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ANNUAL REPORT
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August 31, 1997
NEUBERGER&BERMAN
EQUITY TRUST-Registered Trademark-
Neuberger&Berman
FOCUS TRUST
Neuberger&Berman
GENESIS TRUST
Neuberger&Berman
GUARDIAN TRUST
Neuberger&Berman
MANHATTAN TRUST
Neuberger&Berman
PARTNERS TRUST
EQUITY ASSETS-SM-
Neuberger&Berman
SOCIALLY RESPONSIVE TRUST
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE FUNDS
CHAIRMAN'S LETTER A-4
PORTFOLIO COMMENTARY
Focus Trust A-6
Genesis Trust A-9
Guardian Trust A-12
Manhattan Trust A-15
Partners Trust A-18
Socially Responsive Trust A-21
GROWTH OF A DOLLAR CHARTS
COMPARISON OF A $10,000 INVESTMENT
Focus Trust B-1
Genesis Trust B-3
Guardian Trust B-5
Manhattan Trust B-6
Partners Trust B-8
Socially Responsive Trust B-9
FINANCIAL STATEMENTS B-10
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Focus Trust B-21
Genesis Trust B-22
Guardian Trust B-23
Manhattan Trust B-24
Partners Trust B-25
Socially Responsive Trust B-26
REPORT OF INDEPENDENT ACCOUNTANTS/AUDITORS B-29
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
TOP TEN EQUITY HOLDINGS
Focus Portfolio B-32
Genesis Portfolio B-34
Guardian Portfolio B-38
Manhattan Portfolio B-41
Partners Portfolio B-43
Socially Responsive Portfolio B-46
FINANCIAL STATEMENTS B-50
FINANCIAL HIGHLIGHTS B-63
REPORT OF INDEPENDENT ACCOUNTANTS/AUDITORS B-66
OTHER INFORMATION
Directory/Officers and Trustees C-1
</TABLE>
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CHAIRMAN'S LETTER October 17, 1997
Dear Fellow Shareholder,
Despite sharp corrections in March, early April, and again in late
July-August, the stock market continued its historic advance with the Standard &
Poor's "500" Index returning 14.78% and 40.73%, respectively, for the six- and
twelve-month periods concluding August 31, 1997. In August, the blue chip growth
stocks, which outpaced virtually every other sector for the last two and a half
years, surrendered market leadership to large-cap value stocks, and small- and
mid-cap stocks in general.
Driven by the exceptional performance of a relative handful of the Index's
largest stocks, the S&P "500" has materially out-performed broader market
indices and most active equities managers in recent years. This changed rather
suddenly in August, with the S&P (and the Dow Jones Industrial
Average -- another rather narrow large-cap stock index) bearing the brunt of the
market correction. Is this dramatic change in market leadership a temporary
phenomena or a major shift in investor focus? We believe the answer lies in
valuations.
In an article titled "Cautionary Tale of Index Fund Dangers" published in the
July 23, 1997 edition of THE WALL STREET JOURNAL, our own Kent Simons,
co-manager of the Neuberger&Berman Guardian and Focus Portfolios, addressed the
valuation issue. Kent highlighted eight high-quality companies in the Guardian
Portfolio that could theoretically be purchased in their entirety for less than
the then $169.35 billion market capitalization of Coca-Cola. These eight
companies are projected to have combined 1997 earnings of $12.4 billion compared
to the $4.1 billion consensus earnings estimate for Coke. Although Coca-Cola was
growing earnings at a higher rate than the average of Kent's eight companies, at
its annual growth rate of 18%, it would take Coke nearly seven years to equal
these companies' current projected 1997 earnings. The moral of the story is that
while Coca-Cola is a terrific company, its valuation may have become excessive
relative to many other equally fine companies. We believe the same can be said
for a number of the other growth stock giants that have had such a
disproportionate influence on the performance of the capitalization-weighted
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S&P "500." Going forward, if investors are once again focusing on fundamentals,
active, value-oriented managers will be competing on a much more level playing
field with the indexers.
We are proud of Neuberger&Berman's value heritage. But, we have also made a
major commitment to growth stock investing. The recent addition of Jennifer
Silver and Brooke Cobb, who are leading Neuberger&Berman LLC's new growth stock
group and serving as co-managers of the Manhattan Portfolio, is an important
step in enhancing our growth stock research and management capabilities.
Jennifer comes to us from Putnam Investments, Inc., where she co-managed the
$3.5 billion Putnam Vista Fund. Brooke is also a Putnam veteran and the former
Chief Investment Officer of Bainco International Investors. I urge you to read
the Manhattan shareholder letter (included in this Annual Report), in which
Jennifer and Brooke detail their innovative growth-oriented investment
discipline.
In closing, we thank you for your confidence in our investment skills. We
remain dedicated to helping you achieve your long-term financial objectives
through our diversified value and growth stock portfolios.
Sincerely,
/s/ Stanley Egener
Stanley Egener
Chairman of the Board
Neuberger&Berman Equity Trust
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Focus Trust
THE MANAGEMENT TEAM OF KENT SIMONS AND KEVIN RISEN EMPLOY A
SECTOR-SPECIFIC APPROACH TO SHAPING THE PORTFOLIO. FIRST, THEY IDENTIFY
SIX ECONOMIC SECTORS (OUT OF A POSSIBLE 13) THEY BELIEVE TO BE MOST
UNDERVALUED. THEY THEN FOCUS ON WELL MANAGED, FINANCIALLY SOUND INDUSTRY
LEADERS IN EACH CHOSEN ECONOMIC SECTOR. THE PORTFOLIO MANAGEMENT TEAM
FAVORS COMPANIES WITH ABOVE MARKET AVERAGE EARNINGS GROWTH POTENTIAL
TRADING AT BELOW MARKET AVERAGE PRICE/EARNINGS MULTIPLES.
For the fiscal six and twelve month periods ended August 31, 1997, Focus Trust
returned 17.97% and 43.93%, respectively, versus the Standard & Poor's "500"
Index's 14.78% and 40.73% gains over the same periods (see page B-1 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1997).*
Our portfolio holdings in the financial services sector (banking, finance,
insurance, and investment companies), performed well with Merrill Lynch and
Travelers Group at the top of the list. Our technology investments were also
productive with Applied Materials and Compaq the stars of the show. Investments
in heavy industry and media/entertainment companies lagged. We have reduced our
exposure in the heavy industry sector and completely eliminated our positions in
media/entertainment to focus our assets in groups we believe have better
prospects in the fiscal year ahead.
One of the premises of value investing is that over the long term, the stock
market is a rational animal and that stock prices will ultimately reflect the
underlying economic value of companies. Over the short term, the market and
individual stock prices are influenced by investor emotion, fad, fashion and
momentum. Human nature being what it is, relatively few investors -- amateur or
professional -- rush out to buy stocks that have not been doing well. More
often, investors are inclined to do today what they should have done two years
ago. Which brings us to the subject of indexing.
The S&P "500" has been a very tough hurdle for active managers over the last
several years. S&P returns have been enhanced by the
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Focus Trust (Cont'd)
exceptional performance of a relative handful of the large-cap growth stocks
that heavily influence this capitalization-weighted index. For example, in the
first six months of calendar 1997, the largest 30 companies in the S&P (just 6%
of the 500 stocks in the index), represented approximately 34% of the index's
weighting and contributed about 52% of its total performance. The better these
stocks do, the heavier their weighting in the index. Consequently, a greater
percentage of every dollar put in an S&P "500" index fund goes into these
stocks, creating a snowball effect. The end result are valuations that defy
economic reality.
In August, a degree of sanity reappeared. Following cautions of modest
earnings slowdowns from Coca-Cola and Gillette, there was a sharp correction in
many of the large-cap growth "darlings" that have been propelling S&P "500"
returns over the last several years.
Investors seemed to wake up and ask themselves if they really wanted to pay
30-40 times earnings for these stocks when they could buy other fine companies
with excellent earnings prospects for much lower multiples. This, of course, is
music to our ears. If we are entering a period in which fundamentals once again
matter, we believe the S&P "500" will be a much easier target for value-oriented
investors like ourselves.
We have had significant exposure to bank stocks for several years. The group
has performed well, raising the issue of whether we can still fairly categorize
the banks as an out-of-favor industry. We consider industries and individual
stocks to be out-of-favor when we believe valuations do not adequately reflect
superior earnings growth and return on equity prospects. Let's use CITICORP as
an example. CITICORP is the most global and diverse money center bank, and in
our opinion, the best positioned to produce consistently strong revenue gains.
Management has set a goal of increasing return on equity to 18%, well above the
market average. While we can't predict what management will do in the future,
net earnings could advance in the 10%-12% annual range if the company continues
to use excess cash flow to buy back stock (CITICORP has repurchased 70 million
shares for $5.8 billion since mid-1995). Yet, at the close of this reporting
period,
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Focus Trust (Cont'd)
CITICORP stock was trading at about 16 times trailing 12 month earnings and
about 15 times our 1997 earnings estimate. In CITICORP, we have a company with
above-market average earnings growth and return on equity potential selling at a
below market average multiple. We don't fall in love with stocks forever, and if
CITICORP fails to live up to our fundamental expectations, or if we think it has
become fully valued, we will respond. However, today, we still think it is a
bargain.
In closing, we are pleased to have exceeded our S&P "500" benchmark in fiscal
1997 and even more delighted the market appears poised to more adequately
recognize fundamental value. We look forward to serving you in the year ahead.
Sincerely,
<TABLE>
<S> <C>
/s/ Kent Simons /s/ Kevin Risen
Kent Simons Kevin Risen
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. No single holding of Focus Trust makes up more than a small fraction of
the Portfolio's total assets. Prior to November 1, 1991, the investment
policies of Focus required that it invest a substantial portion of its assets
in the energy field. While the value-oriented approach is intended to limit
risks, the Portfolio -- with its concentration in sectors -- may be more
greatly affected by any single economic, political or regulatory development
than a more diversified mutual fund.
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Genesis Trust
PORTFOLIO CO-MANAGERS JUDITH VALE AND ROBERT D'ALELIO FOCUS ON
"EASY-TO-UNDERSTAND" COMPANIES IN THE LESS GLAMOROUS SECTORS OF THE SMALL
CAPITALIZATION STOCK UNIVERSE. BY AVOIDING THE CUTTING-EDGE TECHNOLOGY
COMPANIES THAT ATTRACT SO MUCH SPECULATIVE ATTENTION IN THE SMALL-CAP
MARKET, THE MANAGERS BELIEVE THEY ARE BETTER ABLE TO IDENTIFY
FUNDAMENTALLY UNDERVALUED STOCKS WITH EXCEPTIONAL GROWTH POTENTIAL. THIS
VALUE-ORIENTED APPROACH TO SMALL-CAP INVESTING HAS TRANSLATED INTO A
PORTFOLIO WITH FAVORABLE RISK/REWARD CHARACTERISTICS.
For the fiscal six and twelve month periods ended August 31, 1997, Genesis
Trust returned 28.98% and 44.31% respectively. This compares to the Russell
2000-Registered Trademark- Index's gains of 18.53% and 28.96%, respectively,
over the same time periods (see page B-3 for comparison of a $10,000 investment
and average annual total returns as of August 31, 1997).*
As the performance results reflect, we've had a terrific year. Our investments
in aerospace components, energy, oil services, and regional bank stocks were
among the leaders in the performance parade, but many other industry group
selections marched smartly ahead as well. Disappointments have come not from any
particular industry groups, but rather from individual companies that have not
lived up to earnings expectations. NN Ball & Roller, a niche ball bearing
manufacturer with extensive business in the Pacific Rim, was a casualty of the
economic problems plaguing many of the Asian "Tiger" nations. Lawter
International, a specialty chemical company, suffered from slackening demand for
its products and an unanticipated earnings shortfall.
The Portfolio still has a significant weighting in the aerospace components
group -- the companies that supply parts to Boeing and the other major
commercial airplane builders. We believe we are only midway through an extended
commercial aerospace boom. Boeing has ramped up production and new orders remain
strong. Due to improving demand from Boeing and others, component suppliers are
experiencing significant volume growth, which should translate into expanding
profit margins and accelerating earnings.
The oil patch is still vibrant. Oil prices have stabilized, the much
ballyhooed natural gas bubble appears to have evaporated, and the percentage of
"shut-in" production -- reserves instantly accessible to satisfy spikes in
demand -- has declined from about 30% of production
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Genesis Trust (Cont'd)
in the late 1980's to just around 5% today. All this would indicate to us that
energy companies are likely to continue to be poking a lot of new holes to
increase production. Oil service companies, particularly drilling rig owners and
operators, are major beneficiaries of strong exploration and production
activity.
We believe the prospects for selected regional bank stocks are still
excellent. We are stock-pickers, not economists. However, our reading of the
economy is that interest rates should trend down over the next year. This should
provide a modest tailwind for bank stocks, which are generally perceived as
interest rate sensitive.
We are focusing on regional banks in geographic areas -- like the oil
patch -- we believe to have stronger than average economic growth prospects.
Generally, the stronger the regional economy has been, the greater the loan
demand, and the better the earnings prospects for local banks.
Finally, we are partial to regional banks with significant "goodwill" lawsuits
against the federal government. During the savings and loan crisis of the 1980s,
large, financially healthy S&Ls were encouraged to buy smaller ailing thrifts.
In the process, a lot of goodwill was added to the rescuers' balance sheets.
Bank regulators permitted this goodwill to be included in the banks' stated
capital. When the full magnitude of the savings and loan crisis became apparent
in the early 1990's, the government reversed its decision and required goodwill
to be removed as a capital asset. This damaged the "Good Samaritan" banks'
balance sheets, reducing lending capital and restraining earnings. Regional
banks are now suing the government for damages. Recently, the federal judge
overseeing the Golden State Bancorp versus Uncle Sam suit urged the government
to settle, publicly warning the government attorneys that if he were to decide
the case that day, he would be inclined to award Golden State every dollar it
was asking for. Four of our regional bank stock holdings have substantial
goodwill lawsuits against the government. These are profitable, well-managed
banks that we like based on their own fundamental merits. While each case will
be decided on its own facts, if they win their suits or get large settlements
from the government, these banks will receive cash windfalls representing a
significant portion of their current market capitalizations.
A-10
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Genesis Trust (Cont'd)
Our investment opinions on every stock in the portfolio can change on short
notice. However, in our reports to shareholders, we like to briefly discuss at
least one portfolio holding that we currently favor. Since we've already gone
into some detail on the regional banking group, let's fill in the blanks on Bank
United Corp., a Texas savings and loan. Bank United is a beneficiary of the
recovery in the Texas economy, spawned in part by strength in the oil patch. It
has a sizable Net Operating Loss carry forward, which will reduce its future tax
bills and enhance cash flow. Bank United also has a sizable goodwill lawsuit
pending against the government. In addition, we believe it will benefit from
recent state legislation, which for the first time, allows Texas banks to offer
home equity loans -- potentially a very profitable business. Bank United has
been gearing up to enter this new market, and we expect it to hit the street
running. We believe the bank has very good earnings growth potential going
forward. If the company wins or favorably settles its goodwill lawsuit with the
government, there would be a lot of icing on this already appetizing cake.
In closing, we are proud of the portfolio's strong returns this year and hope
to build on our performance record in the years ahead.
Sincerely,
<TABLE>
<S> <C>
/s/ Judith Vale /s/ Robert D'Alelio
Judith Vale Robert D'Alelio
</TABLE>
Portfolio Co-Managers
*The Russell 2000 Index is an unmanaged index generally considered to be
representative of small stock market activity. Please note that indices do not
take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The risks involved in seeking capital appreciation from investments principally
in companies with small market capitalization are set forth in the prospectus.
The composition, industries and holdings of the Trust are subject to change.
Genesis Portfolio is invested in a wide array of stocks and no single holding
makes up more than a small fraction of the Portfolio's total assets.
A-11
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Guardian Trust
PORTFOLIO CO-MANAGERS KENT SIMONS AND KEVIN RISEN FOCUS ON "FIRST-RATE"
COMPANIES IN INDUSTRIES THAT ARE CURRENTLY OUT OF FAVOR. RECOGNIZING THAT
"CHEAP" STOCKS ARE NOT NECESSARILY UNDERVALUED, THEY SEEK WELL MANAGED,
FINANCIALLY SOUND COMPANIES TRADING AT FUNDAMENTALLY ATTRACTIVE PRICES
RELATIVE TO THEIR LONG-TERM EARNINGS GROWTH POTENTIAL. BY CONCENTRATING
THE PORTFOLIO IN HIGH QUALITY WALL STREET "ORPHANS," THE PORTFOLIO
MANAGEMENT TEAM ATTEMPTS TO CONSISTENTLY TAKE ADVANTAGE OF OPPORTUNITIES
CREATED BY INVESTORS' OVER-REACTION TO REAL OR PERCEIVED PROBLEMS.
For the fiscal six and twelve month periods ended August 31, 1997, Guardian
Trust returned 16.10% and 39.56%, respectively, versus the Standard & Poor's
"500"'s 14.78% and 40.73% gains over the same periods (see page B-5 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1997).*
Our investments in the financial services industries (banking, finance,
insurance and brokerage/investment management) continued to perform well with
Signet Banking (bought by First Union Corp. later in the period), Travelers
Group, and Merrill Lynch near the top of the charts. Our electronics holdings
also did quite well, led by Teradyne. Selected technology holdings soared with
Applied Materials, KLA Tencor, and Texas Instruments more than doubling in
fiscal 1997. As a result, we have taken profits. Portfolio holdings in the
steel, energy, and media and entertainment industries disappointed. We have
eliminated our positions in steel companies and almost all of our holdings in
media and entertainment, re-allocating assets to other industry groups we
believe offer better value.
Investor emotion -- particularly fear -- has a powerful short-term influence
on the stock market. This was demonstrated in 1993, when investors stampeded out
of drug stocks as the Clintons and Ira Magaziner were threatening to radically
overhaul America's healthcare system. Investors were simply afraid to own some
absolutely terrific companies. Fear created opportunity that value investors
were able to take advantage of when the panic subsided and the drug group
rebounded strongly. In 1996 and the first half 1997, we saw a reverse
panic -- investors were afraid not to own the giant blue chip growth
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Guardian Trust (Cont'd)
stocks. S&P "500" indexers took much of the credit (or should that be blame) for
the rather incredible valuations given to the big-cap market "darlings." But,
index fund investors were not the only folks driving these stocks higher. Active
managers were throwing in the towel and almost regardless of their stated
discipline, loading up on Coca-Cola, Gillette, GE, Procter & Gamble and a
handful of the other favored few. This "if you can't beat them, join them"
response has also created opportunity. We believe investors who conquered the
fear of under-performing the S&P are well positioned to take advantage of a
market that is now more inclined to acknowledge fundamental values.
Another great danger created by euphoric markets is to buy "relative value."
The rationale is that if XYZ stock is growing earnings at 15% and trading at a
price/earnings ratio of 40, then PDQ stock, which is also growing earnings at
15% and "only" trading at 35 times earnings is a raging bargain. This is a trap
we strive to avoid. To us, cheap does not mean less expensive. We want to own
companies trading at a price/earnings and return on equity discounts to the
market, but valuations must be sensible on an absolute basis as well. In other
words, we would much rather be right than less wrong.
We would not describe investors' current attitude on the auto industry as a
panic. But, judging from the present valuations of the big three auto companies,
investors seem to fear the autos are as vulnerable to a slowing economy as they
were to the steeper economic downturns of the boom and bust cycles of the past.
We believe this is an over-reaction. The bear case on the auto companies is that
the economic expansion is long of tooth and the strength of the dollar against
the yen is making Japanese products much more competitive. These concerns are,
to a degree, justified. If the economy slows, a decline in vehicle demand is
possible. Retail incentives -- price discounting -- are up, partially in
response to Japanese competition. However, cost cutting in the industry and much
improved inventory management should help cushion a fall resulting from a
decelerating economy. Importantly, the domestic autos are in vastly better
financial shape than they were in the last cycle. Chrysler, for example, has a
cash horde of $8 billion to help see it through a period of weak demand and soft
pricing. Although we can't
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Guardian Trust (Cont'd)
predict what the company would do, some of this king's ransom could be used to
help buoy stock price through dividend increases and significant share
repurchases. Earnings could decline in calendar 1998, but through the cycle, we
think they will make a good showing. Our substantial position in Chrysler stock
is subject to change if we believe fundamentals warrant it. However, with the
stock currently trading around 7.5 times our calendar 1997 earnings estimate, we
think it is a long-term bargain.
This rising market has given us the opportunity to take profits in portfolio
holdings that became fairly, if not fully priced. We have also reduced or
eliminated positions in several industry groups with diminishing prospects. The
result is a somewhat more concentrated portfolio that we believe will enhance
return potential in the year ahead.
In closing, we are pleased with our competitive returns relative to the S&P
"500" benchmark. Going forward, we welcome the challenges presented by what we
believe is becoming a more selective and fundamentally disciplined market.
Sincerely,
<TABLE>
<S> <C>
/s/ Kent Simons /s/ Kevin Risen
Kent Simons Kevin Risen
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Trust are subject to change.
Guardian Portfolio is invested in a wide array of stocks and no single holding
makes up more than a small fraction of the Portfolio's total assets.
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PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
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Manhattan Trust
PORTFOLIO CO-MANAGERS JENNIFER SILVER AND BROOKE COBB LOVE
SURPRISES -- POSITIVE EARNINGS SURPRISES THAT IS. THEIR EXTENSIVE RESEARCH
HAS REVEALED THAT THE STOCKS OF COMPANIES THAT CONSISTENTLY EXCEEDED
CONSENSUS EARNINGS ESTIMATES TENDED TO BE TERRIFIC PERFORMERS. THEY SCREEN
THE MID-CAP GROWTH STOCK UNIVERSE TO ISOLATE STOCKS WHOSE MOST RECENT
EARNINGS HAVE BEAT THE STREET'S EXPECTATIONS. THEY THEN ROLL UP THEIR
SLEEVES, AND THROUGH DILIGENT FUNDAMENTAL RESEARCH, STRIVE TO IDENTIFY
THOSE COMPANIES MOST LIKELY TO RECORD A STRING OF POSITIVE EARNINGS
SURPRISES. THEIR GOAL IS TO INVEST TODAY IN THE FAST GROWING MID-SIZED
COMPANIES THAT WILL COMPRISE TOMORROW'S FORTUNE 500.
For the fiscal six and twelve month periods ended August 31, 1997, Manhattan
Trust returned, 15.11% and 38.84%, respectively. This compares to the S&P "500"
Index's 14.78% and 40.73%, gains over the same periods (see page B-6 for
comparison of a $10,000 investment and average annual total returns as of August
31, 1997).*
In fiscal 1997, the portfolio's financial services, technology, and health
care investments excelled. Although posting positive returns, investments in the
energy, communications, and consumer cyclical groups on average under-performed.
We are pleased by the portfolio's very competitive performance versus the S&P
"500," particularly because it was achieved during a period of transition as we
took over from Mark Goldstein and began rapidly reshaping the portfolio. The re-
engineering of the portfolio is now complete.
Since this is our first opportunity to directly address the shareholders, we
thought it important to describe our investment discipline in some detail. Let
us begin by saying we are growth stock investors in the purest sense of the
term. We want to own the stocks of companies that are growing earnings faster
than the average American business and ideally, faster than the competitors in
their respective industries. We are particularly biased towards companies that
have consistently beaten consensus earnings estimates. Our extensive research
has revealed that stocks whose earnings consistently exceeded expectations
offered greater potential for long-term capital appreciation.
We focus our research efforts on mid-cap stocks in new and/or rapidly evolving
industries. The mid-cap growth sector is less widely followed by Wall Street
analysts and therefore, less efficient than the
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Manhattan Trust (Cont'd)
large-cap stock market. By operating in the mid-cap arena (stocks with market
capitalizations between $500 million and $8 billion), we believe we are likely
to identify more of our brand of growth stock opportunities. Considering the
currently high valuations of large-cap growth stocks relative to mid-cap stocks
with what we think is comparable or in many cases, better earnings growth
potential, we believe the portfolio is particularly well positioned in today's
market. Going forward, the portfolio will use the Russell Midcap-TM- Growth
Index* as its benchmark. Consistent with our clearly defined capitalization
parameters and our growth style, we believe this is a more appropriate benchmark
than the S&P "500."
Let us once again emphasize we are growth stock investors. But, there is a
value component to our discipline as well. We just define value differently. The
kind of fast-growth companies we favor generally do not trade at below market
average price/earnings ratios. However, they often trade at very reasonable
multiples relative to annual earnings growth rates. Given the choice between two
good companies with comparable earnings growth rates, we will select the one
trading at the lower multiple to earnings growth.
We are dispassionate sellers. If a stock does not live up to our earnings
expectations or if we believe its valuation has become excessive, we will sell
and direct the assets to another opportunity we find more attractive. We will
maintain a broadly diversified portfolio rather than heavily concentrating our
holdings in just a few of the fastest growing industry groups.
An examination of the portfolio's current characteristics provides a good
illustration of our discipline. As of August 31, 1997, the portfolio had 80
stocks in 11 different industry groups. The average weighted capitalization is
approximately $4 billion. The majority of the Portfolio's companies exceeded
consensus earnings estimates in the preceding quarter. Based on consensus
earnings estimates from First Call (an independent research firm that compiles
and distributes Wall Street earnings estimates), the Portfolio's earnings are
projected to grow 25% in calendar year 1998 and 21% annually over the next five
years. The Portfolio is trading at just less than one time its projected
five-year annual earnings growth rate.
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Manhattan Trust (Cont'd)
To further demonstrate our approach, we will briefly discuss Staples,
currently one of our largest holdings. Staples virtually created an entire new
retail category, the office supply super store. It is a retailing concept that
works and could continue to expand nationwide and perhaps globally. Recently
reported earnings were 9% higher than consensus estimates. We expect additional
pleasant earnings surprises going forward. At the close of this reporting
period, Staples' stock traded at just 0.7 times our long-term earnings growth
rate projections. With the caveat that things can change in a hurry and we will
respond to those changes, we believe Staples will continue to be a very
rewarding investment.
In closing, we thank you for your patience as we have transformed the
Manhattan Portfolio in to what we believe will be a more dynamic growth stock
vehicle. We look forward to serving you and to welcoming new shareholders as we
further demonstrate the effectiveness of our focused growth stock discipline.
Sincerely,
<TABLE>
<S> <C>
/s/ Jennifer Silver /s/ Brooke Cobb
Jennifer Silver Brooke Cobb
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. The Russell Midcap-TM- Growth Index is
an unmanaged index which measures the performance of those Russell Midcap Index
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell Midcap-TM- Index measures the performance of the 800 smallest
companies in the Russell 1000-Registered Trademark- Index, which represents
approximately 35% of the total market capitalization of the Russell 1000 Index
(which in turn, consists of the 1,000 largest US companies, based on market
capitalization). Please note that indices do not take into account any fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index. Data about the performance of
these indices are prepared or obtained by Neuberger&Berman Management Inc. and
include reinvestment of all dividends and capital gain distributions. The
Portfolio invests in many securities not included in the above-described
indices.
The composition, industries and holdings of the Portfolio are subject to
change. Manhattan Trust's portfolio is invested in a wide array of stocks and
no single holding makes up more than a small fraction of the Portfolio's total
assets.
A-17
<PAGE>
PORTFOLIO MANAGERS' COMMENTARY
Neuberger&Berman
- ----------------------------------------------------------------------
Partners Trust
PORTFOLIO CO-MANAGERS MICHAEL KASSEN AND ROBERT GENDELMAN FOCUS ON
OUT-OF-FAVOR LARGE-CAP STOCKS AND MID-SIZED COMPANIES LESS WIDELY FOLLOWED
BY WALL STREET ANALYSTS. THEY ARE PARTICULARLY PARTIAL TO "FALLEN
ANGELS" -- GROWTH STOCKS THAT HAVE EXPERIENCED TEMPORARY SETBACKS, BUT
WHOSE LONGER TERM FUNDAMENTAL OUTLOOK REMAINS STRONG. THE PORTFOLIO
MANAGEMENT TEAM VIEWS STOCKS AS PIECES OF BUSINESSES THEY WOULD LIKE TO
OWN RATHER THAN PIECES OF PAPER TO TRADE BASED ON SHORT-TERM PRICE
FLUCTUATIONS. THE GOAL IS TO FIND QUALITY COMPANIES TRADING AT A DISCOUNT
TO THEIR INTRINSIC ECONOMIC VALUE.
For the fiscal six and twelve month periods ended August 31, 1997, Partners
Trust returned 19.06% and 47.11%, respectively, versus the S&P "500" Index's
14.78% and 40.73% gains over the same periods (see page B-8 for comparison of a
$10,000 investment and average annual total returns as of August 31, 1997).*
In fiscal 1997, our portfolio holdings in the paper and forest products,
technology, insurance, entertainment, and retail sectors performed particularly
well. Once again, our healthcare holdings lagged well behind. The major
pharmaceutical companies, which we unfortunately had to pass on due to our value
discipline, forged ahead. Returns from HMO's and biotechnology stocks that
qualified as our kind of fundamental bargains were much less inspiring.
Value investors occasionally get opportunities to buy unblemished companies
that have somehow evaded Wall Street analysts' radar screens. More often, we are
investing in good companies with real and/or perceived problems. Sometimes our
timing is fortuitous and we buy right at the bottom. Generally, however, we are
buying on the way down and patiently waiting for portfolio companies to
demonstrate they have solved their problems or for perceptions to change. Our
recent experience with cable television stocks demonstrates that patience can
indeed be a virtue.
When we began investing in cable TV operators, we knew the industry's
problems. Cable operators were seeing cash flows decline due to stiffer
competition from satellite broadcasters at a time when they needed to step up
capital expenditures to modernize their systems. We
A-18
<PAGE>
- ----------------------------------------------------------------------
Partners Trust (Cont'd)
focused on the advantages of all those two-way wires connected to American
homes. We eliminated positions in the financially weaker cable operators, but we
believed the well-financed companies, which we held onto, would find the capital
needed to upgrade systems and that new interactive services such as
video-on-demand movies and internet connection through high speed cable modems
would generate significant incremental business. We thought cable stock prices
were fully discounting the industry's problems and not at all reflecting some of
the potentially profitable developments. We waited and then waited some more for
other investors to see the value in our cable holdings. Earlier this summer,
another investor did. Recognizing that cable television lines into the home
represented the best current transmission vehicle for internet connectivity,
Microsoft Chairman Bill Gates invested $1 billion in Comcast, one of our cable
television holdings. Investors took note and the entire cable television group
took off. The second half of fiscal 1997 returns from our cable television
holdings were spectacular. When our entire holding period is factored in, the
returns from our cable TV investments were merely good. That is generally good
enough for disciplined value investors.
Our financial service sector holdings have performed well for several years.
But, we are still finding selected values in the group. When we discuss
portfolio holdings to illustrate our investment discipline, one must be aware we
reserve the right to reduce or eliminate these positions if our perspective
changes. This caveat duly noted, we believe Countrywide Credit Industries
currently represents excellent value. Countrywide is the U.S.'s second largest
originator and servicer of home mortgages. There is a lot of room for the
company to increase its market share in both businesses in what is still a very
fragmented industry. On the mortgage service side, Countrywide is a low cost
provider, making it very attractive to the banks who are outsourcing mortgage
servicing operations. The bear case on the mortgage service business is that if
interest rates trend down, mortgages will be refinanced and Countrywide's
mortgage service bookings will decline. However, with a weighted average coupon
(WAC) currently approximating rates
A-19
<PAGE>
- ----------------------------------------------------------------------
Partners Trust (Cont'd)
on a new no-point mortgage, we believe interest rates would have to come down
substantially before costing Countrywide much servicing business.
If much lower rates do spawn another refinancing boom, Countrywide could
recapture lost revenue from servicing by originating new loans. In essence, any
money coming from the left pocket could easily find its way to the right one. In
addition, Countrywide is entering new related businesses like mortgage insurance
and home appraisals, which historically have been highly profitable. Countrywide
stock is currently trading at just 11 times our 1998 earnings estimate -- a deep
discount from the current market multiple and a very reasonable price to pay for
what we think is better than average earnings growth potential.
This is the close of a very good year for Partners' Portfolio. Our value style
was productive even in an environment that for the most part still favored
growth stock investing. If the pattern we witnessed in August
continues -- investors gravitating from large-cap growth stocks to the value and
smaller capitalization sectors -- we should have the opportunity to excel in the
year ahead.
Sincerely,
<TABLE>
<S> <C>
/s/ Michael Kassen /s/ Robert Gendelman
Michael Kassen Robert Gendelman
</TABLE>
Portfolio Co-Managers
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. Partners Trust's portfolio is invested in a wide array of stocks and no
single holding makes up more than a small fraction of the Portfolio's total
assets.
A-20
<PAGE>
PORTFOLIO MANAGER'S COMMENTARY
Neuberger&Berman
- ----------------------------------------------------------------------
Socially Responsive Trust
PORTFOLIO MANAGER JANET PRINDLE BELIEVES DOING GOOD, IS GOOD BUSINESS AND
HAS THE POTENTIAL TO PRODUCE POSITIVE INVESTMENT RESULTS. SHE FOCUSES ON
COMPANIES THAT ARE AGENTS OF FAVORABLE CHANGE IN WORKPLACE POLICIES
(PARTICULARLY FOR WOMEN AND MINORITIES); ARE GOOD CORPORATE CITIZENS; AND
ARE RESPONSIVE TO ENVIRONMENTAL ISSUES. SHE DOES NOT INVEST IN TOBACCO,
ALCOHOL, GAMBLING, NUCLEAR POWER, OR WEAPONS COMPANIES. BUT, SOCIAL
RESPONSIBILITY ALONE DOES NOT QUALIFY A COMPANY AS A GOOD INVESTMENT. TRUE
TO NEUBERGER& BERMAN'S PRINCIPLES, PORTFOLIO CANDIDATES MUST FIRST BE
FOUND TO BE FUNDAMENTALLY ATTRACTIVE. THEN, AND ONLY THEN, ARE SOCIAL
SCREENS APPLIED. THE OBJECTIVE IS SIMPLE AND STRAIGHTFORWARD -- TO SERVE
BOTH SOCIETY AND SHAREHOLDERS.
For the six and twelve month periods ended August 31, 1997, Socially
Responsive Trust returned 14.30% and 31.92%, respectively, compared to the
Standard & Poor's "500" Index's 14.78% and 40.73% gains over the same periods
(see page B-9 for comparison of a $10,000 investment and average annual total
returns as of August 31, 1997).*
In fiscal 1997, our retail, insurance, banking, and technology investments
were, on average, stellar performers. Our telecommunications, food and beverage,
and energy investments disappointed.
Value investing requires patience. If you do your homework and find good
companies in out-of-favor industries, patience is generally rewarded. Retail
stocks were in Wall Street's "doghouse" in 1995-96. We had the opportunity to
buy two of the best, Costco and Nordstrom, at very reasonable prices. Our little
shopping spree didn't do much for the Portfolio last year, but it produced
strong positive returns in fiscal year 1997.
We are being similarly patient with our energy investments, which as a group
lagged this year. The economics in the industry have improved as worldwide
demand has continued to outpace new production. Exploration and production
activity recently has been vigorous -- a very good sign for oil service
companies. Political instability in oil-producing nations, weather patterns, and
short-term supply/demand
A-21
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Trust (Cont'd)
imbalances will cause oil and gas prices to fluctuate. However, we believe the
long-term prospects for energy pricing and energy stock earnings are favorable.
We continue to have significant exposure to the banking sector. Our portfolio
holdings in the group performed quite well in fiscal 1997. On a fundamental
basis, we believe the stocks are still very reasonably priced. The regional bank
stocks seem particularly appealing. Earnings have been progressing quite nicely
despite a back-up in interest rates. If rates trend down from here -- the spread
between interest rates and inflation is historically high -- regional banks
could attract more investor attention. Finally, we believe consolidation in the
industry could continue. The stocks should do well on fundamentals alone and we
may even get a windfall in the form of a takeover of one or more of our regional
bank holdings.
In our shareholder letter, we like to go into detail on at least one current
portfolio holding that illustrates our investment approach. Be advised, we can
change our minds on any stock in our portfolio if deteriorating fundamentals or
price appreciation warrants it. Technology giant Intel was one of our better
performing stocks in fiscal 1997. We think it will continue to do well. As the
leading designer and manufacturer of microprocessors, Intel holds the dominant
market share in a rapidly growing industry. Enormous research and development
spending, in addition to high capital expenditures, has allowed the company to
maintain and enhance its competitive position.
Intel is also one of America's better corporate citizens. The company has a
good environmental record. It has a diverse workforce, with women and minorities
well represented. It is employee friendly, with numerous family-oriented
programs in the workplace. Finally, the company is one of the largest charitable
givers in the American corporate community.
In closing, our mandate does present special challenges. We must find not only
good companies, but also companies that are good to their employees and society
in general. If we can do so successfully, we
A-22
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Trust (Cont'd)
receive a double reward -- the gratification all portfolio managers get from
taking good care of their shareholders, and the special feeling of
accomplishment from doing so in a socially responsive manner.
Sincerely,
/s/ Janet Prindle
Janet Prindle
Portfolio Manager
*The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. Socially Responsive Trust's portfolio is invested in a wide array of
stocks and no single holding makes up more than a small fraction of the
Portfolio's total assets.
A-23
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Focus Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Focus S&P "500"(2)
1 Year +43.93% +40.73%
5 Year +22.58% +19.78%
10 Year +14.70% +13.85%
Focus Trust S&P "500"
1987 $10,000 $10,000
1988 $8,491 $8,201
1989 $11,408 $11,418
1990 $10,983 $10,833
1991 $12,736 $13,756
1992 $14,239 $14,848
1993 $18,255 $17,104
1994 $20,733 $18,046
1995 $26,422 $21,912
1996 $27,379 $26,009
1997 $39,407 $36,602
</TABLE>
The performance information for Neuberger&Berman Focus Trust-SM- is as of
August 31, 1997. Neuberger&Berman Focus Trust started operating on August 30,
1993. It has identical investment objectives and policies, and invests in the
same Portfolio as Neuberger&Berman Focus Fund-Registered Trademark- ("Sister
Fund"), which is also managed by Neuberger& Berman Management
Inc.-Registered Trademark- The performance information shown in the above chart
for the period before August 30, 1993, is for the Sister Fund. Neuberger&Berman
Management Inc. voluntarily bears certain operating expenses of the Trust so
that its expense ratio per annum will not exceed the expense ratio per annum of
its Sister Fund by more than 0.10% of the Trust's average daily net assets per
annum. This arrangement can be terminated upon 60 days' prior written notice.
Absent such arrangement, the average annual total returns of the Trust would
have been less. The total returns for periods prior to the Trust's commencement
of operations would have been lower had they reflected the higher expense ratios
of the Trust as compared to those of Neuberger&Berman Focus Fund.
The Trust's name prior to January 1, 1995 was Neuberger&Berman Selected
Sectors Trust. Prior to November 1, 1991, the investment policies of the Sister
Fund required that a substantial percentage of its assets be invested in the
energy field; accordingly, performance results prior to that time do not
necessarily reflect the level of performance that may be expected under the
Trust's current investment policies. While the Trust's value-
B-1
<PAGE>
oriented approach is intended to limit risks, the Portfolio, with its
concentration in sectors, may be more greatly affected by any single economic,
political or regulatory development than a more diversified mutual fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-2
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Genesis Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return1
Genesis Russell 2000-R-2
1 Year +44.31% +28.96%
5 Year +22.35% +19.36%
Life of Fund +16.76% +14.57%
Genesis Trust Russell 2000
9/27/88 $10,000 $10,000
1989 $13,045 $12,317
1990 $10,236 $9,877
1991 $13,856 $12,963
1992 $14,562 $13,910
1993 $18,072 $18,435
1994 $19,061 $19,516
1995 $22,780 $23,581
1996 $27,664 $26,134
1997 $39,923 $33,701
</TABLE>
The performance information for Neuberger&Berman Genesis
Trust-Registered Trademark- is as of August 31, 1997. Neuberger&Berman Genesis
Trust started operating on August 26, 1993. It has identical investment
objectives and policies, and invests in the same Portfolio as Neuberger&Berman
Genesis Fund-Registered Trademark- ("Sister Fund"), which is also managed by
Neuberger&Berman Management Inc. The performance information shown in the above
chart for the period before August 26, 1993, is for the Sister Fund which
commenced operations on September 27, 1988. Neuberger&Berman Management Inc.
voluntarily bears certain operating expenses of the Trust so that its expense
ratio per annum will not exceed the expense ratio per annum of its Sister Fund
by more than 0.10% of the Trust's average daily net assets per annum. This
arrangement can be terminated upon 60 days' prior written notice. Effective May
1, 1995, Neuberger& Berman Management Inc. has voluntarily agreed to waive a
portion of the management fee borne directly by Neuberger&Berman Genesis
Portfolio-SM- and indirectly by Neuberger&Berman Genesis Trust to reduce that
fee by 0.10% of the Portfolio's average daily net assets per annum. Absent such
arrangements, the average annual total returns of the Trust would have been
less. The total returns for periods prior to the Trust's commencement of
operations would have been lower had they reflected the higher expense ratios of
the Trust as compared to those of Neuberger&Berman Genesis Fund.
B-3
<PAGE>
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The Russell 2000 Index is an unmanaged index generally considered to be
representative of the 2,000 issuers having the smallest capitalization in the
Russell 3000-Registered Trademark- Index, representing approximately 10% of the
Russell 3000 total market capitalization. The smallest company's market
capitalization is roughly $13 million. The risks involved in seeking capital
appreciation from investments principally in companies with small market
capitalization are set forth in the prospectus. Please note that indices do not
take into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly in any
index. Data about the performance of this index are prepared or obtained by
Neuberger&Berman Management Inc. and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
B-4
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Guardian Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Guardian S&P "500"(2)
1 Year +39.56% +40.73%
5 Year +19.85% +19.78%
10 Year +14.42% +13.85%
Guardian Trust S&P "500"
1987 $10,000 $10,000
1988 $8,931 $8,201
1989 $11,958 $11,418
1990 $10,464 $10,833
1991 $13,654 $13,756
1992 $15,550 $14,848
1993 $19,102 $17,104
1994 $21,122 $18,046
1995 $26,194 $21,912
1996 $27,553 $26,009
1997 $38,455 $36,602
</TABLE>
The performance information for Neuberger&Berman Guardian Trust-SM- is as of
August 31, 1997. Neuberger&Berman Guardian Trust started operating on August 3,
1993. It has identical investment objectives and policies, and invests in the
same Portfolio as Neuberger&Berman Guardian Fund-SM- ("Sister Fund"), which is
also managed by Neuberger&Berman Management Inc. The performance information
shown in the above chart for the period before August 3, 1993, is for the Sister
Fund. Neuberger&Berman Management Inc. voluntarily bears certain operating
expenses of the Trust so that its expense ratio per annum will not exceed the
expense ratio per annum of its Sister Fund by more than 0.10% of the Trust's
average daily net assets per annum. This arrangement can be terminated upon 60
days' prior written notice. Absent such arrangement, the average annual total
returns of the Trust would have been less. The total returns for periods prior
to the Trust's commencement of operations would have been lower had they
reflected the higher expense ratios of the Trust as compared to those of
Neuberger&Berman Guardian Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-5
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Manhattan Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C> <C>
Average Annual Total Return(1)
Russell Midcap-TM-
Manhattan S&P "500"(2) Growth Index(2)
1 Year +38.84% +40.73% +31.23%
5 Year +17.56% +19.78% +18.56%
10 Year +11.49% +13.85% +13.18%
Manhattan Trust S&P "500" Russell Midcap Growth
1987 $10,000 $10,000 $10,000
1988 $8,021 $8,201 $8,052
1989 $11,423 $11,418 $11,014
1990 $10,000 $10,833 $9,923
1991 $12,616 $13,756 $13,789
1992 $13,214 $14,848 $14,722
1993 $16,873 $17,104 $17,874
1994 $17,497 $18,046 $18,837
1995 $22,029 $21,912 $23,499
1996 $21,372 $26,009 $26,276
1997 $29,673 $36,602 $34,483
</TABLE>
The performance information for Neuberger&Berman Manhattan
Trust-Registered Trademark- is as of August 31, 1997. Neuberger&Berman Manhattan
Trust started operating on August 30, 1993. It has identical investment
objectives and policies, and invests in the same Portfolio as Neuberger&Berman
Manhattan Fund-Registered Trademark- ("Sister Fund"), which is also managed by
Neuberger&Berman Management Inc. The performance information shown in the above
chart for the period before August 30, 1993, is for the Sister Fund.
Neuberger&Berman Management Inc. voluntarily bears certain operating expenses of
the Trust so that its expense ratio per annum will not exceed the expense ratio
per annum of its Sister Fund by more than 0.10% of the Trust's average daily net
assets per annum. This arrangement can be terminated upon 60 days' prior written
notice. Absent such arrangement, the average annual total returns of the Trust
would have been less. The total returns for periods prior to the Trust's
commencement of operations would have been lower had they reflected the higher
expense ratios of the Trust as compared to those of Neuberger&Berman Manhattan
Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. Before July 1997, Neuberger&Berman Manhattan Portfolio-SM- (the "Portfolio")
was managed using a "growth at a reasonable price" investment approach. Under
this blended value and growth approach, the Portfolio Manager purchased
securities of small-, medium-, and large-capitalization companies that he
B-6
<PAGE>
believed offered greater potential for long-term capital appreciation, in most
cases at prices reflecting relatively higher multiples to measures of economic
value (such as earnings or cash flow) compared to securities purchased by other
Neuberger&Berman Portfolios.
In July 1997, growth-style Managers Jennifer Silver and Brooke Cobb joined
Neuberger&Berman Management Inc. and assumed responsibility for the Portfolio.
Ms. Silver now heads Neuberger&Berman, LLC's new Growth Equity Group in Boston.
The Portfolio is now managed using a growth-oriented investment approach. True
to this new approach, the Managers seek securities of companies that are growing
earnings faster than the average American business, and ideally, faster than
competitors in their respective industries. In return for this perceived higher
earnings growth potential, the Managers are willing to pay a higher absolute
multiple for these securities. They do so because they believe these stocks
offer greater potential for long-term capital appreciation. Moreover, while the
Portfolio can still invest in securities of small-, medium-, and large-cap
companies, the Portfolio Managers currently intend to focus on the securities of
medium-cap companies.
The S&P "500" Index is an unmanaged index generally considered to be
representative of overall stock market activity. The Russell Midcap-TM- Index,
on the other hand, measures the performance of the 800 smallest companies in the
Russell 1000-Registered Trademark- Index, which represents approximately 35% of
the total market capitalization of the Russell 1000 Index (which, in turn,
consists of the 1,000 largest U.S. companies, based on market capitalization).
The Russell Midcap Growth Index measures the performance of those Russell Midcap
Index companies with higher price-to-book ratios and higher forecasted growth
values.
Therefore, the Portfolio prior to July 1997 was appropriately compared to the
S&P "500" Index as a benchmark. However, with its focus on medium-cap growth
stocks, the current Portfolio is more appropriately compared to the Russell
Midcap Growth Index as a benchmark.
Please note that indices do not take into account any fees and expenses of
investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of these indices
are prepared or obtained by Neuberger&Berman Management Inc. and include
reinvestment of all dividends and capital gain distributions. The Portfolio
invests in many securities not included in the above-described indices.
B-7
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Partners Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Partners S&P "500"(2)
1 Year +47.11% +40.73%
5 Year +22.44% +19.78%
10 Year +14.33% +13.85%
Partners Trust S&P "500"
1987 $10,000 $10,000
1988 $8,820 $8,201
1989 $11,615 $11,418
1990 $10,823 $10,833
1991 $12,775 $13,756
1992 $13,860 $14,848
1993 $17,763 $17,104
1994 $18,759 $18,046
1995 $22,795 $21,912
1996 $25,932 $26,009
1997 $38,148 $36,602
</TABLE>
The performance information for Neuberger&Berman Partners Trust-SM- is as of
August 31, 1997. Neuberger&Berman Partners Trust started operating on August 30,
1993. It has identical investment objectives and policies, and invests in the
same Portfolio as Neuberger&Berman Partners Fund-Registered Trademark- ("Sister
Fund"), which is also managed by Neuberger&Berman Management Inc. The
performance information shown in the above chart for the period before August
30, 1993, is for the Sister Fund. Neuberger&Berman Management Inc. voluntarily
bears certain operating expenses of the Trust so that its expense ratio per
annum will not exceed the expense ratio per annum of its Sister Fund by more
than 0.10% of the Trust's average daily net assets per annum. This arrangement
can be terminated upon 60 days' prior written notice. Absent such arrangement,
the average annual total returns of the Trust would have been less. The total
returns for periods prior to the Trust's commencement of operations would have
been lower had they reflected the higher expense ratios of the Trust as compared
to those of Neuberger&Berman Partners Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-8
<PAGE>
COMPARISON OF A $10,000 INVESTMENT
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Socially Responsive Trust
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C> <C>
Average Annual Total Return(1)
Socially Responsive S&P "500"(2)
1 Year +31.92% +40.73%
Life of Fund +20.02% +23.65%
Socially Responsive
Trust S&P "500"
3/16/94 $10,000 $10,000
8/31/94 $10,070 $10,279
1995 $11,865 $12,481
1996 $14,261 $14,814
1997 $18,813 $20,848
</TABLE>
The performance information for Neuberger&Berman Socially Responsive
Trust-SM- is as of August 31, 1997. Neuberger&Berman Socially Responsive Trust
started operating on March 3, 1997. It has identical investment objectives and
policies, and invests in the same Portfolio as Neuberger&Berman Socially
Responsive Fund-Registered Trademark- ("Sister Fund"), which is also managed by
Neuberger&Berman Management Inc. The performance information shown in the above
chart for the period before March 3, 1997, is for the Sister Fund.
Neuberger&Berman Management Inc. voluntarily bears certain operating expenses of
the Trust so that its expense ratio per annum will not exceed the expense ratio
per annum of its Sister Fund by more than 0.10% of the Trust's average daily net
assets per annum. This arrangement can be terminated upon 60 days' prior written
notice. Absent such arrangement, the average annual total returns of the Trust
would have been less. The total returns for periods prior to the Trust's
commencement of operations would have been lower had they reflected the higher
expense ratios of the Trust as compared to those of Neuberger&Berman Socially
Responsive Fund.
1. "Total Return" includes reinvestment of all income dividends and capital gain
distributions. Results represent past performance and do not indicate future
results. The value of an investment in the Trust and the return on the
investment both will fluctuate, and redemption proceeds may be higher or lower
than an investor's original cost.
2. The S&P "500" Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger&Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolio invests in many securities not included in the
above-described index.
B-9
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger&Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
-------------------
FOCUS GENESIS
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) TRUST TRUST
-------------------
<S> <C> <C>
ASSETS
Investment in corresponding Portfolio, at value (Note
A) $162,588 $377,916
Deferred organization costs (Note A) 10 10
Receivable for Trust shares sold 485 5,079
Receivable from administrator -- net (Note B) -- --
-------------------
163,083 383,005
-------------------
LIABILITIES
Payable for Fund expenses (Note B) -- --
Payable for Trust shares redeemed 2,095 119
Payable to administrator -- net (Note B) 59 121
Accrued organization costs (Note A) -- --
Accrued expenses 32 28
-------------------
2,186 268
-------------------
NET ASSETS at value $160,897 $382,737
-------------------
NET ASSETS consist of:
Par value $ 8 $ 18
Paid-in capital in excess of par value 122,415 304,439
Accumulated undistributed net investment income 26 --
Accumulated net realized gains on investment 3,658 3,817
Net unrealized appreciation in value of investment 34,790 74,463
-------------------
NET ASSETS at value $160,897 $382,737
-------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares authorized) 7,565 17,845
-------------------
NET ASSET VALUE, offering and redemption price per share $21.27 $21.45
-------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-10
<PAGE>
August 31, 1997
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS
EQUITY TRUST -------------
---------------------------------- SOCIALLY
GUARDIAN MANHATTAN PARTNERS RESPONSIVE
TRUST TRUST TRUST TRUST
-------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at value (Note
A) $2,273,339 $51,010 $470,161 $7,707
Deferred organization costs (Note A) 9 10 10 102
Receivable for Trust shares sold 8,866 95 1,224 42
Receivable from administrator -- net (Note B) -- -- -- 23
-------------------------------------------------
2,282,214 51,115 471,395 7,874
-------------------------------------------------
LIABILITIES
Payable for Fund expenses (Note B) -- -- -- 8
Payable for Trust shares redeemed 11,574 8 634 --
Payable to administrator -- net (Note B) 776 20 160 --
Accrued organization costs (Note A) -- -- -- 114
Accrued expenses 112 24 27 20
-------------------------------------------------
12,462 52 821 142
-------------------------------------------------
NET ASSETS at value $2,269,752 $51,063 $470,574 $7,732
-------------------------------------------------
NET ASSETS consist of:
Par value $ 117 $ 3 $ 25 $ 1
Paid-in capital in excess of par value 1,595,058 34,719 365,535 7,198
Accumulated undistributed net investment income 2,314 -- 1,364 1
Accumulated net realized gains on investment 143,597 9,031 40,046 70
Net unrealized appreciation in value of investment 528,666 7,310 63,604 462
-------------------------------------------------
NET ASSETS at value $2,269,752 $51,063 $470,574 $7,732
-------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares authorized) 116,563 3,237 25,035 676
-------------------------------------------------
NET ASSET VALUE, offering and redemption price per share $19.47 $15.77 $18.80 $11.43
-------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-11
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger&Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
FOCUS GENESIS
TRUST TRUST
For the For the
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1997
-----------------------
<S> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio (Note A) $ 1,110 $ 1,678
-----------------------
Expenses:
Administration fee (Note B) 418 615
Amortization of deferred organization and initial
offering expenses (Note A) 9 9
Auditing fees 5 5
Custodian fees 11 11
Legal fees 11 16
Registration and filing fees 49 49
Shareholder reports 26 23
Shareholder servicing agent fees 20 19
Trustees' fees and expenses 1 3
Miscellaneous 1 1
Expenses from corresponding Portfolio (Notes A & B) 550 1,178
-----------------------
Total expenses 1,101 1,929
Expenses reimbursed by administrator and/or reduced by
custodian fee arrangement (Note B) (103) (1)
-----------------------
Total net expenses 998 1,928
-----------------------
Net investment income (loss) 112 (250)
-----------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM
CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain on investment securities 3,661 4,157
Net realized loss on option contracts written (16) --
Change in net unrealized appreciation of investment
securities and option contracts written 32,689 62,917
-----------------------
Net gain on investments from corresponding Portfolio
(Note A) 36,334 67,074
-----------------------
Net increase in net assets resulting from operations $36,446 $66,824
-----------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-12
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST EQUITY ASSETS
SOCIALLY
RESPONSIVE
TRUST
GUARDIAN MANHATTAN PARTNERS For the
TRUST TRUST TRUST Period from
March 3, 1997
For the For the For the (Commencement
Year Year Year of Operations)
Ended Ended Ended to
August 31, August 31, August 31, August 31,
1997 1997 1997 1997
-------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio (Note A) $ 23,883 $ 351 $ 4,159 $ 29
-------------------------------------------------------
Expenses:
Administration fee (Note B) 7,078 178 1,074 7
Amortization of deferred organization and initial
offering expenses (Note A) 10 9 9 11
Auditing fees 5 9 5 5
Custodian fees 11 10 10 5
Legal fees 15 11 10 3
Registration and filing fees 150 29 61 3
Shareholder reports 147 19 33 13
Shareholder servicing agent fees 27 18 20 --
Trustees' fees and expenses 16 1 2 --
Miscellaneous 8 1 2 --
Expenses from corresponding Portfolio (Notes A & B) 8,097 262 1,301 11
-------------------------------------------------------
Total expenses 15,564 547 2,527 58
Expenses reimbursed by administrator and/or reduced by
custodian fee arrangement (Note B) (1) (64) (90) (30)
-------------------------------------------------------
Total net expenses 15,563 483 2,437 28
-------------------------------------------------------
Net investment income (loss) 8,320 (132) 1,722 1
-------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM
CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain on investment securities 144,961 9,993 41,373 69
Net realized loss on option contracts written (2,026) -- -- --
Change in net unrealized appreciation of investment
securities and option contracts written 430,378 4,760 55,878 462
-------------------------------------------------------
Net gain on investments from corresponding Portfolio
(Note A) 573,313 14,753 97,251 531
-------------------------------------------------------
Net increase in net assets resulting from operations $581,633 $14,621 $98,973 $532
-------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger&Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
FOCUS TRUST GENESIS TRUST
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1996 1997 1996
-------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 112 $ 230 $ (250) $ (104)
Net realized gain (loss) on investments from corresponding Portfolio (Note A) 3,645 (313) 4,157 1,183
Change in net unrealized appreciation of investments from corresponding Portfolio
(Note A) 32,689 488 62,917 6,518
-------------------------------------
Net increase (decrease) in net assets resulting from operations 36,446 405 66,824 7,597
-------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (289) (33) -- --
Net realized gain on investments -- (133) (846) (822)
-------------------------------------
Total distributions to shareholders (289) (166) (846) (822)
-------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial capitalization of the Fund (Note A) -- -- -- --
Proceeds from shares sold to the public 111,352 59,911 283,599 30,213
Proceeds from reinvestment of dividends and distributions 289 161 846 822
Payments for shares redeemed (42,514) (19,169) (32,922) (3,211)
-------------------------------------
Net increase (decrease) from Trust share transactions 69,127 40,903 251,523 27,824
-------------------------------------
NET INCREASE IN NET ASSETS 105,284 41,142 317,501 34,599
NET ASSETS:
Beginning of year 55,613 14,471 65,236 30,637
-------------------------------------
End of year $160,897 $ 55,613 $382,737 $65,236
-------------------------------------
Accumulated undistributed net investment income at end of year $ 26 $ 203 $ -- $ --
-------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of the Fund (Note A) -- -- -- --
Sold to the public 6,127 4,038 15,306 2,095
Issued on reinvestment of dividends and distributions 17 11 51 64
Redeemed (2,329) (1,303) (1,865) (227)
-------------------------------------
Net increase (decrease) in shares outstanding 3,815 2,746 13,492 1,932
-------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-14
<PAGE>
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY TRUST
GUARDIAN TRUST MANHATTAN TRUST PARTNERS TRUST
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1997 1996 1997 1996 1997 1996
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 8,320 $ 13,233 $ (132) $ (172) $ 1,722 $ 726
Net realized gain (loss) on investments from
corresponding Portfolio (Note A) 142,935 24,032 9,993 1,705 41,373 7,827
Change in net unrealized appreciation of investments
from corresponding Portfolio (Note A) 430,378 8,398 4,760 (3,356) 55,878 212
----------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 581,633 45,663 14,621 (1,823) 98,973 8,765
----------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (9,986) (9,999) -- -- (961) (364)
Net realized gain on investments (22,820) (10,557) (2,874) (1,370) (7,693) (4,629)
----------------------------------------------------------------
Total distributions to shareholders (32,806) (20,556) (2,874) (1,370) (8,654) (4,993)
----------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial capitalization of
the Fund (Note A) -- -- -- -- -- --
Proceeds from shares sold to the public 743,301 854,807 18,421 24,466 344,075 75,478
Proceeds from reinvestment of dividends and
distributions 32,801 20,520 2,874 1,370 8,113 4,893
Payments for shares redeemed (395,265) (243,412) (30,177) (10,026) (100,384) (17,026)
----------------------------------------------------------------
Net increase (decrease) from Trust share transactions 380,837 631,915 (8,882) 15,810 251,804 63,345
----------------------------------------------------------------
NET INCREASE IN NET ASSETS 929,664 657,022 2,865 12,617 342,123 67,117
NET ASSETS:
Beginning of year 1,340,088 683,066 48,198 35,581 128,451 61,334
----------------------------------------------------------------
End of year $2,269,752 $1,340,088 $ 51,063 $ 48,198 $ 470,574 $128,451
----------------------------------------------------------------
Accumulated undistributed net investment income at end
of year $ 2,314 $ 3,980 $ -- $ -- $ 1,364 $ 603
----------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of the Fund (Note A) -- -- -- -- -- --
Sold to the public 43,802 60,492 1,312 1,900 20,951 5,647
Issued on reinvestment of dividends and distributions 2,055 1,469 226 110 538 394
Redeemed (23,424) (17,232) (2,257) (792) (6,046) (1,287)
----------------------------------------------------------------
Net increase (decrease) in shares outstanding 22,433 44,729 (719) 1,218 15,443 4,754
----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
Neuberger&Berman
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY ASSETS
SOCIALLY
RESPONSIVE
TRUST
Period from
March 3, 1997
(Commencement
of Operations)
to
August 31,
(000'S OMITTED) 1997
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 1
Net realized gain (loss) on investments from
corresponding Portfolio (Note A) 69
Change in net unrealized appreciation of investments
from corresponding Portfolio (Note A) 462
--------
Net increase (decrease) in net assets resulting from
operations 532
--------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gain on investments --
--------
Total distributions to shareholders --
--------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial capitalization of
the Fund (Note A) 100
Proceeds from shares sold to the public 7,261
Proceeds from reinvestment of dividends and
distributions --
Payments for shares redeemed (161)
--------
Net increase (decrease) from Trust share transactions 7,200
--------
NET INCREASE IN NET ASSETS 7,732
NET ASSETS:
Beginning of year --
--------
End of year $7,732
--------
Accumulated undistributed net investment income at end
of year $ 1
--------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of the Fund (Note A) 10
Sold to the public 680
Issued on reinvestment of dividends and distributions --
Redeemed (14)
--------
Net increase (decrease) in shares outstanding 676
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Equity Trust and Equity Assets
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Focus Trust ("Focus"), Neuberger&Berman Genesis
Trust ("Genesis"), Neuberger&Berman Guardian Trust ("Guardian"),
Neuberger&Berman Manhattan Trust ("Manhattan"), and Neuberger&Berman Partners
Trust ("Partners") are separate operating series of Neuberger&Berman Equity
Trust ("Equity Trust"), a Delaware business trust organized pursuant to a
Trust Instrument dated May 6, 1993. Neuberger&Berman Socially Responsive
Trust ("Socially Responsive") is a separate operating series of
Neuberger&Berman Equity Assets ("Equity Assets"), a Delaware business trust
organized pursuant to a Trust Instrument dated October 18, 1993. These six
aforementioned series are collectively referred to as the "Funds." Equity
Trust and Equity Assets (collectively, the "Trusts") are registered as
diversified, open-end management investment companies under the Investment
Company Act of 1940, as amended (the "1940 Act"), and their shares are
registered under the Securities Act of 1933, as amended (the "1933 Act").
Socially Responsive had no operations until March 3, 1997, other than matters
relating to its organization and registration as a diversified, open-end
management investment company under the 1940 Act, and registration of its
shares under the 1933 Act, and the sale and issuance of 10,000 shares to
Neuberger&Berman Management Incorporated ("Management") on October 26, 1994.
The trustees of the Trusts may establish additional series or classes of
shares without the approval of shareholders.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding Portfolio of Equity Managers
Trust (each a "Portfolio") having the same investment objective and policies
as the Fund. The value of each Fund's investment in its corresponding
Portfolio reflects that Fund's proportionate interest in the net assets of
that Portfolio (10.33%, 34.87%, 25.96%, 8.21%, 13.15%, and 3.01%, for Focus,
Genesis, Guardian, Manhattan, Partners, and Socially Responsive,
respectively, at August 31, 1997). 73.67% of Neuberger& Berman Socially
Responsive Portfolio is held by another regulated investment company, which
has only a single shareholder and is sponsored by Management. The performance
of each Fund is directly affected by the performance of its corresponding
Portfolio. The financial statements of each Portfolio, including the Schedule
of Investments, are included elsewhere in this report and should be read in
conjunction with the corresponding Fund's financial statements.
B-17
<PAGE>
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
by Equity Managers Trust as indicated in the notes following the Portfolios'
Schedule of Investments.
3) FEDERAL INCOME TAXES: Each series of the Trusts are treated as a separate
entity for Federal income tax purposes. It is the policy of Focus, Genesis,
Guardian, Manhattan, and Partners to continue to qualify and the intention of
Socially Responsive to qualify as a regulated investment company by complying
with the provisions available to certain investment companies, as defined in
applicable sections of the Internal Revenue Code, and to make distributions
of investment company taxable income and net capital gains (after reduction
for any amounts available for Federal income tax purposes as capital loss
carryforwards) sufficient to relieve it from all, or substantially all,
Federal income taxes. Accordingly, each Fund paid no Federal income taxes and
no provision for Federal income taxes was required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net of
Portfolio expenses, daily on its investment in its corresponding Portfolio.
Dividends and distributions from net realized capital gains, if any, are
normally distributed in December. Guardian generally distributes
substantially all of its net investment income, if any, at the end of each
calendar quarter. Income dividends and capital gain distributions to
shareholders are recorded on the ex-dividend date. To the extent each Fund's
net realized capital gains, if any, can be offset by capital loss
carryforwards, it is the policy of each Fund not to distribute such gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) ORGANIZATION EXPENSES: Expenses incurred by each Fund in connection with its
organization are being amortized by that Fund on a straight-line basis over a
five-year period. At August 31, 1997, the unamortized balance of such
expenses amounted to $9,716, $9,608, $8,970, $9,715, $9,717, and $102,264,
for Focus, Genesis, Guardian, Manhattan, Partners, and Socially Responsive,
respectively. The accrued organization costs for Socially Responsive are
payable to Management, the administrator to the Fund.
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trusts with respect to any two or more Funds are allocated in
B-18
<PAGE>
proportion to the net assets of such Funds, except where a more appropriate
allocation of expenses to each Fund can otherwise be made fairly. Expenses
directly attributable to a Fund are charged to that Fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Management as its administrator under an Administration
Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an
administration fee at the annual rate of .40% of that Fund's average daily net
assets. Each Fund indirectly pays for investment management services through its
investment in its corresponding Portfolio (see Note B of Notes to Financial
Statements of the Portfolios). The Agreement provides that, if with respect to
any fiscal year of each Fund, its total operating expenses plus its pro rata
portion of its corresponding Portfolio's operating expenses (including the fees
payable to Management but excluding interest, taxes, brokerage commissions, and
extraordinary expenses) ("Operating Expenses") exceed the most restrictive of
the expense limitations imposed by securities laws of the states in which such
Fund's shares are qualified for sale, the administration fees for that fiscal
year will be reduced by the amount of such excess, provided that Management has
no obligation to reimburse the Fund for any such expenses that exceed the
administration fee. Effective October 11, 1996, states may no longer impose
expense limitations as a condition to the sale of mutual fund shares. The most
restrictive expense limitation applicable prior to that date, to which each Fund
(excluding Socially Responsive) was subject, was 2 1/2% of the first $30 million
of average daily net assets, 2% of the next $70 million of average daily net
assets, and 1 1/2% of any additional average daily net assets. No reduction in
the administration fee as a result of any state expense limitation was required
for the period ended August 31, 1997.
Management has voluntarily undertaken (subject to termination upon 60 days'
prior written notice) to reimburse Focus, Genesis, Guardian, Manhattan,
Partners, and Socially Responsive for their Operating Expenses which, in the
aggregate, exceed by more than .10% the expense ratio per annum of a certain
other mutual fund ("Sister Fund") which also invests in the same Portfolio. For
the year ended August 31, 1997, expenses (net of reimbursement) incurred by
Focus, Genesis, Guardian, Manhattan, Partners, and Socially Responsive amounted
to .96%, 1.25%, .88%, 1.09%, .91%, and 1.58%, respectively, of average daily net
assets on an annualized basis.
Since inception of Socially Responsive, Management has voluntarily undertaken
to pay certain expenses as an advance. These expenses will be repaid by the Fund
to Management in the future, and are included under the caption Payable for Fund
expenses in the Statements of Assets and Liabilities.
B-19
<PAGE>
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger&Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Several individuals who are
officers and/or trustees of the Trusts are also principals of Neuberger and/or
officers and/or directors of Management.
Each Fund also has a distribution agreement with Management. Management
receives no compensation therefor and no commissions for sales or redemptions of
shares of beneficial interest of each Fund.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Expenses from corresponding Portfolio, was a
reduction of $461, $1,280, $785, $64, $393, and $4, for Focus, Genesis,
Guardian, Manhattan, Partners, and Socially Responsive, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the period ended August 31, 1997, additions and reductions in each
Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- -------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 87,069,461 $15,540,958
GENESIS 251,656,873 6,501,081
GUARDIAN 425,431,726 75,803,622
MANHATTAN 11,319,637 25,363,996
PARTNERS 276,258,772 34,719,470
SOCIALLY RESPONSIVE 7,324,107 165,650
</TABLE>
B-20
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Focus Trust(1)
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 30, 1993(2)
Year Ended August 31, to August 31,
1997 1996 1995 1994 1993
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.83 $14.41 $11.36 $10.03 $10.00
--------------------------------------------------
Income From Investment Operations
Net Investment Income .01 .06 .05 .05 --
Net Gains or Losses on Securities (both realized and unrealized) 6.49 .46 3.05 1.31 .03
--------------------------------------------------
Total From Investment Operations 6.50 .52 3.10 1.36 .03
--------------------------------------------------
Less Distributions
Dividends (from net investment income) (.06) (.02) (.05) (.02) --
Distributions (from capital gains) -- (.08) -- (.01) --
--------------------------------------------------
Total Distributions (.06) (.10) (.05) (.03) --
--------------------------------------------------
Net Asset Value, End of Year $21.27 $14.83 $14.41 $11.36 $10.03
--------------------------------------------------
Total Return(3) +43.93% +3.62% +27.44% +13.58% +0.30%(4)
--------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $160.9 $ 55.6 $ 14.5 $ 1.6 $ --
--------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) .96% .99% -- -- --
--------------------------------------------------
Ratio of Net Expenses to Average Net Assets(6) .96% .99% .96% .85% .92%(7)
--------------------------------------------------
Ratio of Net Investment Income to Average Net Assets(6) .11% .63% .67% .92% .05%(7)
--------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-21
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Genesis Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 26,
1993(2)
Year Ended August 31, to August 31,
1997 1996 1995 1994 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.99 $12.65 $10.59 $10.05 $10.00
----------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (.01) (.02) (.01) (.01) --
Net Gains or Losses on Securities (both realized
and unrealized) 6.61 2.68 2.08 .56 .05
----------------------------------------------------------
Total From Investment Operations 6.60 2.66 2.07 .55 .05
----------------------------------------------------------
Less Distributions
Distributions (from capital gains) (.14) (.32) (.01) (.01) --
----------------------------------------------------------
Net Asset Value, End of Year $21.45 $14.99 $12.65 $10.59 $10.05
----------------------------------------------------------
Total Return(3) +44.31% +21.44% +19.51% +5.47% +0.50%(4)
----------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $382.7 $ 65.2 $ 30.6 $ 3.1 $ --
----------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.26% 1.38% -- -- --
----------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(6) 1.25% 1.38% 1.42% 1.36% 1.51%(7)
----------------------------------------------------------
Ratio of Net Investment Loss to Average Net
Assets(6) (.16%) (.27%) (.24%) (.21%) (.44%)(7)
----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-22
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Guardian Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 3, 1993(2)
Year Ended August 31, to August 31,
1997 1996 1995 1994 1993
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 14.24 $ 13.83 $11.27 $10.27 $10.00
-----------------------------------------------------------------
Income From Investment Operations
Net Investment Income .08 .16 .13 .09 --
Net Gains or Losses on Securities (both
realized and unrealized) 5.48 .55 2.55 .99 .27
-----------------------------------------------------------------
Total From Investment Operations 5.56 .71 2.68 1.08 .27
-----------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.10) (.14) (.12) (.07) --
Distributions (from capital gains) (.23) (.16) -- (.01) --
-----------------------------------------------------------------
Total Distributions (.33) (.30) (.12) (.08) --
-----------------------------------------------------------------
Net Asset Value, End of Year $ 19.47 $ 14.24 $13.83 $11.27 $10.27
-----------------------------------------------------------------
Total Return(3) +39.56% +5.19% +24.01% +10.57% +2.70%(4)
-----------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $2,269.8 $1,340.1 $683.1 $ 75.8 $ --
-----------------------------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) .88% .92% -- -- --
-----------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets .88% .92%(6) .90%(6) .80%(6) .81%(6)(7)
-----------------------------------------------------------------
Ratio of Net Investment Income to Average Net
Assets .47% 1.26%(6) 1.35%(6) 1.50%(6) 1.00%(6)(7)
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-23
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Manhattan Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 30, 1993(2)
Year Ended August 31, to August 31,
1997 1996 1995 1994 1993
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $12.18 $12.99 $10.37 $10.01 $10.00
----------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (.04) (.04) -- .01 --
Net Gains or Losses on Securities (both realized
and unrealized) 4.55 (.34) 2.67 .36 .01
----------------------------------------------------------
Total From Investment Operations 4.51 (.38) 2.67 .37 .01
----------------------------------------------------------
Less Distributions
Dividends (from net investment income) -- -- (.01) (.01) --
Distributions (from capital gains) (.92) (.43) (.04) -- --
----------------------------------------------------------
Total Distributions (.92) (.43) (.05) (.01) --
----------------------------------------------------------
Net Asset Value, End of Year $15.77 $12.18 $12.99 $10.37 $10.01
----------------------------------------------------------
Total Return(3) +38.84% -2.98% +25.90% +3.70% +0.10%(4)
----------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $ 51.1 $ 48.2 $ 35.6 $ 12.1 $ --
----------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) 1.09% 1.08% -- -- --
----------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(6) 1.09% 1.08% 1.06% .96% 1.04%(7)
----------------------------------------------------------
Ratio of Net Investment Income (Loss) to Average
Net Assets(6) (.30%) (.38%) (.03%) .16% 5.48%(7)
----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-24
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Partners Trust
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 30, 1993(2)
Year Ended August 31, to August 31,
1997 1996 1995 1994 1993
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $13.39 $12.68 $10.54 $10.01 $10.00
--------------------------------------------------
Income From Investment Operations
Net Investment Income .07 .08 .05 .03 --
Net Gains or Losses on Securities (both realized and unrealized) 6.06 1.59 2.19 .53 .01
--------------------------------------------------
Total From Investment Operations 6.13 1.67 2.24 .56 .01
--------------------------------------------------
Less Distributions
Dividends (from net investment income) (.08) (.07) (.02) (.01) --
Distributions (from capital gains) (.64) (.89) (.08) (.02) --
--------------------------------------------------
Total Distributions (.72) (.96) (.10) (.03) --
--------------------------------------------------
Net Asset Value, End of Year $18.80 $13.39 $12.68 $10.54 $10.01
--------------------------------------------------
Total Return(3) +47.11% +13.76% +21.52% +5.61% +0.10%(4)
--------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $470.6 $128.5 $ 61.3 $ 4.7 $ --
--------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(5) .91% .94% -- -- --
--------------------------------------------------
Ratio of Net Expenses to Average Net Assets(6) .91% .94% .92% .81% .84%(7)
--------------------------------------------------
Ratio of Net Investment Income to Average Net Assets(6) .64% .84% .81% .47% 2.65%(7)
--------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-25
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Socially Responsive Trust
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the Financial
Statements. The per share amounts and ratios which are shown reflect income and
expenses, including the Fund's proportionate share of its corresponding
Portfolio's income and expenses. It should be read in conjunction with its
corresponding Portfolio's Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
March 3,1997(2)
to August 31,
1997
---------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
---------------
Income From Investment Operations
Net Investment Income --
Net Gains or Losses on Securities (both realized and unrealized) 1.43
---------------
Total From Investment Operations 1.43
---------------
Net Asset Value, End of Period $11.43
---------------
Total Return(3)(4) +14.30%
---------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 7.7
---------------
Ratio of Gross Expenses to Average Net Assets(5)(7) 1.58%
---------------
Ratio of Net Expenses to Average Net Assets(7)(8) 1.58%
---------------
Ratio of Net Investment Income to Average Net Assets(7)(8) .06%
---------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-26
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger&Berman August 31, 1997
- ----------------------------------------------------------------------
Equity Trust and Equity Assets
1) Prior to January 1, 1995, its name was Neuberger&Berman Selected Sectors
Trust.
2) The date investment operations commenced.
3) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return would
have been lower if Management had not reimbursed certain expenses. In
addition, for Genesis, total return would have been lower if Management had
not waived a portion of the management fee.
4) Not annualized.
5) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without expense reductions related to expense
offset arrangements. These ratios include management fee waiver and/or
reimbursement of expenses.
6) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
August 30, 1993
Year Ended August 31, to August 31,
FOCUS 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses 1.06% 1.27% 2.50% 2.50% 2.50%
-----------------------------------------------------------
Net Investment Income (Loss) .01% .35% (.87%) (.73%) (1.53%)
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
August 3, 1993
Year Ended August 31, to August 31,
GUARDIAN 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses .92% .96% 1.52% 2.50%
---------------------------------------------
Net Investment Income (Loss) 1.26% 1.29% .78% (.69%)
---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
August 30, 1993
Year Ended August 31, to August 31,
MANHATTAN 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses 1.23% 1.25% 1.46% 2.50% 2.50%
-------------------------------------------------------------
Net Investment Income (Loss) (.44%) (.55%) (.43%) (1.38%) 4.02%
-------------------------------------------------------------
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
Period from
August 30, 1993
Year Ended August 31, to August 31,
PARTNERS 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses .94% 1.06% 1.24% 2.50% 2.50%
---------------------------------------------------------
Net Investment Income (Loss) .61% .72% .49% (1.22%) .99%
---------------------------------------------------------
</TABLE>
After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements and/or the waiver of a portion of the management fee as
described in Note B of Notes to Financial Statements of Neuberger&Berman Genesis
Portfolio. Had Management not undertaken such action the annualized ratios to
average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
August 26, 1993
Year Ended August 31, to August 31,
GENESIS 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Expenses 1.35% 1.65% 1.78% 2.50% 2.50%
-------------------------------------------------------------
Net Investment Loss (.26%) (.54%) (.60%) (1.35%) (1.43%)
-------------------------------------------------------------
</TABLE>
7) Annualized.
8) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized expense and net investment income ratios to average daily net
assets would have been higher and lower, respectively.
B-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Neuberger&Berman Equity Trust and
Shareholders of Neuberger&Berman Manhattan Trust
We have audited the accompanying statement of assets and liabilities of
Neuberger&Berman Manhattan Trust (the "Trust"), as of August 31, 1997, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger&Berman Manhattan Trust as of August 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods indicated therein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
B-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Neuberger&Berman Equity Assets and
Shareholders of Neuberger&Berman Socially Responsive Trust
We have audited the accompanying statement of assets and liabilities of
Neuberger&Berman Socially Responsive Trust (the "Trust"), as of August 31, 1997,
and the related statement of operations, the statement of changes in net assets,
and the financial highlights for the period from March 3, 1997 (Commencement of
Operations) to August 31, 1997. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger&Berman Socially Responsive Trust as of August 31, 1997, the results of
its operations, the changes in its net assets, and the financial highlights for
the period from March 3, 1997 (Commencement of Operations) to August 31, 1997,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
B-30
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Neuberger&Berman Equity Trust and
Shareholders of:
Neuberger&Berman Focus Trust
Neuberger&Berman Genesis Trust
Neuberger&Berman Guardian Trust and
Neuberger&Berman Partners Trust
We have audited the accompanying statements of assets and liabilities of the
Neuberger&Berman Focus Trust, Neuberger&Berman Genesis Trust, Neuberger& Berman
Guardian Trust, and Neuberger&Berman Partners Trust, four of the series
comprising Neuberger&Berman Equity Trust (the "Trust"), as of August 31, 1997,
and the related statements of operations for the year then ended, the statements
of changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Neuberger&Berman Equity Trust at August 31,
1997, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts /s/ ERNST & YOUNG LLP
October 3, 1997
B-31
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Compaq Computer 5.5%
2. 3Com Corp. 4.3%
3. Aetna Inc. 4.0%
4. General Motors 3.9%
5. CITICORP 3.8%
6. ADVANTA Corp. Class A 3.6%
7. Foundation Health Systems 3.5%
8. Travelers Group 3.3%
9. Countrywide Credit Industries 3.2%
10. Banc One 3.1%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (98.1%)
AUTOMOTIVE (7.0%)
1,370,000 Chrysler Corp. $ 48,121
981,000 General Motors 61,558
------------
109,679
------------
FINANCIAL SERVICES (38.5%)
380,000 ACE Ltd. 31,587
1,691,500 ADVANTA Corp. Class A 56,031 (2)
195,300 Associates First Capital 11,340
900,000 Banc One 48,263
365,200 BankBoston Corp. 30,357
940,000 Capital One Financial 36,190
466,200 CITICORP 59,499
1,515,000 Countrywide Credit Industries 51,037
986,000 Fannie Mae 43,384
1,225,000 Federal Home Loan Mortgage 39,889
242,000 Hartford Financial Services
Group 19,299
570,000 Merrill Lynch 35,055
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
569,300 Morgan Stanley, Dean Witter,
Discover $ 27,398
525,600 PartnerRe Ltd. 20,893
307,500 Providian Corp. 11,454
222,000 St. Paul Cos. 16,289
162,000 Transamerica Corp. 15,967
820,000 Travelers Group 52,070
------------
606,002
------------
HEALTH CARE (14.9%)
652,600 Aetna Inc. 62,283
1,743,000 Foundation Health Systems 55,449 (3)
230,000 PacifiCare Health Systems
Class B 15,726
934,500 Sierra Health Services 30,780 (2)(3)
519,300 United Healthcare 25,251
838,000 Wellpoint Health Networks 45,566 (3)
------------
235,055
------------
HEAVY INDUSTRY (9.1%)
1,285,000 AGCO Corp. 41,762
1,045,000 DT Industries 31,089 (2)
604,100 Harnischfeger Industries 24,240
297,500 Ispat International 7,977 (3)
804,600 UCAR International 37,967 (3)
------------
143,035
------------
RETAIL (8.3%)
600,000 Barnes & Noble 27,862 (3)
1,925,000 Furniture Brands International 33,928 (3)
1,298,000 Neiman-Marcus Group 40,076 (3)
434,800 Payless ShoeSource 27,882 (3)
------------
129,748
------------
TECHNOLOGY (18.8%)
1,340,000 3Com Corp. 66,916 (3)
200,000 Applied Materials 18,875 (3)
242,000 Arrow Electronics 14,868 (3)
</TABLE>
B-32
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Focus Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
585,000 Atmel Corp. $ 20,694(3)
976,000 Cabletron Systems 29,524(3)
1,312,500 Compaq Computer 85,969(3)(4)
449,000 Gateway 2000 17,567(3)
550,000 Rational Software 9,075(3)
950,000 Silicon Valley Group 32,063(3)
------------
295,551
------------
TRANSPORTATION (1.5%)
644,000 Continental Airlines Class B 23,586 (3)
------------
TOTAL COMMON STOCKS (COST
$955,133) 1,542,656
------------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ------------
<C> <S> <C>
SHORT-TERM CORPORATE NOTES (2.9%)
$46,120,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $46,120) $ 46,120(5)
------------
TOTAL INVESTMENTS (101.0%)
(COST $1,001,253) 1,588,776(6)
Liabilities, less cash,
receivables and other assets
[(1.0%)] (15,335)
------------
TOTAL NET ASSETS (100.0%) $1,573,441
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-33
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Thiokol Corp. 2.9%
2. Pride International 2.8%
3. BMC Industries 2.2%
4. Bank United 2.1%
5. Texas Industries 2.0%
6. Data General 1.9%
7. AAR Corp. 1.9%
8. Dallas Semiconductor 1.8%
9. Webster Financial 1.6%
10. AptarGroup Inc. 1.6%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -----------
<C> <S> <C>
COMMON STOCKS (93.7%)
AEROSPACE (10.4%)
617,600 AAR Corp. $ 20,728
140,800 Alliant Techsystems 9,090(3)
947,000 Aviall Inc. 15,507
154,700 BE Aerospace 5,492(3)
401,500 DONCASTERS PLC ADR 10,339(3)
199,900 Ducommun Inc. 7,446(3)
171,200 Hexcel Corp. 4,762(3)
79,300 Moog, Inc. Class A 2,885(3)
257,300 Orbital Sciences 5,580(3)
390,100 Thiokol Corp. 31,062
-----------
112,891
-----------
AUTOMOTIVE (1.3%)
144,500 Donaldson Co. 6,448
67,800 Monaco Coach 1,678(3)
135,900 Tower Automotive 6,099(3)
-----------
14,225
-----------
BANKING & FINANCIAL (13.3%)
642,400 Bank United 23,207(3)
112,250 Charter One Financial 6,103
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -----------
<C> <S> <C>
90,400 Coast Savings Financial $ 4,164(3)
95,900 Colonial BancGroup 2,523
121,500 Community First Bankshares 4,951
185,000 Cullen/Frost Bankers 8,232
211,600 Dime Community Bancorp 4,153
166,700 First Commerce 8,898
583,000 Golden State Bancorp 16,834
119,600 Long Island Bancorp 4,769
78,300 North Fork Bancorp 1,953
112,700 Ocean Financial 3,789
65,377 ONBANCorp, Inc. 3,400
218,500 Peoples Heritage Financial
Group 8,139
89,450 Queens County Bancorp 4,819
202,600 Reliance Bancorp 6,243
458,450 Sterling Bancshares 8,252
264,750 Texas Regional Bancshares 6,751
325,800 Webster Financial 17,227
-----------
144,407
-----------
BUILDING, CONSTRUCTION & FURNISHINGS (3.6%)
656,100 Apogee Enterprises 14,352
73,000 Lincoln Electric Class A 2,847
659,600 Texas Industries 21,973
-----------
39,172
-----------
CHEMICALS (0.8%)
334,100 Lawter International 4,385
201,000 Lilly Industries 4,447
-----------
8,832
-----------
COMMUNICATIONS (0.6%)
175,100 Black Box 6,369(3)
-----------
CONSUMER PRODUCTS & SERVICES (5.2%)
120,073 Block Drug 5,703
124,100 Bush Boake Allen 3,863(3)
</TABLE>
B-34
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -----------
<C> <S> <C>
368,800 Coachmen Industries $ 6,823
427,400 First Brands 10,658
3,400 Marcus Corp. 84
579,500 Prime Hospitality 11,011(3)
645,000 Richfood Holdings 14,513
125,000 The First Years 3,156
-----------
55,811
-----------
DIAGNOSTIC EQUIPMENT (1.2%)
683,100 ADAC Laboratories 13,406
-----------
ELECTRONICS (3.7%)
224,800 Continental Circuits 4,496(3)
496,100 Dallas Semiconductor 19,007
79,400 Kent Electronics 2,973(3)
70,000 Nu Horizons 551(3)
84,943 Pioneer Standard Electronics 1,274
302,600 SCI Systems 11,896(3)
-----------
40,197
-----------
ENERGY (4.4%)
286,400 Apache Corp. 11,367
157,300 Aquila Gas Pipeline 1,642
182,500 Cairn Energy USA 2,087(3)
701,900 Coho Energy 6,844(3)
121,800 Cross Timbers Oil 2,626
54,200 Ocean Energy 3,486
243,800 Offshore Energy Development 1,310(3)
410,900 Swift Energy 10,658(3)
564,400 Unit Corp. 7,584(3)
-----------
47,604
-----------
HEALTH CARE (6.7%)
460,200 Ballard Medical Products 10,642
110,000 CONMED Corp. 2,049(3)
168,000 Haemonetics Corp. 3,066(3)
749,800 Kinetic Concepts 13,778
235,500 Patterson Dental 8,331(3)
151,900 Sofamor Danek Group 7,282(3)
90,000 STAAR Surgical 1,530(3)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -----------
<C> <S> <C>
266,500 Sullivan Dental Products $ 6,862
375,200 Trigon Healthcare 8,958(3)
232,500 Universal Health Services
Class B 10,186(3)
-----------
72,684
-----------
INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (7.8%)
115,000 Alamo Group 2,530
752,800 BMC Industries 23,431
108,500 Dionex Corp. 5,073(3)
142,850 Holophane Corp. 3,321(3)
228,400 Kaydon Corp. 13,490
134,100 Libbey Inc. 5,146
332,000 NN Ball & Roller 4,067
119,900 Pameco Corp. 2,308(3)
107,000 Pentair, Inc. 3,812
81,600 Roper Industries 2,305
139,900 SOS Staffing Services 2,396(3)
154,800 W.H. Brady 4,702
127,100 Wallace Computer Services 3,940
168,100 Wolverine Tube 5,400(3)
155,750 Woodhead Industries 2,881
-----------
84,802
-----------
INSURANCE (2.0%)
94,400 Allied Group 4,177
210,300 FBL Financial Group 6,730(3)
81,000 Orion Capital 3,443
178,000 Penn-America Group 3,248
109,400 Trenwick Group 3,979
-----------
21,577
-----------
MACHINERY & EQUIPMENT (1.6%)
119,800 Allied Products 4,231
536,700 Stewart & Stevenson Services 13,082
-----------
17,313
-----------
</TABLE>
B-35
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -----------
<C> <S> <C>
OFFICE EQUIPMENT (0.0%)
14,960 DH Technology $ 254(3)
-----------
OIL SERVICES (16.6%)
208,200 Cal Dive International 7,079(3)
178,800 Cliffs Drilling 8,527(3)
138,800 Dawson Production Services 2,602(3)
217,100 Dreco Energy Services 11,941(3)
322,000 Falcon Drilling 10,143(3)
145,000 Friede Goldman International 5,836(3)
265,200 Global Industries 9,663(3)
187,700 Hvide Marine 5,795(3)
399,500 Nabors Industries 13,758(3)
238,300 National-Oilwell 14,670(3)
480,700 Oceaneering International 11,206(3)
742,500 Offshore Logistics 13,551(3)
940,500 Pride International 30,096
142,400 Smith International 10,360(3)
224,400 Trico Marine Services 6,956(3)
192,600 Tuboscope Inc. 5,369(3)
108,400 UTI Energy 8,306(3)
213,700 Willbros Group 3,686(3)
-----------
179,544
-----------
PACKING & CONTAINERS (1.6%)
302,200 AptarGroup Inc. 16,999
-----------
PUBLISHING & BROADCASTING (0.5%)
87,500 McClatchy Newspapers 2,636
45,666 Pulitzer Publishing 2,400
-----------
5,036
-----------
REAL ESTATE (2.8%)
197,100 CCA Prison Realty Trust 6,529(3)
26,800 Crescent Operating 432
359,500 Crescent Real Estate Equities 11,369
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -----------
<C> <S> <C>
470,100 Prime Retail $ 6,787
219,400 SL Green Realty 5,225(3)
-----------
30,342
-----------
RETAILING (0.9%)
228,900 99 Cents Only Stores 7,353(3)
119,000 Schultz Sav-O Stores 2,901
-----------
10,254
-----------
TECHNOLOGY (7.8%)
176,600 Analysts International 6,049
935,900 Auspex Systems 10,295(3)
1,378,700 Borland International 12,236(3)
267,400 CACI International 4,512(3)
134,700 Computer Data Systems 4,108
578,900 Data General 20,804(3)
300,000 Methode Electronics Class A 7,125
706,700 Reynolds & Reynolds 14,222
159,000 Zebra Technologies 4,671(3)
-----------
84,022
-----------
TEXTILES & APPAREL (0.5%)
124,300 St. John Knits 5,236
-----------
TRANSPORTATION, SHIPPING & FREIGHT (0.4%)
78,375 Air Express International 2,381
213,600 Maritrans Inc. 1,775
-----------
4,156
-----------
TOTAL COMMON STOCKS (COST
$743,618) 1,015,133
-----------
PREFERRED STOCKS (0.3%)
60,000 Hvide Capital Trust, Cv.,
6.50% (COST $3,000) 3,757(7)
-----------
</TABLE>
B-36
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- -----------
<C> <S> <C>
U.S. TREASURY SECURITIES (6.6%)
$71,960,000 U.S. Treasury Bills, 5.00% &
5.04%, due 9/4/97 & 10/16/97
(COST $71,731) $ 71,739
-----------
SHORT-TERM CORPORATE NOTES (3.7%)
40,000,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $40,000) 40,000(5)
-----------
TOTAL INVESTMENTS (104.3%)
(COST $858,349) 1,130,629(6)
Liabilities, less cash,
receivables and other assets
[(4.3%)] (46,978)
-----------
TOTAL NET ASSETS (100.0%) $1,083,651
-----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-37
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Compaq Computer 5.0%
2. General Motors 4.1%
3. Aetna Inc. 4.0%
4. 3Com Corp. 4.0%
5. Foundation Health Systems 3.3%
6. Banc One 3.2%
7. CITICORP 3.0%
8. Chrysler Corp. 3.0%
9. Merrill Lynch 2.3%
10. Chase Manhattan 2.2%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (89.3%)
AGRICULTURE (4.8%)
4,737,400 AGCO Corp. $ 153,966 (2)
4,160,000 IMC Global 146,380
1,592,900 Potash Corp. of Saskatchewan 117,775
------------
418,121
------------
AUTOMOTIVE (11.4%)
2,662,300 Cabot Corp. 72,881
7,380,000 Chrysler Corp. 259,223
4,893,900 Coltec Industries 109,501 (2)(3)
5,760,500 General Motors 361,471
574,000 Lear Corp. 26,296 (3)
1,815,486 LucasVarity PLC ADR 57,528
809,800 Magna International Class A 53,649
2,130,081 Mark IV Industries 53,518
------------
994,067
------------
BANKING (11.3%)
5,174,963 Banc One 277,507
1,830,000 BankBoston Corp. 152,119
1,750,000 Chase Manhattan 194,578
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
2,060,000 CITICORP $ 262,908
504,000 First Tennessee National 26,838
904,400 First Union 43,468
140,000 Wells Fargo 35,595
------------
993,013
------------
DRUGS (0.4%)
361,100 Zeneca Group ADR 34,485
------------
ELECTRONICS (2.7%)
2,866,000 Atmel Corp. 101,385 (3)
2,350,000 Teradyne, Inc. 130,865 (3)
------------
232,250
------------
ENERGY (2.3%)
2,295,700 Enron Oil & Gas 55,384
1,670,000 Unocal Corp. 65,234
788,200 Vastar Resources 33,646
1,702,000 Zeigler Coal Holding 43,507 (2)
------------
197,771
------------
FINANCIAL SERVICES (14.0%)
3,955,000 ADVANTA Corp. Class B 125,571
220,814 Alleghany Corp. 52,995 (3)
4,445,000 Capital One Financial 171,133 (2)
5,445,000 Countrywide Credit Industries 183,428 (2)
4,100,000 Fannie Mae 180,400
3,210,000 Federal Home Loan Mortgage 104,526
3,280,000 Merrill Lynch 201,720
400,000 MGIC Investment 20,125 (4)
3,715,000 Morgan Stanley, Dean Witter,
Discover 178,784
510,000 Security Capital Industrial
Trust 10,774
------------
1,229,456
------------
</TABLE>
B-38
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
FOOD PRODUCTS (0.6%)
2,224,300 IBP, Inc. $ 51,020
------------
HEALTH CARE (11.6%)
3,673,500 Aetna Inc. 350,590
9,065,800 Foundation Health Systems 288,406 (2)(3)
4,240,400 Humana Inc. 99,914 (3)
1,960,300 Mid Atlantic Medical Services 30,262 (3)
1,327,790 PacifiCare Health Systems
Class B 90,788 (3)
800,000 United Healthcare 38,900
2,226,396 Wellpoint Health Networks 121,060 (3)
------------
1,019,920
------------
HEAVY INDUSTRY (3.3%)
1,010,000 Aluminum Co. of America 83,073
1,166,900 Harnischfeger Industries 46,822
3,404,400 UCAR International 160,645 (2)(3)
------------
290,540
------------
INDUSTRIAL GOODS & SERVICES (1.7%)
1,460,200 American Standard 68,630 (3)
1,885,000 USG Corp. 80,819 (3)
------------
149,449
------------
INSURANCE (4.9%)
626,250 American International Group 59,102
1,499,800 Hartford Financial Services
Group 119,609
460,500 St. Paul Cos. 33,789
451,050 Transatlantic Holdings 31,884
2,894,066 Travelers Group 183,773
------------
428,157
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
MEDIA & ENTERTAINMENT (0.6%)
1,050,700 Harcourt General $ 49,974
147,000 Jones Intercable Inc. Class A 1,654 (3)
------------
51,628
------------
REAL ESTATE INVESTMENT TRUSTS (1.0%)
2,173,700 INMC Mortgage Holdings 52,033
1,040,000 Spieker Properties 38,675
------------
90,708
------------
RETAIL (1.1%)
1,034,400 Barnes & Noble 48,035 (3)
1,300,000 Wal-Mart Stores 46,150
------------
94,185
------------
TECHNOLOGY (16.6%)
7,000,000 3Com Corp. 349,562 (3)
1,020,000 Applied Materials 96,262 (3)
1,475,000 Arrow Electronics 90,620 (3)
1,296,600 Avnet, Inc. 89,709
5,120,000 Cabletron Systems 154,880 (3)
6,724,000 Compaq Computer 440,422 (3)(4)
625,000 Gateway 2000 24,453 (3)
500,000 KLA-Tencor 35,438 (3)
552,000 Komag, Inc. 9,695 (3)
1,735,200 National Semiconductor 59,431 (3)
1,350,000 Seagate Technology 51,553 (3)
490,000 Texas Instruments 55,676 (4)
------------
1,457,701
------------
TRANSPORTATION (1.0%)
1,510,600 Continental Airlines Class B 55,326 (3)
550,000 Union Pacific 35,715
------------
91,041
------------
TOTAL COMMON STOCKS (COST
$5,217,000) 7,823,512
------------
</TABLE>
B-39
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
PREFERRED STOCKS (0.1%)
52,430 Aetna Inc., Ser. C, Cv., 6.25% $ 4,614
125,000 PacifiCare Health Systems,
Ser. C, Cv., $1.00 3,500
------------
TOTAL PREFERRED STOCKS (COST
$7,557) 8,114
------------
<CAPTION>
Principal
Amount
- -----------
<C> <S> <C>
CONVERTIBLE BONDS (0.2%)
$15,000,000 International CableTel Inc.,
Cv. Sub. Notes, 7.25%, due
4/15/05 (COST $14,997) 15,075(7)
------------
U.S. TREASURY SECURITIES (10.5%)
717,980,000 U.S. Treasury Bills, 4.79% -
5.325%, due 9/4/97 -
10/16/97 716,117
15,000,000 U.S. Treasury Notes, 8.00%,
due 5/15/01 15,895
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ------------
<C> <S> <C>
$100,000,000 U.S. Treasury Bonds, 6.25%,
due 8/15/23 $ 94,625
100,000,000 U.S. Treasury Bonds, 6.00%,
due 2/15/26 91,500
------------
TOTAL U.S. TREASURY SECURITIES
(COST $923,065) 918,137
------------
SHORT-TERM CORPORATE NOTES (0.4%)
36,480,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $36,480) 36,480(5)
------------
TOTAL INVESTMENTS (100.5%)
(COST $6,199,099) 8,801,318(6)
Liabilities, less cash,
receivables and other assets
[(0.5%)] (43,111)
------------
TOTAL NET ASSETS (100.0%) $8,758,207
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-40
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. General Nutrition 2.3%
2. Staples Inc. 2.2%
3. CKE Restaurants 2.2%
4. CUC International 2.1%
5. ACE Ltd. 2.0%
6. Finova Group 1.9%
7. KLA-Tencor 1.9%
8. Dura Pharmaceuticals 1.8%
9. MBNA Corp. 1.8%
10. TJX Cos. 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (92.7%)
BASIC MATERIALS (2.0%)
108,100 Cytec Industries $ 5,277 (3)
145,000 UCAR International 6,842 (3)
-------------
12,119
-------------
CAPITAL GOODS (4.0%)
385,000 Corporate Express 6,569 (3)
278,000 Miller Industries 4,118 (3)
167,100 U.S. Filter 6,016 (3)
200,700 USA Waste Services 8,429 (3)
-------------
25,132
-------------
COMMUNICATIONS (0.2%)
66,400 NTL Inc. 1,469
-------------
CONSUMER CYCLICALS (19.4%)
390,000 Authentic Fitness 6,118
218,300 Costco Cos. 7,872 (3)
550,000 CUC International 12,925 (3)
169,900 Doubletree Corp. 8,495 (3)
220,100 GTECH Holdings 6,617 (3)
366,200 Harrah's Entertainment 8,217 (3)
133,400 Hayes Wheels 4,336 (3)
131,400 Mirage Resorts 3,523 (3)
194,500 Outdoor Systems 5,142 (3)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
200,000 Promus Hotel $ 7,762(3)
96,400 Robert Half International 5,627(3)
155,300 SABRE Group Holdings 4,775(3)
580,000 Staples Inc. 13,630(3)
146,300 Sylvan Learning Systems 5,468(3)
71,200 Tiffany & Co. 3,222
394,900 TJX Cos. 10,860
293,100 Viking Office Products 6,192(3)
-------------
120,781
-------------
CONSUMER STAPLES (14.1%)
117,600 Blyth Industries 4,344 (3)
567,600 Buffets Inc. 6,208 (3)
160,100 Cardinal Health 10,607
208,500 Cheesecake Factory 5,760 (3)
415,600 CKE Restaurants 13,403
420,900 Comcast Corp. Class A Special 9,865
151,700 Estee Lauder 7,206
207,700 Evergreen Media 9,944 (3)
507,800 General Nutrition 14,091 (3)
104,900 Luxottica Group ADR 6,123
-------------
87,551
-------------
ENERGY (6.4%)
120,600 BJ Services 8,713 (3)
280,000 Enron Oil & Gas 6,755
313,900 Noble Drilling 8,927 (3)
233,800 Oryx Energy 6,181 (3)
139,500 Seagull Energy 3,409 (3)
110,000 Tidewater Inc. 5,775
-------------
39,760
-------------
FINANCIAL SERVICES (15.6%)
150,900 ACE Ltd. 12,544
60,000 BankBoston Corp. 4,988
200,000 Bear Stearns 7,912
153,500 Equitable Cos. 6,677
160,000 EXEL Ltd. 8,780
</TABLE>
B-41
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
140,000 Finova Group $ 11,839
95,300 GreenPoint Financial 5,867
284,100 MBNA Corp. 10,920
178,800 Northern Trust 9,499
190,100 PennCorp Financial Group 6,095
129,100 Redwood Trust 4,954
140,100 State Street 6,987
-------------
97,062
-------------
HEALTH CARE (10.7%)
241,400 Acuson Corp. 6,503 (3)
316,200 Dura Pharmaceuticals 11,265 (3)
79,500 HBO & Co. 5,694
302,700 Omnicare, Inc. 8,759
100,400 Oxford Health Plans 7,342 (3)
30,700 Quintiles Transnational 2,394 (3)
72,600 Spine-Tech 3,412 (3)
175,000 Watson Pharmaceuticals 9,198 (3)
125,000 Wellpoint Health Networks 6,797 (3)
172,200 Zonagen, Inc. 5,446 (3)
-------------
66,810
-------------
TECHNOLOGY (17.6%)
130,400 Altera Corp. 6,944 (3)
90,000 Andrew Corp. 2,239 (3)
116,500 Ascend Communications 4,944 (3)
131,700 BMC Software 8,248 (3)
92,500 CBT Group ADR 6,013 (3)
100,200 CHS Electronics 3,870 (3)
114,700 Citrix Systems 5,792 (3)
270,000 ECI Telecommunications 8,049
135,900 EMC Corp. 6,973 (3)
335,200 Equifax, Inc. 9,868
163,700 KLA-Tencor 11,602 (3)
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
241,400 LSI Logic $ 7,770(3)
150,300 McAfee Associates 8,511(3)
163,600 Micron Technology 7,290
163,800 NextLevel Systems 3,286(3)
35,000 SAP AG (Ordinary Shares) 7,718
-------------
109,117
-------------
TRANSPORTATION (1.0%)
210,200 Southwest Airlines 5,886
-------------
UTILITIES (1.7%)
288,600 AES Corp. 10,678 (3)
-------------
TOTAL COMMON STOCKS (COST
$483,085) 576,365
-------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C>
U.S. TREASURY SECURITIES (3.5%)
$21,490,000 U.S. Treasury Bills, 5.165% &
5.25%, due 9/18/97 (COST
$21,437) 21,439
-------------
SHORT-TERM CORPORATE NOTES (2.9%)
18,100,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $18,100) 18,100 (5)
-------------
TOTAL INVESTMENTS (99.1%)
(COST $522,622) 615,904 (6)
Cash, receivables and other
assets, less liabilities
(0.9%) 5,839
-------------
TOTAL NET ASSETS (100.0%) $ 621,743
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-42
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman August 31, 1997
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Costco Cos. 2.1%
2. Comcast Corp. Class A Special 2.0%
3. CITICORP 1.9%
4. EXEL Ltd. 1.9%
5. Burlington Northern Santa Fe 1.9%
6. McDonald's Corp. 1.9%
7. Gap, Inc. 1.7%
8. Host Marriott 1.7%
9. Allstate Corp. 1.7%
10. Micron Technology 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ------------ -----------
<C> <S> <C>
COMMON STOCKS (94.4%)
AIRLINES (2.9%)
1,103,300 Continental Airlines Class B $ 40,408(3)
150,700 Delta Air Lines 13,036
1,760,200 Southwest Airlines 49,286
-----------
102,730
-----------
AUTO/TRUCK REPLACEMENT PARTS (1.6%)
900,000 Goodyear Tire & Rubber 55,462
-----------
AUTOMOTIVE (1.5%)
1,567,600 Chrysler Corp. 55,062
-----------
BANKING & FINANCIAL SERVICES (6.0%)
1,157,000 Capital One Financial 44,544
464,600 Chase Manhattan 51,658
537,300 CITICORP 68,573
1,497,400 Countrywide Credit Industries 50,444
-----------
215,219
-----------
BUILDING, CONSTRUCTION & REFURNISHING (1.6%)
1,300,000 USG Corp. 55,737(3)
-----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ------------ -----------
<C> <S> <C>
CHEMICALS (3.9%)
900,000 duPont $ 56,081
1,267,200 Morton International 42,135
604,500 W.R. Grace 41,597
-----------
139,813
-----------
COMMUNICATIONS (1.5%)
1,636,000 Airtouch Communications 55,317(3)
-----------
CONSUMER GOODS & SERVICES (2.2%)
692,400 Nike, Inc. 36,957
1,198,400 Tupperware Corp. 40,221
-----------
77,178
-----------
DIVERSIFIED (1.6%)
1,171,600 Tenneco Inc. 56,896
-----------
ELECTRONICS (2.0%)
1,633,500 Loral Space & Communications 28,586(3)
462,900 Raychem Corp. 43,079
-----------
71,665
-----------
ENTERTAINMENT (4.1%)
900,000 Evergreen Media 43,087(3)
1,848,900 Mirage Resorts 49,574(3)
1,059,300 Time Warner 54,554
-----------
147,215
-----------
FOOD & TOBACCO (4.5%)
1,294,300 Anheuser-Busch 55,170
1,000,000 Philip Morris 43,625
400,000 RJR Nabisco Holdings 13,925
1,697,800 UST, Inc. 49,024
-----------
161,744
-----------
FOOD PRODUCTS (0.7%)
1,150,200 IBP, Inc. 26,383
-----------
</TABLE>
B-43
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ------------ -----------
<C> <S> <C>
HEALTH CARE (3.8%)
1,134,700 Biogen, Inc. $ 44,679(3)
1,331,650 Columbia/HCA Healthcare 42,030
713,042 Novartis AG ADR 50,804
-----------
137,513
-----------
INDUSTRIAL GOODS & SERVICES (3.5%)
1,088,000 AK Steel Holding 49,232
837,200 Crown Cork & Seal 42,593
1,000,000 Owens-Illinois 34,812(3)
-----------
126,637
-----------
INSURANCE (9.7%)
522,700 Aetna Inc. 49,885
815,900 Allstate Corp. 59,612(3)
444,700 Equitable Cos. 19,344
1,245,800 EXEL Ltd. 68,363
1,283,550 Orion Capital 54,551
500,000 Progressive Corp. 49,500
729,000 Travelers Group 46,292
-----------
347,547
-----------
MEDIA (2.0%)
3,032,081 Comcast Corp. Class A Special 71,064
-----------
OIL & GAS (8.7%)
1,333,400 Cabot Corp. 36,502
748,200 ENI ADR 41,525
1,109,200 Enron Corp. 42,773
2,957,500 Gulf Canada Resources 23,845(3)
1,003,300 Noble Affiliates 46,528
820,950 Tejas Gas 38,995(3)
1,487,755 Union Pacific Resources Group 37,194
1,353,800 YPF SA ADR 44,083
-----------
311,445
-----------
OIL SERVICES (0.9%)
597,000 Tidewater Inc. 31,343
-----------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ------------ -----------
<C> <S> <C>
PAPER & FOREST PRODUCTS (2.6%)
700,000 Mead Corp. $ 49,656
727,000 Weyerhaeuser Corp. 41,984
-----------
91,640
-----------
PUBLISHING & BROADCASTING (1.7%)
1,208,800 Hollinger International 15,563
900,000 Knight-Ridder 45,563
-----------
61,126
-----------
RAILROADS (1.9%)
738,800 Burlington Northern Santa Fe 67,739
-----------
REAL ESTATE (2.8%)
3,072,100 Host Marriott 59,906(3)
873,500 Security Capital Industrial
Trust 18,453
1,607,700 Security Capital U.S. Realty 23,151(7)
-----------
101,510
-----------
RESTAURANTS (1.9%)
1,418,500 McDonald's Corp. 67,113
-----------
RETAILING (3.6%)
605,000 CVS Corp. 34,107
984,200 Harcourt General 46,811
1,300,000 Wal-Mart Stores 46,150
-----------
127,068
-----------
RETAILING & APPAREL (3.8%)
2,100,000 Costco Cos. 75,731(3)
1,350,000 Gap, Inc. 59,991
-----------
135,722
-----------
SPECIALTY CHEMICAL (1.4%)
979,300 Millipore Corp. 48,475
-----------
TECHNOLOGY (11.1%)
1,243,000 Adobe Systems 48,943
1,300,000 Analog Devices 43,063(3)
400,000 Autodesk, Inc. 17,500
1,300,000 Cabletron Systems 39,325(3)
</TABLE>
B-44
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ------------ -----------
<C> <S> <C>
1,460,600 Komag, Inc. $ 25,652(3)
1,325,000 Micron Technology 59,045
12,000 Netscape Communications 478
1,100,000 Seagate Technology 42,006(3)
467,600 Texas Instruments 53,131
660,300 Varian Associates 37,678
650,000 Western Digital 31,281(3)
-----------
398,102
-----------
UTILITIES (0.9%)
1,329,000 Unicom Corp. 31,398(3)
-----------
TOTAL COMMON STOCKS (COST
$2,675,602) 3,375,863
-----------
PREFERRED STOCKS (0.4%)
566,700 Fresenius National Medical
Care, Class D 41
280,000 Loral Space & Communications
Cv., Ser. C, 6% 15,330(7)
-----------
TOTAL PREFERRED STOCKS (COST
$14,107) 15,371
-----------
RIGHTS (0.0%)
873,500 Security Capital Industrial
Trust, Expire 9/9/97 (COST
$0) 14(3)
-----------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ------------ -----------
<C> <S> <C>
U.S. TREASURY SECURITIES (4.2%)
$150,000,000 U.S. Treasury Bills, 5.04% &
5.165%, due 9/18/97 &
10/16/97 (COST $149,249) $ 149,263
-----------
SHORT-TERM CORPORATE NOTES (1.2%)
43,550,000 General Electric Capital
Corp., 5.45%, due 9/2/97
(COST $43,550) 43,550(5)
-----------
TOTAL INVESTMENTS (100.2%)
(COST $2,882,508) 3,584,061(6)
Liabilities, less cash,
receivables and other assets
[(0.2%)] (8,488)
-----------
TOTAL NET ASSETS (100.0%) $3,575,573
-----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-45
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger&Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Intel Corp. 2.7%
2. Warner-Lambert 2.7%
3. ReliaStar Financial 2.3%
4. Johnson & Johnson 2.2%
5. Raychem Corp. 2.2%
6. A.G. Edwards 2.2%
7. CITICORP 2.1%
8. Dexter Corp. 2.1%
9. Wal-Mart Stores 2.1%
10. Mead Corp. 2.1%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (95.1%)
AUTOMOTIVE (1.8%)
90,000 Borg-Warner Automotive $ 4,691
-------------
BANKING (9.6%)
42,000 CITICORP 5,360
80,007 CoreStates Financial 4,920
230,000 Dime Bancorp 4,442
70,000 Mercantile Bancorporation 4,826
90,000 National City 5,085
-------------
24,633
-------------
BUSINESS SERVICES (1.9%)
170,000 Dun & Bradstreet 4,760
-------------
CHEMICALS (8.5%)
65,000 Air Products & Chemicals 5,302
140,300 Dexter Corp. 5,331
60,000 Minerals Technologies 2,385
150,000 Morton International 4,987
50,000 Perkin-Elmer 3,700
-------------
21,705
-------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
CONSUMER GOODS & SERVICES (2.7%)
90,000 Kimberly-Clark $ 4,270
20,000 Procter & Gamble 2,661
-------------
6,931
-------------
DIVERSIFIED (1.8%)
60,000 Tyco International 4,706
-------------
ENERGY (1.8%)
100,000 Noble Affiliates 4,638
-------------
FINANCIAL SERVICES (8.0%)
140,000 A.G. Edwards 5,565
120,000 ADVANTA Corp. Class A 3,975
64,000 ADVANTA Corp. Class B 2,032
100,000 Fannie Mae 4,400
70,000 Travelers Group 4,445
-------------
20,417
-------------
FOOD & BEVERAGE (1.6%)
85,200 McDonald's Corp. 4,031
-------------
FURNISHINGS (1.8%)
110,000 Leggett & Platt 4,730
-------------
HEALTH CARE (8.3%)
200,000 Invacare Corp. 4,200
100,000 Johnson & Johnson 5,669
100,000 SmithKline Beecham ADR 4,331
55,000 Warner-Lambert 6,988
-------------
21,188
-------------
INDUSTRIAL & COMMERCIAL PRODUCTS (2.2%)
60,000 Raychem Corp. 5,584
-------------
INSURANCE (5.9%)
60,000 Chubb Corp. 4,013
80,000 ReliaStar Financial 5,980
70,000 St. Paul Cos. 5,136
-------------
15,129
-------------
LODGING (1.6%)
75,000 HFS, Inc. 4,177 (3)
-------------
</TABLE>
B-46
<PAGE>
August 31, 1997
- --------------------------------------------------------------------------------
Socially Responsive Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
MACHINERY & EQUIPMENT (1.8%)
178,400 Cincinnati Milacron $ 4,594
-------------
OIL & GAS (2.6%)
200,000 Enserch Exploration 1,800 (3)
200,000 Seagull Energy 4,887 (3)
-------------
6,687
-------------
OIL SERVICES (3.7%)
100,000 Dresser Industries 4,175
100,000 Tidewater Inc. 5,250
-------------
9,425
-------------
PAPER & FOREST PRODUCTS (2.7%)
70,000 American Pad & Paper 1,610 (3)
75,000 Mead Corp. 5,320
-------------
6,930
-------------
PUBLISHING & BROADCASTING (2.9%)
120,700 CMP Media 3,229 (3)
140,000 Valassis Communications 4,252 (3)
-------------
7,481
-------------
RAILROADS (1.4%)
104,600 Illinois Central 3,511
-------------
RECYCLING (1.1%)
150,000 IMCO Recycling 2,878
-------------
RETAIL STORES (2.1%)
90,000 Nordstrom, Inc. 5,265
-------------
RETAILING (4.1%)
145,000 Costco Cos. 5,229 (3)
150,000 Wal-Mart Stores 5,325
-------------
10,554
-------------
TECHNOLOGY (8.0%)
100,000 AMP, Inc. 5,000
130,000 Cabletron Systems 3,933 (3)
76,000 Hewlett-Packard 4,660
76,000 Intel Corp. 7,001
-------------
20,594
-------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- -------------
<C> <S> <C>
TELECOMMUNICATIONS (5.8%)
300,000 Metromedia International Group $ 3,563 (3)
114,000 Southern New England
Telecommunications 4,360
50,000 Telephone & Data Systems 1,975
170,000 WorldCom Inc. 5,089 (3)
-------------
14,987
-------------
UTILITIES (1.4%)
115,000 Brooklyn Union Gas 3,472
-------------
TOTAL COMMON STOCKS (COST
$176,412) 243,698
-------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C>
U.S. TREASURY SECURITIES (4.7%)
$12,097,000 U.S. Treasury Bills, 4.90% -
5.34%, due 9/4/97 -
10/16/97 (COST $12,052) 12,052(5)
-------------
CERTIFICATES OF DEPOSIT (0.0%)
100,000 Self Help Credit Union, 5.33%,
due 11/25/97 (COST $100) 100 (5)
-------------
TOTAL INVESTMENTS (99.8%)
(COST $188,564) 255,850 (6)
Cash, receivables and other
assets, less liabilities
(0.2%) 431
-------------
TOTAL NET ASSETS (100.0%) $ 256,281
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
B-47
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
August 31, 1997
- ----------------------------------------------------------------------
Equity Managers Trust
1) Investment securities of each Portfolio are valued at the latest sales price;
securities for which no sales were reported, unless otherwise noted, are
valued at the mean between the closing bid and asked prices. The Portfolios
value all other securities by a method that the trustees of Equity Managers
Trust believe accurately reflects fair value. Foreign security prices are
furnished by independent quotation services expressed in local currency
values. Foreign security prices are translated from the local currency into
U.S. dollars using current exchange rates. Short-term debt securities with
less than 60 days until maturity may be valued at cost which, when combined
with interest earned, approximates market value.
2) Affiliated Issuer (see Note E of Notes to Financial Statements).
3) Non-income producing security.
4) The following securities were held in escrow at August 31, 1997 to cover
outstanding call options written:
<TABLE>
<CAPTION>
MARKET VALUE
SECURITIES AND OF PREMIUM ON MARKET VALUE
NEUBERGER&BERMAN SHARES OPTIONS SECURITIES OPTIONS OF OPTIONS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOCUS PORTFOLIO 162,500 Compaq Computer $10,643,750 $1,208,511 $3,087,500
October 1997 @ 48
150,000 Compaq Computer $ 9,825,000 $ 776,674 $2,193,750
October 1997 @ 52
GUARDIAN PORTFOLIO 250,000 Compaq Computer $16,375,000 $1,315,706 $3,656,250
October 1997 @ 52
249,250 Compaq Computer $16,325,875 $1,073,052 $3,364,875
October 1997 @ 54
250,000 Compaq Computer $16,375,000 $ 861,351 $2,843,750
October 1997 @ 56
400,000 MGIC Investment $20,125,000 $ 893,970 $2,225,000
September 1997 @ 45
100,000 Texas Instruments $11,362,500 $1,346,955 $ 262,500
September 1997 @ 120
</TABLE>
5) At cost, which approximates market value.
B-48
<PAGE>
6) At August 31, 1997, selected Portfolio information on a Federal income tax
basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
NEUBERGER&BERMAN COST APPRECIATION DEPRECIATION APPRECIATION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS PORTFOLIO $1,003,330,000 $ 591,929,000 $ 6,483,000 $ 585,446,000
GENESIS PORTFOLIO 858,349,000 276,077,000 3,797,000 272,280,000
GUARDIAN PORTFOLIO 6,199,356,000 2,675,595,000 73,633,000 2,601,962,000
MANHATTAN PORTFOLIO 522,622,000 103,997,000 10,715,000 93,282,000
PARTNERS PORTFOLIO 2,885,221,000 733,767,000 34,927,000 698,840,000
SOCIALLY RESPONSIVE PORTFOLIO 188,591,000 69,292,000 2,033,000 67,259,000
</TABLE>
7) Security exempt from registration under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers under Rule 144A. At August 31, 1997, these
securities amounted to $3,757,000 or .3% of net assets for Neuberger&Berman
Genesis Portfolio, $15,075,000 or .2% of net assets for Neuberger&Berman
Guardian Portfolio, and $38,481,000 or 1.1% of net assets for
Neuberger&Berman Partners Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS
B-49
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) PORTFOLIO PORTFOLIO
-------------------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of Investments:
Unaffiliated issuers $ 1,470,876 $ 1,130,629
Non-controlled affiliated issuers 117,900 --
-------------------------------
1,588,776 1,130,629
Cash 8 26
Deferred organization costs (Note A) 8 2
Dividends and interest receivable 959 466
Prepaid expenses and other assets 33 17
Receivable for securities sold 13,792 85
-------------------------------
1,603,576 1,131,225
-------------------------------
LIABILITIES
Option contracts written, at market value (Note A) 5,281 --
Payable for collateral on securities loaned (Note A) 3,431 15,251
Payable for securities purchased 20,629 31,635
Payable to investment manager (Note B) 660 581
Accrued expenses 134 107
-------------------------------
30,135 47,574
-------------------------------
NET ASSETS Applicable to Investors' Beneficial Interests $ 1,573,441 $ 1,083,651
-------------------------------
NET ASSETS consist of:
Paid-in capital $ 989,214 $ 811,371
Net unrealized appreciation in value of investment securities
and option contracts written 584,227 272,280
-------------------------------
NET ASSETS $ 1,573,441 $ 1,083,651
-------------------------------
*Cost of investments:
Unaffiliated issuers $ 900,387 $ 858,349
Non-controlled affiliated issuers 100,866 --
-------------------------------
Total cost of investments $ 1,001,253 $ 858,349
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-50
<PAGE>
August 31, 1997
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
GUARDIAN MANHATTAN PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 7,690,732 $ 615,904 $ 3,584,061 $ 255,850
Non-controlled affiliated issuers 1,110,586 -- -- --
-----------------------------------------------------------------
8,801,318 615,904 3,584,061 255,850
Cash 13 12 19 1
Deferred organization costs (Note A) 23 9 16 10
Dividends and interest receivable 6,874 165 2,833 279
Prepaid expenses and other assets 175 18 78 4
Receivable for securities sold 16,328 20,605 27,925 2,969
-----------------------------------------------------------------
8,824,731 636,713 3,614,932 259,113
-----------------------------------------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) 12,352 -- -- --
Payable for collateral on securities loaned
(Note A) 1,566 -- 5,761 --
Payable for securities purchased 49,050 14,593 32,033 2,668
Payable to investment manager (Note B) 3,281 282 1,377 122
Accrued expenses 275 95 188 42
-----------------------------------------------------------------
66,524 14,970 39,359 2,832
-----------------------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 8,758,207 $ 621,743 $ 3,575,573 $ 256,281
-----------------------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 6,162,849 $ 528,461 $ 2,874,020 $ 188,995
Net unrealized appreciation in value of
investment securities and option contracts
written 2,595,358 93,282 701,553 67,286
-----------------------------------------------------------------
NET ASSETS $ 8,758,207 $ 621,743 $ 3,575,573 $ 256,281
-----------------------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 5,377,996 $ 522,622 $ 2,882,508 $ 188,564
Non-controlled affiliated issuers 821,103 -- -- --
-----------------------------------------------------------------
Total cost of investments $ 6,199,099 $ 522,622 $ 2,882,508 $ 188,564
-----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-51
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) PORTFOLIO PORTFOLIO
---------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 12,565 $ 4,129
Dividend income -- non-controlled affiliated
issuers 406 --
Interest income 1,187 1,749
Foreign taxes withheld (Note A) (28) --
---------------------------
Total income 14,130 5,878
---------------------------
Expenses:
Investment management fee (Note B) 6,610 4,420
Accounting fees 10 10
Amortization of deferred organization and
initial offering expenses (Note A) 9 2
Auditing fees 41 23
Custodian fees (Note B) 288 172
Insurance expense 24 5
Interest expense (Note D) -- --
Legal fees 17 41
Trustees' fees and expenses 17 10
Miscellaneous 1 11
---------------------------
Total expenses 7,017 4,694
Fee waived by investment manager and/or
expenses reduced by custodian fee
arrangement (Note B) (6) (544)
---------------------------
Total net expenses 7,011 4,150
---------------------------
Net investment income 7,119 1,728
---------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities
sold in unaffiliated issuers 176,798 18,411
Net realized loss on investment securities
sold in non-controlled affiliated issuers -- --
Net realized loss on option contracts written
(Note A) (327) --
Change in net unrealized appreciation of
investment securities and option contracts
written 298,137 211,059
---------------------------
Net gain on investments 474,608 229,470
---------------------------
Net increase in net assets resulting from
operations $ 481,727 $ 231,198
---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-52
<PAGE>
For the Year Ended August 31, 1997
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
GUARDIAN MANHATTAN PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 78,254 $ 3,701 $ 35,204 $ 2,887
Dividend income -- non-controlled affiliated
issuers 3,303 -- -- --
Interest income 20,405 934 6,410 612
Foreign taxes withheld (Note A) (798) (63) (182) (6)
----------------------------------------------------------------
Total income 101,164 4,572 41,432 3,493
----------------------------------------------------------------
Expenses:
Investment management fee (Note B) 32,887 3,093 12,498 1,123
Accounting fees 10 10 10 10
Amortization of deferred organization and
initial offering expenses (Note A) 26 10 18 7
Auditing fees 49 37 43 20
Custodian fees (Note B) 1,113 205 457 91
Insurance expense 130 13 44 3
Interest expense (Note D) -- 4 -- --
Legal fees 18 29 19 19
Trustees' fees and expenses 70 10 28 7
Miscellaneous 6 8 2 --
----------------------------------------------------------------
Total expenses 34,309 3,419 13,119 1,280
Fee waived by investment manager and/or
expenses reduced by custodian fee
arrangement (Note B) (3) (1) (3) (1)
----------------------------------------------------------------
Total net expenses 34,306 3,418 13,116 1,279
----------------------------------------------------------------
Net investment income 66,858 1,154 28,316 2,214
----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities
sold in unaffiliated issuers 906,206 180,525 531,668 11,478
Net realized loss on investment securities
sold in non-controlled affiliated issuers (26,691) -- -- --
Net realized loss on option contracts written
(Note A) (8,365) -- -- --
Change in net unrealized appreciation of
investment securities and option contracts
written 1,570,338 10,646 473,597 44,043
----------------------------------------------------------------
Net gain on investments 2,441,488 191,171 1,005,265 55,521
----------------------------------------------------------------
Net increase in net assets resulting from
operations $ 2,508,346 $ 192,325 $ 1,033,581 $ 57,735
----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-53
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
PORTFOLIO PORTFOLIO
Year Year
Ended Ended
August 31, August 31,
(000'S OMITTED) 1997 1996 1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 7,119 $ 11,390 $ 1,728 $ 471
Net realized gain on investments 176,471 51,701 18,411 5,660
Change in net unrealized
appreciation (depreciation) of
investments 298,137 (21,728) 211,059 27,635
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 481,727 41,363 231,198 33,766
-------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 156,839 231,514 609,195 110,968
Reductions (187,496) (119,679) (16,606) (27,030)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (30,657) 111,835 592,589 83,938
-------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 451,070 153,198 823,787 117,704
NET ASSETS:
Beginning of year 1,122,371 969,173 259,864 142,160
-------------------------------------------------------------
End of year $ 1,573,441 $ 1,122,371 $ 1,083,651 $ 259,864
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-54
<PAGE>
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO
Year Year Year
Ended Ended Ended
August 31, August 31, August 31,
1997 1996 1997 1996 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 66,858 $ 97,934 $ 1,154 $ 829 $ 28,316 $ 23,394
Net realized gain on investments 871,150 307,410 180,525 59,509 531,668 240,765
Change in net unrealized appreciation of investments 1,570,338 (111,192) 10,646 (74,167) 473,597 (30,217)
--------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 2,508,346 294,152 192,325 (13,829) 1,033,581 233,942
--------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 592,646 1,540,028 41,417 70,833 715,909 309,196
Reductions (575,327) (214,834) (179,425) (134,984) (173,520) (167,061)
--------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests 17,319 1,325,194 (138,008) (64,151) 542,389 142,135
--------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 2,525,665 1,619,346 54,317 (77,980) 1,575,970 376,077
NET ASSETS:
Beginning of year 6,232,542 4,613,196 567,426 645,406 1,999,603 1,623,526
--------------------------------------------------------------------
End of year $8,758,207 $6,232,542 $ 621,743 $ 567,426 $3,575,573 $1,999,603
--------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-55
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
RESPONSIVE
PORTFOLIO
Year
Ended
August 31,
(000'S OMITTED) 1997 1996
-----------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income $ 2,214 $ 1,307
Net realized gain on investments 11,478 11,385
Change in net unrealized appreciation of investments 44,043 9,035
-----------------------------
Net increase (decrease) in net assets resulting from
operations 57,735 21,727
-----------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 57,455 45,974
Reductions (17,394) (5,963)
-----------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests 40,061 40,011
-----------------------------
NET INCREASE (DECREASE) IN NET ASSETS 97,796 61,738
NET ASSETS:
Beginning of year 158,485 96,747
-----------------------------
End of year $ 256,281 $ 158,485
-----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
- ----------------------------------------------------------------------
Equity Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger&Berman Focus Portfolio ("Focus"), Neuberger&Berman Genesis
Portfolio ("Genesis"), Neuberger&Berman Guardian Portfolio ("Guardian"),
Neuberger&Berman Manhattan Portfolio ("Manhattan"), Neuberger& Berman
Partners Portfolio ("Partners"), and Neuberger&Berman Socially Responsive
Portfolio ("Socially Responsive") (collectively, the "Portfolios") are
separate operating series of Equity Managers Trust ("Managers Trust"), a New
York common law trust organized as of December 1, 1992. Managers Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). Other regulated
investment companies sponsored by Neuberger&Berman Management Incorporated
("Management"), whose financial statements are not presented herein, also
invest in Managers Trust.
The assets of each series belong only to that series, and the liabilities
of each series are borne solely by that series and no other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolios' Schedule of Investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange of such currency against the U.S.
dollar to determine the value of investments, other assets and liabilities.
Purchase and sale prices of securities, and income and expenses are
translated into U.S. dollars at the prevailing rate of exchange on the
respective dates of such transactions.
4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date or, for certain foreign dividends, as soon as the Portfolio
becomes aware of the dividends. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, including original issue discount, where
applicable, and accretion of discount on short-term investments, is recorded
on the accrual basis. Realized gains and losses from securities transactions
and foreign currency transactions are recorded on the basis of identified
cost.
5) FEDERAL INCOME TAXES: Managers Trust intends to comply with the requirements
of the Internal Revenue Code of 1986, as amended. Each Portfolio of Managers
Trust also intends to conduct its operations so that each of its investors
B-57
<PAGE>
will be able to qualify as a regulated investment company. Each Portfolio
will be treated as a partnership for U.S. Federal income tax purposes and is
therefore not subject to U.S. Federal income tax.
6) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign
tax authorities, net of refunds recoverable.
7) ORGANIZATION EXPENSES: Expenses incurred by each Portfolio in connection with
its organization are being amortized by each Portfolio on a straight-line
basis over a five-year period. At August 31, 1997, the unamortized balance of
such expenses amounted to $7,998, $1,763, $23,447, $8,926, $16,249, and
$10,339, for Focus, Genesis, Guardian, Manhattan, Partners, and Socially
Responsive, respectively.
8) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by Managers Trust with respect to any two or more
Portfolios are allocated in proportion to the net assets of such Portfolios,
except where a more appropriate allocation of expenses to each Portfolio can
otherwise be made fairly. Expenses directly attributable to a Portfolio are
charged to that Portfolio.
9) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered call
option are recorded in the liability section of each Portfolio's Statement of
Assets and Liabilities and are subsequently adjusted to the current market
value. When an option is exercised, closed, or expired, the Portfolio
realizes a gain or loss and the liability is eliminated. A Portfolio bears
the risk of a decline in the price of the security during the period,
although any potential loss during the period would be reduced by the amount
of the option premium received. In general, written covered call options may
serve as a partial hedge against decreases in value in the underlying
securities to the extent of the premium received. All securities covering
outstanding options are held in escrow by the custodian bank.
Summary of option transactions for the year ended August 31, 1997:
<TABLE>
<CAPTION>
VALUE
WHEN
FOCUS NUMBER WRITTEN
- --------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/96 0 $ 0
CONTRACTS WRITTEN 11,918 5,472,524
CONTRACTS EXPIRED (600) (125,696)
CONTRACTS EXERCISED (4,268) (1,153,282)
CONTRACTS CLOSED (5,800) (2,208,361)
-------------------------
CONTRACTS OUTSTANDING 8/31/97 1,250 $ 1,985,185
-------------------------
</TABLE>
B-58
<PAGE>
<TABLE>
<CAPTION>
VALUE
WHEN
GUARDIAN NUMBER WRITTEN
- ---------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/96 0 $ 0
CONTRACTS WRITTEN 42,060 20,271,636
CONTRACTS EXPIRED (60) (13,319)
CONTRACTS EXERCISED (13,004) (4,664,985)
CONTRACTS CLOSED (20,999) (10,102,298)
--------------------------
CONTRACTS OUTSTANDING 8/31/97 7,997 $ 5,491,034
--------------------------
</TABLE>
10) SECURITY LENDING: Portfolio securities loans involve certain risks in the
event a borrower should fail financially, including delays or inability to
recover the lent securities or foreclose against the collateral. The
investment manager, under the general supervision of the Trusts' Boards of
Trustees, monitors the creditworthiness of the parties to whom the
Portfolios make security loans. The Portfolios will not lend securities on
which covered call options have been written, or lend securities on terms
which would prevent each of their investors from qualifying as a regulated
investment company. Portfolio securities loans to Neuberger&Berman, LLC
("Neuberger"), the Portfolios' principal broker and sub-adviser, are made in
accordance with an exemptive order issued by the Securities and Exchange
Commission under the 1940 Act. The Portfolios receive cash as collateral
against the lent securities, which must be maintained at not less than 100%
of the market value of the lent securities during the period of the loan.
The Portfolios receive income earned on the lent securities and a portion of
the income earned on the cash collateral. During the year ended August 31,
1997, Focus, Genesis, Guardian, Manhattan, Partners, and Socially Responsive
lent securities to Neuberger. At August 31, 1997, the value of the
securities loaned and the value of the collateral were as follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
- ------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 3,400,231 $ 3,430,700
GENESIS 14,670,344 15,251,200
GUARDIAN 1,533,081 1,565,700
PARTNERS 5,298,063 5,761,000
</TABLE>
11) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
with institutions that each Portfolio's investment manager has determined
are creditworthy. Each repurchase agreement is recorded at cost. A Portfolio
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable a Portfolio to
obtain those securities in the event of a default under the repurchase
agreement. A Portfolio monitors, on a
B-59
<PAGE>
daily basis, the value of the securities transferred to ensure that their
value, including accrued interest, is greater than amounts owed to a
Portfolio under each such repurchase agreement.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
(except Genesis) pays Management a fee at the annual rate of 0.55% of the first
$250 million of that Portfolio's average daily net assets, 0.525% of the next
$250 million, 0.50% of the next $250 million, 0.475% of the next $250 million,
0.45% of the next $500 million, and 0.425% of average daily net assets in excess
of $1.5 billion. Genesis has contracted to pay Management a fee for investment
management services at the annual rate of 0.85% of the first $250 million of
that Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75%
of the next $250 million, 0.70% of the next $250 million, and 0.65% of average
daily net assets in excess of $1 billion. Management has voluntarily agreed to
waive a portion of the management fee borne directly by Genesis and indirectly
by Neuberger&Berman Genesis Trust to reduce the annual fee by 0.10% per annum of
average daily net assets of Genesis, effective May 1, 1995.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger, a member firm of The New York Stock Exchange and sub-
adviser to each Portfolio. Neuberger is retained by Management to furnish it
with investment recommendations and research information without added cost to
each Portfolio. Several individuals who are officers and/or trustees of Managers
Trust are also principals of Neuberger and/or officers and/or directors of
Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Custodian fees was a reduction of $5,870,
$4,507, $3,355, $839, $3,408, and $509, for Focus, Genesis, Guardian, Manhattan,
Partners, and Socially Responsive, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the year ended August 31, 1997, there were purchase and sale
transactions (excluding short-term securities and option contracts written) as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 824,820,266 $ 831,328,130
GENESIS 633,503,648 94,550,616
GUARDIAN 3,570,949,280 3,874,878,295
MANHATTAN 508,485,851 692,207,887
PARTNERS 2,566,392,485 1,986,851,872
SOCIALLY RESPONSIVE 136,770,015 98,492,220
</TABLE>
B-60
<PAGE>
During the year ended August 31, 1997, there were brokerage commissions on
securities paid to Neuberger and other brokers as follows:
<TABLE>
<CAPTION>
OTHER
NEUBERGER BROKERS TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOCUS $ 920,202 $ 905,291 $ 1,825,493
GENESIS 516,040 344,057 860,097
GUARDIAN 4,806,913 3,733,422 8,540,335
MANHATTAN 458,679 512,347 971,026
PARTNERS 3,508,790 1,904,663 5,413,453
SOCIALLY RESPONSIVE 232,238 73,402 305,640
</TABLE>
In addition, Neuberger's share of the total interest income earned for the
year ended August 31, 1997, from the collateralization of securities loaned to
or through Neuberger was $898,127, $69,948, $3,523,486, $326,403, $688,624, and
$51,639, for Focus, Genesis, Guardian, Manhattan, Partners, and Socially
Responsive, respectively.
NOTE D -- COMBINED LINE OF CREDIT:
At August 31, 1997, Genesis and Manhattan were two of the holders of an
unsecured $60,000,000 combined line of credit with State Street Bank and Trust
Company, to be used only for temporary or emergency purposes. Interest is
charged on borrowings under this agreement at the overnight Federal Funds Rate
plus .75% per annum. A facility fee of .1% per annum of the available line of
credit is charged, of which Genesis and Manhattan each has agreed to pay its pro
rata share, based on the ratio of its individual net assets to the net assets of
all the participants at the time the fee is due and payable. The fee is paid
quarterly in arrears, commencing June 30, 1997. No compensating balance is
required. Another investment company managed by Management also participates in
the line of credit on the same terms. Because several investment companies
participate, there is no assurance that an individual Portfolio will have access
to the entire $60,000,000 at any particular time. Genesis and Manhattan had no
loans outstanding pursuant to this line of credit at August 31, 1997, nor had
Genesis utilized this line of credit at anytime prior to that date. The
following information relates to short-term borrowings for the year ended August
31, 1997, for Manhattan. The average loan amount outstanding (total of daily
outstanding principal balances divided by the number of days with debt
outstanding) during the period was $4,550,758, the average interest rate was
6.13%, and the total interest expense on such borrowings was $3,875.
B-61
<PAGE>
NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
<TABLE>
<CAPTION>
BALANCE OF BALANCE OF
SHARES GROSS GROSS SHARES
HELD PURCHASES SALES HELD VALUE
FOCUS AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1996 ADDITIONS REDUCTIONS 1997 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVANTA CORP. CLASS A 0 1,691,500 0 1,691,500 $56,030,938
DT INDUSTRIES 0 1,045,000 0 1,045,000 31,088,750
SIERRA HEALTH SERVICES 0 934,500 0 934,500 30,780,094
</TABLE>
<TABLE>
<CAPTION>
BALANCE OF BALANCE OF
SHARES GROSS GROSS SHARES
HELD PURCHASES SALES HELD VALUE
GUARDIAN AUGUST 31, AND AND AUGUST 31, AUGUST 31,
NAME OF ISSUER: 1996 ADDITIONS REDUCTIONS 1997 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AGCO CORP. 0 4,737,400 0 4,737,400 $ 153,965,500
CAPITAL ONE FINANCIAL 2,424,000 2,036,000 15,000 4,445,000 171,132,500
COLTEC INDUSTRIES 4,778,900 115,000 0 4,893,900 109,501,013
COUNTRYWIDE CREDIT INDUSTRIES 4,800,000 645,000 0 5,445,000 183,428,438
FINGERHUT COS.** 3,241,700 0 3,241,700 0 0
FOUNDATION HEALTH SYSTEMS 3,020,000 6,045,800 0 9,065,800 288,405,763
HEALTHSOURCE INC.** 4,190,000 0 4,190,000 0 0
HOSPITALITY PROPERTIES TRUST** 1,442,600 0 1,442,600 0 0
J & L SPECIALTY STEEL** 3,278,200 10,000 3,288,200 0 0
UCAR INTERNATIONAL 0 3,404,400 0 3,404,400 160,645,125
USFREIGHTWAYS CORP.** 1,257,000 0 1,257,000 0 0
ZEIGLER COAL HOLDING 1,702,000 0 0 1,702,000 43,507,375
</TABLE>
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE
PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES.
**AT AUGUST 31, 1997, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED
WITH THE PORTFOLIO.
B-62
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
PORTFOLIO PORTFOLIO
Period Period
from from
August 2, August 2,
1993(1) 1993(1)
to August to August
Year Ended August 31, 31, Year Ended August 31, 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE
NET ASSETS:
Gross
Expenses(2) .53% .54% -- -- -- .77% .85% -- -- --
-----------------------------------------------------------------------------------------------------------
Net Expenses .53% .54% .57% .58% .58%(3) .77%(4) .85%(4) .94%(4) .98% 1.07%(3)
-----------------------------------------------------------------------------------------------------------
Net Investment
Income .54% 1.04% 1.05% 1.16% 1.46%(3) .32%(4) .27%(4) .25%(4) .18% .37%(3)
-----------------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate 63% 39% 36% 52% 4% 18% 21% 37% 63% 3%
-----------------------------------------------------------------------------------------------------------
Average Commission
Rate Paid $0.0555 $0.0578 -- -- -- $0.0565 $0.0576 -- -- --
-----------------------------------------------------------------------------------------------------------
Net Assets, End of
Year (in
millions) $1,573.4 $1,122.4 $969.2 $645.0 $574.0 $1,083.7 $259.9 $142.2 $138.6 $118.6
-----------------------------------------------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements. For Genesis, these ratios include the management fee waiver.
3) Annualized.
4) Had Management not waived a portion of the management fee, the annualized
ratios to average daily net assets would have been:
<TABLE>
<CAPTION>
Year Ended August 31,
GENESIS 1997 1996 1995
- -------------------------------------------------------
<S> <C> <C> <C>
Net Expenses .87% .95% .97%
Net Investment Income .22% .17% .22%
</TABLE>
B-63
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN
PORTFOLIO PORTFOLIO
Period
Period from from
August 2, August 2,
1993(1) 1993(1)
to August to August
Year Ended August 31, 31, Year Ended August 31, 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET
ASSETS:
Gross Expenses(2) .46% .46% -- -- -- .59% .58% -- -- --
-------------------------------------------------------------------------------------------------
Net Expenses .46% .46% .48% .50% .51%(3) .59% .58% .59% .59% .59%(3)
-------------------------------------------------------------------------------------------------
Net Investment Income .89% 1.72% 1.72% 1.66% 2.45%(3) .20% .13% .42% .53% .55%(3)
-------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 50% 37% 26% 24% 3% 89% 53% 44% 50% 3%
-------------------------------------------------------------------------------------------------
Average Commission Rate
Paid $0.0538 $0.0580 -- -- -- $0.0573 $0.0373 -- -- --
-------------------------------------------------------------------------------------------------
Net Assets, End of Year
(in millions) $8,758.2 $6,232.5 $4,613.2 $2,480.3 $1,777.6 $621.7 $567.4 $645.4 $521.7 $536.8
-------------------------------------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements.
3) Annualized.
B-64
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
PARTNERS SOCIALLY RESPONSIVE
PORTFOLIO PORTFOLIO
Period from Period from
August 2, 1993(1) March 14, 1994(1)
Year Ended August 31, to August 31, Year Ended August 31, to August 31,
1997 1996 1995 1994 1993 1997 1996 1995 1994
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET
ASSETS:
Gross Expenses(2) .48% .51% -- -- -- .63% .65% -- --
-------------------------------------------------------------------------------------------------------
Net Expenses .48% .51% .53% .54% .54%(3) .63% .65% .68% .69%(3)
-------------------------------------------------------------------------------------------------------
Net Investment Income 1.05% 1.26% 1.13% .75% 1.19%(3) 1.08% 1.02% 1.18% 1.33%(3)
-------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 77% 96% 98% 75% 8% 51% 53% 58% 14%
-------------------------------------------------------------------------------------------------------
Average Commission Rate
Paid $0.0522 $0.0494 -- -- -- $0.0568 $0.0587 -- --
-------------------------------------------------------------------------------------------------------
Net Assets, End of Year
(in millions) $3,575.6 $1,999.6 $1,623.5 $1,340.3 $1,182.1 $256.3 $158.5 $96.7 $70.7
-------------------------------------------------------------------------------------------------------
</TABLE>
1) The date investment operations commenced.
2) For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without reductions related to expense offset
arrangements.
3) Annualized.
B-65
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger&Berman Manhattan Portfolio and
Neuberger&Berman Socially Responsive Portfolio
We have audited the accompanying statements of assets and liabilities of
Neuberger&Berman Manhattan Portfolio and Neuberger&Berman Socially Responsive
Portfolio (collectively the "Portfolios"), including the schedules of
investments, as of August 31, 1997, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Neuberger&Berman Manhattan Portfolio and Neuberger&Berman Socially Responsive
Portfolio as of August 31, 1997, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
B-66
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Board of Trustees
Equity Managers Trust and
Owners of Beneficial Interest of
Neuberger&Berman Focus Portfolio
Neuberger&Berman Genesis Portfolio
Neuberger&Berman Guardian Portfolio and
Neuberger&Berman Partners Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Neuberger&Berman Focus Portfolio,
Neuberger&Berman Genesis Portfolio, Neuberger&Berman Guardian Portfolio, and
Neuberger&Berman Partners Portfolio, four of the series comprising Equity
Managers Trust (the "Trust"), as of August 31, 1997, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1997, by correspondence with the custodian and
brokers or other appropriate auditing procedures where replies from brokers were
not received. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above mentioned series of Equity Managers Trust at August 31, 1997, the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
[SIGNATURE]
Boston, Massachusetts /s/ ERNST & YOUNG LLP
October 3, 1997
B-67
<PAGE>
OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
Institutional Services 800-366-6264
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
INDEPENDENT ACCOUNTANTS/AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Lawrence Zicklin
PRESIDENT AND TRUSTEE
Faith Colish
TRUSTEE
Donald M. Cox
TRUSTEE
Howard A. Mileaf
TRUSTEE
Edward I. O'Brien
TRUSTEE
John T. Patterson, Jr.
TRUSTEE
John P. Rosenthal
TRUSTEE
Cornelius T. Ryan
TRUSTEE
Gustave H. Shubert
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
Neuberger&Berman Management Inc., Neuberger&Berman Focus Trust, Neuberger&Berman
Genesis Trust, Neuberger&Berman Guardian Trust, Neuberger&Berman Manhattan
Trust, Neuberger&Berman Partners Trust, and Neuberger&Berman Socially Responsive
Trust are registered service marks of Neuberger&Berman Management Inc.
- -C- 1997 Neuberger&Berman Management Inc.
C-1
<PAGE>
Notice to Shareholders (Unaudited)
For Neuberger&Berman Guardian Trust 75% of the dividends distributed during
the fiscal year ended August 31, 1997 qualifies for the dividend received
deduction for corporate shareholders. The Fund will notify shareholders in
January 1998 of the applicable percentage of qualifying dividends for corporate
shareholders for use in preparing 1997 income tax returns.
C-2
<PAGE>
NEUBERGER&BERMAN MANAGEMENT INC.-Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
SHAREHOLDER SERVICES
800-877-9700
INSTITUTIONAL SERVICES
800-366-6264
Statistics and projections in this report are derived from sources
deemed to be reliable but cannot be regarded as a representation of
future results of the Funds. This report is prepared for the general infor-
mation of shareholders and is not an offer of shares of the Funds.
Shares are sold only through the currently effective prospectus, which
must precede or accompany this report.
[LOGO] PRINTED ON RECYCLED PAPER
NBETAR020897
