As filed with the Securities and Exchange Commission on August 29, 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 [ X ]
-----
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ 12 ] [ X ]
---- -----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
-----
Amendment No. [ 10 ] [ X ]
---- -----
(Check appropriate box or boxes)
NEUBERGER & BERMAN EQUITY TRUST
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger & Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
__ immediately upon filing pursuant to paragraph (b)
X August 30, 1997 pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on _______________, pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on _______________, pursuant to paragraph (a)(2)
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and filed the notice required by
such rule for its 1996 fiscal year on October 25, 1996.
Neuberger & Berman Equity Trust is a "master/feeder fund." This
Post-Effective Amendment No. 12 includes a signature page for the master fund,
Global Managers Trust, and appropriate officers and trustees thereof.
Page _______ of _______
Exhibit Index Begins on
Page _______
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 12 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective 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 Post-Effective 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
POST-EFFECTIVE 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 Information Performance Information
Item 4. General Description of Registrant Investment Program;
Description of Investments;
Special Information
Regarding Organization,
Capitalization, and Other
Matters
Item 5. Management of the Fund Management and Administration;
Other Information; Back Cover
Page
Item 6. Capital Stock and Other Securities Front Cover Page; Dividends,
Other Distributions, and
Taxes; Special Information
Regarding Organization,
Capitalization, and Other
Matters
Item 7. Purchase of Securities Being Offered Shareholder Services; Share
Prices and 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
Statement of Additional
Form N-1A Item No. Information
------------------ ------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Organization
Item 13. Investment Objectives and Policies Investment Information;
Certain Risk Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Principal Not Applicable
Holders of Securities
-3-
<PAGE>
Caption in Part B
Statement of Additional
Form N-1A Item No. Information
------------------ ------------------------------
Item 16. Investment Advisory and Other Investment Management and
Services Administration Services;
Trustees And Officers;
Distribution Arrangements;
Reports To Shareholders;
Custodian And Transfer Agent;
Independent Auditors
Item 17. Brokerage Allocatio Portfolio Transactions
Item 18. Capital Stock and Other Securities Investment Information;
Additional 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 Data Performance Information
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 Post-Effective Amendment No.
12.
<PAGE>
Neuberger&Berman
INTERNATIONAL TRUSTSM
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 unique structure that you should consider, see "Summary" on
page __, and "Special 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 August 30, 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 AUGUST 30, 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 OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
SUMMARY 3
The Fund and Portfolio; Risk Factors 3
Management 3
The Neuberger & Berman Investment Approach 4
EXPENSE INFORMATION 5
Shareholder Transaction Expenses 5
Annual Fund Operating Expenses 5
Example 6
INVESTMENT PROGRAM 7
Short-Term Trading; Portfolio Turnover 8
Borrowings 8
Other Investments 8
PERFORMANCE INFORMATION 9
Total Return Information 9
SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS 10
The Fund 10
The Portfolio 10
SHAREHOLDER SERVICES 12
How To Buy Shares 12
How To Sell Shares 12
Exchanging Shares 12
SHARE PRICES AND NET ASSET VALUE 13
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES 14
Distribution Options 14
Taxes 14
MANAGEMENT AND ADMINISTRATION 16
Trustees and Officers 16
Investment Manager, Administrator, Distributor,
and Sub-Adviser 16
Expenses 17
Transfer Agent 18
DESCRIPTION OF INVESTMENTS 19
OTHER INFORMATION 23
Directory 23
Funds Eligible for Exchange 23
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
"Special 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 diversified, Seeks long-term capital appreciation by investing primarily in
medium- to large-cap foreign stocks, both in developed economies and in emerging
international equity markets. Portfolio manager seeks undervalued companies in
fund. Capitalization countries with strong potential for growth.
is determined in
relation to the
principal market in
which securities are
traded.
============================= ========================= =====================================================================
</TABLE>
MANAGEMENT
- --------------------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page __. 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.
3
<PAGE>
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, 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 million. 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.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER EXPENSES TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES (ESTIMATED) EXPENSES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTERNATIONAL TRUST 1.05%* None 0.75% 1.80%*
</TABLE>
*Reflects N&B Management's expense reimbursement undertaking, described below.
The trustees of the Trust believe that investment in the Portfolio by
investors in addition to the Fund may enable the Portfolio to achieve economies
of scale which could reduce expenses. The expenses and, accordingly, the returns
of other funds that may invest in the Portfolio may differ from those of the
Fund.
As set forth in "Expenses" on page ___, N&B Management has voluntarily
undertaken to reimburse the Fund for a portion of its Total Operating Expenses.
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 __.
5
<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 normally invests in issuers in at least three foreign countries. 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"), 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 about these risks, see "Description of
Investments" on page __.
7
<PAGE>
SHORT-TERM TRADING; PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention
of profiting from short-term trading, the Portfolio may sell portfolio
securities when N&B Management believes that such action is advisable. 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 exaggerate 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 smoothes 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") and is administered by N&B Management, which has a name similar
to the Fund and the same investment objective, policies, and limitations as the
Fund ("Sister Fund"), also invests in the Portfolio. The following table shows
the average annual total returns of the Sister Fund for the 1-year period ended
February 28, 1997 and for the periods from June 15, 1994 (commencement of
operations) to February 28, 1997 and June 30, 1997. The table also shows a
comparison with the EAFE(R) Index. The EAFE(R) Index is the Morgan Stanley
Capital International Europe, Australia, 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)
<TABLE>
<CAPTION>
PERIODS ENDED PERIOD ENDED
02/28/97 06/30/97
-------- --------
1 YEAR SINCE SINCE INCEPTION
INCEPTION INCEPTION DATE
--------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
INTERNATIONAL +25.92% +13.36% +14.65% 6/15/94
EAFE(REGISTERED TRADEMARK INDEX) + 3.54 + 5.53 +9.36 N/A
</TABLE>
BNP-N&B Global Asset Management L.P. ("BNP-N&B Global"), a joint
venture of Neuberger&Berman and Banque Nationale de Paris, served as the
investment adviser to the Portfolio from its inception until November 1, 1995;
however, the same individual was responsible for portfolio management both
before and after that date. Had BNP-N&B Global and N&B Management not reimbursed
certain expenses, the total returns shown above would have been lower. The total
returns would have been lower had they reflected the higher fees of the Fund, as
compared to those of the Sister Fund.
You can obtain current performance information about the Fund by calling N&B
Management at 800-877-9700.
9
<PAGE>
SPECIAL 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 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. This "master/feeder fund" structure is depicted in the "Summary" on
page __.
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.
10
<PAGE>
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. The Fund does not sell its
shares directly to members of the general public. Other investors in the
Portfolio (including the 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 may invest in the
Portfolio in the future will be available from N&B Management by calling
800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by
the 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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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. Prices
for Fund shares are usually calculated as of 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. Prices for Fund shares are usually
calculated as of 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 (besides weekends and holidays), when trading on
the NYSE is restricted, or as permitted by the SEC.
. Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Fund.
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.
. Shares can be exchanged ONLY between accounts registered in the same
name, address, and taxpayer ID number of the Institution.
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<PAGE>
. 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.
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. 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.
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<PAGE>
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes, normally in December, substantially all of its
share of any net investment income (net of the Fund's expenses), any net capital
gains from investment transactions, and any net gains from foreign currency
transactions earned or realized by the Portfolio.
DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions paid on
shares of the Fund are automatically reinvested in additional shares of the
Fund, unless 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
- --------------------------------------------------------------------------------
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. The Taxpayer Relief Act of 1997 ("Relief Act"),
enacted in August, 1997, dramatically changes the taxation of net capital gain,
by applying different rates depending on the taxpayer's holding period and
marginal rate of federal income tax. The Relief Act, however, does not address
the application of these rules to distributions by regulated investment
companies and instead authorizes the issuance of regulations to do so. The
current rules governing distributions of net capital gain to Fund shareholders
will remain in effect until the Internal Revenue Service issues guidance as to
the effect of the Relief Act on those distributions. Accordingly, shareholders
should consult their tax advisers.
Every January, the Fund will send each Institution a statement showing
the amount of distributions paid in cash or reinvested in Fund shares for the
previous year. Information accompanying that statement will show the portion, if
any, of those distributions that generally are not subject to state and local
income taxes.
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.
When an Institution sells Fund shares, it will receive a confirmation
statement showing the number of shares sold and the price.
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<PAGE>
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 be relieved of 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.
15
<PAGE>
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. The trustees of the Trust and of Managers Trust, including a majority of
those trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust or Managers Trust, have adopted written procedures reasonably
appropriate to deal with potential conflicts of interest between the Trust and
Managers Trust, including, if necessary, creating a separate board of trustees
of Managers Trust.
INVESTMENT MANAGER, ADMINISTRATOR,
DISTRIBUTOR, AND SUB-ADVISER
- --------------------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolio and other mutual
funds managed by N&B Management, also serves as investment adviser of one other
investment company. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $15.8 billion as of
March 31, 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 $46.0 billion of assets as of March
31, 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.
Felix Rovelli, manager of the Portfolio, is on a leave of absence
attending to a personal matter. Valerie 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. Ms. Chang 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.
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.
16
<PAGE>
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 are 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.
17
<PAGE>
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.
18
<PAGE>
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in
"Investment Program" herein, the Portfolio may make the following investments,
among others, individually or in combination, although it may not necessarily
buy all of the types of securities or use all of the investment techniques that
are described. For additional information on the following investments and on
other types of investments which the Portfolio may make, see the SAI.
ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net
assets in illiquid securities, which are securities that cannot be expected to
be sold within seven days at approximately the price at which they are valued.
Due to the absence of an active trading market, the Portfolio may experience
difficulty in valuing or disposing of illiquid securities. N&B Management
determines the liquidity of the Portfolio's securities, under general
supervision of the trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities and Rule 144A securities. Restricted securities
cannot be sold to the public without registration under the Securities Act of
1933, as amended ("1933 Act"). Unless registered for sale, these securities can
be sold only in privately negotiated transactions or pursuant to an exemption
from registration. Rule 144A securities, although not registered, may be resold
to qualified institutional buyers in accordance with Rule 144A under the 1933
Act. Unregistered securities may also be sold abroad pursuant to Regulation S
under the 1933 Act. Foreign securities that are freely tradable in their
principal market are not considered restricted securities even if they are not
registered for sale in the United States. Restricted securities are generally
considered illiquid. N&B Management, acting pursuant to guidelines established
by the trustees of Managers Trust, may determine that some restricted or Rule
144A securities are liquid.
FOREIGN SECURITIES. Foreign securities are those of issuers organized
and doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities.
The Portfolio 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
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.
19
<PAGE>
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
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 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 writing of options could result in
significant increases in the Portfolio's turnover rate.
20
<PAGE>
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.
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. Futures, options and forward contracts are considered
"derivatives." Losses that may arise from certain futures transactions are
potentially unlimited.
SHORT SALES AGAINST-THE-BOX. The Portfolio may make short sales
against-the-box, in which it sells securities short only if it owns or has the
right to obtain without payment of additional consideration an equal amount of
the same type of securities sold. Short selling against-the-box may defer
recognition of gains or losses into a later tax period.
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
movements in the price of the securities sold short and the securities being
hedged.
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 Portfolio's and the
Fund's NAVs.
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.
21
<PAGE>
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
Portfolio's and the Fund's NAVs and may be viewed as a form of leverage.
FOREIGN CORPORATE AND GOVERNMENT DEBT SECURITIES. The Portfolio may
invest up to 5% of its net assets in U.S. dollar-denominated and non-U.S.
dollar-denominated corporate and government debt securities of foreign issuers.
These securities may be 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.
INDEXED SECURITIES. 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.
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.
"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, 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.
22
<PAGE>
OTHER INFORMATION
<TABLE>
<CAPTION>
DIRECTORY FUNDS ELIGIBLE FOR EXCHANGE
INVESTMENT MANAGER, ADMINISTRATOR, EQUITY TRUST
AND DISTRIBUTOR Neuberger&Berman Focus Trust
<S> <C>
Neuberger&Berman Management Incorporated Neuberger&Berman Genesis Trust
605 Third Avenue 2nd Floor Neuberger&Berman Guardian Trust
New York, NY 10158-0180 Neuberger&Berman Manhattan Trust
800-877-9700 Neuberger&Berman Partners Trust
SUB-ADVISER EQUITY ASSETS
Neuberger&Berman, LLC Neuberger&Berman Socially
605 Third Avenue Responsive Trust
New York, NY 10158-3698
INCOME TRUST
CUSTODIAN AND TRANSFER AGENT Neuberger&Berman Ultra Short Bond Trust
State Street Bank and Trust Company Neuberger&Berman Limited Maturity Bond Trust
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
</TABLE>
Neuberger&Berman, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are registered trademarks or service marks of Neuberger&Berman Management
Inc.
(COPYRIGHT)1997 Neuberger&Berman Management Inc.
23
<PAGE>
________________________________________________________________________________
NEUBERGER & BERMAN INTERNATIONAL TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED AUGUST 30, 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 A PENSION PLAN 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 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. (The Trust and Managers Trust, which are
open-end management investment companies managed by N&B Management, are together
referred to below as the "Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment policy or limitation that is not fundamental may be
changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust
("Portfolio Trustees") without shareholder approval. The fundamental investment
policies and limitations of the Fund or the Portfolio may not be changed without
the approval of the lesser of (1) 67% of the total units of beneficial interest
("shares") of the Fund or Portfolio represented at a meeting at which more than
50% of the outstanding Fund or Portfolio shares are represented or (2) a
majority of the outstanding shares of the Fund or Portfolio. These percentages
are required by the Investment Company Act of 1940 ("1940 Act") and are referred
to in this SAI as a "1940 Act majority vote." Whenever the Fund is called upon
to vote on a change in a fundamental investment policy or limitation of the
Portfolio, the Fund casts its votes in proportion to the votes of its
shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
The Fund has the following fundamental investment policy, to enable
it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its 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
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
2
<PAGE>
Except for the limitation on borrowing and the limitation on
ownership of portfolio securities by officers and trustees, any investment
policy or limitation that involves a maximum percentage of securities or assets
will not be considered to be violated unless the percentage limitation is
exceeded immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations are
as follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and 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.
3
<PAGE>
5. LENDING. The Portfolio may not lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. REAL ESTATE. The Portfolio may not 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 Portfolio's non-fundamental investment policies and limitations
are as follows:
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. INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio may not
purchase securities of other investment companies, except to the extent
permitted by the 1940 Act and in the open market at no more than customary
brokerage commission rates. This limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a result of
a reorganization, consolidation, or merger.
4
<PAGE>
4. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
5. SHORT SALES. The Portfolio may not engage in a short sale (except
a short sale against-the-box) if, as a result, the dollar amount of all short
sales would exceed 25% of its net assets or if, as a result, the value of
securities of any one issuer in which the Portfolio would be short would exceed
2% of the value of the Portfolio's net assets or 2% of the securities of any
class of any issuer. Transactions in forward contracts, futures contracts and
options are not considered short sales.
6. OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND TRUSTEES. The
Portfolio may not purchase or retain the securities of any issuer if, to the
knowledge of N&B Management, those officers and trustees of Managers Trust and
officers and directors of N&B Management who each owns individually more than
1/2 of 1% of the outstanding securities of such issuer, together own more than
5% of such securities.
7. UNSEASONED ISSUERS. The Portfolio may not purchase the securities
of any issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three years
of continuous operation. For purposes of this limitation, pass-through entities
and other special purpose vehicles or pools of financial assets are not
considered to be business enterprises.
8. ILLIQUID SECURITIES. The Portfolio may not purchase any security
if, as a result, more than 10% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
9. RESTRICTED SECURITIES. The Portfolio may not purchase a security
restricted as to resale if, as a result, more than 10% of the Portfolio's total
assets would be invested in restricted securities. Foreign securities that are
freely tradable in their principal market are not considered restricted, even if
they are not registered for sale in the United States.
5
<PAGE>
10. WARRANTS. The Portfolio may not invest more than 5% of its net
assets in warrants, including warrants that are listed on the New York Stock
Exchange ("NYSE") or American Stock Exchange ("AmEx"), or more than 2% of its
net assets in warrants that are not so listed. For purposes of this limitation,
warrants are valued at the lower of cost or market value, and warrants acquired
by the Portfolio in units or attached to securities are deemed to be without
value, even if the warrants are later separated from the unit.
11. OIL AND GAS PROGRAMS. The Portfolio may not invest in
participations or other direct interests in oil, gas, or other mineral leases or
exploration or development programs, but the Portfolio may purchase securities
of companies that own interests in any of the foregoing.
12. REAL ESTATE. The Portfolio may not invest in partnership or
similar interests in real estate limited partnerships.
THE PORTFOLIO
- -------------
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
- -------------------------------
1 Source: Morgan Stanley Capital International.
6
<PAGE>
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.
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.
7
<PAGE>
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
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 June 30, 1997:
Avg. annual total
Value of investment return2/
12/31/96 6/30/97 12/31/96 6/30/97
International stocks
(EAFE[REGISTERED TRADEMARK]) $171,996 $179,213 15.29% 15.52%
Domestic stocks (S&P "500") $150,282 $189,557 14.51% 15.85%
- -----------------------------
2/ Total return assumes reinvestment of all dividends and other distributions.
The EAFE(R) Index, also known as the Morgan Stanley Capital International
Europe, Australia, 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.
8
<PAGE>
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
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.
9
<PAGE>
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
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.
10
<PAGE>
In addition, it appears to us that both Europe and Japan recently
passed the bottom of their economic cycles. In many economies, the current
recession has been the most severe of all recessions in the last five decades.
With global inflation still in check, many economies should continue to have
lower interest rates, which, coupled with a forecast of recovery in profits,
could positively impact stock market returns.
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
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.
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.
11
<PAGE>
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 if, as a result, more
than 10% of the value of its net assets would then be invested in such
repurchase agreements and other illiquid securities. The Portfolio may enter
into a repurchase agreement only if (1) the underlying securities are of a type
that the Portfolio's investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities, including
accrued interest, at all times equals or exceeds the repurchase price, and (3)
payment for the underlying securities is made only upon satisfactory evidence
that the securities are being held for the Portfolio's account by its custodian
or a bank acting as the Portfolio's agent. 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
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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
1933 Act permits the sale abroad of securities that are not registered for sale
in the United States.
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. To the extent
restricted securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 10% limit on investments in illiquid
securities. Restricted securities for which no market exists are priced by a
method that the Portfolio Trustees believe accurately reflects fair value.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio sells portfolio securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of the
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, the Portfolio will deposit in a
segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to the Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
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
exaggerate changes in the Portfolio's and the Fund's net asset values ("NAVs").
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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 stockholders as dividends
will be reduced. Reverse repurchase agreements create leverage and are
considered borrowings for purposes of the Portfolio's investment limitations.
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) 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, (2)
nationalization, expropriation, or confiscatory taxation, and (3) adverse
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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
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.
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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
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.
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PUT AND CALL OPTIONS ON SECURITIES. The Portfolio may write call
options and purchase put options on securities in order to hedge (I.E., to
reduce, at least in part, the effect of price fluctuations of securities held by
the Portfolio on the Portfolio's and the Fund's NAVs). The Portfolio may also
purchase or write put options, purchase call options and write covered call
options in an attempt to earn premium income.
The obligation under any option terminates upon expiration of the
option or, at an earlier time, when the writer offsets the option by entering
into a "closing purchase transaction" to purchase an option of the same series.
If an option is purchased by the Portfolio and is never exercised, the Portfolio
will lose the entire amount of the premium paid.
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser of the option decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio might purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price, thereby giving up any additional gain on the security.
The Portfolio intends to write only "covered" call options on securities it
owns.
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 might purchase a call option in order to protect
against an increase in the price of securities it intends to purchase or to
offset a previously written call option.
Portfolio securities on which call and 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. The writing
of covered call options is a conservative investment technique that is believed
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to involve relatively little risk (in contrast to the writing of "naked" or
uncovered call options, which the Portfolio will not do) but is capable of
enhancing the Portfolio's total return. When writing a covered call option, the
Portfolio, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
When writing a put option, the Portfolio, in return for the premium, takes the
risk that it must purchase the underlying security at a price that may be higher
than the current market price of the security.
If a call or put option that the Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium;
however, in the case of a call option, that gain may be offset by a decline in
the market value of the underlying security 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.
Securities options are traded both on exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options are issued by a
clearing organization affiliated with the exchange on which the option is
listed; the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to close out the option prior to its expiration only by entering into a closing
transaction with the dealer to whom (or from whom) the Portfolio originally sold
(or purchased) the option. There can be no assurance that the Portfolio would be
able to liquidate an OTC option at any time prior to expiration. Unless the
Portfolio is able to effect a closing purchase transaction in a covered OTC call
option it has written, it will not be able to liquidate securities used as cover
until the option expires or is exercised or until different cover is
substituted. In the event of the counter-party's insolvency, the Portfolio may
be unable to liquidate its options position and the associated cover. N&B
Management monitors the creditworthiness of dealers with which the Portfolio may
engage in OTC options transactions, and limits the Portfolio's counter-parties
in such transactions to dealers with a net worth of at least $20 million as
reported in their latest financial statements.
The assets used as cover (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
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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, less (or plus) a commission. The premium may reflect,
among other things, the current market price of the underlying security, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security, the length of the option period, the
general supply of and demand for credit, and the interest rate environment. The
premium received by the Portfolio for writing an option is recorded as a
liability on the Portfolio's statement of assets and liabilities. This liability
is adjusted daily to the option's current market value, which is the sales price
on the option's last reported trade on that day before the time the Portfolio's
NAV is computed or, in the absence of any trades thereof on that day, the last
available bid price.
Closing transactions are effected in order to realize a profit on an
outstanding option, to prevent an underlying security from being called, or to
permit the sale or the put of the underlying security. Furthermore, effecting a
closing transaction permits the Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or both.
If the Portfolio desires to sell a security on which it has written a call
option, it will seek to effect a closing transaction prior to, or concurrently
with, the sale of the security. There is, of course, no assurance that the
Portfolio will be able to effect closing transactions at favorable prices. If
the Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be subject to
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.
Options normally have expiration dates between three and nine months
from the date written. The Portfolio may purchase both European-style options
and American-style options. European-style options are exercisable only
immediately prior to their expiration date. American-style options, in contrast,
are exercisable at any time prior to their expiration date. The exercise price
of an option may be below, equal to, or above the market value of the underlying
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security at the time the option is written. From time to time, the Portfolio may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering the security from
its portfolio. In those cases, additional brokerage commissions are incurred.
PUT AND CALL OPTIONS ON SECURITIES INDICES. The Portfolio may write
and 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.
However, 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 NYSE, the AmEx, and other U.S.
and foreign exchanges. All securities index options purchased by the Portfolio
will be listed and traded on an exchange.
The Portfolio may purchase put options in order to hedge against an
anticipated decline in securities market prices that might adversely affect the
value of portfolio securities. If the Portfolio purchases a put option on a
securities index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any decline in the level of the securities
index below the exercise price. Such payments would tend to offset a decline in
the value of the Portfolio's portfolio securities. However, if the level of the
securities index increases and remains above the exercise price while the put
option is outstanding, the Portfolio will not be able to exercise the option
profitably and will lose the amount of the premium and any transaction costs.
Such loss may be partially offset by an increase in the value of portfolio
securities.
The Portfolio may purchase call options on securities indices in
order to participate in an anticipated increase in securities market prices. If
the Portfolio purchases a call option on a securities index, the amount of the
payment it would receive upon exercising the option would depend on the extent
of any increase in the level of the securities index above the exercise price.
Such payments would, in effect, allow the Portfolio to benefit from securities
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market appreciation even though it may not have had sufficient cash to purchase
the underlying securities. Such payments may also offset increases in the price
of securities that the Portfolio intends to purchase. If, however, the level of
the securities index declines and remains below the exercise price while the
call option is outstanding, the Portfolio will not be able to exercise the
option profitably and will lose the amount of the premium and any transaction
costs. Such loss may be partially offset by a reduction in the price the
Portfolio pays to buy additional securities.
The Portfolio may write securities index options in order to close
out positions in securities index options which it has purchased. These closing
sale transactions enable the Portfolio immediately to realize gains or minimize
losses on its options positions. If the Portfolio is unable to effect a closing
sale transaction with respect to options that it has purchased, it would have to
exercise the options in order to realize any profit and may incur transaction
costs.
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.
The effectiveness of hedging through the purchase of securities
index options will depend upon the extent to which price movements in the
portfolio 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. In addition, the
purchase of securities index options involves the risk that the premium and
transaction costs paid by the Portfolio in purchasing an option will be lost as
a result of unanticipated movements in prices of the securities comprising the
securities index on which the option is based.
OTHER RISKS OF OPTIONS TRANSACTIONS. The Portfolio may purchase and
sell options that are traded on both U.S. and foreign exchanges. There is no
assurance that a liquid secondary market on a domestic or foreign options
exchange will exist for any particular exchange-traded option or at any
particular time, and, for some options, no secondary market on an exchange may
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exist. If the Portfolio is unable to effect a closing purchase transaction with
respect to covered call options it has written, it will not be able to sell the
underlying securities until the options expire or are exercised or until
different cover is substituted.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (1) there may be insufficient interest in trading certain
options; (2) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (3) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (4) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (5) the facilities of an exchange or
its clearing organization may not at all times be adequate to handle current
trading volume; or (6) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the
clearing organization as a result of trades on that exchange would continue to
be exercisable in accordance with their terms.
The writing and purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. The writing of options on
securities involves a risk that the Portfolio will be required to sell or
purchase such securities at a price that is less favorable than the current
market price and will lose the benefit of appreciation or depreciation in the
market price of such securities.
The Portfolio would incur brokerage commissions or spreads in
connection with its options transactions, as well as for purchases and sales of
underlying securities. Brokerage commissions for options transactions may be
higher or lower than for portfolio securities transactions. The writing of
options could result in a significant increase in the Portfolio's turnover rate.
FUTURES CONTRACTS. The Portfolio may enter into futures contracts on
individual securities and futures contracts on securities indices which 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.
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A futures contract on a security is a binding contractual commitment
which, if held to maturity, will result in an obligation to make or accept
delivery during a particular month of securities having a standardized face
value and rate of return. By purchasing futures on securities, the Portfolio
will legally obligate itself to accept delivery of the underlying security and
to pay the agreed price. By selling futures on securities, the Portfolio will
legally obligate itself to make delivery of the security and receive payment of
the agreed price.
Open futures positions on securities are valued at the most recent
settlement price, unless such price does not reflect the fair value of the
contract. In that case, the position will be valued at fair value, as determined
by or under the general direction of the Portfolio Trustees. 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. 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.
Futures contracts on securities normally are not held to maturity
but are instead liquidated through offsetting transactions which may result in a
profit or loss. While futures contracts on securities entered into by the
Portfolio will usually be liquidated in this manner, the Portfolio may instead
make or take delivery of the underlying securities whenever it appears
economically advantageous for it to do so. A clearing corporation associated
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with the exchange on which the futures are traded assumes responsibility for
closing out open futures positions and guarantees that, if a position is still
open, the sale or purchase of securities will be performed on the settlement
date.
A securities index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs, and
the futures positions are simply closed out. Changes in the market value of a
particular securities index futures contract generally reflect changes in the
specified index of securities on which the futures contract is based.
The Portfolio sells 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
of such securities increases. The Portfolio purchases 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.
The Portfolio may also purchase put and call options on futures
contracts for BONA FIDE hedging and non-hedging purposes. A put option purchased
by the Portfolio would give it the right to assume a position as the seller of a
futures contract (assume a short position). A call option purchased by the
Portfolio would give it the right to assume a position as the purchaser of a
futures contract (assume a long position). The Portfolio pays a premium when it
purchases an option on a futures contract. In exchange for the premium, the
Portfolio becomes entitled to exercise the option, but is not required to do so.
If the option cannot be profitably exercised before it expires, the Portfolio's
loss will be limited to the amount of the premium and any transaction costs.
In addition, the Portfolio may write (sell) put and call options on
futures contracts for BONA FIDE hedging and non-hedging purposes. Writing a put
option on a futures contract generates a premium, which may partially offset an
increase in the price of securities that the Portfolio intends to purchase.
However, the Portfolio becomes obligated to purchase a futures contract, which
may have a value lower than the exercise price. Conversely, writing a call
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option on a futures contract generates a premium, which may partially offset a
decline in the value of the Portfolio's assets. By writing a call option, the
Portfolio becomes obligated to sell a futures contract, which may have a value
higher than the exercise price.
The Portfolio may enter into closing purchase or sale transactions
in order to terminate a futures contract. The Portfolio may close out an option
which it has purchased or written by selling or purchasing an offsetting option
of the same series. There is no guarantee that such closing transactions can be
effected. The Portfolio's ability to enter into closing transactions depends on
the development and maintenance of a liquid market, which may not exist at all
times.
Although futures and options transactions are intended to enable the
Portfolio to manage interest rate or stock market risks, unanticipated changes
in interest rates or market prices could result in poorer performance than if
the Portfolio had not entered into such transactions. Even if N&B Management
correctly predicts interest rate or market price movements, a hedge could be
unsuccessful if changes in the value of the Portfolio's futures position do not
correspond to changes in the value of its investments. This lack of correlation
between the Portfolio's futures and securities positions may be caused by
differences between the futures and securities markets or by differences between
the securities underlying the Portfolio's futures position and the securities
held by or to be purchased for the Portfolio. N&B Management attempts to
minimize these risks through careful selection and monitoring of the Portfolio's
futures and options positions. The ability to predict the direction of the
securities markets and interest rates involves skills different from those used
in selecting securities.
The prices of futures contracts depend primarily on the value or
level of the securities or indices on which they are based. Because there are a
limited number of types of futures contracts, it is likely that the standardized
futures contracts available to the Portfolio will not exactly match the
securities the Portfolio wishes to hedge or intends to purchase, and
consequently will not provide a perfect hedge against all price fluctuations. 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 or intends to purchase.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may engage in foreign
currency exchange transactions. Such transactions are conducted either on a spot
(I.E., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through forward contracts to purchase or sell foreign currencies. The
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Portfolio may enter into forward contracts in order to protect against
uncertainty in the level of future foreign currency exchange rates and may also
enter into forward contracts for non-hedging purposes.
A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
(usually less than one year) from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are traded
in the interbank market directly between traders (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.
When the Portfolio enters into a contract for the purchase or sale
of a security denominated in a foreign currency, it may wish to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign
currency involved in the underlying securities transaction, the Portfolio will
be able to protect itself against a possible loss. Such loss would result from
an adverse change in the relationship between the U.S. dollar and the foreign
currency during the period between the date on which the security is purchased
or sold and the date on which payment is made or received.
When N&B Management believes that a particular foreign currency may
suffer a substantial decline against the U.S. dollar, the Portfolio may also
enter into a forward contract to sell, for a fixed amount of dollars, an amount
of foreign currency which approximates the value of some or all of the portfolio
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the Portfolio's foreign currency
denominated securities will not generally be possible, since the value of such
securities will change as a consequence of market movements between the date the
forward contract is entered into and the date it matures.
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, when N&B Management believes
that there is a pattern of correlation between the two currencies. 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.
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
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the value of the portfolio securities or other assets denominated in that
currency. 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 that
obligates it to purchase the same amount of such foreign currency at the same
maturity date. 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 trader who is a
party to the original forward contract.
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. It simply establishes a
rate of exchange which can be achieved at some future point in time. The precise
projection of short-term currency market movements is not possible, and
short-term hedging provides a means of fixing the dollar value of only a portion
of the Portfolio's foreign assets.
While the Portfolio may enter into forward contracts to reduce
currency exchange rate risks, transactions in such contracts involve certain
other risks. Thus, while the Portfolio may benefit from such transactions,
unanticipated changes in currency exchange rates may result in a poorer overall
performance for the Portfolio than if it had not engaged in any such
transactions. Moreover, there may be imperfect correlation between the
Portfolio's holdings of securities denominated in a particular currency and
forward contracts entered into by the Portfolio. Such imperfect correlation may
cause the Portfolio to sustain losses or may prevent the Portfolio from
achieving a complete hedge. 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. The Portfolio may experience delays in the settlement of its
foreign currency transactions. The Portfolio is not required to enter into
transactions in forward contracts and will not do so unless deemed appropriate
by N&B Management.
An issuer of fixed income securities purchased by the Portfolio may
be domiciled in a country other than the country in whose currency the
instrument is denominated. The Portfolio may invest in debt 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
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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.
CURRENCY FUTURES AND OPTIONS THEREON. The Portfolio may enter into
currency futures contracts and options on such futures contracts in domestic and
foreign markets and may do so for hedging or non-hedging purposes (I.E., in an
effort to enhance income) as defined in CFTC regulations. The Portfolio may sell
a currency 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.
The sale of a currency futures contract creates an obligation by the
Portfolio, as seller, to deliver the amount of currency called for in the
contract at a specified future time for a specified price. The purchase of a
currency futures contract creates an obligation by the Portfolio, as purchaser,
to take delivery of an amount of currency at a specified future time at a
specified price. Although the terms of currency futures contracts specify actual
delivery or receipt, in most instances the contracts are closed out before the
settlement date without the parties making or taking delivery of the currency. A
currency futures contract is closed out by entering into an offsetting purchase
or sale transaction. To close out a currency futures contract sold by the
Portfolio, the Portfolio purchases a currency futures contract for the same
aggregate amount of currency and same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Portfolio is immediately paid
the difference. Similarly, to close out a currency futures contract purchased by
the Portfolio, the Portfolio sells a currency futures contract. If the
offsetting sale price exceeds the purchase price, the Portfolio realizes a gain.
Likewise, if the offsetting sale price is less than the purchase price, the
Portfolio realizes a loss.
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A risk in employing currency futures contracts to protect against
price volatility of portfolio securities denominated in a particular currency is
imperfect correlation between the prices of such currency futures contracts and
the cash prices of the Portfolio's securities. The correlation may be distorted
by the fact that 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. Another risk is that N&B Management could be incorrect in its
expectation as to the direction or extent of various exchange rate movements or
the time span within which such movements will take place. When the Portfolio
purchases currency futures contracts, it will deposit an amount of cash or
appropriate liquid securities equal to the market value of the currency futures
contract (minus any required margin) in a segregated account to collateralize
the position and thereby limit the use of such futures contracts.
Unlike a currency futures contract, which requires the parties to
buy and sell currency on a set date, an option on a futures contract entitles
its holder to decide on or before a future date whether to enter into such a
contract. If the holder decides not to enter into the contract, the premium paid
for the option is lost. For the holder of an option, there are no daily payments
of cash for variation margin to reflect changes in the value of the underlying
contract, as there are by a purchaser or seller of a currency futures contract.
Put and call options on currency futures have characteristics
similar to those of other options. In particular, the ability to establish and
close out positions on such options will be subject to the development and
maintenance of a liquid secondary market for such options.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may purchase options on
foreign currencies for hedging purposes in a manner similar to currency futures
contracts or forward contracts. For example, a decline in the dollar value of a
foreign currency in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such decreases in the value of
portfolio securities, the Portfolio may purchase put options on the foreign
currency. If the value of the currency declines, the Portfolio will have the
right to sell such currency for a fixed amount of dollars which exceeds the
market value of such currency. This would result in a gain that may offset, in
whole or in part, the negative effect of currency depreciation on the value of
the Portfolio's securities denominated in that currency.
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Conversely, if a rise is projected in the dollar value of a currency
in which securities to be acquired by the Portfolio are denominated, thereby
increasing the cost of such securities, the Portfolio may purchase call options
on that currency. If the value of the currency increases sufficiently, the
Portfolio will have the right to purchase that currency for a fixed amount of
dollars which is less than the market value of that currency. Such a purchase
would result in a gain that may offset, at least partially, the effect of any
currency-related increase in the price of securities the Portfolio intends to
acquire.
As in the case of other types of options transactions, however, the
benefit the Portfolio derives from purchasing foreign currency options will be
reduced by the amount of the premium and related transaction costs. In addition,
if currency exchange rates do not move in the direction or to the extent
anticipated, the Portfolio could sustain losses on transactions in foreign
currency options, which would deprive the Portfolio of all or a portion of the
benefits of advantageous changes in such rates.
The Portfolio may also write options on foreign currencies for
hedging purposes. For example, if N&B Management anticipates a decline in the
dollar value of foreign currency denominated securities because of declining
exchange rates, the Portfolio could, instead of purchasing a put option, write a
call option on the relevant currency. If the expected decline occurs, the call
option most likely will not be exercised, and the decrease in value of portfolio
securities will be offset, at least in part, by the amount of the premium
received by the Portfolio.
Similarly, the Portfolio could write a put option on the relevant
currency, instead of purchasing a call option, to hedge against an anticipated
increase in the dollar cost of securities to be acquired. If exchange rates move
in the manner projected, the put option most likely will not be exercised, and
such increased cost will be offset, at least in part, by the amount of the
premium received by the Portfolio.
If unanticipated exchange rate fluctuations occur, a put or call
option may be exercised, and the Portfolio could be required to purchase or sell
the underlying currency at a loss which may not be fully offset by the amount of
the premium. As a result of writing options on foreign currencies, the Portfolio
also may be required to forego all or a portion of the benefits which might
otherwise have been obtained from favorable movements in currency exchange
rates.
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The Portfolio may purchase call options on foreign currencies for
non-hedging purposes when N&B Management anticipates that a currency will
appreciate 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.
However, in writing covered call options for income, the Portfolio may forego
the opportunity to profit from an increase in the market value of the underlying
currency. Also, when writing put options, the Portfolio accepts, in return for
the option premium, the risk that it may be required to purchase the underlying
currency at a price in excess of the currency's market value at the time of
purchase.
The Portfolio would normally purchase call options for non-hedging
purposes in anticipation of an increase in the market value of a currency. The
Portfolio would ordinarily realize a gain if, during the option period, the
value of such currency exceeded the sum of the exercise price, the premium paid
and transaction costs. Otherwise the Portfolio would realize either no gain or a
loss on the purchase of the call option. Put options may be purchased by the
Portfolio for the purpose of benefiting from a decline in the value of
currencies which it does not own. The Portfolio would ordinarily realize a gain
if, during the option period, the value of the underlying currency decreased
below the exercise price sufficiently to more than cover the premium and
transaction costs. Otherwise the Portfolio would realize either no gain or a
loss on the purchase of the put option.
A call option on foreign currency written by the Portfolio is
"covered" if the Portfolio owns the underlying foreign currency or if it has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration. A call option is also covered if the Portfolio holds a call
on the same foreign currency for the same principal amount as the call written
where the exercise price of the call held is (1) equal to or less than the
exercise price of the call written or (2) greater than the exercise price of the
call written if the amount of the difference is maintained by the Portfolio in
cash or appropriate liquid securities in a segregated account with its
custodian.
The risks of currency options are similar to the risks of other
options, as discussed herein.
LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES, OPTIONS ON
SECURITIES AND INDICES, FORWARD CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
(COLLECTIVELY, "FINANCIAL INSTRUMENTS"). The Portfolio is required to maintain
margin deposits with, or for the benefit of, futures commission merchants
through which it effects futures transactions. The Portfolio must deposit
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initial margin each time it enters into a futures contract. Such initial margin
is usually equal to a percentage of the contract's value. In addition, daily
variation margin payments in cash are required to reflect gains and losses on
open futures positions. If the price of a futures contract changes so that the
margin deposit does not satisfy margin requirements, the Portfolio will be
required to make additional margin payments during the term of the futures
contract. 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. The Portfolio also must make margin deposits with respect to options
on futures that it has written. If the futures commission merchant holding the
margin deposit goes bankrupt, the Portfolio could suffer a delay in recovering
its funds and could ultimately suffer a loss.
The Portfolio may not purchase or sell futures contracts (including
currency futures contracts) or related options (including certain options on
foreign currencies) on foreign or U.S. exchanges if immediately thereafter the
aggregate amount of initial margin deposits and premiums paid on the Portfolio's
existing positions (excluding futures contracts and options entered into for
BONA FIDE hedging purposes and net of the amount options are "in the money")
would exceed 5% of the market value of the Portfolio's net assets. When the
Portfolio purchases futures contracts or writes put options thereon, the
Portfolio will deposit an amount of cash or appropriate liquid securities equal
to the market value of the futures contracts and options (less any related
margin deposits) in a segregated account with its custodian to collateralize the
position, thereby limiting the use of such futures contracts. The Portfolio does
not currently intend to invest more than 5% of its total assets in instruments
commonly known as options, financial futures, or stock index futures, other than
hedging positions or positions that are covered by cash or securities. Also, the
Portfolio does not currently intend to invest more than 5% of its total assets
in puts, calls, straddles, spreads, or any combination thereof.
When the Portfolio enters into forward contracts for the sale or
purchase of currencies, the Portfolio will either cover its position or
establish a segregated account. The Portfolio will consider its position covered
if it owns securities in the currency subject to the forward contract, which are
at least equal in value to the amount of currency the Portfolio is obligated to
deliver, or if it otherwise has the right to obtain that currency at no
additional cost. In the alternative, the Portfolio will place cash which is not
available for investment or appropriate liquid securities in a segregated
account. The amounts in such segregated account will equal the value of the
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Portfolio's assets which are committed to the consummation of foreign currency
exchange contracts. If the value of the securities placed in the segregated
account declines, the Portfolio will place additional cash or securities in the
account on a daily basis so that the value of the account will equal the amount
of the Portfolio's commitments with respect to such contracts.
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 the Fund is to qualify as a regulated investment company
("RIC"). See "Additional Tax Information."
SHORT SALES. The Portfolio may enter into short sales of securities
to the extent permitted by its non-fundamental investment policies and
limitations. 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 exaggerate 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").
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The Portfolio may invest up to 5% of its net assets in foreign
corporate bonds and debentures and sovereign debt instruments issued or
guaranteed by foreign governments, their agencies or instrumentalities. The
Portfolio may invest in 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
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.
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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.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security entitles the holder to receive the interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, such securities ordinarily provide a stream of income with generally
higher yields than common stocks of the same or similar issuers, but lower than
the yields on non-convertible debt. Convertible securities are usually
subordinated to comparable-tier non-convertible securities but rank senior to
common stock in a corporation's capital structure. The value of a convertible
security is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege and (2) its worth if converted into the underlying common stock.
Convertible debt securities are subject to the Portfolio's investment policies
and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in
the price of the underlying common stock in a way that non-convertible debt may
not. Convertible securities are typically issued by smaller capitalization
companies whose stock prices may be volatile. A convertible security may be
subject to redemption at the option of the issuer at a price established in the
security's governing instrument. If a convertible security held by the Portfolio
is called for redemption, the Portfolio will be required to convert it into the
underlying common stock, sell it to a third party or permit the issuer to redeem
the security. Any of these actions could have an adverse effect on the
Portfolio's and the Fund's ability to achieve their investment objective.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
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have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and
are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n = ERV
Average annual total return smooths out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
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 February 28, 1996, and for the period from June 15, 1994
(commencement of operations) through February 28, 1997, were +25.92% and
+13.36%, respectively. The prior investment adviser to the Portfolio and N&B
Management, as the Sister Fund's administrator, reimbursed certain expenses of
the Portfolio and the Sister Fund, respectively. Such actions had the effect of
increasing total return. If an investor had invested $10,000 in the Sister
Fund's shares on June 15, 1994, the NAV of that investor's holdings would have
been $14,046 on February 28, 1997.
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BNP-N&B Global Asset Management L.P. ("BNP-N&B Global"), a joint
venture of Banque Nationale de Paris ("BNP") and Neuberger & Berman, LLC
("Neuberger & Berman"), served as the investment adviser to the Portfolio from
its inception until November 1, 1995. On that date, N&B Management became the
Portfolio's investment manager, and Neuberger & Berman became its sub-adviser;
there was no change in the personnel primarily responsible for daily management
of the Portfolio.
COMPARATIVE INFORMATION
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings)
published by independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance of
mutual funds, such as Lipper Analytical Services, Inc., C.D.A. Investment
Technologies, Inc., Wiesenberger Investment Companies Service, Investment
Company Data Inc., Morningstar, Inc., Micropal Incorporated, and quarterly
mutual fund rankings by Money, Fortune, Forbes, Business Week, Personal
Investor, and U.S. News & World Report magazines, The Wall Street Journal,
The New York Times, Kiplinger's Personal Finance, and Barron's Newspaper,
or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Dow Jones Industrial Average ("DJIA"), Wilshire 1750 Index,
Nasdaq Composite Index, Value Line Index, 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 $21 million to $2.4 billion, with an average of $462
million. The S&P 400 Index measures mid-sized companies that have an
average market capitalization of $1.7 billion. The EAFE(R) Index is an
unmanaged index of common stock prices of more than 900 companies from
Europe, Australia, and the Far East translated into U.S. dollars. The
Financial Times World XUS Index is an index of 24 international markets,
excluding the U.S. market. Each assumes reinvestment of distributions and
is calculated without regard to tax consequences or the costs of
investing. The Portfolio may invest in different types of securities from
those included in some of the above indices.
37
<PAGE>
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.)
From time to time, the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Fund's Advertisements. This
philosophy is described in further detail in "The Art of Investing: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance the Portfolio will achieve its
investment objective.
38
<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 (61) 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 formerly Vice President and
New York, NY 10022 General Counsel of Keene
Corporation (manufacturer of
industrial products); Director
of Kevlin Corporation
(manufacturer of microwave and
other products).
39
<PAGE>
Positions
Name, Age, and Held With
Address(1) The Trust PRINCIPAL OCCUPATION(S)(2)
- --------------- --------- --------------------------
Edward I. O'Brien* (68) 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 Corp. registered broker-dealer)
1325 Avenue of the Americas since 1991; formerly Partner
17th Floor of Silberberg, Rosenthal & Co
New York, NY 10019 (member of National
Association of Securities
Dealers, Inc.); Director,
Cancer Treatment Holdings,
Inc.
Cornelius T. Ryan (65) Trustee General Partner of Oxford
Oxford Bioscience Partners Partners and Oxford Bioscience
315 Post Road West Partners (venture capital
Westport, CT 06880 partnerships) and President of
Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money market
fund) and Prime Cash Fund.
40
<PAGE>
Positions
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; prior
thereto, Vice President of N&B
Management; Vice President of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
41
<PAGE>
Positions
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; prior
thereto, Vice President and
Treasurer of N&B Management
and Treasurer of certain
mutual funds for which N&B
Management acted as investment
adviser; Vice President and
Principal Financial Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Claudia A. Brandon (40) Secretary 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.
42
<PAGE>
Positions
Name, Age, and Held With
Address(1) The Trust PRINCIPAL OCCUPATION(S)(2)
- --------------- --------- --------------------------
C. Carl Randolph (59) Assistant Principal of Neuberger &
Secretary Berman since 1992; prior
thereto, employee of Neuberger
& Berman; Assistant Secretary
of eight other mutual funds
for which N&B Management acts
as investment manager or
administrator.
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 N&B Management since 1994;
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.
MANAGERS TRUST:
- --------------
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
43
<PAGE>
Positions
Name, Age, and Held With
Address(1) The Trust PRINCIPAL OCCUPATION(S)(2)
- --------------- --------- --------------------------
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
Richard Russell (50) Treasurer and (See above)
Principal
Accounting
Officer
Claudia A. Brandon (40) Secretary (See above)
Stacy Cooper-Shugrue (34) Assistant (See above)
Secretary
C. Carl Randolph (59) Assistant (See above)
Secretary
Barbara DiGiorgio (38) Assistant (See above)
Treasurer
Celeste Wischerth (36) Assistant (See above)
Treasurer
44
<PAGE>
Positions
Name, Age, and Held With
Address(1) The Trust PRINCIPAL OCCUPATION(S)(2)
- --------------- --------- --------------------------
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, State
Secretary 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.
* Indicates a trustee who is an "interested person" 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.
45
<PAGE>
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger & Berman
Funds(R) has any retirement plan for its trustees or officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/96
-----------------------------
Total Compensation
from Investment
Aggregate Companies in the
Compensation Neuberger & Berman
Name and Position from the Fund Complex Paid
With The Trust Trust To Trustees
----------------- ------------ -------------------
Faith Colish $ 2,320 $ 38,500
Trustee (5 other investment
companies)
Donald M. Cox $ 2,320 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment
Chief Executive companies)
Officer, and Trustee
Howard A. Mileaf $ 2,350 $ 37,000
Trustee (4 other investment
companies)
Edward I. O'Brien $ 2,409 $ 31,500
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 2,587 $ 40,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,320 $ 36,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,350 $ 30,500
Trustee (3 other investment
companies)
Gustave H. Shubert $ 2,350 $ 30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
46
<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
Institutions for accounting, recordkeeping, and other services that they provide
in connection with investments in the Fund.
47
<PAGE>
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 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.
The Management Agreement continues with respect to the Portfolio
until November 1, 1997. The Management Agreement is renewable thereafter from
year to year with respect to the Portfolio, so long as its continuance is
approved at least annually (1) by the vote of a majority of the Independent
Portfolio Trustees, cast in person at a meeting called for the purpose of voting
on such approval, and (2) by the vote of a majority of the Portfolio Trustees or
by a 1940 Act majority vote of the outstanding interests in the Portfolio. The
Administration Agreement continues with respect to the Fund for a period of two
years after the date the Fund became subject thereto. The Administration
Agreement is renewable from year to year with respect to the Fund, so long as
its continuance is approved at least annually (1) by the vote of a majority of
the Fund Trustees who are not "interested persons" of N&B Management or the
Trust ("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of the
Fund Trustees or by a 1940 Act majority vote of the outstanding shares in the
Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by N&B Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by N&B Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
48
<PAGE>
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 approximately
fourteen investment analysts, each of whom specializes in studying one or more
industries, under the supervision of the Director of Research, who is also
available for consultation with N&B Management. The Sub-Advisory Agreement
provides that N&B Management will pay for the services rendered by Neuberger &
Berman based on the direct and indirect costs to Neuberger & Berman in
connection with those services. Neuberger & Berman also serves as sub-adviser
for all of the other mutual funds managed by N&B Management.
The Sub-Advisory Agreement continues with respect to the Portfolio
until November 1, 1997 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 terminates automatically with respect to the
Portfolio if it is assigned or if the Management Agreement terminates with
respect to the Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
- ----------------------------
N&B Management currently serves as investment manager of the
following investment companies. As of March 31, 1997, these companies, along
with one other investment company advised by Neuberger & Berman, had aggregate
net assets of approximately $15.8 billion, as shown in the following list:
49
<PAGE>
Approximate Net
Assets at
NAME March 31, 1997
---- ----------------
Neuberger & Berman Cash Reserves $ 581,162,538
Portfolio
(investment portfolio for Neuberger
& Berman Cash Reserves)
Neuberger & Berman Government Money $ 286,105,662
Portfolio
(investment portfolio for Neuberger
& Berman Government Money Fund)
Neuberger & Berman Limited Maturity $ 270,321,891
Bond Portfolio
(investment portfolio for Neuberger
& Berman Limited Maturity Bond Fund
and Neuberger & Berman Limited
Maturity Bond Trust)
Neuberger & Berman Municipal Money $ 148,313,079
Portfolio
(investment portfolio for Neuberger
& Berman Municipal Money Fund)
Neuberger & Berman Municipal $ 31,855,567
Securities Portfolio
(investment portfolio for Neuberger
& Berman Municipal Securities Trust)
Neuberger & Berman New York Insured $ 9,524,904
Intermediate Portfolio
(investment portfolio for Neuberger
& Berman New York Insured
Intermediate Fund)
Neuberger & Berman Ultra Short Bond $ 86,252,752
Portfolio
(investment portfolio for Neuberger
& Berman Ultra Short Bond Fund and
Neuberger & Berman Ultra Short Bond
Trust)
Neuberger & Berman Focus Portfolio $1,256,520,338
(investment portfolio for Neuberger
& Berman Focus Fund, Neuberger &
Berman Focus Trust, and Neuberger &
Berman Focus Assets)
50
<PAGE>
Approximate Net
Assets at
NAME March 31, 1997
---- ----------------
Neuberger & Berman Genesis Portfolio $ 532,815,685
(investment portfolio for Neuberger
& Berman Genesis Fund, Neuberger &
Berman Genesis Trust, and Neuberger
& Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio $7,180,913,389
(investment portfolio for Neuberger
& Berman Guardian Fund, Neuberger &
Berman Guardian Trust and Neuberger
& Berman Guardian Assets)
Neuberger & Berman International $ 94,728,860
Portfolio
(investment portfolio for Neuberger
& Berman International Fund and
Neuberger & Berman International
Trust)
Neuberger & Berman Manhattan Portfolio $ 540,029,870
(investment portfolio for Neuberger
& Berman Manhattan Fund, Neuberger
& Berman Manhattan Trust and
Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio $2,620,782,294
(investment portfolio for Neuberger
& Berman Partners Fund, Neuberger &
Berman Partners Trust, and
Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive $ 194,939,684
Portfolio
(investment portfolio for Neuberger
& Berman Socially Responsive Fund,
Neuberger & Berman NYCDC Socially
Responsive Trust, and Neuberger &
Berman Socially Responsive Trust)
Advisers Managers Trust $1,868,674,687
(six series)
In addition, Neuberger & Berman serves as investment adviser to one
investment company, Plan Investment Fund, with assets of $59,619,902 at March
31, 1997.
51
<PAGE>
The investment decisions concerning the Portfolio and the other
mutual funds managed by N&B Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolio. Even where the investment objectives are similar, however, the
methods used by the Other N&B Funds and the Portfolio to achieve their
objectives may differ. The investment results achieved by all of the mutual
funds managed by N&B Management have varied from one another in the past and are
likely to vary in the future.
There may be occasions when the Portfolio and one or more of the
Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger & Berman (including the Portfolio, the Other N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
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; Clara Del Villar, Vice President; Brian J. Gaffney,
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;
52
<PAGE>
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, 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; Roberta D'Orio, Assistant Vice
President; Joseph G. Galli, Assistant Vice President; Michael J. Hanratty,
Assistant Vice President; Leslie Holliday-Soto, Assistant Vice President; Jody
L. Irwin, Assistant Vice President; Carmen G. Martinez, Assistant Vice
President; Joseph S. Quirk, Assistant Vice President; Josephine Velez, Assistant
Vice President; Celeste Wischerth, Assistant Vice President; KimMarie Zamot,
Assistant Vice President; Loraine Olavarria, Assistant Secretary. Messrs.
Cantor, Egener, Gendelman, Giuliano, Goldstein, Kassen, Lainoff, Risen, Simons,
Sundman and Zicklin, and Mmes. Prindle 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.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers of each Trust. C. Carl Randolph, a principal of Neuberger
& Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to
Institutions. In connection with the sale of its shares, the Fund has authorized
the Distributor to give only the information, and to make only the statements
and representations, contained in the Prospectus and this SAI or that properly
may be included in sales literature and advertisements in accordance with the
1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations.
Sales may be made only by the Prospectus, which may be delivered personally,
through the mails, or by electronic means. The Distributor is the Fund's
"principal underwriter" within the meaning of the 1940 Act and, as such, acts as
agent in arranging for the sale of the Fund's shares to Institutions without
sales commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
The 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.
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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
and that are 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.
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.
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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.
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 FUNDS
- ------------
Neuberger & Berman Seeks current income with minimal risk to principal
Ultra Short Bond Trust and liquidity. The corresponding portfolio invests in
money market instruments and investment grade debt
securities of government and non-government issuers.
Maximum average duration of two years.
Neuberger & Berman Seeks the highest current income 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 Funds are series of a
Delaware business trust (named "Neuberger & Berman Income Trust") that is
registered with the SEC as an open-end management investment company, (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.
- ------------------------
*/ 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.
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Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. The Income Funds share a prospectus and the Equity Funds share a
prospectus, except for Neuberger & Berman Socially Responsive Trust which has
its own prospectus. An exchange is treated as a sale for federal income tax
purposes and, depending on the circumstances, a short- or long-term capital gain
or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the NYSE is closed (other than weekend
and holiday closings), (2) when trading on the NYSE is restricted, (3) when an
emergency exists as a result of which it is not reasonably practicable for the
Portfolio to dispose of securities it owns or fairly to determine the value of
its net assets, or (4) for such other period as the SEC may by order permit for
the protection of the Fund's shareholders. Applicable SEC rules and regulations
shall govern whether the conditions prescribed in (2) or (3) exist. If the right
of redemption is suspended, shareholders may withdraw their offers of
redemption, or they will receive payment at the NAV per share in effect at the
close of business on the first day the NYSE is open ("Business Day") after
termination of the suspension.
REDEMPTIONS IN KIND
- -------------------
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, a shareholder generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Fund does not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of the
Fund's shareholders as a whole.
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DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders amounts equal to
substantially all of its share of any net investment income (after deducting
expenses incurred directly by the Fund), any net realized capital gains, and any
net realized gains from foreign currency transactions earned or realized by the
Portfolio. The Fund calculates its net investment income and NAV per share as of
the close of regular trading on the NYSE on each Business Day (usually 4:00 p.m.
Eastern time).
The Portfolio's net investment income consists of all income accrued
on portfolio assets less accrued expenses, but does not include capital and
foreign currency gains and losses. Net investment income and realized gains and
losses are reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until
they are distributed. Dividends from net investment income and distributions of
net realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless 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
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investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
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.
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<PAGE>
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
qualifies as a RIC, the Portfolio intends to continue to conduct its operations
so that the Fund will be able to 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
thereby, may be subject to income, withholding, or other taxes imposed by
foreign countries and U.S. possessions ("foreign taxes") that would reduce the
yield 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 such taxpayer, his or her share of
those taxes, (2) treat his or her share of those taxes and of any dividend paid
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<PAGE>
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 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 in the singular
as a U.S. person that owns, directly, indirectly, or constructively, at least
10% of that voting power) as to which the Portfolio is a U.S. shareholder
(effective for the Portfolio's taxable years beginning after 1997) -- 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," then in lieu of the Fund's incurring the foregoing
tax and interest obligation, the Fund would be required to include in income
each year its share of the Portfolio's pro rata share of the qualified electing
fund's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
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<PAGE>
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 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.
Regulations proposed in 1992 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 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) at the end of the
Portfolio's taxable year. Sixty percent of any gain or loss recognized as a
result of these "deemed sales," and 60% of any net realized gain or loss from
any actual sales, of Section 1256 contracts are treated as long-term capital
gain or loss; the remainder is treated as short-term capital gain or loss.
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.
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PORTFOLIO TRANSACTIONS
Neuberger & Berman may act as broker for the Portfolio. During the
period June 15, 1994 (commencement of operations) through August 31, 1994, and
the fiscal years ended August 31, 1995 and 1996, the Portfolio paid brokerage
commissions of $24,554, $128,324 and $183,335, respectively. During those
periods, the Portfolio paid commissions of $330, $4,110 and $5,485,
respectively, to Neuberger & Berman and $0, $0 and $0, respectively, to
BNP-International Financial Services Corporation (a wholly owned subsidiary of
BNP that previously was an affiliate of an affiliate of Neuberger & Berman).
Transactions in which the Portfolio used Neuberger & Berman as broker comprised
6.34% of the aggregate dollar amount of transactions involving the payment of
commissions, and 2.99% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1996. Of the $177,850 paid to
other brokers by the Portfolio during that fiscal year, 100% (representing
commissions on transactions involving approximately $43,383,896) was directed to
those brokers because of research services they provided. During the fiscal year
ended August 31, 1996, the Portfolio acquired securities of the following of its
Regular B/Ds: HSBC Holdings PLC and State Street Bank and Trust Company, N.A.;
at that date, the Portfolio held the securities of its Regular B/Ds with an
aggregate value as follows: HSBC Holdings PLC, $379,850.
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.
During the fiscal years ended August 31, 1996 and 1995, and the
period June 15, 1994 (commencement of operations) to August 31, 1994, the
Portfolio earned no interest income from the collateralization of securities
loans.
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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 (or any other affiliated
broker or dealer) as its broker where, in the judgment of N&B Management (the
Portfolio's investment manager and an affiliate of Neuberger & Berman), that
firm is able to obtain a price and execution at least as favorable as other
qualified brokers. To the Portfolio's knowledge, no affiliate of the Portfolio
receives give-ups or reciprocal business in connection with its securities
transactions.
The use of Neuberger & Berman as a broker for the Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining 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).
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.
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Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
& Berman must, in N&B Management's judgment, be (1) at least as favorable as
those charged by other brokers having comparable execution capability and (2) at
least as favorable as commissions contemporaneously charged by Neuberger &
Berman on comparable transactions for its most favored unaffiliated customers,
except for accounts for which Neuberger & Berman acts as a clearing broker for
another brokerage firm and customers of Neuberger & Berman considered by a
majority of the Independent Portfolio Trustees not to be comparable to the
Portfolio. The Portfolio does not deem it practicable and in its best interests
to solicit competitive bids for commissions on each transaction effected by
Neuberger & Berman. However, consideration regularly is given to information
concerning the prevailing level of commissions charged by other brokers on
comparable transactions during comparable periods of time. The 1940 Act
generally prohibits Neuberger & Berman from acting as principal in the purchase
of portfolio securities from, or the sale of portfolio securities to, the
Portfolio unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders simultaneously placed by the other accounts, subject to
de minimis exceptions. All participating accounts will pay or receive the same
price.
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The Portfolio expects that it will continue to execute a significant
portion of its transactions through brokers other than Neuberger & Berman. In
selecting those brokers, N&B Management considers the quality and reliability of
brokerage services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of N&B Management and principals
of Neuberger & Berman who are portfolio managers of the Portfolio and Other N&B
Funds (collectively, "N&B Funds") and some of Neuberger & Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the N&B Funds and the Managed Accounts
that are not effected by Neuberger & Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the N&B Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the N&B
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger & Berman may
be higher than the amount another firm might charge if N&B Management determines
in good faith that the amount of those commissions is reasonable in relation to
the value of the brokerage and research services provided by the broker. N&B
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolio's benefit.
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Felix Rovelli, manager of the Portfolio, is on a leave of absence
attending to a personal matter. Valerie Chang, who is an Assistant Vice
President of N&B Management, is the person currently responsible for making
decisions as to specific action to be taken with respect to the investment
portfolio of the Portfolio. She has full authority to take action with respect
to portfolio transactions and may or may not consult with other personnel of N&B
Management prior to taking such action.
PORTFOLIO TURNOVER
- ------------------
The Portfolio's portfolio turnover rate is calculated by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
The portfolio turnover rates for the Portfolio for the years ended
August 31, 1995 and 1996 were 41% and 45%, respectively. The average commission
rate paid by the Portfolio during the year ended August 31, 1996 was $0.0150.
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.
66
<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.
67
<PAGE>
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, 1996:
The audited financial statements of the Portfolio and notes thereto
for the fiscal year ended August 31, 1996, and the reports of Ernst
& Young, independent auditors, with respect to such audited
financial statements.
The following financial statements and related documents are
incorporated herein by reference from the Semi-Annual Report to shareholders of
Neuberger & Berman Equity Funds for the period ended February 28, 1997:
The unaudited financial statements of the Portfolio and notes
thereto for the period ended February 28, 1997.
68
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S CORPORATE BOND RATINGS:
------------------------------
AAA - Bonds rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
69
<PAGE>
AA - Bonds rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in AAA-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in AAA-rated
securities.
A - Bonds rated A possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
BAA - Bonds which are rated BAA are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
BA - Bonds rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA - Bonds rated CA represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
70
<PAGE>
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.
71
<PAGE>
Appendix B
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
B-2
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
B-3
<PAGE>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure
that some of your investments, make sure that some of your principal is kept
safe, and principal is kept safe, and try to increase try to increase your
income your income as well as your capital. as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
B-4
<PAGE>
Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
B-5
<PAGE>
One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a
book, the last thing to particular security. It is after all just a
fall in love with is a sheet of paper indicating a part ownership in
particular security." a corporation and its use is purely
mercenary. If you must love a security, stay
in love with it until it gets overvalued;
then let somebody else fall in love.
[PICTURE OF ROY NEUBERGER]
B-6
<PAGE>
ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL
INVESTING STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
B-7
<PAGE>
The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR
INVESTING STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
B-8
<PAGE>
Both are an art, although picking stocks is a
minor art compared with painting, sculpture
"When things look bad, I or literature. I started buying art in the
become optimistic. When 30s, and in the 40s it was a daily, almost
everything looks rosy, and hourly occurrence. My inclination to buy the
the crowd is optimistic, I works of living artists comes from Van Gogh,
like to be a seller." who sold only one painting during his
lifetime. He died in poverty, only then to
become a legend and have his work sold for
millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
B-9
<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
B-10
<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
B-11
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
B-12
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
B-13
<PAGE>
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.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
INVESTMENT INFORMATION........................................................2
Investment Policies and Limitations.....................................2
The Portfolio...........................................................6
Additional Investment Information......................................12
PERFORMANCE INFORMATION......................................................36
Total Return Computations..............................................36
Comparative Information......................................................37
Other Performance Information..........................................38
CERTAIN RISK CONSIDERATIONS..................................................39
TRUSTEES AND OFFICERS........................................................39
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES............................49
Investment Manager and Administrator...................................49
Sub-Adviser............................................................51
Investment Companies Managed...........................................51
Management and Control of N&B Management...............................55
DISTRIBUTION ARRANGEMENTS....................................................56
ADDITIONAL EXCHANGE INFORMATION..............................................57
ADDITIONAL REDEMPTION INFORMATION............................................60
Suspension of Redemptions..............................................60
Redemptions in Kind....................................................60
DIVIDENDS AND OTHER DISTRIBUTIONS............................................61
ADDITIONAL TAX INFORMATION...................................................61
Taxation of the Fund...................................................61
Taxation of the Portfolio..............................................62
Taxation of the Fund's Shareholders....................................65
i
<PAGE>
PAGE
----
PORTFOLIO TRANSACTIONS.......................................................65
Portfolio Turnover.....................................................70
REPORTS TO SHAREHOLDERS......................................................70
ORGANIZATION.................................................................70
CUSTODIAN AND TRANSFER AGENT.................................................70
INDEPENDENT AUDITORS.........................................................71
LEGAL COUNSEL................................................................71
REGISTRATION STATEMENT.......................................................71
FINANCIAL STATEMENTS.........................................................72
Appendix A...................................................................73
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER........................73
Appendix B...................................................................76
THE ART OF INVESTMENT:.................................................76
ii
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 12 ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
- ------- ---------------------------------
(a) Financial Statements:
The audited financial statements contained in the Annual Report to
Shareholders of Neuberger & Berman Equity Funds for the fiscal year ended August
31, 1996 for Neuberger & Berman International Portfolio (a series of Global
Managers Trust) and the report of the independent auditors are filed herewith.
The unaudited financial statements from the Semi-Annual Report to Shareholders
for the period ended February 28, 1997 for Neuberger & Berman International
Portfolio are filed herewith.
(b) Exhibits:
Exhibit
Number Description
------- -----------
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Trust Instrument of Neuberger & Berman Equity
Trust. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger &
Berman Equity Trust. Filed Herewith.
(2) By-laws of Neuberger & Berman Equity Trust.
Incorporated by Reference to Post-Effective No. 8
to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(3) Voting Trust Agreement. None.
(4) (a) Trust Instrument of Neuberger & Berman
Equity Trust, Articles IV, V, and VI.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(b) By-laws of Neuberger & Berman Equity Trust,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
-5-
<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.
(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.
-6-
<PAGE>
(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) Form of Distribution Agreement Between Neuberger
& Berman Equity Trust and Neuberger & Berman
Management Incorporated. Filed Herewith.
(b) Form of Schedule A - Series of Neuberger & Berman
Equity Trust Currently Subject to the
Distribution Agreement. Filed Herewith.
(7) Bonus, Profit Sharing or Pension Plans. None.
-7-
<PAGE>
(8) (a) Custodian Contract Between Neuberger & Berman
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to Post-
Post-Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(b) Schedule A - Approved Foreign Banking
Institutions and Securities Depositories Under
the Custodian Contract. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-95-000427.
(c) Schedule of Compensation under the Custodian
Contract. 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.
(d) 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.
Filed Herewith.
(9) (a) (i) Transfer Agency and Service Agreement Between
Neuberger & Berman Equity Trust and State Street
Bank and Trust Company. Incorporated by Reference
to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-95-000427.
(ii) Agreement Between Neuberger & Berman Equity Trust
and State Street Bank and Trust Company Adding
Neuberger & Berman NYCDC Socially Responsive
Trust as a Portfolio Governed by the Transfer
Agency Agreement. Incorporated by Reference to
Post-Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(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. Filed Herewith.
(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.
(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.
-8-
<PAGE>
(vi) Second Amendment to Transfer Agency and Service
Agreement between Neuberger & Berman Equity Trust
and State Street Bank and Trust Company. Filed
Herewith.
(b) (i) Form of Administration Agreement Between
Neuberger & Berman Equity Trust and Neuberger &
Berman Management Incorporated. Filed Herewith.
(ii) Form of Schedule A - Series of Neuberger &
Berman Equity Trust Currently Subject to the
Administration Agreement. Filed Herewith.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. Incorporated by
Reference to Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-95-000427.
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters. Incorporated by Reference to
Registrant's Rule 24f-2 Notice for the Fiscal Year Ended
August 31, 1996, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-96-000465.
(11) Consent of Ernst & Young. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance Quotations.
Incorporated by Reference to Post-Effective Amendment No.
4 to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(17) Financial Data Schedule. Filed Herewith.
(18) Plan Pursuant to Rule 18f-3. None
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- ------- -------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
-9-
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
- ------- -------------------------------
The following information is given as of July 31, 1997.
Number of
Title of Class Record Holders
-------------- --------------
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Focus Trust 73
Neuberger & Berman Genesis Trust 99
Neuberger & Berman Guardian Trust 299
Neuberger & Berman Manhattan Trust 49
Neuberger & Berman Partners Trust 118
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
-10-
<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.
-11-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger & Berman
Vice President, N&B Advisers Management Trust; Secretary,
Management Advisers 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 Chief Investment Officer, Bainco
Vice President, N&B International Investors.1/ Senior
Management Vice President and Senior Portfolio
Manager, Putnam Investments.2/
Stacy Cooper-Shugrue Assistant Secretary, Neuberger &
Assistant Vice President, Berman Advisers Management Trust;
N&B Management 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.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, N&B Investments.3/
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger &
Assistant Vice President, Berman Advisers Management Trust;
N&B Management Assistant Treasurer, Advisers
Managers Trust; Assistant Treasurer,
Neuberger & Berman Income Funds;
Assistant Treasurer, Neuberger &
Berman Income Trust; Assistant
Treasurer, Neuberger & Berman Equity
Funds; Assistant Treasurer, Neuberger
& Berman Equity Trust; Assistant
Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers
Trust; Assistant Treasurer, Global
Managers Trust; Assistant Treasurer,
Neuberger & Berman Equity Assets.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers
N&B Management; Principal, Neuberger & Management Trust; Chairman of the
Berman Board and Trustee, Advisers
Managers Trust; Chairman of the Board
and Trustee, Neuberger & Berman
Berman Income Funds; Chairman of the
Board and Trustee, Neuberger & Berman
- -------------------
1 Until 1997.
2 Until 1995.
3 Until 1996.
-12-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Income Trust; Chairman of the Board
and Trustee, Neuberger & Berman
Equity Funds; Chairman of the Board
and Trustee, Neuberger & Berman
Equity Trust; Chairman of the Board
and Trustee, Income Managers Trust;
Chairman of the Board and Trustee,
Equity Managers Trust; Chairman of
the Board and Trustee, Global
Managers Trust; Chairman of the Board
and Trustee, Neuberger & Berman
Equity Assets.
Theodore P. Giuliano President and Trustee, Neuberger &
Vice President and Berman Income Funds; President and
Director, N&B Management; Trustee, Neuberger & Berman Income
Principal, Neuberger & Berman Trust; President and Trustee, Income
Managers Trust.
C. Carl Randolph President and and Trustee, Neuberger
Principal, Neuberger & Berman & Berman Income Trust; President and
Director, N&B Management; Trustee,
Income Managers Trust. Principal,
Neuberger & Berman Assistant
Secretary, 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.
Jennifer K. Silver Portfolio Manager and Director,
Vice President, N&B Putnam Investments.4/
Management; Principal,
Neuberger & Berman
Richard Russell Treasurer, Neuberger & Berman
Vice President, Advisers Management Trust; Treasurer,
N&B Management Advisers 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.
Daniel J. Sullivan Vice President, Neuberger & Berman
Senior Vice President, N&B Management Advisers Management Trust; Vice
President, Advisers Managers Trust;
Vice President, Neuberger & Berman
Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice
President, Neuberger & Berman Equity
Funds; Vice President, Neuberger &
Berman Equity Trust; Vice President,
Income Managers Trust; Vice
President, Equity Managers Trust;
Vice President, Global Managers
Trust; Vice President, Neuberger &
Berman Equity Assets.
Michael J. Weiner Vice President, Neuberger & Berman
Senior Vice President, Advisers Management Trust; Vice
N&B Management President, Advisers Managers Trust;
Vice President, Neuberger & Berman
Income Funds; Vice President,
- ----------------
4 Until 1997.
-13-
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
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 &
Assistant Vice President, Berman Advisers Management Trust;
N&B Management Assistant Treasurer, Advisers
Managers Trust; Assistant Treasurer,
Neuberger & Berman Income Funds;
Assistant Treasurer, Neuberger &
Berman Income Trust; Assistant
Treasurer, Neuberger & Berman Equity
Funds; Assistant Treasurer, Neuberger
& Berman Equity Trust; Assistant
Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers
Trust; Assistant Treasurer, Global
Managers Trust; Assistant Treasurer,
Neuberger & Berman Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger &
Director, N&B Management; Berman Advisers Management Trust;
President and Trustee, Advisers
Managers Trust; President Principal,
Neuberger & Berman 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.
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------------
Claudia A. Brandon Vice President Secretary
-14-
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------------
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
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
Richard Russell Vice President Treasurer and Principal
Accounting Officer
-15-
<PAGE>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ---- ---------------- ---------------------
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
KimMarie Zamot Assistant 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 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.
-16-
<PAGE>
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.
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY TRUST
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 12 to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City and State of New York on the
27th day of August, 1997.
NEUBERGER & BERMAN EQUITY TRUST
By:/s/ Lawrence Zicklin
---------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Faith Colish
- --------------------------- Trustee August 27, 1997
Faith Colish
/s/ Donald M. Cox
- --------------------------- Trustee August 27, 1997
Donald M. Cox
/s/ Stanley Egener
- --------------------------- Chairman of the Board August 27, 1997
Stanley Egener and Trustee (Chief
Executive Officer
/s/ Howard A. Mileaf
- --------------------------- Trustee August 27, 1997
Howard A. Mileaf
/s/ Edward I. O'Brien
- --------------------------- Trustee August 27, 1997
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John T. Patterson, Jr.
- --------------------------- Trustee August 27, 1997
John T. Patterson, Jr.
/s/ John P. Rosenthal
- --------------------------- Trustee August 27, 1997
John P. Rosenthal
/s/ Cornelius T. Ryan
- --------------------------- Trustee August 27, 1997
Cornelius T. Ryan
/s/ Gustave H. Shubert
- --------------------------- Trustee August 27, 1997
Gustave H. Shubert
/s/ Lawrence Zicklin
- --------------------------- President and Trustee August 27, 1997
Lawrence Zicklin
/s/ Michael J. Weiner
- --------------------------- Vice President August 27, 1997
Michael J. Weiner (Principal Financial
Officer)
/s/ Richard Russell
- --------------------------- Treasurer (Principal August 27, 1997
Richard Russell Accounting Officer)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, GLOBAL MANAGERS TRUST has duly caused
Post-Effective Amendment No. 12 to be signed on its behalf by the undersigned,
thereto duly authorized, in the City and State of New York, on the 27th day of
August, 1997.
GLOBAL MANAGERS TRUST
By:/s/ Stanely Egener
-------------------------------------
Stanley Egener, Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, Post-Effective
Amendment No. has been signed below by the following persons in the capacities
and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Stanley Egener Chairman of the Board August 27, 1997
- -------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf Trustee August 27, 1997
- --------------------------
Howard A. Mileaf
/s/ John T. Patterson, Jr. Trustee August 27, 1997
- --------------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee August 27, 1997
- --------------------------
John P. Rosenthal
/s/ Michael J. Weiner Vice President August 27, 1997
- -------------------------- (Principal
Michael J. Weiner Financial Officer)
/s/ Richard Russell Treasurer (Principal August 27, 1997
------------------------- Accounting Officer)
Richard Russell
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 12 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----
(1) (a) Certificate of Trust. Incorporated by Reference to N.A.
Post-Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(b) Trust Instrument of Neuberger & Berman Equity Trust. N.A.
Incorporated by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger & Berman ___
Equity Trust. Filed Herewith.
(2) By-laws of Neuberger & Berman Equity Trust. Incorporated by N.A.
Reference to Post-Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(3) Voting Trust Agreement. None. N.A.
(4) (a) Trust Instrument of Neuberger & Berman Equity Trust, N.A.
Articles IV, V, and VI. Incorporated by Reference to
Post-Effective No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784, Edgar
Accession No. 0000898432-95-000427.
(b) Bylaws of Neuberger & Berman Equity Trust, Articles V,
VI, and VIII. Incorporated by Reference to Post-
Effective No. 8 to Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(5) (a) (i) Management Agreement Between Equity Managers N.A.
Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to
Post-Effective Amendment No. 70 to Registration
Statement of Neuberger & Berman Equity Funds,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(ii) Schedule A - Series of Neuberger & Berman Equity N.A.
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.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----
(iii) Schedule B - Schedule of Compensation Under the N.A.
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 N.A.
Management Incorporated and Neuberger & Berman, LLC
with Respect to Equity Managers Trust. Incorporated
by Reference to Post-Effective Amendment No. 70 to
Registration Statement of Neuberger & Berman Equity
Funds, File Nos. 2-11357 and 811-582, Edgar Accession
No. 0000898432-000314.
(ii) Schedule A - Series of Neuberger & Berman Equity N.A.
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 N.A.
And Neuberger & Berman Management, 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 N.A.
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registrant's Registration
Statement, File Nos. 2-11357 and 811-582,
Edgar Accession No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation Under the N.A.
Management Agreement. 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.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----
(d) (i) Sub-Advisory Agreement Between Neuberger & Berman N.A.
Management Incorporated and Neuberger & Berman, LLC
with Respect to Global Managers Trust. Incorporated
by Reference to Post-Effective Amendment No. 74 to
Registrant's Registration Statement, File Nos. 2-11357
and 811-582, Edgar Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust Currently N.A.
Subject to the Sub-Advisory Agreement, Incorporated
by Reference to Post-Effective Amendment No. 74 to
Registrant's Registration Statement, File Nos. 2-11357
and 811-582, Edgar Accession No. 0000898432-95-000426.
(6) (a) Form of Distribution Agreement Between Neuberger & ____
Berman Equity Trust and Neuberger & Berman Management.
Filed Herewith.
(b) Form of Schedule A - Series of Neuberger & Berman Equity ____
Trust Currently Subject to the Distribution Agreement.
Filed Herewith.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Neuberger & Berman N.A.
Equity Trust and State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------- ----------- ----
(b) Schedule A - Approved Foreign Banking Institutions and N.A.
Securities Depositories Under the Custodian Contract.
Incorporated by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos. 33-64368
and and 811-7784, Edgar Accession No. 0000898432-95-000427.
(c) Schedule of Compensation Under the Custodian Contract. N.A.
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.
(d) Agreement Between Neuberger & Berman Equity Trust and ____
State Street Bank Trust Company Adding Neuberger & Berman
International Trust as a Portfolio Governed by the
Custodian Contract. Filed Herewith.
(9) (a) (i) Transfer Agency and Service Agreement 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.
(ii) Agreement Between Neuberger & Berman Equity Trust and N.A.
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 Agreement. Filed Herewith.
(iv) First Amendment to Transfer Agency and Service Agreement N.A.
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 Agency and N/A.
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.
(vi) Second Amendment to Transfer Agency and Service Agreement ____
between Equity Trust and State Street Bank and Trust Company.
Filed Herewith.
(b) (i) Form of Administration Agreement Between Neuberger & Berman ____
Equity Trust and Neuberger & Berman Management Incorporated.
Filed Herewith.
(ii) Form of Schedule A - Series of Neuberger & Berman Equity ____
Trust Currently Subject to the Administration Agreement.
Filed Herewith.
(iii) Schedule B - Schedule of Compensation Under the N.A.
Administration Agreement. 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.
<PAGE>
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP on Securities N.A.
Matters. Incorporated by Reference to Registrant's Rule 24f-2
Notice for the Fiscal Year Ended August 31, 1996, File Nos.
2-11357 and 811-582, Edgar Accession No. 0000898432-96-000465.
(11) Consent of Ernst & Young. Filed Herewith. ____
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance Quotations. Incorporated N.A.
by Reference to Post-Effective Amendment No. 4 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(17) Financial Data Schedule. Filed Herewith. ____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
<TABLE> <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-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 50,943
<INVESTMENTS-AT-VALUE> 57,765
<RECEIVABLES> 79
<ASSETS-OTHER> 33
<OTHER-ITEMS-ASSETS> 19
<TOTAL-ASSETS> 57,896
<PAYABLE-FOR-SECURITIES> 712
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 201
<TOTAL-LIABILITIES> 913
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,399
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 575
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (635)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,644
<NET-ASSETS> 56,983
<DIVIDEND-INCOME> 605
<INTEREST-INCOME> 183
<OTHER-INCOME> 0
<EXPENSES-NET> 555
<NET-INVESTMENT-INCOME> 233
<REALIZED-GAINS-CURRENT> 609
<APPREC-INCREASE-CURRENT> 3,964
<NET-CHANGE-FROM-OPS> 4,806
<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> 0
<ACCUMULATED-NII-PRIOR> 342
<ACCUMULATED-GAINS-PRIOR> (1,244)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 327
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 603
<AVERAGE-NET-ASSETS> 40,479
<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> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Internationl Portfolio Semi 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> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 75,768
<INVESTMENTS-AT-VALUE> 92,542
<RECEIVABLES> 576
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 16
<TOTAL-ASSETS> 93,162
<PAYABLE-FOR-SECURITIES> 1,585
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215
<TOTAL-LIABILITIES> 1,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,410
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 486
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 518
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,948
<NET-ASSETS> 91,362
<DIVIDEND-INCOME> 215
<INTEREST-INCOME> 119
<OTHER-INCOME> 0
<EXPENSES-NET> (432)
<NET-INVESTMENT-INCOME> (89)
<REALIZED-GAINS-CURRENT> 1,153
<APPREC-INCREASE-CURRENT> 10,304
<NET-CHANGE-FROM-OPS> 11,368
<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> 34,379
<ACCUMULATED-NII-PRIOR> 575
<ACCUMULATED-GAINS-PRIOR> (635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 295
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 423
<AVERAGE-NET-ASSETS> 69,946
<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> 1.22<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Annualized.
</FN>
</TABLE>
EXHIBIT 1(c)
NEUBERGER & BERMAN EQUITY TRUST
TRUST INSTRUMENT
SCHEDULE A
SERIES DATE ADDED
- ------ ----------
Neuberger & Berman Focus Trust May 6, 1993
Neuberger & Berman Genesis Trust May 6, 1993
Neuberger & Berman Guardian Trust May 6, 1993
Neuberger & Berman Manhattan Trust May 6, 1993
Neuberger & Berman Partners Trust May 6, 1993
Neuberger & Berman NYCDC Socially Responsive Trust March 14, 1994
Neuberger & Berman International Trust August 30, 1997
EXHIBIT 6(a)
DISTRIBUTION AGREEMENT
This Agreement is made as of August 3, 1993, between Neuberger
& Berman Equity Trust, a Delaware business trust ("Trust"), and Neuberger &
Berman Management Incorporated, a New York corporation (the "Distributor"), and
is amended as of August 2, 1996.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end, diversified management investment
company and has established several separate series of shares ("Series"), with
each Series having its own assets and investment policies; and
WHEREAS, the Trust desires to retain the Distributor to furnish
distribution services to each Series listed in Schedule A attached hereto, and
to such other Series of the Trust hereinafter established as agreed to from time
to time by the parties, evidenced by an addendum to Schedule A (hereinafter
"Series" shall refer to each Series which is subject to this Agreement and all
agreements and actions described herein to be made or taken by a Series shall be
made or taken by the Trust on behalf of the Series), and the Distributor is
willing to furnish such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. The Trust hereby appoints the Distributor as agent to sell
the shares of beneficial interest of each Series (the "Shares") and the
Distributor hereby accepts such appointment. All sales by the Distributor shall
be expressly subject to acceptance by the Trust, acting on behalf of the Series.
The Trust may suspend sales of the Shares of any one or more Series at any time,
and may resume sales at any later time.
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value ("NAV") thereof as described in
Section 3 hereof, and (ii) the Series shall receive 100% of such NAV.
(b) The Distributor may enter into agreements, in form and
substance satisfactory to the Trust, with dealers selected by the Distributor,
providing for the sale to such dealers and resale by such dealers of Shares at
their NAV.
3. The Trust agrees to supply to the Distributor, promptly
after the time or times at which NAV is determined, on each day on which the New
York Stock Exchange is open for unrestricted trading and on such other days as
the Board of Trustees of the Trust ("Trustees") may from time to time determine
(each such day being hereinafter called a "business day"), a statement of the
NAV of each Series having been determined in the manner set forth in the
<PAGE>
then-current Prospectus and Statement of Additional Information ("SAI") of each
Series. Each determination of NAV shall take effect as of such time or times on
each business day as set forth in the then-current Prospectus of each Series.
4. Upon receipt by the Trust at its principal place of
business of a written order from the Distributor, together with delivery
instructions, the Trust shall, if it elects to accept such order, as promptly as
practicable, cause the Shares purchased by such order to be delivered in such
amounts and in such names as the Distributor shall specify, against payment
therefor in such manner as may be acceptable to the Trust. The Trust may, in its
discretion, refuse to accept any order for the purchase of Shares that the
Distributor may tender to it.
5. (a) All sales literature and advertisements used by the
Distributor in connection with sales of Shares shall be subject to approval by
the Trust. The Trust authorizes the Distributor, in connection with the sale or
arranging for the sale of Shares of any Series, to provide only such information
and to make only such statements or representations as are contained in the
Series's then-current Prospectus and SAI or in such financial and other
statements furnished to the Distributor pursuant to the next paragraph or as may
properly be included in sales literature or advertisements in accordance with
the provisions of the Securities Act of 1933 (the "1933 Act"), the 1940 Act and
applicable rules of self-regulatory organizations. Neither the Trust nor any
Series shall be responsible in any way for any information provided or
statements or representations made by the Distributor or its representatives or
agents other than the information, statements and representations described in
the preceding sentence.
(b) Each Series shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy of
all of its financial statements and a signed copy of each report prepared for it
by its independent auditors, and shall cooperate fully in the efforts of the
Distributor to negotiate and sell Shares of such Series and in the Distributor's
performance of all its duties under this Agreement.
6. The Distributor, as agent of each Series and for the account and
risk of each Series, is authorized, subject to the direction of the Trust, to
redeem outstanding Shares of such Series when properly tendered by shareholders
pursuant to the redemption right granted to such Series's shareholders by the
2
<PAGE>
Trust Instrument of the Trust, as from time to time in effect, at a redemption
price equal to the NAV per Share of such Series next determined after proper
tender and acceptance. The Trust has delivered to the Distributor a copy of the
Trust's Trust Instrument as currently in effect and agrees to deliver to the
Distributor any amendments thereto promptly upon filing thereof with the Office
of the Secretary of State of the State of Delaware.
7. The Distributor shall assume and pay or reimburse each Series for
the following expenses of such Series: (i) costs of printing and distributing
reports, prospectuses and SAIs for other than existing shareholders used in
connection with the sale or offering of the Series' Shares; (ii) costs of
preparing, printing and distributing all advertising and sales literature
relating to such Series printed at the instruction of the Distributor; and (iii)
counsel fees and expenses in connection with the foregoing. The Distributor
shall pay all its own costs and expenses connected with the sale of Shares.
8. Each Series shall maintain a currently effective
Registration Statement on Form N-1A with respect to such Series and shall file
with the Securities and Exchange Commission ("SEC") such reports and other
documents as may be required under the 1933 Act and the 1940 Act or by the rules
and regulations of the SEC thereunder.
Each Series represents and warrants that the Registration
Statement, post-effective amendments, Prospectus and SAI (excluding statements
relating to the Distributor and the services it provides that are based upon
written information furnished by the Distributor expressly for inclusion
therein) of such Series shall not contain any untrue statement of material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and that all statements or
information furnished to the Distributor, pursuant to Section 5(b) hereof, shall
be true and correct in all material respects.
9. (a) This Agreement, as amended, shall become effective on
August 2, 1996 and shall remain in full force and effect until August 2, 1997
and may be continued from year to year thereafter; provided, that such
continuance shall be specifically approved each year by the Trustees or by a
majority of the outstanding voting securities of the Series, and in either case,
also by a majority of the Trustees who are not interested persons of the Trust
or the Distributor ("Disinterested Trustees"). This Agreement may be amended as
to any Series with the approval of the Trustees or of a majority of the
outstanding voting securities of such Series; provided, that in either case,
such amendment also shall be approved by a majority of the Disinterested
Trustees.
3
<PAGE>
(b) Either party may terminate this Agreement without the
payment of any penalty, upon not more than sixty days' nor less than thirty
days' written notice delivered personally or mailed by registered mail, postage
prepaid, to the other party; provided, that in the case of termination by any
Series, such action shall have been authorized (i) by resolution of the
Trustees, or (ii) by vote of a majority of the outstanding voting securities of
such Series, or (iii) by written consent of a majority of the Disinterested
Trustees.
(c) This Agreement shall automatically terminate if it is
assigned by the Distributor.
(d) Any question of interpretation of any term or provision
of this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "interested persons," "assignment" and "vote of a
majority of the outstanding voting securities," as used in this Agreement, shall
have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition,
when the effect of a requirement of the 1940 Act reflected in any provision of
this Agreement is modified, interpreted or relaxed by a rule, regulation or
order of the SEC, whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule, regulation or order. The
Trust and the Distributor may from time to time agree on such provisions
interpreting or clarifying the provisions of this Agreement as, in their joint
opinion, are consistent with the general tenor of this Agreement and with the
specific provisions of this Section 9(d). Any such interpretations or
clarifications shall be in writing signed by the parties and annexed hereto, but
no such interpretation or clarification shall be effective if in contravention
of any applicable federal or state law or regulations, and no such
interpretation or clarification shall be deemed to be an amendment of this
Agreement.
No term or provision of this Agreement shall be construed
to require the Distributor to provide distribution services to any series of the
Trust other than the Series, or to require any Series to pay any compensation or
expenses that are properly allocable, in a manner approved by the Trustees, to a
series of the Trust other than such Series.
4
<PAGE>
(e) This Agreement is made and to be principally performed
in the State of New York, and except insofar as the 1940 Act or other federal
laws and regulations may be controlling, this Agreement shall be governed by,
and construed and enforced in accordance with, the internal laws of the State of
New York.
(f) This Agreement is made by the Trust solely with respect
to the Series, and the obligations created hereby with respect to one Series
bind only assets belonging to that Series and are not binding on any other
series of the Trust.
10. The Distributor or one of its affiliates may from time to
time deem it desirable to offer to the list of shareholders of each Series the
shares of other mutual funds for which it acts as Distributor, including other
series of the Trust or other products or services; however, any such use of the
list of shareholders of any Series shall be made subject to such terms and
conditions, if any, as shall be approved by a majority of the Disinterested
Trustees.
11. The Distributor shall look only to the assets of a Series
for the performance of this Agreement by the Trust on behalf of such Series, and
neither the shareholders, Trustees nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed by their duly authorized officers and under their
respective seals.
NEUBERGER & BERMAN
EQUITY TRUST
By: _______________________
Title: ____________________
NEUBERGER & BERMAN
MANAGEMENT INCORPORATED
By: _______________________
Title: ____________________
5
EXHIBIT 6(b)
NEUBERGER & BERMAN EQUITY TRUST
DISTRIBUTION AGREEMENT
SCHEDULE A
Series Date Made Party to Agreement
- ------ ----------------------------
Neuberger & Berman Focus Trust August 3, 1993
Neuberger & Berman Genesis Trust August 3, 1993
Neuberger & Berman Guardian Trust August 3, 1993
Neuberger & Berman Manhattan Trust August 3, 1993
Neuberger & Berman Partners Trust August 3, 1993
Neuberger & Berman NYCDC Socially Responsive Trust March 14, 1994
Neuberger & Berman International Trust August 30, 1997
EXHIBIT 8(d)
VIA FEDERAL EXPRESS
- -------------------
Sharon Baker Morin, Esq.
State Street Bank and Trust Company
1776 Heritage Drive
Mail Stop A4N
North Quincy, Massachusetts 02171-2197
Dear Ms. Morin,
Pursuant to section 17 of the custodian contract between State Street Bank &
Trust Company ("State Street") and Neuberger & Berman Equity Trust dated as of
August 2, 1993, we request that Neuberger & Berman International Trust be added
as a Portfolio governed by that custodian contract. The addition of this series
is effective as of August 30, 1997. Please indicate State Street's acceptance of
this request by having a duly authorized officer of State Street sign in the
space indicated below.
Sincerely,
Neuberger & Berman Equity Trust
/s/Michael J. Weiner
---------------------------------
Name: Michael J. Weiner
Title: Vice President
Accepted by State Street
Bank and Trust Company
/s/ Ronald E. Logue
- -------------------------------
Name: Ronald E. Logue
Title: Executive Vice President
EXHIBIT 9(a)(iii)
VIA FEDERAL EXPRESS
- -------------------
Sharon Baker Morin, Esq.
State Street Bank and Trust Company
1776 Heritage Drive
Mail Stop A4N
North Quincy, Massachusetts 02171-2197
Dear Ms. Morin,
Pursuant to section 9 of the transfer agency and service contract
between State Street Bank & Trust Company ("State Street") and Neuberger &
Berman Equity Trust dated as of August 2, 1993, we request that Neuberger &
Berman International Trust be added as a Portfolio governed by that contract.
The addition of this series is effective as of August 30, 1997. Please indicate
State Street's acceptance of this request by having a duly authorized officer of
State Street sign in the space indicated below.
Sincerely,
Neuberger & Berman Equity Trust
/s/Michael J. Weiner
-------------------------------
Name: Michael J. Weiner
Title: Vice President
Accepted by State Street
Bank and Trust Company
/s/Ronald E. Logue
- -------------------------------
Name: Ronald E. Logue
Title: Executive Vice President
EXHIBIT 9(a)(vi)
AMENDMENT TO THE
TRANSFER AGENCY AND SERVICE AGREEMENT
This Amendment dated as of January 23, 1997 between Neuberger & Berman
Equity Trust, a Delaware business trust, having its principal office and place
of business at 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 (the "Fund")
and State Street Bank and Trust Company, a Massachusetts trust company having
its principal office and place of business at 225 Franklin Street, Boston, MA
02110 (the "Bank") is made to the Transfer Agency and Service Agreement dated as
of August 2, 1993 between the Fund and the Bank, as amended (the "Transfer
Agency Agreement").
WHEREAS, Neuberger & Berman Management, Inc. ("NBMI"), acting in its
own name on its own behalf and on behalf of the Fund and its Portfolios, to
which it serves as distributor and investment manager, has contracted with
National Securities Clearing Corporation (the "NSCC") for the use of certain
mutual fund processing systems called Fund/SERV and Networking;
WHEREAS, Fund/SERV is an automated trading and settlement system and
Networking is an automated electronic recordkeeping and dividend settlement
system through which customer-level accounts ("Networking Accounts") are
established with the Fund by institutions such as recordkeepers or
broker-dealers ("Institutions");
WHEREAS, the NSCC will transmit orders for Fund shares placed by
Institutions via Fund/SERV to the Bank's agent, Boston Financial Data Services,
Inc. ("BFDS") on DST;
WHEREAS, NBMI has appointed the Bank as its settling bank for purposes
of performing same day funds settlement under an agreement dated January 26,
1996;
WHEREAS, NBMI will enter into agreements with Institutions which will
set forth details about Networking or Fund/SERV, including establishing
subaccounts in lieu of omnibus accounts, the transmission of orders for Fund
shares via Fund/SERV, and each parties responsibilities under Networking matrix
levels;
WHEREAS, the matrix levels chosen by NBMI and the Institutions will
determine which services to the Networked Accounts will be performed by the
Institutions and which will be performed by the Fund or the Bank;
WHEREAS, the Transfer Agency Agreement covers only omnibus accounts
opened with the Fund and not sub-accounts, such as Networked Accounts;
WHEREAS, in instances where Networked Accounts are established and the
Institutions will be providing services to the Networked Accounts, the fees
charged per Networking Account by the Bank or BFDS will be paid by NBMI in lieu
of the Fund,
WHEREAS, in lieu of having the Bank or BFDS be a party to NBMI's
agreements with the NSCC and with each Institution, the Bank and the Fund desire
to amend the Transfer Agency Agreement to provide for changes related to the use
of Fund/SERV and or Networking by the Fund and the payment by NBMI, in lieu of
the Funds, for any fees based on Networked Accounts;
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NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the parties agree as follows:
Article 1. Fund/SERV and Networking; Schedule A
(a) The parties hereto agree that with respect to all Networked
Accounts, Networking and Fund/SERV transactions, the parties and/or their agents
shall be bound by the By-Laws and the Rules and Procedures of the NSCC.
(b) The Bank or BFDS may only take instructions from NBMI or the Fund
regarding the conversion to, implementation of or day-to-day operations of
Fund/SERV and Networking with respect to Networked Accounts with the Fund.
(c) Schedule A to the Transfer Agency Agreement shall be updated to
include NSCC (on behalf of Institutions) as a Designated Party to transmit
orders to the Bank on DST.
Article 2. Fees and Expenses; Fee Schedule
The Bank or BFDS shall not charge the Fund for any fees or expenses in
connection with Networked Accounts. The fee schedule to the Transfer Agency
Agreement shall be amended to include that there shall be no fees or expenses
for Networked Accounts.
Article 3. Miscellaneous
(a) All other terms and conditions of the Transfer Agency Agreement
remain in full force and effect.
(b) Terms used herein but not defined herein shall have the meanings
set forth in the Transfer Agency Agreement.
(c) This Amendment may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same Amendment.
NEUBERGER & BERMAN EQUITY TRUST STATE STREET BANK AND TRUST
COMPANY
By: /s/Daniel J. Sullivan By: /s/Ronald E. Logue
------------------------- --------------------------------
Daniel J. Sullivan Ronald E. Logue
Vice President Executive Vice President
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EXHIBIT 9(b)(i)
ADMINISTRATION AGREEMENT
This Agreement is made as of August 3, 1993, between Neuberger
& Berman Equity Trust, a Delaware business trust ("Trust"), and Neuberger &
Berman Management Incorporated, a New York corporation ("Administrator"), and is
amended as of August 2, 1996.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end, diversified management investment
company and has established several separate series of shares ("Series"), with
each Series having its own assets and investment policies; and
WHEREAS, the Trust desires to retain the Administrator to furnish
administrative services, including shareholder accounting, recordkeeping, and
other services to shareholders, to each Series listed in Schedule A attached
hereto, and to such other Series of the Trust hereinafter established as agreed
to from time to time by the parties, evidenced by an addendum to Schedule A
(hereinafter "Series" shall refer to each Series which is subject to this
Agreement and all agreements and actions described herein to be made or taken by
a Series shall be made or taken by the Trust on behalf of the Series), and the
Administrator is willing to furnish such services,
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NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. SERVICES OF THE ADMINISTRATOR.
-----------------------------
1.1 ADMINISTRATIVE SERVICES. The Administrator shall supervise
each Series's business and affairs and shall provide such services required for
effective administration of such Series as are not provided by employees or
other agents engaged by such Series; PROVIDED, that the Administrator shall not
have any obligation to provide under this Agreement any direct or indirect
services to a Series's shareholders, any services related to the distribution of
a Series's shares, or any other services that are the subject of a separate
agreement or arrangement between a Series and the Administrator. Subject to the
foregoing, in providing administrative services hereunder, the Administrator
shall:
1.1.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish
without cost to each Series, or pay the cost of, such office space, office
equipment and office facilities as are adequate for the Series's needs;
1.1.2 PERSONNEL. Provide, without remuneration from or
other cost to each Series, the services of individuals competent to perform all
of the Series's executive, administrative and clerical functions that are not
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performed by employees or other agents engaged by the Series or by the
Administrator acting in some other capacity pursuant to a separate agreement or
arrangement with the Series;
1.1.3 AGENTS. Assist each Series in selecting and
coordinating the activities of the other agents engaged by the Series, including
the Series's shareholder servicing agent, custodian, independent auditors and
legal counsel;
1.1.4 TRUSTEES AND OFFICERS. Authorize and permit the
Administrator's directors, officers or employees who may be elected or appointed
as trustees or officers of the Trust to serve in such capacities, without
remuneration from or other cost to the Trust or any Series;
1.1.5 BOOKS AND RECORDS. Assure that all financial,
accounting and other records required to be maintained and preserved by each
Series are maintained and preserved by it or on its behalf in accordance with
applicable laws and regulations; and
1.1.6 REPORTS AND FILINGS. Assist in the preparation of
(but not pay for) all periodic reports by each Series to shareholders of such
Series and all reports and filings required to maintain the registration and
qualification of the Series and the Series's shares, or to meet other regulatory
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or tax requirements applicable to the Series, under federal and state securities
and tax laws.
1.2 SHAREHOLDER AND RELATED SERVICES. The Administrator shall provide
each of the following services as may be required by any Series, its
shareholders (each of which must be either a broker-dealer, pension plan
administrator, or other institution that provides certain accounting,
recordkeeping and other services to its accounts ("Accounts") and which has
entered into an administrative services agreement with the Administrator (each,
an "Institution"), or the Accounts, as specified; PROVIDED, that the
Administrator's obligation to furnish any service to Accounts or Account holders
of any Institution shall be dependent upon receipt of all necessary information
from that Institution:
1.2.1 PURCHASE ORDERS. Receive for acceptance, as agent for the
Series, orders from Institutions and Accounts for the purchase of Series shares
transmitted or delivered to the office of the Administrator, note the time and
date of each order when received, promptly deliver payment for such purchases to
the Series' custodian ("Custodian"), and coordinate with the Series or its
designees for the issuance of the appropriate number of shares so purchased to
the appropriate Institution or Account;
1.2.2 RECORDS. Maintain records of the number of shares of each
Series attributable to each Account (including name, address and taxpayer
identification number), record all changes to such shares held in each Account
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on a daily basis, and furnish to each Series each business day the total number
of shares of such Series attributable to all Accounts;
1.2.3 REDEMPTION REQUESTS. Receive for acceptance requests and
directions from Institutions and Accounts for the redemption of Series shares
transmitted or delivered to the office of the Administrator, note the time and
date of each request when received, process such requests and directions in
accordance with the redemption procedures set forth in the then current
Prospectus and Statement of Additional Information ("SAI") of the Series, and
deliver the appropriate documentation to the Custodian;
1.2.4 WIRE TRANSFERS. Coordinate and implement bank-to-bank wire
transfers in connection with Series share purchases and redemptions by
Institutions;
1.2.5 REDEMPTION PAYMENTS. Upon receipt of monies paid to it by the
Custodian with respect to any redemption of Series shares, pay or cause such
monies to be paid pursuant to instructions by the appropriate Account or
Institution.
1.2.6 EXCHANGES. Receive and execute orders from Accounts and
Institutions to exchange shares by concurrent purchases and redemptions of
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<PAGE>
shares of a Series and shares of other Series or of other investment companies
or series thereof pursuant to each Series's then current Prospectus and SAI;
1.2.7 DIVIDENDS. Based upon information received from a Series
regarding dividends or other distributions on Series shares, calculate the
dividend or distribution attributable to each Account; if such dividend or
distribution is payable in shares or by reinvestment in shares, calculate such
shares for each Account and record same in the share records for each Account,
and if such dividend or distribution is payable in cash, upon receipt of monies
therefor from the Custodian, pay or cause such monies to be paid to the
appropriate Account or as such Account may direct;
1.2.8 INQUIRIES. Respond to telephonic, mail, and in-person
inquiries from Institutions, Account holders, or their representatives
requesting information regarding matters such as shareholder account or
transaction status, net asset value ("NAV") of Series shares, Series
performance, Series services, plans and options, Series investment policies,
Series portfolio holdings, and Series distributions and taxation thereof;
1.2.9 COMPLAINTS. Deal with complaints and correspondence of
Institutions and Account holders directed to or brought to the attention of the
Administrator;
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<PAGE>
1.2.10 REPORTS; PROXIES. Distribute as appropriate to all Account
holders all Series reports, dividend and distribution notices, and proxy
material relating to any meeting of Series shareholders, and soliciting,
processing and tabulating proxies for such meetings;
1.2.11 SPECIAL REPORTS. Generate or develop and distribute special
data, notices, reports, programs and literature required by Institutions or by
Account holders generally in light of developments, such as changes in tax laws;
and
1.2.12 AGENTS. Assist any institutional servicing agent ("Agent")
engaged by the Series in the development, implementation and maintenance of the
following special programs and systems to enhance each Series's capability to
service its shareholders and Account holders servicing capability:
(a) Training programs for personnel of such Agent;
(b) Joint programs with such Agent for the development of
systems software, shareholder information reports, and other special reports;
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<PAGE>
(c) Automatic data exchange facilities with shareholders and
such Agent;
(d) Automated clearing house transfer procedures between
shareholders and such Agent; and
(e) Touch-tone telephone information and transaction systems
for shareholders.
2. EXPENSES OF EACH SERIES.
-----------------------
2.1 EXPENSES TO BE PAID BY THE ADMINISTRATOR. The Administrator shall
pay all salaries, expenses and fees of the officers, trustees, or employees of
the Trust who are officers, directors or employees of the Administrator. If the
Administrator pays or assumes any expenses of the Trust or a Series not required
to be paid or assumed by the Administrator under this Agreement, the
Administrator shall not be obligated hereby to pay or assume the same or any
similar expense in the future; PROVIDED, that nothing herein contained shall be
deemed to relieve the Administrator of any obligation to the Trust or to a
Series under any separate agreement or arrangement between the parties.
2.2 EXPENSES TO BE PAID BY THE SERIES. Each Series shall bear all
expenses of its operation, except those specifically allocated to the
Administrator under this Agreement or under any separate agreement between such
Series and the Administrator. Expenses to be borne by such Series shall include
8
<PAGE>
both expenses directly attributable to the operation of that Series and the
offering of its shares, as well as the portion of any expenses of the Trust that
is properly allocable to such Series in a manner approved by the trustees of the
Trust ("Trustees"). Subject to any separate agreement or arrangement between the
Trust or a Series and the Administrator, the expenses hereby allocated to each
Series, and not to the Administrator, include, but are not limited to:
2.2.1 CUSTODY. All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property;
2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent (other
than the Administrator hereunder) engaged by a Series to service shareholder
accounts;
2.2.3 SHAREHOLDER REPORTS. All expenses of preparing, setting in
type, printing and distributing reports and other communications to shareholders
of a Series;
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<PAGE>
2.2.4 PROSPECTUSES. All expenses of preparing, setting in type,
printing and mailing annual or more frequent revisions of a Series's Prospectus
and SAI and any supplements thereto and of supplying them to shareholders of the
Series and Account holders;
2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of computing
a Series's net asset value ("NAV") per share, including any equipment or
services obtained for the purpose of pricing shares or valuing the Series's
investment portfolio;
2.2.6 COMMUNICATIONS. All charges for equipment or services used
for communications between the Administrator or the Series and any custodian,
shareholder servicing agent, portfolio accounting services agent, or other agent
engaged by a Series;
2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services and
expenses of a Series's legal counsel and independent auditors;
2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of Trustees
other than those affiliated with the Administrator, all expenses incurred in
connection with such unaffiliated Trustees' services as Trustees, and all other
expenses of meetings of the Trustees or committees thereof;
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<PAGE>
2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to holding
meetings of shareholders, including the printing of notices and proxy materials,
and proxy solicitation therefor;
2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust and each Series under
the 1940 Act and the registration of each Series's shares under the Securities
Act of 1933 (the "1933 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing, and filing of any
Registration Statement, Prospectus and SAI under the 1933 Act or the 1940 Act,
and any amendments or supplements that may be made from time to time;
2.2.11 STATE REGISTRATION FEES. All fees and expenses of
qualifying and maintaining the qualification of the Trust and each Series and of
each Series's shares for sale under securities laws of various states or
jurisdictions, and of registration and qualification of each Series under all
other laws applicable to a Series or its business activities (including
registering the Series as a broker-dealer, or any officer of the Series or any
person as agent or salesman of the Series in any state);
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<PAGE>
2.2.12 SHARE CERTIFICATES. All expenses of preparing and
transmitting a Series's share certificates, if any;
2.2.13 CONFIRMATIONS. All expenses incurred in connection with
the issue and transfer of a Series's shares, including the expenses of
confirming all share transactions;
2.2.14 BONDING AND INSURANCE. All expenses of bond, liability,
and other insurance coverage required by law or regulation or deemed advisable
by the Trustees, including, without limitation, such bond, liability and other
insurance expense that may from time to time be allocated to the Series in a
manner approved by the Trustees;
2.2.15 BROKERAGE COMMISSIONS. All brokers' commissions and other
charges incident to the purchase, sale or lending of a Series's portfolio
securities;
2.2.16 TAXES. All taxes or governmental fees payable by or with
respect to a Series to federal, state or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes;
2.2.17 TRADE ASSOCIATION FEES. All fees, dues and other expenses
incurred in connection with a Series's membership in any trade association or
other investment organization;
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2.2.18 NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring
and extraordinary expenses as may arise, including the costs of actions, suits,
or proceedings to which the Series is a party and the expenses a Series may
incur as a result of its legal obligation to provide indemnification to the
Trust's officers, Trustees and agents;
2.2.19 ORGANIZATIONAL EXPENSES. All organizational expenses of
each Series paid or assessed by the Administrator, which such Series shall
reimburse to the Administrator at such time or times and subject to such
condition or conditions as shall be specified in the Prospectus and SAI pursuant
to which such Series makes the initial public offering of its shares; and
2.2.20 INVESTMENT ADVISORY SERVICES. Any fees and expenses for
investment advisory services that may be incurred or contracted for by a Series.
3. ADMINISTRATION FEE.
3.1 FEE. As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Administrator to or for each Series
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under this Agreement, such Series shall pay the Administrator an annual fee as
set out in Schedule B to this Agreement.
3.2 COMPUTATION AND PAYMENT OF FEE. The administration fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accruals for each
Series shall be computed by multiplying the fraction of one divided by the
number of days in the calendar year by the applicable annual administration fee
rate (as set forth in Schedule B hereto), and multiplying this product by the
NAV of such Series, determined in the manner set forth in such Series's
then-current Prospectus, as of the close of business on the last preceding
business day on which such Series's NAV was determined.
3.3 STATE EXPENSE LIMITATION. If in any fiscal year a Series's
operating expenses plus such Series's pro rata portion of the operating expenses
of any portfolio of Equity Managers Trust in which such Series invests all or
substantially all of its assets ("Aggregate Operating Expenses"), which includes
any fees or expense reimbursements payable to the Administrator pursuant to this
Agreement and any compensation payable to the Administrator pursuant to (i) the
Management Agreement between such portfolio and the Administrator, or (ii) any
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other agreement or arrangement with respect to such Series, but excluding
interest, taxes, brokerage commissions, litigation and indemnification expenses,
and other extraordinary expenses not incurred in the ordinary course of such
Series's business) exceed the lowest applicable percentage expense limitation
imposed under the securities law and regulations of any state in which such
Series's shares are qualified for sale (the "State Expense Limitation"), then
the administration fee payable to the Administrator under this Agreement by such
Series shall be reduced by the amount of such excess; PROVIDED, that the
Administrator shall have no obligation hereunder to reimburse the Series for any
such expenses which exceed such administration fee.
Any reduction in the administration fee shall be made monthly, by
annualizing the Aggregate Operating Expenses of such Series for each month as of
the last day of such month. An adjustment shall be made on or before the last
day of the first month of the next succeeding fiscal year if Aggregate Operating
Expenses for such Series's fiscal year do not exceed the State Expense
Limitation or if for such fiscal year there is no applicable State Expense
Limitation.
4. OWNERSHIP OF RECORDS. All records required to be maintained and
preserved by each Series pursuant to the provisions or rules or regulations of
the Securities and Exchange Commission ("SEC") under Section 31(a) of the 1940
Act and maintained and preserved by the Administrator on behalf of such Series
are the property of such Series and shall be surrendered by the Administrator
promptly on request by the Series; PROVIDED, that the Administrator may at its
own expense make and retain copies of any such records.
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5. REPORTS TO ADMINISTRATOR. Each Series shall furnish or otherwise
make available to the Administrator such copies of that Series's Prospectus,
SAI, financial statements, proxy statements, reports, and other information
relating to its business and affairs as the Administrator may, at any time or
from time to time, reasonably require in order to discharge its obligations
under this Agreement.
6. REPORTS TO EACH SERIES. The Administrator shall prepare and furnish
to each Series such reports, statistical data and other information in such form
and at such intervals as such Series may reasonably request.
7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS. All computer programs,
written procedures and similar items developed or acquired and used by the
Administrator in performing its obligations under this Agreement shall be the
property of the Administrator, and no Series will acquire any ownership interest
therein or property rights with respect thereto.
8. CONFIDENTIALITY. The Administrator agrees, on its own behalf and on
behalf of its employees, agents and contractors, to keep confidential any and
all records maintained and other information obtained hereunder which relates to
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any Series or to any of a Series's former, current or prospective shareholders,
EXCEPT that the Administrator may deliver records or divulge information (a)
when requested to do so by duly constituted authorities after prior notification
to and approval in writing by such Series (which approval will not be
unreasonably withheld and may not be withheld by such Series where the
Administrator advises such Series that it may be exposed to civil or criminal
contempt proceedings or other penalties for failure to comply with such request)
or (b) whenever requested in writing to do so by such Series.
9. THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON SERIES' INSTRUCTIONS,
LEGAL OPINIONS, ETC.; SERIES' COMPLIANCE WITH LAWS.
9.1 The Administrator may at any time apply to an officer of the Trust
for instructions, and may consult with legal counsel for a Series or with the
Administrator's own legal counsel, in respect of any matter arising in
connection with this Agreement; and the Administrator shall not be liable for
any action taken or omitted to be taken in good faith in and with due care in
accordance with such instructions or with the advice or opinion of such legal
counsel. The Administrator shall be protected in acting upon any such
instructions, advice or opinion and upon any other paper or document delivered
by a Series or such legal counsel which the Administrator believes to be genuine
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and to have been signed by the proper person or persons, and the Administrator
shall not be held to have notice of any change of status or authority of any
officer or representative of the Trust, until receipt of written notice thereof
from the Series.
9.2 Except as otherwise provided in this Agreement or in any separate
agreement between the parties and except for the accuracy of information
furnished to each Series by the Administrator, each Series assumes full
responsibility for the preparation, contents, filing and distribution of its
Prospectus and SAI, and full responsibility for other documents or actions
required for compliance with all applicable requirements of the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act, and any other applicable laws,
rules and regulations of governmental authorities having jurisdiction over such
Series.
10. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the
freedom of the Administrator or any affiliated person of the Administrator to
render administrative or shareholder services to other investment companies, to
act as administrator to other persons, firms, or corporations, or to engage in
other business activities.
11. LIMITATION OF LIABILITY REGARDING THE TRUST. The Administrator
shall look only to the assets of each Series for performance of this Agreement
by the Trust on behalf of such Series, and neither the Trustees of the Trust
("Trustees") nor any of the Trust's officers, employees or agents, whether past,
present or future shall be personally liable therefor.
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12. INDEMNIFICATION BY SERIES. Each Series shall indemnify the
Administrator and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by the
Administrator that result from: (i) any claim, action, suit or proceeding in
connection with the Administrator's entry into or performance of this Agreement
with respect to such Series; or (ii) any action taken or omission to act
committed by the Administrator in the performance of its obligations hereunder
with respect to such Series; or (iii) any action of the Administrator upon
instructions believed in good faith by it to have been executed by a duly
authorized officer or representative of the Trust with respect to such Series;
PROVIDED, that the Administrator shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or misconduct on the
part of the Administrator or its employees, agents or contractors. Before
confessing any claim against it which may be subject to indemnification by a
Series hereunder, the Administrator shall give such Series reasonable
opportunity to defend against such claim in its own name or in the name of the
Administrator.
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13. INDEMNIFICATION BY THE ADMINISTRATOR. The Administrator shall
indemnify each Series and hold it harmless from and against any and all losses,
damages and expenses, including reasonable attorneys' fees and expenses,
incurred by such Series which result from: (i) the Administrator's failure to
comply with the terms of this Agreement with respect to such Series; or (ii) the
Administrator's lack of good faith in performing its obligations hereunder with
respect to such Series; or (iii) the Administrator's negligence or misconduct or
its employees, agents or contractors in connection herewith with respect to such
Series. A Series shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or misconduct on the part of that
Series or its employees, agents or contractors other than the Administrator
unless such negligence or misconduct results from or is accompanied by
negligence or misconduct on the part of the Administrator, any affiliated person
of the Administrator, or any affiliated person of an affiliated person of the
Administrator. Before confessing any claim against it which may be subject to
indemnification hereunder, a Series shall give the Administrator reasonable
opportunity to defend against such claim in its own name or in the name of the
Trust on behalf of such Series.
14. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to
require the Trust or any Series to take any action contrary to the Trust
Instrument or By-laws of the Trust or any applicable law, regulation or order to
which it is subject or by which it is bound, or to relieve or deprive the
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Trustees of their responsibility for and control of the conduct of the business
and affairs of the Series or Trust.
15. TERM OF AGREEMENT. The term of this Agreement, as amended, shall
begin on August 2, 1996 with respect to each Series and, unless sooner
terminated as hereinafter provided, this Agreement shall remain in effect
through August 2, 1997. Thereafter, this Agreement shall continue in effect with
respect to each Series from year to year, subject to the termination provisions
and all other terms and conditions hereof; PROVIDED, such continuance with
respect to a Series is approved at least annually by vote or written consent of
the Trustees, including a majority of the Trustees who are not interested
persons of either party hereto ("Disinterested Trustees"); and PROVIDED FURTHER,
that the Administrator shall not have notified a Series in writing at least
sixty days prior to the first expiration date hereof or at least sixty days
prior to any expiration date in any year thereafter that it does not desire such
continuation. The Administrator shall furnish any Series, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.
16. AMENDMENT OR ASSIGNMENT OF AGREEMENT. Any amendment to this
Agreement shall be in writing signed by the parties hereto; PROVIDED, that no
such amendment shall be effective unless authorized on behalf of any Series (i)
by resolution of the Trustees, including the vote or written consent of a
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majority of the Disinterested Trustees, or (ii) by vote of a majority of the
outstanding voting securities of such Series. This Agreement shall terminate
automatically and immediately in the event of its assignment; provided, that
with the consent of a Series, the Administrator may subcontract to another
person any of its responsibilities with respect to such Series.
17. TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time by either party hereto, without the payment of any penalty, upon at least
sixty days' prior written notice to the other party; PROVIDED, that in the case
of termination by any Series, such action shall have been authorized (i) by
resolution of the Trustees, including the vote or written consent of the
Disinterested Trustees, or (ii) by vote of a majority of the outstanding voting
securities of such Series.
18. NAME OF A SERIES. Each Series hereby agrees that if the
Administrator shall at any time for any reason cease to serve as administrator
to a Series, such Series shall, if and when requested by the Administrator,
eliminate from such Series's name the name "Neuberger & Berman" and thereafter
refrain from using the name "Neuberger & Berman" or the initials "N&B" in
connection with its business or activities, and the foregoing agreement of each
Series shall survive any termination of this Agreement and any extension or
renewal thereof.
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19. INTERPRETATION AND DEFINITION OF TERMS. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the 1940 Act and to interpretation
thereof, if any, by the United States courts or, in the absence of any
controlling decision of any such court, by rules, regulations or orders of the
SEC validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities," "interested persons,"
"assignment" and "affiliated person," as used in this Agreement shall have the
meanings assigned to them by Section 2(a) of the 1940 Act. In addition, when the
effect of a requirement of the 1940 Act reflected in any provision of this
Agreement is modified, interpreted or relaxed by a rule, regulation or order of
the SEC, whether of special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
20. CHOICE OF LAW. This Agreement is made and to be principally
performed in the State of New York, and except insofar as the Act or other
federal laws and regulations may be controlling, this Agreement shall be
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York.
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21. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
22. EXECUTION IN COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly authorized
and their respective seals to be hereunto affixed, as of the day and year first
above written.
NEUBERGER & BERMAN EQUITY TRUST
By __________________________________
_____________________________________
Title
24
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NEUBERGER & BERMAN
MANAGEMENT INCORPORATED
By __________________________________
_____________________________________
Title
25
EXHIBIT 9(b)(ii)
NEUBERGER & BERMAN EQUITY TRUST
ADMINISTRATION AGREEMENT
SCHEDULE A
SERIES Date Made a Party to Agreement
- ------ ------------------------------
Neuberger & Berman Focus Trust August 3, 1993
Neuberger & Berman Genesis Trust August 3, 1993
Neuberger & Berman Guardian Trust August 3, 1993
Neuberger & Berman Manhattan Trust August 3, 1993
Neuberger & Berman Partners Trust August 3, 1993
Neuberger & Berman NYCDC Socially Responsive Trust March 14, 1994
Neuberger & Berman International Trust August 30, 1997
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Reports to
Shareholders", "Independent Auditors" and "Financial Statements" in the
Statement of Additional Information in Post-Effective Amendment No. 12 to the
Registration Statement (Form N-1A No. 33-64368) of Neuberger & Berman Equity
Trust, and to the incorporation by reference of our report dated October 3, 1996
on Neuberger & Berman International Portfolio, a series of Global Managers
Trust, included in the 1996 Annual Report to Shareholders of Neuberger & Berman
Equity Funds.
By: /s/ Ernst & Young
--------------------------
ERNST & YOUNG
August 25, 1997
