . . . . . 23
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 . . . . . . . . . . . . . . . . . . . . . . . . 37
Investment Companies Managed . . . . . . . . . . . . . . . . 38
Management and Control of N&B Management . . . . . . . . . . 41
DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 42
ADDITIONAL EXCHANGE INFORMATION . . . . . . . . . . . . . . . . . . . 43
ADDITIONAL REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . 44
DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 45
ADDITIONAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . 46
Taxation of the Funds . . . . . . . . . . . . . . . . . . . 46
Taxation of the Portfolios . . . . . . . . . . . . . . . . . 47
Taxation of the Funds' Shareholders . . . . . . . . . . . . 50
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 50
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . 57
REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 57
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Page
ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . 57
INDEPENDENT AUDITORS/ACCOUNTANTS . . . . . . . . . . . . . . . . . . 58
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . 58
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 62
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 63
Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER . . . . . . 64
Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . 67
Appendix C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER . 68
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INVESTMENT INFORMATION
Each Fund is a separate 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
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.") Prior to
January 1, 1995, the names of Neuberger & Berman FOCUS Trust and Neuberger
& Berman FOCUS Portfolio were Neuberger & Berman Selected Sectors Trust
and Neuberger & Berman Selected Sectors Portfolio, respectively.
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. Although 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, each Fund intends to notify its shareholders
before changing its investment objective or implementing any material
change in any non-fundamental policy or limitation. 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. This vote is required by the Investment Company Act of
1940 ("1940 Act") and is 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 thereon 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 substan-
tially the same investment objective, policies, and
limitations as the Fund.
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All other fundamental investment policies and limitations
and the non-fundamental investment policies and limitations of each Fund
and its corresponding Portfolio are identical. 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 Portfolios' fundamental investment policies and
limitations are as follows:
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 instrumentalities.
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
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(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
securities of other issuers, except to the extent that a 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 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 agreements,
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.
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.
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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.
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 transac-
tions. The Portfolios do not construe the foregoing limitation to pre-
clude 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").
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 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.
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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 not listed on the New York Stock Exchange
("NYSE") or American Stock Exchange ("AmEx"), or more than 2% of its net
assets in such unlisted warrants. 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.
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
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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,"
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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 rates. 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 is a great long-term
investment."
"We view value both on a relative and an absolute basis,
so we may buy stocks with somewhat above-market historical growth rates,"
Mr. Goldstein explains. "We also 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 its net
investable assets in Neuberger & Berman GENESIS Portfolio) was established
in 1988. A long-term growth fund dedicated to small capitalization stocks
(companies with total market value of outstanding capital stock of less
than $750 million), Neuberger & Berman GENESIS Portfolio is devoted to the
same value principles as the other equity funds managed by N&B Management.
"Neuberger & Berman GENESIS Portfolio buys stocks that we believe are
CURRENTLY undervalued, unlike small capitalization stock funds offered by
many other firms, which look for companies whose earnings reflect FUTURE
developments," says its portfolio manager Judith Vale.
"Many people think that small capitalization stock funds
are predominantly invested in high-risk, high-tech companies. Not
Neuberger & Berman GENESIS Portfolio. We look 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.
Why a small capitalization stock fund? Research has
demonstrated that, over the last 30 years, smaller capitalization stocks
as a group have outperformed larger capitalization stocks two-thirds of
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the time.1/ Ms. Vale points out, "This Portfolio offers the ability to
share in the growth potential of small capitalization stocks."
Kent C. Simons and Lawrence Marx III, Portfolio Managers of Neuberger &
Berman FOCUS and Neuberger & Berman GUARDIAN Portfolios
-----------------------------------------------------------------------
These Portfolios are managed by two veterans of N&B Man-
agement who have consistently followed their value-oriented philosophy
over many years: Kent Simons and Larry Marx.
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 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.
I think 90% of cheap stocks deserve to be cheap. My 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. 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
rotated 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 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.
1/ Source: Ibbotson and Sinquefield.
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<PAGE>
Both Mr. Simons and Mr. Marx place a high premium on
being knowledgeable about the companies whose stocks they buy for
Neuberger & Berman GUARDIAN Portfolio. 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 Managers of Neuberger
& Berman PARTNERS Portfolio
--------------------------------------------------------------------------
"Neuberger & Berman PARTNERS Portfolio's objective is
capital growth," say its portfolio 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."
"We look for stocks that are undervalued in the
marketplace either in relation to strong current fundamentals, such as low
price-to-earnings ratios, consistent cash flow, and support from asset
values, or in relation to the growth of their future earnings, as
projected by N&B Management. If the market goes down, those stocks we
elect to hold, historically, go down less."
The co-portfolio 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 will 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.
Their reasoning? "Market leaders tend to earn higher levels of profits."
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<PAGE>
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). Repurchase
agreements are agreements under which 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. No Portfolio may enter into a repurchase agreement with a maturity
of more than seven days 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 the 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 value of the repurchase
agreement, 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
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 (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 or, if they are unregistered,
may be sold only in a privately negotiated transaction or pursuant to an
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<PAGE>
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 further
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 guide-
lines established by the Portfolio Trustees, may determine that certain
securities qualified for trading under Rule 144A are liquid. Foreign
securities that can be freely sold in the markets in which they are
principally traded 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 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 privately
placed 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
at fair value as determined in accordance with procedures approved and
periodically reviewed by the Portfolio Trustees.
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 the Portfolios' investment policies
and limitations concerning borrowings. While a reverse repurchase
agreement is outstanding, a Portfolio will maintain with its custodian in
a segregated account cash, U.S. Government or Agency Securities, or other
liquid, high-grade debt 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 contra-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 issued by foreign issuers
(including banks, governments, and quasi-governmental organizations) and
foreign branches of U.S. banks, including negotiable certificates of depo-
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<PAGE>
sit ("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 diver-
sification, 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 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 or their subdivisions, agencies, and instrumentali-
ties, international agencies, and supranational entities. Investing in
foreign currency denominated securities includes the special risks asso-
ciated with investing in non-U.S. issuers described in the preceding
paragraph and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxa-
tion, (3) adverse changes in investment or exchange control regulations
(which could prevent cash from being brought back to the United States),
and (4) expropriation or nationalization of foreign portfolio companies.
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.
Prices of foreign securities and exchange rates for
foreign currencies may be affected by the interest rates prevailing in
other countries. Interest rates in other countries are often affected by
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. Individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
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growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position.
Foreign markets also have different clearance and
settlement procedures, and, 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. Such
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 portfolio securities, or, if the
Portfolio has entered into a contract to sell the securities, could result
in possible liability to the purchaser.
In order to limit the risk inherent in investing in
foreign currency denominated securities, a Portfolio may not purchase any
such security if, after such purchase, 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 or purchase covered call options on securities it owns valued at
up to 10% of its net assets. Generally, the purpose of writing and
purchasing these options is to reduce 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 the
purchaser requests until a certain date, and 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
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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 specified date. A Portfolio would purchase a call
option to offset a previously written call option.
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 its 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 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
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<PAGE>
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 general supply of and demand for
credit, and the general 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 sales
price on the option's last reported trade on that day before the time the
Portfolio's NAV is computed or, in the absence of any trades thereof on
that day, the mean between the closing bid and ask 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 any 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. However, 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.
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.
Options normally have expiration dates between three and
nine months from the date written. 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.
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 expected changes in
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<PAGE>
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 effec-
tive return on securities denominated in foreign 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 pro-
tecting 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 "cross-hedges," can help protect against
declines in the U.S. dollar value of income available for distribution and
declines in a Portfolio's NAV resulting from adverse changes in currency
exchange rates. For example, the return available from securities denomi-
nated 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 cross-hedge
involving a forward contract to sell a different foreign currency, where
the contract is available on terms more advantageous to a Portfolio than a
contract to sell the currency in which the securities being hedged are
denominated. N&B Management believes that hedges and cross-hedges can,
therefore, provide significant protection of NAV in the event of a general
rise in the U.S. dollar against foreign currencies. However, a hedge or
cross-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. In addition, 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, and 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,
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 those positions (excluding the
amount by which options are "in-the-money") may not exceed 5% of the
Portfolio's net assets.
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<PAGE>
General Considerations Involving Options and Forward Contracts
(collectively, "Hedging Instruments")
Risks Involved in Using Hedging Instruments. The primary
risks in using Hedging Instruments are (1) imperfect correlation or no
correlation between changes in market value of the securities held or to
be acquired by a Portfolio and changes in market value 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 Instru-
ments 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 that of a Portfolio's underlying securities. 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.
The Portfolios' use of Hedging Instruments may be limited
by the requirements of the Internal Revenue Code of 1986, as amended
("Code"), that apply to each Fund for qualification as a regulated
investment company ("RIC"). See "Additional Tax Information."
Cover for Hedging Instruments. Each Portfolio will com-
ply with SEC guidelines regarding cover for Hedging Instruments and, if
the guidelines so require, set aside in a segregated account with its
custodian cash, U.S. Government or Agency Securities, or other liquid,
high-grade debt securities in the prescribed amount. Securities held in a
segregated account cannot be sold while the option 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 option or forward position; this inability may result in a loss
to the Portfolio.
Fixed Income Securities (All Portfolios). While the
emphasis of the Portfolios' investment programs is on common stocks and
other equity securities (including preferred stocks and securities
convertible into or exchangeable for common stocks), the Portfolios may
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<PAGE>
also invest in money market instruments, U.S. Government or 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. The Portfolios rely primarily on 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 general 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 such securities only when it concludes that the
anticipated return to Neuberger & Berman PARTNERS Portfolio and its
corresponding Fund on such an investment 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 not be eligible for purchase by that Portfolio.
In such a case, N&B Management 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 (All Portfolios). Commercial paper is a
short-term debt security issued by a corporation or bank 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 equivalent quality.
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<PAGE>
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 by the Portfolio prior to the receipt of
any actual payments. Because Neuberger & Berman PARTNERS Trust must
distribute substantially all of its income (including its pro rata share
of the Portfolio's original issue discount) to its shareholders each year
for income and excise tax purposes (see "Additional Tax Information --
Taxation of the Funds"), the Portfolio may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash, or may be
required to borrow, to satisfy the corresponding Fund's distribution
requirements.
The market prices of zero coupon securities generally are
more volatile than the prices of securities that pay interest periodi-
cally. Zero coupon securities are likely to respond to changes in
interest rates to a greater degree than other types of debt securities
having similar maturities and credit quality.
Convertible Securities (All Portfolios). The Portfolios
may invest in convertible securities. A convertible security entitles the
holder to receive interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed,
converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks
of the same or similar issuers, but lower than the yield on non-
convertible debt. Convertible securities are usually subordinated to
comparable-tier non-convertible securities but rank senior to common stock
in a corporation's capital structure. The value of a convertible security
is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a
conversion privilege and (2) its worth if converted into the underlying
common stock.
Convertible securities are typically issued by smaller
capitalization companies whose stock prices may be volatile. The price of
a convertible security often reflects variations in the price of the
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<PAGE>
underlying common stock in a way that non-convertible debt does not. 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 the
corresponding Fund's ability to achieve their investment objectives.
Preferred Stock (All Portfolios). The Portfolios 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, although preferred shareholders may have
certain rights if dividends are not paid. Shareholders may suffer a loss
of value if dividends are not paid and generally have no legal recourse
against the issuer. 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 concentrating
at least 90% of its investments in not more than six such sectors:
(1) Autos and Housing Sector: Companies engaged in design,
production, or sale of automobiles, automobile parts, mobile homes, or
related products ("automobile industries") or design, construction,
renovation, or refurbishing of residential dwellings. The value of
securities of companies in the automobile industries is affected by, among
other things, foreign competition, the level of consumer confidence and
consumer debt, and installment loan rates. The housing construction
industry may be affected by the level of consumer confidence and consumer
debt, mortgage rates, tax laws, and the inflation outlook.
(2) Consumer Goods and Services Sector: Companies engaged in
providing consumer goods or services, including design, processing,
production, sale, or storage of packaged, canned, bottled, or frozen foods
and beverages and design, production, or sale of home furnishings,
appliances, clothing, accessories, cosmetics, or perfumes. Certain of
these companies are subject to government regulation affecting the use of
various food additives and production methods, which could affect
profitability. Also, the success of food- and fashion-related products
may be strongly affected by fads, marketing campaigns, health concerns,
and other factors affecting supply and demand.
(3) Defense and Aerospace Sector: Companies engaged in re-
search, 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
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<PAGE>
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 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, manu-
facture, 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.
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<PAGE>
(8) Machinery and Equipment Sector: Companies engaged in the
research, development, or manufacture of products, processes, or services
relating to electrical equipment, machinery, pollution control, or
construction services, including transformers, motors, turbines, hand
tools, earth-moving equipment, and waste disposal services. The
profitability of most of these companies may fluctuate significantly in
response to capital spending and general economic conditions. As is the
case for the heavy industry sector, there are risks associated with the
production, handling, and disposal of materials and processes that involve
hazardous components and the risk of product obsolescence.
(9) Media and Entertainment Sector: Companies engaged in
design, production, or distribution of goods or services for the media
industries (including television or radio broadcasting or manufacturing,
publishing, recordings and musical instruments, motion pictures, and
photography) and the entertainment industries (including sports arenas,
amusement and theme parks, gaming casinos, sporting goods, camping and
recreational equipment, toys and games, travel-related services, hotels
and motels, and fast food and other restaurants). Many products produced
by companies in this sector -- for example, video and electronic games --
may become obsolete quickly. Additionally, companies engaged in tele-
vision and radio broadcast are subject to government regulation.
(10) Retailing Sector: Companies engaged in retail distribu-
tion 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, railroads, and
trucking firms. Revenues of these companies are affected by fluctuations
in fuel prices and government regulation of fares.
(13) Utilities Sector: Companies in the public utilities
industry and companies that derive a substantial majority of their
revenues through supplying public utilities (including companies engaged
in the manufacture, production, generation, transmission, or sale of gas
and electric energy) and that provide telephone, telegraph, satellite,
- 21 -
<PAGE>
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
earnings and are not intended to indicate future performance. The share
price and total return of each Fund will vary, and an investment in a
Fund, when redeemed, may be worth more or less than an investor's original
cost.
Total Return Computations
-------------------------
Each Fund may advertise certain total return information.
An average annual compounded rate of return ("T") may be computed by using
the redeemable value at the end of a specified period ("ERV") of a
hypothetical initial investment of $1,000 ("P") over a period of time
("n") according to the formula:
P(1+T)n = ERV
Average annual total return smooths out year-to-year
variations and, in that respect, differs from actual year-to-year results.
Although none of the Funds commenced operations until
August 3, 1993, each Fund's investment objective, limitations, and poli-
cies are the same as another mutual fund administered by N&B Management,
which 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. Appendix B to this SAI
includes additional performance data.
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, 1995, were 25.90%,
17.11%, and 15.02% respectively. If an investor had invested $10,000 in
that predecessor's shares on March 1, 1979 and had reinvested all
distributions and income dividends, the NAV of that investor's holdings
would have been $149,149 on August 31, 1995.
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, 1995, and for the period from
- 22 -
<PAGE>
September 27, 1988 (commencement of operations), through August 31, 1995,
were 19.51%, 17.35%, and 12.61%, respectively. If an investor had
invested $10,000 in that predecessor's shares on September 27, 1988 and
had reinvested all distributions and income dividends, the NAV of that
investor's holdings would have been $22,780 on August 31, 1995.
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, 1995, were 27.44%,
19.19%, and 15.09%, respectively. If an investor had invested $10,000 in
that predecessor's shares on October 19, 1955 and had reinvested all
distributions and income dividends, the NAV of that investor's holdings
would have been $932,053 on August 31, 1995.
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, 1995, were 24.01%,
20.14%, and 15.66%, respectively. If an investor had invested $10,000 in
that predecessor's shares on June 1, 1950 and had reinvested all
distributions and income dividends, the NAV of that investor's holdings
would have been $2,629,312 on August 31, 1995.
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, 1995, were 21.52%,
16.06%, and 14.44%, respectively. If an investor had invested $10,000 in
that predecessor's shares on January 20, 1975 and had reinvested all
distributions and income dividends, the NAV of that investor's holdings
would have been $287,463 on August 31, 1995.
Comparative Information
-----------------------
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 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.
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
- 23 -
<PAGE>
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, New York
Times, Kiplingers Personal Finance, and Barron's News-
paper, 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, Nasdaq Composite Index, Value Line Index, U.S.
Department of Labor Consumer Price Index ("Consumer Price
Index"), College Board Survey of Colleges Annual
Increases of College Costs, 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 $27
million to $880 million, with an average of $302 million.
The S&P 400 Index measures mid-sized companies with an
average market capitalization of $1.2 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, for
example, 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,
- 24 -
<PAGE>
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 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.
Four years' tuition, room and board at a top private institution can
already cost over $80,000. If college expenses continue to increase at
current rates, by the time today's pre-schooler enters the ivy-covered
halls in 2009, four years at a private college may easily cost
$200,000!2/
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 Man-
agement'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 C to this SAI.
CERTAIN RISK CONSIDERATIONS
Although each Portfolio seeks to reduce risk by investing
in a diversified portfolio, diversification does not eliminate all risk.
There can, of course, be no assurance that any Portfolio will achieve its
investment objective, and an investment in a Fund involves certain risks
that are described in the sections entitled "Investment Programs" and
2/ Source: College Board, 1994, 1995 Annual Survey of Colleges,
Princeton, NJ, assuming an average 6% increase in annual expenses.
- 25 -
<PAGE>
"Description of Investments" in the Prospectus and "Investment Information
-- Additional Investment Information" in this SAI.
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 (where applicable) their corresponding portfolios, administered
or managed by N&B Management and Neuberger & Berman, L.P. ("Neuberger &
Berman").
<TABLE>
<CAPTION>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
-------------- --------------- --------------------------
<S> <C> <C>
Faith Colish (60) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (73) Trustee of each Trust Retired. Formerly Senior Vice President and
435 East 52nd Street Director of Exxon Corporation; Director of
New York, NY 10022 Emigrant Savings Bank.
Stanley Egener* (61) Chairman of the Board, Partner of Neuberger & Berman; President and
Chief Executive Officer, Director of N&B Management; Chairman of the
and Trustee of each Board, Chief Executive Officer, and Trustee
Trust of eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Alan R. Gruber (68) Trustee of each Trust Chairman and Chief Executive Officer of
Orion Capital Corporation Orion Capital Corporation (property and
600 Fifth Avenue, 24th Floor casualty insurance); Director of Trenwick
New York, NY 10020 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).
- 26 -
<PAGE>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
-------------- --------------- --------------------------
Howard A. Mileaf (57) Trustee of each Trust Vice President and Special Counsel to Wheel-
Wheeling Pittsburgh Corporation ing Pittsburgh Corporation (holding company)
110 East 59th Street since 1992; formerly Vice President and
New York, NY 10022 General Counsel of Keene Corporation (manu-
facturer of industrial products); Director
of Kevlin Corporation (manufacturer of
microwave and other products).
Edward I. O'Brien* (67) 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. (67) Trustee of each Trust President of SOBRO (South Bronx Overall
90 Riverside Drive Economic Development Corporation).
Apartment 1B
New York, NY 10024
John P. Rosenthal (63) Trustee of each Trust Senior Vice President of Burnham Securities
Burnham Securities Inc. Inc. (a registered broker-dealer) since
Burnham Asset Management Corp. 1991; formerly Partner of Silberberg,
1325 Avenue of the Americas Rosenthal & Co. (member of National Asso-
17th Floor ciation of Securities Dealers, Inc.);
New York, NY 10019 Director, Cancer Treatment Holdings, Inc.
Cornelius T. Ryan (64) Trustee of each Trust General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture capital
315 Post Road West partnerships) and President of Oxford Ven-
Westport, CT 06880 ture Corporation; Director of Capital Cash
Management Trust (money market fund) and
Prime Cash Fund.
- 27 -
<PAGE>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
-------------- --------------- --------------------------
Gustave H. Shubert (66) Trustee of each Trust Senior Fellow/Corporate Advisor and Advisory
13838 Sunset Boulevard Trustee of Rand (a non-profit public
Pacific Palisades, CA 90272 interest research institution) since 1989;
Honorary Member of the Board of Overseers of
the Institute for Civil Justice, the Policy
Advisory Committee of the Clinical Scholars
Program at the University of California, the
American Association for the Advancement of
Science, the Counsel on Foreign Relations,
and the Institute for Strategic Studies
(London); advisor to the Program Evaluation
and Methodology Division of the U.S. General
Accounting Office; formerly Senior Vice
President and Trustee of Rand.
Lawrence Zicklin* (59) President and Trustee of Partner of Neuberger & Berman; Director of
each Trust N&B Management; President and/or Trustee of
five other mutual funds for which N&B
Management acts as investment manager or
administrator.
Daniel J. Sullivan (55) 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 (48) Vice President and Senior Vice President and Treasurer of N&B
Principal Financial Management since 1992; prior thereto, Vice
Officer of each Trust 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 (38) 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.
- 28 -
<PAGE>
Name, Age, and Positions Held
Address(1) With the Trusts Principal Occupation(s)(2)
-------------- --------------- --------------------------
Richard Russell (48) Treasurer and Principal Vice President of N&B Management since 1993;
Accounting Officer of prior thereto, Assistant Vice President of
each Trust N&B Management; Treasurer and Principal Ac-
counting Officer of eight other mutual funds
for which N&B Management acts as investment
manager or administrator.
Stacy Cooper-Shugrue (32) Assistant Secretary of Assistant Vice President of N&B Management
each Trust since 1993; employee of N&B Management since
1989; Assistant Secretary of eight other
mutual funds for which N&B Management acts
as investment manager or administrator.
C. Carl Randolph (57) Assistant Secretary of Partner of Neuberger & Berman since 1992;
each Trust employee thereof since 1971; Assistant
Secretary of eight other mutual funds for
which N&B Management acts as investment
manager or administrator.
</TABLE>
____________________
(1) Unless otherwise indicated, the business address of each listed
person is 605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
* Indicates 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
partners 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 each provides that it 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 engaged in bad
faith, willful misfeasance, gross negligence, or reckless disregard of the
duties involved in the conduct of their offices. 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
- 29 -
<PAGE>
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, 1995, each Fund and
Portfolio paid 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 - $901;
Neuberger & Berman GENESIS Trust and Portfolio - $2,724; Neuberger &
Berman FOCUS Trust and Portfolio - $224; Neuberger & Berman GUARDIAN Trust
and Portfolio - $15,468; and Neuberger & Berman PARTNERS Trust and
Portfolio - $2,015.
The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the
Neuberger & Berman Funds(SERVICEMARK) has any retirement plan for its
trustees or officers.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/95
-----------------------------
Aggregate
Compensation Total Compensation from the Neuberger &
Name and Position with the Trust from the Trust Berman Fund Complex Paid to Trustees
-------------------------------- -------------- ---------------------------------------
<S> <C> <C>
Faith Colish $1,336.05 $39,000
Trustee (5 other investment companies)
Donald M. Cox $1,336.05 $31,000
Trustee (3 other investment companies)
Stanley Egener $0 $0
Chairman of the Board, Chief Executive (9 other investment companies)
Officer, and Trustee
Alan R. Gruber $1,336.05 $31,000
Trustee (3 other investment companies)
Howard A. Mileaf $1,404.81 $36,500
Trustee (4 other investment companies)
Edward I. O'Brien Trustee $1,388.74 $31,500
(3 other investment companies)
John T. Patterson, Jr. $1,371.96 $34,500
Trustee (4 other investment companies)
John P. Rosenthal $1,309.92 $33,000
Trustee (4 other investment companies)
- 30 -
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/95
-----------------------------
Aggregate
Compensation Total Compensation from the Neuberger &
Name and Position with the Trust from the Trust Berman Fund Complex Paid to Trustees
-------------------------------- -------------- ---------------------------------------
Cornelius T. Ryan $1,404.81 $33,500
Trustee (3 other investment companies)
Gustave H. Shubert $1,309.92 $30,000
Trustee (3 other investment companies)
Lawrence Zicklin $0 $0
President and Trustee (5 other investment companies)
</TABLE>
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 do so.
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 partners of Neuberger & Berman), one of whom also serves as an officer
- 31 -
<PAGE>
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 shareholder accounting, recordkeeping, and other
shareholder services, to each Fund pursuant to an administration agreement
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 such Institutions for
accounting, recordkeeping and other services that they provide to
investors who purchase shares of the Funds.
During the fiscal years ended August 31, 1995 and 1994
and the period from August 3 to August 31, 1993, each Fund accrued
management and administration fees as follows: Neuberger & Berman
MANHATTAN Trust - $202,729, $49,957, and $0.51; Neuberger & Berman GENESIS
Trust - $274,709, $14,462, and $3.70; Neuberger & Berman FOCUS Trust -
$43,330, $4,624, and $0.51; Neuberger & Berman GUARDIAN Trust -
$2,417,586, $142,142, and $43.97; and Neuberger & Berman PARTNERS Trust -
$292,161, $17,299, and $0.50, respectively.
N&B Management has voluntarily undertaken until December
31, 1996, 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. During the period from August 3, 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 which, in the aggregate, exceeded the aggregate Operating
Expenses and pro rata share of corresponding Portfolio Operating Expenses
of that Fund's Sister Fund. During the fiscal years ended August 31, 1995
and 1994, N&B Management reimbursed each Fund the following amounts of
expenses under the above arrangements: Neuberger & Berman MANHATTAN
Trust, $87,443 and $88,693, respectively; Neuberger & Berman GENESIS
Trust, $69,047 and $73,439, respectively; Neuberger & Berman FOCUS Trust,
$92,687 and $68,286, respectively; Neuberger & Berman GUARDIAN Trust,
$171,796 and $116,354, respectively; and Neuberger & Berman PARTNERS
Trust, $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
- 32 -
<PAGE>
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
shares 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 "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 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 if authorized by the Fund Trustees,
including a majority of the Independent Fund Trustees. Each Agreement
terminates automatically if it is assigned.
In addition to the voluntary expense reimbursements
described in the Prospectus under "Management and Administration --
Expenses," N&B Management has agreed in the Management Agreement to
reimburse each Fund's expenses, as follows. If, in any fiscal year, a
Fund's Aggregate Operating Expenses (as defined below) exceed the most
restrictive expense limitation imposed under the securities laws of the
states in which that Fund's shares are qualified for sale ("State Expense
Limitation"), then N&B Management will pay the Fund the amount of that
excess, less the amount of any reduction of the administration fee payable
by the Fund under a similar State Expense Limitation contained in the
Administration Agreement. N&B Management will have no obligation to pay a
Fund, however, for any expenses that exceed the pro rata portion of the
management fees attributable to that Fund's interest in its corresponding
Portfolio. At the date of this SAI, the most restrictive State Expense
Limitation to which any Fund expects to be subject is 2 1/2% of the first
$30 million of average net assets, 2% of the next $70 million of average
net assets, and 1-1/2% of average net assets over $100 million.
For purposes of the State Expense Limitation, the term
"Aggregate Operating Expenses" means a Fund's operating expenses plus its
pro rata portion of its corresponding Portfolio's operating expenses
(including any fees or expense reimbursements payable to N&B Management
and any compensation payable thereto pursuant to (1) the Administration
Agreement or (2) any other agreement or arrangement with Managers Trust in
regard to the Portfolio; but excluding (with respect to both the Fund and
the Portfolio) interest, taxes, brokerage commissions, litigation and
indemnification expenses, and other extraordinary expenses not incurred in
the ordinary course of business).
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<PAGE>
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 inter-
ests 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 partners 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, by a 1940 Act
majority vote of the outstanding Portfolio shares, 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 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, 1995, these
companies, along with three investment companies advised by Neuberger &
Berman, had aggregate net assets of approximately $11.4 billion, as shown
in the following list:
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<PAGE>
Approximate Net Assets at
September 30,
Name 1995
---- ------------------------
Neuberger & Berman Cash Reserves Portfolio $ 377,608,619
(investment portfolio for Neuberger
& Berman Cash Reserves)
Neuberger & Berman Government Income $ 12,053,656
Portfolio
(investment portfolio for Neuberger
& Berman Government Income Fund and
Neuberger & Berman Government
Income Trust)
Neuberger & Berman Government Money $ 346,898,132
Portfolio
(investment portfolio for Neuberger
& Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond $ 309,540,451
Portfolio
(investment portfolio for Neuberger
& Berman Limited Maturity Bond Fund
and Neuberger & Berman Limited
Maturity Bond Trust)
Neuberger & Berman Municipal Money $ 149,657,613
Portfolio
(investment portfolio for Neuberger
& Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities $ 44,568,635
Portfolio
(investment portfolio for Neuberger
& Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured $ 10,679,324
Intermediate Portfolio
(investment portfolio for Neuberger
& Berman New York Insured
Intermediate Fund)
- 35 -
<PAGE>
Approximate Net Assets at
September 30,
Name 1995
---- ------------------------
Neuberger & Berman Ultra Short Bond $ 102,903,312
Portfolio
(investment portfolio for Neuberger
& Berman Ultra Short Bond Fund and
Neuberger & Berman Ultra Short Bond
Trust)
Neuberger & Berman Focus Portfolio $1,031,915,664
(investment portfolio for Neuberger
& Berman Focus Fund and Neuberger &
Berman Focus Trust)
Neuberger & Berman Genesis Portfolio $ 145,188,783
(investment portfolio for Neuberger
& Berman Genesis Fund and Neuberger
& Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio $4,943,764,830
(investment portfolio for Neuberger
& Berman Guardian Fund and
Neuberger & Berman Guardian Trust)
Neuberger & Berman International Portfolio $ 29,990,616
(investment portfolio for Neuberger
& Berman International Fund)
Neuberger & Berman Manhattan Portfolio $ 670,916,038
(investment portfolio for Neuberger
& Berman Manhattan Fund and
Neuberger & Berman Manhattan Trust)
Neuberger & Berman Partners Portfolio $1,664,460,688
(investment portfolio for Neuberger
& Berman Partners Fund and
Neuberger & Berman Partners Trust)
Neuberger & Berman Socially Responsive $ 102,675,093
Portfolio
(investment portfolio for Neuberger
& Berman Socially Responsive Fund,
Neuberger & Berman Socially
Responsive Trust, and Neuberger &
Berman NYCDC Socially Responsive
Trust)
- 36 -
<PAGE>
Approximate Net Assets at
September 30,
Name 1995
---- ------------------------
Neuberger & Berman Advisers $1,257,506,124
Managers Trust
(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 $85,110,472,
$110,683,193, and $23,891,472, respectively, at September 30, 1995.
The investment decisions concerning the Portfolios and
the other funds and portfolios 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. 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.
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 as to amounts 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 investment results
achieved by all of the funds managed by N&B Management have varied from
one another in the past and are likely to vary in the future.
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; Theresa A. Havell, Vice President and director; Irwin Lainoff,
director; Marvin C. Schwartz, director; Lawrence Zicklin, director; Daniel
J. Sullivan, Senior Vice President; Michael J. Weiner, Senior Vice
President and Treasurer; Claudia A. Brandon, Vice President; William
Cunningham, Vice President; Clara Del Villar, Vice President; Mark R.
Goldstein, Vice President; Farha-Joyce Haboucha, Vice President; Michael
M. Kassen, Vice President; Michael Lamberti, Vice President; Josephine P.
- 37 -
<PAGE>
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; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Patrick T. Byrne, Assistant Vice President; Robert
Conti, Assistant Vice President; Stacy Cooper-Shugrue, Assistant Vice
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Roberta D'Orio, Assistant Vice President; Robert
I. Gendelman, Assistant Vice President; Leslie Holliday-Soto, Assistant
Vice President; Carmen G. Martinez, Assistant Vice President; Paul
Metzger, Assistant Vice President; Susan Switzer, Assistant Vice
President; Susan Walsh, Assistant Vice President; and Celeste Wischerth,
Assistant Vice President. Messrs. Cantor, Egener, Lainoff, Schwartz,
Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Havell and Prindle
are general partners of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and
Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue
are officers, of each Trust. C. Carl Randolph, a general partner 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 general partners 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 either 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 a Fund's shareholders, 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 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.
- 38 -
<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,
1996. 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 automatically
terminate 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 a higher total return than is available
Ultra Short Bond Trust from money market funds, with minimal risk to
principal and liquidity. Through its
corresponding portfolio, the fund invests in
high-quality money market instruments and
short-term debt securities.
Neuberger & Berman Seeks the highest current income consistent
Limited Maturity Bond with low risk to principal and liquidity and,
Trust secondarily, total return. Through its
corresponding portfolio, the fund invests in
short- to intermediate-term debt securities
of at least investment grade.
- 39 -
<PAGE>
Neuberger & Berman Seeks a high level of current income and
Government Income Trust total return, consistent with safety of
principal. At least 65% of the corresponding
portfolio's investments are in U.S. Gov-
ernment securities that are issued or
guaranteed as to principal and interest by
the U.S. Government or its agencies,
including U.S. Government mortgage-backed
securities; at least 25% of its investments
are in mortgage-backed and asset-backed
securities.
Any Fund described herein, and any of the Income Funds, may
terminate or modify its exchange privilege in the future.
Fund shareholders who are considering exchanging shares into any
of the funds listed above should note that (1) the Income Funds are 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) each series of Neuberger & Berman Income Trust invests
all its net investable assets in a portfolio of Income Managers Trust, an
open-end management investment company that is managed by N&B Management.
Each such portfolio has an investment objective identical to that of its
corresponding fund and invests in accordance with investment policies and
limitations identical to those of that 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. In this regard, it should be noted that
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 the 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 a Fund's shareholders; provided that 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.
- 40 -
<PAGE>
Redemptions in Kind
-------------------
Each Fund reserves the right, under certain conditions,
to honor any request for redemption by making payment in whole or in part
in securities valued as described under "Share Information -- Share Prices
and Net Asset Value" in the Prospectus. If payment is made in securities,
a shareholder generally will incur brokerage expenses in converting those
securities into cash and will be subject to fluctuations in the market
price 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
determine that it is in the best interests of a Fund's shareholders as a
whole. Redemptions in kind will be made with readily marketable
securities to the extent possible.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders amounts equal
to substantially all of its proportionate share of any net investment
income (after deducting expenses incurred directly by the Fund), net
capital gains (both long-term and short-term), and net 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 realized 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, at the end of each calendar quarter.
Dividends and/or other distributions are automatically
reinvested in additional shares of the distributing Fund, unless and until
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.
- 41 -
<PAGE>
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 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 secu-
rities 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, 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 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) of any one issuer.
Certain funds managed by N&B Management, including the
Sister Funds, have received a ruling from the Internal Revenue Service
("Service") that each such fund, as an investor in a corresponding
portfolio of Managers Trust or Income Managers Trust, will be deemed to
own a proportionate share of the portfolio's assets and income for pur-
poses of determining whether the fund satisfies all the requirements
described above to qualify as a RIC. Although that ruling may not be
relied on as precedent by the Funds, N&B Management believes that the
reasoning thereof and, hence, its 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 conse-
quences to the Funds of distributions to them from the Portfolios,
investments by the Portfolios in certain securities, and hedging trans-
actions engaged in by the Portfolios.
- 42 -
<PAGE>
Taxation of the Portfolios
--------------------------
The Portfolios have received a ruling 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 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 satisfies the requirements to qualify 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 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
- 43 -
<PAGE>
federal income tax on a portion of any "excess distribution" received on
the stock or of any gain on disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in the Fund's investment company taxable income
and, accordingly, will not be taxable to it to the extent that income is
distributed to its shareholders.
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 pro rata 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 to 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 writ-
ing (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. Income from foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and
income from transactions in Hedging Instruments derived by the Portfolio
with respect to its business of investing in securities or foreign cur-
rencies, 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 in-
crease 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
- 44 -
<PAGE>
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 qualify for this
treatment for its hedging transactions. To the extent a Portfolio does
not so qualify, it may be forced to defer the closing out of certain
Hedging Instruments 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, that Portfolio (and, through
it, its corresponding 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
Neuberger & Berman PARTNERS Trust 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 to
avoid imposition of the Excise Tax, that Fund may be required in a parti-
cular year to distribute as a dividend an amount that is greater than its
proportionate share of the total amount of cash Neuberger & Berman
PARTNERS Portfolio actually receives. Those distributions will be made
from that Fund's (or its proportionate share of that Portfolio's) cash
assets or, if necessary, from the proceeds of sales of that Portfolio's
securities. That 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, 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. Investors also should be aware that if shares
of any Fund are purchased shortly before the record date for a dividend or
other distribution, the purchaser will receive some portion of the
purchase price back as a taxable distribution.
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
- 45 -
<PAGE>
market, which that Portfolio purchases and sells in principal transactions
with dealers who are the principal market makers for the securities) and
in connection with the writing of covered call options on its securities.
Transactions in portfolio securities for which Neuberger & Berman serves
as broker will be effected in accordance with Rule 17e-1 under the 1940
Act.
During the period August 3 to August 31, 1993, Neuberger
& Berman MANHATTAN Portfolio paid brokerage commissions of $42,780, of
which $32,922 was paid to Neuberger & Berman. During the fiscal year
ended August 31, 1994, that Portfolio paid brokerage commissions of
$655,640, of which $525,610 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman MANHATTAN Portfolio paid brokerage commissions of $654,982, of
which $436,568 was paid to Neuberger & Berman. Transactions in which that
Portfolio used Neuberger & Berman as broker comprised 73.70% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 66.65% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 94.53% of the
$218,414 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$81,737,328) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, 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., 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., $6,187,500, and Morgan Stanley & Co.,
Inc., $10,859,370.
During the period August 3 to August 31, 1993,
Neuberger & Berman GENESIS Portfolio paid brokerage commissions of
$13,580, of which $10,660 was paid to Neuberger & Berman. During the
fiscal year ended August 31, 1994, that Portfolio paid brokerage
commissions of $287,587, of which $170,883 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman GENESIS Portfolio paid brokerage commissions of $199,718, of which
$118,014 was paid to Neuberger & Berman. Transactions in which that
Portfolio used Neuberger & Berman as broker comprised 55.55% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 59.09% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 80.60% of the
$81,704 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$21,361,399) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: EXXON
Credit Corp., and General Electric Capital Corp.; at that date, that
Portfolio held the securities of its Regular B/Ds with an aggregate value
as follows: None.
- 46 -
<PAGE>
During the period August 3 to August 31, 1993,
Neuberger & Berman FOCUS Portfolio paid brokerage commissions of $46,296,
of which $42,606 was paid to Neuberger & Berman. During the fiscal year
ended August 31, 1994, that Portfolio paid brokerage commissions of
$719,994, of which $567,972 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman FOCUS Portfolio paid brokerage commissions of $1,031,245, of which
$617,957 was paid to Neuberger & Berman. Transactions in which that
Portfolio used Neuberger & Berman as broker comprised 66.83% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 59.92% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 89.62% of the
$413,288 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$160,855,610) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: EXXON
Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce,
Fenner & Smith, Inc.; at that date, that Portfolio held the securities of
its Regular B/Ds with an aggregate value as follows: General Electric
Capital Corp., $2,300,000, and Merrill Lynch, Pierce, Fenner & Smith,
Inc., $14,406,250.
During the period August 3 to August 31, 1993,
Neuberger & Berman GUARDIAN Portfolio paid brokerage commissions of
$201,981, of which $149,496 was paid to Neuberger & Berman. During the
fiscal year ended August 31, 1994, that 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, Neuberger &
Berman GUARDIAN Portfolio paid brokerage commissions of $3,751,206, of
which $2,521,523 was paid to Neuberger & Berman. Transactions in which
that Portfolio used Neuberger & Berman as broker comprised 70.49% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 67.22% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 82.78% of the
$1,229,683 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$509,609,733) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: EXXON
Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce,
Fenner & Smith, Inc.; at that date, that Portfolio held the securities of
its Regular B/Ds with an aggregate value as follows: General Electric
Capital Corp., $1,500,000, and Merrill Lynch, Pierce, Fenner & Smith,
Inc., $48,116,875.
During the period August 3 to August 31, 1993, Neuberger
& Berman PARTNERS Portfolio paid brokerage commissions of $373,486, of
which $272,542 was paid to Neuberger & Berman. During the fiscal year
- 47 -
<PAGE>
ended August 31, 1994, that 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, Neuberger &
Berman PARTNERS Portfolio paid brokerage commissions of $4,608,156, of
which $3,092,789 was paid to Neuberger & Berman. Transactions in which
that Portfolio used Neuberger & Berman as broker comprised 71.83% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 67.12% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 95.02% of the
$1,515,367 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$600,676,631) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds:
Salomon Brothers, Inc., EXXON Credit Corp., and General Electric Capital
Corp.; at that date, that Portfolio held the securities of its Regular
B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$7,600,000.
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. Under the order, the portion of the
income on the cash collateral which may be shared with Neuberger & Berman
is determined with 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 relend 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 relending
of the borrowed 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.
- 48 -
<PAGE>
During the fiscal years ended August 31, 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>
1994 1995
---- ----
Payment to Payment to
Neuberger & Neuberger &
Portfolio Interest Berman Interest Berman
--------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Neuberger & Berman $147,103 $119,620 $1,430,672 $1,252,190
GUARDIAN Portfolio
Neuberger & Berman FOCUS 38,627 33,225 327,447 291,207
Portfolio
Neuberger & Berman 16,085 13,880 52,410 48,736
PARTNERS Portfolio
Neuberger & Berman 0 0 0 0
GENESIS Portfolio
Neuberger & Berman 0 0 507,239 270,594
MANHATTAN Portfolio
</TABLE>
During the period August 3 to August 31, 1993, Neuberger
& Berman GUARDIAN Portfolio earned interest income of $3,164 from the
collateralization of securities loans, from which Neuberger & Berman was
paid $2,881. During the same period, none of the other Portfolios earned
interest income from the collateralization of securities loans.
Each Portfolio may also lend securities to unaffiliated
entities, including brokers or dealers, banks and other recognized
institutional borrowers of securities, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the securities
loaned, is continuously maintained by the borrower with the Portfolio.
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. 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. 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
- 49 -
<PAGE>
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 gen-
erally 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,
however, 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 Port-
folio 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 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 or sale of securities for a Portfolio's account,
unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time
to time reviews, among other things, information relating to the
- 50 -
<PAGE>
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.
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.
To ensure that accounts of all investment clients,
including a Portfolio, are treated fairly in the event that transaction
instructions for more than one investment account regarding the same
security are received by Neuberger & Berman at or about the same time,
Neuberger & Berman may combine transaction 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 transaction order
actually placed by the account bears to the aggregate size of transaction
orders simultaneously made by the other accounts, subject to de minimis
exceptions, with all participating accounts paying or receiving the same
price.
A committee comprised of officers of N&B Management and
partners 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 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 transac-
tions 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 or research
capabilities of particular brokers, or in the execution or research needs
of the N&B Funds and/or the Managed Accounts; and (3) the aggregate amount
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<PAGE>
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 charged by 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 research
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 and
Kent C. Simons, and Michael M. Kassen and Robert I. Gendelman, each of
whom is a Vice President of N&B Management (except for Mr. Gendelman, who
is an Assistant Vice President) and a general partner of Neuberger &
Berman (except for Ms. Vale 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 Man-
agement 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.
Portfolio Turnover
------------------
The portfolio turnover rate is the lesser of the cost of
the securities purchased or the value of the securities sold, excluding
all securities, including options, whose maturity or expiration date at
the time of acquisition was one year or less, divided by the average
monthly value of such securities owned during the 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.
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<PAGE>
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. All correspondence should be
mailed to Neuberger & Berman Funds, Institutional Services, 605 Third
Avenue, 2nd Floor, New York, NY 10158-0180. 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.
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. 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 M Street, N.W., Washington, D.C. 20036, 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 owned of record, or who was
known by each Fund to own beneficially or of record, 5% or more of that
Fund's outstanding shares at November 30, 1995:
- 53 -
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Ownership at
Name and Address November 30, 1995
---------------- -----------------
<S> <C> <C>
Neuberger & Berman MANHATTAN MAC & Co. 51.68%
Trust A/C 195-643
Mellon Bank N.A.
Mutual Funds
P.O. Box 320
Pittsburgh, PA 15230-0320
The Northern Trust Co., Trustee 25.56%
FBO Case Corporation
22-75833
P.O. Box 92956
Chicago, IL 60675-0001
Riggs National Bank of Washington DC Retirement 7.40%
Plan for Employees of Professional Golfers Assoc.
of America
100 Avenue of the Champions
Palm Beach Gardens, FL 33418-3653
National Finance Services Corp.* 5.19%
P.O. Box 3908
Church Street Station
New York, NY 100008-3908
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<PAGE>
Percentage of
Ownership at
Name and Address November 30, 1995
---------------- -----------------
Neuberger & Berman PARTNERS PRC Inc. 50.62%
Trust c/o T. Rowe Price Financial
Attn: Asset Recom.
P.O. Box 17215
Baltimore, MD 21297-0354
The Bank of NY, Trustee 20.82%
Chesapeake Corp. 401(k) Plan
One Wall Street
Master Trust
7th Floor
New York, NY 10286-0001
National Financial Services Corp.* 12.18%
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Marshall & Isley Trust Co., Trustee
Mitra & Co. 6.22%
Attn: Exp Mutual Funds TR14
1000 N. Water Street
Milwaukee, WI 53202-3197
- 55 -
<PAGE>
Percentage of
Ownership at
Name and Address November 30, 1995
---------------- -----------------
Neuberger & Berman GUARDIAN The Northern Trust Co., Trustee 27.18%
Trust Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-0001
MAC & Co.
A/C 195-643 17.15%
Mellon Bank N.A.
P.O. Box 320
Pittsburgh, PA 15230-0320
National Financial Services Corp.* 9.54%
P.O. Box 3908
Church Street Station
New York, NY 100008-3908
The Bank of NY, Trustee 6.33%
Melville Corp. 401(k)
PSRP-General DTD 6/7/89
1 Wall Street, 7th Floor
New York, NY 10286-0001
MAC & Co. 5.38%
A/C #854-169
Mellon Bank N.A.
Mutual Funds Dept.
P.O. Box 320
Pittsburgh, PA 15230-0320
Neuberger & Berman FOCUS Trust National Financial Services Corp.* 51.22%
P.O. Box 3908
Church Street Station
New York, NY 100008-3908
MAC & Co. 21.80%
A/C 195-643
Mellon Bank N.A.
P.O. Box 320
Pittsburgh, PA 15230-0320
Aetna Life Insurance & Annuity Co. 8.97%
ACES - Separate Account F
Attn: Michael Weiner - RTAL
15 Farmington Ave.
Hartford, CT 06156-0001
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<PAGE>
Percentage of
Ownership at
Name and Address November 30, 1995
---------------- -----------------
Neuberger & Berman GENESIS Profit Sharing Plan for Partners & Principals of 72.78%
Trust Price Waterhouse
P.O. Box 30004
Tampa, FL 33630-3004
MAC & Co. 22.34%
A/C 195-643
Mellon Bank N.A.
P.O. Box 320
Pittsburgh, PA 15230-0320
</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.
At December 6, 1995, 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.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the infor-
mation included in the Trust's registration statement filed with the SEC
under the 1933 Act with respect to the securities offered by the
Prospectus. Certain portions of the registration statement have been
omitted pursuant to SEC rules and regulations. 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, and in each instance reference is made to the copy
of the contract or other document filed as an exhibit to the registration
statement, each such statement being 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, 1995:
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<PAGE>
The audited financial statements of the Funds and
Portfolios and notes thereto for the fiscal year ended
August 31, 1995, 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.
- 58 -
<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.
- 59 -
<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.
- 60 -
<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.
- 61 -
<PAGE>
Appendix B
PERFORMANCE DATA
<PAGE>
<TABLE>
<CAPTION>
COST OF LIVING INDEX
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- --------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
9/27/88 $10,000.00 $119.8000 0.00% 83.472 $119.8000 $10,000
Dividends and Capital Gains Reinvested
=========== C O S T O F S H A R E S ==============
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
8/31/89 10,000 0 0 10,000 0
8/31/90 10,000 0 0 10,000 0
8/31/91 10,000 0 0 10,000 0
8/31/92 10,000 0 0 10,000 0
8/31/93 10,000 0 0 10,000 0
8/31/94 10,000 0 0 10,000 0
8/31/95 10,000 0 0 10,000 0
Totals 0 0
================ V A L U E O F S H A R E S ===============
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
---- ---------- ---------- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
8/31/89 10,401 0 10,401 0 10,401 83
8/31/90 10,985 0 10,985 0 10,985 83
8/31/91 11,402 0 11,402 0 11,402 83
8/31/92 11,761 0 11,761 0 11,761 83
8/31/93 12,087 0 12,087 0 12,087 83
8/31/94 12,437 0 12,437 0 12,437 83
8/31/95 12,730 0 12,730 0 12,730 83
Totals 12,730 0 12,730 0 12,730 83
Average Annual Total Return for This Illustration: 3.55% (Annual Compounding)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM FOCUS TRUST
PREPARED FOR: BARBARA
Net Asset Initial
Initial Offering Sales Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- -------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
10/19/55 $200,000.00 $2.5084 0.00% 79,733.329 $2.5084 $200,000
Systematic Withdrawal Plan
Dividends and Capital Gains Reinvested
Monthly Withdrawals of $1,666.67 (10.0% Annually) Beginning 11/30/55
====================== AMOUNTS WITHDRAWN ========================
From
Income From Annual Cumulative
Date Dividends Principal Total Total
---- --------- --------- ------ ----------
<S> <C> <C> <C> <C>
12/31/55 0 3,333 3,333 3,333
12/31/56 3,075 16,925 20,000 23,333
12/31/57 2,911 17,089 20,000 43,333
12/31/58 3,531 16,469 20,000 63,333
12/31/59 2,647 17,353 20,000 83,333
12/31/60 2,638 17,362 20,000 103,333
12/31/61 1,514 18,486 20,000 123,333
12/31/62 2,823 17,177 20,000 143,333
12/31/63 4,158 15,842 20,000 163,333
12/31/64 4,580 15,420 20,000 183,333
12/31/65 4,878 15,122 20,000 203,333
12/31/66 5,474 14,526 20,000 223,333
12/31/67 6,001 13,999 20,000 243,333
12/31/68 7,814 12,186 20,000 263,333
12/31/69 10,904 9,096 20,000 283,333
12/31/70 11,517 8,483 20,000 303,333
12/31/71 8,939 11,061 20,000 323,333
12/31/72 6,963 13,037 20,000 343,333
12/31/73 7,714 12,286 20,000 363,333
12/31/74 10,666 9,334 20,000 383,333
12/31/75 11,931 8,069 20,000 403,333
12/31/76 11,691 8,309 20,000 423,333
12/31/77 12,064 7,936 20,000 443,333
12/31/78 14,895 5,105 20,000 463,333
12/31/79 17,745 2,255 20,000 483,333
12/31/80 24,168 -4,168 20,000 503,333
12/31/81 34,507 -14,507 20,000 523,333
12/31/82 35,376 -15,376 20,000 543,333
12/31/83 38,234 -18,234 20,000 563,333
<PAGE>
From
Income From Annual Cumulative
Date Dividends Principal Total Total
---- --------- --------- ------ ----------
<S> <C> <C> <C> <C>
12/31/84 34,870 -14,870 20,000 583,333
12/31/85 39,588 -19,588 20,000 603,333
12/31/86 40,877 -20,877 20,000 623,333
12/31/87 31,651 -11,651 20,000 643,333
12/31/88 31,622 -11,622 20,000 663,333
12/31/89 31,152 -11,152 20,000 683,333
12/31/90 25,865 -5,865 20,000 703,333
12/31/91 27,428 -7,428 20,000 723,333
12/31/92 22,593 -2,593 20,000 743,333
12/31/93 4,220 15,780 20,000 763,333
12/31/94 10,487 9,513 20,000 783,333
8/31/95 0 13,333 13,333 796,666
Totals 609,711 186,955 796,666 796,666
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
====== VALUE OF REMAINING SHARES =======
Annual Remaining Capital
Cap Gain Original Gain Total Shares
Date Distrib'n Shares Shares Value Held
---- --------- --------- -------- ----- ------
<S> <C> <C> <C> <C>
12/31/55 0 224,392 0 224,392 78,535
12/31/56 7,330 243,982 8,155 252,137 75,616
12/31/57 8,869 182,115 14,547 196,662 73,399
12/31/58 5,116 239,403 26,648 266,051 69,711
12/31/59 14,487 260,750 47,285 308,035 69,413
12/31/60 12,216 244,571 60,887 305,458 68,446
12/31/61 12,799 262,910 83,479 346,389 67,418
12/31/62 6,319 191,487 73,223 264,710 65,143
12/31/63 9,227 205,607 94,268 299,875 63,590
12/31/64 9,923 198,421 107,998 306,419 62,459
12/31/65 12,757 225,255 145,661 370,916 61,763
12/31/66 24,135 189,601 158,410 348,011 64,430
12/31/67 28,440 228,946 232,144 461,090 66,401
12/31/68 29,099 211,733 256,462 468,195 69,003
12/31/69 12,581 162,510 218,142 380,652 69,986
12/31/70 4,495 139,496 203,486 342,982 69,223
12/31/71 9,498 133,615 219,440 353,055 69,109
12/31/72 9,192 129,330 243,386 372,716 68,633
12/31/73 4,408 103,616 223,115 326,731 66,855
12/31/74 0 73,168 173,873 247,041 64,865
12/31/75 0 85,275 223,115 308,390 63,102
12/31/76 10,166 98,133 289,582 387,715 63,565
12/31/77 13,091 87,043 290,631 377,674 64,760
12/31/78 16,463 78,911 298,167 377,078 66,370
12/31/79 18,820 106,167 433,773 539,940 68,772
12/31/80 55,081 136,243 600,430 736,673 75,144
12/31/81 65,009 120,522 518,239 638,761 86,666
12/31/82 18,042 128,437 493,997 622,434 92,304
12/31/83 29,906 161,024 578,434 739,458 98,760
12/31/84 26,760 170,504 584,155 754,659 104,585
12/31/85 40,018 211,307 690,668 901,975 112,723
12/31/86 77,109 226,632 745,438 972,070 125,890
12/31/87 174,683 200,276 760,369 960,645 148,345
12/31/88 33,263 231,501 866,455 1,097,956 154,853
12/31/89 166,796 269,717 1,133,269 1,402,986 177,282
12/31/90 28,044 250,146 1,049,910 1,300,056 182,282
12/31/91 66,461 300,626 1,298,210 1,598,836 191,508
12/31/92 170,497 327,575 1,586,004 1,913,579 212,897
12/31/93 2,110 372,854 1,893,677 2,266,531 211,430
12/31/94 0 365,190 1,902,509 2,267,699 210,557
8/31/95 0 473,197 2,545,512 3,018,709 209,487
Totals 1,233,211 473,197 2,545,512 3,018,709 209,487
Average Annual Total Return for This Illustration: 12.25% (Annual Compounding)
<PAGE>
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 26.32% 16.13% 14.32%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEUBERGER & BERMAN FOCUS
========================= COST OF SHARES ===========================
Annual Cumulative Total Annual Cap
Cumulative Income Income Investment Gain
Date Investment Dividends Dividends Cost Distribution
<S> <C> <C> <C> <C> <C>
8/31/77 10,000 2,230 17,323 27,232 1,939
8/31/78 10,000 2,425 19,748 29,748 2,631
8/31/79 10,000 3,158 22,906 32,906 3,490
8/31/80 10,000 3,951 26,857 36,857 4,191
8/31/81 10,00 5,579 32,436 42,436 12,716
8/31/82 10,000 8,199 40,635 50,635 15,446
8/31/83 10,000 8,699 49,334 59,334 4,436
8/31/84 10,000 9,691 59,025 69,025 7,580
8/31/85 10,000 9,081 68,106 78,106 6,969
8/31/86 10,000 10,569 78,675 88,675 10,684
8/31/87 10,000 11,157 89,832 99,832 21,046
8/31/88 10,000 8,807 98,639 108,639 48,561
8/31/89 10,000 8,973 107,612 117,612 9,433
8/31/90 10,000 8,987 116,599 126,599 48,090
8/31/91 10,000 7,572 124,172 134,172 8,209
8/31/92 10,000 8,144 132,316 142,316 19,739
8/31/93 10,000 6,791 139,107 149,107 51,238
8/31/94 10,000 6,710 145,817 155,817 45,629
8/31/95 10,000 5,822 151,639 161,639 43,083
Totals 151,639 387,682
=========================== VALUE OF SHARES=================================
From Cap From
From Gains Dividends
Date Investment Reinvested Sub Total Reinvested Total Value Shares Held
<S> <C> <C> <C> <C> <C> <C>
8/31/77 24,299 29,207 53,506 21,716 75,222 5,159
8/31/78 26,133 34,517 60,650 26,217 86,867 5,540
8/31/79 29,884 43,675 73,559 33,784 107,343 5,987
8/31/80 37,917 61,280 99,197 48,394 147,591 6,488
8/31/81 35,767 70,225 105,992 51,100 157,092 7,320
8/31/82 26,550 66,476 93,026 45,548 138,574 8,699
8/31/83 32,801 88,080 120,881 67,947 188,828 9,595
8/31/84 31,416 92,348 123,764 75,287 199,051 10,560
8/31/85 33,167 105,513 138,680 89,933 228,613 11,488
8/31/86 35,117 124,321 159,438 107,689 267,127 12,678
8/31/87 40,650 172,364 213,014 139,741 352,755 14,643
8/31/88 28,766 163,857 192,623 106,906 299,529 17,354
8/31/89 36,333 219,324 255,657 146,768 402,425 18,460
8/31/90 30,083 227,279 257,362 130,065 387,427 21,464
8/31/91 33,416 262,297 295,713 153,540 449,253 22,407
<PAGE>
=========================== VALUE OF SHARES=================================
From Cap From
From Gains Dividends
Date Investment Reinvested Sub Total Reinvested Total Value Shares Held
<S> <C> <C> <C> <C> <C> <C>
8/31/92 35,084 297,046 332,130 170,166 502,296 23,862
8/31/93 39,999 401,852 441,851 202,320 644,171 26,840
8/31/94 40,700 457,204 497,904 212,966 710,870 29,110
8/31/95 48,134 598,363 646,497 259,653 906,150 31,376
Totals 48,134 598,363 646,497 259,653 906,150 31,376
Average Annual Total Return for This Illustration: 11.97% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value
for Period Ending 6/30/95: 26.38% 15.48% 14.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM SELECTED SECTORS TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
----- ---------- -------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
10/19/55 $10,000.00 $2.5084 0.00% 3,986.666 $2.5084 $10,000
Dividends and Capital Gains Reinvested
============= C O S T O F S H A R E S =============
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
8/31/56 10,000 0 0 10,000 0
8/31/57 10,000 165 165 10,165 393
8/31/58 10,000 169 334 10,334 516
8/31/59 10,000 226 560 10,560 327
8/31/60 10,000 182 741 10,741 994
8/31/61 10,000 193 935 10,935 896
8/31/62 10,000 118 1,053 11,053 998
8/31/63 10,000 235 1,288 11,288 527
8/31/64 10,000 373 1,661 11,661 828
8/31/65 10,000 439 2,100 12,100 951
8/31/66 10,000 499 2,599 12,599 1,304
8/31/67 10,000 592 3,190 13,190 2,609
8/31/68 10,000 683 3,873 13,873 3,238
8/31/69 10,000 930 4,803 14,803 3,464
8/31/70 10,000 1,358 6,162 16,162 1,567
8/31/71 10,000 1,520 7,682 17,682 593
8/31/72 10,000 1,247 8,929 18,929 1,325
8/31/73 10,000 1,028 9,956 19,956 1,356
8/31/74 10,000 1,207 11,164 21,164 690
8/31/75 10,000 1,785 12,949 22,949 0
8/31/76 10,000 2,145 15,094 25,094 0
8/31/77 10,000 2,230 17,323 27,323 1,939
8/31/78 10,000 2,425 19,748 29,748 2,631
8/31/79 10,000 3,158 22,906 32,906 3,490
8/31/80 10,000 3,951 26,857 36,857 4,191
8/31/81 10,000 5,579 32,436 42,436 12,716
8/31/82 10,000 8,199 40,635 50,635 15,446
8/31/83 10,000 8,699 49,334 59,334 4,436
8/31/84 10,000 9,691 59,025 69,025 7,580
8/31/85 10,000 9,081 68,106 78,106 6,969
8/31/86 10,000 10,569 78,675 88,675 10,684
8/31/87 10,000 11,157 89,832 99,832 21,046
8/31/88 10,000 8,807 98,639 108,639 48,561
<PAGE>
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
8/31/89 10,000 8,973 107,612 117,612 9,433
8/31/90 10,000 8,987 116,599 126,599 48,090
8/31/91 10,000 7,572 124,172 134,172 8,209
8/31/92 10,000 8,144 132,316 142,316 19,739
8/31/93 10,000 6,791 139,107 149,107 51,238
8/31/94 10,000 1,284 140,391 150,391 642
8/31/95 10,000 3,219 143,610 153,610 0
Totals 143,610 299,612
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===================== VALUE OF SHARES ==========================
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
--- ---------- ---------- ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
8/31/56 13,082 0 13,082 0 13,082 3,987
8/31/57 13,343 439 13,782 184 13,966 4,173
8/31/58 13,022 995 14,017 366 14,383 4,403
8/31/59 17,576 1,780 19,356 795 20,151 4,571
8/31/60 18,891 3,108 21,999 1,073 23,072 4,869
8/31/61 20,491 4,497 24,988 1,407 26,395 5,135
8/31/62 16,392 4,432 20,824 1,224 22,048 5,362
8/31/63 19,283 5,929 25,212 1,760 26,972 5,576
8/31/64 19,692 6,927 26,619 2,190 28,809 5,833
8/31/65 21,250 8,509 29,759 2,841 32,600 6,116
8/31/66 21,350 9,776 31,126 3,323 34,449 6,433
8/31/67 28,650 17,059 45,709 5,353 51,062 7,105
8/31/68 28,016 19,965 47,981 5,928 53,909 7,671
8/31/69 23,799 20,063 43,862 5,869 49,731 8,330
8/31/70 18,833 17,235 36,068 5,822 41,890 8,867
8/31/71 22,017 20,853 42,870 8,613 51,483 9,322
8/31/72 21,783 22,065 43,848 9,870 53,718 9,831
8/31/73 19,151 20,718 39,869 9,677 49,546 10,314
8/31/74 15,166 16,907 32,073 8,536 40,609 10,674
8/31/75 20,167 22,480 42,647 13,779 56,426 11,155
8/31/76 23,783 26,512 50,295 18,869 69,164 11,594
8/31/77 24,299 29,207 53,506 21,716 75,222 12,341
8/31/78 26,133 34,517 60,650 26,217 86,867 13,252
8/31/79 29,884 43,675 73,559 33,784 107,343 14,320
8/31/80 37,917 61,280 99,197 48,394 147,591 15,518
8/31/81 35,767 70,225 105,992 51,100 157,092 17,510
8/31/82 26,549 66,476 93,025 45,548 138,573 20,808
8/31/83 32,801 88,080 120,881 67,947 188,828 22,951
8/31/84 31,416 92,348 123,764 75,287 199,051 25,259
8/31/85 33,167 105,513 138,680 89,933 228,613 27,479
8/31/86 35,117 124,231 159,438 107,689 267,127 30,326
8/31/87 40,650 172,364 213,014 139,741 352,755 34,596
8/31/88 28,766 163,857 192,623 106,906 299,529 41,511
8/31/89 36,333 219,324 255,657 146,768 402,425 44,156
8/31/90 30,083 227,279 257,362 130,065 387,427 51,342
8/31/91 33,416 262,297 295,713 153,540 449,253 53,597
8/31/92 35,083 297,046 332,129 170,166 502,295 57,078
8/31/93 39,986 401,714 441,700 202,250 643,950 64,202
8/31/94 45,288 455,662 500,950 230,430 731,380 64,382
8/31/95 57,448 578,001 635,449 296,604 932,053 64,681
Totals 57,448 578,001 635,449 296,604 932,053 64,681
Average Annual Total Return for This Illustration: 12.05% (Annual Compounding)
<PAGE>
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 26.32% 16.13% 14.32%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM GENESIS TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- -------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
9/27/88 $10,000.00 $5.8343 0.00% 1,714.000 $5.8343 $10,000
Dividends and Capital Gains Reinvested
============== C O S T O F S H A R E S =================
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
13/31/88 10,000 20 20 10,020 0
12/31/89 10,000 40 60 10,060 240
12/31/90 10,000 82 142 10,142 0
12/31/91 10,000 21 163 10,163 186
12/31/92 10,000 0 163 10,163 0
12/31/93 10,000 0 163 10,163 18
12/31/94 10,000 0 163 10,163 9
8/31/95 10,000 0 163 10,163 0
Totals 163 454
=============== V A L U E O F S H A R E S ==================
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
---- ---------- ---------- ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
13/31/88 10,320 0 10,320 20 10,340 1,717
12/31/89 11,820 240 12,060 63 12,123 1,758
12/31/90 9,820 200 10,020 134 10,154 1,772
12/31/91 13,700 465 14,165 208 14,373 1,798
12/31/92 15,840 537 16,377 241 16,618 1,798
12/31/93 18,100 632 18,732 275 19,007 1,800
12/31/94 17,792 630 18,422 270 18,692 1,801
8/31/95 21,683 768 22,451 329 22,780 1,801
Totals 21,683 768 22,451 329 22,780 1,801
Average Annual Total Return for This Illustration: 12.62% (Annual Compounding)
<PAGE>
Average Annual Total Returns 1-Year 5-Year Since Inception (9/27/88)
at Net Asset Value ------ ------ -------------------------
for Periods Ending 6/30/95: 16.33% 11.54% 11.68%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM GENESIS TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
9/27/88 $10,000.00 $5.8343 0.00% 1,714.000 $5.8343 $10,000
Dividends and Capital Gains Reinvested
=============== C O S T O F S H A R E S ==============
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
8/31/89 10,000 20 20 10,020 0
8/31/90 10,000 40 60 10,060 240
8/31/91 10,000 82 142 10,142 0
8/31/92 10,000 21 163 10,163 186
8/31/93 10,000 0 163 10,163 0
8/31/94 10,000 0 163 10,163 18
8/31/95 10,000 0 163 10,163 9
Totals 163 454
==================== VALUE OF SHARES =======================
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
---- ---------- ---------- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
8/31/89 13,020 0 13,020 25 13,045 1,717
8/31/90 9,980 203 10,183 53 10,236 1,758
8/31/91 13,400 273 13,673 183 13,856 1,772
8/31/92 13,880 471 14,351 211 14,562 1,798
8/31/93 17,226 584 17,810 262 18,072 1,798
8/31/94 18,151 634 18,785 276 19,061 1,800
8/31/95 21,683 768 22,451 329 22,780 1,801
Totals 21,683 768 22,451 329 22,780 1,801
Average Annual Total Return for This Illustration: 12.62% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year Since Inception (9/27/88)
at Net Asset Value ------ ------ -------------------------
for Periods Ending 9/30/95: 22.18% 19.27% 12.66%
<PAGE>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM GUARDIAN TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- -------- -------- --------- --------- ---------
6/1/50 $200,000.00 $1.8674 0.00% 107,100.000 $1.8674 $200,000
Systematic Withdrawal Plan
Dividends and Capital Gains Reinvested
Monthly Withdrawals of $1,666.67 (10.0% Annually) Beginning 6/30/50
================= AMOUNTS WITHDRAWN ========================
From Annual
Income From Annual Cumulative Cap Gain
Date Dividends Principal Total Total Distrib'n
---- --------- --------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
12/31/50 1,949 9,718 11,667 11,667 0
12/31/51 8,912 11,088 20,000 31,667 4,011
12/31/52 7,746 12,254 20,000 51,667 5,294
12/31/53 7,508 12,492 20,000 71,667 1,195
12/31/54 6,623 13,377 20,000 91,667 8,092
12/31/55 7,297 12,703 20,000 111,667 14,484
12/31/56 8,168 11,832 20,000 131,667 11,270
12/31/57 8,166 11,834 20,000 151,667 4,022
12/31/58 8,448 11,552 20,000 171,667 7,844
12/31/59 7,257 12,743 20,000 191,667 29,528
12/31/60 8,672 11,328 20,000 211,667 8,561
12/31/61 7,963 12,037 20,000 231,667 24,917
12/31/62 8,563 11,437 20,000 251,667 8,454
12/31/63 9,171 10,829 20,000 271,667 11,764
12/31/64 9,205 10,795 20,000 291,667 20,942
12/31/65 10,119 9,881 20,000 311,667 21,979
12/31/66 10,391 9,609 20,000 331,667 13,153
12/31/67 10,141 9,859 20,000 351,667 35,963
12/31/68 11,847 8,153 20,000 371,667 40,279
12/31/69 14,336 5,664 20,000 391,667 21,098
12/31/70 16,016 3,984 20,000 411,667 4,760
12/31/71 16,556 3,444 20,000 431,667 27,974
12/31/72 16,575 3,425 20,000 451,667 26,866
12/31/73 17,922 2,078 20,000 471,667 12,600
12/31/74 23,031 -3,031 20,000 491,667 2,344
12/31/75 27,310 -7,310 20,000 511.667 4,072
12/31/76 26,446 -6,446 20,000 531,667 40,400
12/31/77 27,585 -7,585 20,000 551,667 31,538
<PAGE>
From Annual
Income From Annual Cumulative Cap Gain
Date Dividends Principal Total Total Distrib'n
---- --------- --------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
12/31/78 30,570 -10,570 20,000 571,667 46,444
12/31/79 34,576 -14,576 20,000 591,667 80,676
12/31/80 41,729 -21,729 20,000 611,667 165,482
12/31/81 66,294 -46,294 20,000 631,667 70,690
12/31/82 68,340 -48,340 20,000 651,667 35,556
12/31/83 66,325 -46,325 20,000 671,667 109,076
12/31/84 71,652 -51,652 20,000 691,667 56,355
12/31/85 93,224 -73,224 20,000 711,667 342,188
12/31/86 96,987 -76,987 20,000 731,667 290,204
12/31/87 112,025 -92,025 20,000 751,667 313,521
12/31/88 93,586 -73,586 20,000 771,667 315,070
12/31/89 104,904 -84,904 20,000 791,667 342,357
12/31/90 113,366 -93,366 20,000 811,667 53,901
12/31/91 105,305 -85,305 20,000 831,667 303,786
12/31/92 91,918 -71,918 20,000 851,667 237,107
12/31/93 50,982 -30,982 20,000 871,667 6,718
12/31/94 81,035 -61,035 20,000 891,667 0
8/31/95 33,973 -20,640 13,333 905,000 0
Totals 1,700,716 -795,716 905,000 905,000 3,212,534
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
======= VALUE OF REMAINING SHARES ========
Remaining Capital
Original Gain Total Shares
Date Shares Shares Value Held
---- --------- --------- ----- ------
<S> <C> <C> <C> <C>
12/31/50 205,803 0 205,803 101,950
12/31/51 217,640 4,164 221,804 98,733
12/31/52 214,635 10,055 224,690 95,798
12/31/53 189,442 10,673 200,115 90,738
12/31/54 229,670 22,978 252,648 88,659
12/31/55 238,303 40,212 278,515 89,362
12/31/56 228,625 52,308 280,933 89,388
12/31/57 186,916 49,235 236,151 87,033
12/31/58 235,536 73,907 309,443 85,637
12/31/59 226,001 105,441 331,442 90,647
12/31/60 222,016 118,118 340,134 89,902
12/31/61 239,690 159,191 398,881 92,910
12/31/62 197,144 147,404 344,548 92,161
12/31/63 215,254 181,382 396,636 92,347
12/31/64 219,173 214,377 433,550 94,492
12/31/65 225,462 252,809 478,271 96,976
12/31/66 197,924 245,799 443,723 97,904
12/31/67 220,178 323,669 543,847 103,273
12/31/68 216,850 370,879 587,729 109,129
12/31/69 179,328 336,080 515,408 112,607
12/31/70 171,975 334,938 506,913 112,917
12/31/71 181,013 389,433 570,446 118,954
12/31/72 184,207 430,959 615,166 123,657
12/31/73 150,890 368,713 519,603 126,534
12/31/74 124,819 298,471 423,290 128,353
12/31/75 173,644 400,266 573,910 131,169
12/31/76 221,270 537,271 758,541 140,602
12/31/77 208,687 520,363 729,050 148,613
12/31/78 214,664 556,158 770,822 160,613
12/31/79 274,553 756,693 1,031,246 178,254
12/31/80 317,570 980,308 1,297,878 207,777
12/31/81 314,589 901,452 1,216,041 230,021
12/31/82 425,892 1,110,224 1,536,116 243,658
12/31/83 530,917 1,372,115 1,903,032 266,216
12/31/84 585,533 1,434,323 2,019,856 281,382
12/31/85 673,563 1,829,577 2,503,140 341,077
12/31/86 726,309 2,055,106 2,781,415 390,624
12/31/87 694,140 2,041,976 2,736,116 454,604
12/31/88 858,447 2,623,825 3,482,272 510,892
12/31/89 1,015,474 3,194,664 4,210,138 568,321
12/31/90 1,019,797 2,971,539 3,991,336 589,942
12/31/91 1,352,732 3,986,428 5,339,160 636,775
12/31/92 1,600,592 4,731,383 6,331,975 669,848
12/31/93 1,834,180 5,332,300 7,166,480 673,541
12/31/94 1,902,833 5,352,346 7,255,179 679,324
8/31/95 2,486,742 6,930,987 9,417,729 680,964
<PAGE>
Remaining Capital
Original Gain Total Shares
Date Shares Shares Value Held
---- --------- --------- ----- ------
<S> <C> <C> <C> <C>
12/31/50 205,803 0 205,803 101,950
Totals 2,486,742 6,930,987 9,417,729 680,964
Average Annual Return for This Illustration: 12.98% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 24.88% 16.17% 14.92%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM GUARDIAN TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
----- ----------- -------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
6/1/50 $10,000.00 $1.8674 0.00% 5,355.000 $1.8674 $10,000
Dividends and Capital Gains Reinvested
=============== C O S T O F S H A R E S ================
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
8/31/50 10,000 0 0 10,000 0
8/31/51 10,000 406 406 10,406 0
8/31/52 10,000 511 917 10,917 228
8/31/53 10,000 488 1,404 11,404 330
8/31/54 10,000 512 1,916 11,916 82
8/31/55 10,000 506 2,421 12,421 609
8/31/56 10,000 611 3,033 13,033 1,177
8/31/57 10,000 729 3,761 13,761 984
8/31/58 10,000 867 4,629 14,629 378
8/31/59 10,000 869 5,498 15,498 797
8/31/60 10,000 842 6,340 16,340 3,194
8/31/61 10,000 1,013 7,352 17,352 985
8/31/62 10,000 1,012 8,364 18,364 3,028
8/31/63 10,000 1,117 9,481 19,481 1,086
8/31/64 10,000 1,268 10,750 20,750 1,597
8/31/65 10,000 1,353 12,102 22,102 2,983
8/31/66 10,000 1,553 13,656 23,656 3,275
8/31/67 10,000 1,649 15,305 25,305 2,046
8/31/68 10,000 1,724 17,029 27,029 5,829
8/31/69 10,000 2,081 19,110 29,110 6,776
8/31/70 10,000 2,566 21,676 31,676 3,678
8/31/71 10,000 3,298 24,974 34,974 866
8/31/72 10,000 3,258 28,232 38,232 5,285
8/31/73 10,000 3,355 31,587 41,587 5,256
8/31/74 10,000 3,872 35,458 45,458 2,555
8/31/75 10,000 5,577 41,036 51,036 495
8/31/76 10,000 6,125 47,161 57,161 895
8/31/77 10,000 6,287 53,448 63,448 9,159
8/31/78 10,000 6,693 60,142 70,142 7,349
8/31/79 10,000 7,695 67,837 77,837 11,115
8/31/80 10,000 9,009 76,845 86,845 19,773
<PAGE>
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
8/31/81 10,000 11,305 88,150 98,150 41,343
8/31/82 10,000 17,522 105,672 115,672 17,945
8/31/83 10,000 18,076 123,748 133,748 9,177
8/31/84 10,000 20,004 143,752 153,752 28,486
8/31/85 10,000 19,528 163,281 173,281 14,879
8/31/86 10,000 27,134 190,415 200,415 91,183
8/31/87 10,000 27,958 218,373 228,373 77,910
8/31/88 10,000 26,953 245,325 255,325 84,700
8/31/89 10,000 26,927 272,252 282,252 85,664
8/31/90 10,000 30,193 302,445 312,445 93,568
8/31/91 10,000 31,735 334,181 344,181 14,818
8/31/92 10,000 24,360 358,541 368,541 83,874
8/31/93 10,000 25,329 383,870 393,870 65,697
8/31/94 10,000 13,106 396,976 406,976 1,867
8/31/95 10,000 22,667 419,643 429,643 0
Totals 419,643 812,922
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===================== VALUE OF SHARES ==========================
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
---- ---------- ---------- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
8/31/50 10,070 0 10,070 0 10,070 5,355
8/31/51 11,960 0 11,960 436 12,396 5,550
8/31/52 12,279 242 12,521 978 13,499 5,887
8/31/53 11,451 549 12,000 1,384 13,384 6,259
8/31/54 13,450 740 14,190 2,182 16,372 6,518
8/31/55 17,130 1,719 18,849 3,341 22,190 6,937
8/31/56 17,380 3,019 20,399 4,024 24,423 7,525
8/31/57 16,320 3,830 20,150 4,500 24,650 8,088
8/31/58 16,960 4,427 21,387 5,636 27,023 8,532
8/31/59 21,271 6,483 27,754 8,004 35,758 9,002
8/31/60 20,160 9,559 29,719 8,470 38,189 10,144
8/31/61 23,360 12,273 35,633 10,902 46,535 10,668
8/31/62 19,769 13,016 32,785 10,163 42,948 11,633
8/31/63 23,170 16,559 39,729 13,134 52,863 12,218
8/31/64 24,960 19,612 44,572 15,480 60,052 12,884
8/31/65 25,860 23,410 49,270 17,411 66,681 13,808
8/31/66 23,260 23,993 47,253 17,072 64,325 14,809
8/31/67 29,449 32,922 62,371 23,464 85,835 15,608
8/31/68 28,760 38,443 67,203 24,725 91,928 17,117
8/31/69 25,960 40,738 66,698 24,245 90,943 18,760
8/31/70 21,620 37,139 58,759 22,637 81,396 20,161
8/31/71 26,400 46,409 72,809 31,308 104,117 21,119
8/31/72 26,850 53,451 80,301 35,383 115,684 23,072
8/31/73 22,880 50,080 72,960 33,326 106,286 24,876
8/31/74 17,809 41,114 58,923 29,267 88,190 26,517
8/31/75 22,720 53,090 75,810 43,788 119,598 28,189
8/31/76 28,039 66,646 94,685 60,968 155,653 29,726
8/31/77 27,441 74,636 102,077 65,961 168,038 32,793
8/31/78 30,261 90,846 121,107 80,290 201,397 35,640
8/31/79 32,421 111,545 143,966 95,231 239,197 39,509
8/31/80 34,021 140,270 174,291 109,849 284,140 44,726
8/31/81 30,591 163,434 194,025 109,262 303,287 53,092
8/31/82 28,740 172,049 200,789 190,863 321,652 59,932
8/31/83 39,531 247,290 286,821 186,311 473,132 64,094
8/31/84 38,119 267,922 306,041 200,382 506,423 71,141
8/31/85 43,360 321,569 364,929 248,996 613,925 75,820
8/31/86 45,770 452,146 497,916 294,520 792,436 92,713
8/31/87 50,319 596,296 646,615 357,180 1,003,795 106,823
8/31/88 38,510 554,756 593,266 303,185 896,451 124,656
8/31/89 45,669 763,809 809,478 390,876 1,200,354 140,747
8/31/90 35,710 681,487 717,319 333,090 1,050,409 157,517
8/31/91 44,701 871,487 916,188 454,426 1,370,614 164,198
8/31/92 47,200 1,008,398 1,055,598 505,323 1,560,921 177,092
8/31/93 54,996 1,246,328 1,301,324 616,108 1,917,432 186,702
8/31/94 60,350 1,369,662 1,430,012 690,165 2,120,177 188,126
8/31/95 74,060 1,680,783 1,754,843 874,469 2,629,312 190,117
<PAGE>
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
---- ---------- ---------- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Totals 74,060 1,680,783 1,754,843 874,469 2,629,312 190,117
Average Annual Total Return for This Illustration: 13.10% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 24.88% 16.17% 14.92%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM MANHATTAN TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- -------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
3/1/79 $100,000.00 $1.9814 0.00% 50,468.754 $1.9814 $100,000
Systematic Withdrawal Plan
Dividends and Capital Gains Reinvested
Monthly Withdrawals of $666.67 (8.0% Annually) Beginning 3/31/79
=============== AMOUNTS WITHDRAWN ===================
From Annual
Income From Annual Cumulative Cap Gain
Date Dividends Principal Total Total Distrib'n
---- --------- --------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C>
12/31/79 1,883 4,784 6,667 6,667 0
12/31/80 3,280 4,720 8,000 14,667 0
12/31/81 3,547 4,453 8,000 22,667 0
12/31/82 4,551 3,449 8,000 30,667 0
12/31/83 5,835 2,165 8,000 38,667 0
12/31/84 6,138 1,862 8,000 46,667 0
12/31/85 3,726 4,274 8,000 54,667 0
12/31/86 2,675 5,325 8,000 62,667 42,676
12/31/87 3,393 4,607 8,000 70,667 5,279
12/31/88 13,101 -5,101 8,000 78,667 32,377
12/31/89 7,517 483 8,000 86,667 43,849
12/31/90 7,337 663 8,000 94,667 6,879
12/31/91 5,131 2,869 8,000 102,667 18,658
12/31/92 2,400 5,600 8,000 110,667 80,646
12/31/93 351 7,649 8,000 118,667 351
12/31/94 694 7,306 8,000 126,667 2,776
8/31/95 0 5,333 5,333 132,000 0
Totals 71,560 60,440 132,000 132,000 233,490
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===== VALUE OF REMAINING SHARES =====
Remaining Capital
Original Gain Total Shares
Date Shares Shares Value Held
---- --------- ------ ----- ------
<S> <C> <C> <C> <C>
12/31/79 127,622 0 127,622 48,354
12/31/80 164,831 0 164,831 46,805
12/31/81 145,245 0 145,245 45,437
12/31/82 177,074 0 177,074 44,510
12/31/83 216,209 0 216,209 44,200
12/31/84 222,819 0 222,819 43,884
12/31/85 296,292 0 296,292 43,206
12/31/86 294,506 43,543 338,049 48,800
12/31/87 285,291 47,334 332,625 48,879
12/31/88 298,976 84,694 383,670 54,834
12/31/89 345,026 141,659 486,685 60,230
12/31/90 306,649 132,934 439,583 61,135
12/31/91 381,160 185,362 566,522 62,828
12/31/92 386,526 271,417 657,943 70,898
12/31/93 416,710 298,670 715,380 70,135
12/31/94 393,206 289,733 682,939 69,688
8/31/95 515,056 384,045 899,101 69,215
Totals 515,056 384,045 899,101 69,215
Average Annual Total Return for This Illustration: 18.35% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 28.38% 12.59% 13.93%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM MANHATTAN TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
3/1/79 $10,000.00 $1.9814 0.00% 5,046.875 $1.9814 $10,000
Dividends and Capital Gains Reinvested
============== C O S T O F S H A R E S =================
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
8/31/79 10,000 0 0 10,000 0
8/31/80 10,000 553 553 10,553 0
8/31/81 10,000 407 960 10,960 0
8/31/82 10,000 542 1,501 11,501 0
8/31/83 10,000 733 2,234 12,234 0
8/31/84 10,000 801 3,035 13,035 0
8/31/85 10,000 505 3,540 13,540 0
8/31/86 10,000 373 3,913 13,913 2,749
8/31/87 10,000 485 4,398 14,398 4,022
8/31/88 10,000 937 5,335 15,335 4,464
8/31/89 10,000 989 6,324 16,324 247
8/31/90 10,000 1,137 7,461 17,461 6,632
8/31/91 10,000 1,130 8,590 18,590 1,059
8/31/92 10,000 803 9,393 19,393 2,919
8/31/93 10,000 381 9,774 19,774 12,795
8/31/94 10,000 56 9,830 19,830 56
8/31/95 10,000 113 9,943 19,943 451
Totals 9,943 35,395
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=============== V A L U E O F S H A R E S ==================
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
----- ---------- ---------- ------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
8/31/79 12,383 0 12,383 0 12,383 5,047
8/31/80 15,469 0 15,469 649 16,118 5,259
8/31/81 15,586 0 15,586 1,037 16,623 5,383
8/31/82 16,015 0 16,015 1,661 17,676 5,570
8/31/83 23,633 0 23,633 3,290 26,923 5,750
8/31/84 25,039 0 25,039 4,385 29,424 5,931
8/31/85 30,430 0 30,430 5,872 36,302 6,021
8/31/86 38,632 3,199 41,831 7,889 49,720 6,495
8/31/87 47,343 9,210 56,553 10,245 66,798 7,121
8/31/88 33,867 11,378 45,245 8,334 53,579 7,984
8/31/89 47,187 16,184 63,371 12,933 76,304 8,161
8/31/90 36,954 18,683 55,637 11,158 66,795 9,123
8/31/91 45,117 24,128 69,245 15,028 84,273 9,427
8/31/92 45,273 27,115 72,388 15,879 88,267 9,840
8/31/93 50,519 44,058 94,577 18,129 112,706 11,259
8/31/94 52,337 45,699 98,036 18,838 116,874 11,270
8/31/95 65,559 57,843 123,402 23,747 147,149 11,328
Totals 65,559 57,843 123,402 23,747 147,149 11,328
Average Annual Total Return for This Illustration: 17.70% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 28.38% 12.59% 13.93%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM PARTNERS TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- -------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1/20/75 $100,000.00 $2.9100 0.00% 34,364.471 $2.9100 $100,000
Systematic Withdrawal Plan
Dividends and Capital Gains Reinvested
Monthly Withdrawals of $666.67 (8.0% Annually) Beginning 2/28/75
============== AMOUNTS WITHDRAWN ===============
From Annual
Date Income From Annual Cumulative Cap Gain
---- Dividends Principal Total Total Distrib'n
--------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
12/31/75 5,318 2,015 7,333 7,333 0
12/31/76 4,233 3,767 8,000 15,333 0
12/31/77 3,267 4,733 8,000 23,333 0
12/31/78 4,122 3,878 8,000 31,333 0
12/31/79 6,168 1,832 8,000 39,333 0
12/31/80 9,210 -1,210 8,000 47,333 40,179
12/31/81 15,507 -7,507 8,000 55,333 53,866
12/31/82 23,564 -15,564 8,000 63,333 0
12/31/83 19,017 -11,017 8,000 71,333 44,374
12/31/84 19,169 -11,169 8,000 79,333 7,188
12/31/85 18,242 -10,242 8,000 87,333 35,642
12/31/86 13,684 -5,684 8,000 95,333 69,975
12/31/87 26,170 -18,170 8,000 103,333 102,242
12/31/88 27,730 -19,730 8,000 111,333 0
12/31/89 33,949 -25,949 8,000 119,333 75,346
12/31/90 36,929 -28,929 8,000 127,333 16,660
12/31/91 18,002 -10,002 8,000 135,333 40,788
12/31/92 10,393 -2,393 8,000 143,333 97,911
12/31/93 1,342 6,658 8,000 151,333 2,685
12/31/94 2,677 5,323 8,000 159,333 10,707
8/31/95 0 5,333 5,333 164,666 0
Totals 298,694 -134,028 164,666 164,666 597,564
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
======= VALUE OF REMAINING SHARES======
Remaining Capital
Original Gain Total Shares
Date Shares Shares Value Held
---- --------- ------- ----- ------
<S> <C> <C> <C> <C>
12/31/75 110,735 0 110,735 33,808
12/31/76 136,496 0 136,496 32,829
12/31/77 137,664 0 137,664 31,716
12/31/78 151,649 0 151,649 30,824
12/31/79 207,212 0 207,212 30,511
12/31/80 222,076 45,753 267,829 37,168
12/31/81 184,895 91,414 276,309 48,327
12/31/82 234,349 105,949 340,298 51,354
12/31/83 245,016 152,082 397,098 60,372
12/31/84 259,418 160,969 420,387 63,525
12/31/85 311,544 225,673 537,217 70,251
12/31/86 321,789 300,102 621,891 80,341
12/31/87 295,384 346,029 641,413 95,573
12/31/88 348,049 384,170 732,219 98,272
12/31/89 401,420 489,025 890,445 110,640
12/31/90 386,054 450,928 836,982 117,240
12/31/91 454,523 561,044 1,015,567 123,586
12/31/92 487,673 696,987 1,184,660 135,011
12/31/93 554,180 804,960 1,359,140 134,568
12/31/94 538,043 799,728 1,337,771 135,128
8/31/95 683,111 1,024,298 1,707,409 134,654
Totals 683,111 1,024,298 1,707,409 134,654
Average Annual Total Return for This Illustration: 18.21% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------- ------ -------
for Periods Ending 6/30/95: 23.93% 13.22% 13.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FROM PARTNERS TRUST
PREPARED FOR: BARBARA
Sales Net Asset Initial
Initial Offering Charge Shares Value Net Asset
Date Investment Price Included Purchased per Share Value
---- ---------- ------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1/20/75 $10,000.00 $2.9100 0.00% 3,436.447 $2.9100 $10,000
Dividends and Capital Gains Reinvested
=============== C O S T O F S H A R E S ================
Annual Cumulative Total Annual
Cumulative Income Income Investment Cap Gain
Date Investment Dividends Dividends Cost Distrib'n
---- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
8/31/75 10,000 551 551 10,551 0
8/31/76 10,000 467 1,018 11,018 0
8/31/77 10,000 383 1,401 11,401 0
8/31/78 10,000 511 1,912 11,912 0
8/31/79 10,000 804 2,716 12,716 0
8/31/80 10,000 1,248 3,965 13,965 5,446
8/31/81 10,000 2,167 6,131 16,131 7,527
8/31/82 10,000 3,390 9,521 19,521 0
8/31/83 10,000 2,802 12,323 22,323 6,537
8/31/84 10,000 2,883 15,206 25,206 1,081
8/31/85 10,000 2,795 18,001 28,001 5,461
8/31/86 10,000 2,127 20,128 30,128 10,879
8/31/87 10,000 2,409 22,537 32,537 12,101
8/31/88 10,000 3,739 26,276 36,276 4,006
8/31/89 10,000 4,786 31,063 41,063 4,206
8/31/90 10,000 3,090 34,152 44,152 7,945
8/31/91 10,000 6,011 40,163 50,163 2,709
8/31/92 10,000 2,956 43,120 53,120 6,694
8/31/93 10,000 1,722 44,841 54,841 16,219
8/31/94 10,000 224 45,065 55,065 448
8/31/95 10,000 449 45,514 55,514 1,796
Totals 45,514 93,055
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=============== V A L U E O F S H A R E S =================
From From
From Cap Gains Sub- Dividends Total Shares
Date Investment Reinvested Total Reinvested Value Held
---- ---------- ---------- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
8/31/75 11,011 0 11,011 562 11,573 3,612
8/31/76 13,017 0 13,017 1,122 14,139 3,733
8/31/77 14,272 0 14,272 1,611 15,883 3,824
8/31/78 18,039 0 18,039 2,553 20,592 3,923
8/31/79 21,807 0 21,807 3,959 25,766 4,060
8/31/80 22,221 5,565 27,786 5,310 33,096 5,118
8/31/81 18,714 12,022 30,736 6,583 37,319 6,853
8/31/82 19,295 12,396 31,691 10,333 42,024 7,484
8/31/83 21,623 20,503 42,126 14,413 56,539 8,985
8/31/84 21,853 21,871 43,724 17,634 61,358 9,649
8/31/85 23,630 29,113 52,743 21,864 74,607 10,850
8/31/86 27,320 45,104 72,424 27,517 99,941 12,571
8/31/87 30,368 62,659 93,027 33,079 126,106 14,270
8/31/88 24,809 55,507 80,316 30,914 111,230 15,407
8/31/89 30,489 72,629 103,118 43,355 146,473 16,509
8/31/90 26,233 70,024 96,257 40,232 136,489 17,880
8/31/91 28,943 80,548 109,491 51,605 161,096 19,127
8/31/92 29,540 89,421 118,961 55,825 174,786 20,333
8/31/93 34,399 122,629 157,028 66,970 223,998 22,377
8/31/94 36,221 129,589 165,810 70,749 236,559 22,444
8/31/95 43,574 158,200 201,774 85,689 287,463 22,671
Totals 43,574 158,200 201,774 85,689 287,463 22,671
Average Annual Total Return for This Illustration: 17.69% (Annual Compounding)
Average Annual Total Returns 1-Year 5-Year 10-Year
at Net Asset Value ------ ------ -------
for Periods Ending 6/30/95: 23.93% 13.22% 13.61%
</TABLE>
<PAGE>
Appendix C
THE ART OF INVESTMENT:
A CONVERSATION WITH ROY NEUBERGER
<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
- 11 -
<PAGE>
</TABLE>
