As filed with the Securities and Exchange Commission on December 31, 1997
1933 Act Registration No. 33-64368
1940 Act Registration No. 811-7784
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ ] [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [ 12 ] [ X ]
---- -----
(Check appropriate box or boxes)
NEUBERGER & BERMAN EQUITY TRUST
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger & Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
__ on ______________, pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on _______________, pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on _______________, pursuant to paragraph (a)(2)
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and filed the notice required by
such rule for its 1997 fiscal year on November 25, 1997.
Page _______ of _______
Exhibit Index Begins on
Page _______
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
CONTENTS OF AMENDMENT NO. 12 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Amendment No. 12 on Form N-1A
Cross Reference Sheet
NEUBERGER & BERMAN INTERNATIONAL TRUST
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
No change is intended to be made by this Amendment No. 12 to the
prospectuses or statements of additional information for Neuberger & Berman
Focus Trust, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian
Trust, Neuberger & Berman Manhattan Trust, Neuberger & Berman Partners Trust, or
Neuberger & Berman NYCDC Socially Responsive Trust.
-2-
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
AMENDMENT NO. 12 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for
Neuberger & Berman International Trust
FORM N-1A ITEM NO. CAPTION IN PART A PROSPECTUS
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; Information Regarding
Organization, Capitalization, and
Other Matters
Item 5. Management of the Fund Management and Administration;
Directory; Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other
Securities Distributions, and Taxes; Information
Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Shareholder Services; Share Prices and
Being Offered Net Asset Value; Management and
Administration
Item 8. Redemption or Repurchase Shareholder Services; Share Prices and
Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
CAPTION IN PART B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Organization
History
Item 13. Investment Objectives Investment Information; Certain Risk
and Policies Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Not Applicable
Principal Holders of
Securities
-3-
<PAGE>
CAPTION IN PART B
FORM N-1A ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
Item 16. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional
Exchange Information; Additional
Redemption Information
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Amendment No. 12.
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<PAGE>
Neuberger&Berman
INTERNATIONAL TRUST(SERVICE MARK)
A NO-LOAD EQUITY FUND
- --------------------------------------------------------------------------------
Neuberger&Berman INTERNATIONAL TRUST (the "Fund") seeks long-term
capital appreciation through a diversified portfolio consisting primarily of
equity securities of foreign issuers.
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES ACCOUNTING,
RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE
SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT INCORPORATED (EACH AN
"INSTITUTION").
- --------------------------------------------------------------------------------
The Fund, which is a series of Neuberger&Berman Equity Trust (the
"Trust"), invests all of its net investable assets in Neuberger&Berman
International Portfolio (the "Portfolio") of Global Managers Trust ("Managers
Trust"), an open-end management investment company managed by Neuberger & Berman
Management Incorporated ("N&B Management"). The Portfolio invests in securities
in accordance with an investment objective, policies, and limitations identical
to those of the Fund. The investment performance of the Fund directly
corresponds with the investment performance of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
For more information on this structure that you should consider, see "Summary"
on page __, and "Information Regarding Organization, Capitalization, and Other
Matters," on page __.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 31, 1997, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED DECEMBER 31, 1997
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
SUMMARY .......................................................................3
The Fund and Portfolio; Risk Factors...................................3
Management.............................................................4
The Neuberger & Berman Investment Approach.............................4
EXPENSE INFORMATION............................................................5
Shareholder Transaction Expenses.......................................5
Annual Fund Operating Expenses.........................................5
Example................................................................6
INVESTMENT PROGRAM.............................................................7
Special Considerations of Mid-Cap Company Stocks.......................8
Short-Term Trading; Portfolio Turnover.................................8
Borrowings.............................................................8
Other Investments......................................................8
PERFORMANCE INFORMATION........................................................9
Total Return Information...............................................9
SHAREHOLDER SERVICES..........................................................10
How To Buy Shares.....................................................10
How To Sell Shares....................................................10
Exchanging Shares.....................................................10
SHARE PRICES AND NET ASSET VALUE..............................................12
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES.....................................13
Distribution Options..................................................13
Taxes ...............................................................13
MANAGEMENT AND ADMINISTRATION.................................................15
Trustees and Officers.................................................15
Investment Manager, Administrator, Distributor, and Sub-Adviser.......15
Expenses..............................................................16
Transfer Agent........................................................16
INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS.........17
The Fund..............................................................17
The Portfolio.........................................................17
DESCRIPTION OF INVESTMENTS....................................................19
DIRECTORY.....................................................................24
FUNDS ELIGIBLE FOR EXCHANGE...................................................25
2
<PAGE>
SUMMARY
THE FUND AND PORTFOLIO; RISK FACTORS
- --------------------------------------------------------------------------------
The Fund is a series of the Trust and invests in the Portfolio which, in
turn, invests in securities in accordance with an investment objective,
policies, and limitations that are identical to those of the Fund. This is
sometimes called a master/feeder fund structure, because the Fund "feeds"
shareholders' investments into the Portfolio, a "master" fund. The structure
looks like this:
------------------------------------------------------
SHAREHOLDERS
------------------------------------------------------
BUY SHARES IN
------------------------------------------------------
FUND
------------------------------------------------------
INVESTS IN
------------------------------------------------------
PORTFOLIO
------------------------------------------------------
INVESTS IN
------------------------------------------------------
STOCKS & OTHER SECURITIES
------------------------------------------------------
The trustees who oversee the Fund believe that this structure may
benefit shareholders; investment in the Portfolio by investors in addition to
the Fund may enable the Portfolio to achieve economies of scale that could
reduce expenses. For more information about the organization of the Fund and the
Portfolio, including certain features of the master/feeder fund structure, see
"Information Regarding Organization, Capitalization, and Other Matters" on page
__. An investment in the Fund involves certain risks, depending upon the types
of investments made by the Portfolio. For more details about the Portfolio, its
investments and their risks, see "Investment Program" on page __ and
"Description of Investments" on page __.
Here is a summary highlighting features of the Fund and the Portfolio.
Of course, there can be no assurance that the Fund will meet its investment
objective.
<TABLE>
<CAPTION>
========================= ==================== ================================================
NEUBERGER&BERMAN
EQUITY TRUST INVESTMENT STYLE PORTFOLIO CHARACTERISTICS
- ------------------------- -------------------- ------------------------------------------------
<S> <C> <C>
INTERNATIONAL TRUST Broadly Seeks long-term capital appreciation by
diversified, investing primarily in foreign stocks, both in
medium- to developed economies and in emerging markets.
large-cap Portfolio manager seeks undervalued companies
international in countries with strong potential for growth.
equity fund.
Capitalization is
determined in
relation to the
principal market
in which
securities are
traded.
========================= ==================== ================================================
</TABLE>
3
<PAGE>
MANAGEMENT
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page __. If you want to know how to buy and sell shares of the Fund or exchange
them for shares of other Neuberger&Berman Funds(R) made available through an
Institution, see "Shareholder Services - How to Buy Shares" on page __,
"Shareholder Services - How to Sell Shares" on page __, and "Shareholder
Services Exchanging Shares" on page __, and the policies of the Institution
through which you are purchasing shares.
THE NEUBERGER&BERMAN INVESTMENT APPROACH
The Portfolio uses an investment process that includes a combination of
country selection and individual security selection primarily based on a
value-oriented investment approach. A value-oriented portfolio manager buys
stocks that are selling for a price that is lower than what the manager believes
they are worth. These include stocks that are currently under-researched or are
temporarily out of favor on Wall Street.
Portfolio managers identify value stocks in several ways. One of the
most common identifiers is a low price-to-earnings ratio -- that is, stocks
selling at multiples of earnings per share that are lower than that of the
market as a whole. Other criteria are high dividend yield, a strong balance
sheet and financial position, a recent company restructuring with the potential
to realize hidden values, strong management, and low price-to-book value (net
value of the company's assets). A value-oriented manager believes that, over
time, securities that are undervalued are more likely to appreciate in price and
be subject to less risk of price decline than securities whose market prices
have already reached their perceived economic values. This approach also
contemplates selling portfolio securities when N&B Management believes they have
reached their potential.
4
<PAGE>
EXPENSE INFORMATION
This section gives you certain information about the expenses of the
Fund and the Portfolio. See "Performance Information" for important facts about
the investment performance of the Fund, after taking expenses into account.
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
As shown by this table, the Fund imposes no transaction charges when you buy or
sell Fund shares.
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------------------
The following table shows anticipated annual operating expenses for the Fund,
which are paid out of the assets of the Fund and which include the Fund's pro
rata portion of the operating expenses of the Portfolio ("Total Operating
Expenses"). "Total Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses.
The Fund pays N&B Management an administration fee based on the Fund's
average daily net assets. The Portfolio pays N&B Management a management fee
based on the Portfolio's average daily net assets; a pro rata portion of this
fee is borne indirectly by the Fund. "Management and Administration Fees" in the
following table are based upon current administration fees for the Fund and
current management fees for the Portfolio and the current expense reimbursement
undertaking. For more information, see "Management and Administration" and the
SAI.
The Fund and Portfolio incur other expenses for things such as
accounting and legal fees, transfer agency fees, custodial fees, printing and
furnishing shareholder statements and Fund reports and compensating trustees who
are not affiliated with N&B Management ("Other Expenses"). "Other Expenses" in
the following table are estimated amounts for the Fund and the Portfolio for the
current fiscal year and assume average daily net assets of $25,000,000. There
can be no assurance that the Fund will achieve that asset level. All expenses
are factored into the Fund's share prices and dividends and are not charged
directly to Fund shareholders.
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER EXPENSES TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES (ESTIMATED) EXPENSES
- ---------------- ------------------- ----- -------------- ----------------
INTERNATIONAL TRUST 1.05%* None 0.75% 1.80%*
*Reflects N&B Management's expense reimbursement undertaking described below.
5
<PAGE>
As set forth in "Expenses" on page ___, N&B Management has voluntarily
undertaken to reimburse the Fund if its Total Operating Expenses exceed certain
limits. Absent the reimbursement, Management and Administration Fees and Total
Operating Expenses would be 1.25% and 2.00%, respectively, of the Fund's average
daily net assets.
For more information, see "Expenses" on page ___.
EXAMPLE
- --------------------------------------------------------------------------------
To illustrate the effect of Total Operating Expenses, let's assume that the
Fund's annual return is 5% and that it had Total Operating Expenses described in
the table above. For every $1,000 you invested in the Fund, you would have paid
the following amounts of total expenses if you closed your account at the end of
each of the following time periods:
NEUBERGER&BERMAN
EQUITY TRUST... 1 YEAR 3 YEARS
- ----------------------------------------------------------
INTERNATIONAL TRUST $18 $57
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
6
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to
those of the Portfolio. The Fund invests only in the Portfolio. Therefore, the
following shows you the kinds of securities in which the Portfolio invests. For
an explanation of some types of investments, see "Description of Investments" on
page __.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning
the Portfolio's investment program are described in the SAI.
The investment objective of the Portfolio and Fund is to seek long-term
capital appreciation by investing primarily in a diversified portfolio of equity
securities of foreign issuers. Foreign issuers are issuers organized and doing
business principally outside the United States and include non-U.S. governments,
their agencies, and instrumentalities. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
The Portfolio invests primarily in equity securities of medium- to
large-capitalization companies traded on foreign exchanges. A company's
capitalization is determined in relation to the principal market in which its
securities are traded. The strategy of N&B Management is to select attractive
investment opportunities outside the United States, allocating the Portfolio's
assets among investments in economically mature countries and emerging
industrialized countries. The criteria for security selection focus on companies
with leadership in specific markets or with niches in specific industries that
appear to exhibit positive fundamentals and seem undervalued relative to their
earnings potential or the worth of their assets. At least 65% of the Portfolio's
total assets normally are invested in equity securities of foreign issuers. The
Portfolio may invest more heavily in certain countries than in others. From time
to time, the Portfolio may invest a significant portion of its assets in Japan.
The Portfolio may invest in foreign securities in the form of American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs), International Depositary Receipts (IDRs) or other
similar securities representing an interest in securities of foreign issuers.
Because the Portfolio invests primarily in foreign securities, it may be
subject to greater risks and higher expenses than equity funds that invest
primarily in securities of U.S. issuers. Such risks may be even greater in
emerging industrialized and less developed countries. Most of the securities
held by the Portfolio are denominated in foreign currencies, and the value of
these investments can be adversely affected by fluctuations in foreign currency
values.
The Portfolio may use techniques such as options, futures, forward
foreign currency exchange contracts ("forward contracts"), swaps, and short
selling for hedging purposes and in an attempt to realize income. The Portfolio
may use leverage to facilitate transactions it enters into for hedging purposes.
The use of these strategies may entail special risks.
For more information, see "Special Considerations of Mid-Cap Company
Stocks" on page __ and "Description of Investments" on page __.
7
<PAGE>
SPECIAL CONSIDERATIONS OF MID-CAP COMPANY STOCKS
- --------------------------------------------------------------------------------
Investments in stocks of medium-capitalization companies ("mid-cap
companies") may present greater opportunities for capital appreciation than
investments in stocks of large-capitalization companies ("large-cap companies").
However, mid-cap company stocks may have higher risk and volatility. These
stocks generally are not as broadly traded as large-cap company stocks and their
prices thus may fluctuate more widely and abruptly. Any such movements in stocks
held by the Portfolio would be reflected in the Fund's net asset value. Mid-cap
company stock also are less researched than large-cap company stocks and are
often overlooked in the market.
SHORT-TERM TRADING; PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention
of profiting from short-term trading, the Portfolio may sell portfolio
securities when N&B Management believes that such action is advisable. It is
anticipated that the annual turnover rate of the Portfolio normally will not
exceed 100%.
BORROWINGS
- --------------------------------------------------------------------------------
The Portfolio has a fundamental policy that it may not borrow money,
except that it may (1) borrow money from banks for temporary or emergency
purposes and for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
The Portfolio may borrow money from banks to facilitate transactions
that it enters into for hedging purposes, which is a form of leverage. This
leverage may amplify the gains and losses on the Portfolio's investments and
changes in the net asset value of the Fund's shares. Leverage also creates
interest expenses; if those expenses exceed the return on the transactions that
the borrowings facilitate, the Portfolio will be in a worse position than if it
had not borrowed. The use of derivatives in connection with leverage may create
the potential for significant losses. The Portfolio may pledge assets in
connection with permitted borrowings.
OTHER INVESTMENTS
- --------------------------------------------------------------------------------
For temporary defensive purposes, the Portfolio may invest up to 100% of
its total assets in short-term foreign and U.S. investments, such as cash or
cash equivalents, commercial paper, short-term bank obligations, government and
agency securities, and repurchase agreements. The Portfolio may also invest in
such instruments to increase liquidity or to provide collateral to be held in
segregated accounts.
8
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This evens out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
As of the date of this Prospectus, the Fund has no past performance.
However, a mutual fund that is a series of Neuberger&Berman Equity Funds ("N&B
Equity Funds"), which has a name similar to the Fund and the same investment
objective, policies, and limitations as the Fund ("Sister Fund"), also invests
in the Portfolio. The following table shows the average annual total returns of
the Sister Fund for the 1-year period ended August 31, 1997 and for the period
from June 15, 1994 (commencement of operations) to August 31, 1997. The table
also shows a comparison with the EAFE(R) Index. The EAFE(R) Index is the Morgan
Stanley Capital International Europe, Australasia, Far East Index, an unmanaged
index of non-U.S. equity market performance. Please note that an index does not
take into account any fees or expenses of investing in the individual securities
that it tracks.
AVERAGE ANNUAL TOTAL RETURNS
(PERFORMANCE RESULTS OF THE SISTER FUND)
PERIODS ENDED
08/31/97
----------------------------------------------
1 YEAR SINCE INCEPTION
INCEPTION DATE
- --------------- --------------- ------------------ -----------------------
INTERNATIONAL +24.71% +13.33% 6/15/94
EAFE(R)INDEX + 9.36 + 6.82* N/A
* From the inception date of the Sister Fund.
TOTAL RETURN INFORMATION. You can obtain current performance information
about the Fund by calling N&B Management at 800-877-9700.
9
<PAGE>
10
<PAGE>
11
<PAGE>
SHAREHOLDER SERVICES
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
INSTITUTION. N&B Management and the Fund do not recommend, endorse, or receive
payments from any Institution. N&B Management compensates Institutions for
services they provide under an administrative services agreement. N&B Management
does not provide investment advice to any Institution or its clients or make
decisions regarding their investments.
Each Institution will establish its own procedures for the purchase of
Fund shares, including minimum initial and additional investments for shares of
the Fund and the acceptable methods of payment for shares. Shares are purchased
at the next price calculated on a day the New York Stock Exchange ("NYSE") is
open, after a purchase order is received and accepted by an Institution.
Investors should consult their Institution to determine the time by which it
must receive an order so that Fund shares can be purchased at that day's price.
Prices for Fund shares are calculated as of the close of regular trading on the
NYSE, usually 4 p.m. Eastern time.
Other Information:
. An Institution must pay for shares it purchases on its clients'
behalf in U.S. dollars.
. The Fund has the right to suspend the offering of its shares for a
period of time. The Fund also has the right to accept or reject a
purchase order in its sole discretion, including certain purchase
orders using an exchange of shares.
. See "Shareholder Services -- Exchanging Shares." The Fund does not
issue certificates for shares.
. Some Institutions may charge their clients a fee in connection with
purchases of shares of the Fund.
HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell (redeem) all or some of your Fund shares only through an
account with an Institution. Each Institution will establish its own procedures
for the sale of Fund shares and the payment of redemption proceeds. Shares are
sold at the next price calculated on a day the NYSE is open, after a sales order
is received and accepted by an Institution. Investors should consult their
Institution to determine the time by which it must receive an order so that Fund
shares can be sold at that day's price. Prices for Fund shares are calculated as
of the close of trading on the NYSE, usually 4 p.m. Eastern time.
Other Information:
. Redemption proceeds will be paid to Institutions as agreed with N&B
Management, but in any case within three business days (under unusual
circumstances the Fund may take longer, as permitted by law). An
Institution may not follow the same procedures for payment of
redemption proceeds to its clients.
. The Fund may suspend redemptions or postpone payments on days when
the NYSE is closed, when trading on the NYSE is restricted, or as
permitted by the SEC.
. Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Fund.
EXCHANGING SHARES
- --------------------------------------------------------------------------------
Through an account with an Institution, you may be able to exchange
shares of the Fund for shares of another Neuberger&Berman Fund. Each Institution
will establish its own exchange policy and procedures. Shares are exchanged at
the next price calculated on a day the NYSE is open, after an exchange order is
received and accepted by an Institution.
12
<PAGE>
. Shares can be exchanged ONLY between accounts registered in the same
name, address, and taxpayer ID number of the Institution.
. An exchange can be made only into a fund whose shares are eligible
for sale in the state where the Institution is located.
. An exchange may have tax consequences.
. The Fund may refuse any exchange orders from any Institution if, for
any reason, they are deemed not to be in the best interests of the
Fund and its shareholders.
. The Fund may impose other restrictions on the exchange privilege, or
modify or terminate the privilege, but will try to give each
Institution advance notice whenever it can reasonably do so.
13
<PAGE>
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net
asset value ("NAV") per share. The NAVs for the Fund and the Portfolio are
calculated by subtracting liabilities from total assets (in the case of the
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of the Fund, its percentage interest in the Portfolio,
multiplied by the Portfolio's NAV, plus any other assets). The Fund's per share
NAV is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values equity securities at the last sale price on the
principal exchange or in the principal over-the-counter market in which such
securities are traded, as of the close of regular trading on the NYSE on the day
the securities are being valued or, if there are no sales, at the last available
bid price on that day. Debt obligations are valued at the last available bid
price for such securities or, if such prices are not available, at prices for
securities of comparable maturity, quality, and type. Foreign securities are
translated from the local currency into U.S. dollars using current exchange
rates. The Portfolio values all other types of securities and assets, including
restricted securities and securities for which market quotations are not readily
available, by a method that the trustees of Managers Trust believe accurately
reflects fair value.
The Portfolio's portfolio securities are traded primarily in foreign
markets which may be open on days when the NYSE is closed. As a result, the NAV
of the Fund may be significantly affected on days when shareholders have no
access to the Fund.
If N&B Management believes that the price of a security obtained under
the Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
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DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes, normally in December, substantially all of its
share of any net investment income (net of the Fund's expenses), any net capital
gains from investment transactions, and any net gains from foreign currency
transactions earned or realized by the Portfolio.
DISTRIBUTION OPTIONS
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REINVESTMENT IN SHARES. All dividends and other distributions paid on
shares of the Fund are automatically reinvested in additional shares of the
Fund, unless an Institution elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
TAXES
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An investment has certain tax consequences, depending on the type of
account through which the investment is made. FOR AN ACCOUNT UNDER A QUALIFIED
RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax
and generally also are subject to state and local income taxes. Distributions
are taxable when they are paid, whether in cash or by reinvestment in additional
Fund shares, except that distributions declared in December to shareholders of
record on a date in that month and paid in the following January are taxable as
if they were paid on December 31 of the year in which the distributions were
declared. Investors who buy Fund shares just before the Fund deducts a dividend
or other distribution from its NAV will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares in December should
take this into account.
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally taxed as long-term capital gain, no matter how long an
investor has owned Fund shares. Distributions of net capital gain may include
gains from the sale of portfolio securities that appreciated in value before an
investor bought Fund shares. Under the Taxpayer Relief Act of 1997, different
maximum tax rates apply to the Fund's distributions of net capital gain
depending on the Portfolio's holding period.
Every January, the Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid in cash or
reinvested in Fund shares for the previous year. Each Institution will also
receive information showing (1) the portion, if any, of those distributions that
generally is not subject to state and local income taxes in certain states and
(2) capital gain distributions broken down in a manner that will enable
investors or their tax advisers to determine the appropriate rate of capital
gains tax on such distributions.
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TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund
shares, including redemptions in connection with exchanges to other
Neuberger&Berman Funds, are subject to tax. A capital gain or loss generally is
the difference between the amount paid for shares (including the amount of any
dividends and other distributions that were reinvested) and the amount received
when shares are sold. Capital gain on shares held for more than one year will be
long-term capital gain, in which event it will be subject to federal income tax
at the capital gains rate applicable to an investor's holding period and tax
bracket.
When an Institution sells Fund shares, it will receive a confirmation
statement showing the number of shares sold and the price.
OTHER. Every January, Institutions will receive a consolidated
transaction statement for the previous year.
Each Institution is required annually to send each investor in its
account a statement showing the investor's distribution and transaction
information for the previous year. The Fund intends to qualify for treatment as
a regulated investment company for federal income tax purposes so that it will
not have to pay federal income tax on that part of its taxable income and
realized gains that it distributes to its shareholders.
The foregoing is only a summary of some of the important income tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
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MANAGEMENT AND ADMINISTRATION
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust have
oversight responsibility for the operations of the Fund and the Portfolio,
respectively. The SAI contains general background information about each trustee
and officer of the Trust and of Managers Trust. The trustees and officers of the
Trust and of Managers Trust who are officers and/or directors of N&B Management
and/or principals of Neuberger&Berman serve without compensation from the Fund
or the Portfolio. All trustees of Managers Trust also serve as trustees of the
Trust.
INVESTMENT MANAGER, ADMINISTRATOR,
DISTRIBUTOR, AND SUB-ADVISER
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N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolio and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $21.2 billion as of
September 30, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with
investment recommendations and research without added cost to the Portfolio. N&B
Management compensates Neuberger&Berman for its costs in connection with those
services. Neuberger&Berman is a member firm of the NYSE and other principal
exchanges. Neuberger&Berman and its affiliates, including N&B Management, manage
securities accounts that had approximately $54.1 billion of assets as of
September 30, 1997. All of the voting stock of N&B Management is owned by
individuals who are principals of Neuberger&Berman.
State Street Cayman Trust Company, Ltd., located in George Town, Grand
Cayman, Cayman Islands, British West Indies, provides certain administrative,
fund accounting and transfer agency services for the Portfolio, which has its
principal offices in the Cayman Islands.
Valerie Chang is manager of the Portfolio. Ms. Chang, an Assistant Vice
President of N&B Management and an assistant portfolio manager for the Portfolio
from December 1996 until June 1997, has been responsible for the management of
the Portfolio since June 1997. She served in the investment banking division of
Salomon Brothers and Morgan Stanley & Co., Inc. from 1993 until 1995 and as a
senior securities analyst for TIAA/CREF from 1995 until December 1996.
Neuberger&Berman may act as broker for the Portfolio in the purchase and
sale of portfolio securities and in the purchase and sale of options, and for
those services receives brokerage commissions. In effecting securities
transactions, the Portfolio seeks to obtain the best price and execution of
orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and
employees of N&B Management, together with their families, have invested over
$100 million of their own money in Neuberger&Berman Funds.
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To mitigate the possibility that the Portfolio will be adversely
affected by employees' personal trading, the Trust, Managers Trust, N&B
Management, and Neuberger&Berman have adopted policies that restrict securities
trading in the personal accounts of portfolio managers and others who normally
come into possession of information on portfolio transactions.
EXPENSES
- --------------------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio
that include, among other things, making and implementing investment decisions
and providing facilities and personnel necessary to operate the Portfolio. The
Portfolio pays N&B Management a fee for investment management services at the
annual rate of 0.85% of the first $250 million of the Portfolio's average daily
net assets, 0.825% of the next $250 million, 0.80% of the next $250 million,
0.775% of the next $250 million, 0.75% of the next $500 million, and 0.725% of
average daily net assets in excess of $1.5 billion.
N&B Management provides administrative services to the Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping and other services. For such administrative services, the Fund
pays N&B Management a fee at the annual rate of 0.40% of the Fund's average
daily net assets. With the Fund's consent, N&B Management may subcontract to
Institutions some of its responsibilities to the Fund under the administration
agreement and may compensate each Institution that provides such services at an
annual rate of up to 0.25% of the average net asset value of Fund shares held
through that Institution.
The Fund bears all expenses of its operations other than those borne by
N&B Management as administrator of the Fund and as distributor of its shares.
The Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page ___.
See "Expense Information -- Annual Fund Operating Expenses" for
information about how these fees and expenses may affect the value of your
investment.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Total Operating Expenses so that the Fund's expense ratio per annum will not
exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the
Fund's average daily net assets. The Fund's per annum "expense ratio" is the sum
of the Fund's Total Operating Expenses divided by the Fund's average daily net
assets for the year. N&B Management may terminate this undertaking to the Fund
by giving at least 60 days' prior written notice to the Fund. The effect of
reimbursement by N&B Management is to reduce the Fund's expenses and thereby
increase its total return.
TRANSFER AGENT
- --------------------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to
Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180.
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INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS
THE FUND
The Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated as of May 6, 1993. The Trust is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company, commonly known as a mutual
fund. The Trust has seven separate series. The Fund invests all of its net
investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited
number of shares of beneficial interest (par value $0.001 per share). Shares of
the Fund represent equal proportionate interests in the assets of the Fund only
and have identical voting, dividend, redemption, liquidation, and other rights.
All shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
OTHER. Because Fund shares can be bought, owned and sold only through an
account with an Institution, a client of an Institution may be unable to
purchase additional shares and/or may be required to redeem shares (and possibly
incur a tax liability) if the client no longer has a relationship with the
Institution or if the Institution no longer has a contract with N&B Management
to perform services. Depending on the policies of the Institutions involved, an
investor may be able to transfer an account from one Institution to another.
THE PORTFOLIO
The Portfolio is a separate operating series of Managers Trust, a New
York common law trust organized as of March 18, 1994. Managers Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Managers Trust currently has one operating Portfolio. The assets of the
Portfolio belong only to the Portfolio, and the liabilities of the Portfolio are
borne solely by the Portfolio and no other.
FUND'S INVESTMENT IN PORTFOLIO. The Fund is a "feeder fund" that seeks
to achieve its investment objective by investing all of its net investable
assets in the Portfolio, which is a "master fund." The Portfolio, which has the
same investment objective, policies, and limitations as the Fund, in turn
invests in securities; the Fund thus acquires an indirect interest in those
securities.
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The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. The Sister Fund invests all of its
net investable assets in the Portfolio. The shares of the Sister Fund are
available for purchase by members of the general public. The Fund does not sell
its shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in the
Portfolio (including the Sister Fund) are not required to sell their shares at
the same public offering price as the Fund, could have a different
administration fee and expenses than the Fund, and (except the Sister Fund)
might charge a sales commission. Therefore, Fund shareholders may have different
returns than shareholders in another investment company that invests exclusively
in the Portfolio. Information regarding any fund that invests in the Portfolio
is available from N&B Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by
the Sister Fund or by other potential investors in addition to the Fund may
enable the Portfolio to realize economies of scale that could reduce its
operating expenses, thereby producing higher returns and benefiting all
shareholders. However, the Fund's investment in the Portfolio may be affected by
the actions of other large investors in the Portfolio, if any. For example, if a
large investor in the Portfolio (other than the Fund) redeemed its interest in
the Portfolio, the Portfolio's remaining investors (including the Fund) might,
as a result, experience higher pro rata operating expenses, thereby producing
lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the trustees of the Trust determine that it is in the best interests of
the Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective,
policies, or limitations of the Portfolio in a manner not acceptable to the
trustees of the Trust. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio to the
Fund. That distribution could result in a less diversified portfolio of
investments for the Fund and could affect adversely the liquidity of the Fund's
investment portfolio. If the Fund decided to convert those securities to cash,
it usually would incur brokerage fees or other transaction costs. If the Fund
withdrew its investment from the Portfolio, the trustees of the Trust would
consider what actions might be taken, including the investment of all of the
Fund's net investable assets in another pooled investment entity having
substantially the same investment objective as the Fund or the retention by the
Fund of its own investment manager to manage its assets in accordance with its
investment objective, policies, and limitations. The inability of the Fund to
find a suitable replacement could have a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in the
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund,
will be liable for all obligations of the Portfolio. However, the risk of an
investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
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DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in
"Investment Program" herein, the Portfolio may make the following investments,
among others, individually or in combination, although it may not necessarily
buy all of the types of securities or use all of the investment techniques that
are described. For additional information on the following investments and on
other types of investments which the Portfolio may make, see the SAI.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. The Portfolio may invest
up to 15% of its net assets in illiquid securities, which are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for the Portfolio to value or dispose of due to the absence of
an active trading market. The sale of some illiquid securities by the Portfolio
maybe subject to legal restrictions which could be costly to the Portfolio.
FOREIGN SECURITIES. Foreign securities are those of issuers organized
and doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities.
The Portfolio invests primarily in foreign securities. The Portfolio may
invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or unsponsored) are
receipts typically issued by a U.S. bank or trust company evidencing its
ownership of the underlying foreign securities. Most ADRs are denominated in
U.S. dollars and are traded on a U.S. stock exchange. Issuers of the securities
underlying sponsored ADRs, but not unsponsored ADRs, are contractually obligated
to disclose material information in the United States. Therefore, the market
value of unsponsored ADRs may not reflect the effect of such information. EDRs
and IDRs are receipts typically issued by a European bank or trust company
evidencing its ownership of the underlying foreign securities. GDRs are receipts
issued by either a U.S. or non-U.S. banking institution evidencing its ownership
of the underlying foreign securities and are often denominated in U.S. dollars.
Factors affecting investments in foreign securities include, but are not
limited to, varying custody, brokerage and settlement practices, which may cause
delays and expose the Portfolio to the creditworthiness of a foreign broker;
difficulty in pricing some foreign securities; less public information about
issuers of securities; less governmental regulation and supervision of issuance
and trading of securities; the unavailability of financial information or the
difficulty of interpreting financial information prepared under foreign
accounting standards; less liquidity and more volatility in foreign securities
markets; the possibility of expropriation, nationalization, or confiscatory
taxation; the imposition of foreign withholding and other taxes; potentially
adverse local political, economic, social, or diplomatic developments;
limitations on the movement of funds or other assets of the Portfolio between
different countries; difficulties in invoking legal process and enforcing
contractual obligations abroad; and the difficulty of assessing economic trends
21
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in foreign countries. Investment in foreign securities also may involve higher
brokerage and custodial expenses than investment in domestic securities.
In addition, investing in foreign securities may involve other risks
which are not ordinarily associated with investing in domestic securities. These
risks include changes in currency exchange rates and currency exchange control
regulations (or other foreign or U.S. laws or restrictions applicable to such
investments) and devaluations of foreign currencies. Some foreign currencies may
be volatile. A decline in the exchange rate between the U.S. dollar and another
currency will reduce the value of portfolio securities denominated in that
currency irrespective of the performance of the underlying investment. In
addition, the Portfolio generally will incur costs in connection with conversion
between various currencies. Investments in depositary receipts (whether or not
denominated in U.S. dollars) may be subject to exchange controls and changes in
rates of exchange with the U.S. dollar because the underlying security is
usually denominated in foreign currency.
All of the foregoing risks may be intensified in emerging industrialized
and less developed countries.
JAPANESE INVESTMENTS. From time to time, the Portfolio may invest a
significant portion of its assets in securities of Japanese issuers. The
performance of the Portfolio may therefore be significantly affected by events
influencing the Japanese economy and the exchange rate between the Japanese yen
and the U.S. dollar. Japan has experienced a severe recession, including a
decline in real estate values and other events that adversely affected the
balance sheets of many financial institutions and indicate that there may be
structural weaknesses in the Japanese financial system. The effects of this
economic downturn may be felt for a considerable period and are being
exacerbated by the currency exchange rate. Japan is heavily dependent on foreign
oil. Japan is located in a seismically active area, and severe earthquakes may
damage important elements of the country's infrastructure. Japan's economic
prospects may be affected by the political and military situations of its near
neighbors, notably North and South Korea, China and Russia.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its
total assets in the shares of other investment companies. Such investment may be
the most practical or only manner in which the Portfolio can participate in
certain foreign markets because of the expenses involved or because other
vehicles for investing in those countries may not be available at the time the
Portfolio is ready to make an investment. As a shareholder in an investment
company, the Portfolio would bear its pro rata share of that investment
company's expenses. Investment in other funds may involve the payment of
substantial premiums above the value of such issuers' portfolio securities. The
Portfolio does not intend to invest in such funds unless, in the judgment of N&B
Management, the potential benefits of such investment justify the payment of any
applicable premium or sales charge.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into forward
contracts in order to protect against adverse changes in foreign currency
exchange rates. The Portfolio may enter into contracts to purchase foreign
currencies to protect against an anticipated rise in the U.S. dollar price of
securities it intends to purchase. The Portfolio may also enter into contracts
to sell foreign currencies to protect against a decline in the value of its
foreign currency denominated portfolio securities due to a decline in the value
of foreign currencies against the U.S. dollar.
The Portfolio may also enter into forward contracts for non-hedging
purposes when N&B Management anticipates that a foreign currency will appreciate
or depreciate in value, but securities denominated in that currency do not
present attractive investment opportunities and are not held in the Portfolio.
The Portfolio may also engage in proxy-hedging by using forward contracts in one
currency to hedge against fluctuations in the value of securities denominated in
a different currency if N&B Management believes that there is a pattern of
correlation between the two currencies. Proxy-hedges may result in losses if the
currency used to hedge does not perform similarly to the currency in which the
securities are denominated.
PUT AND CALL OPTIONS ON FOREIGN CURRENCIES, SECURITIES, AND SECURITIES
INDICES. The Portfolio may purchase and write put and call options on foreign
currencies to protect against declines in the dollar value of foreign portfolio
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. The Portfolio may also use options on foreign currencies to
proxy-hedge. In addition, the Portfolio may purchase put and call options on
currencies for non-hedging purposes when N&B Management expects that a currency
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will appreciate or depreciate in value, but securities denominated in that
currency do not present attractive investment opportunities and are not held in
the Portfolio. Options on foreign currencies may be traded on U.S. or foreign
exchanges or over-the-counter. Options on foreign currencies which are traded in
the over-the-counter market may be considered illiquid and subject to the
restriction on illiquid securities.
To realize greater income than would be realized on portfolio securities
transactions alone, the Portfolio may purchase and write put and call options on
any securities in which it may invest or options on any securities index based
on securities in which the Portfolio may invest.
The Portfolio will not write a call option on a security or currency
unless it owns the underlying security or currency or has the right to obtain it
at no additional cost. The Portfolio pays brokerage commissions or spreads in
connection with its options transactions, as well as for purchases and sales of
underlying securities or currencies. The use of options could result in
significant increases in the Portfolio's turnover rate.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolio may
enter into futures contracts on currencies, debt securities, interest rates, and
securities indices and may purchase and sell options on such contracts on both
U.S. and foreign exchanges. The Portfolio may engage in such transactions for
hedging or non-hedging purposes. When the Portfolio purchases or sells a futures
contract it generally becomes obligated to accept or make delivery of the
currencies or securities underlying the contract at a specified price at a
specified future time. The obligations of the parties under a futures contract
are often closed out before the delivery date.
GENERAL RISKS OF OPTIONS, FUTURES AND FORWARD CONTRACTS. The primary
risks in using put and call options, futures contracts, options on futures
contracts, and forward contracts ("Financial Instruments") are (1) imperfect
correlation or no correlation between changes in market value of the securities
or currencies held by the Portfolio and the prices of Financial Instruments; (2)
possible lack of a liquid secondary market for Financial Instruments and the
resulting inability to close out Financial Instruments when desired; (3) the
fact that use of Financial Instruments is a highly specialized activity that
involves skills, techniques, and risks (including price volatility and a high
degree of leverage) different from those associated with selection of the
Portfolio's securities; and (4) the fact that, although use of Financial
Instruments for hedging purposes can reduce the risk of loss, they also can
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments. When the Portfolio uses
Financial Instruments, the Portfolio will place cash or appropriate liquid
securities in a segregated account, or will "cover" its position, to the extent
required by SEC staff policy. Another risk of Financial Instruments is the
possible inability of the Portfolio to purchase or sell a security at a time
that would otherwise be favorable for it to do so, or the possible need for the
Portfolio to sell a security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of
Financial Instruments. Losses that may arise from certain futures transactions
are potentially unlimited.
SHORT SALES. The Portfolio may attempt to limit exposure to a possible
decline in the market value of portfolio securities through short sales of
securities that N&B Management believes possess volatility characteristics
similar to those being hedged. The Portfolio also may use short sales in an
attempt to realize gain. To effect a short sale, the Portfolio borrows a
security from a brokerage firm to make delivery to the buyer. The Portfolio then
is obligated to replace the borrowed security by purchasing it at the market
price at the time of replacement. Until the security is replaced, the Portfolio
is required to pay the lender any dividends and may be required to pay a premium
or interest.
The Portfolio will realize a gain if the security declines in price
between the date of the short sale and the date on which the Portfolio replaces
the borrowed security. The Portfolio will incur a loss if the price of the
security increases between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium or
interest the Portfolio is required to pay in connection with a short sale. A
short position may be adversely affected by imperfect correlation between
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movements in the price of the securities sold short and the securities being
hedged.
The Portfolio also may make short sales against-the-box, in which it
sells securities short only if it owns or has the right to obtain without
payment of additional consideration an equal amount of the same type of
securities sold.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. In a when-issued or
forward commitment transaction, the Portfolio commits to purchase securities at
a future date (generally within two months) and pays for the securities when
they are delivered. If the seller fails to complete the sale, the Portfolio may
lose the opportunity to obtain a favorable price. When-issued securities or
securities subject to a forward commitment may decline or increase in value
during the period from the Portfolio's investment commitment to the settlement
of the purchase, which may magnify fluctuations in the Fund's NAV.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank, a foreign bank or
a U.S. branch or agency of a foreign bank, or a securities dealer and
simultaneously agrees to sell it back at a higher price, at a specified date,
usually less than a week later. The underlying securities must fall within the
Portfolio's investment policies and limitations. The Portfolio also may lend
portfolio securities to banks, brokerage firms, or institutional investors to
earn income. Costs, delays, or losses could result if the selling party to a
repurchase agreement or the borrower of portfolio securities becomes bankrupt or
otherwise defaults. N&B Management monitors the creditworthiness of sellers and
borrowers.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In such a transaction, the Portfolio sells a security to
a bank or securities dealer and simultaneously agrees to repurchase it at a
higher price on a specific date. The Portfolio will place cash or appropriate
liquid securities in a segregated account to cover its obligations under reverse
repurchase agreements. Such transactions may increase fluctuations in the Fund's
NAV and may be viewed as a form of leverage.
OTHER INVESTMENTS. Although the Portfolio invests primarily in common
stocks, when market conditions warrant it may invest in preferred stocks,
securities convertible into or exchangeable for common stocks, U.S. Government
and Agency Securities, investment grade debt securities, or money market
instruments, or may retain assets in cash or cash equivalents.
24
<PAGE>
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's, S&P or another nationally recognized statistical
rating organization ("NRSRO") or, if unrated by any NRSRO, deemed comparable by
N&B Management to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest category (Baa) or Comparable
Unrated Securities may be deemed to have speculative characteristics. The value
of the fixed income securities in which the Portfolio may invest is likely to
decline in times of rising market interest rates. Conversely, when rates fall,
the value of the Portfolio's fixed income investments is likely to rise.
U.S. Government Securities are obligations of the U.S. Treasury backed
by the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may be supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
The Portfolio may invest in domestic and foreign debt securities of any
rating, including those rated below investment grade and Comparable Unrated
Securities. Such securities may be considered predominantly speculative,
although, as debt securities, they generally have priority over equity
securities of the same issuer and are generally better secured. Debt securities
in the lowest rating categories may involve a substantial risk of default or may
be in default. Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuer of such securities to make principal and interest
payments than is the case for higher-grade debt securities. An economic downturn
affecting the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-rated
securities. The Portfolio will invest in such securities only when N&B
Management concludes that the anticipated return to the Portfolio on such an
investment warrants exposure to the additional level of risk. A further
description of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
("S&P") ratings is included in the Appendix to the SAI.
The Portfolio may invest in indexed securities whose values are linked
to currencies, interest rates, commodities, indices, or other financial
indicators. Most indexed securities are short- to intermediate-term fixed income
securities whose values at maturity or interest rates rise or fall according to
the change in one or more specified underlying instruments. The value of indexed
securities may increase or decrease if the underlying instrument appreciates,
and they may have return characteristics similar to direct investment in the
underlying instrument or to one or more options on the underlying instrument.
Indexed securities may be more volatile than the underlying instrument itself.
25
<PAGE>
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue
2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are registered trademarks or service marks of Neuberger&Berman Management
Inc. (C)1997 Neuberger&Berman Management Inc.
26
<PAGE>
FUNDS ELIGIBLE FOR EXCHANGE
EQUITY TRUSTS
Neuberger&Berman Focus Trust
Neuberger&Berman Genesis Trust
Neuberger&Berman Guardian Trust
Neuberger&Berman Manhattan Trust
Neuberger&Berman Partners Trust
Neuberger&Berman Socially
Responsive Trust
INCOME TRUST
Neuberger&Berman Limited Maturity Bond Trust
27
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN INTERNATIONAL TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 31, 1997
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger & Berman INTERNATIONAL Trust ("Fund"), a series of Neuberger
& Berman Equity Trust ("Trust"), is a no-load mutual fund that offers shares
pursuant to a Prospectus dated August 30, 1997. The Fund invests all of its net
investable assets in Neuberger & Berman INTERNATIONAL Portfolio ("Portfolio").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT
INCORPORATED (EACH AN "INSTITUTION").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger & Berman Management Incorporated ("N&B Management"),
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or
by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company. The Fund seeks its
investment objective by investing all of its net investable assets in the
Portfolio, a series of Global Managers Trust ("Managers Trust") that has an
investment objective identical to that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. Managers Trust is an open-end
management investment company managed by N&B Management.
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of the Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of (1) 67% of the total units
of beneficial interest ("shares") of the Fund or Portfolio represented at a
meeting at which more than 50% of the outstanding Fund or Portfolio shares are
represented or (2) a majority of the outstanding shares of the Fund or
Portfolio. These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
Investment Policies And Limitations
- -----------------------------------
The Fund has the following fundamental investment policy, to enable it
to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its net investable assets in an open-end management
investment company having substantially the same investment objective,
policies, and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
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<PAGE>
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The following investment policies and limitations are fundamental:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts, options (including options on futures contracts,
but excluding options or futures contracts on physical commodities), foreign
currencies or forward contracts, or from investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer 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. This limitation
does not apply to securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
3
<PAGE>
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. The Portfolio may not invest any part of its total
assets in real estate or interests in real estate unless acquired as a result of
the ownership of securities or instruments, but this restriction shall not
prohibit the Portfolio from purchasing readily marketable securities issued by
entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that the Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
The following investment policies and limitations are non-fundamental:
1. INVESTMENTS IN ANY ONE ISSUER. At the close of each quarter of the
Portfolio's tax year, (i) no more than 25% of its total assets may be invested
in the securities of a single issuer, and (ii) with regard to 50% of its total
assets, no more than 5% of total assets may be invested in the securities of a
single issuer. These limitations do not apply to U.S. Government securities, as
defined for tax purposes.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. ILLIQUID SECURITIES. The Portfolio may not purchase any security if,
as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
4
<PAGE>
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
Investment Insight
- ------------------
Equity portfolios consisting solely of domestic investments generally
have not enjoyed the higher returns foreign opportunities can offer. Over the
past thirty years, for example, the average growth rates of many foreign
economies have outpaced that of the United States. While the United States
accounted for almost 66% of the world's total securities market capitalization
in 1970, it accounted for less than 30% of that total at the end of 1996 -- or
less than a third of the dollar value of the world's available stocks and
bonds.1
Over time, a number of international equity markets have outperformed
their U.S. counterpart. Although there are no guarantees, foreign markets could
continue to provide attractive investment opportunities.
In addition, according to Morgan Stanley Capital International, the
leading companies in any given sector are not always U.S.-based. For example,
all ten of the largest construction companies, nine of the ten largest banks and
seven of the ten largest automobile companies are based outside of the United
States.
A principal advantage of investing overseas is diversification. A
diversified portfolio gives investors the opportunity to pursue increased
overall return while reducing risk. It is prudent to diversify by taking
advantage of investment opportunities in more than one country's stock or bond
market. By investing in several countries through a worldwide portfolio,
investors can lower their exposure and vulnerability to weakness in any one
market. Investors should be aware, however, that international investing is not
a guarantee against market risk and may be affected by the economic and other
factors described in the Prospectus. These include the prospects of individual
companies and other risks such as currency fluctuations or controls,
expropriation, nationalization and confiscatory taxation.
Furthermore, buying foreign stocks and bonds can be difficult for the
individual investor and involves many decisions. Accessing international markets
is complicated; few individuals have the time or resources to evaluate
thoroughly foreign companies and markets or the ability to incur the high
transaction costs of direct investment in such markets. A mutual fund investing
in foreign securities offers an investor broad diversification at a relatively
low cost.
_________________________________
1 Source: Morgan Stanley Capital International.
5
<PAGE>
The Portfolio invests primarily in equity securities of companies
located in developed foreign economies, as well as in "emerging markets." In all
cases, N&B Management's investment process includes a combination of "top-down
country allocation" and "bottom-up security selection."
The portfolio manager searches the world for investment opportunities
wherever and whenever they arise -- in both developed and emerging markets.
First, the portfolio manager selects countries with strong potential for growth.
N&B Management believes that the majority of the total return in a global equity
portfolio can be attributed to country allocation. The Portfolio's stock
selection process leads to diversification across more than 20 countries that
the manager believes offer the best value.
Then, the portfolio manager focuses on individual companies. The
portfolio manager looks at the fundamentals. Does the company lead its market
niche? How strong is its management? If the company is small, has it shown
sustained growth? In general, the Portfolio's selection process leads to
investments in mid-sized companies in developed countries and larger, more
established firms in emerging markets such as Hungary and Singapore.
TOP-DOWN APPROACH TO REGIONAL AND COUNTRY DIVERSIFICATION
N&B Management uses extensive economic research to identify
countries that offer attractive investment opportunities, by analyzing factors
such as growth rates of gross domestic product, interest rate trends, and
currency exchange rates. Market valuations, combined with correlation and
volatility comparisons, provide N&B Management with a target allocation across
twenty or more countries.
BOTTOM-UP APPROACH TO SECURITY SELECTION
N&B Management's value-oriented approach seeks out attractively
priced issues, by concentrating on criteria such as a low price-to-earnings
ratio relative to earnings growth rate, balance sheet strength, low price to
cash flow, and management quality. Typically, the Portfolio's investment
portfolio is comprised of over 100 different securities issues, primarily of
medium- to large-capitalization companies (determined in relation to the
principal market in which a company's securities are traded).
CURRENCY RISK MANAGEMENT
Exchange rate movements and volatility are important factors in
international investing. The portfolio manager believes in actively managing the
Portfolio's currency exposure, in an effort to capitalize on foreign currency
trends and to reduce overall portfolio volatility. Currency risk management is
6
<PAGE>
performed separately from equity analysis. The portfolio manager uses a
combination of economic analysis to guide the Portfolio's longer-term posture
and quantitative trend analysis to assist in timing decisions with respect to
whether (or when) to invest in instruments denominated in a particular foreign
currency, or whether (or when) to hedge particular foreign currencies in which
liquid foreign exchange markets exist.
For much of the past two decades, international stocks, on average,
have outperformed U.S. stocks. If you had invested $10,000 in the international
stocks that comprise the EAFE(R) Index and the U.S. stocks that make up the S&P
"500" Index twenty years ago, here's what your investments would have been worth
as of December 31, 1996 and August 31, 1997:
Value of investment Avg. annual total
return2/
12/31/96 8/31/97 12/31/96 8/31/97
-------- ------- -------- -------
International stocks
(EAFE(REGISTERED)) $171,996 $163,875 15.29% 15.01%
Domestic stocks (S&P "500") $150,282 $200,011 14.51% 16.16%
Of course, these historical results may not continue in the future.
Investors should keep in mind the greater risks inherent in foreign markets,
such as currency exchange fluctuations, interest rates, and potentially adverse
economic and political conditions.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: Why should investors allocate a portion of their assets to
international markets?
A: First, an investor who does not invest internationally misses out
on about two-thirds of the world's potential investment opportunities. The U.S.
stock market today represents less than one-third of the world's stock market
capitalization, and the U.S. portion continues to shrink as other countries
_____________________________
2/ Total return includes reinvestment of all dividends and other
distributions. The EAFE(R) Index, also known as the Morgan Stanley Capital
International Europe, Australasia, Far East Index, is an unmanaged index of over
1,000 foreign stock prices and is translated into U.S. dollars. The S&P "500"
Index is an unmanaged index generally considered to be representative of U.S.
stock market activity. Indices do not take into account brokerage commissions or
other fees and expenses of investing in the individual securities that they
track. Data about the performance of these indices are prepared or obtained by
N&B Management.
7
<PAGE>
around the world introduce or expand the size of their equity markets.
Privatizations of government-owned corporations, initial public offerings, and
the occasional creation of official stock exchanges in emerging economies
continuously present new opportunities for capital in an expanding global
market.
Second, many foreign economies are in earlier stages of development
than ours and are growing fast. Economic growth can often mean potential for
investment growth.
Finally, international investing helps an investor increase
diversification, which can reduce risk. Domestic and foreign markets generally
do not all move in the same direction, so gains in one market may offset losses
in another.
Q: Does international investing involve special risks?
A: Currency risk is one important risk presented by international
investing. Fluctuations in exchange rates can either add to or
reduce an investor's returns. Anyone who invests in foreign
markets should keep that fact in mind.
Other risks include, but are not limited to, greater market
volatility, less government supervision and availability of public information,
and the possibility of adverse economic or political developments. Additional
special risks of foreign investing are discussed in the Prospectus.
Q: What are some of the advantages of investing in an
international fund?
A: An international mutual fund can be a convenient way to invest
internationally and diversify assets among several markets to reduce risk.
Additionally, the considerable burden of obtaining timely, accurate, and
comprehensive information about foreign economies and securities is left to
professional managers.
Q: What is your investment approach?
A: We seek to capitalize on investments in countries where we
believe that positive economic and political factors are likely to produce
above-average returns. Studies have shown that the allocation of assets among
countries is typically the most important factor contributing to portfolio
performance. We believe that, in the long term, a nation's economic growth and
the performance of its equity market are highly correlated. Therefore, we
continuously evaluate the global economic outlook as well as individual country
data to guide country allocation. Our process also leads to diversification
8
<PAGE>
across many countries, typically twenty or more, in an effort to limit total
portfolio risk.
We strive to invest in companies within the selected countries that
are in the best position to capitalize on such positive developments or
companies that are most attractively valued. We usually include in the
Portfolio's investments the securities of large-capitalization companies,
determined in relation to the appropriate national market, as well as securities
of faster-growing, medium-sized companies that offer potentially higher returns
but are often associated with higher risk.
The criteria for security selection focus on companies with
leadership in specific markets or with niches in specific industries, which
appear to exhibit positive fundamentals and seem undervalued relative to their
earnings potential or the worth of their assets. Typically, in emerging markets,
we invest in relatively large, established companies that we believe possess the
managerial, financial, and marketing strength to exploit successfully the growth
of a dynamic economy. In more developed markets, such as Europe and Japan, the
Portfolio may invest to a higher degree in medium-sized companies. Medium-sized
companies can often provide above-average growth and are less followed by market
analysts, which sometimes leads to inefficient valuation.
Finally, we strive to limit total portfolio volatility and protect
the value of portfolio securities by selectively hedging the Portfolio's foreign
currency exposure in times when we expect the U.S. dollar to strengthen.
Q: How do you perceive the current outlook?
A: There is still an abundance of exciting investment
opportunities around the world. Many equity markets still have not reached the
maturity stage of the U.S. market and have much more room to grow. There are new
markets opening up to foreign investment and many changes are occurring in
markets where equity investments have traditionally commanded less attention
than fixed income securities.
Q: Compared to the stock market in the United States, are there
more anomalies in security pricing abroad?
A: Well, the rest of the world is not as well followed as the
United States. So you'll find more anomalies. At the same time, though, the
level of analysis of companies around the world is improving every day, and the
gap in coverage is narrowing.
What never changes is the psychology of the investor -- you
regularly see either despair or euphoria in different sectors of every
9
<PAGE>
international market. That, in our opinion, creates opportunities to find
undiscovered gems at extraordinarily cheap prices.
These opportunities can come from, say, uncertainty over an election
going one way or another. Investors may see the outcome as totally disastrous
for a country -- or as totally euphoric. Then, reality sets in, and things are
never as bleak or as wonderful as they had been painted.
Q: Do you integrate ideas from Neuberger & Berman's research and
the domestic portfolio managers?
A: Oh, sure. As everyone knows, the world is becoming smaller,
and certain industries are becoming global (or have become global). Whether one
thinks about technology, pharmaceuticals, medical devices, or the automobile
industry, it's really become one world market. So it's crucial to have good
knowledge about BOTH the United States and the areas outside the United States
where these companies dominate.
* * * * *
The Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of its total assets. Of course, the
Portfolio's holdings are subject to change.
Additional Investment Information
- ---------------------------------
The Portfolio may make the following investments, among others. It
may not buy all of the types of securities or use all of the investment
techniques that are described.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System,
from a foreign bank or a U.S. branch or agency of a foreign bank or from a
securities dealer that agrees to repurchase the securities from the Portfolio at
a higher price on a designated future date. Repurchase agreements generally are
for a short period of time, usually less than a week. Repurchase agreements with
a maturity of more than seven days are considered to be illiquid securities. The
Portfolio may not enter into such a repurchase agreement with a maturity of more
than seven days if, as a result, more than 15% of the value of its net assets
would then be invested in such repurchase agreements and other illiquid
securities. The Portfolio may enter into a repurchase agreement only if (1) the
10
<PAGE>
underlying securities are of a type that the Portfolio's investment policies and
limitations would allow it to purchase directly, (2) the market value of the
underlying securities, including accrued interest, at all times equals or
exceeds the repurchase price, and (3) payment for the underlying securities is
made only upon satisfactory evidence that the securities are being held for the
Portfolio's account by its custodian or a bank acting as the Portfolio's agent.
If the Portfolio enters into a repurchase agreement subject to foreign law and
the counter-party defaults, the Portfolio may not enjoy protections comparable
to those provided to certain repurchase agreements under U.S. bankruptcy law and
may suffer delays and losses in disposing of the collateral as a result.
SECURITIES LOANS. In order to realize income, the Portfolio may lend
portfolio securities with a value not exceeding 33-1/3% of its total assets to
banks, brokerage firms, or other institutional investors judged creditworthy by
N&B Management. Borrowers are required continuously to secure their obligations
to return securities on loan from the Portfolio by depositing collateral in a
form determined to be satisfactory by the Portfolio Trustees. The collateral,
which must be marked to market daily, must be equal to at least 100% of the
market value of the loaned securities, which will also be marked to market
daily. N&B Management believes the risk of loss on these transactions is slight
because, if a borrower were to default for any reason, the collateral should
satisfy the obligation. However, as with other extensions of secured credit,
loans of portfolio securities involve some risk of loss of rights in the
collateral should the borrower fail financially.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradable in their
principal market are not considered to be restricted. Regulation S under the
11
<PAGE>
1933 Act permits the sale abroad of securities that are not registered for sale
in the United States.
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. To the extent
restricted securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 15% limit on investments in illiquid
securities. Restricted securities for which no market exists are priced by a
method that the Portfolio Trustees believe accurately reflects fair value.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio sells portfolio securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of the
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, the Portfolio will deposit in a
segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to the Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
LEVERAGE. The Portfolio may make investments while borrowings are
outstanding. Leverage creates an opportunity for increased net income but, at
the same time, creates special risk considerations. For example, leverage may
amplify changes in the Portfolio's and the Fund's net asset values ("NAVs").
Although the principal of such borrowings will be fixed, the Portfolio's assets
may change in value during the time the borrowing is outstanding. Leverage
creates interest expenses for the Portfolio. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Portfolio
will have to pay, the Portfolio's net income will be greater than it would be if
leverage were not used. Conversely, if the income from the assets obtained with
borrowed funds is not sufficient to cover the cost of leveraging, the net income
of the Portfolio will be less than it would be if leverage were not used, and
therefore the amount available for distribution to the Fund's shareholders as
dividends will be reduced. Reverse repurchase agreements create leverage and are
considered borrowings for purposes of the Portfolio's investment limitations.
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Generally, the Portfolio does not intend to use leverage for
investment purposes. It may, however, use leverage to purchase securities needed
to close out short sales entered into for hedging purposes and to facilitate
other hedging transactions.
FOREIGN SECURITIES. Investments in foreign securities involve
sovereign and other risks, in addition to the credit and market risks normally
associated with domestic securities. These additional risks include the
possibility of adverse political and economic developments (including political
instability, nationalization, expropriation, or confiscatory taxation) and the
potentially adverse effects of unavailability of public information regarding
issuers, less governmental supervision and regulation of financial markets,
reduced liquidity of certain financial markets, and the lack of uniform
accounting, auditing, and financial reporting standards or the application of
standards that are different or less stringent than those applied in the United
States.
The Portfolio 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) certificates of deposit ("CDs"), commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolio endeavors to
achieve the most favorable net results on portfolio transactions.
Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
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temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices
of foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. The Portfolio may
purchase securities on a when-issued basis and may purchase or sell securities
on a forward commitment basis. These transactions involve a commitment by the
Portfolio to purchase or sell securities at a future date (ordinarily within two
months, although the Portfolio may agree to a longer settlement period). The
price of the underlying securities (usually expressed in terms of yield) and the
date when the securities will be delivered and paid for (the settlement date)
are fixed at the time the transaction is negotiated. When-issued purchases and
forward commitment transactions are negotiated directly with the other party,
and such commitments are not traded on exchanges.
When-issued purchases and forward commitment transactions enable the
Portfolio to "lock in" what N&B Management believes to be an attractive price or
yield on a particular security for a period of time, regardless of future
changes in interest rates. For instance, in periods of rising interest rates and
falling prices, the Portfolio might sell securities it owns on a forward
commitment basis to limit its exposure to falling prices. In periods of falling
interest rates and rising prices, the Portfolio might purchase a security on a
when-issued or forward commitment basis and sell a similar security to settle
such purchase, thereby obtaining the benefit of currently higher yields.
The value of securities purchased on a when-issued or forward
commitment basis and any subsequent fluctuations in their value are reflected in
the computation of the Portfolio's NAV starting on the date of the agreement to
purchase the securities. Because the Portfolio has not yet paid for the
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securities, this produces an effect similar to leverage. The Portfolio does not
earn interest on securities it has committed to purchase until the securities
are paid for and delivered on the settlement date. When the Portfolio makes a
forward commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Portfolio's assets. Fluctuations in the market
value of the underlying securities are not reflected in the Portfolio's NAV as
long as the commitment to sell remains in effect.
The Portfolio will purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, the
Portfolio may dispose of or renegotiate a commitment after it has been entered
into. The Portfolio also may sell securities it has committed to purchase before
those securities are delivered to the Portfolio on the settlement date. The
Portfolio may realize capital gains or losses in connection with these
transactions.
When the Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio will deposit in a segregated account with its
custodian, until payment is made, appropriate liquid securities having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio securities,
the custodian will hold the portfolio securities themselves in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio maintains sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitment transactions.
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may enter into
futures contracts on currencies, debt securities, interest rates, and securities
indices that are traded on exchanges regulated by the Commodity Futures Trading
Commission ("CFTC") or on foreign exchanges. Trading on foreign exchanges is
subject to the legal requirements of the jurisdiction in which the exchange is
located and to the rules of such foreign exchange. The Portfolio may purchase
and sell futures for BONA FIDE hedging and non-hedging purposes (I.E., in an
effort to enhance income) as defined in regulations of the CFTC. The Portfolio
may also purchase and write put and call options on such futures contracts for
BONA FIDE hedging and non-hedging purposes.
The Portfolio may sell futures contracts in order to offset a possible
decline in the value of its portfolio securities. When a futures contract is
sold by the Portfolio, the value of the contract will tend to rise when the
value of the portfolio securities declines and will tend to fall when the value
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of such securities increases. The Portfolio may purchase futures contracts in
order to fix what N&B Management believes to be a favorable price for securities
the Portfolio intends to purchase. If a futures contract is purchased by the
Portfolio, the value of the contract will tend to change together with changes
in the value of such securities. To compensate for differences in historical
volatility between positions the Portfolio wishes to hedge and the standardized
futures contracts available to it, the Portfolio may purchase or sell futures
contracts with a greater or lesser value than the securities it wishes to hedge.
With respect to currency futures, the Portfolio may sell a futures
contract or a call option, or it may purchase a put option on such futures
contract, if N&B Management anticipates that exchange rates for a particular
currency will fall. Such a transaction will be used as a hedge (or, in the case
of a sale of a call option, a partial hedge) against a decrease in the value of
portfolio securities denominated in that currency. If N&B Management anticipates
that a particular currency will rise, the Portfolio may purchase a currency
futures contract or a call option to protect against an increase in the price of
securities which are denominated in that currency and which the Portfolio
intends to purchase. The Portfolio may also purchase a currency futures contract
or a call option thereon for non-hedging purposes when N&B Management
anticipates that a particular currency will appreciate in value, but securities
denominated in that currency do not present an attractive investment and are not
included in the Portfolio.
A "sale" of a futures contract (or a "short" futures position)
entails the assumption of a contractual obligation to deliver the securities or
currency underlying the contract at a specified price at a specified future
time. A "purchase" of a futures contract (or a "long" futures position) entails
the assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded
on exchanges that have been designated as "contract markets" by the CFTC;
futures transactions must be executed through a futures commission merchant that
is a member of the relevant contract market. In both U.S. and foreign markets,
an exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
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the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
While futures contracts entered into by the Portfolio will usually be liquidated
in this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts
will benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
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the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered call
options and may purchase call options on securities. The purpose of writing call
options is to hedge (I.E., to reduce, at least in part, the effect of price
fluctuations of securities held by the Portfolio on the Portfolio's and its
corresponding Fund's NAVs) or to earn premium income. Portfolio securities on
which call options may be written and purchased by the Portfolio are purchased
solely on the basis of investment considerations consistent with the Portfolio's
investment objective.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
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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.
The Portfolio writes only "covered" call options on securities it
owns. The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk (in contrast to the writing
of "naked" or uncovered call options, which the Portfolio will not do) but is
capable of enhancing the Portfolio's total return. When writing a covered call
option, the Portfolio, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline.
If a call option that the Portfolio has written expires unexercised,
the Portfolio will realize a gain in the amount of the premium; however, that
gain may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.
When the Portfolio purchases a call option, it pays a premium for
the right to purchase a security from the writer at a specified price until a
specified date. The Portfolio would purchase a call option to offset a
previously written call option. The Portfolio may purchase call options for
hedging or non-hedging purposes.
PUT OPTIONS ON SECURITIES. The Portfolio may write and purchase put
options on securities. Generally, the purpose of writing and purchasing these
options is to hedge (I.E., to reduce, at least in part, the effect of price
fluctuations of securities held by the Portfolio on the Portfolio's and its
corresponding Fund's NAVs). However, the Portfolio also may use put options for
non-hedging purposes.
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser decides to exercise the option. The
Portfolio may be obligated to purchase the underlying security at more than its
current value.
When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio might purchase a put option in
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order to protect itself against a decline in the market value of a security it
owns.
Portfolio securities on which put options may be written and
purchased by the Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective. When
writing a put option, the Portfolio, in return for the premium, takes the risk
that it must purchase the underlying security at a price that may be higher than
the current market price of the security. If a put option that the Portfolio has
written expires unexercised, the Portfolio will realize a gain in the amount of
the premium.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of
an option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
Portfolio also may purchase European-style options, which are exercisable only
immediately prior to their expiration date. The obligation under any option
written by the Portfolio terminates upon expiration of the option or, at an
earlier time, when the Portfolio offsets the option by entering into a "closing
purchase transaction" to purchase an option of the same series. If an option is
purchased by the Portfolio and is never exercised or closed out, the Portfolio
will lose the entire amount of the premium paid.
Options are traded both on U.S. national securities exchanges and in
the over-the-counter ("OTC") market. The Portfolio also may purchase and sell
options that are traded on foreign exchanges. Exchange-traded options are issued
by a clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. N&B Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
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The assets used as cover (or held in a segregated account) for OTC
options written by the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection
with purchasing or writing options, including those used to close out existing
positions. From time to time, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned to
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it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
PUT AND CALL OPTIONS ON SECURITIES INDICES. The Portfolio may
purchase put and call options on securities indices for the purpose of hedging
against the risk of price movements that would adversely affect the value of the
Portfolio's securities or securities the Portfolio intends to buy. The Portfolio
may write securities index options to close out positions in such options that
it has purchased. The Portfolio currently does not expect to invest a
substantial portion of its assets in securities index options.
Unlike a securities option, which gives the holder the right to
purchase or sell a specified security at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (1) the difference between the exercise price of the
option and the value of the underlying securities index on the exercise date (2)
multiplied by a fixed "index multiplier." A securities index fluctuates with
changes in the market values of the securities included in the index. Options on
stock indices are currently traded on the Chicago Board Options Exchange, the
New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S.
and foreign exchanges. All securities index options purchased by the Portfolio
will be listed and traded on an exchange.
The effectiveness of hedging through the purchase of securities
index options will depend upon the extent to which price movements in the
securities being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by the Portfolio will not exactly match the composition
of the securities indices on which options are available.
Securities index options have characteristics and risks similar to
those of securities options, as discussed herein.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolio also may engage in foreign currency
exchange transactions on a spot (I.E., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
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The Portfolio may enter into forward contracts for hedging or
non-hedging purposes. When the Portfolio engages in foreign currency
transactions for hedging purposes, it will not enter into forward contracts to
sell currency or maintain a net exposure to such contracts if their consummation
would obligate the Portfolio to deliver an amount of foreign currency materially
in excess of the value of its portfolio securities or other assets denominated
in that currency. The Portfolio may also purchase and sell forward contracts for
non-hedging purposes when N&B Management anticipates that a foreign currency
will appreciate or depreciate in value, but securities in that currency do not
present attractive investment opportunities and are not held in the Portfolio's
investment portfolio.
Forward contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
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However, a hedge or proxy-hedge cannot protect against exchange rate risks
perfectly, and, if N&B Management is incorrect in its judgment of future
exchange rate relationships, the Portfolio could be in a less advantageous
position than if such a hedge had not been established. If the Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of the Portfolio's securities against a decline in the value of a currency
does not eliminate fluctuations in the prices of the underlying securities.
Because forward contracts are not traded on an exchange, the assets used to
cover such contracts may be illiquid. The Portfolio may experience delays in the
settlement of its foreign currency transactions.
The Portfolio may purchase securities of an issuer domiciled in a
country other than the country in whose currency the instrument is denominated.
The Portfolio may invest in securities denominated in the European Currency Unit
("ECU"), which is a "basket" consisting of a specified amount of the currencies
of certain of the member states of the European Union. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Union from time to time to reflect changes in relative values of the
underlying currencies. The market for ECUs may become illiquid at times of
uncertainty or rapid change in the European currency markets, limiting the
Portfolio's ability to prevent potential losses. In addition, the Portfolio may
invest in securities denominated in other currency baskets.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies. The Portfolio would engage
in such transactions to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired or to protect the U.S. dollar equivalent of dividends, interest, or
other payments on those securities. In addition, the Portfolio may purchase put
and call options on foreign currencies for non-hedging purposes when N&B
Management anticipates that a currency will appreciate or depreciate in value,
but securities denominated in that currency do not present attractive investment
opportunities and are not included in the Portfolio. The Portfolio may write
(sell) put and covered call options on any currency in order to realize greater
income than would be realized on portfolio securities alone.
Currency options have characteristics and risks similar to those of
securities options, as discussed herein. Certain options on foreign currencies
are traded on the OTC market and involve liquidity and credit risks that may not
be present in the case of exchange-traded currency options.
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REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent
the Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.
COVER FOR FINANCIAL INSTRUMENTS. The Portfolio will comply with SEC
guidelines regarding "cover" for Financial Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using
Financial Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of Financial Instruments; (2) possible lack of a
liquid secondary market for Financial Instruments and the resulting inability to
close out Financial Instruments when desired; (3) the fact that the skills
needed to use Financial Instruments are different from those needed to select
the Portfolio's securities; (4) the fact that, although use of Financial
Instruments for hedging purposes can reduce the risk of loss, they also can
reduce the opportunity for gain, or even result in losses, by offsetting
favorable price movements in hedged investments; and (5) the possible inability
of the Portfolio to purchase or sell a portfolio security at a time that would
otherwise be favorable for it to do so, or the possible need for the Portfolio
to sell a portfolio security at a disadvantageous time, due to its need to
maintain cover or to segregate securities in connection with its use of
Financial Instruments. N&B Management intends to reduce the risk of imperfect
correlation by investing only in Financial Instruments whose behavior is
expected to resemble or offset that of the Portfolio's underlying securities or
currency. N&B Management intends to reduce the risk that the Portfolio will be
unable to close out Financial Instruments by entering into such transactions
only if N&B Management believes there will be an active and liquid secondary
market. There can be no assurance that the Portfolio's use of Financial
Instruments will be successful.
25
<PAGE>
The Portfolio's use of Financial Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if its corresponding Fund is to continue to qualify as a RIC. See
"Additional Tax Information." Hedging instruments may not be available with
respect to some currencies, especially those of so-called emerging market
countries.
SHORT SALES. The Portfolio may enter into short sales of securities.
Under applicable guidelines of the SEC staff, if the Portfolio engages in a
short sale (other than a short sale against-the-box), it must put in a
segregated account (not with the broker) an amount of cash or appropriate liquid
securities equal to the difference between (1) the market value of the
securities sold short at the time they were sold short and (2) any cash or
securities required to be deposited as collateral with the broker in connection
with the short sale (not including the proceeds from the short sale). In
addition, until the Portfolio replaces the borrowed security, it must daily
maintain the segregated account at such a level that (1) the amount deposited in
it plus the amount deposited with the broker as collateral equals the current
market value of the securities sold short, and (2) the amount deposited in it
plus the amount deposited with the broker as collateral is not less than the
market value of the securities at the time they were sold short.
The effect of short selling on the Portfolio is similar to the
effect of leverage. Short selling may amplify changes in the Portfolio's and the
Fund's NAVs. Short selling may also produce higher than normal portfolio
turnover, which may result in increased transaction costs to the Portfolio.
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in corporate bonds and
debentures receiving one of the four highest ratings from Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally
recognized statistical rating organization ("NRSRO") or, if not rated by any
NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable
Unrated Securities").
The Portfolio may invest in domestic and foreign debt securities of
any rating, including those rated below investment grade and Comparable Unrated
Securities. Foreign debt securities are subject to risks similar to those of
other foreign 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
26
<PAGE>
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Debt securities in the lowest rating categories may involve a substantial
risk of default or may be in default. Changes in economic conditions or
developments regarding the individual issuer are more likely to cause price
volatility and weaken the capacity of the issuer of such securities to make
principal and interest payments than is the case for higher-grade debt
securities. An economic downturn affecting the issuer may result in an increased
incidence of default. The market for lower-rated securities may be thinner and
less active than for higher-rated securities. Pricing of thinly traded
securities requires greater judgment than pricing of securities for which market
transactions are regularly reported. N&B Management will invest in lower-rated
securities only when it concludes that the anticipated return on such an
investment to the Portfolio warrants exposure to the additional level of risk.
Subsequent to its purchase by the Portfolio, an issue of debt
securities may cease to be rated or its rating may be reduced, so that the
securities would no longer be eligible for purchase by the Portfolio. N&B
Management will make a determination as to whether the Portfolio should dispose
of the downgraded securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt security
issued by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest only in commercial paper receiving the
highest rating from S&P (A-1) or Moody's (P-1), or deemed by N&B Management to
be of comparable quality. The Portfolio may invest in such commercial paper as a
defensive measure, to increase liquidity, or as needed for segregated accounts.
The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, N&B Management
may in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
27
<PAGE>
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security entitles the holder to receive the interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, such securities ordinarily provide a stream of income with generally
higher yields than common stocks of the same or similar issuers, but lower than
the yields on non-convertible debt. Convertible securities are usually
subordinated to comparable-tier non-convertible securities but rank senior to
common stock in a corporation's capital structure. The value of a convertible
security is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege and (2) its worth if converted into the underlying common stock.
Convertible debt securities are subject to the Portfolio's investment policies
and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in
the price of the underlying common stock in a way that non-convertible debt may
not. Convertible securities are typically issued by smaller capitalization
companies whose stock prices may be volatile. A convertible security may be
subject to redemption at the option of the issuer at a price established in the
security's governing instrument. If a convertible security held by the Portfolio
is called for redemption, the Portfolio will be required to convert it into the
underlying common stock, sell it to a third party or permit the issuer to redeem
the security. Any of these actions could have an adverse effect on the
Portfolio's and the Fund's ability to achieve their investment objectives.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
SWAP AGREEMENTS. The Portfolio may enter into swap agreements to
manage or gain exposure to particular types of investments (including equity
securities or indices of equity securities in which the Portfolio otherwise
could not invest efficiently). In a swap agreement, one party agrees to make
regular payments equal to a floating rate on a specified amount in exchange for
payments equal to a fixed rate, or a different floating rate, on the same amount
for a specified period.
28
<PAGE>
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have a considerable impact on the
Portfolio's performance. The risks of swap agreements depend upon the other
party's creditworthiness and ability to perform, as well as the Portfolio's
ability to terminate its swap agreements or reduce its exposure through
offsetting transactions. In accordance with SEC staff requirements, the
Portfolio will segregate cash or appropriate liquid securities in an amount
equal to its obligations under swap agreements; when an agreement provides for
netting of the payments by the two parties, the Portfolio will segregate only
the amount of its net obligation, if any. Swap agreements may be illiquid. The
swap market is relatively new and is largely unregulated.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and
are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
Total Return Computations
- -------------------------
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)[SUPERSCRIPT]n = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
As of the date of this SAI, the Fund has no past performance.
However, the Fund's investment objective, policies, and limitations are the same
as those of Neuberger & Berman INTERNATIONAL Fund, a mutual fund that is a
series of Neuberger & Berman Equity Funds and that invests in the Portfolio
("Sister Fund"). The following total return data is for the Sister Fund. The
total returns shown below would have been lower had they reflected the higher
fees of the Fund, as compared to those of the Sister Fund.
The average annual total returns for the Sister Fund for the
one-year period ended August 31, 1997, and for the period from June 15, 1994
29
<PAGE>
(commencement of operations) through August 31, 1997, were +24.71% and +13.33%,
respectively.
N&B Management may from time to time waive a portion of its fees due
from the Fund or Portfolio or reimburse the Fund or Portfolio for a portion of
its expenses. Such action has the effect of increasing total return. Actual
reimbursements and waivers are described in the Prospectus and in "Investment
Management and Administration Services" below.
COMPARATIVE INFORMATION
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings)
published by independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance of
mutual funds, such as Lipper Analytical Services, Inc., C.D.A. Investment
Technologies, Inc., Wiesenberger Investment Companies Service, Investment
Company Data Inc., Morningstar, Inc., Micropal Incorporated, and quarterly
mutual fund rankings by Money, Fortune, Forbes, Business Week, Personal
Investor, and U.S. News & World Report magazines, The Wall Street Journal,
The New York Times, Kiplinger's Personal Finance, and Barron's Newspaper,
or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Russell Midcap Growth Index, Dow Jones Industrial Average
("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index, Value Line Index,
Montgomery Securities Growth Stock Index, U.S. Department of Labor
Consumer Price Index ("Consumer Price Index"), College Board Annual Survey
of Colleges, Kanon Bloch's Family Performance Index, the Barra Growth
Index, the Barra Value Index, the EAFE(R) Index, the Financial Times World
XUS Index, and various other domestic, international, and global indices.
The S&P 500 Index is a broad index of common stock prices, while the DJIA
represents a narrower segment of industrial companies. The S&P 600 Index
includes stocks that range in market value from $39 million to $2.7
billion, with an average of $616 million. The S&P 400 Index measures
mid-sized companies that have an average market capitalization of $2.2
billion. The EAFE(R) Index is an unmanaged index of common stock prices of
more than 1,000 companies from Europe, Australia, and the Far East
translated into U.S. dollars. The Financial Times World XUS Index is an
30
<PAGE>
index of 24 international markets, excluding the U.S. market. Each assumes
reinvestment of distributions and is calculated without regard to tax
consequences or the costs of investing. The Portfolio may invest in
different types of securities from those included in some of the above
indices.
Evaluations of the Fund's performance, its total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Fund
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the Fund. This information may include the Portfolio's
portfolio diversification by asset type. Information used in Advertisements may
include statements or illustrations relating to the appropriateness of types of
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
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.)
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that the Portfolio will achieve its
investment objective.
31
<PAGE>
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees
and officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman.
THE TRUST:
Positions
Name, Age, and Held With
Address(1) The Trust Principal Occupation(s)(2)
- ---------- --------- --------------------------
Faith Colish (62) Trustee Attorney at Law, Faith Colish,
63 Wall Street A Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (75) Trustee Retired. Formerly Senior Vice
435 East 52nd Street President and Director of
New York, NY 10022 Exxon Corporation; Director of
Emigrant Savings Bank.
Stanley Egener* (63) Chairman of the Principal of Neuberger &
Board, Chief Berman; President and Director
Executive of N&B Management; Chairman of
Officer, and the Board, Chief Executive
Trustee Officer and Trustee of eight
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Howard A. Mileaf (60) Trustee Vice President and Special
WHX Corporation Counsel to WHX Corporation
110 East 59th Street (holding company) since 1992;
30th Floor Director of Kevlin Corporation
New York, NY 10022 (manufacturer of microwave and
other products).
32
<PAGE>
Name, Age, and Held With
Address(1) The Trust Principal Occupation(s)(2)
- ---------- --------- --------------------------
Edward I. O'Brien* (69) Trustee Until 1993, President of the
12 Woods Lane Securities Industry
Scarsdale, NY 10583 Association ("SIA")
(securities industry's
representative in government
relations and regulatory
matters at the federal and
state levels); until November
1993, employee of the SIA;
Director of Legg Mason, Inc.
John T. Patterson, Jr. (69) Trustee Retired. Formerly, President
183 Ledge Drive of SOBRO (South Bronx Overall
Torrington, CT 06790 Economic Development
Corporation).
John P. Rosenthal (64) Trustee Senior Vice President of
Burnham Securities Inc. Burnham Securities Inc. (a
Burnham Asset Management registered broker-dealer)
Corp. since 1991; Director, Cancer
1325 Avenue of the Americas Treatment Holdings, Inc.
17th Floor
New York, NY 10019
Cornelius T. Ryan (66) Trustee General Partner of Oxford
Oxford Bioscience Partners and Oxford Bioscience
Partners Partners (venture capital
315 Post Road West partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money market
fund) and Prime Cash Fund.
33
<PAGE>
Name, Age, and Held With
Address(1) The Trust Principal Occupation(s)(2)
- ---------- --------- --------------------------
Gustave H. Shubert (68) Trustee Senior Fellow/Corporate
13838 Sunset Boulevard Advisor and Advisory Trustee
Pacific Palisades, CA 90272 of Rand (a non-profit public
interest research institution)
since 1989; Member of the
Board of Overseers of the
Institute for Civil Justice,
the Policy Advisory Committee
of the Clinical Scholars
Program at the University of
California, the American
Association for the
Advancement of Science, the
Counsel on Foreign Relations,
and the Institute for
Strategic Studies (London);
advisor to the Program
Evaluation and Methodology
Division of the U.S. General
Accounting Office; formerly
Senior Vice President and
Trustee of Rand.
Lawrence Zicklin* (61) President and Principal of Neuberger &
Trustee Berman; Director of N&B
Management; President of five
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Daniel J. Sullivan (57) Vice President Senior Vice President of N&B
Management since 1992; Vice
President of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
34
<PAGE>
Name, Age, and Held With
Address(1) The Trust Principal Occupation(s)(2)
- ---------- --------- --------------------------
Michael J. Weiner (50) Vice President Senior Vice President of N&B
and Principal Management since 1992;
Financial Treasurer of N&B Management
Officer from 1992 to 1996; 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 (41) Secretary Vice President of N&B
Management; Secretary of eight
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Richard Russell (50) Treasurer and Vice President of N&B
Principal Management since 1993; prior
Accounting thereto, Assistant Vice
Officer President of N&B Management;
Treasurer and Principal
Accounting Officer of eight
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Stacy Cooper-Shugrue (34) Assistant Assistant Vice President of
Secretary N&B Management since 1993;
prior thereto, employee of N&B
Management; Assistant
Secretary of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
35
<PAGE>
Name, Age, and Held With
Address(1) The Trust Principal Occupation(s)(2)
- ---------- --------- --------------------------
C. Carl Randolph (60) Assistant Principal of Neuberger &
Secretary Berman since 1992; Assistant
Secretary of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
Barbara DiGiorgio (38) Assistant Assistant Vice President of
Treasurer N&B Management since 1993;
prior thereto, employee of N&B
Management; Assistant
Treasurer since 1996 of eight
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Celeste Wischerth (36) Assistant Assistant Vice President of
Treasurer of N&B Management since 1994;
each Trust prior thereto, employee of N&B
Management; Assistant
Treasurer since 1996 of eight
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
36
<PAGE>
MANAGERS TRUST:
Positions
Name, Age, and Held with
Address(1) Managers Trust Principal Occupation(s)(2)
- ---------- -------------- --------------------------
Stanley Egener* (63) Chairman of the (See above)
Board, Chief
Executive
Officer and
Trustee
Howard A. Mileaf (60) Trustee (See above)
WHX Corporation
110 East 59th Street
30th Floor
New York, NY 10022
John T. Patterson, Jr. (69) Trustee (See above)
183 Ledge Drive
Torrington, CT 06790
John P. Rosenthal (64) Trustee (See above)
Burnham Securities Inc.
Burnham Asset Management Corp.
1325 Avenue of the Americas
17th Floor
New York, NY 10019
Lawrence Zicklin (61) President (See above)
Daniel J. Sullivan (57) Vice President (See above)
Michael J. Weiner (50) Vice President (See above)
and Principal
Financial
Officer
37
<PAGE>
MANAGERS TRUST:
Positions
Name, Age, and Held with
Address(1) Managers Trust Principal Occupation(s)(2)
- ---------- -------------- --------------------------
Richard Russell (50) Treasurer and (See above)
Principal
Accounting
Officer
Claudia A. Brandon (41) Secretary (See above)
Stacy Cooper-Shugrue (34) Assistant (See above)
Secretary
C. Carl Randolph (60) Assistant (See above)
Secretary
Barbara DiGiorgio (38) Assistant (See above)
Treasurer
Celeste Wischerth (36) Assistant (See above)
Treasurer
Jacqueline Henning (55) Assistant Managing Director, State
Treasurer Street Cayman Trust Co.,
Ltd. since 1994; Assistant
Director, Morgan Grenfell,
1993-94; Bank of Nova
Scotia Trust Co. (Cayman)
Ltd., Managing Director,
1988-93.
Lenore Joan McCabe (36) Assistant Operations Supervisor,
Secretary State Street Cayman Trust
Co., Ltd.; Project Manager,
State Street Canada, Inc.,
1992-94; employee, Boston
Financial Data Services,
1984-92.
(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.
38
<PAGE>
* Indicates a trustee who is an "interested person" of each Trust within
the meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons
of each Trust by virtue of the fact that they are officers and/or directors of
N&B Management and principals of Neuberger & Berman. Mr. O'Brien is an
interested person of the Trust by virtue of the fact that he is a director of
Legg Mason, Inc., a wholly owned subsidiary of which, from time to time, serves
as a broker or dealer to the Portfolio and other funds for which N&B Management
serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provides that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger & Berman
Funds(REGISTERED) has any retirement plan for its trustees.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/97
-----------------------------
Total Compensation
from Investment
Aggregate Companies in the
Compensation Neuberger & Berman
Name and Position from the Fund Complex Paid To
With The Trust Trust Trustees
----------------- ------------ ---------------------
Faith Colish $ 2,592 $ 64,000
Trustee (5 other investment
companies)
Donald M. Cox $ 2,952 $ 31,000
Trustee (3 other investment
companies)
39
<PAGE>
Total Compensation
from Investment
Aggregate Companies in the
Compensation Neuberger & Berman
Name and Position from the Fund Complex Paid To
With The Trust Trust Trustees
----------------- ------------ ---------------------
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive companies)
Officer, and Trustee
Howard A. Mileaf $ 2,995 $ 33,500
Trustee (4 other investment
companies)
Edward I. O'Brien $ 3,321 $ 34,000
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 3,321 $ 37,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,952 $ 32,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,995 $ 30,500
Trustee (3 other investment
companies)
Gustave H. Shubert $ 2,995 $ 30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
40
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager And Administrator
- ------------------------------------
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. N&B Management serves
as the Portfolio's investment manager pursuant to a management agreement with
Managers Trust, dated as of November 1, 1995 ("Management Agreement"). The
Management Agreement was approved 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 August 8,
1995, and was approved by the holders of the interests in the Portfolio on
October 26, 1995.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits N&B Management to effect securities
transactions on behalf of the Portfolio through associated persons of N&B
Management. The Management Agreement also specifically permits N&B Management to
compensate, through higher commissions, brokers and dealers who provide
investment research and analysis to the Portfolio, although N&B Management has
no current plans to pay a material amount of such compensation.
N&B Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and/or officers of the Trusts. See "Trustees and Officers." The 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 facilities, services and personnel, as well
as accounting, recordkeeping, and other services, to the Fund pursuant to an
administration agreement with the Trust, dated August 3, 1993, as amended August
2, 1996 ("Administration Agreement"). The Fund was authorized to become subject
to the Administration Agreement by vote of the Fund Trustees on January 22, 1997
and became subject to it on August 30, 1997. For such administrative services,
the Fund pays N&B Management a fee based on the Fund's average daily net assets,
as described in the Prospectus. N&B Management enters into administrative
services agreements with Institutions, pursuant to which it compensates
41
<PAGE>
Institutions for accounting, recordkeeping, and other services that they provide
in connection with investments in the Fund.
Because the Portfolio has its principal offices in the Cayman
Islands, Managers Trust has entered into an Administrative Services Agreement
with State Street Cayman Trust Company Ltd. ("State Street Cayman"), Elizabethan
Square, P.O. Box 1984, George Town, Grand Cayman, Cayman Islands, British West
Indies, effective August 31, 1994. Under the Administrative Services Agreement,
State Street Cayman provides sufficient personnel and suitable facilities for
the principal offices of the Portfolio and provides certain administrative, fund
accounting, and transfer agency services with respect to the Portfolio. The
Administrative Services Agreement terminates if assigned by State Street Cayman;
however, State Street Cayman is permitted to, and does, employ an affiliate,
State Street Canada, Inc., to perform certain accounting functions.
Prior to November 1, 1995, the Portfolio was advised by BNP-N&B
Global Asset Management, L.P. ("BNP-N&B Global"), a joint venture of Banque
Nationale de Paris ("BNP") and Neuberger & Berman, pursuant to an investment
advisory agreement dated June 15, 1994. During that period, BNP-N&B Global
voluntarily reimbursed the Portfolio to the extent that its operating expenses
(excluding interest, taxes, brokerage commissions, and extraordinary expenses)
exceeded 0.70% per annum of the Portfolio's average daily net assets. N&B
Management provided the Portfolio with administrative services pursuant to a
separate administration agreement dated June 15, 1994.
Institutions may be subject to federal or state laws that limit
their ability to provide certain administrative or distribution-related
services. For example, the Glass-Steagall Act is generally interpreted to
prohibit most banks from underwriting mutual fund shares. N&B Management intends
to contract with Institutions for only those services they may legally provide.
If, due to a change in the laws governing Institutions or in the interpretation
of any such law, an Institution is prohibited from performing some or all of the
above-described services, N&B Management may be required to find alternative
means of providing those services. Any such change is not expected to impact the
Funds or their shareholders adversely.
The Management Agreement continues until August 2, 1998. The
Management Agreement is renewable thereafter from year to year with respect to
the Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Independent Portfolio Trustees, cast in person at
a meeting called for the purpose of voting on such approval, and (2) by the vote
of a majority of the Portfolio Trustees or by a 1940 Act majority vote of the
outstanding interests in the Portfolio. The Administration Agreement continues
until August 2, 1998. The Administration Agreement is renewable from year to
42
<PAGE>
year with respect to the Fund, so long as its continuance is approved at least
annually (1) by the vote of a majority of the Fund Trustees who are not
"interested persons" of N&B Management or the Trust ("Independent Fund
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval, and (2) by the vote of a majority of the Fund Trustees or by a 1940
Act majority vote of the outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by N&B Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by N&B Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
Sub-Adviser
- -----------
N&B Management retains Neuberger & Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated November 1, 1995 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the Portfolio Trustees, including a
majority of the Independent Portfolio Trustees, on August 8, 1995, and was
approved by the holders of the interests in the Portfolio on October 26, 1995.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger & Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with 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 until August 2, 1998 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
Portfolio, by N&B Management, or by Neuberger & Berman on not less than 30 nor
more than 60 days' prior written notice. The Sub-Advisory Agreement also
43
<PAGE>
terminates automatically with respect to the Portfolio if it is assigned or if
the Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
Investment Companies Managed
- ----------------------------
As of September 30, 1997, the investment companies managed by N&B
Management had aggregate net assets of approximately $21.2 billion. N&B
Management currently serves as investment manager of the following investment
companies:
NAME Approximate Net
---- Assets at
September 30, 1997
------------------
Neuberger & Berman Cash Reserves $ 667,531,894
Portfolio
(investment portfolio for Neuberger
& Berman Cash Reserves)
Neuberger & Berman Government Money $ 248,190,672
Portfolio
(investment portfolio for Neuberger
& Berman Government Money Fund)
Neuberger & Berman Limited Maturity $ 295,393,823
Bond Portfolio
(investment portfolio for Neuberger
& Berman Limited Maturity Bond Fund
and Neuberger & Berman Limited
Maturity Bond Trust)
Neuberger & Berman Municipal Money $ 146,706,408
Portfolio
(investment portfolio for Neuberger
& Berman Municipal Money Fund)
44
<PAGE>
NAME Approximate Net
---- Assets at
September 30, 1997
------------------
Neuberger & Berman Municipal $ 31,573,660
Securities Portfolio
(investment portfolio for Neuberger
& Berman Municipal Securities Trust)
Neuberger & Berman Ultra Short Bond $ 62,627,463
Portfolio
(investment portfolio for Neuberger
& Berman Ultra Short Bond Fund and
Neuberger & Berman Ultra Short Bond
Trust)
Neuberger & Berman Focus Portfolio $1,661,565,204
(investment portfolio for Neuberger
& Berman Focus Fund, Neuberger &
Berman Focus Trust, and Neuberger &
Berman Focus Assets)
Neuberger & Berman Genesis Portfolio $1,491,048,221
(investment portfolio for Neuberger
& Berman Genesis Fund, Neuberger &
Berman Genesis Trust, and Neuberger
& Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio $9,123,101,599
(investment portfolio for Neuberger
& Berman Guardian Fund, Neuberger &
Berman Guardian Trust and Neuberger
& Berman Guardian Assets)
45
<PAGE>
NAME Approximate Net
---- Assets at
September 30, 1997
------------------
Neuberger & Berman International $ 127,016,071
Portfolio
(investment portfolio for Neuberger
& Berman International Fund and
Neuberger & Berman International
Trust)
Neuberger & Berman Manhattan Portfolio $ 655,156,471
(investment portfolio for Neuberger
& Berman Manhattan Fund, Neuberger
& Berman Manhattan Trust and
Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio $3,783,754,657
(investment portfolio for Neuberger
& Berman Partners Fund, Neuberger &
Berman Partners Trust, and
Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive $ 274,230,723
Portfolio
(investment portfolio for Neuberger
& Berman Socially Responsive Fund,
Neuberger & Berman NYCDC Socially
Responsive Trust, and Neuberger &
Berman Socially Responsive Trust)
Advisers Managers Trust $2,651,503,613
(seven series)
The investment decisions concerning the Portfolio and the other
mutual funds managed by N&B Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolio. Even where the investment objectives are similar, however, the
46
<PAGE>
methods used by the Other N&B Funds and the Portfolio to achieve their
objectives may differ. The investment results achieved by all of the mutual
funds managed by N&B Management have varied from one another in the past and are
likely to vary in the future.
There may be occasions when the Portfolio and one or more of the
Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger & Berman (including the Portfolio, the Other N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
Management And Control Of N&B Management
- ----------------------------------------
The directors and officers of N&B Management, all of whom have
offices at the same address as N&B Management, are Richard A. Cantor, Chairman
of the Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph G. Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine Mahaney, Vice President; Ellen
Metzger, Vice President and Secretary; Paul Metzger, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice President;
Frederic B. Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh,
47
<PAGE>
Vice President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Robert Conti, Treasurer; Valerie Chang, Assistant Vice
President; Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Michael J. Hanratty, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice President;
Celeste Wischerth, Assistant Vice President; Loraine Olavarria, Assistant
Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen, Lainoff, Risen,
Simons, Sundman and Zicklin, and Mmes. Prindle, Silver and Vale are principals
of Neuberger & Berman.
Mr. Egener is a trustee and officer of each Trust. Mr. Zicklin is a
trustee and officer of the Trust and an officer of Managers Trust. Messrs.
Russell, Sullivan and Weiner, and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers of each Trust. C. Carl Randolph, a principal of Neuberger
& Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to
Institutions. In connection with the sale of its shares, the Fund has authorized
the Distributor to give only the information, and to make only the statements
and representations, contained in the Prospectus and this SAI or that properly
may be included in sales literature and advertisements in accordance with the
1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations.
Sales may be made only by the Prospectus, which may be delivered personally,
through the mails, or by electronic means. The Distributor is the Fund's
"principal underwriter" within the meaning of the 1940 Act and, as such, acts as
agent in arranging for the sale of the Fund's shares to Institutions without
sales commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
From time to time, N&B Management may enter into arrangements
pursuant to which it compensates a registered broker-dealer or other third party
in connection with the distribution of Fund shares.
48
<PAGE>
The Trust, on behalf of the Fund, and the Distributor are parties to
a Distribution Agreement that continues until August 2, 1998. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Exchanging Shares," an Institution may exchange shares of the Fund for shares
of one or more of the equity and income funds that are briefly described below,
if made available through that Institution.
EQUITY FUNDS
- ------------
Neuberger & Berman Seeks long-term capital appreciation through
Focus Trust investments principally in common stocks selected
from 13 multi-industry economic sectors. The
corresponding portfolio uses a value-oriented approach
to select individual securities and then focuses its
investments in the sectors in which the undervalued
stocks are clustered. Through this approach, 90% or
more of the portfolio's investments are normally made
in not more than six sectors.
Neuberger & Berman Seeks capital appreciation through investments
Genesis Trust primarily in common stocks of companies with small
market capitalizations (i.e., up to $1.5 billion at
the time of investment). The corresponding portfolio
uses a value-oriented approach to the selection of
individual securities.
49
<PAGE>
Neuberger & Berman Seeks capital appreciation through investments
Guardian Trust primarily in common stocks of long-established,
high-quality companies that N&B Management believes
are well-managed. The corresponding portfolio uses a
value-oriented approach to the selection of individual
securities. Current income is a secondary objective.
The sister fund (and its predecessor) have paid its
shareholders an income dividend every quarter, and a
capital gain distribution every year, since its
inception in 1950, although this past record does not
necessarily predict the fund's future practices.
Neuberger & Berman Seeks capital appreciation, without regard to
Manhattan Trust income, through investments generally in securities
of small-, medium- and large-capitalization companies
that N&B Management believes have the maximum
potential for long-term capital appreciation. The
portfolio managers currently intend to focus primarily
on the securities of medium-capitalization companies.
The corresponding portfolio's growth-oriented
investment approach involves greater risks and share
price volatility than programs that invest in more
undervalued securities.
Neuberger & Berman Seeks capital growth through an investment approach
Partners Trust that is designed to increase capital with
reasonable risk. Its investment program seeks
securities believed to be undervalued based on strong
fundamentals such as a low price-to-earnings ratio,
consistent cash flow, and the company's track record
through all parts of the market cycle. The
corresponding portfolio uses the value-oriented
investment approach to the selection of individual
securities.
50
<PAGE>
Neuberger & Berman Seeks long-term capital appreciation through
Socially Responsive investments primarily in securities of companies that
Trust meet both financial and social criteria.
INCOME FUND
- -----------
Neuberger & Berman Seeks the highest current income consistent with low
Limited Maturity Bond risk to principal and liquidity and, secondarily,
Trust total return. The corresponding portfolio invests in
debt securities, primarily investment grade; maximum
10% below investment grade, but no lower than B.*/
Maximum average duration of four years.
The Fund and any of the Equity or 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 Fund is a series of a
Delaware business trust (named "Neuberger & Berman Income Trust") that is
registered with the SEC as an open-end management investment company, (2) like
the Fund, the Equity Funds are series of the Trust, except for Neuberger &
Berman Socially Responsive Trust, which is a series of a Delaware business trust
(named "Neuberger & Berman Equity Assets") that is registered with the SEC as an
open-end management investment company, (3) each such fund invests all of its
net investable assets in a corresponding portfolio that has an investment
objective, policies, and limitations identical to those of the fund.
Before effecting an exchange, Fund shareholders must obtain and
should review a currently effective prospectus of the fund into which the
exchange is to be made. The Equity Funds share a prospectus. An exchange is
treated as a sale for federal income tax purposes and, depending on the
circumstances, a capital gain or loss may be realized.
__________________________
*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by N&B Management to be of comparable quality.
51
<PAGE>
ADDITIONAL REDEMPTION INFORMATION
Suspension Of Redemptions
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the NYSE is closed, (2) when trading on
the NYSE is restricted, (3) when an emergency exists as a result of which it is
not reasonably practicable for the Portfolio to dispose of securities it owns or
fairly to determine the value of its net assets, or (4) for such other period as
the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
Redemptions In Kind
- -------------------
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, an Institution generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Fund does not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of the
Fund's shareholders as a whole.
52
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of its
share of any net investment income (after deducting expenses incurred directly
by the Fund), any net realized capital gains, and any net realized gains from
foreign currency transactions earned or realized by the Portfolio. The
Portfolio's net investment income consists of all income accrued on portfolio
assets less accrued expenses, but does not include capital and foreign currency
gains and losses. Net investment income and realized gains and losses are
reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until they are
distributed. The Fund calculates its net investment income and NAV per share as
of the close of regular trading on the NYSE on each Business Day (usually 4:00
p.m. Eastern time).
Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December. Dividends and other distributions are automatically
reinvested in additional shares of the Fund, unless the 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 remains in effect until the Institution notifies the
Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
Taxation Of The Fund
- --------------------
In order to qualify for treatment as a RIC under the Code, the Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Financial Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
53
<PAGE>
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios managed by N&B Management
have received rulings from the Internal Revenue Service ("Service") that each
such fund, as an investor in its corresponding portfolio, will be deemed to own
a proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described above to
qualify as a RIC. Although these rulings may not be relied on as precedent by
the Fund, N&B Management believes that the reasoning thereof and, hence, their
conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the
Fund of distributions to it from the Portfolio, investments by the Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.
Taxation Of The Portfolio
- -------------------------
Certain portfolios managed by N&B Management have received rulings
from the Service to the effect that, among other things, each such portfolio
will be treated as a separate partnership for federal income tax purposes and
will not be a "publicly traded partnership." Although these rulings may not be
relied on as precedent by the Portfolio, N&B Management believes that the
reasoning thereof and, hence, their conclusion apply to the Portfolio as well.
As a result, the Portfolio is not subject to federal income tax; instead, each
investor in the Portfolio, such as the Fund, is required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gains, losses, deductions, and credits, without regard to whether it has
received any cash distributions from the Portfolio. The Portfolio also is not
subject to Delaware or New York income or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
54
<PAGE>
continue to conduct its operations so that the Fund will be able to satisfy all
those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (1) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (2) the Fund's share of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains realized
by a Portfolio, may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions ("foreign taxes") that would reduce the
yield and/or total return on its securities. Tax treaties between certain
countries and the United States may reduce or eliminate foreign taxes, however,
and many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors.
If more than 50% of the value of the Fund's total assets (taking
into account its share of the Portfolio's total assets) at the close of its
taxable year consists of securities of foreign corporations, the Fund will be
eligible to, and may, file an election with the Service that will enable its
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to the Fund's share of any foreign taxes paid by the Portfolio ("Fund's
foreign taxes"). Pursuant to the election, the Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by the shareholder, his or her share
of those taxes, (2) treat his or her share of those taxes and of any dividend
paid by the Fund that represents its share of the Portfolio's income from
foreign or U.S. possessions sources as his or her own income from those sources,
and (3) either deduct the taxes deemed paid by him or her in computing his or
her taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against his or her federal income tax. The
Fund will report to its shareholders shortly after each taxable year their
respective shares of the Fund's foreign taxes and income (taking into account
55
<PAGE>
its share of the Portfolio's income) from sources within foreign countries and
U.S. possessions if it makes this election.
The Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that own, directly, indirectly, or constructively, at least 10% of that voting
power) as to which the Portfolio is a U.S. shareholder (effective for the
taxable year beginning September 1, 1998) -- that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, if the Portfolio holds stock of
a PFIC, the Fund (indirectly through its interest in the Portfolio) will be
subject to federal income tax on its share of a portion of any "excess
distribution" received by the Portfolio on the stock or of any gain on the
Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Fund to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock
in any PFIC may elect to include in ordinary income each taxable year the
excess, if any, of the fair market value of the PFIC's stock over the adjusted
basis therein as of the end of that year. Pursuant to the election, a deduction
(as an ordinary, not capital, loss) also would be allowed for the excess, if
any, of the holder's adjusted basis in PFIC stock over the fair market value
thereof as of the taxable year-end, but only to the extent of any net
mark-to-market gains with respect to that stock included in income for prior
56
<PAGE>
taxable years. The adjusted basis in each PFIC's stock subject to the election
would be adjusted to reflect the amounts of income included and deductions taken
thereunder. Proposed regulations would provide a similar election with respect
to the stock of certain PFICs.
The Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the amount, character and timing of recognition of the gains and losses the
Portfolio realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from Financial Instruments derived by the Portfolio with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts, and
listed options thereon ("Section 1256 contracts") are required to be marked to
market (that is, treated as having been sold at market value) federal income tax
purposes at the end of the Portfolio's taxable year. Sixty percent of any net
gain or loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, proposed technical
corrections legislation would clarify that the 20% rate applies.
Taxation Of The Fund's Shareholders
- -----------------------------------
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger & Berman may act as broker for the Portfolio. During the fiscal
year ended August 31, 1995, Neuberger & Berman INTERNATIONAL Portfolio paid
brokerage commissions of $128,324, of which $4,110 was paid to Neuberger &
Berman and $0 was paid to BNP-International Financial Services Corporation (a
57
<PAGE>
wholly owned subsidiary of BNP that previously was an affiliate of an affiliate
of Neuberger & Berman). During the fiscal year ended August 31, 1996, Neuberger
& Berman INTERNATIONAL Portfolio paid brokerage commissions of $183,335, of
which $5,485 was paid to Neuberger & Berman and $0 was paid to BNP-International
Financial Services Corporation.
During the fiscal year ended August 31, 1997, Neuberger &
Berman INTERNATIONAL Portfolio paid brokerage commissions of $297,431, of which
$5,910 was paid to Neuberger & Berman. Transactions in which the Portfolio used
Neuberger & Berman as broker comprised 5.69% of the aggregate dollar amount of
transactions involving the payment of commissions, and 1.99% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1997. Of the $291,521 paid to other brokers by that Portfolio during that
fiscal year, 95.22% (representing commissions on transactions involving
approximately $72,894,607) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1997, that
Portfolio acquired securities of the following of its Regular B/Ds: HSBC
Securities, Inc., Societe Generale Securities Corporation, and State Street Bank
and Trust Company, N.A.; at that date, that Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: HSBC Securities, Inc., $913,607
and Societe General Securities Corporation, $719,951.
Portfolio securities are, from time to time, loaned by the Portfolio
to Neuberger & Berman in accordance with the terms and conditions of an order
issued by the SEC. The order exempts such transactions from provisions of the
1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. In accordance with the order, securities loans made by the Portfolio
to Neuberger & Berman are fully secured by cash collateral. The portion of the
income on the cash collateral which may be shared with Neuberger & Berman is to
be determined by reference to concurrent arrangements between Neuberger & Berman
and non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger & Berman borrows securities from the Portfolio in
order to re-lend them to others, Neuberger & Berman may be required to pay the
Portfolio, on a quarterly basis, certain of the earnings that Neuberger & Berman
otherwise has derived from the re-lending of the borrowed securities. When
Neuberger & Berman desires to borrow a security that the Portfolio has indicated
a willingness to lend, Neuberger & Berman must borrow such security from the
Portfolio, rather than from an unaffiliated lender, unless the unaffiliated
lender is willing to lend such security on more favorable terms (as specified in
the order) than the Portfolio. If, in any month, the Portfolio's expenses exceed
its income in any securities loan transaction with Neuberger & Berman, Neuberger
& Berman must reimburse the Portfolio for such loss.
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During the fiscal years ended August 31, 1997, 1996 and 1995, the
Portfolio earned no interest income from the collateralization of securities
loans.
The Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B Management, provided that cash or equivalent collateral,
equal to at least 100% of the market value of the loaned securities, is
continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio.
In effecting securities transactions, the Portfolio generally seeks
to obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger & Berman as its broker where, in
the judgment of N&B Management that firm is able to obtain a price and execution
at least as favorable as other qualified brokers. To the Portfolio's knowledge,
no affiliate of the Portfolio receives give-ups or reciprocal business in
connection with its securities transactions.
The use of Neuberger & Berman as a broker for the Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers Trust and N&B Management have expressly
authorized Neuberger & Berman to retain such compensation, and Neuberger &
Berman has agreed to comply with the reporting requirements of Section 11(a).
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Under the 1940 Act, commissions paid by the Portfolio to Neuberger &
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
& Berman must, in N&B Management's judgment, be (1) at least as favorable as
those charged by other brokers having comparable execution capability and (2) at
least as favorable as commissions contemporaneously charged by Neuberger &
Berman on comparable transactions for its most favored unaffiliated customers,
except for accounts for which Neuberger & Berman acts as a clearing broker for
another brokerage firm and customers of Neuberger & Berman considered by a
majority of the Independent Portfolio Trustees not to be comparable to the
Portfolio. The Portfolio does not deem it practicable and in its best interests
to solicit competitive bids for commissions on each transaction effected by
Neuberger & Berman. However, consideration regularly is given to information
concerning the prevailing level of commissions charged by other brokers on
comparable transactions during comparable periods of time. The 1940 Act
generally prohibits Neuberger & Berman from acting as principal in the purchase
of portfolio securities from, or the sale of portfolio securities to, the
Portfolio unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will continue to execute a significant
portion of its transactions through brokers other than Neuberger & Berman. In
selecting those brokers, N&B Management considers the quality and reliability of
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brokerage services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of N&B Management and principals
of Neuberger & Berman who are portfolio managers of the Portfolio and Other N&B
Funds (collectively, "N&B Funds") and some of Neuberger & Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the N&B Funds and the Managed Accounts
that are not effected by Neuberger & Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the N&B Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the N&B
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger & Berman may
be higher than the amount another firm might charge if N&B Management determines
in good faith that the amount of those commissions is reasonable in relation to
the value of the brokerage and research services provided by the broker. N&B
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolio's benefit.
Valerie Chang, who is an Assistant Vice President of N&B Management,
is the person responsible for making decisions as to specific action to be taken
with respect to the investment portfolio of the Portfolio. She has full
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authority to take action with respect to portfolio transactions and may or may
not consult with other personnel of N&B Management prior to taking such action.
Portfolio Turnover
- ------------------
The Portfolio's portfolio turnover rate is calculated by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
The portfolio turnover rates for the Portfolio for the years ended
August 31, 1996 and 1997 were 45% and 37%, respectively. The average commission
rate paid by the Portfolio during the year ended August 31, 1997 was $0.0161.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and Portfolio. The Fund's statements show the investments
owned by the Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in the Portfolio.
ORGANIZATION
Prior to November 17, 1995, the name of the Portfolio was
International Portfolio.
<PAGE>
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian
for their respective securities and cash. State Street also serves as the Fund's
transfer agent, administering purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be mailed to Neuberger
& Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York,
NY 10158-0180. State Street Cayman serves as transfer agent for the Portfolio.
INDEPENDENT AUDITORS
The Fund has selected Ernst & Young LLP, 200 Clarendon Street,
Boston, MA 02116, as the independent auditors who will audit its financial
statements. The Portfolio has selected Ernst & Young, Shedden Road, George Town,
Grand Cayman, Cayman Islands, British West Indies, as the independent auditors
who will audit its financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the contents of any
contract or other document referred to are not necessarily complete. In each
instance where reference is made to the copy of any contract or other document
filed as an exhibit to the registration statement, each such statement is
qualified in all respects by such reference.
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FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Annual Report to shareholders of
Neuberger & Berman Equity Funds for the fiscal year ended August 31, 1997:
The audited financial statements of the Portfolio and notes thereto
for the fiscal year ended August 31, 1997, and the reports of Ernst
& Young, independent auditors, with respect to such audited
financial statements.
65
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Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&p Corporate Bond Ratings:
---------------------------
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
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.
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Moody's Corporate Bond Ratings:
-------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa-rated securities, fluctuation of
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.
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Ca - Bonds rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MODIFIERS--Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated PRIME-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash generation.
- Well-established access to a range of financial
markets and assured sources of alternate liquidity.
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THIS REPORT IS NOT AN OFFER OF SHARES OF ANY PORTFOLIO OR ANY FUND THAT
INVESTS IN A PORTFOLIO. SHARES OF A FUND ARE SOLD ONLY THROUGH A CURRENTLY
EFFECTIVE PROSPECTUS. A FUND'S PROSPECTUS CONTAINS MORE COMPLETE INFORMATION
ABOUT THE FUND AND MAY BE OBTAINED FROM NEUBERGER & BERMAN MANAGEMENT INC. BY
CALLING 800-877-9700. INVESTORS SHOULD READ A PROSPECTUS CAREFULLY BEFORE
INVESTING.
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TABLE OF CONTENTS
PAGE
----
INVESTMENT INFORMATION.......................................................2
Investment Policies and Limitations....................................2
The Portfolio..........................................................5
Additional Investment Information.....................................10
PERFORMANCE INFORMATION.....................................................29
Total Return Computations.............................................29
Comparative Information.....................................................30
Other Performance Information.........................................31
CERTAIN RISK CONSIDERATIONS.................................................31
TRUSTEES AND OFFICERS.......................................................32
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................41
Investment Manager and Administrator..................................41
Sub-Adviser...........................................................43
Investment Companies Managed..........................................44
Management and Control of N&B Management..............................47
DISTRIBUTION ARRANGEMENTS...................................................48
ADDITIONAL EXCHANGE INFORMATION.............................................49
ADDITIONAL REDEMPTION INFORMATION...........................................52
Suspension of Redemptions.............................................52
Redemptions in Kind...................................................52
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................53
ADDITIONAL TAX INFORMATION..................................................53
Taxation of the Fund..................................................53
Taxation of the Portfolio.............................................54
Taxation of the Fund's Shareholders...................................57
i
<PAGE>
PORTFOLIO TRANSACTIONS......................................................57
Portfolio Turnover....................................................62
REPORTS TO SHAREHOLDERS.....................................................62
ORGANIZATION................................................................62
CUSTODIAN AND TRANSFER AGENT................................................63
INDEPENDENT AUDITORS........................................................63
LEGAL COUNSEL...............................................................63
REGISTRATION STATEMENT......................................................63
FINANCIAL STATEMENTS........................................................65
Appendix A..................................................................66
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.......................66
Appendix B.
THE ART OF INVESTMENT:................................................69
ii
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
AMENDMENT NO. 12 ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
The audited financial statements for Neuberger & Berman International
Portfolio (a series of Global Managers Trust) and the report of the independent
auditors are incorporated herein by reference from the Annual Report to
Shareholders of Neuberger & Berman Equity Funds for the fiscal year ended August
31, 1997, File Nos. 2-11357 and 811-582, Edgar Accession No.
0000898432-97-000455.
(b) Exhibits:
Exhibit
NUMBER DESCRIPTION
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Trust Instrument of Neuberger & Berman Equity
Trust. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession
No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger & Berman
Equity Trust. Incorporated by Reference to
Post-Effective Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-97-000398.
(2) By-laws of Neuberger & Berman Equity Trust.
Incorporated by Reference to Post-Effective Amendment
No. 8 to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(3) Voting Trust Agreement. None.
(4) (a) Trust Instrument of Neuberger & Berman Equity
Trust, Articles IV, V, and VI. Incorporated by
Reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(b) By-laws of Neuberger & Berman Equity Trust,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
-5-
<PAGE>
Exhibit
NUMBER DESCRIPTION
(5) (a) (i) Management Agreement Between Equity
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated
by Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
70 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-000314.
(b) (i) Sub-Advisory Agreement Between Neuberger
& Berman Management Incorporated and
Neuberger & Berman, LLC with Respect to
Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(iii) Substitution Agreement Among Neuberger &
Berman Management Incorporated, Equity
Managers Trust, Neuberger & Berman, L.P.,
and Neuberger & Berman, LLC. Incorporated
by Reference to Amendment No. 7 to
Registration Statement of Equity Managers
Trust, File No. 811-7910, Edgar Accession
No. 0000898432-96-000557.
-6-
<PAGE>
Exhibit
NUMBER DESCRIPTION
(c) (i) Management Agreement Between Global
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No.
74 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and
811-582, Edgar Accession No.
0000898432-95-000426.
(d) (i) Sub-Advisory Agreement Between Neuberger
& Berman Management Incorporated and
Neuberger & Berman, LLC with Respect to
Global Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000426.
(iii) Substitution Agreement among Neuberger &
Berman Management Incorporated, Global
Managers Trust, Neuberger & Berman, L.P.
and Neuberger & Berman, LLC. Incorporated
by Reference to the substantially similar
agreement filed in Amendment No. 7 to the
Registration Statement of Equity Managers
Trust, File No. 811-7910, Edgar Accession
No. 0000898432-96-000557 (the documents
differ only with respect to the date of and
the master fund party to the subadvisory
agreement under which substitution is
sought and the name of the executing master
fund).
(6) (a) Distribution Agreement Between Neuberger & Berman
Equity Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to
Post-Effective No. 13 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-97-000519.
(b) Schedule A - Series of Neuberger & Berman Equity
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Post-Effective No. 13 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-97-000519.
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Exhibit
NUMBER DESCRIPTION
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger & Berman
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to
Post-Effective No. 10 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-96-000532.
(c) Agreement Between Neuberger & Berman Equity
Trust and State Street Bank and Trust Company
Adding Neuberger & Berman International Trust
as a Portfolio Governed by the Custodian
Contract. Incorporated by Reference to
Post-Effective Amendment No. 12 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-97-000398.
(9) (a) (i) Transfer Agency and Service Agreement Between
Neuberger & Berman Equity Trust and State
Street Bank and Trust Company. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(ii) Agreement Between Neuberger & Berman Equity
Trust and State Street Bank and Trust Company
Adding Neuberger & Berman NYCDC Socially
Responsive Trust as a Portfolio Governed by
the Transfer Agency Agreement. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(iii) Agreement Between Neuberger & Berman Equity Trust
and State Street Bank and Trust Company Adding
Neuberger & Berman International Trust as a
Portfolio Governed by the Transfer Agency and
Service Agreement. Incorporated by Reference to
Post-Effective Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-97-000398.
(iv) First Amendment to Transfer Agency and Service
Agreement between Neuberger & Berman Equity
Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession
No. 0000898432-95-000427.
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<PAGE>
Exhibit
NUMBER DESCRIPTION
(v) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated by
Reference to Post-Effective No. 10 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-96-000-532.
(vi) Second Amendment to Transfer Agency and Service
Agreement between Neuberger & Berman Equity Trust
and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
Amendment No. 12 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No.0000898432-97-000398.
(b) (i) Administration Agreement Between Neuberger &
Berman Equity Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective No. 13 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-97-000519.
(ii) Schedule A - Series of Neuberger & Berman
Equity Trust Currently Subject to the
Administration Agreement. Incorporated by
Reference to Post-Effective No. 13 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-97-000519.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-95-000427.
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters. To Be Filed.
(11) Consent of Ernst & Young. None.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance Quotations.
Incorporated by Reference to Post-Effective
Amendment No. 4 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784.
(17) Financial Data Schedule. Filed Herewith.
(18) Plan Pursuant to Rule 18f-3. None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
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No person is controlled by or under common control with the
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
The following information is given as of October 31, 1997.
Number of
TITLE OF CLASS RECORD HOLDERS
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Focus Trust 81
Neuberger & Berman Genesis Trust 360
Neuberger & Berman Guardian Trust 333
Neuberger & Berman Manhattan Trust 51
Neuberger & Berman Partners Trust 146
Neuberger & Berman NYCDC Socially Responsive Trust 2
Neuberger & Berman International Trust 0
ITEM 27. INDEMNIFICATION.
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger and Berman
Management Incorporated ("N&B Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
referred to as the "Managers Trusts") provide that neither N&B Management nor
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<PAGE>
any director, officer or employee of N&B Management performing services for the
series of the Managers Trusts at the direction or request of N&B Management in
connection with N&B Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relate; provided, that nothing in the Agreements shall be construed
(i) to protect N&B Management against any liability to the Managers Trusts or
any series thereof or their interest holders to which N&B Management would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of N&B Management's
reckless disregard of its obligations and duties under the Agreements, or (ii)
to protect any director, officer or employee of N&B Management who is or was a
trustee or officer of the Managers Trusts against any liability to the Managers
Trusts or any series thereof or their interest holders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office with the Managers Trusts.
Section 1 of the Sub-Advisory Agreements between N&B Management and
Neuberger & Berman, LLC ("Neuberger & Berman") with respect to the Managers
Trusts provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreements, Neuberger & Berman will not be
subject to any liability for any act or omission or any loss suffered by any
series of the Managers Trusts or their interest holders in connection with the
matters to which the Agreements relate.
Section 11 of the Distribution Agreement between the Registrant and N&B
Management provides that N&B Management shall look only to the assets of a
Series for the Registrant's performance of the Agreement by the Registrant on
behalf of such Series, and neither the Trustees nor any of the Registrant's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISER AND SUB-ADVISER.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of N&B Management and each principal of Neuberger & Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
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<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, N&B Management Trust; Secretary, Advisers
Management Managers Trust; Secretary, Neuberger &
Berman Income Funds; Secretary, Neuberger &
Berman Income Trust; Secretary, Neuberger &
Berman Equity Funds; Secretary, Neuberger &
Berman Equity Trust; Secretary, Income
Managers Trust; Secretary, Equity Managers
Trust; Secretary, Global Managers Trust;
Secretary, Neuberger & Berman Equity Assets.
Brooke A. Cobb
Vice President, N&B Chief Investment Officer, Bainco
Management International Investors.1 Senior Vice
President and Senior Portfolio Manager,
Putnam Investments.2
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Income Funds; Assistant Secretary, Neuberger
& Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant
Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger & Berman
Equity Assets.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, N&B Investments.3
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer, Neuberger
& Berman Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds; Assistant
Treasurer, Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers Trust;
Assistant Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers Management
N&B Management; Principal, Trust; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Income
Funds; Chairman of the Board and Trustee,
Neuberger & Berman Income Trust; Chairman of
the Board and Trustee, Neuberger & Berman
Equity Funds; Chairman of the Board and
Trustee, Neuberger & Berman Equity Trust;
Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and
- -------------------------
1 Until 1997.
2 Until 1995.
3 Until 1996.
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<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Trustee, Equity Managers Trust; Chairman of
the Board and Trustee, Global Managers
Trust; Chairman of the Board and Trustee,
Neuberger & Berman Equity Assets.
Theodore P. Giuliano President and Trustee, Neuberger & Berman
Vice President and Income Funds; President and Trustee,
Director, N&B Management; Neuberger & Berman Income Trust; President
Principal, Neuberger & Berman and Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Income Funds; Assistant Secretary, Neuberger
& Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant
Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger & Berman
Equity Assets.
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
N&B Management Managers Trust; Treasurer, Neuberger &
Berman Income Funds; Treasurer, Neuberger &
Berman Income Trust; Treasurer, Neuberger &
Berman Equity Funds; Treasurer, Neuberger &
Berman Equity Trust; Treasurer, Income
Managers Trust; Treasurer, Equity Managers
Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger & Berman Equity Assets.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities4
N&B Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, N&B Investments.5
Management; Principal,
Neuberger & Berman
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; Vice President, Neuberger &
Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice
President, Neuberger & Berman Equity Funds;
Vice President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman
Equity Assets.
Michael J. Weiner Vice President, Neuberger & Berman Advisers
- ------------------------
4 Until 1997.
5 Until 1997.
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<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; Vice President, Neuberger &
Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice
President, Neuberger & Berman Equity Funds;
Vice President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman
Equity Assets.
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer, Neuberger
& Berman Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds; Assistant
Treasurer, Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers Trust;
Assistant Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Management; Advisers Management Trust; President and
Principal, Neuberger & Berman Trustee, Advisers Managers Trust; President
and Trustee, Neuberger & Berman Equity
Funds; President and Trustee, Neuberger &
Berman Equity Trust; President and Trustee,
Equity Managers Trust; President, Global
Managers Trust; President and Trustee,
Neuberger & Berman Equity Assets.
The principal address of N&B Management, Neuberger & Berman, and of each
of the investment companies named above, is 605 Third Avenue, New York, New York
10158.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) N&B Management, the principal underwriter distributing securities
of the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Assets
Neuberger & Berman Income Funds
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
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<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
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<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Equity Managers Trust's Declaration of Trust and By-laws, minutes
of meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
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<PAGE>
with respect to Global Managers Trust are maintained at the offices of State
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
ITEM 31. MANAGEMENT SERVICES
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to file a Post-Effective Amendment to
its Registration Statement, containing financial statements with respect to
Neuberger & Berman International Trust, which need not be certified, within four
to six months from the date of the Fund's commencement of operations.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment No. 12 to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of NEW YORK in the State of
NEW YORK on the 30th day of December, 1997.
NEUBERGER & BERMAN EQUITY TRUST
By: /s/ Lawrence Zicklin
---------------------------
Lawrence Zicklin
President
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
AMENDMENT NO. 12 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(1) (a) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective Amendment No. 8
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Trust Instrument of Neuberger & Berman N.A.
Equity Trust. Incorporated by Reference to
Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger & N.A.
Berman Equity Trust. Incorporated by
Reference to Post-Effective Amendment No. 12
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000398.
(2) By-laws of Neuberger & Berman Equity Trust. N.A.
Incorporated by Reference to Post-Effective
Amendment No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(3) Voting Trust Agreement. None. N.A.
(4) (a) Trust Instrument of Neuberger & N.A.
Berman Equity Trust, Articles IV, V, and
VI. Incorporated by Reference to
Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Bylaws of Neuberger & Berman Equity
Trust, Articles V, VI, and VIII.
Incorporated by Reference to Post-Effective
Amendment No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(5) (a) (i) Management Agreement Between Equity N.A.
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated
by Reference to Post-Effective
Amendment No. 70 to Registration
Statement of Neuberger & Berman Equity
Funds, File Nos. 2-11357 and 811-582,
Edgar Accession No. 0000898432-000314.
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Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Managers Trust Currently
Subject to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(b) (i) Sub-Advisory Agreement Between N.A.
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
LLC with Respect to Equity Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Managers Trust Currently
Subject to the Sub-Advisory
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(c) (i) Management Agreement Between Global
Managers Trust and Neuberger & Berman
Management, Incorporated by Reference N.A.
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated
by Reference to Post-Effective N.A.
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession
No. 0000898432-95-000426.
-19-
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to N.A.
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(d) (i) Sub-Advisory Agreement Between
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
LLC with Respect to Global Managers N.A.
Trust. Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Sub-Advisory Agreement, Incorporated
by Reference to Post-Effective N.A.
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession
No. 0000898432-95-000426.
(6) (a) Distribution Agreement Between Neuberger & Berman N.A.
Equity Trust and Neuberger & Berman Management.
Incorporated by Reference to Post-Effective No. 13
to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-97-000519.
(b) Schedule A - Series of Neuberger & Berman Equity N.A.
Trust Currently Subject to the Distribution
Agreement. Incorporated by Reference to
Post-Effective No. 13 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-97-000519.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Neuberger & N.A.
Berman Equity Trust and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
-20-
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(b) Schedule of Compensation Under the Custodian N.A.
Contract. Incorporated by Reference to
Post-Effective No. 10 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-96-000532.
(c) Agreement Between Neuberger & Berman Equity N.A
Trust and State Street Bank Trust Company
Adding Neuberger & Berman International
Trust as a Portfolio Governed by the
Custodian Contract. Incorporated by
Reference to Post-Effective Amendment No. 12
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000398.
(9) (a) (i) Transfer Agency and Service Agreement N.A.
Between Neuberger & Berman Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427. N.A.
(ii) Agreement Between Neuberger & Berman Equity
Trust and State Street Bank and Trust
Company Adding Neuberger & Berman NYCDC
Socially Responsive Trust as a Portfolio
Governed by the Transfer Agency Agreement.
Incorporated by Reference to Post-Effective N.A.
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(iii) Agreement Between Neuberger & Berman Equity N.A.
Trust and State Street Bank and Trust
Company Adding Neuberger & Berman
International Trust as a Portfolio Governed
by the Transfer Agency Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-97-000398.
(iv) First Amendment to Transfer Agency and N.A.
Service Agreement between Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(v) Schedule of Compensation under the Transfer N.A.
Agency and Service Agreement. Incorporated
by Reference to Post-Effective No. 10 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-96-000532.
-21-
<PAGE>
Sequentially
Exhibit Numbered
NUMBER DESCRIPTION PAGE
(vi) Second Amendment to Transfer Agency and N.A.
Service Agreement between Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-97-000398.
(b) (i) Administration Agreement Between Neuberger & N.A.
Berman Equity Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective No. 13 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000519.
(ii) Schedule A - Series of Neuberger & Berman N.A.
Equity Trust Currently Subject to the
Administration Agreement. Incorporated by
Reference to Post-Effective No. 13 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000519.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Administration Agreement. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP N.A.
on Securities Matters. None.
(11) Consent of Ernst & Young. None. N.A.
(12) Financial Statements Omitted from Prospectus. N.A.
None.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance N.A.
Quotations. Incorporated by Reference to
Post-Effective Amendment No. 4 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(17) Financial Data Schedule. Filed Herewith. _____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
-22-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman International Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN INTERNATIONAL PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 91,445
<INVESTMENTS-AT-VALUE> 115,099
<RECEIVABLES> 272
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 28
<TOTAL-ASSETS> 115,422
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158
<TOTAL-LIABILITIES> 158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,673
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,000
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,733
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,858
<NET-ASSETS> 115,264
<DIVIDEND-INCOME> 1,130
<INTEREST-INCOME> 382
<OTHER-INCOME> 0
<EXPENSES-NET> (1,087)
<NET-INVESTMENT-INCOME> 425
<REALIZED-GAINS-CURRENT> 2,368
<APPREC-INCREASE-CURRENT> 16,214
<NET-CHANGE-FROM-OPS> 19,007
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 58,281
<ACCUMULATED-NII-PRIOR> 575
<ACCUMULATED-GAINS-PRIOR> (635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 764
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,087
<AVERAGE-NET-ASSETS> 89,921
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
