As filed with the Securities and Exchange Commission on December 12, 1997
1933 Act Registration No. 33-64368
1940 Act Registration No. 811-7784
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [ 13 ] [ X ]
---- -----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
-----
Amendment No. [ 11 ] [ X ]
---- -----
(Check appropriate box or boxes)
NEUBERGER & BERMAN EQUITY TRUST
-------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger & Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
- ---
X on December 15, 1997 pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1)
- ---
on _______________, pursuant to paragraph (a)(1)
- ---
75 days after filing pursuant to paragraph (a)(2)
- ---
on _______________, pursuant to paragraph (a)(2)
- ---
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and filed the notice required by
such rule for its 1997 fiscal year on November 25, 1997.
Neuberger & Berman Equity Trust is a "master/feeder fund." This
Post-Effective Amendment No. 13 includes a signature page for the master fund,
Equity Managers Trust, and appropriate officers and trustees thereof.
Page _______ of _______
Exhibit Index Begins on
Page _______
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 13 ON FORM N-1A
This post-effective amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 13 on Form N-1A
Cross Reference Sheets
Neuberger & Berman Focus Trust
Neuberger & Berman Genesis Trust
Neuberger & Berman Guardian Trust
Neuberger & Berman Manhattan Trust
Neuberger & Berman Partners Trust
- ---------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Neuberger & Berman Guardian Trust
- ---------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Neuberger & Berman NYCDC Socially Responsive Trust
- --------------------------------------------------
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
- 2 -
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 13 ON FORM N-1A
Cross Reference Sheets
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for
Neuberger & Berman Focus Trust
Neuberger & Berman Genesis Trust
Neuberger & Berman Guardian Trust
Neuberger & Berman Manhattan Trust
Neuberger & Berman Partners Trust
---------------------------------
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; Special Information
Regarding Organization,
Capitalization, and Other Matters
Item 5. Management of the Fund Management and Administration; Other
Information; Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other
Securities Distributions, and Taxes; Special
Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Shareholder Services; Share Prices and
Being Offered Net Asset Value; Management and
Administration
Item 8. Redemption or Repurchase Shareholder Services; Share Prices and
Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Organization
History
Item 13. Investment Objectives Investment Information; Certain Risk
and Policies Considerations
Item 14. Management of the Fund Trustees And Officers
- 3 -
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 15. Control Persons and Not Applicable
Principal Holders of
Securities
Item 16. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional
Exchange Information; Additional
Redemption Information
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
- 4 -
<PAGE>
Prospectus and Statement of Additional Information for
Neuberger & Berman Guardian Trust
---------------------------------
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; Special Information
Regarding Organization,
Capitalization, and Other Matters
Item 5. Management of the Fund Management and Administration; Other
Information; Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other
Securities Distributions, and Taxes; Special
Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Shareholder Services; Share Prices and
Being Offered Net Asset Value; Management and
Administration
Item 8. Redemption or Repurchase Shareholder Services; Share Prices and
Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Not Applicable
History
Item 13. Investment Objectives Investment Information; Certain Risk
and Policies Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Control Persons and Principal Holders
Principal Holders of of Securities
Securities
Item 16. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent Auditors
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional
Redemption Information
- 5 -
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
- 6 -
<PAGE>
Prospectus and Statement of Additional Information for
Neuberger & Berman NYCDC Socially Responsive Trust
--------------------------------------------------
Form N-1A Item No. Caption in Part A Prospectus
------------------ ----------------------------
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; Special Information
Regarding Organization,
Capitalization, and Other Matters
Item 5. Management of the Fund Management and Administration;
Directory; Back Cover Page
Item 6. Capital Stock and Other Front Cover Page; Dividends, Other
Securities Distributions, and Taxes; Special
Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities How to Buy and Sell Shares; Share
Being Offered Prices and Net Asset Value; Management
and Administration
Item 8. Redemption or Repurchase How to Buy and Sell Shares; Share
Prices and Net Asset Value
Item 9. Pending Legal Proceedings Not Applicable
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and Not Applicable
History
Item 13. Investment Objectives Investment Information; Certain Risk
and Policies Considerations
Item 14. Management of the Fund Trustees And Officers
Item 15. Control Persons and Control Persons and Principal Holders
Principal Holders of of Securities
Securities
Item 16. Investment Advisory and Investment Management and
Other Services Administration Services; Trustees And
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian And
Transfer Agent; Independent Accountants
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Investment Information; Additional
Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase, Redemption Distribution Arrangements; Additional
Redemption Information
- 7 -
<PAGE>
Caption in Part B
Form N-1A Item No. Statement of Additional Information
------------------ -----------------------------------
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and
Administration Services; Distribution
Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No.
13.
- 8 -
<PAGE>
<PAGE> 1
Neuberger&Berman Neuberger&Berman
EQUITY TRUST EQUITY ASSETS
- ------------------------------
No-Load Equity Funds
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Neuberger&Berman FOCUS TRUST Neuberger&Berman MANHATTAN TRUST
Neuberger&Berman GENESIS TRUST Neuberger&Berman PARTNERS TRUST
Neuberger&Berman GUARDIAN TRUST Neuberger&Berman SOCIALLY RESPONSIVE TRUST
</TABLE>
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES ACCOUNTING,
RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE
SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT INCORPORATED(R) (EACH AN
"INSTITUTION").
- --------------------------------------------------------------------------------
Each of the above-named funds (a "Fund") invests all of its net investable
assets in its corresponding portfolio (a "Portfolio") of Equity Managers Trust
("Managers Trust"), an open-end management investment company managed by
Neuberger&Berman Management Incorporated ("N&B Management"). Each Portfolio
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of its corresponding Fund. The investment
performance of each Fund directly corresponds with the investment performance of
its corresponding Portfolio. This "master/feeder fund" structure is different
from that of many other investment companies which directly acquire and manage
their own portfolios of securities. For more information on this structure that
you should consider, see "Summary" on page 3, and "Information Regarding
Organization, Capitalization, and Other Matters" on page 40.
Please read this Prospectus before investing in any of the Funds and keep it
for future reference. It contains information about the Funds that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Funds and Portfolios, dated December 15, 1997, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED DECEMBER 15, 1997
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Funds and Portfolios;
Risk Factors 3
Management 5
The Neuberger&Berman
Investment Approach 5
EXPENSE INFORMATION 7
Shareholder Transaction
Expenses for Each Fund 7
Annual Fund Operating
Expenses 7
Example 8
FINANCIAL HIGHLIGHTS 9
Selected Per Share Data and
Ratios 9
Focus Trust 10
Genesis Trust 11
Guardian Trust 12
Manhattan Trust 13
Partners Trust 14
Socially Responsive Trust 15
INVESTMENT PROGRAMS 19
Focus Portfolio 19
Genesis Portfolio 20
Guardian Portfolio 21
Manhattan Portfolio 21
Partners Portfolio 22
Socially Responsive
Portfolio 22
Special Considerations of
Small-and Mid-Cap Company
Stocks 24
Short-Term Trading;
Portfolio Turnover 25
Borrowings 25
Other Investments 25
PERFORMANCE INFORMATION 27
Total Return Information 29
SHAREHOLDER SERVICES 30
How to Buy Shares 30
How to Sell Shares 30
Exchanging Shares 31
SHARE PRICES AND NET
ASSET VALUE 32
DIVIDENDS, OTHER
DISTRIBUTIONS, AND
TAXES 33
Distribution Options 33
Taxes 33
MANAGEMENT AND
ADMINISTRATION 35
Trustees and Officers 35
Investment Manager,
Administrator, Distributor,
and Sub-Adviser 35
Expenses 37
Transfer Agent 39
INFORMATION REGARDING
ORGANIZATION,
CAPITALIZATION, AND
OTHER MATTERS 40
The Funds 40
The Portfolios 41
DESCRIPTION OF
INVESTMENTS 44
USE OF JOINT PROSPECTUS
AND STATEMENT OF
ADDITIONAL INFORMATION 47
DIRECTORY 48
FUNDS ELIGIBLE FOR
EXCHANGE 49
</TABLE>
<PAGE> 3
SUMMARY
- -----------------------------------------------------
The Funds and Portfolios; Risk Factors
- --------------------------------------------------------------------------------
Each Fund is a series of Neuberger&Berman Equity Trust(R) ("N&B Equity
Trust"), with the exception of Neuberger&Berman SOCIALLY RESPONSIVE Trust, which
is a series of Neuberger&Berman Equity AssetsSM ("N&B Equity Assets") (N&B
Equity Trust and N&B Equity Assets are referred to below individually as a
"Trust" and collectively as the "Trusts"). Each Fund invests in its
corresponding Portfolio which, in turn, invests in securities in accordance with
an investment objective, policies, and limitations that are identical to those
of the Fund. This is sometimes called a master/feeder fund structure, because
each Fund "feeds" shareholders' investments into its corresponding Portfolio, a
"master" fund. The structure looks like this:
SHAREHOLDERS
BUY SHARES IN
-
.
FUNDS
INVEST IN
-
.
PORTFOLIOS
INVEST IN
-
.
STOCKS & OTHER SECURITIES
The trustees who oversee the Funds believe that this structure may benefit
shareholders; investment in a Portfolio by investors in addition to a Fund may
enable the Portfolio to achieve economies of scale that could reduce expenses.
For more information about the organization of the Funds and the Portfolios,
including certain features of the master/feeder fund structure, see "Information
Regarding Organization, Capitalization, and Other Matters" on page 40. An
investment in any Fund involves certain risks, depending upon the types of
investments made by its corresponding Portfolio. For more details about each
Portfolio, its investments and their risks, see "Investment Programs" on page 19
and "Description of Investments" on page 44.
3
<PAGE> 4
The following table is a summary highlighting features of the Funds and
their corresponding Portfolios. You may want to invest in a variety of Funds to
fit your particular investment needs. Of course, there can be no assurance that
a Fund will meet its investment objective.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PORTFOLIO
EQUITY TRUSTS STYLE CHARACTERISTICS
- -----------------------------------------------------------------------
<S> <C> <C>
GUARDIAN TRUST Broadly diversified, A growth and income fund
large- cap value fund. that invests primarily in
stocks of established,
high- quality companies
that are not well
followed on Wall Street
or are temporarily out of
favor.
FOCUS TRUST Large-cap value fund, Invests principally in
more concentrated common stocks selected
portfolio than from 13 multi-industry
Guardian. sectors of the economy.
To maximize potential
return, the Portfolio
normally makes at least
90% of its investments in
not more than six sectors
believed by the portfolio
managers to be
undervalued.
GENESIS TRUST Broadly diversified, Invests primarily in
small-cap value fund. stocks of companies with
small market
capitalizations (up to
$1.5 billion at the time
of the Portfolio's
investment). Portfolio
managers seek to buy the
stocks of strong
companies with a history
of solid performance and
a proven management team,
which are selling at
attractive prices.
MANHATTAN TRUST Broadly diversified, Invests in securities
small-, medium- and believed to have the
large-cap growth fund. maximum potential for
long-term capital
appreciation. Portfolio
managers seek stocks of
companies that are
projected to grow at
above-average rates and
that may appear poised
for a period of
accelerated earnings.
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
NEUBERGER&BERMAN INVESTMENT PORTFOLIO
EQUITY TRUSTS STYLE CHARACTERISTICS
- -----------------------------------------------------------------------
<S> <C> <C>
PARTNERS TRUST Broadly diversified, Seeks capital growth
medium-to large-cap through an approach that
value fund. is intended to increase
capital with reasonable
risk. Portfolio managers
look at fundamentals,
focusing particularly on
cash flow, return on
capital, and asset
values.
SOCIALLY Broadly diversified, Seeks long-term capital
RESPONSIVE TRUST large- cap value fund. appreciation by investing
in common stocks of
companies that meet both
financial and social
criteria.
</TABLE>
- -------------------
Management
- --------------------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolios. N&B
Management also provides administrative services to the Portfolios and the Funds
and acts as distributor of Fund shares. See "Management and Administration" on
page 35. If you want to know how to buy and sell shares of the Funds or exchange
them for shares of other Neuberger&Berman Funds(R) made available through an
Institution, see "Shareholder Services -- How to Buy Shares" on page 30,
"Shareholder Services -- How to Sell Shares" on page 30, "Shareholder
Services -- Exchanging Shares" on page 31, and the policies of the Institution
through which you are purchasing shares.
- --------------------------------------------------------------
The Neuberger&Berman Investment Approach
- --------------------------------------------------------------------------------
While each Portfolio has its own investment objective, policies, and
limitations, each Portfolio is managed using one of two basic investment
approaches -- value or growth.
A value-oriented portfolio manager buys stocks that are selling for a price
that is lower than what the manager believes they are worth. These include
stocks that are currently under-researched or are temporarily out of favor on
Wall Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets). A
5
<PAGE> 6
value-oriented manager believes that, over time, securities that are undervalued
are more likely to appreciate in price and be subject to less risk of price
decline than securities whose market prices have already reached their perceived
economic values. This approach also contemplates selling portfolio securities
when N&B Management believes they have reached their potential.
While a value approach concentrates on securities that are undervalued in
relation to their fundamental economic values, a growth approach seeks stocks of
companies that N&B Management projects will grow at above-average rates and
faster than others expect. While a growth portfolio manager may be willing to
pay a higher multiple of earnings per share than a value manager, the multiple
tends to be reasonable relative to the manager's expectation of the company's
earnings growth rate.
In general, Neuberger&Berman FOCUS, Neuberger&Berman GENESIS,
Neuberger&Berman GUARDIAN, Neuberger&Berman PARTNERS and Neuberger& Berman
SOCIALLY RESPONSIVE Portfolios adhere to a value-oriented investment approach.
Neuberger&Berman MANHATTAN Portfolio adheres to a growth-oriented investment
approach. Neuberger&Berman MANHATTAN Portfolio is therefore willing to invest in
securities with prices that are higher multiples of earnings than securities
likely to be purchased by the other Portfolios, but generally buys companies
that are projected by N&B Management to have higher earnings growth rates.
6
<PAGE> 7
EXPENSE INFORMATION
This section gives you certain information about the expenses of each Fund
and its corresponding Portfolio. See "Performance Information" for important
facts about the investment performance of each Fund, after taking expenses into
account.
- -------------------------------------------------------------------
Shareholder Transaction Expenses for Each Fund
- --------------------------------------------------------------------------------
As shown by this table, the Funds impose no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
- ----------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
The following table shows annual operating expenses for each Fund which are
paid out of the assets of the Fund and which include the Fund's pro rata portion
of the operating expenses of its corresponding Portfolio ("Total Operating
Expenses"). "Total Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses.
Each Fund pays N&B Management an administration fee based on the Fund's
average daily net assets. Each Portfolio pays N&B Management a management fee
based on the Portfolio's average daily net assets; a pro rata portion of this
fee is borne indirectly by the corresponding Fund. "Management and
Administration Fees" in the following table (except with respect to
Neuberger&Berman GENESIS Trust) are based upon administration fees incurred by
each Fund and management fees incurred by its corresponding Portfolio during the
past fiscal year. Management and Administration Fees for Neuberger&Berman
GENESIS Trust have been restated based on current fee rates. For more
information, see "Management and Administration" and the SAI.
The Funds and Portfolios incur other expenses for things such as accounting
and legal fees, transfer agency fees, custodial fees, printing and furnishing
shareholder statements and Fund reports and compensating trustees who are not
affiliated with N&B Management ("Other Expenses"). Other Expenses in the
following table (except with respect to Neuberger&Berman SOCIALLY RESPONSIVE
Trust) are based on each Fund's and Portfolio's expenses for the past fiscal
year. Other Expenses for Neuberger&Berman SOCIALLY RESPONSIVE Trust are
estimated amounts for the current fiscal year and assume average net assets of
$25,000,000. All expenses are
7
<PAGE> 8
factored into the Funds' share prices and dividends and are not charged directly
to Fund shareholders.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
EQUITY TRUSTS ADMINISTRATION FEES FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS TRUST 0.90% None 0.06%* 0.96%*
GENESIS TRUST 1.21% None 0.14% 1.35%
GUARDIAN TRUST 0.84% None 0.04% 0.88%
MANHATTAN TRUST 0.93% None 0.15%* 1.08%*
PARTNERS TRUST 0.86% None 0.05%* 0.91%*
SOCIALLY RESPONSIVE TRUST 0.95% None 0.35%* 1.30%*
</TABLE>
*Reflects N&B Management's expense reimbursement undertaking described below.
As set forth in "Expenses" on page 37, N&B Management has voluntarily
undertaken to reimburse each Fund if its Total Operating Expenses exceed certain
limits. Absent the reimbursement, Other Expenses would be 0.16%, 0.30%, 0.08%
and 0.48% per annum and Total Operating Expenses would be 1.06%, 1.23%, 0.94%
and 1.43% per annum of the average daily net assets of Neuberger&Berman FOCUS
Trust, Neuberger&Berman MANHATTAN Trust, Neuberger&Berman PARTNERS Trust and
Neuberger&Berman SOCIALLY RESPONSIVE Trust, respectively.
For more information, see "Expenses" on page 37.
- -------------
Example
- --------------------------------------------------------------------------------
To illustrate the effect of Total Operating Expenses, let's assume that each
Fund's annual return is 5% and that it had Total Operating Expenses described in
the table above. For every $1,000 you invested in each Fund, you would have paid
the following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUSTS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS TRUST $10 $ 31 $ 53 $ 118
GENESIS TRUST $14 $ 43 $ 74 $ 162
GUARDIAN TRUST $ 9 $ 28 $ 49 $ 108
MANHATTAN TRUST $11 $ 34 $ 60 $ 132
PARTNERS TRUST $ 9 $ 29 $ 50 $ 112
SOCIALLY RESPONSIVE TRUST $13 $ 41 N/A N/A
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
8
<PAGE> 9
FINANCIAL HIGHLIGHTS
- --------------------------------------------------
Selected Per Share Data and Ratios
- --------------------------------------------------------------------------------
The financial information in the following tables is for each Fund as of
August 31, 1997 and prior periods. This information has been audited by the
Funds' respective independent auditors/accountants. You may obtain, at no cost,
further information about the performance of the Funds in their annual report to
shareholders. The auditors'/accountants' reports are incorporated in the SAI by
reference to the annual report. Please call 800-877-9700 for a free copy of the
annual report and for up-to-date information. Also, see "Performance
Information."
9
<PAGE> 10
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 net 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
10
<PAGE> 11
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 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 net 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
11
<PAGE> 12
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 net 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
12
<PAGE> 13
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 net 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
13
<PAGE> 14
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 net 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
14
<PAGE> 15
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
15
<PAGE> 16
NOTES TO FINANCIAL HIGHLIGHTS
1)Prior to January 1, 1995, the name of Neuberger&Berman FOCUS Trust was
Neuberger&Berman Selected Sectors Trust.
2)The date investment operations commenced.
3)Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would have been lower if
N&B Management had not reimbursed certain expenses. In addition, for
Neuberger&Berman GENESIS Trust, total return would have been lower if N&B
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 taking into consideration any expense
reductions related to expense offset arrangements. These ratios reflect the
reimbursement of certain expenses and/or the waiver of a portion of the
management fee.
6)After reimbursement of expenses by N&B Management. Had N&B Management not
undertaken such action, the annualized ratios of net expenses and net
investment income (loss) to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
August 30, 1993
NEUBERGER&BERMAN Year Ended August 31, to August 31,
FOCUS TRUST 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
NEUBERGER&BERMAN Year Ended August 31, to August 31,
GUARDIAN TRUST 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
NEUBERGER&BERMAN Year Ended August 31, to August 31,
MANHATTAN TRUST 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>
16
<PAGE> 17
<TABLE>
<CAPTION>
Period from
August 30, 1993
NEUBERGER&BERMAN Year Ended August 31, to August 31,
PARTNERS TRUST 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 N&B Management and/or the waiver of a
portion of the management fee borne directly by Neuberger&Berman GENESIS
Portfolio. Had N&B Management not undertaken such action, the annualized
ratios of net expenses and net investment income (loss) to average daily net
assets would have been:
<TABLE>
<CAPTION>
Period from
August 26, 1993
NEUBERGER&BERMAN Year Ended August 31, to August 31,
GENESIS TRUST 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 N&B Management. Had N&B Management not
undertaken such action, the annualized ratios of net expenses and net
investment income to average daily net assets would have been higher and
lower, respectively.
9)Because each Fund invests only in its corresponding Portfolio and that
Portfolio (rather than the Fund) engages in securities transactions, no Fund
calculates a portfolio turnover rate or pays any brokerage commissions. The
portfolio turnover rates for each Portfolio were as follows:
<TABLE>
<CAPTION>
Period from
August 2, 1993
Year Ended August 31, to August 31,
1997 1996 1995 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger&Berman FOCUS Portfolio 63% 39% 36% 52% 4%
Neuberger&Berman GENESIS Portfolio 18% 21% 37% 63% 3%
Neuberger&Berman GUARDIAN Portfolio 50% 37% 26% 24% 3%
Neuberger&Berman MANHATTAN Portfolio 89% 53% 44% 50% 3%
Neuberger&Berman PARTNERS Portfolio 77% 96% 98% 75% 8%
Neuberger&Berman SOCIALLY RESPONSIVE
Portfolio 51% 53% 58% 14%* N/A
</TABLE>
* Period from March 14, 1994 (commencement of operations) to August 31,
1994.
17
<PAGE> 18
The average commission rates paid by each Portfolio were as follows:
<TABLE>
<CAPTION>
Year Ended
August 31,
1997 1996
----------------------------------------------------------------------------------
<S> <C> <C>
Neuberger&Berman FOCUS Portfolio $0.0555 $0.0578
Neuberger&Berman GENESIS Portfolio $0.0565 $0.0576
Neuberger&Berman GUARDIAN Portfolio $0.0538 $0.0580
Neuberger&Berman MANHATTAN Portfolio $0.0573 $0.0373
Neuberger&Berman PARTNERS Portfolio $0.0522 $0.0494
Neuberger&Berman SOCIALLY RESPONSIVE Portfolio $0.0568 $0.0587
</TABLE>
18
<PAGE> 19
INVESTMENT PROGRAMS
The investment policies and limitations of each Fund are identical to those
of its corresponding Portfolio. Each Fund invests only in its corresponding
Portfolio. Therefore, the following shows you the kinds of securities in which
each Portfolio invests. For an explanation of some types of investments, see
"Description of Investments" on page 44.
Investment policies and limitations of the Funds and Portfolios are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the
respective Trust or of Managers Trust without shareholder approval.
The investment objectives of the Funds and Portfolios are not fundamental.
There can be no assurance that the Funds or Portfolios will achieve their
objectives. Each Fund, by itself, does not represent a comprehensive investment
program.
Additional investment techniques, features, and limitations concerning the
Portfolios' investment programs are described in the SAI.
- -------------------------------------------------
Neuberger&Berman Focus Portfolio
- --------------------------------------------------------------------------------
The investment objective of Neuberger&Berman FOCUS Portfolio and
Neuberger&Berman FOCUS Trust is to seek long-term capital appreciation.
Neuberger&Berman FOCUS Portfolio invests principally in common stocks
selected from the following 13 multi-industry sectors of the economy:
<TABLE>
<S> <C> <C>
- - Autos & Housing - Health Care - Technology
- - Consumer Goods & Services - Heavy Industry - Transportation
- - Defense & Aerospace - Machinery & Equipment - Utilities
- - Energy - Media & Entertainment
- - Financial Services - Retailing
</TABLE>
To maximize potential return, the Portfolio normally makes at least 90% of
its investments in not more than six sectors it identifies as undervalued. Where
a particular industry may fall within more than one sector, N&B Management uses
its judgment and experience to determine the placement of that industry within a
sector. The Portfolio uses the value-oriented investment approach to identify
stocks believed to be undervalued, including stocks that are temporarily out of
favor in the market. The Portfolio then focuses its investments in the sectors
in which the undervalued stocks are clustered. These sectors are believed to
offer the greatest potential for capital growth. This investment approach is
different from that of most other mutual funds that emphasize sector investment.
Those funds either invest in only a single economic sector or choose a number of
sectors by analyzing general
19
<PAGE> 20
economic trends. Further information on the Portfolio's securities holdings and
their allocation by sector as of the end of the Fund's most recent fiscal year
is included in the Fund's annual report to shareholders, which is available at
no cost upon request. The sectors are more fully described in the SAI.
The Portfolio may be affected more by any single economic, political, or
regulatory development than a more diversified mutual fund. The risk of decline
in the Portfolio's asset value due to an adverse development may be partially
offset by the value-oriented investment approach. To further reduce this risk,
the Portfolio may not purchase any security if, as a result, (1) more than 50%
of its total assets would be invested in any one sector, or (2) 25% or more of
its total assets would be invested in the securities of companies having their
principal business activities in any one industry (this policy is fundamental).
- ----------------------------------------------------
Neuberger&Berman Genesis Portfolio
- --------------------------------------------------------------------------------
The investment objective of Neuberger&Berman GENESIS Portfolio and
Neuberger&Berman GENESIS Trust is to seek capital appreciation.
Neuberger&Berman GENESIS Portfolio invests primarily in common stocks of
companies with small market capitalizations ("small-cap companies"). Market
capitalization means the total market value of a company's outstanding common
stock. The Portfolio regards companies with market capitalizations of up to $1.5
billion at the time of the Portfolio's investment as small-cap companies.
Companies whose market capitalizations exceed $1.5 billion after purchase
continue to be considered small-cap companies for purposes of the Portfolio's
investment policies. There is no necessary correlation between market
capitalization and the financial attributes -- such as levels of assets,
revenues, or income -- commonly used to measure the size of a company.
Studies indicate that the market values of small-cap company stocks, such as
those included in the Russell 2000 Index and the Wilshire 1750 Index or quoted
on Nasdaq, are out-of-sync with larger capitalization stocks. Over the last 30
years, small-cap company stocks have outperformed larger capitalization stocks
about two-thirds of the time, even though small-cap stocks have usually declined
more than larger capitalization stocks in declining markets. There can be no
assurance that this pattern will continue.
The Portfolio tries to enhance the potential for appreciation and limit the
risk of decline in the value of its securities by employing the value-oriented
investment approach. The Portfolio seeks securities that appear to be
underpriced and are issued by companies with proven management, sound finances,
and strong potential for market growth. To reduce risk, the Portfolio
diversifies its holdings among many companies and industries. The Portfolio
focuses on the fundamentals of each small-cap company, instead of trying to
anticipate what changes might occur in the stock
20
<PAGE> 21
market, the economy, or the political environment. This approach differs from
that used by many other funds investing in small-cap company stocks. Those funds
often buy stocks of companies they believe will have above-average earnings
growth, based on anticipated future developments. In contrast, the Portfolio's
securities are generally selected with the belief that they are currently
undervalued, based on existing conditions.
For more information, see "Special Considerations of Small- and Mid-Cap
Company Stocks" on page 24.
- -----------------------------------------------------
Neuberger&Berman Guardian Portfolio
- --------------------------------------------------------------------------------
The investment objective of Neuberger&Berman GUARDIAN Portfolio and
Neuberger&Berman GUARDIAN Trust is to seek capital appreciation and,
secondarily, current income.
Neuberger&Berman GUARDIAN Portfolio invests primarily in common stocks of
long-established, high-quality companies. The Portfolio uses the value-oriented
investment approach in selecting securities. Thus, N&B Management looks for such
factors as low price-to-earnings ratios, strong balance sheets, solid
managements, and consistent earnings.
Neuberger&Berman GUARDIAN Fund, a mutual fund administered by N&B
Management, also invests all of its net investable assets in Neuberger&Berman
GUARDIAN Portfolio. Neuberger&Berman GUARDIAN Fund has paid its shareholders an
income dividend every quarter and a capital gain distribution every year since
Neuberger&Berman GUARDIAN Fund's inception in 1950; Neuberger&Berman GUARDIAN
Trust has done so since December 1993. Of course, this past record does not
necessarily predict the Fund's future practices.
- -------------------------------------------------------
Neuberger&Berman Manhattan Portfolio
- --------------------------------------------------------------------------------
The investment objective of Neuberger&Berman MANHATTAN Portfolio and
Neuberger&Berman MANHATTAN Trust is to seek capital appreciation without regard
to income.
Neuberger&Berman MANHATTAN Portfolio can invest in securities of small-,
medium-, and large-capitalization companies believed by N&B Management to have
the maximum potential for long-term capital appreciation. The portfolio managers
currently intend to focus primarily on the securities of medium-capitalization
companies ("mid-cap companies"). The portfolio managers do not seek to invest in
securities that pay dividends or interest, and any such income is incidental.
The Portfolio uses a growth-oriented investment approach. When N&B
Management believes that particular securities have greater potential for long-
term capital appreciation, the Portfolio may purchase such securities at prices
with relatively higher multiples to measures of economic value (such as earnings
or cash
21
<PAGE> 22
flow) than securities likely to be purchased by other Portfolios. In selecting
stocks, N&B Management considers, among other factors, a company's financial
strength, competitive position, projected future earnings, management strength
and experience, reasonable valuation and other investment criteria. The
Portfolio also diversifies its investments among companies and industries.
The Portfolio's growth investment program involves greater risks and share
price volatility than programs that invest in more undervalued securities.
Moreover, the Portfolio does not follow a policy of active trading for
short-term profits. Accordingly, the Portfolio may be more appropriate for
investors with a longer-range perspective.
For more information, see "Special Considerations of Small- and Mid-Cap
Company Stocks" on page 24.
- ----------------------------------------------------
Neuberger&Berman Partners Portfolio
- --------------------------------------------------------------------------------
The investment objective of Neuberger&Berman PARTNERS Portfolio and
Neuberger&Berman PARTNERS Trust is to seek capital growth.
Neuberger&Berman PARTNERS Portfolio invests principally in common stocks of
medium- to large-capitalization established companies, using the value-oriented
investment approach. The Portfolio seeks capital growth through an investment
approach that is designed to increase capital with reasonable risk. N&B
Management looks for securities believed to be undervalued based on strong
fundamentals, including a low price-to-earnings ratio, consistent cash flow, and
the company's track record through all parts of the market cycle.
The Portfolio considers additional factors when selecting securities,
including ownership by a company's management of the company's stock and the
dominance of a company in its particular field.
For more information, see "Special Considerations of Small- and Mid-Cap
Company Stocks" on page 24.
- -------------------------------------------------------------------
Neuberger&Berman Socially Responsive Portfolio
- --------------------------------------------------------------------------------
The investment objective of Neuberger&Berman SOCIALLY RESPONSIVE Portfolio
and Neuberger&Berman SOCIALLY RESPONSIVE Trust is to seek long-term capital
appreciation by investing primarily in securities of companies that meet both
financial criteria and the Social Policy.
In seeking capital appreciation, the Portfolio generally follows a
value-oriented investment approach to the selection of individual securities.
Prospective investments are first subjected to detailed financial analysis and
are not studied further unless N&B Management believes that they are currently
undervalued relative to the issuer's assets and potential earning power.
22
<PAGE> 23
The Portfolio expects to be nearly fully invested at all times, primarily in
common stock. It may also invest in convertible securities and preferred stock
and in foreign securities and American Depositary Receipts ("ADRs") of foreign
companies that meet the Social Policy. On occasion, deposits with community
banks and credit unions may be considered for investment. Under normal
conditions, at least 65% of the Portfolio's total assets are invested in
accordance with the Social Policy, and at least 65% of its total assets are
invested in equity securities. The Portfolio expects that substantially all of
its equity securities will be selected in accordance with the Social Policy.
The Portfolio may also engage in portfolio management techniques that are
not subject to the Social Policy, such as lending securities and purchasing and
selling put and call options on securities and currencies, futures contracts,
options on futures contracts, and forward contracts.
SOCIAL POLICY. Companies deemed acceptable from a financial standpoint are
evaluated by N&B Management using a database that Neuberger&Berman has designed
to develop and monitor information on companies in various categories of social
criteria. N&B Management seeks to invest in issuers that show leadership in the
following major areas of social impact: environment and workplace diversity and
employment. N&B Management also evaluates investments based on companies'
records in other areas of concern: public health, type of products, and
corporate citizenship.
The Portfolio's social orientation is predicated in part on the belief that
good corporate citizenship is good business; that is, good policies with respect
to such social criteria as employment and environmental practices may often have
a positive impact on the company's "bottom line." N&B Management recognizes,
however, that many social criteria represent goals rather than achievements and
that goals are often difficult to quantify. In each area, N&B Management seeks
to elicit and understand management's vision of the company's social role and,
in making investment decisions, gives weight to enlightened, progressive
policies. The information used by N&B Management in evaluating prospective
investments for conformity with the Social Policy is obtained primarily from
services that specialize in reporting information from issuers or from agencies
that oversee issuers' activities or compliance with laws and regulations.
Additionally, the information may come from public interest groups and from N&B
Management's discussions with company representatives. N&B Management attempts
to assess the objectivity of all information that it receives. However,
decisions made by N&B Management inevitably involve some level of subjective
judgment.
The Portfolio seeks to invest in companies that show leadership in
addressing environmental problems effectively and in promoting progressive
workplace policies, especially as they affect women and minorities. N&B
Management seeks to identify
23
<PAGE> 24
companies committed to improving their environmental performance by examining
their policies and programs in such areas as energy conservation, pollution
reduction and control, waste management, recycling, and careful stewardship of
natural resources. In a similar manner, N&B Management seeks to identify
companies whose policies and practices recognize the importance of human
resources to corporate productivity and the centrality of the work experience to
the quality of life of all employees. The Portfolio seeks to invest in companies
that demonstrate leadership in such areas as providing and promoting equal
opportunity, investing in the training and re-training of workers, promoting a
safe working environment, providing family-oriented flexible benefits, and
involving workers in job and workflow engineering.
In making investment decisions, N&B Management takes into account a
company's record as a member of the various communities of which it is a part
and its commitment to product quality and value. Currently, the Social Policy
screens out any company that derives more than 5% of its total annual revenue
from (i) manufacturing and selling alcohol and/or tobacco, (ii) sales in or
services related to gambling, or (iii) the manufacturing of weapons systems.
Additionally, the Portfolio does not invest in any company that derives its
total annual revenue primarily from non-consumer sales to the military or that
owns or operates one or more nuclear power facilities or is a major supplier of
nuclear power services.
Not every issuer selected by N&B Management will demonstrate leadership in
each category of the Social Policy. The social records of most companies are
written in shades of gray. For example, a company may have a progressive record
in employee relations and community affairs but a poor one on product marketing
issues. Another company may have a mixed record within a single area. Finally,
it is often difficult to distinguish between substantive commitment and public
relations. This principle works both ways: there are many companies with
excellent records on social issues that maintain a low profile for one reason or
another. Taking these factors into consideration, N&B Management emphasizes the
overall approach that companies take toward the areas of social impact and pays
particular attention to progress achieved toward the goals of the Social Policy.
If securities held by the Portfolio no longer satisfy the Social Policy, the
Portfolio will seek to dispose of the securities as soon as reasonably
practicable, which may cause the Portfolio to sell the securities at a time not
desirable from a purely financial standpoint.
- ---------------------------------------------------
Special Considerations of Small- and
Mid-Cap Company Stocks
- --------------------------------------------------------------------------------
Investments in small- and mid-cap company stocks may present greater
opportunities for capital appreciation than investments in stocks of
large-capitalization com-
24
<PAGE> 25
panies ("large-cap companies"). However, small- and mid-cap company stocks may
have higher risk and volatility. These stocks generally are not as broadly
traded as large-cap company stocks and their prices thus may fluctuate more
widely and abruptly. Any such movements in stocks held by a Portfolio would be
reflected in the corresponding Fund's net asset value. Small- and mid-cap
company stocks also are less researched than large-cap company stocks and are
often overlooked in the market.
- -----------------------------------------------------
Short-Term Trading; Portfolio Turnover
- --------------------------------------------------------------------------------
Although none of the Portfolios purchases securities with the intention of
profiting from short-term trading, each Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. See "Notes to
Financial Highlights" for more information about the portfolio turnover rate of
each Portfolio. It is anticipated that the annual turnover rate of
Neuberger&Berman MANHATTAN Portfolio and of Neuberger&Berman PARTNERS Portfolio
may exceed 100% in some fiscal years. Turnover rates in excess of 100% generally
result in higher transaction costs (which are borne directly by the Portfolio
and indirectly by the corresponding Fund) and a possible increase in realized
short-term capital gains or losses. See "Dividends, Other Distributions, and
Taxes" on page 33 and the SAI.
- -----------------
Borrowings
- --------------------------------------------------------------------------------
Each Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
None of the Portfolios expects to borrow money or to enter into reverse
repurchase agreements. As a non-fundamental policy, none of the Portfolios may
purchase portfolio securities if its outstanding borrowings, including reverse
repurchase agreements, exceed 5% of its total assets.
- --------------------------
Other Investments
- --------------------------------------------------------------------------------
For temporary defensive purposes, each Portfolio (except Neuberger&Berman
SOCIALLY RESPONSIVE Portfolio) may invest up to 100% of its total assets in cash
and cash equivalents, U.S. Government and Agency Securities, commercial paper
and certain other money market instruments, as well as repurchase agreements
collateralized by the foregoing.
Any part of Neuberger&Berman SOCIALLY RESPONSIVE Portfolio's assets may be
retained temporarily in investment grade fixed income securities of non-govern-
25
<PAGE> 26
mental issuers, U.S. Government and Agency Securities, repurchase agreements,
money market instruments, commercial paper, and cash and cash equivalents when
N&B Management believes that significant adverse market, economic, political, or
other circumstances require prompt action to avoid losses. In addition, the
feeder funds that invest in Neuberger&Berman SOCIALLY RESPONSIVE Portfolio deal
with large institutional investors, and the Portfolio may hold such instruments
pending investment or payout when the Portfolio has received a large influx of
cash due to sales of Neuberger&Berman SOCIALLY RESPONSIVE Trust shares, or
shares of another fund which invests in the Portfolio, or when it anticipates a
substantial redemption. Generally, the foregoing temporary investments for
Neuberger&Berman SOCIALLY RESPONSIVE Portfolio are selected with a concern for
the social impact of each investment.
26
<PAGE> 27
PERFORMANCE INFORMATION
The performance of the Funds is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This evens out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
The Funds commenced operations in August 1993, except Neuberger&Berman
SOCIALLY RESPONSIVE Trust, which commenced operations in March 1997. However,
mutual funds that are series of Neuberger&Berman Equity Funds ("N&B Equity
Funds"), each of which has a name similar to a Fund and the same investment
objective, policies and limitations as that Fund ("Sister Fund"), also invest in
the Portfolios and have longer operating histories. The following table shows
the average annual total returns of each Fund for the 1-year, 5-year, 10-year
and since inception periods ended August 31, 1997. Returns for periods prior to
each Fund's commencement of operations represent the performance of the
respective Sister Fund. The table also shows a comparison with the S&P "500"
Index for each Fund, except Neuberger&Berman GENESIS Trust, which is compared
with the Russell 2000(R) Index and Neuberger&Berman MANHATTAN Trust, which is
compared with the Russell Midcap GrowthTM Index. The S&P "500" Index is the
Standard & Poor's 500 Composite Stock Price Index, an unmanaged index generally
considered to be representative of overall stock market activity. The Russell
2000 is an unmanaged index of the securities of the 2,000 issuers having the
smallest capitalization in the Russell 3000(R) Index, representing about 10% of
the Russell 3000's total 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. The Russell MidcapTM
Index measures the performance of the 800 smallest companies in the Russell
1000(R) 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). Please note that indices
do not take into account any fees or expenses of investing in the individual
securities that they track. Further information regarding the Funds' performance
is presented in their annual report to shareholders, which is available without
charge by calling 800-877-9700.
27
<PAGE> 28
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS
ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SINCE INCEPTION
EQUITY TRUSTS 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOCUS TRUST +43.93% +22.58% +14.70% +12.50% 10/19/55
GUARDIAN TRUST +39.56 +19.85 +14.42 +13.42 6/1/50
PARTNERS TRUST +47.11 +22.44 +14.33 +18.66 1/20/75 +
SOCIALLY RESPONSIVE
TRUST +31.92 N/A N/A +20.02 3/16/94
S&P "500" INDEX +40.73 +19.78 +13.85 N/A N/A
MANHATTAN TRUST +38.84 +17.56 +11.49 +17.50 3/1/79 +
RUSSELL MIDCAP
GROWTH INDEX +31.23 +18.56 13.18 N/A N/A
GENESIS TRUST +44.31 +22.35 N/A +16.76 9/27/88
RUSSELL 2000 INDEX +28.96 +19.36 N/A +14.57* N/A
</TABLE>
+ The dates when N&B Management became investment adviser to the Sister Funds.
* From the inception date of Neuberger&Berman GENESIS Trust's Sister Fund.
Prior to November 1991, the investment policies of Neuberger&Berman FOCUS
Trust's Sister Fund required that a substantial percentage of its assets be
invested in the energy field; accordingly, performance results prior to that
time do not necessarily reflect the level of performance that might have been
achieved had the Fund's current policies been in effect during that period.
Neuberger&Berman MANHATTAN Portfolio has the ability to invest in the stocks of
small-, medium- and large-capitalization companies. Prior to July 1997,
Neuberger&Berman MANHATTAN Portfolio invested in the stocks of companies from
each of these capitalization levels. In July 1997, Neuberger&Berman MANHATTAN
Portfolio changed its focus to the stocks of medium-capitalization companies.
Therefore, performance results for Neuberger&Berman MANHATTAN Trust prior to
July 1997 may be more appropriately compared to the S&P "500" Index. Had N&B
Management not reimbursed certain expenses or waived certain fees, the total
returns of the Funds would have been lower. The total returns for periods prior
to the Funds' commencement of operations would have been lower had they
reflected the higher fees of the Funds as compared to those of the Sister Funds.
28
<PAGE> 29
The following table lets you take a closer look at how each Fund and its
respective Sister Fund performed year by year, in terms of an annual per share
total return for each of the last ten calendar years (ending December 31).
Please note that the previous chart reflects information for periods ended on
the Funds' last fiscal year-end (that is, as of August 31, 1997).
TOTAL RETURNS FOR CALENDAR YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY TRUSTS 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- -----------------------------------------------------
FOCUS TRUST +0.6% +16.5% +29.8% -5.9% +24.7% +21.1% +19.6% +0.9% +36.0% +16.3%
GUARDIAN TRUST -1.0 +28.0 +21.5 -4.7 +34.3 +19.0 +13.5 +1.5 +32.0 +17.7
MANHATTAN TRUST +0.4 +18.3 +29.1 -8.1 +30.9 +17.8 +10.0 -3.4 +30.8 +9.7
PARTNERS TRUST +4.3 +15.5 +22.8 -5.1 +22.4 +17.5 +15.5 -1.0 +35.2 +26.5
SOCIALLY RESPONSIVE
TRUST N/A N/A N/A N/A N/A N/A N/A N/A +38.9 +18.5
S&P "500" INDEX +5.2 +16.5 +31.6 -3.1 +30.3 +7.6 +10.0 +1.4 +37.5 +22.9
GENESIS TRUST N/A N/A +17.3 -16.2 +41.6 +15.6 +14.4 -1.7 +27.2 +29.9
RUSSELL 2000 INDEX N/A N/A +16.3 -19.5 +46.0 +18.4 +18.9 -1.8 +28.5 +16.5
</TABLE>
TOTAL RETURN INFORMATION. You can obtain current performance information
about each Fund by calling N&B Management at 800-877-9700.
29
<PAGE> 30
SHAREHOLDER SERVICES
- ---------------------------
How to Buy Shares
- --------------------------------------------------------------------------------
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION.
N&B Management and the Funds do not recommend, endorse, or receive payments from
any Institution. N&B Management compensates Institutions for services they
provide under an administrative services agreement. N&B Management does not
provide investment advice to any Institution or its clients or make decisions
regarding their investments.
Each Institution will establish its own procedures for the purchase of Fund
shares, including minimum initial and additional investments for shares of each
Fund and the acceptable methods of payment for shares. Shares are purchased at
the next price calculated on a day the New York Stock Exchange ("NYSE") is open,
after a purchase order is received and accepted by an Institution. Investors
should consult their Institution to determine the time by which it must receive
an order so that Fund shares can be purchased at that day's price. Prices for
shares of all Funds are calculated as of the close of regular trading on the
NYSE, usually 4 p.m. Eastern time. An Institution may be closed on days when the
NYSE is open. As a result, prices for Fund shares may be significantly affected
on days when an investor has no access to that Institution to buy shares.
Other Information:
----- An Institution must pay for shares it purchases on its clients' behalf
in U.S. dollars.
----- Each Fund has the right to suspend the offering of its shares for a
period of time. Each Fund also has the right to accept or reject a
purchase order in its sole discretion, including certain purchase
orders using an exchange of shares. See "Shareholder
Services -- Exchanging Shares."
----- The Funds do not issue certificates for shares.
----- Some Institutions may charge their clients a fee in connection with
purchases of shares of the Funds.
- ---------------------------
How to Sell Shares
- --------------------------------------------------------------------------------
You can sell (redeem) all or some of your Fund shares only through an
account with an Institution. Each Institution will establish its own procedures
for the sale of Fund shares and the payment of redemption proceeds. Shares are
sold at the next price calculated on a day the NYSE is open, after a sales order
is received and accepted by an Institution. Investors should consult their
Institution to determine the time by which it must receive an order so that Fund
shares can be sold at that day's price. Prices for shares of all Funds are
calculated as of the close of regular trading on the NYSE, usually 4 p.m.
Eastern time. An Institution may be closed on
30
<PAGE> 31
days when the NYSE is open. As a result, prices for Fund shares may be
significantly affected on days when an investor has no access to that
Institution to sell shares.
Other Information:
----- Redemption proceeds will be paid to Institutions as agreed with N&B
Management, but in any case within three business days (under unusual
circumstances a Fund may take longer, as permitted by law). An
Institution may not follow the same procedures for payment of
redemption proceeds to its clients.
----- Each Fund may suspend redemptions or postpone payments on days when
the NYSE is closed, when trading on the NYSE is restricted, or as
permitted by the SEC.
----- Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Funds.
- ---------------------------
Exchanging Shares
- --------------------------------------------------------------------------------
Through an account with an Institution, you may be able to exchange shares
of a Fund for shares of another Neuberger&Berman Fund. Each Institution will
establish its own exchange policy and procedures. Shares are exchanged at the
next price calculated on a day the NYSE is open, after an exchange order is
received and accepted by an Institution.
----- Shares can be exchanged ONLY between accounts registered in the same
name, address, and taxpayer ID number of the Institution.
----- An exchange can be made only into a fund whose shares are eligible for
sale in the state where the Institution is located.
----- An exchange may have tax consequences.
----- Each Fund may refuse any exchange orders from any Institution if, for
any reason, they are deemed not to be in the best interests of the
Fund and its shareholders.
----- Each Fund may impose other restrictions on the exchange privilege, or
modify or terminate the privilege, but will try to give each
Institution advance notice whenever it can reasonably do so.
31
<PAGE> 32
SHARE PRICES AND NET ASSET VALUE
Each Fund's shares are bought or sold at a price that is the Fund's net
asset value ("NAV") per share. The NAVs for each Fund and its corresponding
Portfolio are calculated by subtracting liabilities from total assets (in the
case of a Portfolio, the market value of the securities the Portfolio holds plus
cash and other assets; in the case of a Fund, its percentage interest in its
corresponding Portfolio, multiplied by the Portfolio's NAV, plus any other
assets). Each Fund's per share NAV is calculated by dividing its NAV by the
number of Fund shares outstanding and rounding the result to the nearest full
cent. Each Fund and its corresponding Portfolio calculate their NAVs as of the
close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day
the NYSE is open.
Each Portfolio values securities (including options) listed on the NYSE, the
American Stock Exchange, or other national securities exchanges or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices on that day. The Portfolios value
all other securities and assets, including restricted securities, by a method
that the trustees of Managers Trust believe accurately reflects fair value.
If N&B Management believes that the price of a security obtained under a
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
32
<PAGE> 33
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
Each Fund distributes, normally in December, substantially all of its share
of any net investment income (net of the Fund's expenses), any net capital gains
from investment transactions, and any net gains from foreign currency
transactions earned or realized by its corresponding Portfolio. In addition,
Neuberger&Berman GUARDIAN Trust distributes substantially all of its share of
Neuberger&Berman GUARDIAN Portfolio's net investment income, if any, near the
end of each other calendar quarter.
- -----------------------------
Distribution Options
- --------------------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions paid on
shares of a Fund are automatically reinvested in additional shares of that Fund,
unless an Institution elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
- ---------- Taxes
- --------------------------------------------------------------------------------
An investment has certain tax consequences, depending on the type of account
through which the investment is made. FOR AN ACCOUNT UNDER A QUALIFIED
RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and
generally also are subject to state and local income taxes. Distributions are
taxable when they are paid, whether in cash or by reinvestment in additional
Fund shares, except that distributions declared in December to shareholders of
record on a date in that month and paid in the following January are taxable as
if they were paid on December 31 of the year in which the distributions were
declared. Investors who buy Fund shares just before a Fund deducts a dividend or
other distribution from its NAV will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares in December (or, in
the case of Neuberger&Berman GUARDIAN Trust, near the end of any other calendar
quarter) should take this into account.
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally
33
<PAGE> 34
taxed as long-term capital gain, no matter how long an investor has owned Fund
shares. Distributions of net capital gain may include gains from the sale of
portfolio securities that appreciated in value before an investor bought Fund
shares. Under the Taxpayer Relief Act of 1997, different maximum tax rates apply
to a Fund's distributions of net capital gain depending on its corresponding
Portfolio's holding period.
Every January, each Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid in cash or
reinvested in Fund shares for the previous year. Each Institution will also
receive information showing (1) the portion, if any, of those distributions that
generally is not subject to state and local income taxes in certain states and
(2) capital gain distributions broken down in a manner that will enable
investors or their tax advisers to determine the appropriate rate of capital
gains tax on such distributions.
TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares,
including redemptions in connection with exchanges to other Neuberger&Berman
Funds, are subject to tax. A capital gain or loss generally is the difference
between the amount paid for shares (including the amount of any dividends and
other distributions that were reinvested) and the amount received when shares
are sold. Capital gain on shares held for more than one year will be long-term
capital gain, in which event it will be subject to federal income tax at the
capital gains rate applicable to an investor's holding period and tax bracket.
When an Institution sells Fund shares, it will receive a confirmation
statement showing the number of shares sold and the price.
OTHER. Every January, Institutions will receive a consolidated transaction
statement for the previous year.
Each Institution is required annually to send each investor in its account a
statement showing the investor's distribution and transaction information for
the previous year. Each Fund intends to continue to qualify for treatment as a
regulated investment company for federal income tax purposes so that it will not
have to pay federal income tax on that part of its taxable income and realized
gains that it distributes to its shareholders.
The foregoing is only a summary of some of the important income tax
considerations affecting each Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
34
<PAGE> 35
MANAGEMENT AND ADMINISTRATION
- -------------------------------
Trustees and Officers
- --------------------------------------------------------------------------------
The trustees of the Trusts and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of each Fund and each Portfolio, respectively. The SAI contains general
background information about each trustee and officer of the Trusts and of
Managers Trust. The trustees and officers of the Trusts and of Managers Trust
who are officers and/or directors of N&B Management and/or principals of
Neuberger&Berman serve without compensation from the Funds or the Portfolios.
- --------------------------------------------------
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- --------------------------------------------------------------------------------
N&B Management serves as the investment manager of each Portfolio, as
administrator of each Fund, and as distributor of the shares of each Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolios, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolios and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $21.2 billion as of
September 30, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolios. N&B
Management compensates Neuberger&Berman for its costs in connection with those
services. Neuberger&Berman is a member firm of the NYSE and other principal
exchanges and acts as the Portfolios' principal broker in the purchase and sale
of their securities. Neuberger&Berman and its affiliates, including N&B
Management, manage securities accounts that had approximately $54.1 billion of
assets as of September 30, 1997. All of the voting stock of N&B Management is
owned by individuals who are principals of Neuberger&Berman.
The following is information about the individuals who are primarily
responsible for the day-to-day management of the Portfolios:
Neuberger&Berman FOCUS Portfolio and Neuberger&Berman GUARDIAN
Portfolio -- Kent C. Simons and Kevin L. Risen are co-managers of the
Portfolios. Mr. Simons and Mr. Risen are Vice Presidents of N&B Management and
principals of Neuberger&Berman. Mr. Simons has had responsibility for
Neuberger&Berman FOCUS Portfolio since 1988, and for Neuberger&Berman GUARDIAN
Portfolio since 1981. Mr. Risen has had those responsibilities since 1996, and
during the year prior
35
<PAGE> 36
thereto, he was a portfolio manager for Neuberger&Berman. He was a research
analyst at Neuberger&Berman from 1992 to 1995.
Neuberger&Berman GENESIS Portfolio -- Judith M. Vale and Robert W. D'Alelio
are co-managers of the Portfolio. Ms. Vale and Mr. D'Alelio have been senior
members of Neuberger&Berman's Small Cap Group since 1992 and 1996, respectively,
and are both Vice Presidents of N&B Management. Ms. Vale is a principal of
Neuberger&Berman. Ms. Vale and Mr. D'Alelio have been primarily responsible for
the day-to-day management of Neuberger&Berman GENESIS Portfolio since February
1994 and July 1997, respectively. Mr. D'Alelio was a senior portfolio manager
for another investment management group from 1992 to 1996.
Neuberger&Berman MANHATTAN Portfolio -- Jennifer K. Silver and Brooke A.
Cobb are co-managers of the Portfolio. Ms. Silver is Director of the Neuberger&
Berman Growth Equity Group, and both she and Mr. Cobb are Vice Presidents of N&B
Management. Ms. Silver is a principal of Neuberger&Berman. Ms. Silver and Mr.
Cobb have had responsibility for Neuberger&Berman MANHATTAN Portfolio since July
1997. Previously, Ms. Silver was a portfolio manager for several large mutual
funds managed by a prominent investment adviser. Mr. Cobb was the chief
investment officer for an investment advisory firm managing individual accounts
from 1995 to 1997 and, from 1992 to 1995, a portfolio manager of a large mutual
fund managed by a prominent investment adviser.
Neuberger&Berman PARTNERS Portfolio -- Michael M. Kassen and Robert I.
Gendelman are co-managers of the Portfolio. Mr. Kassen and Mr. Gendelman are
Vice Presidents of N&B Management and principals of Neuberger&Berman. Mr. Kassen
and Mr. Gendelman have had responsibility for Neuberger&Berman PARTNERS
Portfolio since June 1990 and October 1994, respectively. Mr. Kassen has been an
employee of N&B Management since 1990. Mr. Gendelman was a portfolio manager for
another mutual fund manager from 1992 to 1993.
Neuberger&Berman SOCIALLY RESPONSIVE Portfolio -- Janet Prindle is manager
of the Portfolio and Robert Ladd and Ingrid Saukaitis are associate managers of
the Portfolio. Ms. Prindle, a Vice President of N&B Management since November
1993, has been a principal of Neuberger&Berman since 1983. Ms. Prindle has been
responsible for Neuberger&Berman SOCIALLY RESPONSIVE Portfolio since its
inception in March 1994. Ms. Prindle is Director of Socially Responsive
Investment Services at Neuberger&Berman, and has been researching and developing
corporate responsibility criteria as they apply to investments since 1989. She
has been managing money using these criteria since 1990. Mr. Ladd and Ms.
Saukaitis have had responsibility for Neuberger&Berman SOCIALLY RESPONSIVE
Portfolio since December 1997. During the five years prior thereto, Mr. Ladd was
a portfolio manager for Neuberger&Berman. Ms. Saukaitis has been Director of
Social Research for Neuberger&Berman since February 1997. From 1995 to January
1997,
36
<PAGE> 37
she was a project director for a non-profit group that provided social research
on companies to the investment industry. Both Mr. Ladd and Ms. Saukaitis are
Assistant Vice Presidents of N&B Management.
Neuberger&Berman acts as the principal broker for the Portfolios in the
purchase and sale of portfolio securities and in the sale of covered call
options, and for those services receives brokerage commissions. In effecting
securities transactions, each Portfolio seeks to obtain the best price and
execution of orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds.
To mitigate the possibility that a Portfolio will be adversely affected by
employees' personal trading, the Trusts, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
- ---------------
Expenses
- --------------------------------------------------------------------------------
N&B Management provides investment management services to each Portfolio
that include, among other things, making and implementing investment decisions
and providing facilities and personnel necessary to operate the Portfolio. For
investment management services, each Portfolio (except Neuberger&Berman GENESIS
Portfolio) pays N&B Management a fee at the annual rate of 0.55% of the first
$250 million of that Portfolio's average daily net assets, 0.525% of the next
$250 million, 0.50% of the next $250 million, 0.475% of the next $250 million,
0.45% of the next $500 million, and 0.425% of average daily net assets in excess
of $1.5 billion. Neuberger&Berman GENESIS Portfolio pays N&B Management a fee
for investment management services at the annual rate of 0.85% of the first $250
million of the Portfolio's average daily net assets, 0.80% of the next $250
million, 0.75% of the next $250 million, 0.70% of the next $250 million, and
0.65% of average daily net assets in excess of $1 billion.
N&B Management provides administrative services to each Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services. For such administrative services, each Fund
pays N&B Management a fee at the annual rate of 0.40% of that Fund's average
daily net assets. With a Fund's consent, N&B Management may subcontract to
Institutions some of its responsibilities to that Fund under the administration
agreement and may compensate each Institution that provides such services at an
annual rate of up to 0.25% of the average net asset value of Fund shares held
through that Institution.
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Each Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. Each
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page 7.
See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
During its 1997 fiscal year, each Fund accrued administration fees and a pro
rata portion of the corresponding Portfolio's management fees (prior to any
expense reimbursement or fee waiver), as a percentage of the Fund's average
daily net assets, as follows:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Neuberger&Berman FOCUS Trust 0.90%
Neuberger&Berman GENESIS Trust 1.21%
Neuberger&Berman GUARDIAN Trust 0.84%
Neuberger&Berman MANHATTAN Trust 0.93%
Neuberger&Berman PARTNERS Trust 0.86%
Neuberger&Berman SOCIALLY RESPONSIVE Trust 0.48%*
*Not annualized.
</TABLE>
During its 1997 fiscal year, each Fund bore aggregate expenses as a
percentage of its average daily net assets (after taking into consideration N&B
Management's expense reimbursement for each Fund and N&B Management's then
current waiver of a portion of the management fee borne indirectly by
Neuberger&Berman GENESIS Trust), as follows:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Neuberger&Berman FOCUS Trust 0.96%
Neuberger&Berman GENESIS Trust 1.25%
Neuberger&Berman GUARDIAN Trust 0.88%
Neuberger&Berman MANHATTAN Trust 1.09%
Neuberger&Berman PARTNERS Trust 0.91%
Neuberger&Berman SOCIALLY RESPONSIVE Trust 1.58%
</TABLE>
N&B Management has voluntarily undertaken to reimburse each Fund for its
Total Operating Expenses so that each Fund's expense ratio per annum will not
exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the
Fund's average daily net assets. A Fund's per annum "expense ratio" is the sum
of the Fund's Total Operating Expenses divided by that Fund's average daily net
assets for the year. N&B Management may terminate this undertaking to any Fund
by
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giving at least 60 days' prior written notice to the Fund. The effect of
reimbursement by N&B Management is to reduce a Fund's expenses and thereby
increase its total return.
- ---------------------
Transfer Agent
- --------------------------------------------------------------------------------
The Funds' transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to the
Neuberger& Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor,
New York, NY 10158-0180.
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<PAGE> 40
INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION, AND
OTHER MATTERS
- ----------------
The Funds
- --------------------------------------------------------------------------------
Neuberger&Berman FOCUS Trust, Neuberger&Berman GENESIS Trust,
Neuberger&Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust and
Neuberger&Berman PARTNERS Trust are separate operating series of N&B Equity
Trust, a Delaware business trust organized pursuant to a Trust Instrument dated
May 6, 1993. Neuberger&Berman SOCIALLY RESPONSIVE Trust is a separate operating
series of N&B Equity Assets, a Delaware business trust organized pursuant to a
Trust Instrument dated October 18, 1993. Each Trust is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end
management investment company, commonly known as a mutual fund. N&B Equity Trust
has seven separate series. N&B Equity Assets has six separate series. Each Fund
invests all of its net investable assets in its corresponding Portfolio, in each
case receiving a beneficial interest in that Portfolio. The trustees of the
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.
DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of each
Fund represent equal proportionate interests in the assets of that Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trusts do not intend to hold
annual meetings of shareholders of the Funds. The trustees will call special
meetings of shareholders of a Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of that Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of a Fund will not be personally liable for the obligations of any
Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, each Trust Instrument
requires that every written obligation of the Trust or a Fund contain a
statement that such obligation may be enforced only against the assets of that
Trust or Fund and provides for indemnification out of Trust or Fund property of
any shareholder nevertheless held personally liable for Trust or Fund
obligations, respectively.
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<PAGE> 41
OTHER. Because Fund shares can be bought, owned and sold only through an
account with an Institution, a client of an Institution may be unable to
purchase additional shares and/or may be required to redeem shares (and possibly
incur a tax liability) if the client no longer has a relationship with the
Institution or if the Institution no longer has a contract with N&B Management
to perform services. Depending on the policies of the Institutions involved, an
investor may be able to transfer an account from one Institution to another.
- ---------------------
The Portfolios
- --------------------------------------------------------------------------------
Each Portfolio is a separate operating series of Managers Trust, a New York
common law trust organized as of December 1, 1992. Managers Trust is registered
under the 1940 Act as a diversified, open-end management investment company.
Managers Trust has six separate Portfolios. The assets of each Portfolio belong
only to that Portfolio, and the liabilities of each Portfolio are borne solely
by that Portfolio and no other.
FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that seeks
to achieve its investment objective by investing all of its net investable
assets in its corresponding Portfolio, which is a "master fund." The Portfolio,
which has the same investment objective, policies, and limitations as the Fund,
in turn invests in securities; the Fund thus acquires an indirect interest in
those securities.
Each Fund's investment in its corresponding Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in a Portfolio. The Sister Funds that are series of
N&B Equity Funds and other mutual funds that are series of N&B Equity Assets
invest all of their respective net investable assets in corresponding Portfolios
of Managers Trust. The shares of each series of N&B Equity Funds are available
for purchase by members of the general public. The Trusts do not sell their
shares directly to members of the general public.
Each Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
a Portfolio on the same terms and conditions as a Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in a Portfolio
(including the series of N&B Equity Funds and N&B Equity Assets) are not
required to sell their shares at the same public offering price as a Fund, could
have a different administration fee and expenses than a Fund, and (except N&B
Equity Funds and N&B Equity Assets) might charge a sales commission. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the Portfolio. Information
regarding any fund that invests in a Portfolio is available from N&B Management
by calling 800-877-9700.
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<PAGE> 42
The trustees of the Trusts believe that investment in a Portfolio by a
series of N&B Equity Funds or by other potential investors in addition to a Fund
may enable the Portfolio to realize economies of scale that could reduce its
operating expenses, thereby producing higher returns and benefitting all
shareholders. However, a Fund's investment in its corresponding Portfolio may be
affected by the actions of other large investors in the Portfolio, if any. For
example, if a large investor in a Portfolio (other than a Fund) redeemed its
interest in the Portfolio, the Portfolio's remaining investors (including the
Fund) might, as a result, experience higher pro rata operating expenses, thereby
producing lower returns.
Each Fund may withdraw its entire investment from its corresponding
Portfolio at any time, if the trustees of the respective Trust determine that it
is in the best interests of the Fund and its shareholders to do so. A Fund might
withdraw, for example, if there were other investors in a Portfolio with power
to, and who did by a vote of all investors (including the Fund), change the
investment objective, policies, or limitations of the Portfolio in a manner not
acceptable to the trustees of the respective Trust. A withdrawal could result in
a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. That distribution could result in a
less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's investment portfolio. If the Fund decided
to convert those securities to cash, it usually would incur brokerage fees or
other transaction costs. If a Fund withdrew its investment from a Portfolio, the
trustees of the respective Trust would consider what actions might be taken,
including the investment of all of the Fund's net investable assets in another
pooled investment entity having substantially the same investment objective as
the Fund or the retention by the Fund of its own investment manager to manage
its assets in accordance with its investment objective, policies, and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in a
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, a
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in a Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in a Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in a Portfolio, including a Fund, will be
liable for all obligations of the Portfolio. However, the risk of an investor in
a
42
<PAGE> 43
Portfolio incurring financial loss beyond the amount of its investment on
account of such liability would be limited to circumstances in which the
Portfolio had inadequate insurance and was unable to meet its obligations out of
its assets. Upon liquidation of a Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
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<PAGE> 44
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in "Investment
Programs" herein, each Portfolio may make the following investments, among
others, individually or in combination, although it may not necessarily buy all
of the types of securities or use all of the investment techniques that are
described. For additional information on the following investments and on other
types of investments which the Portfolios may make, see the SAI.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. Each Portfolio may invest up
to 15% of its net assets in illiquid securities, which are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for a Portfolio to value or dispose of due to the absence of an
active trading market. The sale of some illiquid securities by the Portfolios
may be subject to legal restrictions which could be costly to the Portfolios.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and
doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities. Each Portfolio may invest up
to 10% of the value of its total assets in foreign securities. The 10%
limitation does not apply to foreign securities that are denominated in U.S.
dollars, including ADRs. Foreign securities (including those denominated in U.S.
dollars and ADRs) are affected by political and economic developments in foreign
countries. Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. In addition, foreign markets may be
less liquid and more volatile than U.S. markets and may offer less protection to
investors. Investments in foreign securities that are not denominated in U.S.
dollars (including those made through ADRs) may be subject to special risks,
such as governmental regulation of foreign exchange transactions and changes in
rates of exchange with the U.S. dollar, irrespective of the performance of the
underlying investment.
COVERED CALL OPTIONS. Each Portfolio may try to reduce the risk of
securities price changes (hedge) or generate income by writing (selling) covered
call options against portfolio securities and may purchase call options in
related closing transactions. When a Portfolio writes a covered call option
against a security, the Portfolio is obligated to sell that security to the
purchaser of the option at a fixed price at any
44
<PAGE> 45
time during a specified period if the purchaser decides to exercise the option.
The maximum price the Portfolio may realize on the security during the option
period is the fixed price; the Portfolio continues to bear the risk of a decline
in the security's price, although this risk is reduced, at least in part, by the
premium received for writing the option.
The primary risks in using call options are (1) possible lack of a liquid
secondary market for options and the resulting inability to close out options
when desired; (2) the fact that use of options is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of a
Portfolio's securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, by offsetting favorable price movements in hedged
investments; and (4) the possible inability of a Portfolio to sell a security at
a time that would otherwise be favorable for it to do so, or the possible need
for a Portfolio to sell a security at a disadvantageous time, due to its need to
maintain "cover" in connection with its use of these instruments.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, a
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations. Each Portfolio
also may lend portfolio securities to banks, brokerage firms, or institutional
investors to earn income. Costs, delays, or losses could result if the selling
party to a repurchase agreement or the borrower of portfolio securities becomes
bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
OTHER INVESTMENTS. Although each Portfolio invests primarily in common
stocks, when market conditions warrant it may invest in preferred stocks,
securities convertible into or exchangeable for common stocks, U.S. Government
and Agency Securities, investment grade debt securities, or money market
instruments, or may retain assets in cash or cash equivalents.
U.S. Government Securities are obligations of the U.S. Treasury backed by
the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae") and
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may be supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government
45
<PAGE> 46
Agency mortgage-backed securities. The market prices of U.S. Government and
Agency Securities are not guaranteed by the Government.
Neuberger&Berman SOCIALLY RESPONSIVE Portfolio may invest up to 20% of its
net assets in convertible securities. A convertible security is a bond,
debenture, note, preferred stock, or other security that may be converted into
or exchanged for a prescribed amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula.
Convertible securities generally have features of both common stock and debt
securities. Neuberger& Berman SOCIALLY RESPONSIVE Portfolio does not intend to
purchase any convertible securities that are not investment grade.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's ("S&P"), or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed comparable by N&B Management to
such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest category (Baa) or Comparable Unrated Securities
may be deemed to have speculative characteristics. The value of the fixed income
securities in which a Portfolio may invest is likely to decline in times of
rising market interest rates. Conversely, when rates fall, the value of a
Portfolio's fixed income investments is likely to rise.
Neuberger&Berman PARTNERS Portfolio may invest up to 15% of its net assets
in debt securities rated below investment grade and Comparable Unrated
Securities. Such securities may be considered predominantly speculative,
although, as debt securities, they generally have priority over equity
securities of the same issuer and are generally better secured. Debt securities
in the lowest rating categories may involve a substantial risk of default or may
be in default. Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuer of such securities to make principal and interest
payments than is the case for higher-grade debt securities. An economic downturn
affecting the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-rated
securities. Neuberger&Berman PARTNERS Portfolio will invest in such securities
only when N&B Management concludes that the anticipated return to the Portfolio
on such an investment warrants exposure to the additional level of risk. A
further description of Moody's and S&P's ratings is included in the Appendix to
the SAI.
46
<PAGE> 47
USE OF JOINT PROSPECTUS AND STATEMENT
OF ADDITIONAL INFORMATION
Each Fund and its corresponding Portfolio acknowledges that it is solely
responsible for all information or lack of information about that Fund and
Portfolio in this Prospectus or in the SAI, and no other Fund or Portfolio is
responsible therefor. The trustees of the Trusts and of Managers Trust have
considered this factor in approving each Fund's use of a single combined
Prospectus and combined SAI.
47
<PAGE> 48
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue
2nd Floor
New York, NY 10158-0180
800-877-9700
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
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<PAGE> 49
FUNDS ELIGIBLE FOR EXCHANGE
EQUITY TRUSTS
Neuberger&Berman Focus Trust
Neuberger&Berman Genesis Trust
Neuberger&Berman Guardian Trust
Neuberger&Berman Manhattan Trust
Neuberger&Berman Partners Trust
Neuberger&Berman Socially Responsive Trust
INCOME TRUST
Neuberger&Berman Limited Maturity Bond Trust
Neuberger&Berman, Neuberger&Berman Management Inc., and the above-named Funds
are registered trademarks or service marks of Neuberger&Berman, LLC or
Neuberger&Berman Management Inc.
(C) 1997 Neuberger&Berman Management Incorporated.
49
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<PAGE> 51
(This page has been left blank intentionally.)
<PAGE> 52
(This page has been left blank intentionally.)
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN EQUITY TRUST AND PORTFOLIOS
NEUBERGER & BERMAN SOCIALLY RESPONSIVE TRUST AND PORTFOLIO
(a series of Neuberger & Berman Equity Assets)
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 15, 1997
Neuberger & Berman Neuberger & Berman
Manhattan Trust Genesis Trust
(and Neuberger & Berman (and Neuberger & Berman
Manhattan Portfolio) Genesis Portfolio)
Neuberger & Berman Neuberger & Berman
Focus Trust Guardian Trust
(and Neuberger & Berman (and Neuberger & Berman
Focus Portfolio) Guardian Portfolio)
Neuberger & Berman Neuberger & Berman
Partners Trust Socially Responsive Trust
(and Neuberger & Berman (and Neuberger & Berman
Partners Portfolio) Socially Responsive Portfolio)
No-Load Mutual Funds
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger & Berman MANHATTAN Trust, Neuberger & Berman GENESIS Trust,
Neuberger & Berman FOCUS Trust, Neuberger & Berman GUARDIAN Trust, and Neuberger
& Berman PARTNERS Trust and Neuberger & Berman SOCIALLY RESPONSIVE Trust (each a
"Fund") are no-load mutual funds that offer shares pursuant to a Prospectus
dated December 15, 1997. The Funds invest all of their net investable assets in
Neuberger & Berman MANHATTAN Portfolio, Neuberger & Berman GENESIS Portfolio,
Neuberger & Berman FOCUS Portfolio, Neuberger & Berman GUARDIAN Portfolio,
Neuberger & Berman PARTNERS Portfolio and Neuberger & Berman SOCIALLY RESPONSIVE
Portfolio (each a "Portfolio"), respectively.
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT
WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT
INCORPORATED (EACH AN "INSTITUTION").
<PAGE>
The Funds' Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger & Berman Management Incorporated ("N&B Management"),
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or
by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by a Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by a Fund or its distributor in any jurisdiction in which such offering
may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................2
Investment Insight.....................................................5
Neuberger & Berman MANHATTAN Portfolio...........................5
Neuberger & Berman GENESIS Portfolio.............................7
Neuberger & Berman FOCUS and Neuberger & Berman
GUARDIAN Portfolios...........................................10
Neuberger & Berman PARTNERS Portfolio...........................11
Neuberger & Berman SOCIALLY RESPONSIVE Portfolio................12
Additional Investment Information.....................................15
Neuberger & Berman FOCUS Portfolio - Description of Economic
Sectors.........................................................33
Neuberger & Berman SOCIALLY RESPONSIVE Portfolio - Description of
Social Policy...................................................36
PERFORMANCE INFORMATION.....................................................40
Total Return Computations.............................................40
Comparative Information...............................................41
Other Performance Information.........................................43
CERTAIN RISK CONSIDERATIONS.................................................44
TRUSTEES AND OFFICERS.......................................................44
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................51
Investment Manager and Administrator..................................51
Sub-Adviser...........................................................54
Investment Companies Managed..........................................55
Management and Control of N&B Management..............................58
DISTRIBUTION ARRANGEMENTS...................................................59
ADDITIONAL EXCHANGE INFORMATION.............................................60
- i -
<PAGE>
ADDITIONAL REDEMPTION INFORMATION...........................................61
Suspension of Redemptions.............................................61
Redemptions in Kind...................................................61
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................62
ADDITIONAL TAX INFORMATION..................................................62
Taxation of the Funds.................................................62
Taxation of the Portfolios............................................64
Taxation of the Funds' Shareholders...................................67
PORTFOLIO TRANSACTIONS......................................................67
Portfolio Turnover....................................................76
REPORTS TO SHAREHOLDERS.....................................................76
ORGANIZATION................................................................77
CUSTODIAN AND TRANSFER AGENT................................................77
INDEPENDENT AUDITORS/ACCOUNTANTS............................................77
LEGAL COUNSEL...............................................................77
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................77
REGISTRATION STATEMENT......................................................82
FINANCIAL STATEMENTS........................................................82
Appendix A..................................................................83
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.......................83
- ii -
<PAGE>
INVESTMENT INFORMATION
Each Fund (except Neuberger & Berman SOCIALLY RESPONSIVE Trust) is a
separate operating series of Neuberger & Berman Equity Trust ("Equity Trust"), a
Delaware business trust that is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company. Neuberger &
Berman SOCIALLY RESPONSIVE Trust is a separate operating series of Neuberger &
Berman Equity Assets ("Equity Assets"), a Delaware business trust that is
registered with the SEC as an open-end management investment company. Neuberger
& Berman Equity Trust and Neuberger & Berman Equity Assets are referred to below
as the "Trusts." Each Fund seeks its investment objective by investing all of
its net investable assets in a Portfolio of Equity Managers Trust ("Managers
Trust") that has an investment objective identical to, and a name similar to,
that of the Fund. Each Portfolio, in turn, invests in securities in accordance
with an investment objective, policies, and limitations identical to those of
its corresponding Fund. Managers Trust is an open-end management investment
company managed by N&B Management.
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of each Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of each Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the respective Trust ("Fund
Trustees") or of Managers Trust ("Portfolio Trustees") without shareholder
approval. The fundamental investment policies and limitations of a Fund or a
Portfolio may not be changed without the approval of the lesser of (1) 67% of
the total units of beneficial interest ("shares") of the Fund or Portfolio
represented at a meeting at which more than 50% of the outstanding Fund or
Portfolio shares are represented or (2) a majority of the outstanding shares of
the Fund or Portfolio. These percentages are required by the Investment Company
Act of 1940 ("1940 Act") and are referred to in this SAI as a "1940 Act majority
vote." Whenever a Fund is called upon to vote on a change in a fundamental
investment policy or limitation of its corresponding Portfolio, the Fund casts
its votes in proportion to the votes of its shareholders at a meeting thereof
called for that purpose.
- 1 -
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
Each Fund (except Neuberger & Berman SOCIALLY RESPONSIVE Trust) has
the following fundamental investment policy, to enable it to invest in its
corresponding Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
Neuberger & Berman SOCIALLY RESPONSIVE Trust has the following
fundamental investment policy, to enable it to invest in its corresponding
Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its net investable assets (cash, securities, and
receivables relating to securities) in an open-end management
investment company having substantially the same investment objective,
policies, and limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of each Fund are identical
to those of its corresponding Portfolio. Therefore, although the following
discusses the investment policies and limitations of the Portfolios, it applies
equally to their corresponding Funds.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by a Portfolio.
The following investment policies and limitations are fundamental and
apply to all Portfolios:
1. BORROWING. No Portfolio may borrow money, except that a Portfolio
may (i) borrow money from banks for temporary or emergency purposes and not for
leveraging or investment and (ii) enter into reverse repurchase agreements for
any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of
the value of its total assets (including the amount borrowed) less liabilities
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(other than borrowings). If at any time borrowings exceed 33-1/3% of the value
of a Portfolio's total assets, that Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to comply
with the 33-1/3% limitation.
2. COMMODITIES. No Portfolio may purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit a Portfolio from purchasing
futures contracts or options (including options on futures contracts, but
excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. No Portfolio may, with respect to 75% of the value
of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. No Portfolio may purchase any security if,
as a result, 25% or more of its total assets (taken at current value) would be
invested in the securities of issuers having their principal business activities
in the same industry. This limitation does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
5. LENDING. No Portfolio may lend any security or make any other loan
if, as a result, more than 33-1/3% of its total assets (taken at current value)
would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. No Portfolio may purchase real estate unless acquired
as a result of the ownership of securities or instruments, but this restriction
shall not prohibit a Portfolio from purchasing securities issued by entities or
investment vehicles that own or deal in real estate or interests therein or
instruments secured by real estate or interests therein.
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7. SENIOR SECURITIES. No Portfolio may issue senior securities, except
as permitted under the 1940 Act.
8. UNDERWRITING. No Portfolio may underwrite securities of other
issuers, except to the extent that a Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolios do not
consider foreign currencies or forward contracts to be physical commodities.
The following investment policies and limitations are non-fundamental
and apply to all Portfolios unless otherwise indicated:
1. BORROWING. No Portfolio may purchase securities if outstanding
borrowings, including any reverse repurchase agreements, exceed 5% of its total
assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, no Portfolio may make any loans other than securities
loans.
3. MARGIN TRANSACTIONS. No Portfolio may purchase securities on margin
from brokers or other lenders, except that a Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. No Portfolio may invest more than 10% of the
value of its total assets in securities of foreign issuers, provided that this
limitation shall not apply to foreign securities denominated in U.S. dollars,
including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. No Portfolio may purchase any security if, as
a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
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6. PLEDGING (NEUBERGER & BERMAN GENESIS AND NEUBERGER & BERMAN
GUARDIAN PORTFOLIOS). Neither of these Portfolios may pledge or hypothecate any
of its assets, except that (i) Neuberger & Berman GENESIS Portfolio may pledge
or hypothecate up to 15% of its total assets to collateralize a borrowing
permitted under fundamental policy 1 above or a letter of credit issued for a
purpose set forth in that policy and (ii) each Portfolio may pledge or
hypothecate up to 5% of its total assets in connection with its entry into any
agreement or arrangement pursuant to which a bank furnishes a letter of credit
to collateralize a capital commitment made by the Portfolio to a mutual
insurance company of which the Portfolio is a member. The other Portfolios are
not subject to any restrictions on their ability to pledge or hypothecate assets
and may do so in connection with permitted borrowings.
7. SECTOR CONCENTRATION (NEUBERGER & BERMAN FOCUS PORTFOLIO). This
Portfolio may not invest more than 50% of its total assets in any one economic
sector.
Each Portfolio (except Neuberger & Berman SOCIALLY RESPONSIVE
Portfolio) as an operating policy, does not intend to invest in futures
contracts and options thereon during the coming year. In addition, although the
Portfolios do not have policies limiting their investment in warrants, no
Portfolio currently intends to invest in warrants unless acquired in units or
attached to securities.
INVESTMENT INSIGHT
NEUBERGER & BERMAN MANHATTAN PORTFOLIO
The portfolio co-managers of Neuberger & Berman MANHATTAN Portfolio
love surprises - positive earnings surprises that is. Their extensive research
has revealed that historically 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.
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The co-managers explain, "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." The
co-managers explain that they are particularly biased towards companies that
have consistently beaten consensus earnings estimates. Their extensive research
has revealed that stocks whose earnings consistently exceeded expectations
offered greater potential for long-term capital appreciation.
The co-managers focus their 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
large-cap stock market. By focusing on stocks with market capitalizations
between $500 million and $8 billion, the co-managers believe they are likely to
identify more of their brand of growth stock opportunities. Considering the
currently high valuations of large-cap growth stocks relative to mid-cap growth
stocks with what the co-managers think is comparable or, in many cases, better
earnings growth potential, they believe the Portfolio is particularly well
positioned in today's market. The Portfolio now uses the Russell MidcapTM Growth
Index as its benchmark. Consistent with the Portfolio's capitalization
parameters and growth style, the co-managers believe this is a more appropriate
benchmark than the S&P "500."
They reiterate, "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 the co-managers
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, the co-managers will select the one trading at
the lower multiple to earnings growth.
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"We are dispassionate sellers," say the co-managers. "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."
NEUBERGER & BERMAN GENESIS PORTFOLIO
Neuberger & Berman Genesis Fund (which, like Neuberger & Berman
GENESIS Trust, invests all of its net investable assets in Neuberger & Berman
GENESIS Portfolio) was established in 1988. A fund dedicated primarily to
small-capitalization stocks (companies with total market value of outstanding
common stock of up to $1.5 billion at the time the Portfolio invests), Neuberger
& Berman GENESIS Portfolio is devoted to the same value principles as most of
the other equity funds managed by N&B Management. The Portfolio is comprised of
small-cap stocks with solid earnings today, not just promises for tomorrow.
Many people think that small-capitalization stock funds are
predominantly invested in high-risk companies. That is not necessarily the case.
Neuberger & Berman GENESIS Portfolio looks for the same fundamentals in
small-capitalization stocks as other Portfolios look for in stocks of larger
companies. The portfolio co-managers stick to the areas they understand. They
look for the most persistent earnings growth at the lowest multiple, as well as
for well-established companies with entrepreneurial management and sound
finances. Also considered are catalysts to exposing value, such as management
changes and new product lines. Often, these are firms that have suffered
temporary setbacks or undergone a restructuring.
Neuberger & Berman GENESIS Portfolio's motto is "boring is beautiful."
Instead of investing in trendy, high-priced stocks that tend to hurt
shareholders on the downside, the Portfolio looks for little-known, solid,
growing companies whose stocks the managers believe are wonderful bargains.
AN INTERVIEW WITH THE PORTFOLIO CO-MANAGER
Q: If I already own a large-cap stock fund, why should I consider
investing in a small-cap fund as well?
A: Look at how fast a sapling grows compared to, say, a mature tree.
Much of the same can be true about companies. It's possible for a smaller
company to grow 50% faster than an IBM or a Coca-Cola.
So, many small-cap stocks offer superior growth potential. Consider
the cereal you eat, the detergent you use, the coffee you drink -- and imagine
if you had invested in these products BEFORE they became household names. If you
had invested only in the blue-chip companies of the day, you would have missed
out on these opportunities.
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Of course, we're not advocating that an investor's portfolio consist
only of small-cap stock funds. It pays to diversify. Let's look back about 25
years. While past performance cannot indicate future performance, small-cap
stocks outperformed larger-cap stocks 16 of the years from 1971 to 1996, which
means larger-cap stocks did better the rest of the time.1/
Q: Neuberger & Berman GENESIS Trust is classified as a "small-cap
value fund." To many people, "small-cap value" is an oxymoron. Can you clarify
the Portfolio's investment approach?
A: We understand the confusion. After all, a lot of people equate
"small-cap" with "growth." They also equate "value" with "cheap." At Neuberger &
Berman GENESIS Portfolio, we're 100% behind finding GROWING small-cap companies
- -- what we believe are highly profitable companies with solid records and
promising futures. So where do we part company with managers who follow a
"small-cap growth" style? It comes down to how much growth and at what price.
Small-cap growth investors seem willing to pay a premium for vastly superior
growth. This results in two problems: a) growth tends to be discounted by the
premium valuations, and b) the growth expectations are so high as to be
unsustainable. We believe superior yet more stable returns can be purchased at
significant discounts. They may be found in mundane, perhaps even boring,
industries. Remember, the same glamorous appeal that attracts so many growth
investors also attracts competitors.
In that respect, we're "value" managers. Yet we'd like to make this
point clear: Low price-to-earnings multiples, in and of themselves, cannot
- ----------
1/ Results are on a total return basis and include reinvestment of all dividends
and other distributions. Small-cap stocks are represented by the fifth
capitalization quintile of stocks on the NYSE from 1971 to 1981 and performance
of the Dimensional Fund Advisors (DFA) Small Company Fund from 1982 to 1996.
Larger-cap stocks are represented by the S&P "500" Index, an unmanaged group of
stocks. Please note that indices do not take into account any fees or expenses
of investing in the individual securities that they track. Data about these
indices are prepared or obtained by N&B Management. The Portfolio may invest in
many securities not included in the above-described indices. Source: STOCKS,
BONDS, BILLS AND INFLATION 1997 YEARBOOK(TRADEMARK), Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved.
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justify a "buy" decision. When we search for growing, high-quality small-cap
companies selling at what we feel are bargain prices, we ask ourselves: Is the
company cheap for a good reason? Or, does it have the financial muscle and the
management talent to make it into the big leagues?
Q: Let's turn to specifics. What criteria are used to decide which
small-cap companies make the cut -- and which ones don't?
A: Over the years, we've seen hundreds of small-cap companies that
flourished and just as many that failed to deliver on their early promises. What
made the difference? While every case is unique, here are a few important traits
of the winners.
First of all, a successful small-cap company normally produces high
returns. In practice, this means the business has a number of barriers to entry.
Perhaps the company has a technology that's hard to duplicate. Or maybe it can
make a product at a substantially lower cost than anyone else. Unlike most
businesses, it has an advantage that allows it to continue earning above-market
returns.
In addition to having a competitive edge, a successful small-cap
company should generate healthy cash flow. With excess cash, a company has the
ability to finance its own growth without diluting the ownership stake of
existing stockholders by issuing more shares.
No small-cap company can grow without having the right people on
board. That's why we spend so much time meeting the CEOs and CFOs of small-cap
companies. While we question the managers about future plans and strategies, we
spend as much time evaluating them as people. Do they seem honest and capable?
Or do they puff up their case? Making portfolio decisions is a lot about making
character judgments -- who has the stuff to manage a growing company, and who
doesn't.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS
PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE
PROSPECTUS.
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NEUBERGER & BERMAN FOCUS AND NEUBERGER & BERMAN GUARDIAN PORTFOLIOS
Neuberger & Berman FOCUS Portfolio's investment objective is long-term
capital appreciation. Like the other Portfolios that use a value-oriented
investment approach, it seeks to buy undervalued securities that offer
opportunities for growth, but then it focuses its assets in those sectors where
undervalued stocks are clustered. The portfolio co-managers begin by looking for
stocks that are selling for less than the managers think they're worth, a
"bottom-up approach." More often than not, such stocks are in a few economic
sectors that are out of favor and are undervalued as a group. The portfolio
co-managers think most cheap stocks deserve to be cheap and their job is to find
the few that don't.
The portfolio co-managers don't pick sectors for Neuberger & Berman
FOCUS Portfolio based on their perception of what the economy is going to do.
They look for stocks with low valuations; often, these stocks will be found in a
particular sector. If an investment manager rotates the sectors in a portfolio
by buying sectors when they are undervalued and selling them when they become
fully valued, the manager may be able to achieve above-average performance.
Neuberger & Berman GUARDIAN Portfolio subscribes to the same
stock-picking philosophy followed since Roy R. Neuberger founded Neuberger &
Berman GUARDIAN Fund (which, like Neuberger & Berman GUARDIAN Trust, invests all
of its net investable assets in Neuberger & Berman GUARDIAN Portfolio) in 1950.
It's no great trick for a mutual fund to make money when the market is
rising. The tide that lifts stock values will carry most funds along. The true
test of management is its ability to make money even when the market is flat or
declining. By that measure, Neuberger & Berman Guardian Fund has served
shareholders well and has paid a dividend every quarter and a capital gain
distribution EVERY YEAR since 1950; Neuberger & Berman GUARDIAN Trust has done
so since December 1993. Of course, there can be no assurance that this trend
will continue.
The portfolio co-managers place a high premium on being knowledgeable
about the companies whose stocks they buy. That knowledge is important, because
sometimes it takes courage to buy stocks that the rest of the market has
forsaken. The managers would rather buy an undervalued stock because they expect
it to become fairly valued than buy one fairly valued and hope it becomes
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<PAGE>
overvalued. The managers tend to buy stocks that are out of favor, believing
that an investor is not going to get great companies at great valuations when
the market perception is great.
Investors who switch around a lot are not going to benefit from
Neuberger & Berman GUARDIAN Portfolio's approach. They're following the market
- -- this Portfolio is looking at fundamentals.
NEUBERGER & BERMAN PARTNERS PORTFOLIO
Neuberger & Berman PARTNERS Portfolio's objective is capital growth.
It seeks to make money in good markets and not give up those gains during rough
times.
Investors in Neuberger & Berman PARTNERS Trust typically seek
consistent performance and have a moderate risk tolerance. They do know,
however, that stock investments can provide the long-term upside potential
essential to meeting their long-term investment goals, particularly a
comfortable retirement and planning for a college education.
The portfolio co-managers look for stocks that are undervalued in the
marketplace either in relation to strong current fundamentals, such as a low
price-to-earnings ratio, consistent cash flow, and support from asset values, or
in relation to their projection of the growth of the company's future earnings.
If the market goes down, those stocks the Portfolio elects to hold,
historically, have gone down less.
The portfolio co-managers monitor stocks of medium- to large-sized
companies that often are not closely scrutinized by other investors. The
managers research these companies in order to determine if they are likely to
produce a new product, become an acquisition target, or undergo a financial
restructuring.
What else catches the portfolio co-managers' eyes? Companies whose
managements own their own stock. These companies usually seek to build
shareholder wealth by buying back shares or making acquisitions that have a
swift and positive impact on the bottom line.
To increase the upside potential, the managers zero in on companies
that dominate their industries or their specialized niches. The managers'
reasoning? Market leaders tend to earn higher levels of profits.
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NEUBERGER & BERMAN SOCIALLY RESPONSIVE PORTFOLIO
Securities for this Portfolio are selected through a two-phase
process. The first is financial. The portfolio manager analyzes a universe of
companies according to N&B Management's value-oriented philosophy and looks for
stocks which are undervalued for any number of reasons. The manager focuses on
financial fundamentals, including balance sheet ratios and cash flow analysis,
and meets with company management in an effort to understand how those
unrecognized values might be realized in the market.
The second part of the process is social screening. N&B Management's
social research is based on the same kind of philosophy that governs its
financial approach: N&B Management believes that first-hand knowledge and
experience are its most important tools. Utilizing a database, the portfolio
manager does careful, in-depth tracking and analyzes a large number of companies
on some eighty issues in six broad social categories. The manager uses a wide
variety of sources to determine company practices and policies in these areas.
Performance is analyzed in light of knowledge of the issues and of the best
practices in each industry.
The portfolio manager understands that, for many issues and in many
industries, absolute standards are elusive and often counterproductive. Thus, in
addition to quantitative measurements, the manager places value on such
indicators as management commitment, progress, direction, and industry
leadership.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: First things first. How do you begin your stock selection process?
A: Our first question is always: On financial grounds alone, is a
company a smart investment? For a company's stock to meet our financial test, it
must pass a number of hurdles.
We look for bargains, just like the portfolio managers of the other
Portfolios. More specifically, we search for companies that we believe have
terrific products, excellent customer service, and solid balance sheets -- but
because they may have missed quarterly earnings expectations by a few pennies,
because their sectors are currently out of favor, because Wall Street
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overreacted to a temporary setback, or because the company's merits aren't
widely known, their stocks are selling at a discount.
While we look at the stock's fundamentals carefully, that's not all we
examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger & Berman each year, and we're also frequently on the
road visiting dozens of corporations. From Neuberger & Berman SOCIALLY
RESPONSIVE Trust's inception, we've met with representatives of every company we
own.
When we're face to face with a CEO, we're searching for answers to two
crucial questions: "Does the company have a vision of where it wants to go?" and
"Can the management team make it happen?" We've analyzed companies for over
three decades, and we always look for companies that have both clear strategies
and management talent.
Q: When you evaluate a company's balance sheet, what matters the most
to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending. Or
increase its dividend payments.
When a company generates lots of excess cash flow, it has growth
capital at its disposal. It can invest for higher profits down the line and
improve shareholder value. Determining exactly HOW a company intends to spend
its excess cash is an entirely different matter -- and that's where the
information learned in our company meetings comes in. Still, you've got to have
the extra cash in the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and its
management. After a company passes your financial test, what do you do next?
A: After we're convinced of a company's merits on financial grounds
alone, we review its record as a corporate citizen. In particular, we look for
evidence of leadership in three key areas: concern for the environment,
workplace diversity, and enlightened employment practices.
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It should be clear that our social screening always takes place after
we search far and wide for what we believe are the best investment opportunities
available. This is a crucial point, and an analogy can be used to explain it.
Let's assume you're looking to fill a vital position in your company. What you'd
pay attention to first is the candidate's competence: Can he or she do the job?
So after interviewing a number of candidates, you'd narrow your list to those
that are highly qualified. To choose from this smaller group, you might look at
the candidate's personality: Can he or she get along with everyone in your
group?
Obviously, you wouldn't hire an unqualified person simply because he
or she is likable. What you'd probably do is give the job to a highly qualified
person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts. How
do we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of
looking for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to Neuberger & Berman SOCIALLY
RESPONSIVE Trust?
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<PAGE>
A: Our shareholders are looking to invest for the future in more ways
than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
* * * * *
Each Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of any Portfolio's total assets. Of course,
each Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
Some or all of the Portfolios, as indicated below, may make the
following investments, among others, although they may not buy all of the types
of securities or use all of the investment techniques that are described.
REPURCHASE AGREEMENTS (ALL PORTFOLIOS). In a repurchase agreement, a
Portfolio purchases securities from a bank that is a member of the Federal
Reserve System or from a securities dealer that agrees to repurchase the
securities from the Portfolio at a higher price on a designated future date.
Repurchase agreements generally are for a short period of time, usually less
than a week. Repurchase agreements with a maturity of more than seven days are
considered to be illiquid securities. No Portfolio may enter into a repurchase
agreement with a maturity of more than seven days if, as a result, more than 15%
of the value of its net assets would then be invested in such repurchase
agreements and other illiquid securities. A Portfolio may enter into a
repurchase agreement only if (1) the underlying securities are of a type that
the Portfolio's investment policies and limitations would allow it to purchase
directly, (2) the market value of the underlying securities, including accrued
interest, at all times equals or exceeds the repurchase price, and (3) payment
for the underlying securities is made only upon satisfactory evidence that the
securities are being held for the Portfolio's account by its custodian or a bank
acting as the Portfolio's agent.
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SECURITIES LOANS (ALL PORTFOLIOS). In order to realize income, each
Portfolio may lend portfolio securities with a value not exceeding 33-1/3% of
its total assets to banks, brokerage firms, or other institutional investors
judged creditworthy by N&B Management. Borrowers are required continuously to
secure their obligations to return securities on loan from a Portfolio by
depositing collateral in a form determined to be satisfactory by the Portfolio
Trustees. The collateral, which must be marked to market daily, must be equal to
at least 100% of the market value of the loaned securities, which will also be
marked to market daily. N&B Management believes the risk of loss on these
transactions is slight because, if a borrower were to default for any reason,
the collateral should satisfy the obligation. However, as with other extensions
of secured credit, loans of portfolio securities involve some risk of loss of
rights in the collateral should the borrower fail financially.
RESTRICTED SECURITIES AND RULE 144A SECURITIES (ALL PORTFOLIOS). Each
Portfolio may invest in restricted securities, which are securities that may not
be sold to the public without an effective registration statement under the 1933
Act. Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by a
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of a Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradable in their
principal market are not considered to be restricted. Regulation S under the
1933 Act permits the sale abroad of securities that are not registered for sale
in the United States.
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Where registration is required, a Portfolio may be obligated to pay
all or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases thereof will
be subject to each Portfolio's 15% limit on investments in illiquid securities.
Restricted securities for which no market exists are priced by a method that the
Portfolio Trustees believe accurately reflects fair value.
REVERSE REPURCHASE AGREEMENTS (ALL PORTFOLIOS). In a reverse
repurchase agreement, a Portfolio sells portfolio securities subject to its
agreement to repurchase the securities at a later date for a fixed price
reflecting a market rate of interest; these agreements are considered borrowings
for purposes of each Portfolio's investment policies and limitations concerning
borrowings. While a reverse repurchase agreement is outstanding, a Portfolio
will deposit in a segregated account with its custodian cash or appropriate
liquid securities, marked to market daily, in an amount at least equal to the
Portfolio's obligations under the agreement. There is a risk that the
counter-party to a reverse repurchase agreement will be unable or unwilling to
complete the transaction as scheduled, which may result in losses to the
Portfolio.
FOREIGN SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. These investments are subject to each Portfolio's quality
standards. While investments in foreign securities are intended to reduce risk
by providing further diversification, such investments involve sovereign and
other risks, in addition to the credit and market risks normally associated with
domestic securities. These additional risks include the possibility of adverse
political and economic developments (including political instability,
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
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Each Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolios endeavor to
achieve the most favorable net results on portfolio transactions. Each Portfolio
may invest only in securities of issuers in countries whose governments are
considered stable by N&B Management.
Foreign securities often trade with less frequency and in less volume
than domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may include
higher custodial fees than apply to domestic custody arrangements and
transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of a Portfolio are uninvested and
no return is earned thereon. The inability of a Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to a Portfolio due
to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
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Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
In order to limit the risks inherent in investing in foreign currency
denominated securities, a Portfolio may not purchase any such security if, as a
result, more than 10% of its total assets (taken at market value) would be
invested in foreign currency denominated securities. Within that limitation,
however, no Portfolio is restricted in the amount it may invest in securities
denominated in any one foreign currency.
FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "HEDGING INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER & BERMAN SOCIALLY
RESPONSIVE PORTFOLIO). The Portfolio may purchase and sell interest rate futures
contracts, stock and bond index futures contracts, and foreign currency futures
contracts and may purchase and sell options thereon in an attempt to hedge
against changes in the prices of securities or, in the case of foreign currency
futures and options thereon, to hedge against changes in prevailing currency
exchange rates. Because the futures markets may be more liquid than the cash
markets, the use of futures contracts permits the Portfolio to enhance portfolio
liquidity and maintain a defensive position without having to sell portfolio
securities. The Portfolio does not engage in transactions in futures or options
on futures for speculation. The Portfolio views investment in (i) interest rate
and securities index futures and options thereon as a maturity management device
and/or a device to reduce risk or preserve total return in an adverse
environment for the hedged securities, and (ii) foreign currency futures and
options thereon as a means of establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies that
are held or intended to be acquired by the Portfolio.
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A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the Commodity
Futures Trading Commission ("CFTC"); futures transactions must be executed
through a futures commission merchant that is a member of the relevant contract
market. The exchange's affiliated clearing organization guarantees performance
of the contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
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it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying a Portfolio's futures position and the securities held by
or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage; as a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, or
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gain, to the investor. Losses that may arise from certain futures transactions
are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
CALL OPTIONS ON SECURITIES (ALL PORTFOLIOS). Neuberger & Berman
SOCIALLY RESPONSIVE Portfolio may write covered call options and may purchase
call options on securities. Each of the other Portfolios may write covered call
options and may purchase call options in related closing transactions. The
purpose of writing call options is to hedge (i.e., to reduce, at least in part,
the effect of price fluctuations of securities held by the Portfolio on the
Portfolio's and its corresponding Fund's NAVs) or to earn premium income.
Portfolio securities on which call options may be written and purchased by a
Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective.
When a Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
Each Portfolio writes only "covered" call options on securities it
owns. The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk (in contrast to the writing
of "naked" or uncovered call options, which the Portfolios will not do) but is
capable of enhancing the Portfolios' total return. When writing a covered call
option, a Portfolio, in return for the premium, gives up the opportunity for
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profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline.
If a call option that a Portfolio has written expires unexercised, the
Portfolio will realize a gain in the amount of the premium; however, that gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security.
When a Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date. A Portfolio would purchase a call option to offset a previously
written call option. Neuberger & Berman SOCIALLY RESPONSIVE Portfolio also may
purchase a call option to protect against an increase in the price of the
securities it intends to purchase.
PUT OPTIONS ON SECURITIES (NEUBERGER & BERMAN SOCIALLY RESPONSIVE
PORTFOLIO). The Portfolio may write and purchase put options on securities.
Generally, the purpose of writing and purchasing these options is to hedge
(i.e., to reduce, at least in part, the effect of price fluctuations of
securities held by the Portfolio on the Portfolio's and its corresponding Fund's
NAVs).
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser decides to exercise the option. The
Portfolio may be obligated to purchase the underlying security at more than its
current value.
When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio would purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
Portfolio securities on which put options may be written and purchased
by the Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective. When writing a put option,
the Portfolio, in return for the premium, takes the risk that it must purchase
the underlying security at a price that may be higher than the current market
price of the security. If a put option that the Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the premium.
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GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of an
option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
obligation under any option written by a Portfolio terminates upon expiration of
the option or, at an earlier time, when the Portfolio offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by a Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between a
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when a Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless a Portfolio is able to effect a closing purchase transaction
in a covered OTC call option it has written, it will not be able to liquidate
securities used as cover until the option expires or is exercised or until
different cover is substituted. In the event of the counter-party's insolvency,
a Portfolio may be unable to liquidate its options position and the associated
cover. N&B Management monitors the creditworthiness of dealers with which a
Portfolio may engage in OTC options transactions.
The assets used as cover (or held in a segregated account) for OTC
options written by a Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
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<PAGE>
The premium received (or paid) by a Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by a Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits Neuberger & Berman SOCIALLY
RESPONSIVE Portfolio to write another call option on the underlying security
with a different exercise price or expiration date or both. There is, of course,
no assurance that a Portfolio will be able to effect closing transactions at
favorable prices. If a Portfolio cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold (or purchase a
security that it would not have otherwise bought), in which case it would
continue to be at market risk on the security.
A Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
A Portfolio pays brokerage commissions or spreads in connection with
purchasing or writing options, including those used to close out existing
positions. From time to time, Neuberger & Berman SOCIALLY Responsive Portfolio
may purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering the security from
its portfolio. In those cases, additional brokerage commissions are incurred.
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The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
FOREIGN CURRENCY TRANSACTIONS (ALL PORTFOLIOS). Each Portfolio may
enter into contracts for the purchase or sale of a specific currency at a future
date (usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolios enter into forward contracts in an attempt
to hedge against changes in prevailing currency exchange rates. The Portfolios
do not engage in transactions in forward contracts for speculation; they view
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by a Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly between
dealers (usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, a
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
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N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if N&B Management is incorrect in its judgment of future
exchange rate relationships, a Portfolio could be in a less advantageous
position than if such a hedge had not been established. If a Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of a Portfolio's securities against a decline in the value of a currency
does not eliminate fluctuations in the prices of the underlying securities.
Because forward contracts are not traded on an exchange, the assets used to
cover such contracts may be illiquid. A Portfolio may experience delays in the
settlement of its foreign currency transactions.
OPTIONS ON FOREIGN CURRENCIES (ALL PORTFOLIOS). Each Portfolio may
write and purchase covered call and put options on foreign currencies. A
Portfolio would engage in such transactions to protect against declines in the
U.S. dollar value of portfolio securities or increases in the U.S. dollar cost
of securities to be acquired or to protect the U.S. dollar equivalent of
dividends, interest, or other payments on those securities. Currency options
have characteristics and risks similar to those of securities options, as
discussed herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in the
case of exchange-traded currency options.
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REGULATORY LIMITATIONS ON USING HEDGING INSTRUMENTS. To the extent a
Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets. The Portfolios (except Neuberger & Berman SOCIALLY RESPONSIVE Portfolio)
do not intend to invest in futures contracts and options thereon during the
coming year.
COVER FOR HEDGING INSTRUMENTS. Each Portfolio will comply with SEC
guidelines regarding "cover" for Hedging Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of a Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. A Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by a Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that the skills needed
to use Hedging Instruments are different from those needed to select a
Portfolio's securities; (4) the fact that, although use of Hedging Instruments
for hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of a Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for a Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Hedging Instruments.
N&B Management intends to reduce the risk of imperfect correlation by investing
only in Hedging Instruments whose behavior is expected to resemble or offset
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that of a Portfolio's underlying securities or currency. N&B Management intends
to reduce the risk that a Portfolio will be unable to close out Hedging
Instruments by entering into such transactions only if N&B Management believes
there will be an active and liquid secondary market. There can be no assurance
that a Portfolio's use of Hedging Instruments will be successful.
Each Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if its corresponding Fund is to continue to qualify as a
regulated investment company ("RIC"). See "Additional Tax Information."
FIXED INCOME SECURITIES (ALL PORTFOLIOS). While the emphasis of the
Portfolios' investment programs is on common stocks and other equity securities,
the Portfolios may also invest in money market instruments, U.S. Government and
Agency Securities, and other fixed income securities. Each Portfolio may invest
in corporate bonds and debentures receiving one of the four highest ratings from
Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any
other nationally recognized statistical rating organization ("NRSRO") or, if not
rated by any NRSRO, deemed comparable by N&B Management to such rated securities
("Comparable Unrated Securities"). In addition, Neuberger & Berman PARTNERS
Portfolio may invest up to 15% of its net assets in corporate debt securities
rated below investment grade or Comparable Unrated Securities.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolios may rely on the ratings of any NRSRO,
the Portfolios primarily refer to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Debt securities in the lowest rating categories may involve a substantial
risk of default or may be in default. Changes in economic conditions or
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developments regarding the individual issuer are more likely to cause price
volatility and weaken the capacity of the issuer of such securities to make
principal and interest payments than is the case for higher-grade debt
securities. An economic downturn affecting the issuer may result in an increased
incidence of default. The market for lower-rated securities may be thinner and
less active than for higher-rated securities. Pricing of thinly traded
securities requires greater judgment than pricing of securities for which market
transactions are regularly reported. N&B Management will invest in lower-rated
securities only when it concludes that the anticipated return on such an
investment to Neuberger & Berman PARTNERS Portfolio warrants exposure to the
additional level of risk.
Subsequent to its purchase by a Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by that Portfolio. In such a case, Neuberger
& Berman SOCIALLY RESPONSIVE Portfolio will engage in an orderly disposition of
the downgraded securities. Each other Portfolio will engage in an orderly
disposition of the downgraded securities to the extent necessary to ensure that
the Portfolio's holdings of securities rated below investment grade and
Comparable Unrated Securities will not exceed 5% of its net assets (15% in the
case of Neuberger & Berman PARTNERS Portfolio).
COMMERCIAL PAPER (ALL PORTFOLIOS). Commercial paper is a short-term
debt security issued by a corporation or bank, usually for purposes such as
financing current operations. The Portfolios may invest only in commercial paper
receiving the highest rating from S&P (A-1) or Moody's (P-1) or deemed by N&B
Management to be of comparable quality.
Each Portfolio may invest in commercial paper that cannot be resold to
the public without an effective registration statement under the 1933 Act. While
restricted commercial paper normally is deemed illiquid, N&B Management may in
certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
ZERO COUPON SECURITIES (NEUBERGER & BERMAN PARTNERS AND NEUBERGER &
BERMAN SOCIALLY RESPONSIVE PORTFOLIOS). Each of these Portfolios may invest in
zero coupon securities, which are debt obligations that do not entitle the
holder to any periodic payment of interest prior to maturity or that specify a
future date when the securities begin to pay current interest. Zero coupon
securities are issued and traded at a discount from their face amount or par
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value. This discount varies depending on prevailing interest rates, the time
remaining until cash payments begin, the liquidity of the security, and the
perceived credit quality of the issuer.
The discount on zero coupon securities ("original issue discount")
must be taken into income ratably by each such Portfolio prior to the receipt of
any actual payments. Because its corresponding Fund must distribute
substantially all of its net income (including its share of the Portfolio's
accrued original issue discount) to its shareholders each year for income and
excise tax purposes, each such Portfolio may have to dispose of portfolio
securities under disadvantageous circumstances to generate cash, or may be
required to borrow, to satisfy its corresponding Fund's distribution
requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically. Zero
coupon securities are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having a similar maturity and
credit quality.
CONVERTIBLE SECURITIES (ALL PORTFOLIOS). Each Portfolio may invest in
convertible securities. A convertible security entitles the holder to receive
the interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, such securities ordinarily provide a stream of income with
generally higher yields than common stocks of the same or similar issuers, but
lower than the yield on non-convertible debt. Convertible securities are usually
subordinated to comparable-tier non-convertible securities but rank senior to
common stock in a corporation's capital structure. The value of a convertible
security is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege and (2) its worth if converted into the underlying common stock.
Convertible debt securities are subject to each Portfolio's investment policies
and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
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governing instrument. If a convertible security held by a Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and its corresponding Fund's ability to achieve their investment objectives.
PREFERRED STOCK (ALL PORTFOLIOS). Each Portfolio may invest in
preferred stock. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's board of
directors. Preferred shareholders may have certain rights if dividends are not
paid but generally have no legal recourse against the issuer. Shareholders may
suffer a loss of value if dividends are not paid. The market prices of preferred
stocks are generally more sensitive to changes in the issuer's creditworthiness
than are the prices of debt securities.
NEUBERGER & BERMAN FOCUS PORTFOLIO - DESCRIPTION OF ECONOMIC SECTORS.
Neuberger & Berman FOCUS Portfolio seeks to achieve its investment
objective by investing principally in common stocks in the following thirteen
multi-industry economic sectors, normally making at least 90% of its investments
in not more than six such sectors:
(1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production, or
sale of automobiles, automobile parts, mobile homes, or related products
("automobile industries") or design, construction, renovation, or refurbishing
of residential dwellings. The value of securities of companies in the automobile
industries is affected by, among other things, foreign competition, the level of
consumer confidence and consumer debt, and installment loan rates. The housing
construction industry may be affected by the level of consumer confidence and
consumer debt, mortgage rates, tax laws, and the inflation outlook.
(2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing
consumer goods or services, including design, processing, production, sale, or
storage of packaged, canned, bottled, or frozen foods and beverages and design,
production, or sale of home furnishings, appliances, clothing, accessories,
cosmetics, or perfumes. Certain of these companies are subject to government
regulation affecting the use of various food additives and production methods,
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which could affect profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns, health concerns,
and other factors affecting supply and demand.
(3) DEFENSE AND AEROSPACE SECTOR: Companies engaged in research,
manufacture, or sale of products or services related to the defense or aerospace
industries, including air transport; data processing or computer-related
services; communications systems; military weapons or transportation; general
aviation equipment, missiles, space launch vehicles, or spacecraft; machinery
for guidance, propulsion, or control of flight vehicles; and airborne or
ground-based equipment essential to the test, operation, or maintenance of
flight vehicles. Because these companies rely largely on U.S. (and foreign)
governmental demand for their products and services, their financial conditions
are heavily influenced by defense spending policies.
(4) ENERGY SECTOR: Companies involved in the production, transmission, or
marketing of energy from oil, gas, or coal, as well as nuclear, geothermal, oil
shale, or solar sources of energy (but excluding public utility companies). Also
included are companies that provide component products or services for those
activities. The value of these companies' securities varies based on the price
and supply of energy fuels and may be affected by international politics, energy
conservation, the success of exploration projects, environmental considerations,
and the tax and other regulatory policies of various governments.
(5) FINANCIAL SERVICES SECTOR: Companies providing financial services to
consumers or industry, including commercial banks and savings and loan
associations, consumer and industrial finance companies, securities brokerage
companies, leasing companies, and insurance companies. These companies are
subject to extensive governmental regulations. Their profitability may fluctuate
significantly as a result of volatile interest rates, concerns about particular
banks and savings institutions, and general economic conditions.
(6) HEALTH CARE SECTOR: Companies engaged in design, manufacture, or sale
of products or services used in connection with the provision of health care,
including pharmaceutical companies; firms that design, manufacture, sell, or
supply medical, dental, or optical products, hardware, or services; companies
involved in biotechnology, medical diagnostic, or biochemical research and
development; and companies that operate health care facilities. Many of these
companies are subject to government regulation and potential health care
reforms, which could affect the price and availability of their products and
services. Also, products and services of these companies could quickly become
obsolete.
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(7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development,
manufacture, or marketing of products, processes, or services related to the
agriculture, chemicals, containers, forest products, non-ferrous metals, steel,
or pollution control industries, including synthetic and natural materials (for
example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or
fragrances), paper, wood products, steel, and cement. Certain of these companies
are subject to state and federal regulation, which could require alteration or
cessation of production of a product, payment of fines, or cleaning of a
disposal site. Furthermore, because some of the materials and processes used by
these companies involve hazardous components, there are additional risks
associated with their production, handling, and disposal. The risk of product
obsolescence also is present.
(8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research,
development, or manufacture of products, processes, or services relating to
electrical equipment, machinery, pollution control, or construction services,
including transformers, motors, turbines, hand tools, earth-moving equipment,
and waste disposal services. The profitability of most of these companies may
fluctuate significantly in response to capital spending and general economic
conditions. As is the case for the heavy industry sector, there are risks
associated with the production, handling, and disposal of materials and
processes that involve hazardous components and the risk of product
obsolescence.
(9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design,
production, or distribution of goods or services for the media industries
(including television or radio broadcasting or manufacturing, publishing,
recordings and musical instruments, motion pictures, and photography) and the
entertainment industries (including sports arenas, amusement and theme parks,
gaming casinos, sporting goods, camping and recreational equipment, toys and
games, travel-related services, hotels and motels, and fast food and other
restaurants). Many products produced by companies in this sector -- for example,
video and electronic games -- may become obsolete quickly. Additionally,
companies engaged in television and radio broadcast are subject to government
regulation.
(10) RETAILING SECTOR: Companies engaged in retail distribution of home
furnishings, food products, clothing, pharmaceuticals, leisure products, or
other consumer goods, including department stores, supermarkets, and retail
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chains specializing in particular items such as shoes, toys, or pharmaceuticals.
The value of these companies' securities fluctuates based on consumer spending
patterns, which depend on inflation and interest rates, the level of consumer
debt, and seasonal shopping habits. The success or failure of a company in this
highly competitive sector depends on its ability to predict rapidly changing
consumer tastes.
(11) TECHNOLOGY SECTOR: Companies that are expected to have or develop
products, processes, or services that will provide, or will benefit
significantly from, technological advances and improvements or future automation
trends, including semiconductors, computers and peripheral equipment, scientific
instruments, computer software, telecommunications equipment, and electronic
components, instruments, and systems. These companies are sensitive to foreign
competition and import tariffs. Also, many of their products may become obsolete
quickly.
(12) TRANSPORTATION SECTOR: Companies involved in providing transportation
of people and products, including airlines, railroads, and trucking firms.
Revenues of these companies are affected by fluctuations in fuel prices and
government regulation of fares.
(13) UTILITIES SECTOR: Companies in the public utilities industry and
companies that derive a substantial majority of their revenues through supplying
public utilities (including companies engaged in the manufacture, production,
generation, transmission, or sale of gas and electric energy) and that provide
telephone, telegraph, satellite, microwave, and other communication facilities
to the public. The gas and electric public utilities industries are subject to
various uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of natural
gas, and risks associated with the construction and operation of nuclear power
facilities.
NEUBERGER & BERMAN SOCIALLY RESPONSIVE PORTFOLIO - DESCRIPTION OF SOCIAL
POLICY
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship
between business and society, socially responsive investing ("SRI") is a
mechanism for assuring that investors' social values are reflected in their
investment decisions. As such, SRI is a direct descendent of the successful
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effort begun in the early 1970's to encourage companies to divest their South
African operations and subscribe to the Sullivan Principles. Today, a growing
number of individuals and institutions are applying similar strategies to a
broad range of problems.
Although there are many strategies available to the socially
responsive investor, including proxy activism, below-market loans to community
projects, and venture capital, the SRI strategies used by the Portfolio
generally fall into two categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to avoid
holding securities of companies whose products or policies are seen as being at
odds with the social good. The most common exclusions historically have involved
tobacco companies and weapons manufacturers.
LEADERSHIP INVESTING. A growing number of investors actively look for
companies with progressive programs that are exemplary or companies which make
it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have
surprised Adam Smith, who was, first and foremost, a moral philosopher. THE
WEALTH OF NATIONS is firmly rooted in the Enlightenment conviction that the
purpose of capital is the social good and the related belief that idle capital
is both wasteful and unethical. But, what very likely would have surprised Smith
is the sheer complexity of the social issues we face today and the diversity of
our attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger & Berman, LLC ("Neuberger & Berman"), the Portfolio's
sub-adviser, maintains a database of information about the social impact of the
companies it follows. N&B Management uses the database to evaluate social issues
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after it deems a stock acceptable from a financial standpoint for acquisition by
the Portfolio. The aim of the database is to be as comprehensive as possible,
given that much of the information concerning corporate responsibility comes
from subjective sources. Information for the database is gathered by Neuberger &
Berman in many categories and then analyzed by N&B Management in the following
six categories of corporate responsibility:
WORKPLACE DIVERSITY AND EMPLOYMENT. N&B Management looks for companies
that show leadership in areas such as employee training and promotion policies
and benefits, such as flextime, generous profit sharing, and parental leave. N&B
Management looks for active programs to promote women and minorities and takes
into account their representation among the officers of an issuer and members of
its board of directors. As a basis for exclusion, N&B Management looks for Equal
Employment Opportunity Act infractions and Occupational Safety and Health Act
violations; examines each case in terms of severity, frequency, and time elapsed
since the incident; and considers actions taken by the company since the
violation. N&B Management also monitors companies' progress and attitudes toward
these issues.
ENVIRONMENT. A company's impact on the environment depends largely on
the industry. Therefore, N&B Management examines a company's environmental
record vis-a-vis those of its peers in the industry. All companies operating in
an industry with inherently high environmental risks are likely to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies, N&B Management examines their problems in
terms of severity, frequency, and elapsed time. N&B Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental policies, procedures, and practices. N&B Management defines an
environmental leadership company as one that puts into place strong affirmative
programs to minimize emissions, promote safety, reduce waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products. N&B Management looks for the commitment and
active involvement of senior management in all these areas. Several major
manufacturers which still produce substantial amounts of pollution are among the
leaders in developing outstanding waste source reduction and remediation
programs.
PRODUCT. N&B Management considers company announcements, press
reports, and public interest publications relating to the health, safety,
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quality, labeling, advertising, and promotion of both consumer and industrial
products. N&B Management takes note of companies with a strong commitment to
quality and with marketing practices which are ethical and consumer-friendly.
N&B Management pays particular attention to companies whose products and
services promote progressive solutions to social problems.
PUBLIC HEALTH. N&B Management measures the participation of companies
in such industries and markets as alcohol, tobacco, gambling and nuclear power.
N&B Management also considers the impact of products and marketing activities
related to those products on nutritional and other health concerns, both
domestically and in foreign markets.
WEAPONS. N&B Management keeps track of domestic military sales and,
whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. N&B Management gathers information about a
company's participation in community affairs, its policies with respect to
charitable contributions, and its support of education and the arts. N&B
Management looks for companies with a focus, dealing with issues not just by
making financial contributions, but also by asking the questions: What can we do
to help? What do we have to offer? Volunteerism, high-school mentoring programs,
scholarships and grants, and in-kind donations to specific groups are just a few
ways that companies have responded to these questions.
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by N&B Management from a financial
standpoint are analyzed using Neuberger & Berman's database. The companies are
then evaluated by the portfolio manager to determine if the companies' policies,
practices, products, and services withstand scrutiny in the following major
areas of concern: the environment and workplace diversity and employment.
Companies are then further evaluated to determine their track record in issues
and areas of concern such as public health, weapons, product, and corporate
citizenship.
The issues and areas of concern that are tracked lend themselves to
objective analysis in varying degrees. Few, however, can be resolved entirely on
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the basis of scientifically demonstrable facts. Moreover, a substantial amount
of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend on Neuberger & Berman's ability to tap a wide variety of sources
and on the experience and judgment of the people at N&B Management who interpret
the information.
In applying the information in the database to stock selection for the
Portfolio, N&B Management considers several factors. N&B Management examines the
severity and frequency of various infractions, as well as the time elapsed since
their occurrence. N&B Management also takes into account any remedial action
which has been taken by the company relating to these infractions. N&B
Management notes any quality innovations made by the company in its effort to
create positive change and looks at the company's overall approach to social
issues.
PERFORMANCE INFORMATION
Each Fund's performance figures are based on historical results and
are not intended to indicate future performance. The share price and total
return of each Fund will vary, and an investment in a Fund, when redeemed, may
be worth more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
Each Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
The Funds commenced operations in August 1993 except for Neuberger &
Berman SOCIALLY RESPONSIVE Trust, which commenced operations in March 1997.
However, each Fund's investment objective, policies, and limitations are the
same as those of another mutual fund that is a series of Neuberger & Berman
Equity Funds and that has a name similar to the Fund's and invests in the same
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Portfolio ("Sister Fund"). Each Sister Fund had a predecessor. The following
total return data is for each Fund since its inception and, for periods prior to
each Fund's inception, its Sister Fund (which, as used herein, includes data for
that Sister Fund's predecessor). The total returns for periods prior to the
Funds' inception would have been lower had they reflected the higher fees of the
Funds, as compared to those of the Sister Funds.
The average annual total returns for Neuberger & Berman MANHATTAN
Trust and its Sister Fund for the one-, five-, and ten-year periods ended August
31, 1997, were +38.84%, +17.56%, and +11.49%, respectively.
The average annual total returns for Neuberger & Berman GENESIS Trust
and its Sister Fund for the one- and five-year periods ended August 31, 1997,
and for the period from September 27, 1988 (commencement of operations), through
August 31, 1997, were +44.31%, +22.35%, and +16.76%, respectively.
The average annual total returns for Neuberger & Berman FOCUS Trust
and its Sister Fund for the one-, five-, and ten-year periods ended August 31,
1997, were +43.93%, +22.58% and +14.70%, respectively.
The average annual total returns for Neuberger & Berman GUARDIAN Trust
and its Sister Fund for the one-, five-, and ten-year periods ended August 31,
1997, were +39.56%, +19.85%, and +14.42%, respectively.
The average annual total returns for Neuberger & Berman PARTNERS Trust
and its Sister Fund for the one-, five-, and ten-year periods ended August 31,
1997, were +47.11%, +22.44%, and +14.33%, respectively.
The average annual total returns for Neuberger & Berman SOCIALLY
RESPONSIVE Trust and its Sister Fund for the one-year period ended August 31,
1997, and for the period from March 16, 1994 (commencement of operations)
through August 31, 1997, were +31.92% and +20.02%, respectively.
Prior to January 5, 1989, the investment policies Neuberger & Berman
FOCUS Trust's Sister Fund required that at least 80% of its investments normally
be in energy-related investments; prior to November 1, 1991, those investment
policies required that at least 25% of its investments normally be in the energy
sector. Neuberger & Berman FOCUS Trust may include information reflecting the
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Sister Fund's performance and expenses for periods before November 1, 1991, in
its advertisements, sales literature, financial statements, and other documents
filed with the SEC and/or provided to current and prospective shareholders.
Investors should be aware that such information may not necessarily reflect the
level of performance and expenses that would have been experienced had the
Fund's current investment policies been in effect.
N&B Management may from time to time waive a portion of its fees due
from any Fund or Portfolio or reimburse a Fund or Portfolio for a portion of its
expenses. Such action has the effect of increasing total return. Actual
reimbursements and waivers are described in the Prospectus and in "Investment
Management and Administration Services" below.
COMPARATIVE INFORMATION
From time to time each Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published
by independent services or publications (including newspapers,
newsletters, and financial periodicals) that monitor the performance
of mutual funds, such as Lipper Analytical Services, Inc., C.D.A.
Investment Technologies, Inc., Wiesenberger Investment Companies
Service, Investment Company Data Inc., Morningstar, Inc., Micropal
Incorporated, and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World Report
magazines, The Wall Street Journal, The New York Times, Kiplinger's
Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell
2000 Stock Index, Russell Midcap Growth Index, Dow Jones Industrial
Average ("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index,
Montgomery Securities Growth Stock Index, Value Line Index, U.S.
Department of Labor Consumer Price Index ("Consumer Price Index"),
College Board Annual Survey of Colleges, Kanon Bloch's Family
Performance Index, the Barra Growth Index, the Barra Value Index, and
various other domestic, international, and global indices. The S&P 500
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Index is a broad index of common stock prices, while the DJIA
represents a narrower segment of industrial companies. The S&P 600
Index includes stocks that range in market value from $39 million to
$2.7 billion, with an average of $616 million. The S&P 400 Index
measures mid-sized companies that have an average market
capitalization of $2.2 billion. Each assumes reinvestment of
distributions and is calculated without regard to tax consequences or
the costs of investing. Each Portfolio may invest in different types
of securities from those included in some of the above indices.
Neuberger & Berman SOCIALLY RESPONSIVE Trust's performance may also be
compared to various socially responsive indices. These include The Domini Social
Index and the indices developed by the quantitative department of Prudential
Securities, such as that department's Large and Mid-Cap portfolio indices for
various breakdowns ("Sin" Stock Free, Cigarette-Stock Free, S&P Composite,
etc.).
Evaluations of the Funds' performance, their total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Funds
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about a Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the corresponding Fund. This information may include the
Portfolio's portfolio diversification by asset type or, in the case of Neuberger
& Berman Socially Responsive Portfolio, by the social characteristics of
companies owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
N&B Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
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for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find Neuberger & Berman PARTNERS Trust, Neuberger &
Berman GUARDIAN Trust or Neuberger & Berman FOCUS Trust to be an attractive
investment vehicle also include parents saving to meet college costs for their
children. For instance, the cost of a college education is rapidly approaching
the cost of the average family home. Estimates of total four-year costs
(tuition, room and board, books and other expenses) for students starting
college in various years may be included in Advertisements, based on the College
Board Annual Survey of Colleges.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
CERTAIN RISK CONSIDERATIONS
Although each Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that any Portfolio will achieve its
investment objective.
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TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts and Managers Trust, including their addresses and
principal business experience during the past five years. Some persons named as
trustees and officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman.
Positions Held
With the Trusts
Name, Age, and and Managers
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- -------------- ------------------- -----------------------
Faith Colish (62) Trustee of each Attorney at Law, Faith Colish,
63 Wall Street Trust and A Professional Corporation.
24th Floor Managers Trust
New York, NY 10005
Donald M. Cox (75) Trustee of each Retired. Formerly Senior Vice
435 East 52nd Street Trust and Managers President and Director of
New York, NY 10022 Trust Exxon Corporation; Director of
Emigrant Savings Bank.
Stanley Egener* (63) Chairman of the Principal of Neuberger &
Board, Chief Berman; President and Director
Executive Officer, of N&B Management; Chairman of
and Trustee of the Board, Chief Executive
each Trust and Officer and Trustee of seven
Managers Trust other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Howard A. Mileaf (60) Trustee of each Vice President and Special
WHX Corporation Trust and Managers Counsel to WHX Corporation
110 East 59th Street Trust (holding company) since 1992;
30th Floor Director of Kevlin Corporation
New York, NY 10022 (manufacturer of microwave and
other products).
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Positions Held
With the Trusts
Name, Age, and and Managers
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- -------------- ------------------- -----------------------
Edward I. O'Brien* (69) Trustee of each Until 1993, President of the
12 Woods Lane Trust and Managers Securities Industry
Scarsdale, NY 10583 Trust Association ("SIA")
(securities industry's
representative in government
relations and regulatory
matters at the federal and
state levels); until November
1993, employee of the SIA;
Director of Legg Mason, Inc.
John T. Patterson, Jr. (69) Trustee of each Retired. Formerly, President
183 Ledge Drive Trust and Managers of SOBRO (South Bronx Overall
Torrington, CT 06790 Trust Economic Development
Corporation).
John P. Rosenthal (64) Trustee of each Senior Vice President of
Burnham Securities Inc. Trust and Managers Burnham Securities Inc. (a
Burnham Asset Management Trust registered broker-dealer)
Corp. since 1992; Director, Cancer
1325 Avenue of the Americas Treatment Holdings, Inc.
17th Floor
New York, NY 10019
Cornelius T. Ryan (66) Trustee of each General Partner of Oxford
Oxford Bioscience Partners Trust and Managers Partners and Oxford Bioscience
315 Post Road West Trust Partners (venture capital
Westport, CT 06880 partnerships) and President of
Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money market
fund) and Prime Cash Fund.
Gustave H. Shubert (68) Trustee of each Senior Fellow/Corporate
13838 Sunset Boulevard Trust and Managers Advisor and Advisory Trustee
Pacific Palisades, CA 90272 Trust of Rand (a non-profit public
interest research institution)
since 1989; Honorary Member of
the Board of Overseers of the
- 45 -
<PAGE>
Positions Held
With the Trusts
Name, Age, and and Managers
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- -------------- ------------------- -----------------------
Institute for Civil Justice,
the Policy Advisory Committee
of the Clinical Scholars
Program at the University of
California, the American
Association for the
Advancement of Science, the
Counsel on Foreign Relations,
and the Institute for
Strategic Studies (London);
advisor to the Program
Evaluation and Methodology
Division of the U.S. General
Accounting Office; formerly
Senior Vice President and
Trustee of Rand.
Lawrence Zicklin* (61) President and Principal of Neuberger &
Trustee of each Berman; Director of N&B
Trust and Managers Management; President and/or
Trust Trustee of four other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Daniel J. Sullivan (57) Vice President of Senior Vice President of N&B
each Trust and Management since 1992; Vice
Managers Trust President of seven other
mutual funds for which N&B
Management acts as investment
manager or administrator.
Michael J. Weiner (50) Vice President Senior Vice President of N&B
and Principal Management since 1992;
Financial Officer Treasurer of N&B Management
of each Trust and from 1992 to 1996; Vice
Managers Trust President and Principal
Financial Officer of seven
other mutual funds for which
- 46 -
<PAGE>
Positions Held
With the Trusts
Name, Age, and and Managers
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- -------------- ------------------- -----------------------
N&B Management acts as
investment manager or
administrator.
Claudia A. Brandon (41) Secretary of each Vice President of N&B
Trust and Managers Management; Secretary of seven
Trust other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Richard Russell (50) Treasurer and Vice President of N&B
Principal Management since 1993; prior
Accounting Officer thereto, Assistant Vice
of each Trust and President of N&B Management;
Managers Trust Treasurer and Principal
Accounting Officer of seven
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Stacy Cooper-Shugrue (34) Assistant Assistant Vice President of
Secretary of each N&B Management since 1993;
Trust and Manager prior thereto, employee of N&B
Trust Management; Assistant
Secretary of seven other
mutual funds for which N&B
Management acts as investment
manager or administrator.
C. Carl Randolph(60) Assistant Principal of Neuberger &
Secretary of each Berman since 1992; Assistant
Trust and Managers Secretary of seven other
Trust mutual funds for which N&B
Management acts as investment
manager or administrator.
- 47 -
<PAGE>
Positions Held
With the Trusts
Name, Age, and and Managers
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- -------------- ------------------- -----------------------
Barbara DiGiorgio (38) Assistant Assistant Vice President of
Treasurer of each N&B Management since 1993;
Trust and Managers thereto, employee of N&B
Trust Management; Assistant
Treasurer since 1996 of seven
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
Celeste Wischerth (36) Assistant Assistant Vice President of
Treasurer of each N&B Management since 1994;
Trust and Managers prior thereto, employee of N&B
Trust Management; Assistant
Treasurer since 1996 of seven
other mutual funds for which
N&B Management acts as
investment manager or
administrator.
- ----------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust and Managers
Trust within the meaning of the 1940 Act. Messrs. Egener and Zicklin are
interested persons by virtue of the fact that they are officers and/or directors
of N&B Management and principals of Neuberger & Berman. Mr. O'Brien is an
interested person by virtue of the fact that he is a director of Legg Mason,
Inc., a wholly owned subsidiary of which, from time to time, serves as a broker
or dealer to the Portfolios and other funds for which N&B Management serves as
investment manager.
- 48 -
<PAGE>
The Trusts' Trust Instruments and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the compensation
of the trustees of each Trust. None of the Neuberger & Berman Funds(R) has any
retirement plan for its trustees.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/97
<TABLE>
<CAPTION>
Aggregate Aggregate
Compensation Compensation Total Compensation from
from Neuberger from Neuberger Investment Companies in the
Name and Position & Berman & Berman Neuberger & Berman Fund
WITH EACH TRUST EQUITY TRUST EQUITY ASSETS COMPLEX PAID TO TRUSTEES
- --------------- ------------ ------------- ------------------------
<S> <C> <C> <C>
Faith Colish $ 2,592 $3 $ 64,000
Trustee (4 other investment
companies)
Donald M. Cox $ 2,952 $3 $ 31,000
Trustee (2 other investment
companies)
Stanley Egener $ 0 $0 $ 0
Chairman of the (8 other investment
Board, Chief companies)
Executive Officer,
and Trustee
- 49 -
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/97
Aggregate Aggregate
Compensation Compensation Total Compensation from
from Neuberger from Neuberger Investment Companies in the
Name and Position & Berman & Berman Neuberger & Berman Fund
WITH EACH TRUST EQUITY TRUST EQUITY ASSETS COMPLEX PAID TO TRUSTEES
- --------------- ------------ ------------- ------------------------
Alan R. Gruber, $ 1,913 $1 $ 20,000
Trustee, and the (2 other investment
Estate of Alan R. companies)
Gruber
Howard A. Mileaf $ 2,995 $3 $ 33,500
Trustee (3 other investment
companies)
Edward I. O'Brien $ 3,321 $4 $ 34,000
Trustee (2 other investment
companies)
John T. Patterson, Jr. $ 3,321 $4 $ 37,500
Trustee (3 other investment
companies)
John P. Rosenthal $ 2,952 $3 $ 32,500
Trustee (3 other investment
companies)
Cornelius T. Ryan $ 2,995 $3 $ 30,500
Trustee (2 other investment
companies)
Gustave H. Shubert $ 2,995 $3 $ 30,500
Trustee (2 other investment
companies)
Lawrence Zicklin $ 0 $0 $ 0
President and Trustee (4 other investment
companies)
</TABLE>
At November 28, 1997, the trustees and officers of the Trusts and of
Managers Trust, as a group, owned beneficially or of record less than 1% of the
outstanding shares of each Fund.
- 50 -
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Funds' net investable assets are invested in their
corresponding Portfolios, the Funds do not need an investment manager. N&B
Management serves as the investment manager to all the Portfolios pursuant to a
management agreement with Managers Trust, dated as of August 2, 1993
("Management Agreement"). The Management Agreement was approved by the holders
of the interests in all the Portfolios (except Neuberger & Berman SOCIALLY
RESPONSIVE Portfolio) on August 2, 1993, and by the holders of the interests in
Neuberger & Berman SOCIALLY RESPONSIVE Portfolio on March 9, 1994. That
Portfolio was authorized to become subject to the Management Agreement by vote
of the Portfolio Trustees on October 20, 1993, and became subject to it on March
14, 1994.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolios in its
discretion and will continuously develop an investment program for the
Portfolios' assets. The Management Agreement permits N&B Management to effect
securities transactions on behalf of each Portfolio through associated persons
of N&B Management. The Management Agreement also specifically permits N&B
Management to compensate, through higher commissions, brokers and dealers who
provide investment research and analysis to the Portfolios, although N&B
Management has no current plans to pay a material amount of such compensation.
N&B Management provides to each Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts and of Managers Trust. See "Trustees and Officers."
Each Portfolio pays N&B Management a management fee based on the Portfolio's
average daily net assets, as described in the Prospectus.
N&B Management provides facilities, services and personnel, as well as
accounting, recordkeeping, and other services, to each Fund (except Neuberger &
Berman SOCIALLY RESPONSIVE Trust) pursuant to an administration agreement with
- 51 -
<PAGE>
Equity Trust, dated August 3, 1993, as amended on August 2, 1996, ("Equity Trust
Administration Agreement"). N&B Management provides facilities, services and
personnel, as well as accounting, recordkeeping, and other services, to
Neuberger & Berman SOCIALLY RESPONSIVE Trust pursuant to an administration
agreement with Equity Assets, dated November 1, 1994, as amended August 2, 1996
("Equity Assets Administration Agreement"). The Equity Trust Administration
Agreement and the Equity Assets Administration Agreement are referred to below
as the "Administration Agreements." For such administrative services, each Fund
pays N&B Management a fee based on the Fund's average daily net assets, as
described in the Prospectus. N&B Management enters into administrative services
agreements with Institutions, pursuant to which it compensates Institutions for
accounting, recordkeeping and other services that they provide in connection
with investments in the Funds.
Institutions may be subject to federal or state laws that limit their
ability to provide certain administrative or distribution-related services. For
example, the Glass-Steagall Act is generally interpreted to prohibit most banks
from underwriting mutual fund shares. N&B Management intends to contract with
Institutions for only those services they may legally provide. If, due to a
change in the laws governing Institutions or in the interpretation of any such
law, an Institution is prohibited from performing some or all of the
above-described services, N&B Management may be required to find alternative
means of providing those services. Any such change is not expected to impact the
Funds or their shareholders adversely.
During the fiscal years ended August 31, 1997, 1996 and 1995, each
Fund accrued management and administration fees as follows: Neuberger & Berman
MANHATTAN Trust - $415,355, $420,605 and $202,729; Neuberger & Berman GENESIS
Trust - $1,870,816, $487,514, and $274,709; Neuberger & Berman FOCUS Trust -
$936,458, $329,609, and $43,330; Neuberger & Berman GUARDIAN Trust -
$14,839,636, $8,821,718, and $2,417,586; and Neuberger & Berman PARTNERS Trust -
$2,313,486, $755,623, and $292,161, respectively. From May 1, 1995 to December
15, 1997, N&B Management voluntarily waived a portion of the management fee
borne by Neuberger & Berman GENESIS Portfolio to reduce the fee by 0.10% per
annum of the average daily net assets of that Portfolio. During the fiscal years
ended August 31, 1997 and 1996 and the period from May 1, 1995 to August 31,
1995, N&B Management waived $153,513, $39,014 and $9,217, respectively, of
management fees that otherwise would have been borne indirectly by Neuberger &
- 52 -
<PAGE>
Berman GENESIS Trust. During the period from its commencement of operations
(March 3, 1997) to August 31, 1997, Neuberger & Berman SOCIALLY RESPONSIVE Trust
accrued management and administration fees of $16,656.
N&B Management has voluntarily undertaken to reimburse each Fund for
its Total Operating Expenses (as defined in the Prospectus) so that each Fund's
expense ratio per annum will not exceed the expense ratio of its Sister Fund by
more than 0.10% of the Fund's average daily net assets. Each undertaking can be
terminated by N&B Management by giving a Fund at least 60 days' prior written
notice. During the period from August 1993 (commencement of operations of each
Fund except Neuberger & Berman SOCIALLY RESPONSIVE Trust) to December 31, 1994,
N&B Management voluntarily undertook to reimburse each Fund for its Total
Operating Expenses so that each Fund's expense ratio per annum would not exceed
the expense ratio of its Sister Fund. During the fiscal years ended August 31,
1997, 1996 and 1995, N&B Management reimbursed each Fund the following amounts
of expenses under the above arrangements: Neuberger & Berman MANHATTAN Trust,
$64,448, $78,810 and $87,443, respectively; Neuberger & Berman GENESIS Trust,
$0, $66,139 and $69,047, respectively; Neuberger & Berman FOCUS Trust, $102,407,
$104,689 and $92,687, respectively; Neuberger & Berman GUARDIAN Trust, $0,
$69,266 and $171,796, respectively; and Neuberger & Berman PARTNERS Trust,
$89,923, $109,574, and $102,400, respectively. During the period from Neuberger
& Berman SOCIALLY RESPONSIVE Trust's commencement of operations (March 3, 1997)
to August 31, 1997, N&B Management reimbursed that Fund for expenses in the
amount of $30,470.
The Management Agreement continues until August 2, 1998. The
Management Agreement is renewable thereafter from year to year with respect to
each Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in that Portfolio. The Administration
Agreements continue until August 2, 1998. The Administration Agreements are
renewable from year to year with respect to a Fund, so long as their continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of N&B Management or the respective Trust
("Independent Fund Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of the
Fund Trustees or by a 1940 Act majority vote of the outstanding shares in that
Fund.
- 53 -
<PAGE>
The Management Agreement is terminable, without penalty, with respect
to a Portfolio on 60 days' written notice either by Managers Trust or by N&B
Management. The Administration Agreements are terminable, without penalty, with
respect to a Fund on 60 days' written notice either by N&B Management or by the
respective Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
N&B Management retains Neuberger & Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to each Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolios (except Neuberger & Berman SOCIALLY RESPONSIVE Portfolio) on August
2, 1993, and by the holders of the interests in Neuberger & Berman SOCIALLY
RESPONSIVE Portfolio on March 9, 1994. That Portfolio was authorized to become
subject to the Sub-Advisory Agreement by vote of the Portfolio Trustees on
October 20, 1993, and became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger & Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with N&B Management. The Sub-Advisory Agreement provides that N&B Management
will pay for the services rendered by Neuberger & Berman based on the direct and
indirect costs to Neuberger & Berman in connection with those services.
Neuberger & Berman also serves as sub-adviser for all of the other mutual funds
managed by N&B Management.
The Sub-Advisory Agreement continues until August 2, 1998 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
- 54 -
<PAGE>
termination, without penalty, with respect to each Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in that
Portfolio, by N&B Management, or by Neuberger & Berman on not less than 30 nor
more than 60 days' written notice. The Sub-Advisory Agreement also terminates
automatically with respect to each Portfolio if it is assigned or if the
Management Agreement terminates with respect to that Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
As of September 30, 1997, the investment companies managed by N&B
Management had aggregate net assets of approximately $21.2 billion. N&B
Management currently serves as investment manager of the following investment
companies:
Approximate Net
Assets at
September 30,
NAME 1997
---- ----
Neuberger & Berman Cash Reserves $667,531,894
Portfolio (investment portfolio for
Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money $248,190,672
Portfolio (investment portfolio for
Neuberger & Berman Government
Money Fund)
Neuberger & Berman Limited Maturity $295,393,823
Bond Portfolio (investment portfolio
for Neuberger & Berman Limited
Maturity Bond Fund and Neuberger
& Berman Limited Maturity Bond Trust)
- 55 -
<PAGE>
Approximate Net
Assets at
September 30,
NAME 1997
---- ----
Neuberger & Berman Municipal Securities $ 31,573,660
Portfolio (investment portfolio for
Neuberger & Berman Municipal
Securities Trust)
Neuberger & Berman Ultra Short Bond $ 62,627,463
Portfolio (investment portfolio for
Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra
Short Bond Trust)
Neuberger & Berman Focus Portfolio $1,661,565,204
(investment portfolio for Neuberger
& Berman Focus Fund, Neuberger &
Berman Focus Trust and Neuberger &
Berman Focus Assets)
Neuberger & Berman Genesis Portfolio $1,491,048,221
(investment portfolio for Neuberger
& Berman Genesis Fund, Neuberger &
Berman Genesis Trust and Neuberger &
Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio $9,123,101,599
(investment portfolio for Neuberger
& Berman Guardian Fund, Neuberger &
Berman Guardian Trust and Neuberger &
Berman Guardian Assets)
Neuberger & Berman International Portfolio $ 127,016,071
(investment portfolio for Neuberger &
Berman International Fund and Neuberger
& Berman International Trust)
- 56 -
<PAGE>
Approximate Net
Assets at
September 30,
NAME 1997
---- ----
Neuberger & Berman Manhattan Portfolio $655,156,471
(investment portfolio for Neuberger &
Berman Manhattan Fund, Neuberger & Berman
Manhattan Trust and Neuberger & Berman
Manhattan Assets)
Neuberger & Berman Partners Portfolio $3,783,754,657
(investment portfolio for Neuberger &
Berman Partners Fund, Neuberger & Berman
Partners Trust and Neuberger & Berman
Partners Assets)
Neuberger & Berman Socially Responsive $274,230,723
Portfolio (investment portfolio for
Neuberger & Berman Socially Responsive
Fund, Neuberger & Berman Socially
Responsive Trust and Neuberger & Berman
NYCDC Socially Responsive Trust)
Advisers Managers Trust $2,651,503,613
(seven series)
The investment decisions concerning the Portfolios and the other
mutual funds managed by N&B Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolios. Even where the investment objectives are similar, however, the
methods used by the Other N&B Funds and the Portfolios to achieve their
- 57 -
<PAGE>
objectives may differ. The investment results achieved by all of the mutual
funds managed by N&B Management have varied from one another in the past and are
likely to vary in the future.
There may be occasions when a Portfolio and one or more of the Other
N&B Funds or other accounts managed by Neuberger & Berman are contemporaneously
engaged in purchasing or selling the same securities from or to third parties.
When this occurs, the transactions are averaged as to price and allocated, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to a Portfolio, in other
cases it is believed that a Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolios'
having their advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolios are subject to certain limitations imposed on all
advisory clients of Neuberger & Berman (including the Portfolios, the Other N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have offices
at the same address as N&B Management, are Richard A. Cantor, Chairman of the
Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph G. Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President; Ellen
Metzger, Vice President and Secretary; Paul Metzger, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice
- 58 -
<PAGE>
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice President;
Frederic B. Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh,
Vice President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Robert Conti, Treasurer; Valerie Chang, Assistant Vice
President; Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Michael J. Hanratty, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice President;
Celeste Wischerth, Assistant Vice President; and Loraine Olavarria, Assistant
Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen, Lainoff, Risen,
Simons, Sundman and Zicklin and Mmes. Prindle, Silver and Vale are principals of
Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Russell, Sullivan and Weiner and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers, of each Trust and Managers Trust. C. Carl Randolph, a
principal of Neuberger & Berman, also is an officer of each Trust and Managers
Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of each Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, each Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Funds' "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of each Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Funds' shares.
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<PAGE>
From time to time, N&B Management may enter into arrangements pursuant
to which it compensates a registered broker-dealer or other third party for
services in connection with the distribution of Fund shares.
The Trusts, on behalf of their respective Funds, and the Distributor
are parties to Distribution Agreements that continue until August 2, 1998. The
Distribution Agreements may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreements may be terminated by either party and will
terminate automatically on their assignment, in the same manner as the
Management Agreement.
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus entitled
"Exchanging Shares," an Institution may exchange shares of any Fund for shares
of one or more of the other Funds or the income fund that is briefly described
below ("Income Fund"), if made available through that Institution.
INCOME FUND
Neuberger & Berman Seeks the highest current income consistent with
Limited Maturity Bond low risk to principal and liquidity and,
Trust secondarily, total return. The corresponding
portfolio invests in debt securities, primarily
investment grade; maximum 10% below investment
grade, but no lower than B.*/ Maximum average
duration of four years.
Any Fund described herein, and the Income Fund, may terminate or
modify its exchange privilege in the future.
Fund shareholders who are considering exchanging shares into the
Income Fund should note that it (1) is a series of a Delaware business trust
- ----------
*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by N&B Management to be of comparable quality.
- 60 -
<PAGE>
(named "Neuberger & Berman Income Trust") that is registered with the SEC as an
open-end management investment company, and (2) invests all of its net
investable assets in a corresponding portfolio that has an investment objective,
policies, and limitations identical to those of the fund.
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. The Income Fund has a separate prospectus. An exchange is treated as
a sale for federal income tax purposes and, depending on the circumstances, a
capital gain or loss may be realized.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem a Fund's shares may be suspended or payment of the
redemption price postponed (1) when the NYSE is closed, (2) when trading on the
NYSE is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for its corresponding Portfolio to dispose of securities
it owns or fairly to determine the value of its net assets, or (4) for such
other period as the SEC may by order permit for the protection of the Fund's
shareholders. Applicable SEC rules and regulations shall govern whether the
conditions prescribed in (2) or (3) exist. If the right of redemption is
suspended, shareholders may withdraw their offers of redemption, or they will
receive payment at the NAV per share in effect at the close of business on the
first day the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
Each Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, an Institution generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Funds do not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of a
Fund's shareholders as a whole.
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DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes to its shareholders substantially all of its
share of any net investment income (after deducting expenses incurred directly
by the Fund), any net realized capital gains, and any net realized gains from
foreign currency transactions earned or realized by its corresponding Portfolio.
A Portfolio's net investment income consists of all income accrued on portfolio
assets less accrued expenses, but does not include capital and foreign currency
gains and losses. Net investment income and realized gains and losses are
reflected in a Portfolio's NAV (and, hence, its corresponding Fund's NAV) until
they are distributed. Each Fund calculates its net investment income and NAV per
share as of the close of regular trading on the NYSE on each Business Day
(usually 4:00 p.m. Eastern time).
Dividends from net investment income and distributions of net realized
capital and foreign currency gains, if any, normally are paid once annually, in
December, except that Neuberger & Berman GUARDIAN Trust distributes
substantially all of its share of Neuberger & Berman GUARDIAN Portfolio's net
investment income (after deducting expenses incurred directly by Neuberger &
Berman GUARDIAN Trust), if any, near the end of each other calendar quarter.
Dividends and other distributions are automatically reinvested in
additional shares of the distributing Fund, unless the Institution elects to
receive them in cash ("cash election"). To the extent dividends and other
distributions are subject to federal, state, or local income taxation, they are
taxable to the shareholders whether received in cash or reinvested in Fund
shares. A cash election with respect to any Fund remains in effect until the
Institution notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUNDS
In order to continue to qualify for treatment as a RIC under the Code,
each Fund must distribute to its shareholders for each taxable year at least 90%
of its investment company taxable income (consisting generally of net investment
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income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from Hedging Instruments) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); and(2) at the close of each quarter of the Fund's
taxable year, (i) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs, and other securities limited, in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's total assets and that
does not represent more than 10% of the issuer's outstanding voting securities,
and (ii) not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government securities or securities of other RICs)
of any one issuer.
Certain funds that invest in portfolios managed by N&B Management,
including most of the Sister Funds, have received rulings from the Internal
Revenue Service ("Service") that each such fund, as an investor in its
corresponding portfolio, will be deemed to own a proportionate share of the
portfolio's assets and income for purposes of determining whether the fund
satisfies all the requirements described above to qualify as a RIC. Although
these rulings may not be relied on as precedent by the Funds, N&B Management
believes that the reasoning thereof and, hence, their conclusion apply to the
Funds as well.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the
Funds of distributions to them from the Portfolios, investments by the
Portfolios in certain securities, and hedging transactions engaged in by the
Portfolios.
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TAXATION OF THE PORTFOLIOS
The Portfolios (except Neuberger & Berman SOCIALLY RESPONSIVE
Portfolio) have received rulings from the Service to the effect that, among
other things, each such Portfolio will be treated as a separate partnership for
federal income tax purposes and will not be a "publicly traded partnership."
Although these rulings may not be relied on as precedent by Neuberger & Berman
SOCIALLY RESPONSIVE Portfolio, N&B Management believes the reasoning thereof
and, hence, their conclusion apply to that Portfolio as well. As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio, such as a Fund, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any cash
distributions from the Portfolio. Each Portfolio also is not subject to Delaware
or New York income or franchise tax.
Because each Fund is deemed to own a proportionate share of its
corresponding Portfolio's assets and income for purposes of determining whether
the Fund satisfies the requirements to qualify as a RIC, each Portfolio intends
to continue to conduct its operations so that its corresponding Fund will be
able to continue to satisfy all those requirements.
Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. A Fund's basis for its interest in its
corresponding Portfolio generally equals the amount of cash the Fund invests in
the Portfolio, increased by the Fund's share of the Portfolio's net income and
capital gains and decreased by (1) the amount of cash and the basis of any
property the Portfolio distributes to the Fund and (2) the Fund's share of the
Portfolio's losses.
Dividends and interest received by a Portfolio, and gains realized by
a Portfolio, may be subject to income, withholding, or other taxes imposed by
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foreign countries and U.S. possessions that would reduce the yield and/or total
return on its securities. Tax treaties between certain countries and the United
States may reduce or eliminate these foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors.
A Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which a Portfolio is a U.S. shareholder (effective for
the taxable year beginning September 1, 1998) -- that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, if a Portfolio holds stock of a
PFIC, its corresponding Fund (indirectly through its interest in the Portfolio)
will be subject to federal income tax on its share of a portion of any "excess
distribution" received by the Portfolio on the stock or of any gain on the
Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If a Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of its corresponding Fund's
incurring the foregoing tax and interest obligation, the Fund would be required
to include in income each year its share of the Portfolio's pro rata share of
the QEF's annual ordinary earnings and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) -- which most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the Excise Tax -- even if those earnings and gain were
not received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
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Effective for taxable years beginning after 1997, a holder of stock in
any PFIC may elect to include in ordinary income each taxable year the excess,
if any, of the fair market value of the stock over the adjusted basis therein as
of the end of that year. Pursuant to the election, a deduction (as an ordinary,
not capital, loss) also would be allowed for the excess, if any, of the holder's
adjusted basis in PFIC stock over the fair market value thereof as of the
taxable year-end, but only to the extent of any net mark-to-market gains with
respect to that stock included in income for prior taxable years. The adjusted
basis in each PFIC's stock subject to the election would be adjusted to reflect
the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolios' use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the amount, character and timing of recognition of the gains and losses the
Portfolios realize in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from Hedging Instruments derived by the Portfolio with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for its corresponding Fund under the Income
Requirement.
Exchange-traded futures contracts, certain forward contracts and
listed options thereon ("Section 1256 contracts") are required to be marked to
market (that is, treated as having been sold at market value) for federal income
tax purposes at the end of a Portfolio's taxable year. Sixty percent of any net
gain or loss recognized as a result of these "deemed sales," and 60% of any net
realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, proposed technical
corrections legislation would clarify that the 20% rate applies.
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Each of Neuberger & Berman PARTNERS and Neuberger & Berman SOCIALLY
RESPONSIVE Portfolios may acquire zero coupon securities or other securities
issued with original issue discount ("OID"). As a holder of those securities,
each such Portfolio (and, through it, its corresponding Fund) must take into
income the OID that accrues on the securities during the taxable year, even if
it receives no corresponding payment on the securities during the year. Because
each such Fund annually must distribute substantially all of its investment
company taxable income (including its share of its corresponding Portfolio's
accrued OID) to satisfy the Distribution Requirement and avoid imposition of the
Excise Tax, the Fund may be required in a particular year to distribute as a
dividend an amount that is greater than its share of the total amount of cash
its corresponding Portfolio actually receives. Those distributions will be made
from a Fund's (or its share of its corresponding Portfolio's) cash assets or, if
necessary, from the proceeds of sales of that Portfolio's securities. A
Portfolio may realize capital gains or losses from those sales, which would
increase or decrease its corresponding Fund's investment company taxable income
and/or net capital gain.
TAXATION OF THE FUNDS' SHAREHOLDERS
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as principal broker for each Portfolio in the
purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market) and in connection with the purchase and sale of
options on its securities. A substantial portion of the portfolio transactions
of Neuberger & Berman GENESIS Portfolio involves securities traded on the OTC
market; that Portfolio purchases and sells OTC securities in principal
transactions with dealers who are the principal market makers for such
securities.
During the fiscal year ended August 31, 1995, Neuberger & Berman
MANHATTAN Portfolio paid brokerage commissions of $654,982, of which $436,568
was paid to Neuberger & Berman. During the fiscal year ended August 31, 1996,
Neuberger & Berman MANHATTAN Portfolio paid brokerage commissions of $940,324,
of which $543,020 was paid to Neuberger & Berman.
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During the fiscal year ended August 31, 1997, Neuberger & Berman
MANHATTAN Portfolio paid brokerage commissions of $971,026, of which $458,679
was paid to Neuberger & Berman. Transactions in which that Portfolio used
Neuberger & Berman as broker comprised 59.11% of the aggregate dollar amount of
transactions involving the payment of commissions, and 47.24% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1997. 92.43% of the $512,347 paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $299,598,328) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1997, that
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act) ("Regular B/Ds"): General Electric Capital
Corp., Merrill, Lynch, Pierce, Fenner & Smith Inc., and State Street Bank and
Trust Company, N.A.; at that date, that Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$18,100,000 and State Street Bank & Trust Company, N.A., $6,987,488.
During the fiscal year ended August 31, 1995, Neuberger & Berman
GENESIS Portfolio paid brokerage commissions of $199,718, of which $118,014 was
paid to Neuberger & Berman. During the fiscal year ended August 31, 1996,
Neuberger & Berman GENESIS Portfolio paid brokerage commissions of $206,150, of
which $95,999 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1997, Neuberger & Berman
GENESIS Portfolio paid brokerage commissions of $860,097, of which $516,040 was
paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger
& Berman as broker comprised 62.57% of the aggregate dollar amount of
transactions involving the payment of commissions, and 60.00% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1997. 89.06% of the $344,057 paid to other brokers by that Portfolio during
that fiscal year (representing commissions on transactions involving
approximately $128,731,955) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1997, that
Portfolio acquired securities of the following of its Regular B/Ds: Chevron Oil
Finance Company, General Electric Capital Corp., and State Street Bank and Trust
Company, N.A.; at that date, that Portfolio held the securities of its Regular
B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$40,000,000.
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During the fiscal year ended August 31, 1995, Neuberger & Berman FOCUS
Portfolio paid brokerage commissions of $1,031,245, of which $617,957 was paid
to Neuberger & Berman. During the fiscal year ended August 31, 1996, Neuberger &
Berman FOCUS Portfolio paid brokerage commissions of $1,165,851, of which
$583,212 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1997, Neuberger & Berman FOCUS
Portfolio paid brokerage commissions of $1,825,493, of which $920,202 was paid
to Neuberger & Berman. Transactions in which that Portfolio used Neuberger &
Berman as broker comprised 55.85% of the aggregate dollar amount of transactions
involving the payment of commissions, and 50.41% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1997.
80.39% of the $905,291 paid to other brokers by that Portfolio during that
fiscal year (representing commissions on transactions involving approximately
$398,888,691) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1997, that Portfolio acquired
securities of the following of its Regular B/Ds: General Electric Capital Corp.,
Merrill, Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley, Dean Witter,
Discover & Co., and State Street Bank and Trust Company, N.A.; at that date,
that Portfolio held the securities of its Regular B/Ds with an aggregate value
as follows: General Electric Capital Corp., $46,120,000; Merrill, Lynch, Pierce,
Fenner & Smith Inc., $35,055,000; and Morgan Stanley, Dean Witter, Discover &
Co., $27,397,563.
During the fiscal year ended August 31, 1995, Neuberger & Berman
GUARDIAN Portfolio paid brokerage commissions of $3,751,206, of which $2,521,523
was paid to Neuberger & Berman. During the fiscal year ended August 31, 1996,
Neuberger & Berman GUARDIAN Portfolio paid brokerage commissions of $6,886,590,
of which $3,542,127 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1997, Neuberger & Berman
GUARDIAN Portfolio paid brokerage commissions of $8,540,335, of which $4,806,913
was paid to Neuberger & Berman. Transactions in which that Portfolio used
Neuberger & Berman as broker comprised 60.45% of the aggregate dollar amount of
transactions involving the payment of commissions, and 56.28% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1997. 87.31% of the $3,733,422 paid to other brokers by that Portfolio
during that fiscal year (representing commissions on transactions involving
approximately $1,958,958,289); was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1997, that
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Portfolio acquired securities of the following of its Regular B/Ds: Chevron Oil
Finance Company, General Electric Capital Corp., Merrill, Lynch, Pierce, Fenner
& Smith Inc., Morgan Stanley, Dean Witter, Discover & Co., and State Street Bank
and Trust Company, N.A.; at that date, that Portfolio held the securities of its
Regular B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$36,480,000; Merrill, Lynch, Pierce, Fenner & Smith Inc., $201,720,000; and
Morgan Stanley, Dean Witter, Discover & Co., $178,784,375.
During the fiscal year ended August 31, 1995, Neuberger & Berman
PARTNERS Portfolio paid brokerage commissions of $4,608,156, of which $3,092,789
was paid to Neuberger & Berman. During the fiscal year ended August 31, 1996,
Neuberger & Berman PARTNERS Portfolio paid brokerage commissions of $4,697,854,
of which $2,741,666 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1997, Neuberger & Berman
PARTNERS Portfolio paid brokerage commissions of $5,413,453, of which $3,508,790
was paid to Neuberger & Berman. Transactions in which that Portfolio used
Neuberger & Berman as broker comprised 66.94% of the aggregate dollar amount of
transactions involving the payment of commissions, and 64.82% of the aggregate
brokerage commissions paid by the Portfolio, during the fiscal year ended August
31, 1997. 89.93% of the $1,904,663 paid to other brokers by that Portfolio
during that fiscal year (representing commissions on transactions involving
approximately $1,164,076,407) was directed to those brokers because of research
services they provided. During the fiscal year ended August 31, 1997, that
Portfolio acquired securities of the following of its Regular B/Ds: Chevron Oil
Finance Company, General Electric Capital Corp., and State Street Bank and Trust
Company, N.A.; at that date, that Portfolio held securities of its Regular B/Ds
with an aggregate value as follows: General Electric Capital Corp., $43,550,000.
During the fiscal year ended August 31, 1995, Neuberger & Berman
SOCIALLY RESPONSIVE Portfolio paid brokerage commissions of $138,378, of which
$95,964 was paid to Neuberger & Berman. During the fiscal year ended August 31,
1996, Neuberger & Berman SOCIALLY RESPONSIVE Portfolio paid brokerage
commissions of $208,834, of which $124,879 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1997, Neuberger & Berman
SOCIALLY RESPONSIVE Portfolio paid brokerage commissions of $305,640, of which
$232,238 was paid to Neuberger & Berman. Transactions in which that Portfolio
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used Neuberger & Berman as broker comprised 80.59% of the aggregate dollar
amount of transactions involving the payment of commissions, and 75.98% of the
aggregate brokerage commissions paid by the Portfolio, during the fiscal year
ended August 31, 1997. 78.58% of the $73,402 paid to other brokers by that
Portfolio during that fiscal year (representing commissions on transactions
involving approximately $30,816,054) was directed to those brokers because of
research services they provided. During the fiscal year ended August 31, 1997,
that Portfolio acquired securities of the following of its Regular B/Ds: State
Street Bank and Trust Company, N.A.; at that date, that Portfolio held none of
the securities of its Regular B/Ds.
Insofar as portfolio transactions of Neuberger & Berman PARTNERS
Portfolio result from active management of equity securities, and insofar as
portfolio transactions of Neuberger & Berman MANHATTAN Portfolio result from
seeking capital appreciation by selling securities whenever sales are deemed
advisable without regard to the length of time the securities may have been
held, it may be expected that the aggregate brokerage commissions paid by those
Portfolios to brokers (including Neuberger & Berman where it acts in that
capacity) may be greater than if securities were selected solely on a long-term
basis.
Portfolio securities are, from time to time, loaned by a Portfolio to
Neuberger & Berman in accordance with the terms and conditions of an order
issued by the SEC. The order exempts such transactions from provisions of the
1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. In accordance with the order, securities loans made by a Portfolio
to Neuberger & Berman are fully secured by cash collateral. The portion of the
income on the cash collateral which may be shared with Neuberger & Berman is to
be determined by reference to concurrent arrangements between Neuberger & Berman
and non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger & Berman borrows securities from a Portfolio in order
to re-lend them to others, Neuberger & Berman may be required to pay that
Portfolio, on a quarterly basis, certain of the earnings that Neuberger & Berman
otherwise has derived from the re-lending of the borrowed securities. When
Neuberger & Berman desires to borrow a security that a Portfolio has indicated a
willingness to lend, Neuberger & Berman must borrow such security from that
Portfolio, rather than from an unaffiliated lender, unless the unaffiliated
lender is willing to lend such security on more favorable terms (as specified in
the order) than that Portfolio. If, in any month, a Portfolio's expenses exceed
its income in any securities loan transaction with Neuberger & Berman, Neuberger
& Berman must reimburse that Portfolio for such loss.
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During the fiscal years ended August 31, 1997, 1996 and 1995,
Neuberger & Berman MANHATTAN Portfolio earned interest income of $988,931,
$301,788, and $507,239, respectively, from the collateralization of securities
loans, from which Neuberger & Berman was paid $326,403, $186,163 and $270,594,
respectively.
During the fiscal year ended August 31, 1997, Neuberger & Berman
GENESIS Portfolio earned interest income of $168,552, from the collateralization
of securities loans, from which Neuberger & Berman was paid $69,948. During the
fiscal years ended August 31, 1996 and 1995, Neuberger & Berman GENESIS
Portfolio earned no interest income from the collateralization of securities
loans.
During the fiscal years ended August 31, 1997, 1996 and 1995,
Neuberger & Berman GUARDIAN Portfolio earned interest income of $4,005,765,
$2,427,096 and $1,430,672, respectively, from the collateralization of
securities loans, from which Neuberger & Berman was paid $3,523,486, $2,129,341
and $1,252,190, respectively.
During the fiscal years ended August 31, 1997, 1996 and 1995,
Neuberger & Berman FOCUS Portfolio earned interest income of $1,053,272,
$368,663 and $327,447, respectively, from the collateralization of securities
loans, from which Neuberger & Berman was paid $898,127, $330,001 and $291,207,
respectively.
During the fiscal years ended August 31, 1997, 1996 and 1995,
Neuberger & Berman PARTNERS Portfolio earned interest income of $797,133,
$173,908 and $52,410, respectively, from the collateralization of securities
loans, from which Neuberger & Berman was paid $688,624, $118,041 and $48,736,
respectively.
During the fiscal year ended August 31, 1997, Neuberger & Berman
SOCIALLY RESPONSIVE Portfolio earned interest income of $80,484, from the
collateralization of securities loans, from which Neuberger & Berman was paid
$51,639. During the fiscal years ended August 31, 1996 and 1995, Neuberger &
Berman SOCIALLY RESPONSIVE Portfolio earned no interest income from the
collateralization of securities loans.
Each Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B Management, provided that cash or equivalent collateral,
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equal to at least 100% of the market value of the loaned securities, is
continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolios.
In effecting securities transactions, each Portfolio generally seeks
to obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. Each
Portfolio plans to continue to use Neuberger & Berman as its principal broker
where, in the judgment of N&B Management, that firm is able to obtain a price
and execution at least as favorable as other qualified brokers. To the
Portfolios' knowledge, no affiliate of any Portfolio receives give-ups or
reciprocal business in connection with their securities transactions.
The use of Neuberger & Berman as a broker for each Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers Trust and N&B Management have expressly
authorized Neuberger & Berman to retain such compensation, and Neuberger &
Berman has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by a Portfolio to Neuberger &
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
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Accordingly, it is each Portfolio's policy that the commissions paid to
Neuberger & Berman must, in N&B Management's judgment, be (1) at least as
favorable as those charged by other brokers having comparable execution
capability and (2) at least as favorable as commissions contemporaneously
charged by Neuberger & Berman on comparable transactions for its most favored
unaffiliated customers, except for accounts for which Neuberger & Berman acts as
a clearing broker for another brokerage firm and customers of Neuberger & Berman
considered by a majority of the Independent Portfolio Trustees not to be
comparable to the Portfolio. The Portfolios do not deem it practicable and in
their best interests to solicit competitive bids for commissions on each
transaction effected by Neuberger & Berman. However, consideration regularly is
given to information concerning the prevailing level of commissions charged by
other brokers on comparable transactions during comparable periods of time. The
1940 Act generally prohibits Neuberger & Berman from acting as principal in the
purchase of portfolio securities from, or the sale of portfolio securities to, a
Portfolio unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolios and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolios must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including a
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
- 74 -
<PAGE>
Each Portfolio expects that it will continue to execute a portion of
its transactions through brokers other than Neuberger & Berman. In selecting
those brokers, N&B Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of N&B Management and principals of
Neuberger & Berman who are portfolio managers of some of the Portfolios and
Other N&B Funds (collectively, "N&B Funds") and some of Neuberger & Berman's
managed accounts ("Managed Accounts") evaluates semi-annually the nature and
quality of the brokerage and research services provided by other brokers. Based
on this evaluation, the committee establishes a list and projected rankings of
preferred brokers for use in determining the relative amounts of commissions to
be allocated to those brokers. Ordinarily, the brokers on the list effect a
large portion of the brokerage transactions for the N&B Funds and the Managed
Accounts that are not effected by Neuberger & Berman. However, in any
semi-annual period, brokers not on the list may be used, and the relative
amounts of brokerage commissions paid to the brokers on the list may vary
substantially from the projected rankings. These variations reflect the
following factors, among others: (1) brokers not on the list or ranking below
other brokers on the list may be selected for particular transactions because
they provide better price and/or execution, which is the primary consideration
in allocating brokerage; (2) adjustments may be required because of periodic
changes in the execution capabilities of or research provided by particular
brokers or in the execution or research needs of the N&B Funds and/or the
Managed Accounts; and (3) the aggregate amount of brokerage commissions
generated by transactions for the N&B Funds and the Managed Accounts may change
substantially from one semi-annual period to the next.
The commissions paid to a broker other than Neuberger & Berman may be
higher than the amount another firm might charge if N&B Management determines in
good faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. N&B
Management believes that those research services benefit the Portfolios by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
- 75 -
<PAGE>
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolios' benefit.
Kent C. Simons and Kevin L. Risen; Judith M. Vale and Robert W.
D'Alelio; Jennifer K. Silver and Brooke A. Cobb; Michael M. Kassen and Robert I.
Gendelman; and Janet W. Prindle, each of whom is a Vice President of N&B
Management and a principal of Neuberger & Berman (except for Mr. D'Alelio and
Mr. Cobb), are the persons primarily responsible for making decisions as to
specific action to be taken with respect to the investment portfolios of
Neuberger & Berman FOCUS and Neuberger & Berman GUARDIAN, Neuberger & Berman
GENESIS, Neuberger & Berman MANHATTAN, Neuberger & Berman PARTNERS, and
Neuberger & Berman SOCIALLY RESPONSIVE Portfolios, respectively. Each of them
has full authority to take action with respect to portfolio transactions and may
or may not consult with other personnel of N&B Management prior to taking such
action. If Ms. Prindle is unavailable to perform her responsibilities, Robert
Ladd and/or Ingrid Saukaitis, each of whom is an Assistant Vice President of N&B
Management, will assume responsibility for the portfolio of Neuberger & Berman
SOCIALLY RESPONSIVE Portfolio.
PORTFOLIO TURNOVER
A Portfolio's portfolio turnover rate is calculated by dividing (1)
the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors or independent accountants for the Fund and its corresponding
Portfolio. Each Fund's statements show the investments owned by its
corresponding Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in its corresponding Portfolio.
- 76 -
<PAGE>
ORGANIZATION
Prior to January 1, 1995, the names of Neuberger and Berman FOCUS
Trust and Neuberger & Berman FOCUS Portfolio were Neuberger & Berman Selected
Sectors Trust and Neuberger & Berman Selected Sectors Portfolio, respectively.
CUSTODIAN AND TRANSFER AGENT
Each Fund and Portfolio has selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian
for its securities and cash. State Street also serves as each Fund's transfer
agent, administering purchases, redemptions, and transfers of Fund shares with
respect to Institutions and the payment of dividends and other distributions to
Institutions. All correspondence should be mailed to Neuberger & Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. In
addition, State Street serves as transfer agent for each Portfolio.
INDEPENDENT AUDITORS/ACCOUNTANTS
Each Fund and Portfolio (other than Neuberger & Berman MANHATTAN Trust
and Portfolio and Neuberger & Berman SOCIALLY RESPONSIVE Trust and Portfolio)
has selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116, as the
independent auditors who will audit its financial statements. Neuberger & Berman
MANHATTAN Trust and Portfolio and Neuberger & Berman SOCIALLY RESPONSIVE Trust
and Portfolio have selected Coopers & Lybrand L.L.P., One Post Office Square,
Boston, MA 02109, as the independent accountants who will audit their financial
statements.
LEGAL COUNSEL
Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as its legal
counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at December 1, 1997:
- 77 -
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
NAME AND ADDRESS DECEMBER 1, 1997
- --------------------------------------------------------------------------------
Neuberger & Berman MAC & Co. 39.50%
MANHATTAN Trust A/C 195-643
AEOF 1956432
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
The Northern Trust Co., Trustee 38.25%
FBO Case Corporation
22-75833
P.O. Box 92956
Chicago, IL 60675-2956
Puig Perfumes 5.27%
Salary Deferral Plan
9 Skyline Drive
Hawthorne, NY 10532-2100
Neuberger & Berman Nationwide Life Insurance 19.40%
PARTNERS Trust QPVA
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
National Financial Services Corp.* 15.75%
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
PRC Inc.
c/o T. Rowe Price Financial 12.83%
Attn: Asset Recon.
P.O. Box 17215
Baltimore, MD 21297-0354
- --------------------------------------------------------------------------------
- 78 -
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
NAME AND ADDRESS DECEMBER 1, 1997
- --------------------------------------------------------------------------------
Connecticut General Life
Insurance Company 10.94%
350 Church St.
P.O. Box 2975 M-110
Hartford, CT 06103-1106
Northern Trust Co.,
Trustee 7.31%
FBO Phycor Savings Plan DV
P.O. Box 92956
Chicago, IL 60675-2956
Fidelity Investments Institutional
Oper. Co. 5.20%
Agent for certain benefit pln
100 Magellan Way
Mailzone KWIC
Covington, KY 41015-1987
- --------------------------------------------------------------------------------
Neuberger & Berman The Northern Trust Co., Trustee 13.37%
GUARDIAN Trust Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-2956
MAC & Co.
A/C 195-643 11.14%
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
National Financial Services Corp.*
P.O. Box 3908 8.30%
Church Street Station
New York, NY 100008-3908
- 79 -
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
NAME AND ADDRESS DECEMBER 1, 1997
- --------------------------------------------------------------------------------
Fidelity Investments
Institutional Ops Co.
Agent for certain EE benefit plans 5.07%
Mailzone KWIC
Covington, KY 41015
Neuberger & Berman National Financial Services 19.05%
FOCUS Trust Corp.*
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
American Express Trust Co. 16.58%
Benefit of American Express
Trust Retirement Service Plans
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
Smith Barney Inc.
00109801250 12.71%
388 Greenwich Street
New York, NY 10013-2375
Emjayco
Omnibus Account 11.03%
P.O. Box 17909
Milwaukee, WI 53217-0909
Aetna Life Insurance & Annuity Co.
ACES - Separate Account F 8.60%
15 Farmington Ave.
Hartford, CT 06156-0001
MAC & Co.
A/C 195-643
AEOF 1956432 6.25%
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
- 80 -
<PAGE>
- --------------------------------------------------------------------------------
Percentage of
Ownership at
NAME AND ADDRESS DECEMBER 1, 1997
- --------------------------------------------------------------------------------
Neuberger & Berman National Financial Services Corp.* 27.34%
GENESIS Trust P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Profit Sharing Plan for Partners
& Principals of Price Waterhouse 19.40%
3109 W. Dr. Martin Luther King
Drive
Tampa, FL 33607
Merrill Lynch, Pierce, Fenner &
Smith, Inc.
Fund Administration 12.43%
4800 Deer Lake Drive East, 3rd
Floor
Jacksonville, FL 32246-6484
Smith Barney, Inc.
00109801250
388 Greenwich Street 11.37%
New York, NY 10013-2375
MAC & Co.
A/C 195-643
AEOF 1956432 7.15%
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
Neuberger & Berman ICMA Retirement Trust 92.94%
SOCIALLY RESPONSIVE 777 N. Capitol St., N.E.
Trust Washington, D.C. 20002-4239
* National Financial Services Corp. holds these shares of record for the account
of certain of its clients and has informed the Funds of its policy to maintain
the confidentiality of holdings in its client accounts unless disclosure is
expressly required by law.
- 81 -
<PAGE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Trusts' registration statements filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration
statements, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the contents
of any contract or other document referred to are not necessarily complete. In
each instance where reference is made to the copy of any contract or other
document filed as an exhibit to a registration statement, each such statement is
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are incorporated
herein by reference from the Funds' Annual Report to shareholders for the fiscal
year ended August 31, 1997:
The audited financial statements of the Funds and Portfolios and notes
thereto for the fiscal year ended August 31, 1997, and the reports of
Ernst & Young LLP, independent auditors, with respect to such audited
financial statements of Neuberger & Berman GENESIS Trust and
Portfolio, Neuberger & Berman FOCUS Trust and Portfolio, Neuberger &
Berman GUARDIAN Trust and Portfolio, and Neuberger & Berman PARTNERS
Trust and Portfolio, and the report of Coopers & Lybrand L.L.P.,
independent accountants, with respect to such audited financial
statements of Neuberger & Berman MANHATTAN Trust and Portfolio and
Neuberger & Berman SOCIALLY RESPONSIVE Trust and Portfolio.
- 82 -
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
- 83 -
<PAGE>
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or an exceptionally stable margin,
and principal is secure. Although the various protective elements are likely to
change, the changes that can be visualized are most unlikely to impair the
fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
"high-grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
- 84 -
<PAGE>
Caa - Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds, and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
MODIFIERS--Moody's may apply numerical modifiers 1, 2, and 3 in each generic
rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+).
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated PRIME-1 (or related supporting institutions), also known as
P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
- 85 -
<PAGE>
<PAGE> 1
Neuberger&Berman
GUARDIAN TRUST(SM)
- -------------------------------
A No-Load Equity Fund
- --------------------------------------------------------------------------------
Neuberger&Berman GUARDIAN TRUST (the "Fund") is a growth and income fund
that emphasizes investments in stocks of established, high-quality companies
considered by the portfolio managers to be undervalued in comparison to stocks
of similar companies.
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES ACCOUNTING,
RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE
SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT INCORPORATED (EACH AN
"INSTITUTION").
- --------------------------------------------------------------------------------
The Fund, which is a series of Neuberger&Berman Equity Trust (the "Trust"),
invests all of its net investable assets in Neuberger&Berman Guardian Portfolio
(the "Portfolio") of Equity Managers Trust ("Managers Trust"), an open-end
management investment company managed by Neuberger&Berman Management
Incorporated ("N&B Management"). The Portfolio invests in securities in
accordance with an investment objective, policies, and limitations identical to
those of the Fund. The investment performance of the Fund directly corresponds
with the investment performance of the Portfolio. This "master/feeder fund"
structure is different from that of many other investment companies which
directly acquire and manage their own portfolios of securities. For more
information on this structure that you should consider, see "Summary" on page 3,
and "Information Regarding Organization, Capitalization, and Other Matters" on
page 21.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 15, 1997, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED DECEMBER 15, 1997.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Fund and Portfolio; Risk
Factors 3
Management 4
The Neuberger&Berman
Investment Approach 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses 5
Annual Fund Operating
Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
Selected Per Share Data and
Ratios 7
INVESTMENT PROGRAM 10
Short-Term Trading;
Portfolio Turnover 10
Borrowings 10
Other Investments 11
PERFORMANCE INFORMATION 12
Total Return Information 12
HOW TO BUY SHARES 13
HOW TO SELL SHARES 14
SHARE PRICES AND NET
ASSET VALUE 15
DIVIDENDS, OTHER
DISTRIBUTIONS, AND TAXES 16
Distribution Options 16
Taxes 16
MANAGEMENT AND
ADMINISTRATION 18
Trustees and Officers 18
Investment Manager, Administrator,
Distributor, and
Sub-Adviser 18
Expenses 19
Transfer Agent 20
INFORMATION REGARDING
ORGANIZATION,
CAPITALIZATION, AND
OTHER MATTERS 21
The Fund 21
The Portfolio 22
DESCRIPTION OF
INVESTMENTS 24
DIRECTORY 27
</TABLE>
<PAGE> 3
SUMMARY
- --------------------------------------------------
The Fund and Portfolio; Risk Factors
- --------------------------------------------------------------------------------
The Fund is a series of the Trust and invests in the Portfolio which, in
turn, invests in securities in accordance with an investment objective,
policies, and limitations that are identical to those of the Fund. This is
sometimes called a master/feeder fund structure, because the Fund "feeds"
shareholders' investments into the Portfolio, a "master" fund. The structure
looks like this:
SHAREHOLDERS
BUY SHARES IN
[ARROW DOWN]
FUND
INVESTS IN
[ARROW DOWN]
PORTFOLIO
INVESTS IN
[ARROW DOWN]
STOCKS & OTHER SECURITIES
The trustees who oversee the Fund believe that this structure may benefit
shareholders; investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale that could reduce
expenses. For more information about the organization of the Fund and the
Portfolio, including certain features of the master/feeder fund structure, see
"Information Regarding Organization, Capitalization, and Other Matters" on page
21. An investment in the Fund involves certain risks, depending upon the types
of investments made by the Portfolio. For more details about the Portfolio, its
investments and their risks, see "Investment Program" on page 10 and
"Description of Investments" on page 24.
3
<PAGE> 4
Here is a summary highlighting features of the Fund and the Portfolio. Of
course, there can be no assurance that the Fund will meet its investment
objective.
<TABLE>
<S> <C> <C>
NEUBERGER&BERMAN INVESTMENT PORTFOLIO
EQUITY TRUST STYLE CHARACTERISTICS
- ----------------------------------------------------------------------
GUARDIAN TRUST Broadly diversified, A growth and income fund
large-cap value fund. that invests primarily in
stocks of established,
high-quality companies
that are not well
followed on Wall Street
or are temporarily out of
favor.
</TABLE>
- -------------------
Management
- --------------------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page 18. If you want to know how to buy and sell shares of the Fund, see "How to
Buy Shares" on page 13 and "How to Sell Shares" on page 14, and the policies of
the Institution through which you are purchasing shares.
- --------------------------------------------------------------
The Neuberger&Berman Investment Approach
- --------------------------------------------------------------------------------
In general, the Portfolio adheres to a value-oriented investment approach. A
value-oriented portfolio manager buys stocks that are selling for a price that
is lower than what the manager believes they are worth. These include stocks
that are currently under-researched or are temporarily out of favor on Wall
Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets).
A value-oriented manager believes that, over time, securities that are
undervalued are more likely to appreciate in price and be subject to less risk
of price decline than securities whose market prices have already reached their
perceived economic values. This approach also contemplates selling portfolio
securities when they are considered to have reached their potential.
4
<PAGE> 5
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund
and the Portfolio. See "Performance Information" for important facts about the
investment performance of the Fund, after taking expenses into account.
- ------------------------------------------------
Shareholder Transaction Expenses
- --------------------------------------------------------------------------------
As shown by this table, the Fund imposes no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
- ----------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
The following table shows annual operating expenses for the Fund which are
paid out of the assets of the Fund and which include the Fund's pro rata portion
of the operating expenses of the Portfolio ("Total Operating Expenses"). "Total
Operating Expenses" exclude interest, taxes, brokerage commissions, and
extraordinary expenses.
The Fund pays N&B Management an administration fee based on the Fund's
average daily net assets. The Portfolio pays N&B Management a management fee
based on the Portfolio's average daily net assets; a pro rata portion of this
fee is borne indirectly by the Fund. "Management and Administration Fees" in the
following table are based upon administration fees incurred by the Fund and
management fees incurred by the Portfolio during the past fiscal year. For more
information, see "Management and Administration" and the SAI.
The Fund and the Portfolio incur other expenses for things such as
accounting and legal fees, transfer agency fees, custodial fees, printing and
furnishing shareholder statements and Fund reports and compensating trustees who
are not affiliated with N&B Management ("Other Expenses"). Other Expenses are
based on the Fund's and Portfolio's expenses for the past fiscal year. All
expenses are factored into the Fund's share prices and dividends and are not
charged directly to Fund shareholders.
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GUARDIAN TRUST 0.84% None 0.04% 0.88%
</TABLE>
For more information, see "Expenses" on page 19.
5
<PAGE> 6
- -------------
Example
- --------------------------------------------------------------------------------
To illustrate the effect of Total Operating Expenses, let's assume that the
Fund's annual return is 5% and that it had Total Operating Expenses described in
the table above. For every $1,000 you invested in the Fund, you would have paid
the following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GUARDIAN TRUST $ 9 $ 28 $ 49 $ 108
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
6
<PAGE> 7
FINANCIAL HIGHLIGHTS
- --------------------------------------------------
Selected Per Share Data and Ratios
- --------------------------------------------------------------------------------
The financial information in the following table is for the Fund as of
August 31, 1997 and prior periods. This information has been audited by the
Fund's independent auditors. You may obtain, at no cost, further information
about the performance of the Fund in its annual report to shareholders. The
auditors' report is incorporated in the SAI by reference to the annual report.
Please call 800-877-9700 for a free copy of the annual report and for up-to-date
information. Also, see "Performance Information."
7
<PAGE> 8
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 Portfolio's
income and expenses. It should be read in conjunction with its Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Period from
August 3,
1993(1)
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 net 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(2) +39.56% +5.19% +24.01% +10.57% +2.70%(3)
--------------------------------------------------------------------------
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(4) .88% .92% -- -- --
--------------------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets .88% .92%(5) .90%(5) .80%(5) .81%(5)(6)
--------------------------------------------------------------------------
Ratio of Net Investment Income to Average Net
Assets .47% 1.26%(5) 1.35%(5) 1.50%(5) 1.00%(5)(6)
--------------------------------------------------------------------------
</TABLE>
See Notes to Financial Highlights
8
<PAGE> 9
NOTES TO FINANCIAL HIGHLIGHTS
1)The date investment operations commenced.
2)Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each fiscal
period, and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Had N&B Management not
reimbursed certain expenses of the Fund, total return would have been lower.
3)Not annualized.
4)For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements. These ratios reflect the
reimbursement of certain expenses.
5)After reimbursement of expenses by N&B Management. Had N&B Management not
undertaken such action, the annualized ratios of net expenses and net
investment income (loss) to average daily net assets would have been:
<TABLE>
<CAPTION>
Period from
August 3, 1993
Year Ended August 31, to August 31,
1996 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses .92% .96% 1.52% 2.50%
------------------------------------------------
Net Investment Income (Loss) 1.26% 1.29% .78% (.69%)
------------------------------------------------
</TABLE>
6)Annualized.
7)Because the Fund invests only in the Portfolio and the Portfolio (rather than
the Fund) engages in securities transactions, the Fund does not calculate a
portfolio turnover rate or pay any brokerage commissions. The portfolio
turnover rates for the Portfolio for the period from August 2, 1993 to August
31, 1993 and the years ended August 31, 1994, 1995, 1996, and 1997 were 3%,
24%, 26%, 37%, and 50%, respectively. The average commission rates paid by the
Portfolio for the years ended August 31, 1996 and 1997 were $0.0580 and
$0.0538, respectively.
9
<PAGE> 10
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those
of the Portfolio. The Fund invests only in the Portfolio. Therefore, the
following shows you the kinds of securities in which the Portfolio invests. For
an explanation of some types of investments, see "Description of Investments" on
page 24.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
The investment objective of the Fund and Portfolio is to seek capital
appreciation and, secondarily, current income. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
The Portfolio invests primarily in common stocks of long-established, high-
quality companies. The Portfolio uses the value-oriented investment approach in
selecting securities. Thus, N&B Management looks for such factors as low
price-to-earnings ratios, strong balance sheets, solid managements, and
consistent earnings.
Neuberger&Berman GUARDIAN Fund, a mutual fund that is a series of
Neuberger&Berman Equity Funds ("N&B Equity Funds") and is administered by N&B
Management, also invests all of its net investable assets in the Portfolio
("Sister Fund"). The Sister Fund has paid its shareholders an income dividend
every quarter and a capital gain distribution every year since the Sister Fund's
inception in 1950; the Fund has done so since December 1993. Of course, this
past record does not necessarily predict the Fund's future practices.
- -----------------------------------------------------
Short-Term Trading; Portfolio Turnover
- --------------------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. See "Notes to
Financial Highlights" for more information about the portfolio turnover rate of
the Portfolio.
- -----------------
Borrowings
- --------------------------------------------------------------------------------
The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the
10
<PAGE> 11
amount borrowed) less liabilities (other than borrowings). The Portfolio does
not expect to borrow money or to enter into reverse repurchase agreements. As a
non-fundamental policy, the Portfolio may not purchase portfolio securities if
its outstanding borrowings, including reverse repurchase agreements, exceed 5%
of its total assets.
- --------------------------
Other Investments
- --------------------------------------------------------------------------------
For temporary defensive purposes, the Portfolio may invest up to 100% of its
total assets in cash and cash equivalents, U.S. Government and Agency
Securities, commercial paper and certain other money market instruments, as well
as repurchase agreements collateralized by the foregoing.
11
<PAGE> 12
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This evens out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
The Fund commenced operations in August 1993, and its first fiscal year
ended August 31, 1993. The following table shows the average annual total
returns of the Fund for the 1-year, 5-year, 10-year and since inception periods
ended August 31, 1997. Returns for periods prior to the Fund's commencement of
operations represent the performance of the Sister Fund. The table also shows a
comparison with the S&P "500" Index. The S&P "500" Index is the Standard &
Poor's 500 Composite Stock Price Index, an unmanaged index generally considered
to be representative of overall stock market activity. Please note that an index
does not take into account any fees or expenses of investing in the individual
securities that it tracks. Further information regarding the Fund's performance
is presented in its annual report to shareholders, which is available without
charge by calling 800-877-9700.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS
ENDED AUGUST 31, 1997
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SINCE INCEPTION
EQUITY TRUST 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARDIAN TRUST +39.56% +19.85% +14.42% +13.42% 6/1/50
S&P "500" +40.73 +19.78 +13.85 +12.84* N/A
</TABLE>
* From the Sister Fund's inception date.
Had N&B Management not reimbursed certain expenses, the total returns of the
Fund would have been lower. The total returns for periods prior to the Fund's
commencement of operations would have been lower had they reflected the higher
fees of the Fund, as compared to those of the Sister Fund.
The following table lets you take a closer look at how the Fund and its
Sister Fund performed year by year, in terms of an annual per share total return
for each of the last ten calendar years (ending December 31). Please note that
the previous chart reflects information for periods ended on the Fund's last
fiscal year-end (that is, as of August 31, 1997).
TOTAL RETURNS FOR CALENDAR YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUST 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GUARDIAN TRUST -1.0% +28.0% +21.5% -4.7% +34.3% +19.0% +13.5% +1.5% +32.0% +17.7%
S&P "500" INDEX +5.2 +16.5 +31.6 -3.1 +30.3 +7.6 +10.0 +1.4 +37.5 +22.9
</TABLE>
TOTAL RETURN INFORMATION. You can obtain current performance information
about the Fund by calling N&B Management at 800-877-9700.
12
<PAGE> 13
HOW TO BUY SHARES
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION.
N&B Management and the Fund do not recommend, endorse, or receive payments from
any Institution. N&B Management compensates Institutions for services they
provide under an administrative services agreement. N&B Management does not
provide investment advice to any Institution or its clients or make decisions
regarding their investments.
Each Institution will establish its own procedures for the purchase of Fund
shares, including minimum initial and additional investments for shares of the
Fund and the acceptable methods of payment for shares. Shares are purchased at
the next price calculated on a day the New York Stock Exchange ("NYSE") is open,
after a purchase order is received and accepted by an Institution. Investors
should consult their Institution to determine the time by which it must receive
an order so that Fund shares can be purchased at that day's price. Prices for
Fund shares are calculated as of the close of regular trading on the NYSE,
usually 4 p.m. Eastern time. An Institution may be closed on days when the NYSE
is open. As a result, prices for Fund shares may be significantly affected on
days when an investor has no access to that Institution to buy shares.
- --------------------------
Other Information
- --------------------------------------------------------------------------------
----- An Institution must pay for shares it purchases on its clients' behalf
in U.S. dollars.
----- The Fund has the right to suspend the offering of its shares for a
period of time. The Fund also has the right to accept or reject a
purchase order in its sole discretion.
----- The Fund does not issue certificates for shares.
----- Some Institutions may charge their clients a fee in connection with
purchases of shares of the Fund.
13
<PAGE> 14
HOW TO SELL SHARES
You can sell (redeem) all or some of your Fund shares only through an
account with an Institution. Each Institution will establish its own procedures
for the sale of Fund shares and the payment of redemption proceeds. Shares are
sold at the next price calculated on a day the NYSE is open, after a sales order
is received and accepted by an Institution. Investors should consult their
Institution to determine the time by which it must receive an order so that Fund
shares can be sold at that day's price. Prices for Fund shares are calculated as
of the close of regular trading on the NYSE, usually 4 p.m. Eastern time. An
Institution may be closed on days when the NYSE is open. As a result, prices for
Fund shares may be significantly affected on days when an investor has no access
to that Institution to sell shares.
- --------------------------
Other Information
- --------------------------------------------------------------------------------
----- Redemption proceeds will be paid to Institutions as agreed with N&B
Management, but in any case within three business days (under unusual
circumstances the Fund may take longer, as permitted by law). An
Institution may not follow the same procedures for payment of
redemption proceeds to its clients.
----- The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed, when trading on the NYSE is restricted, or as
permitted by the SEC.
----- Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Fund.
14
<PAGE> 15
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated
by subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values securities (including options) listed on the NYSE, the
American Stock Exchange, or other national securities exchanges or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices on that day. The Portfolio values
all other securities and assets, including restricted securities, by a method
that the trustees of Managers Trust believe accurately reflects fair value.
If N&B Management believes that the price of a security obtained under the
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
15
<PAGE> 16
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes substantially all of its share of any net investment
income (net of the Fund's expenses) earned by the Portfolio near the end of each
calendar quarter. The Fund distributes substantially all of its share of the
Portfolio's net capital gains from investment transactions and net gains from
foreign currency transactions, if any, normally in December.
- -----------------------------
Distribution Options
- --------------------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions paid on
shares of the Fund are automatically reinvested in additional shares of the
Fund, unless an Institution elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
- ----------
Taxes
- --------------------------------------------------------------------------------
An investment has certain tax consequences, depending on the type of account
through which the investment is made. FOR AN ACCOUNT UNDER A QUALIFIED
RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and
generally also are subject to state and local income taxes. Distributions are
taxable when they are paid, whether in cash or by reinvestment in additional
Fund shares, except that distributions declared in December to shareholders of
record on a date in that month and paid in the following January are taxable as
if they were paid on December 31 of the year in which the distributions were
declared. Investors who buy Fund shares just before the Fund deducts a dividend
or other distribution from its NAV will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares near the end of a
calendar quarter should take this into account.
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally taxed as long-term capital gain, no matter how long an
investor has owned Fund shares. Distributions of net capital gain may include
gains from the sale of portfolio securities that appreciated in value before an
investor bought Fund shares. Under the
16
<PAGE> 17
Taxpayer Relief Act of 1997, different maximum tax rates apply to the Fund's
distributions of net capital gain depending on the Portfolio's holding period.
Every January, the Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid in cash or
reinvested in Fund shares for the previous year. Each Institution will also
receive information showing (1) the portion, if any, of those distributions that
generally is not subject to state and local income taxes in certain states and
(2) capital gain distributions broken down in a manner that will enable
investors or their tax advisers to determine the appropriate rate of capital
gains tax on such distributions.
TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares
are subject to tax. A capital gain or loss generally is the difference between
the amount paid for shares (including the amount of any dividends and other
distributions that were reinvested) and the amount received when shares are
sold. Capital gain on shares held for more than one year will be long-term
capital gain, in which event it will be subject to federal income tax at the
capital gains rate applicable to an investor's holding period and tax bracket.
When an Institution sells Fund shares, it will receive a confirmation
statement showing the number of shares sold and the price.
OTHER. Every January, Institutions will receive a consolidated transaction
statement for the previous year. Each Institution is required annually to send
each investor in its account a statement showing the investor's distribution and
transaction information for the previous year.
The Fund intends to continue to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will not have to
pay federal income tax on that part of its taxable income and realized gains
that it distributes to its shareholders.
The foregoing is only a summary of some of the important income tax
considerations affecting each Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
17
<PAGE> 18
MANAGEMENT AND ADMINISTRATION
- -------------------------------
Trustees and Officers
- --------------------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of the Fund and Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The trustees and officers of the Trust and of Managers Trust who are officers
and/or directors of N&B Management and/or principals of Neuberger&Berman serve
without compensation from the Fund or the Portfolio.
- --------------------------------------------------
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- --------------------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolio and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $21.2 billion as of
September 30, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio. N&B Management
compensates Neuberger&Berman for its costs in connection with those services.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges and
acts as the Portfolio's principal broker in the purchase and sale of its
securities. Neuberger&Berman and its affiliates, including N&B Management,
manage securities accounts that had approximately $54.1 billion of assets as of
September 30, 1997. All of the voting stock of N&B Management is owned by
individuals who are principals of Neuberger&Berman.
Kent C. Simons and Kevin L. Risen are primarily responsible for the
day-to-day management of the Portfolio. Mr. Simons and Mr. Risen are Vice
Presidents of N&B Management and principals of Neuberger&Berman. Mr. Simons has
had responsibility for the Portfolio since 1981. Mr. Risen has had
responsibility for the Portfolio since 1996, and during the year prior thereto,
he was a portfolio manager for Neuberger&Berman. He was a research analyst at
Neuberger&Berman from 1992 to 1995.
Neuberger&Berman acts as the principal broker for the Portfolio in the
purchase and sale of portfolio securities and in the sale of covered call
options, and for those
18
<PAGE> 19
services receives brokerage commissions. In effecting securities transactions,
the Portfolio seeks to obtain the best price and execution of orders. For more
information, see the SAI.
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds(R).
To mitigate the possibility that the Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management and
Neuberger&Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
- ---------------
Expenses
- --------------------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. For
investment management services, the Portfolio pays N&B Management a fee at the
annual rate of 0.55% of the first $250 million of the Portfolio's average daily
net assets, 0.525% of the next $250 million, 0.50% of the next $250 million,
0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of
average daily net assets in excess of $1.5 billion.
N&B Management provides administrative services to the Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services. For such administrative services, the Fund
pays N&B Management a fee at the annual rate of 0.40% of the Fund's average
daily net assets. With the Fund's consent, N&B Management may subcontract to
Institutions some of its responsibilities to the Fund under the administration
agreement and may compensate each Institution that provides such services at an
annual rate of up to 0.25% of the average net asset value of Fund shares held
through that Institution.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page 5. See "Expense Information -- Annual Fund
Operating Expenses" for information about how these fees and expenses may affect
the value of your investment.
During its 1997 fiscal year, the Fund accrued administration fees and a pro
rata portion of the Portfolio's management fees, as a percentage of the Fund's
average daily net assets, of 0.84%.
19
<PAGE> 20
During its 1997 fiscal year, the Fund bore aggregate expenses as a
percentage of its average daily net assets of 0.88% per annum.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Total Operating Expenses so that the Fund's expense ratio per annum will not
exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the
Fund's average daily net assets. The Fund's per annum "expense ratio" is the sum
of the Fund's Total Operating Expenses, divided by the Fund's average daily net
assets for the year. N&B Management may terminate this undertaking to the Fund
by giving at least 60 days' prior written notice to the Fund. The effect of
reimbursement by N&B Management is to reduce the Fund's expenses and thereby
increase its total return.
- ---------------------
Transfer Agent
- --------------------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to
Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180.
20
<PAGE> 21
INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS
- --------------
The Fund
- --------------------------------------------------------------------------------
The Fund is a separate operating series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of May 6, 1993. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as
a diversified, open-end management investment company, commonly known as a
mutual fund. The Trust has seven separate series. The Fund invests all of its
net investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
OTHER. Because Fund shares can be bought, owned and sold only through an
account with an Institution, a client of an Institution may be unable to
purchase additional shares and/or may be required to redeem shares (and possibly
incur a tax liability) if the client no longer has a relationship with the
Institution or if the Institution no longer has a contract with N&B Management
to perform services. Depending on the policies of the Institutions involved, an
investor may be able to transfer an account from one Institution to another.
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- -------------------
The Portfolio
- --------------------------------------------------------------------------------
The Portfolio is a separate operating series of Managers Trust, a New York
common law trust organized as of December 1, 1992. Managers Trust is registered
under the 1940 Act as a diversified, open-end management investment company.
Managers Trust has six separate portfolios. The assets of the Portfolio belong
only to the Portfolio, and the liabilities of the Portfolio are borne solely by
the Portfolio and no other.
FUND'S INVESTMENT IN PORTFOLIO. The Fund is a "feeder fund" that seeks to
achieve its investment objective by investing all of its net investable assets
in the Portfolio, which is a "master fund." The Portfolio, which has the same
investment objective, policies, and limitations as the Fund, in turn invests in
securities; the Fund thus acquires an indirect interest in those securities.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. Members of the general public may not purchase a direct
interest in the Portfolio. The Sister Fund, a series of N&B Equity Funds, and
another mutual fund that is a series of Neuberger&Berman Equity Assets ("N&B
Equity Assets"), invest all of their respective net investable assets in the
Portfolio. The shares of the series of N&B Equity Funds (but not of N&B Equity
Assets) are available for purchase by members of the general public. The Fund
does not sell its shares directly to members of the general public. The
Portfolio may also permit other investment companies and/or other institutional
investors to invest in the Portfolio. All investors will invest in the Portfolio
on the same terms and conditions as the Fund and will pay a proportionate share
of the Portfolio's expenses. Other investors in the Portfolio (including the
series of N&B Equity Funds and N&B Equity Assets) are not required to sell their
shares at the same public offering price as the Fund, could have a different
administration fee and expenses than the Fund, and (except the series of N&B
Equity Funds and N&B Equity Assets) might charge a sales commission. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the Portfolio. Information
regarding any fund that invests in the Portfolio is available from N&B
Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by the
series of N&B Equity Funds or N&B Equity Assets or by other potential investors
in addition to the Fund may enable the Portfolio to realize economies of scale
that could reduce its operating expenses, thereby producing higher returns and
benefitting all shareholders.
The Fund may withdraw its entire investment from the Portfolio at any time,
if the trustees of the Trust determine that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other
22
<PAGE> 23
investors in the Portfolio with power to, and who did by a vote of all investors
(including the Fund), change the investment objective, policies, or limitations
of the Portfolio in a manner not acceptable to the trustees of the Trust. A
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio to the Fund. That distribution
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's investment portfolio. If the
Fund decided to convert those securities to cash, it usually would incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from the Portfolio, the trustees of the Trust would consider what actions might
be taken, including the investment of all of the Fund's net investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund or the retention by the Fund of its own investment manager
to manage its assets in accordance with its investment objective, policies, and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in the Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, the Fund will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in the Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all Portfolio investors; indeed, if other investors
hold a majority interest in the Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund,
will be liable for all obligations of the Portfolio. However, the risk of an
investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
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<PAGE> 24
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in "Investment
Program" herein, the Portfolio may make the following investments, among others,
individually or in combination, although it may not necessarily buy all of the
types of securities or use all of the investment techniques that are described.
For additional information on the following investments and on other types of
investments which the Portfolio may make, see the SAI.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. The Portfolio may invest up
to 15% of its net assets in illiquid securities, which are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for the Portfolio to value or dispose of due to the absence of
an active trading market. The sale of some illiquid securities by the Portfolio
may be subject to legal restrictions which could be costly to the Portfolio.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and
doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities. The Portfolio may invest up
to 10% of the value of its total assets in foreign securities. The 10%
limitation does not apply to foreign securities that are denominated in U.S.
dollars, including American Depositary Receipts ("ADRs"). Foreign securities
(including those denominated in U.S. dollars and ADRs) are affected by political
and economic developments in foreign countries. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations. In
addition, foreign markets may be less liquid and more volatile than U.S. markets
and may offer less protection to investors. Investments in foreign securities
that are not denominated in U.S. dollars (including those made through ADRs) may
be subject to special risks, such as governmental regulation of foreign exchange
transactions and changes in rates of exchange with the U.S. dollar, irrespective
of the performance of the underlying investment.
COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of
securities price changes (hedge) or generate income by writing (selling) covered
call options against portfolio securities and may purchase call options in
related closing transac-
24
<PAGE> 25
tions. When the Portfolio writes a covered call option against a security, the
Portfolio is obligated to sell that security to the purchaser of the option at a
fixed price at any time during a specified period if the purchaser decides to
exercise the option. The maximum price the Portfolio may realize on the security
during the option period is the fixed price; the Portfolio continues to bear the
risk of a decline in the security's price, although this risk is reduced, at
least in part, by the premium received for writing the option.
The primary risks in using call options are (1) possible lack of a liquid
secondary market for options and the resulting inability to close out options
when desired; (2) the fact that use of options is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of the
Portfolio's securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain by offsetting favorable price movements in hedged
investments; and (4) the possible inability of the Portfolio to sell a security
at a time that would otherwise be favorable for it to do so, or the possible
need for the Portfolio to sell a security at a disadvantageous time, due to its
need to maintain "cover" in connection with its use of these instruments.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations. The Portfolio
also may lend portfolio securities to banks, brokerage firms, or institutional
investors to earn income. Costs, delays, or losses could result if the selling
party to a repurchase agreement or the borrower of portfolio securities becomes
bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
OTHER INVESTMENTS. Although the Portfolio invests primarily in common
stocks, when market conditions warrant it may invest in preferred stocks,
securities convertible into or exchangeable for common stocks, U.S. Government
and Agency Securities, investment grade debt securities, or money market
instruments, or may retain assets in cash or cash equivalents.
U.S. Government Securities are obligations of the U.S. Treasury backed by
the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the
25
<PAGE> 26
United States, while others may be supported by the issuer's ability to borrow
from the U.S. Treasury, subject to the Treasury's discretion in certain cases,
or only by the credit of the issuer. U.S. Government Agency Securities include
U.S. Government Agency mortgage-backed securities. The market prices of U.S.
Government and Agency Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's, or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed comparable by N&B Management to
such rated securities ("Comparable Unrated Securities"). Securities rated by
Moody's in its fourth highest category (Baa) or Comparable Unrated Securities
may be deemed to have speculative characteristics. The value of the fixed income
securities in which the Portfolio may invest is likely to decline in times of
rising market interest rates. Conversely, when rates fall, the value of the
Portfolio's fixed income investments is likely to rise.
26
<PAGE> 27
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue 2nd Floor
New York, NY 10158-0180
(800) 877-9700
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman, Neuberger&Berman Management Inc., and Neuberger&Berman
Guardian Trust are registered trademarks or service marks of Neuberger&Berman,
LLC or Neuberger&Berman Management Inc.
(C) 1997 Neuberger&Berman Management Incorporated.
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<PAGE>
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NEUBERGER & BERMAN GUARDIAN TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 15, 1997
No-Load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
Toll-Free 800-877-9700
- --------------------------------------------------------------------------------
Neuberger & Berman GUARDIAN Trust ("Fund"), a series of Neuberger &
Berman Equity Trust ("Trust"), is a no-load mutual fund that offers shares
pursuant to a Prospectus dated December 15, 1997. The Fund invests all of its
net investable assets in Neuberger & Berman GUARDIAN Portfolio ("Portfolio").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN
ACCOUNT WITH AN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES
ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN
ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT
INCORPORATED (EACH AN "INSTITUTION").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger & Berman Management Incorporated ("N&B Management"),
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or
by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
----
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................4
Additional Investment Information......................................5
PERFORMANCE INFORMATION.....................................................15
Total Return Computations.............................................15
Comparative Information...............................................16
Other Performance Information.........................................17
CERTAIN RISK CONSIDERATIONS.................................................17
TRUSTEES AND OFFICERS.......................................................18
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................24
Investment Manager and Administrator..................................24
Sub-Adviser...........................................................26
Investment Companies Managed..........................................26
Management and Control of N&B Management..............................30
DISTRIBUTION ARRANGEMENTS...................................................30
ADDITIONAL REDEMPTION INFORMATION...........................................31
Suspension of Redemptions.............................................31
Redemptions in Kind...................................................31
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................32
ADDITIONAL TAX INFORMATION..................................................32
Taxation of the Fund..................................................32
Taxation of the Portfolio.............................................33
Taxation of the Fund's Shareholders...................................35
PORTFOLIO TRANSACTIONS......................................................36
Portfolio Turnover....................................................40
<PAGE>
REPORTS TO SHAREHOLDERS.....................................................40
CUSTODIAN AND TRANSFER AGENT................................................40
INDEPENDENT AUDITORS........................................................40
LEGAL COUNSEL...............................................................40
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................41
REGISTRATION STATEMENT......................................................41
FINANCIAL STATEMENTS........................................................42
Appendix A..................................................................43
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.......................43
ii
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company. The Fund seeks its
investment objective by investing all of its net investable assets in the
Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an
investment objective identical to that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. (The Trust and Managers Trust, which
is an open-end management investment company managed by N&B Management, are
together referred to below as the "Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of (1) 67% of the total units
of beneficial interest ("shares") of the Fund or Portfolio represented at a
meeting at which more than 50% of the outstanding Fund or Portfolio shares are
represented or (2) a majority of the outstanding shares of the Fund or
Portfolio. These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
The Fund has the following fundamental investment policy, to enable
it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets (cash, securities, and receivables
relating to securities) in an open-end management investment company
having substantially the same investment objective, policies, and
limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
- 1 -
<PAGE>
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations are
as follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities
or contracts thereon, unless acquired as a result of the ownership of securities
or instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of
the value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
- 2 -
<PAGE>
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolio does
not consider foreign currencies or forward contracts to be physical commodities.
The Portfolio's non-fundamental investment policies and limitations
are as follows:
1. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
2. LENDING. Except for the purchase of debt securities and engaging
in repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
- 3 -
<PAGE>
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of
the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any security
if, as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
- 4 -
<PAGE>
6. PLEDGING. The Portfolio may not pledge or hypothecate any of its
assets, except that the Portfolio may pledge or hypothecate up to 5% of its
total assets in connection with its entry into any agreement or arrangement
pursuant to which a bank furnishes a letter of credit to collateralize a capital
commitment made by the Portfolio to a mutual insurance company of which the
Portfolio is a member.
The Portfolio, as an operating policy, does not intend to invest in
futures contracts and options thereon during the coming year. In addition,
although the Portfolio does not have a policy limiting its investment in
warrants, the Portfolio does not currently intend to invest in warrants unless
acquired in units or attached to securities.
- 5 -
<PAGE>
INVESTMENT INSIGHT
The Portfolio subscribes to the same stock-picking philosophy
followed since Roy R. Neuberger founded Neuberger & Berman GUARDIAN Fund (which,
like the Fund, invests all of its net investable assets in the Portfolio) in
1950.
It's no great trick for a mutual fund to make money when the market
is rising. The tide that lifts stock values will carry most funds along. The
true test of management is its ability to make money even when the market is
flat or declining. By that measure, Neuberger & Berman GUARDIAN Fund has served
shareholders well and has paid a dividend every quarter and a capital gain
distribution EVERY YEAR since 1950; the Fund has done so since December 1993. Of
course, there can be no assurance that this trend will continue.
The portfolio co-managers place a high premium on being
knowledgeable about the companies whose stocks they buy. That knowledge is
important, because sometimes it takes courage to buy stocks that the rest of the
market has forsaken. The managers would rather buy an undervalued stock because
they expect it to become fairly valued than buy one fairly valued and hope it
becomes overvalued. The managers tend to buy stocks that are out of favor,
believing that an investor is not going to get great companies at great
valuations when the market perception is great.
Investors who switch around a lot are not going to benefit from the
Portfolio's approach. They're following the market -- the Portfolio is looking
at fundamentals.
The Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of the Portfolio's total assets. Of course,
the Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others,
although it may not buy all of the types of securities or use all of the
investment techniques that are described.
- 6 -
<PAGE>
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or from a securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase agreements
generally are for a short period of time, usually less than a week. Repurchase
agreements with a maturity of more than seven days are considered to be illiquid
securities. The Portfolio may not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 15% of the value of
its net assets would then be invested in such repurchase agreements and other
illiquid securities. The Portfolio may enter into a repurchase agreement only if
(1) the underlying securities are of a type that the Portfolio's investment
policies and limitations would allow it to purchase directly, (2) the market
value of the underlying securities, including accrued interest, at all times
equals or exceeds the repurchase price, and (3) payment for the underlying
securities is made only upon satisfactory evidence that the securities are being
held for the Portfolio's account by its custodian or a bank acting as the
Portfolio's agent.
SECURITIES LOANS. In order to realize income, the Portfolio may lend
portfolio securities with a value not exceeding 33-1/3% of its total assets to
banks, brokerage firms, or other institutional investors judged creditworthy by
N&B Management. Borrowers are required continuously to secure their obligations
to return securities on loan from the Portfolio by depositing collateral in a
form determined to be satisfactory by the Portfolio Trustees. The collateral,
which must be marked to market daily, must be equal to at least 100% of the
market value of the loaned securities, which will also be marked to market
daily. N&B Management believes the risk of loss on these transactions is slight
because, if a borrower were to default for any reason, the collateral should
satisfy the obligation. However, as with other extensions of secured credit,
loans of portfolio securities involve some risk of loss of rights in the
collateral should the borrower fail financially.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
- 7 -
<PAGE>
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradable in their
principal market are not considered to be restricted. Regulation S under the
1933 Act permits the sale abroad of securities that are not registered for sale
in the United States.
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. To the extent
restricted securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 15% limit on investments in illiquid
securities. Restricted securities for which no market exists are priced by a
method that the Portfolio Trustees believe accurately reflects fair value.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio sells portfolio securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of the
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, the Portfolio will deposit in a
segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to the Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
FOREIGN SECURITIES. The Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. These investments are subject to the Portfolio's quality
standards. While investments in foreign securities are intended to reduce risk
by providing further diversification, such investments involve sovereign and
other risks, in addition to the credit and market risks normally associated with
domestic securities. These additional risks include the possibility of adverse
political and economic developments (including political instability,
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<PAGE>
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
The Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolio endeavors to
achieve the most favorable net results on portfolio transactions. The Portfolio
may invest only in securities of issuers in countries whose governments are
considered stable by N&B Management.
Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
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<PAGE>
Interest rates prevailing in other countries may affect the prices
of foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
In order to limit the risks inherent in investing in foreign
currency denominated securities, the Portfolio may not purchase any such
security if, as a result, more than 10% of its total assets (taken at market
value) would be invested in foreign currency denominated securities. Within that
limitation, however, the Portfolio is not restricted in the amount it may invest
in securities denominated in any one foreign currency.
COVERED CALL OPTIONS ON SECURITIES. The Portfolio may write covered
call options and may purchase call options in related closing transactions. The
purpose of writing call options is to hedge (i.e., to reduce, at least in part,
the effect of price fluctuations of securities held by the Portfolio on the
Portfolio's and the Fund's net asset values ("NAVs")) or to earn premium income.
Portfolio securities on which call options may be written and purchased by the
Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying an option at less
than the market price.
The Portfolio writes only "covered" call options on securities it
owns. The writing of covered call options is a conservative investment technique
that is believed to involve relatively little risk (in contrast to the writing
of "naked" or uncovered call options, which the Portfolio will not do) but is
capable of enhancing the Portfolio's total return. When writing a covered call
option, the Portfolio, in return for the premium, gives up the opportunity for
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<PAGE>
profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline.
If a call option that the Portfolio has written expires unexercised,
the Portfolio will realize a gain in the amount of the premium; however, that
gain may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.
When the Portfolio purchases a call option, it pays a premium for
the right to purchase a security from the writer at a specified price until a
specified date. A Portfolio would purchase a call option to offset a previously
written call option.
The exercise price of an option may be below, equal to, or above the
market value of the underlying security at the time the option is written.
Options normally have expiration dates between three and nine months from the
date written. American-style options are exercisable at any time prior to their
expiration date. The obligation under any option written by the Portfolio
terminates upon expiration of the option or, at an earlier time, when the
Portfolio offsets the option by entering into a "closing purchase transaction"
to purchase an option of the same series. If an option is purchased by the
Portfolio and is never exercised or closed out, the Portfolio will lose the
entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio writes an OTC option, it generally will be able to "close
out" the option prior to its expiration only by entering into a closing purchase
transaction with the dealer to whom the Portfolio originally sold the option.
There can be no assurance that the Portfolio would be able to liquidate an OTC
option at any time prior to expiration. Unless the Portfolio is able to effect a
closing purchase transaction in a covered OTC call option it has written, it
will not be able to liquidate securities used as cover until the option expires
or is exercised or until different cover is substituted. In the event of the
counter-party's insolvency, the Portfolio may be unable to liquidate its options
position and the associated cover. N&B Management monitors the creditworthiness
of dealers with which the Portfolio may engage in OTC options transactions.
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<PAGE>
The assets used as cover (or held in a segregated account) for OTC
options written by the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
There is, of course, no assurance that the Portfolio will be able to effect
closing transactions at favorable prices. If the Portfolio cannot enter into
such a transaction, it may be required to hold a security that it might
otherwise have sold, in which case it would continue to be at market risk on the
security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call option. Because increases in the market price of
a call option generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option is likely to
be offset, in whole or in part, by appreciation of the underlying security owned
by the Portfolio; however, the Portfolio could be in a less advantageous
position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection
with purchasing or writing options, including those used to close out existing
positions.
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<PAGE>
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolio enters into forward contracts in an attempt
to hedge against changes in prevailing currency exchange rates. The Portfolio
does not engage in transactions in forward contracts for speculation; it views
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
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<PAGE>
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated but which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and if N&B Management is incorrect in its judgment of future
exchange rate relationships, the Portfolio could be in a less advantageous
position than if such a hedge had not been established. If the Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of the Portfolio's securities against a decline in the value of a currency
does not eliminate fluctuations in the prices of underlying securities. Because
forward contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid. The Portfolio may experience delays in the settlement
of its foreign currency transactions.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies. The Portfolio would engage
in such transactions to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired or to protect the U.S. dollar equivalent of dividends, interest, or
other payments on those securities. Currency options have characteristics and
risks similar to those of securities options, as discussed herein. Certain
options on foreign currencies are traded on the OTC market and involve liquidity
and credit risks that may not be present in the case of exchange-traded currency
options.
REGULATORY LIMITATIONS ON USING OPTIONS AND FORWARD CONTRACTS
(COLLECTIVELY, "HEDGING INSTRUMENTS"). To the extent the Portfolio writes
options on foreign currencies that are traded on an exchange regulated by the
Commodity Futures Trading Commission ("CFTC") other than for BONA FIDE hedging
purposes (as defined by the CFTC), the aggregate initial margin and premiums on
those positions (excluding the amount by which options are "in-the-money") may
not exceed 5% of the Portfolio's net assets.
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<PAGE>
COVER FOR HEDGING INSTRUMENTS. The Portfolio will comply with SEC
guidelines regarding "cover" for Hedging Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities. Securities held in a segregated
account cannot be sold while the options or forward strategy covered by those
securities is outstanding, unless they are replaced with other suitable assets.
As a result, segregation of a large percentage of the Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid options or forward
position; this inability may result in a loss to the Portfolio.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that the skills needed
to use Hedging Instruments are different from those needed to select the
Portfolio's securities; (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Hedging Instruments.
N&B Management intends to reduce the risk of imperfect correlation by investing
only in Hedging Instruments whose behavior is expected to resemble or offset
that of the Portfolio's underlying securities or currency. N&B Management
intends to reduce the risk that the Portfolio will be unable to close out
Hedging Instruments by entering into such transactions only if N&B Management
believes there will be an active and liquid secondary market. There can be no
assurance that the Portfolio's use of Hedging Instruments will be successful.
The Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information."
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<PAGE>
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in corporate bonds and
debentures receiving one of the four highest ratings from Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally
recognized statistical rating organization ("NRSRO") or, if not rated by any
NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable
Unrated Securities").
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates.
Subsequent to its purchase by the Portfolio, an issue of debt
securities may cease to be rated or its rating may be reduced, so that the
securities would no longer be eligible for purchase by the Portfolio. In such a
case, the Portfolio will engage in an orderly disposition of the downgraded
securities to the extent necessary to ensure that the Portfolio's holdings of
securities rated below investment grade and Comparable Unrated Securities will
not exceed 5% of its net assets.
COMMERCIAL PAPER. Commercial paper is a short-term debt security
issued by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest only in commercial paper receiving the
highest rating from S&P (A-1) or Moody's (P-1) or deemed by N&B Management to be
of comparable quality.
The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, N&B Management
may in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
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<PAGE>
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security entitles the holder to receive the interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, such securities ordinarily provide a stream of income with generally
higher yields than common stocks of the same or similar issuers, but lower than
the yield on non-convertible debt. Convertible securities are usually
subordinated to comparable-tier non-convertible securities but rank senior to
common stock in a corporation's capital structure. The value of a convertible
security is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege and (2) its worth if converted into the underlying common stock.
Convertible debt securities are subject to the Portfolio's investment policies
and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objectives.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and
are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
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<PAGE>
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)[SUPERSCRIPT]n = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
The Fund commenced operations in August 1993. However, the Fund's
investment objective, policies, and limitations are the same as those of
Neuberger & Berman GUARDIAN Fund, which is a series of Neuberger & Berman Equity
Funds and invests in the Portfolio ("Sister Fund"). The Sister Fund had a
predecessor. The following total return data is for the Fund since its inception
and, for periods prior to the Fund's inception, its Sister Fund (which, as used
herein, includes data for that Sister Fund's predecessor). The total returns for
periods prior to the Fund's inception would have been lower had they reflected
the higher fees of the Fund, as compared to those of the Sister Fund.
The average annual total returns for the Fund and its Sister Fund
for the one-, five-, and ten-year periods ended August 31, 1997, were +39.56%,
+19.85%, and +14.42%, respectively.
N&B Management may from time to time reimburse the Fund for a
portion of its expenses. Such action has the effect of increasing total return.
Actual reimbursements are described in the Prospectus and in "Investment
Management and Administration Services" below.
COMPARATIVE INFORMATION
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters,
and financial periodicals) that monitor the performance of mutual funds,
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<PAGE>
such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
U.S. News & World Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Russell Midcap Growth Index, Dow Jones Industrial Average
("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index, Montgomery
Securities Growth Stock Index, Value Line Index, U.S. Department of Labor
Consumer Price Index ("Consumer Price Index"), College Board Annual Survey
of Colleges, Kanon Bloch's Family Performance Index, the Barra Growth
Index, the Barra Value Index and various other domestic, international,
and global indices. The S&P 500 Index is a broad index of common stock
prices, while the DJIA represents a narrower segment of industrial
companies. The S&P 600 Index includes stocks that range in market value
from $39 million to $2.7 billion, with an average of $616 million. The S&P
400 Index measures mid-sized companies that have an average market
capitalization of $2.2 billion. Each assumes reinvestment of distributions
and is calculated without regard to tax consequences or the costs of
investing. The Portfolio may invest in different types of securities from
those included in some of the above indices.
Evaluations of the Fund's performance, its total returns, and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Fund
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements for the Fund. This information may include the Portfolio's
portfolio diversification by asset type. Information used in Advertisements may
include statements or illustrations relating to the appropriateness of types of
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<PAGE>
securities and/or mutual funds that may be employed to meet specific financial
goals, such as (1) funding retirement, (2) paying for children's education, and
(3) financially supporting aging parents.
N&B Management believes that many of its common stock funds may be
attractive investment vehicles for conservative investors who are interested in
long-term appreciation from stock investments, but who have a moderate tolerance
for risk. Such investors may include, for example, individuals (1) planning for
or facing retirement, (2) receiving or expecting to receive lump-sum
distributions from individual retirement accounts ("IRAs"), self-employed
individual retirement plans ("Keogh plans"), or other retirement plans, (3)
anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans,
and (4) receiving a significant amount of money as a result of inheritance, sale
of a business, or termination of employment.
Investors who may find the Fund to be an attractive investment
vehicle also include parents saving to meet college costs for their children.
For instance, the cost of a college education is rapidly approaching the cost of
the average family home. Estimates of total four-year costs (tuition, room and
board, books and other expenses) for students starting college in various years
may be included in Advertisements, based on the College Board Annual Survey of
Colleges.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance the Portfolio will achieve its
investment objective.
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<PAGE>
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees
and officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman, LLC ("Neuberger & Berman").
<TABLE>
<CAPTION>
Name, Age, Positions Held
and Address(1) With the Trusts Principal Occupation(s)2)
- -------------- --------------- -------------------------
<S> <C> <C>
Faith Colish (62) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street A Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (75) Trustee of each Trust Retired. Formerly Senior Vice
435 East 52nd Street President and Director of Exxon
New York, NY 10022 Corporation; Director of
Emigrant Savings Bank.
Stanley Egener* (63) Chairman of the Principal of Neuberger & Berman;
Board, Chief President and Director of N&B
Executive Officer, Management; Chairman of the Board
and Trustee of each Chief Executive Officer and
Trust and Trustee of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Howard A. Mileaf (60) Trustee of each Trust Vice President and Special
WHX Corporation Counsel to WHX Corporation
110 East 59th Street (holding company) since 1992;
30th Floor Director of Kevlin Corporation
New York, NY 10022 (manufacturer of microwave and
other products).
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<PAGE>
Edward I. O'Brien* (69) Trustee of each Trust Until 1993, President of the
12 Woods Lane Securities Industry Association
Scarsdale, NY 10583 ("SIA") (securities industry's
representative in government
relations and regulatory matters
at the federal and state levels);
until November 1993, employee of
the SIA; Director of Legg Mason,
Inc.
John T. Patterson, Jr. (69) Trustee of each Trust Retired. Formerly, President of
183 Ledge Drive SOBRO (South Bronx Overall
Torrington, CT 06790 Economic Development Corporation).
John P. Rosenthal (64) Trustee of each Trust Senior Vice President of Burnham
Burnham Securities Inc, Securities Inc. (a registered
Burnham Asset Management broker-dealer) since 1991;
Corp. Director, Cancer Treatment
1325 Avenue of the Americas Holdings, Inc.
17th Floor
New York, NY 10019
Cornelius T. Ryan (66) Trustee of each Trust General Partner of Oxford
Oxford Bioscience Partners Partners and Oxford Bioscience
315 Post Road West Partners (venture capital
Westport, CT 06880 partnerships) and President of
Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money market
fund) and Prime Cash Fund.
- 22 -
<PAGE>
Gustave H. Shubert (68) Trustee of each Trust Senior Fellow/Corporate Advisor
13838 Sunset Boulevard and Advisory Trustee of Rand (a
Pacific Palisades, CA 90272 non-profit public interest
research institution) since 1989;
Honorary Member of the Board of
Overseers of the Institute for
Civil Justice, the Policy
Advisory Committee of the
Clinical Scholars Program at the
University of California, the
American Association for the
Advancement of Science, the
Counsel on Foreign Relations, and
the Institute for Strategic
Studies (London); advisor to the
Program Evaluation and
Methodology Division of the U.S.
General Accounting Office;
formerly Senior Vice President
and Trustee of Rand.
Lawrence Zicklin* (61) President and Principal of Neuberger & Berman;
Trustee of each Trust Director of N&B Management;
President and/or Trustee of five
other mutual funds for which N&B
Management acts as investment
manager or administrator.
Daniel J. Sullivan (57) Vice President of Senior Vice President of N&B
each Trust Management since 1992; Vice
President of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
- 23 -
<PAGE>
Michael J. Weiner (50) Vice President and Senior Vice President of N&B
Principal Financial Management since 1992; Treasurer
Officer of each Trust of N&B Management from 1992 to
1996; Vice President and
Principal Financial Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Claudia A. Brandon (41) Secretary of each Vice President of N&B Management;
Trust Secretary of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Richard Russell (50) Treasurer and Vice President of N&B Management
Principal Accounting since 1993; prior thereto,
Officer of each Trust Assistant Vice President of N&B
Management; Treasurer and
Principal Accounting Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
- 24 -
<PAGE>
Stacy Cooper-Shugrue (34) Assistant Secretary Assistant Vice President of N&B
of each Trust Management since 1993; prior
thereto, employee of N&B
Management; Assistant Secretary
of eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
- 25 -
<PAGE>
C. Carl Randolph (60) Assistant Secretary Principal of Neuberger & Berman
of each Trust since 1992; Assistant Secretary
of eight other mutual funds
for which N&B Management acts as
investment manager or
administrator.
Barbara DiGiorgio (38) Assistant Treasurer Assistant Vice President of N&B
of each Trust Management since 1993; prior
thereto, employee of N&B
Management; Assistant Treasurer
since 1996 of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Celeste Wischerth (36) Assistant Treasurer Assistant Vice President of N&B
of each Trust Management since 1994; prior
thereto, employee of N&B
Management; Assistant Treasurer
since 1996 of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
</TABLE>
- 26 -
<PAGE>
- -------------------------------
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of N&B Management and
principals of Neuberger & Berman. Mr. O'Brien is an interested person by virtue
of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary
of which, from time to time, serves as a broker or dealer to the Portfolio and
other funds for which N&B Management serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger & Berman
Funds(REGISTERED) has any retirement plan for its trustees.
- 27 -
<PAGE>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/97
-----------------------------
Total Compensation
from Investment
Aggregate Companies in the
Name and Position with Compensation Neuberger & Berman Fund
the Trust from the Trust Complex Paid to Trustees
- --------- -------------- ------------------------
Faith Colish $ 2,952 $ 64,000
Trustee (5 other investment
companies)
Donald M. Cox $ 2,952 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief (9 other investment
Executive Officer, and companies)
Trustee
Alan R. Gruber, Trustee, and $ 1,913 $ 20,000
The Estate of (3 other investment
Alan R. Gruber companies)
Howard A. Mileaf $ 2,995 $ 33,500
Trustee (4 other investment
companies)
Edward I. O'Brien $ 3,321 $ 34,000
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 3,321 $ 37,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,952 $ 32,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,995 $ 30,500
Trustee (3 other investment
companies)
Gustave H. Shubert $ 2,995 $ 30,500
Trustee (3 other investment
companies)
- 28 -
<PAGE>
Total Compensation
from Investment
Aggregate Companies in the
Name and Position with Compensation Neuberger & Berman Fund
the Trust from the Trust Complex Paid to Trustees
- --------- -------------- ------------------------
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
At November 28, 1997, the trustees and officers of the Trusts, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. N&B Management serves
as the Portfolio's investment manager pursuant to a management agreement with
Managers Trust, dated as of August 2, 1993 ("Management Agreement"). The
Management Agreement was approved by the holders of the interests in the
Portfolio on August 2, 1993.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits N&B Management to effect securities
transactions on behalf of the Portfolio through associated persons of N&B
Management. The Management Agreement also specifically permits N&B Management to
compensate, through higher commissions, brokers and dealers who provide
investment research and analysis to the Portfolio, although N&B Management has
no current plans to pay a material amount of such compensation.
N&B Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
- 29 -
<PAGE>
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts. See "Trustees and Officers." Each Portfolio pays N&B
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
N&B Management provides facilities, services and personnel, as well
as accounting, recordkeeping, and other services, to the Fund pursuant to an
administration agreement with the Trust, dated August 3, 1993, as amended on
August 2, 1996 ("Administration Agreement"). For such administrative services,
the Fund pays N&B Management a fee based on the Fund's average daily net assets,
as described in the Prospectus. N&B Management enters into administrative
services agreements with Institutions, pursuant to which it compensates
Institutions for accounting, recordkeeping and other services that they provide
in connection with investments in the Fund.
Institutions may be subject to federal or state laws that limit
their ability to provide certain administrative or distribution-related
services. For example, the Glass-Steagall Act is generally interpreted to
prohibit most banks from underwriting mutual fund shares. N&B Management intends
to contract with Institutions for only those services they may legally provide.
If, due to a change in the laws governing Institutions or in the interpretation
of any such law, an Institution is prohibited from performing some or all of the
above-described services, N&B Management may be required to find alternative
means of providing those services. Any such change is not expected to impact the
Fund or its shareholders adversely.
During the fiscal years ended August 31, 1997, 1996 and 1995, the
Fund accrued management and administration fees of $14,839,636, $8,821,718 and
$2,417,586, respectively.
N&B Management has voluntarily undertaken to reimburse the Fund for
its Total Operating Expenses (as defined in the Prospectus) so that the Fund's
expense ratio per annum will not exceed the expense ratio of its Sister Fund by
more than 0.10% of the Fund's average daily net assets. This undertaking can be
terminated by N&B Management by giving the Fund at least 60 days' prior written
notice. During the period from August 3, 1993 (commencement of operations of the
Fund) to December 31, 1994, N&B Management voluntarily undertook to reimburse
the Fund for its Total Operating Expenses so that the Fund's expense ratio per
annum would not exceed the expense ratio of the Sister Fund. During the fiscal
years ended August 31, 1997, 1996 and 1995, N&B Management reimbursed the Fund
$0, $69,266 and $171,796, respectively, of expenses, under this arrangement.
- 30 -
<PAGE>
The Management Agreement continues until August 2, 1998. The
Management Agreement is renewable thereafter from year to year with respect to
the Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in the Portfolio. The Administration
Agreement continues until August 2, 1998. The Administration Agreement is
renewable from year to year with respect to the Fund, so long as its continuance
is approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of N&B Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval, and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by N&B Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by N&B Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
N&B Management retains Neuberger & Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolio on August 2, 1993.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it, in
addition to research from other professional sources, the capability of the
- 31 -
<PAGE>
research staff of Neuberger & Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with N&B Management. The Sub-Advisory Agreement provides that N&B Management
will pay for the services rendered by Neuberger & Berman based on the direct and
indirect costs to Neuberger & Berman in connection with those services.
Neuberger & Berman also serves as sub-adviser for all of the other mutual funds
managed by N&B Management.
The Sub-Advisory Agreement continues until August 2, 1998 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
Portfolio, by N&B Management, or by Neuberger & Berman on not less than 30 nor
more than 60 days' written notice. The Sub-Advisory Agreement also terminates
automatically with respect to the Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
As of September 30, 1997, the investment companies managed by N&B
Management had aggregate net assets of approximately $21.2 billion. N&B
Management currently serves as investment manager of the following investment
companies:
Approximate
Net Assets at
Name September 30, 1997
- ---- ------------------
Neuberger & Berman Cash Reserves Portfolio $667,531,894
(investment portfolio for Neuberger & Berman
Cash Reserves)
- 32 -
<PAGE>
Approximate
Net Assets at
Name September 30, 1997
- ---- ------------------
Neuberger & Berman Government Money Portfolio $248,190,672
(investment portfolio for Neuberger & Berman
Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio $295,393,823
(investment portfolio for Neuberger & Berman
Limited Maturity Bond Fund and Neuberger &
Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio $146,706,408
(investment portfolio for Neuberger & Berman
Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio $31,573,660
(investment portfolio for Neuberger & Berman
Municipal Securities Trust)
Neuberger & Berman Ultra Short Bond Portfolio $62,627,463
(investment portfolio for Neuberger & Berman
Ultra Short Bond Fund and Neuberger & Berman
Ultra Short Bond Trust)
Neuberger & Berman Focus Portfolio $1,661,565,204
(investment portfolio for Neuberger & Berman
Focus Fund, Neuberger & Berman Focus Trust and
Neuberger & Berman Focus Assets)
- 33 -
<PAGE>
Approximate
Net Assets at
Name September 30, 1997
- ---- ------------------
Neuberger & Berman Genesis Portfolio $1,491,048,221
(investment portfolio for Neuberger & Berman
Genesis Fund, Neuberger & Berman Genesis Trust
and Neuberger & Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio $9,123,101,599
(investment portfolio for Neuberger & Berman
Guardian Fund, Neuberger & Berman Guardian Trust
and Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio $127,016,071
(investment portfolio for Neuberger & Berman
International Fund and Neuberger & Berman
International Trust)
Neuberger & Berman Manhattan Portfolio $655,156,471
(investment portfolio for Neuberger & Berman
Manhattan Fund, Neuberger & Berman Manhattan
Trust and Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio $3,783,754,657
(investment portfolio for Neuberger & Berman
Partners Fund, Neuberger & Berman Partners Trust
and Neuberger & Berman Partners Assets)
- 34 -
<PAGE>
Approximate
Net Assets at
Name September 30, 1997
- ---- ------------------
Neuberger & Berman Socially Responsive $274,230,723
Portfolio (investment portfolio for Neuberger &
Berman Socially Responsive Fund, Neuberger & Berman
Socially Responsive Trust and Neuberger & Berman
NYCDC Socially Responsive Trust)
Advisers Managers Trust $2,651,503,613
(seven series)
The investment decisions concerning the Portfolio and the other mutual funds
managed by N&B Management (collectively, "Other N&B Funds") have been and will
continue to be made independently of one another. In terms of their investment
objectives, most of the Other N&B Funds differ from the Portfolio. Even where
the investment objectives are similar, however, the methods used by the Other
N&B Funds and the Portfolio to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by N&B Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when the Portfolio and one or more of the
Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
- 35 -
<PAGE>
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger & Berman (including the Portfolio, the Other N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have
offices at the same address as N&B Management, are Richard A. Cantor, Chairman
of the Board and director; Stanley Egener, President and director; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President; Robert W.
D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del Villar, Vice
President; Brian J. Gaffney, Vice President; Joseph G. Galli, Vice President;
Robert I. Gendelman, Vice President; Josephine P. Mahaney, Vice President; Ellen
Metzger, Vice President and Secretary; Paul Metzger, Vice President; Janet W.
Prindle, Vice President; Kevin L. Risen, Vice President; Richard Russell, Vice
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice President;
Frederic B. Soule, Vice President; Judith M. Vale, Vice President; Susan Walsh,
Vice President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Robert Conti, Treasurer; Valerie Chang, Assistant Vice
President; Stacy Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Michael J. Hanratty, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice President;
Celeste Wischerth, Assistant Vice President; and Loraine Olavarria, Assistant
Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano, Kassen, Lainoff, Risen,
Simons, Sundman and Zicklin and Mmes. Prindle, Silver and Vale are principals of
Neuberger & Berman.
- 36 -
<PAGE>
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Russell, Sullivan and Weiner and Mmes. Brandon, Cooper-Shugrue, DiGiorgio, and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to
Institutions. In connection with the sale of its shares, the Fund has authorized
the Distributor to give only the information, and to make only the statements
and representations, contained in the Prospectus and this SAI or that properly
may be included in sales literature and advertisements in accordance with the
1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations.
Sales may be made only by the Prospectus, which may be delivered personally,
through the mails, or by electronic means. The Distributor is the Fund's
"principal underwriter" within the meaning of the 1940 Act and, as such, acts as
agent in arranging for the sale of the Fund's shares to Institutions without
sales commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
From time to time, N&B Management may enter into arrangements
pursuant to which it compensates a registered broker-dealer or other third party
for services in connection with the distribution of Fund shares.
The Trust, on behalf of the Fund, and the Distributor are parties to
a Distribution Agreement that continues until August 2, 1998. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
- 37 -
<PAGE>
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the NYSE is closed, (2) when trading on
the NYSE is restricted, (3) when an emergency exists as a result of which it is
not reasonably practicable for the Portfolio to dispose of securities it owns or
fairly to determine the value of its net assets, or (4) for such other period as
the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, an Institution generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Fund does not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of the
Fund's shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders substantially all of its
share of any net investment income, (after deducting expenses incurred directly
by the Fund), any net realized capital gains, and any net realized gains from
foreign currency transactions earned or realized by the Portfolio.
- 38 -
<PAGE>
The Portfolio's net investment income consists of all income accrued
on portfolio assets less accrued expenses, but does not include capital and
foreign currency gains and losses. Net investment income and realized gains and
losses are reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until
they are distributed. The Fund calculates its net investment income and NAV per
share as of the close of regular trading on the NYSE on each Business Day
(usually 4:00 p.m. Eastern time).
The Fund generally distributes substantially all of its share of the
Portfolio's net investment income, (after deducting expenses incurred directly
by the Fund), if any, near the end of each other calendar quarter. Distributions
of net realized capital and foreign currency gains, if any, normally are paid
once annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the Institution elects to receive them in
cash ("cash election"). To the extent dividends and other distributions are
subject to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares. A cash
election with respect to the Fund remains in effect until the Institution
notifies the Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the
Code, the Fund must distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income (consisting generally of net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions) ("Distribution Requirement") and must meet
several additional requirements. These requirements include the following: (1)
the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from Hedging Instruments) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
and (2) at the close of each quarter of the Fund's taxable year, (i) at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. Government securities, securities of other RICs, and other securities
- 39 -
<PAGE>
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities, and (ii) not more than 25% of the
value of its total assets may be invested in securities (other than U.S.
Government securities or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios managed by N&B Management,
including the Sister Fund, have received rulings from the Internal Revenue
Service ("Service") that each such fund, as an investor in its corresponding
portfolio, will be deemed to own a proportionate share of the portfolio's assets
and income for purposes of determining whether the fund satisfies all the
requirements described above to qualify as a RIC. Although these rulings may not
be relied on as precedent by the Fund, N&B Management believes that the
reasoning thereof and, hence, their conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the
Fund of distributions to it from the Portfolio, investments by the Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
The Portfolio has received a ruling from the Service to the effect
that, among other things, the Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." As a result, the Portfolio is not subject to federal income tax;
instead, each investor in the Portfolio, such as the Fund, is required to take
into account in determining its federal income tax liability its share of the
Portfolio's income, gains, losses, deductions, and credits, without regard to
whether it has received any cash distributions from the Portfolio. The Portfolio
also is not subject to Delaware or New York income or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
- 40 -
<PAGE>
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash the Fund invests in the Portfolio, increased
by the Fund's share of the Portfolio's net income and capital gains and
decreased by (1) the amount of cash and the basis of any property the Portfolio
distributes to the Fund and (2) the Fund's share of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains realized
by the Portfolio, may be subject to income, withholding, or other taxes imposed
by foreign countries and U.S. possessions that would reduce the yield and/or
total return on its securities. Tax treaties between certain countries and the
United States may reduce or eliminate these foreign taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.
The Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder (effective
for the taxable year beginning September 1, 1998) -- that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if the Portfolio
holds stock of a PFIC, the Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to its shareholders. The balance of the Fund's share of the
PFIC income will be included in its investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
- 41 -
<PAGE>
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Fund to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock
in any PFIC may elect to include in ordinary income each taxable year the
excess, if any, of the fair market value of the stock over the adjusted basis
therein as of the end of that year. Pursuant to the election, a deduction (as an
ordinary, not capital, loss) also would be allowed for the excess, if any, of
the holder's adjusted basis in PFIC stock over the fair market value thereof as
of the taxable year-end, but only to the extent of any net mark-to-market gains
with respect to that stock included in income for prior taxable years. The
adjusted basis in each PFIC's stock subject to the election would be adjusted to
reflect the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and entering into forward contracts, involves complex
rules that will determine for income tax purposes the amount, character and
timing of recognition of the gains and losses the Portfolio realizes in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and gains from
Hedging Instruments derived by the Portfolio with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income for the Fund under the Income Requirement.
- 42 -
<PAGE>
TAXATION OF THE FUND'S SHAREHOLDERS
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as principal broker for the Portfolio in the
purchase and sale of its portfolio securities and in connection with the writing
of covered call options on its securities.
During the fiscal year ended August 31, 1995, the Portfolio paid
brokerage commissions of $3,751,206, of which $2,521,523 was paid to Neuberger &
Berman. During the fiscal year ended August 31, 1996, the Portfolio paid
brokerage commissions of $6,886,590, of which $3,542,127 was paid to Neuberger &
Berman.
During the fiscal year ended August 31, 1997, the Portfolio paid
brokerage commissions of $8,540,335, of which $4,806,913 was paid to Neuberger &
Berman. Transactions in which the Portfolio used Neuberger & Berman as broker
comprised 60.45% of the aggregate dollar amount of transactions involving the
payment of commissions, and 56.28% of the aggregate brokerage commissions paid
by the Portfolio, during the fiscal year ended August 31, 1997. 87.31% of the
$3,733,422 paid to other brokers by the Portfolio during that fiscal year
(representing commissions on transactions involving approximately
- 43 -
<PAGE>
$1,958,958,289) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1997, the Portfolio acquired
securities of the following of its "regular brokers or dealers" (as defined in
the 1940 Act) ("Regular B/Ds"): Chevron Oil Finance Company, General Electric
Capital Corp., Merrill, Lynch, Pierce, Fenner & Smith Inc., Morgan Stanley, Dean
Witter, Discover & Co., and State Street Bank and Trust Company, N.A.; at that
date, that Portfolio held the securities of its Regular B/Ds with an aggregate
value as follows: General Electric Capital Corp., $36,480,000; Merrill, Lynch,
Pierce, Fenner & Smith Inc., $201,720,000; and Morgan Stanley, Dean Witter,
Discover & Co., $178,784,375.
Portfolio securities are, from time to time, loaned by the Portfolio
to Neuberger & Berman in accordance with the terms and conditions of an order
issued by the SEC. The order exempts such transactions from provisions of the
1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. In accordance with the order, securities loans made by the Portfolio
to Neuberger & Berman are fully secured by cash collateral. The portion of the
income on the cash collateral which may be shared with Neuberger & Berman is to
be determined by reference to concurrent arrangements between Neuberger & Berman
and non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger & Berman borrows securities from the Portfolio in
order to re-lend them to others, Neuberger & Berman may be required to pay the
Portfolio, on a quarterly basis, certain of the earnings that Neuberger & Berman
otherwise has derived from the re-lending of the borrowed securities. When
Neuberger & Berman desires to borrow a security that the Portfolio has indicated
a willingness to lend, Neuberger & Berman must borrow such security from the
Portfolio, rather than from an unaffiliated lender, unless the unaffiliated
lender is willing to lend such security on more favorable terms (as specified in
the order) than the Portfolio. If, in any month, the Portfolio's expenses exceed
its income in any securities loan transaction with Neuberger & Berman, Neuberger
& Berman must reimburse the Portfolio for such loss.
During the fiscal years ended August 31, 1997, 1996 and 1995, the
Portfolio earned interest income of $4,005,765, $2,427,096 and $1,430,672,
respectively, from the collateralization of securities loans, from which
Neuberger & Berman was paid $3,523,486, $2,129,341 and $1,252,190, respectively.
The Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
- 44 -
<PAGE>
creditworthy by N&B Management, provided that cash or equivalent collateral,
equal to at least 100% of the market value of the loaned securities, is
continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio.
In effecting securities transactions, the Portfolio generally seeks
to obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger & Berman as its principal broker
where, in the judgment of N&B Management, that firm is able to obtain a price
and execution at least as favorable as other qualified brokers. To the
Portfolio's knowledge, no affiliate of the Portfolio receives give-ups or
reciprocal business in connection with its securities transactions.
The use of Neuberger & Berman as a broker for the Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers Trust and N&B Management have expressly
authorized Neuberger & Berman to retain such compensation, and Neuberger &
Berman has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to Neuberger &
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
& Berman must, in N&B Management's judgment, be (1) at least as favorable as
- 45 -
<PAGE>
those charged by other brokers having comparable execution capability and (2) at
least as favorable as commissions contemporaneously charged by Neuberger &
Berman on comparable transactions for its most favored unaffiliated customers,
except for accounts for which Neuberger & Berman acts as a clearing broker for
another brokerage firm and customers of Neuberger & Berman considered by a
majority of the Independent Portfolio Trustees not to be comparable to the
Portfolio. The Portfolio does not deem it practicable and in its best interests
to solicit competitive bids for commissions on each transaction effected by
Neuberger & Berman. However, consideration regularly is given to information
concerning the prevailing level of commissions charged by other brokers on
comparable transactions during comparable periods of time. The 1940 Act
generally prohibits Neuberger & Berman from acting as principal in the purchase
of portfolio securities from, or the sale of portfolio securities to, the
Portfolio unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will continue to execute a portion of
its transactions through brokers other than Neuberger & Berman. In selecting
those brokers, N&B Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by, and sale of Fund shares effected through, those brokers.
A committee comprised of officers of N&B Management and principals
of Neuberger & Berman who are portfolio managers of the Portfolio and Other N&B
- 46 -
<PAGE>
Funds (collectively, "N&B Funds") and some of Neuberger & Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the N&B Funds and the Managed Accounts
that are not effected by Neuberger & Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the N&B Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the N&B
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger & Berman may
be higher than the amount another firm might charge if N&B Management determines
in good faith that the amount of those commissions is reasonable in relation to
the value of the brokerage and research services provided by the broker. N&B
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolio's benefit.
Kent C. Simons and Kevin L. Risen, each of whom is a Vice President
of N&B Management and a principal of Neuberger & Berman, are the persons
primarily responsible for making decisions as to specific action to be taken
with respect to the investment portfolio of the Portfolio. Each of them has full
authority to take action with respect to portfolio transactions and may or may
not consult with other personnel of N&B Management prior to taking such action.
- 47 -
<PAGE>
PORTFOLIO TURNOVER
The Portfolio's portfolio turnover rate is calculated by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
auditors for the Fund and Portfolio. The Fund's statements show the investments
owned by the Portfolio and the market values thereof and provide other
information about the Fund and its operations, including the Fund's beneficial
interest in the Portfolio.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian
for their respective securities and cash. State Street also serves as the Fund's
transfer agent, administering purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be mailed to Neuberger
& Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York,
NY 10158-0180. In addition, State Street serves as transfer agent for the
Portfolio.
INDEPENDENT AUDITORS
The Fund and Portfolio have selected Ernst & Young LLP, 200
Clarendon Street, Boston, MA 02116, as the independent auditors who will audit
their financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by the Fund to own beneficially or of
record 5% or more of the Fund's outstanding shares at December 1, 1997:
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<PAGE>
Percentage of
Ownership at
NAME AND ADDRESS DECEMBER 1, 1997
Neuberger & Berman The Northern Trust Co., 13.37%
GUARDIAN Trust Trustee
Digital Equipment Corp.
DTD 1-3-95
P.O. Box 92956
Chicago, IL 60675-2956
MAC & Co. 11.14%
A/C 195-643
AEOF 1956432
P.O. Box 3198
Mutual Fund Operations
Pittsburgh, PA 15230-3198
National Financial Services Corp.* 8.30%
P.O. Box 3908
Church Street Station
New York, NY 10008-3908
Fidelity Investments 5.07%
Institutional Ops Co.
Agent for certain EE
benefit plans
Mailzone KWIC
Covington, KY 41015
* National Financial Services Corp. holds these shares of record for
the account of certain of its clients and has informed the Fund of its policy to
maintain the confidentiality of holdings in its client accounts unless
disclosure is expressly required by law.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
- 49 -
<PAGE>
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Fund's Annual Report to shareholders
for the fiscal year ended August 31, 1997:
The audited financial statements of the Fund and Portfolio and notes
thereto for the fiscal year ended August 31, 1997, and the reports of
Ernst & Young LLP, independent auditors, with respect to such audited
financial statements.
- 50 -
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P Corporate Bond Ratings:
--------------------------
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
Plus (+) or Minus (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
- 51 -
<PAGE>
Moody's Corporate Bond Ratings:
------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
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<PAGE>
C - Bonds rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Modifiers--Moody's may apply numerical modifiers 1, 2, and 3 in each generic
rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating.
S&P Commercial Paper Ratings:
----------------------------
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
Moody's Commercial Paper Ratings
--------------------------------
Issuers rated Prime-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
<PAGE>
<PAGE> 1
Neuberger&Berman
NYCDC SOCIALLY RESPONSIVE TRUST(SM)
- --------------------------------
A No-Load Equity Fund
- --------------------------------------------------------------------------------
Neuberger&Berman NYCDC SOCIALLY RESPONSIVE TRUST (the "Fund") is an equity
fund that seeks long-term capital appreciation through investments primarily in
securities of companies that meet both financial and social criteria.
The Fund was created as an investment vehicle for participants in the
Deferred Compensation Plan of the City of New York and Related Agencies and
Instrumentalities ("Plan") who are concerned about the relationship between
business and society and are seeking to invest their assets in a manner
consistent with their social sensibilities.
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH THE PLAN.
- --------------------------------------------------------------------------------
The Fund, which is a series of Neuberger&Berman Equity Trust (the "Trust"),
invests all of its net investable assets in Neuberger&Berman Socially Responsive
Portfolio (the "Portfolio") of Equity Managers Trust ("Managers Trust"), an
open-end management investment company managed by Neuberger&Berman Management
Incorporated ("N&B Management"). The Portfolio invests in securities in
accordance with an investment objective, policies, and limitations identical to
those of the Fund. The investment performance of the Fund directly corresponds
with the investment performance of the Portfolio. This "master/feeder fund"
structure is different from that of many other investment companies which
directly acquire and manage their own portfolios of securities. For more
information on this structure that you should consider, see "Summary" on page 3
and "Information Regarding Organization, Capitalization, and Other Matters" on
page 19.
The Portfolio seeks to achieve its objective by investing in securities
considered by N&B Management to be undervalued in relation to recognized
measures of their fundamental economic values, such as earnings, cash flow,
tangible book value, and asset value. For a description of the investment
policies and techniques of the Portfolio, see "Investment Program" and
"Description of Investments."
The Fund is a no-load mutual fund, so you pay no sales commissions or other
charges when you buy or redeem shares. The Fund does not pay "12b-1 fees" to
promote or distribute its shares.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 15, 1997, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling the Plan at (212) 306-7760.
PROSPECTUS DATED DECEMBER 15, 1997
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY
BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Fund and Portfolio; Risk
Factors 3
Management 4
The Neuberger&Berman
Investment Approach 4
EXPENSE INFORMATION 5
Shareholder Transaction
Expenses 5
Annual Fund Operating
Expenses 5
Example 6
FINANCIAL HIGHLIGHTS 7
INVESTMENT PROGRAM 9
Social Policy 10
Short-Term Trading;
Portfolio Turnover 11
Borrowings 11
PERFORMANCE INFORMATION 12
Total Return Information 12
HOW TO BUY AND SELL
SHARES 13
SHARE PRICES AND NET
ASSET VALUE 14
DIVIDENDS, OTHER
DISTRIBUTIONS AND TAXES 15
Distribution Options 15
Taxes 15
MANAGEMENT AND
ADMINISTRATION 16
Trustees and Officers 16
Investment Manager,
Administrator, Distributor,
and Sub-Adviser 16
Expenses 17
Transfer Agent 18
INFORMATION
REGARDING ORGANIZATION,
CAPITALIZATION, AND
OTHER MATTERS 19
The Fund 19
The Portfolio 20
DESCRIPTION OF
INVESTMENTS 22
DIRECTORY 25
</TABLE>
<PAGE> 3
SUMMARY
- --------------------------------------------------
The Fund and Portfolio; Risk Factors
- --------------------------------------------------------------------------------
The Fund is a series of the Trust and invests in the Portfolio which, in
turn, invests in securities in accordance with an investment objective, policies
and limitations that are identical to those of the Fund. This is sometimes
called a master/feeder fund structure, because the Fund "feeds" shareholders'
investments into the Portfolio, a "master" fund. The structure looks like this:
SHAREHOLDERS
BUY SHARES IN
FUND
INVESTS IN
PORTFOLIO
INVESTS IN
STOCKS & OTHER SECURITIES
The trustees who oversee the Fund believe that this structure may benefit
shareholders; investment in the Portfolio by investors in addition to the Fund
may enable the Portfolio to achieve economies of scale that could reduce
expenses. The Portfolio seeks long-term capital appreciation by investing
primarily in securities considered by N&B Management to be undervalued relative
to the market as a whole and whose issuers meet certain social criteria
established by N&B Management ("Social Policy"). N&B Management evaluates
companies to determine if they meet the Social Policy in the following major
areas of concern: environment, and workplace diversity and employment. Companies
are further evaluated to determine if they meet other aspects of the Social
Policy, such as public health, type of products, and corporate citizenship. The
Portfolio does not invest in companies which derive a significant portion of
their total annual revenue from the following industries: nuclear power,
tobacco, alcohol, gambling, or weapons. The Portfolio will seek to dispose of a
security as soon as reasonably practicable if the
3
<PAGE> 4
issuer no longer meets the Social Policy, even though a sale at that time might
not be desirable from a purely financial standpoint.
For more information about the organization of the Fund and the Portfolio,
including certain features of the master/feeder fund structure, see "Information
Regarding Organization, Capitalization, and Other Matters" on page 19. An
investment in the Fund involves certain risks, depending upon the types of
investments made by the Portfolio. For more details about the Portfolio, its
investments and their risks, see "Investment Program" on page 9, "Social Policy"
on page 10, and "Description of Investments" on page 22.
INVESTMENT STYLE: Broadly diversified, large-cap value fund.
PORTFOLIO CHARACTERISTICS: Seeks long-term capital appreciation by
investing in common stocks of companies that meet both financial and social
criteria.
- -------------------
Management
- --------------------------------------------------------------------------------
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page 16. If you want to know how to buy and sell shares of the Fund, see "How to
Buy and Sell Shares" on page 13, and the policies set forth in the Plan.
- --------------------------------------------------------------
The Neuberger&Berman Investment Approach
- --------------------------------------------------------------------------------
In general, the Portfolio adheres to a value-oriented investment approach. A
value-oriented portfolio manager buys stocks that are selling for a price that
is lower than what the manager believes they are worth. These include stocks
that are currently under-researched or are temporarily out of favor on Wall
Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets).
A value-oriented manager believes that, over time, securities that are
undervalued are more likely to appreciate in price and be subject to less risk
of price decline than securities whose market prices have already reached their
perceived economic values. This approach also contemplates selling portfolio
securities when they are considered to have reached their potential.
4
<PAGE> 5
EXPENSE INFORMATION
This section gives you certain information about the expenses of the Fund
and the Portfolio. See "Performance Information" for important facts about the
investment performance of the Fund, after taking expenses into account.
- ------------------------------------------------
Shareholder Transaction Expenses
- --------------------------------------------------------------------------------
As shown by this table, the Fund imposes no transaction charges when you buy
or sell Fund shares.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
- ----------------------------------------------------
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
- --------------------------------------------------------------------------------
The following table shows annual operating expenses for the Fund which are
paid out of the assets of the Fund and which include the Fund's pro rata portion
of the operating expenses of the Portfolio ("Total Operating Expenses"). "Total
Operating Expenses" exclude interest, taxes, brokerage commissions, and
extraordinary expenses.
The Fund pays N&B Management an administration fee based on the Fund's
average daily net assets. The Portfolio pays N&B Management a management fee
based on the Portfolio's average daily net assets; a pro rata portion of this
fee is borne indirectly by the Fund. "Management and Administration Fees" in the
following table are based upon administration fees incurred by the Fund and
management fees incurred by the Portfolio during the past fiscal year. For more
information, see "Management and Administration" and the SAI.
The Fund and the Portfolio incur other expenses for things such as
accounting and legal fees, transfer agency fees, custodial fees, printing and
furnishing shareholder statements and Fund reports and compensating trustees who
are not affiliated with N&B Management ("Other Expenses"). Other Expenses in the
following table are based on the Fund's and Portfolio's expenses for the past
fiscal year. All expenses are factored into the Fund's share prices and
dividends and are not charged directly to Fund shareholders.
5
<PAGE> 6
<TABLE>
<CAPTION>
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING
EQUITY TRUST ADMINISTRATION FEES FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NYCDC SOCIALLY RESPONSIVE
TRUST 0.60% None 0.00%* 0.60%*
</TABLE>
* Reflects N&B Management's expense reimbursement undertaking described below.
As set forth in "Expenses" on page 17 N&B Management has voluntarily
undertaken to reimburse the Fund if its Total Operating Expenses exceed certain
limits. Absent the reimbursement, Other Expenses and Total Operating Expenses
would be 0.13% and 0.73%, respectively, per annum of the average daily net
assets of the Fund.
For more information, see "Expenses" on page 17.
- -------------
Example
- --------------------------------------------------------------------------------
To illustrate the effect of Total Operating Expenses, let's assume that the
Fund's annual return is 5% and that it had Total Operating Expenses described in
the table above. For every $1,000 you invested in the Fund, you would have paid
the following amounts of total expenses if you closed your account at the end of
each of the following time periods:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NYCDC SOCIALLY RESPONSIVE TRUST $ 6 $ 19 $ 33 $75
</TABLE>
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
6
<PAGE> 7
FINANCIAL HIGHLIGHTS
Neuberger&Berman
- --------------------------------------------
NYCDC Socially Responsive Trust
- --------------------------------------------------------------------------------
The financial information in the following table is for the Fund as of
August 31, 1997 and prior periods. This information has been audited by the
Fund's independent accountants. You may obtain, at no cost, further information
about the performance of the Fund in its annual report to shareholders, which
may be obtained by calling (212) 306-7760. The accountant's report is
incorporated in the SAI by reference to the annual report. Also, see
"Performance Information."
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
Financial Statements. The per share amounts and ratios which are shown reflect
income and expenses, including the Fund's proportionate share of the Portfolio's
income and expenses. It should be read in conjunction with the Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
For the
Period from
For the March 14, 1994(1)
Year Ended August 31, to August 31,
1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $14.42 $12.27 $10.43 $ 10.20
------------------------------------------------------------
Income From Investment Operations
Net Investment Income .17 .14 .13 .06
Net Gains or Losses on Securities (both realized and
unrealized) 4.38 2.44 1.82 .17
------------------------------------------------------------
Total From Investment Operations 4.55 2.58 1.95 .23
------------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.16) (.12) (.11) --
Distributions (from net capital gains) (1.19) (.31) -- --
------------------------------------------------------------
Total Distributions (1.35) (.43) (.11) --
------------------------------------------------------------
Net Asset Value, End of Year $17.62 $14.42 $12.27 $ 10.43
------------------------------------------------------------
Total Return(2) +33.20% +21.27% +18.95% +2.26%(3)
------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year (in millions) $188.9 $125.6 $ 88.5 $ 68.6
------------------------------------------------------------
Ratio of Gross Expenses to Average Net Assets(4) .60% .60% -- --
------------------------------------------------------------
Ratio of Net Expenses to Average Net Assets(5) .60% .60% .60% .60%(6)
------------------------------------------------------------
Ratio of Net Investment Income to Average Net Assets(5) 1.11% 1.06% 1.26% 1.42%(6)
------------------------------------------------------------
</TABLE>
See Notes to Financial Highlights
7
<PAGE> 8
NOTES TO FINANCIAL HIGHLIGHTS
1)The date investment operations commenced.
2)Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each fiscal
period and assumes dividends and other distributions, if any, were reinvested.
Results represent past performance and do not guarantee future results.
Investment returns and principal may fluctuate and shares when redeemed may be
worth more or less than original cost. Total return would have been lower if
N&B Management had not reimbursed certain expenses.
3)Not annualized.
4)For fiscal periods ending after September 1, 1995, the Fund is required to
calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements. These ratios reflect the
reimbursement of certain expenses.
5)After reimbursement of expenses by N&B Management. Had N&B Management not
undertaken such action the annualized ratios of net expenses and net
investment income to average daily net assets would have been:
<TABLE>
<CAPTION>
For the
Period from
For the Year Ended March 14, 1994
August 31, to August 31,
1997 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses .73% .80% .85% .84%
------------------------------------------
Net Investment Income .98% .86% 1.01% 1.18%
------------------------------------------
</TABLE>
6)Annualized.
7)Because the Fund invests only in the Portfolio and the Portfolio (rather than
the Fund) engages in securities transactions, the Fund does not calculate a
portfolio turnover rate or pay any brokerage commissions. The portfolio
turnover rates for the Portfolio for the period from March 14, 1994 to August
31, 1994 and the years ended August 31, 1995, 1996, and 1997 were 14%, 58%,
53%, and 51%, respectively. The average commission rates paid by the Portfolio
for the years ended August 31, 1996 and 1997 were $0.0587 and $0.0568,
respectively.
8
<PAGE> 9
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those
of the Portfolio. The Fund invests only in the Portfolio. Therefore, the
following shows you the kinds of securities in which the Portfolio invests. For
an explanation of some types of investments, see "Description of Investments" on
page 22.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
The investment objective of the Fund and Portfolio is to seek long-term
capital appreciation by investing primarily in securities of companies that meet
both financial criteria and the Social Policy. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
In seeking capital appreciation, the Portfolio generally follows a
value-oriented investment approach to the selection of individual securities.
Prospective investments are first subjected to detailed financial analysis and
are not studied further unless N&B Management believes that they are currently
undervalued relative to the issuer's assets and potential earning power.
The Portfolio expects to be nearly fully invested at all times, primarily in
common stock. It may also invest in convertible securities and preferred stock
and in foreign securities and American Depositary Receipts ("ADRs") of foreign
companies that meet the Social Policy. On occasion, deposits with community
banks and credit unions may be considered for investment. However, any part of
the Portfolio's assets may be retained temporarily in investment grade fixed
income securities of non-governmental issuers, U.S. Government and Agency
Securities, repurchase agreements, money market instruments, commercial paper,
and cash and cash equivalents when N&B Management believes that significant
adverse market, economic, political, or other circumstances require prompt
action to avoid losses. In addition, the feeder funds that invest in the
Portfolio deal with large institutional investors, and the Portfolio may hold
such instruments pending investment or payout when the Portfolio has received a
large influx of cash due to sales of Fund shares, or shares of another fund that
invests in the Portfolio, or when it anticipates a substantial redemption.
Generally, the foregoing temporary investments are selected with a concern for
the social impact of each investment. Under normal conditions, at least 65% of
the Portfolio's total assets are invested in accordance with the Social Policy,
and at least 65% of its total assets are invested in equity securities. The
Portfolio expects that substantially all of its equity securities will be
selected in accordance with the Social Policy.
The Portfolio may also engage in portfolio management techniques that are
not subject to the Social Policy, such as lending securities and purchasing and
selling put
9
<PAGE> 10
and call options on securities and currencies, futures contracts, options on
futures contracts, and forward contracts.
- -------------------
Social Policy
- --------------------------------------------------------------------------------
Companies deemed acceptable from a financial standpoint are evaluated by N&B
Management using a database that Neuberger&Berman has designed to develop and
monitor information on companies in various categories of social criteria. N&B
Management seeks to invest in issuers that show leadership in the following
major areas of social impact: environment, and workplace diversity and
employment. N&B Management also evaluates investments based on companies'
records in other areas of concern: public health, type of products, and
corporate citizenship.
The Portfolio's social orientation is predicated in part on the belief that
good corporate citizenship is good business; that is, good policies with respect
to such social criteria as employment and environmental practices may often have
a positive impact on the company's "bottom line." N&B Management recognizes,
however, that many social criteria represent goals rather than achievements and
that goals are often difficult to quantify. In each area, N&B Management seeks
to elicit and understand management's vision of the company's social role and,
in making investment decisions, gives weight to enlightened, progressive
policies. The information used by N&B Management in evaluating prospective
investments for conformity with the Social Policy is obtained primarily from
services that specialize in reporting information from issuers or from agencies
that oversee issuers' activities or compliance with laws and regulations.
Additionally, the information may come from public interest groups and from N&B
Management's discussions with company representatives. N&B Management attempts
to assess the objectivity of all information that it receives. However,
decisions made by N&B Management inevitably involve some level of subjective
judgment.
The Portfolio seeks to invest in companies that show leadership in
addressing environmental problems effectively and in promoting progressive
workplace policies, especially as they affect women and minorities. N&B
Management seeks to identify companies committed to improving their
environmental performance by examining their policies and programs in such areas
as energy conservation, pollution reduction and control, waste management,
recycling, and careful stewardship of natural resources. In a similar manner,
N&B Management seeks to identify companies whose policies and practices
recognize the importance of human resources to corporate productivity and the
centrality of the work experience to the quality of life of all employees. The
Portfolio seeks to invest in companies that demonstrate leadership in such areas
as providing and promoting equal opportunity, investing in the training and
re-training of workers, promoting a safe working environment, providing
family-oriented flexible benefits, and involving workers in job and workflow
engineering.
10
<PAGE> 11
In making investment decisions, N&B Management takes into account a
company's record as a member of the various communities of which it is a part
and its commitment to product quality and value. Currently, the Social Policy
screens out any company that derives more than 5% of its total annual revenue
from (i) manufacturing and selling alcohol and/or tobacco, (ii) sales in or
services related to gambling, or (iii) the manufacturing of weapons systems.
Additionally, the Portfolio does not invest in any company that derives its
total annual revenue primarily from non-consumer sales to the military or that
owns or operates one or more nuclear power facilities or is a major supplier of
nuclear power services.
Not every issuer selected by N&B Management will demonstrate leadership in
each category of the Social Policy. The social records of most companies are
written in shades of gray. For example, a company may have a progressive record
in employee relations and community affairs but a poor one on product marketing
issues. Another company may have a mixed record within a single area. Finally,
it is often difficult to distinguish between a substantive commitment and public
relations. This principle works both ways: there are many companies with
excellent records on social issues that maintain a low profile for one reason or
another. Taking these factors into consideration, N&B Management emphasizes the
overall approach that companies take toward the areas of social impact and pays
particular attention to progress achieved toward the goals of the Social Policy.
If securities held by the Portfolio no longer satisfy the Social Policy, the
Portfolio will seek to dispose of the securities as soon as reasonably
practicable, which may cause the Portfolio to sell the securities at a time not
desirable from a purely financial standpoint.
Short-Term Trading; Portfolio Turnover
- --------------------------------------------------------------------------------
Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. See "Notes to
Financial Highlights" for more information about the portfolio turnover rate of
the Portfolio.
- -----------------
Borrowings
- --------------------------------------------------------------------------------
The Portfolio has a fundamental policy that it may not borrow money, except
that it may (1) borrow money from banks for temporary or emergency purposes and
not for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
The Portfolio does not expect to borrow money or to enter into reverse
repurchase agreements. As a non-fundamental policy, the Portfolio may not
purchase portfolio securities if its outstanding borrowings, including reverse
repurchase agreements, exceed 5% of its total assets.
11
<PAGE> 12
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This evens out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
The Fund's average annual total returns for the one-year period ended August
31, 1997 and for the period from its inception through August 31, 1997 were
+33.20% and +21.44%, respectively. Had N&B Management not reimbursed certain
expenses, total return would have been lower. Further information regarding the
Fund's performance is presented in its annual report to shareholders, which is
available without charge by calling the Plan at (212) 306-7760.
- ----------------------------------
Total Return Information
- --------------------------------------------------------------------------------
You can obtain current performance information about the Fund by calling the
Plan at (212) 306-7760.
12
<PAGE> 13
HOW TO BUY AND SELL SHARES
YOU CAN BUY AND SELL (REDEEM) SHARES OF THE FUND ONLY AS SET FORTH IN THE
PLAN. Shares are purchased and sold at the next price calculated on a day the
New York Stock Exchange ("NYSE") is open, after a purchase or sales order is
received and accepted by the trustee of the Plan as set forth in the Plan. A
participant should consult the Plan to determine the time by which it must
receive an order so that Fund shares can be purchased or sold at that day's
price. Prices for shares of the Fund are calculated as of the close of regular
trading on the NYSE, usually 4 p.m. Eastern time. The Plan may be closed on days
when the NYSE is open. As a result, prices for Fund shares may be significantly
affected on days when a participant has no access to the Plan to buy or sell
shares.
- --------------------------
Other Information
- --------------------------------------------------------------------------------
----- The Plan must pay for shares it purchases on its participants' behalf
in U.S. dollars.
----- The Fund has the right to suspend the offering of its shares for a
period of time. The Fund also has the right to accept or reject a
purchase order in its sole discretion.
----- Redemption proceeds will be paid to the Plan in the manner and at the
times agreed with N&B Management, but in any case within three
business days (under unusual circumstances the Fund may take longer,
as permitted by law). The Plan may not follow the same procedures for
payment of redemption proceeds to its participants.
----- The Fund may suspend redemptions or postpone payments on days when the
NYSE is closed, when trading on the NYSE is restricted, or as
permitted by the SEC.
13
<PAGE> 14
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated
by subtracting liabilities from total assets (in the case of the Portfolio, the
market value of the securities the Portfolio holds plus cash and other assets;
in the case of the Fund, its percentage interest in the Portfolio, multiplied by
the Portfolio's NAV, plus any other assets). The Fund's per share NAV is
calculated by dividing its NAV by the number of Fund shares outstanding and
rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values securities (including options) listed on the NYSE, the
American Stock Exchange, or other national securities exchanges or quoted on
Nasdaq, and other securities for which market quotations are readily available,
at the last sale price on the day the securities are being valued. If there is
no reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices on that day. The Portfolio values
all other securities and assets, including restricted securities, by a method
that the trustees of Managers Trust believe accurately reflects fair value.
If N&B Management believes that the price of a security obtained under the
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
14
<PAGE> 15
DIVIDENDS, OTHER DISTRIBUTIONS
AND TAXES
The Fund distributes, normally in December, substantially all of its share
of any net investment income (net of the Fund's expenses), any net capital gains
from investment transactions, and any net gains from foreign currency
transactions earned or realized by the Portfolio.
- -----------------------------
Distribution Options
- --------------------------------------------------------------------------------
REINVESTMENT IN SHARES. All dividends and other distributions paid on
shares of the Fund are automatically reinvested in additional shares of the
Fund, unless the Plan elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. The Plan may elect to receive dividends in cash,
with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
- ----------
Taxes
- --------------------------------------------------------------------------------
The Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended ("Code"),
so that it will not have to pay federal income tax on that part of its taxable
income and realized gains that it distributes to the Plan.
Fund shares currently are offered only to the trustee of the Plan acting on
behalf of the participants in the Plan. Because the Plan is an eligible deferred
compensation plan under section 457 of the Code, taxes on distributions from the
Fund to the Plan are deferred. Individual participants in the Plan should
consult the Plan documents and their own tax advisers for information on the tax
consequences associated with participating in an investment in the Fund through
the Plan. See the SAI for additional tax information.
15
<PAGE> 16
MANAGEMENT AND ADMINISTRATION
- -------------------------------
Trustees and Officers
- --------------------------------------------------------------------------------
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of the Fund and the Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The trustees and officers of the Trust and of Managers Trust who are officers
and/or directors of N&B Management and/or principals of Neuberger&Berman serve
without compensation from the Fund or the Portfolio.
- --------------------------------------------------
Investment Manager, Administrator,
Distributor, and Sub-Adviser
- --------------------------------------------------------------------------------
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolio and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $21.2 billion as of
September 30, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio. N&B Management
compensates Neuberger&Berman for its costs in connection with those services.
Neuberger&Berman has advised clients in selecting socially responsive
investments since 1990. Neuberger&Berman is a member firm of the NYSE and other
principal exchanges and acts as the Portfolio's principal broker in the purchase
and sale of its securities. Neuberger&Berman and its affiliates, including N&B
Management, manage securities accounts that had approximately $54.1 billion of
assets as of September 30, 1997. All of the voting stock of N&B Management is
owned by individuals who are principals of Neuberger&Berman.
Janet Prindle is manager of the Portfolio and Robert Ladd and Ingrid
Saukaitis are associate managers of the Portfolio. Ms. Prindle, a Vice President
of N&B Management since November 1993, has been a principal of Neuberger& Berman
since 1983. Ms. Prindle has been responsible for the Portfolio since its
inception in March 1994. Ms. Prindle is Director of Socially Responsive
Investment Services at Neuberger&Berman and has been researching and developing
corporate responsibility criteria as they apply to investments since 1989. She
has been managing money using these criteria since 1990. Mr. Ladd and Ms.
Saukaitis have had
16
<PAGE> 17
responsibility for the Portfolio since December 1997. During the five years
prior thereto, Mr. Ladd was a portfolio manager for Neuberger&Berman. Ms.
Saukaitis has been Director of Social Research for Neuberger&Berman since
February 1997. From 1995 to January 1997, she was a project director for a
non-profit group that provided social research on companies to the investment
industry. Both Mr. Ladd and Ms. Saukaitis are Assistant Vice Presidents of N&B
Management.
Neuberger&Berman acts as the principal broker for the Portfolio in the
purchase and sale of portfolio securities and in the sale of covered call
options, and for those services receives brokerage commissions. In effecting
securities transactions, the Portfolio seeks to obtain the best price and
execution of orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and employees
of N&B Management, together with their families, have invested over $100 million
of their own money in Neuberger&Berman Funds(R).
To mitigate the possibility that the Portfolio will be adversely affected by
employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in the
personal accounts of the portfolio managers and others who normally come into
possession of information on portfolio transactions.
- ---------------
Expenses
- --------------------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio that
include, among other things, making and implementing investment decisions and
providing facilities and personnel necessary to operate the Portfolio. For
investment management services, the Portfolio pays N&B Management a fee at the
annual rate of 0.55% of the first $250 million of the Portfolio's average daily
net assets, 0.525% of the next $250 million, 0.50% of the next $250 million,
0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of
average daily net assets in excess of $1.5 billion.
N&B Management provides administrative services to the Fund that include
furnishing facilities and personnel for the Fund. For such administrative
services, the Fund pays N&B Management a fee at the annual rate of 0.05% of the
Fund's average daily net assets. With the Fund's consent, N&B Management may
subcontract to third parties some of its responsibilities to the Fund under the
administration agreement.
The Fund bears all expenses of its operations other than those borne by N&B
Management as administrator of the Fund and as distributor of its shares. The
Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page 5.
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See "Expense Information -- Annual Fund Operating Expenses" for information
about how these fees and expenses may affect the value of your investment.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Total Operating Expenses which exceed, in the aggregate, 0.60% per annum of the
Fund's average daily net assets. N&B Management may terminate this undertaking
to the Fund by giving at least 60 days' prior written notice to the Fund. The
effect of reimbursement by N&B Management is to reduce the Fund's expenses and
thereby increase its total return.
During its 1997 fiscal year, the Fund accrued administration fees and a pro
rata portion of the Portfolio's management fees (prior to the expense
reimbursement) as a percentage of the Fund's average daily net assets, of 0.60%.
During its 1997 fiscal year, the Fund bore aggregate expenses as a
percentage of its average daily net assets, after taking into consideration N&B
Management's expense reimbursement, of 0.60%.
- ---------------------
Transfer Agent
- --------------------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to the Plan and the payment of dividends and other
distributions to the Plan. Questions should be directed to the Plan's address.
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INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS
- --------------
The Fund
- --------------------------------------------------------------------------------
The Fund is a separate operating series of the Trust, a Delaware business
trust organized pursuant to a Trust Instrument dated as of May 6, 1993. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as
a diversified, open-end management investment company, commonly known as a
mutual fund. The Trust has seven separate series. The Fund invests all of its
net investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of the Trust or Fund property of any
shareholder nevertheless held personally liable for Trust or Fund obligations,
respectively.
OTHER. Because Fund shares can be bought, owned and sold only through the
Plan, a participant in the Plan may be unable to purchase additional shares
and/or may be required to redeem shares (and possibly incur a tax liability) if
the participant no longer has a relationship with the Plan or if the Plan no
longer has a contract with N&B Management.
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- -------------------
The Portfolio
- --------------------------------------------------------------------------------
The Portfolio is a separate operating series of Managers Trust, a New York
common law trust organized as of December 1, 1992. Managers Trust is registered
under the 1940 Act as a diversified, open-end management investment company.
Managers Trust has six separate portfolios. The assets of the Portfolio belong
only to the Portfolio, and the liabilities of the Portfolio are borne solely by
the Portfolio and no other.
FUND'S INVESTMENT IN THE PORTFOLIO. The Fund is a "feeder fund" that seeks
to achieve its investment objective by investing all of its net investable
assets in the Portfolio, which is a "master fund." The Portfolio, which has the
same investment objective, policies, and limitations as the Fund, in turn
invests in securities; the Fund thus acquires an indirect interest in those
securities.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. Members of the general public may not purchase a direct
interest in the Portfolio. Neuberger&Berman Socially Responsive Fund, a mutual
fund that is a series of Neuberger&Berman Equity Funds(R) ("N&B Equity Funds"),
invests all of its net investable assets in the Portfolio. Neuberger&Berman
Socially Responsive Trust, a mutual fund that is a series of Neuberger&Berman
Equity Assets ("N&B Equity Assets"), invests all of its net investable assets in
the Portfolio. The shares of Neuberger&Berman Socially Responsive Fund (but not
of Neuberger&Berman Socially Responsive Trust) are available for purchase by
members of the general public. The Fund does not sell its shares directly to
members of the general public.
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in the
Portfolio (including the series of N&B Equity Funds and N&B Equity Assets) are
not required to sell their shares at the same public offering price as the Fund,
could have a different administration fee and expenses than the Fund, and
(except the series of N&B Equity Funds and N&B Equity Assets) might charge a
sales commission. Therefore, Fund shareholders may have different returns than
shareholders in another investment company that invests exclusively in the
Portfolio. Information regarding any fund that invests in the Portfolio is
available from N&B Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by the
series of N&B Equity Funds or N&B Equity Assets or by other potential investors
in addition to the Fund may enable the Portfolio to realize economies of scale
that could reduce its operating expenses, thereby producing higher returns and
benefitting all shareholders. However, the Fund's investment in the Portfolio
may be affected by the actions of other large investors in the Portfolio, if
any. For example, if a large
20
<PAGE> 21
investor in the Portfolio (other than the Fund) redeemed its interest in the
Portfolio, the Portfolio's remaining investors (including the Fund) might, as a
result, experience higher pro rata operating expenses, thereby producing lower
returns.
The Fund may withdraw its entire investment from the Portfolio at any time,
if the trustees of the Trust determine that it is in the best interests of the
Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective, policies
or limitations of the Portfolio in a manner not acceptable to the trustees of
the Trust. A withdrawal could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by the Portfolio to the Fund.
That distribution could result in a less diversified portfolio of investments
for the Fund and could affect adversely the liquidity of the Fund's investment
portfolio. If the Fund decided to convert those securities to cash, it usually
would incur brokerage fees or other transaction costs. If the Fund withdrew its
investment from the Portfolio, the trustees of the Trust would consider what
actions might be taken, including the investment of all of the Fund's net
investable assets in another pooled investment entity having substantially the
same investment objective as the Fund or the retention by the Fund of its own
investment manager to manage its assets in accordance with its investment
objective, policies, and limitations. The inability of the Fund to find a
suitable replacement could have a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in the Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, the Fund will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in the Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all Portfolio investors; indeed, if other investors
hold a majority interest in the Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund,
will be liable for all obligations of the Portfolio. However, the risk of an
investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
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DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in "Investment
Program" herein, the Portfolio may make the following investments, among others,
individually or in combination, although it may not necessarily buy all of the
types of securities or use all of the investment techniques that are described.
For additional information on the following investments and on other types of
investments which the Portfolio may make, see the SAI.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. The Portfolio may invest up
to 15% of its net assets in illiquid securities, which are securities that
cannot be expected to be sold within seven days at approximately the price at
which they are valued. These may include unregistered or other restricted
securities and repurchase agreements maturing in greater than seven days.
Illiquid securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for the Portfolio to value or dispose of due to the absence of
an active trading market. The sale of some illiquid securities by the Portfolio
may be subject to legal restrictions which could be costly to the Portfolio.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and
doing business principally outside the United States, including non-U.S.
governments, their agencies, and instrumentalities. The Portfolio may invest up
to 10% of the value of its total assets in foreign securities. The 10%
limitation does not apply to foreign securities that are denominated in U.S.
dollars, including ADRs. Foreign securities (including those denominated in U.S.
dollars, such as ADRs) are affected by political and economic developments in
foreign countries. Foreign companies may not be subject to accounting standards
or governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. In addition, foreign markets may be
less liquid and more volatile than U.S. markets and may offer less protection to
investors. Investments in foreign securities that are not denominated in U.S.
dollars (including those made through ADRs) may be subject to special risks,
such as governmental regulation of foreign exchange transactions and changes in
rates of exchange with the U.S. dollar, irrespective of the performance of the
underlying investment.
COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of
securities price changes (hedge) or generate income by writing (selling) covered
call options against portfolio securities and may purchase call options in
related closing transac-
22
<PAGE> 23
tions. When the Portfolio writes a covered call option against a security, the
Portfolio is obligated to sell that security to the purchaser of the option at a
fixed price at any time during a specified period if the purchaser decides to
exercise the option. The maximum price the Portfolio may realize on the security
during the option period is the fixed price; the Portfolio continues to bear the
risk of a decline in the security's price, although this risk is reduced, at
least in part, by the premium received for writing the option.
The primary risks in using call options are (1) possible lack of a liquid
secondary market for options and the resulting inability to close out options
when desired; (2) the fact that use of options is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of the
Portfolio's securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain by offsetting favorable price movements in hedged
investments; and (4) the possible inability of the Portfolio to purchase or sell
a security at a time that would otherwise be favorable for it to do so, or the
possible need for the Portfolio to sell a security at a disadvantageous time,
due to its need to maintain "cover" in connection with its use of these
instruments.
FIXED INCOME SECURITIES. "Investment grade" debt securities are those
receiving one of the four highest ratings from Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's, or another nationally recognized statistical
rating organization ("NRSRO") or, if unrated by any NRSRO, deemed by N&B
Management to be of comparable quality to such rated securities ("Comparable
Unrated Securities"). Securities rated by Moody's in its fourth highest category
(Baa) or Comparable Unrated Securities may be deemed to have speculative
characteristics. The value of the fixed income securities in which the Portfolio
may invest is likely to decline in times of rising market interest rates.
Conversely, when rates fall, the value of the Portfolio's fixed income
investments is likely to rise.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net
assets in convertible securities. A convertible security is a bond, debenture,
note, preferred stock, or other security that may be converted into or exchanged
for a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
securities generally have features of both common stocks and debt securities.
The Portfolio does not intend to purchase any convertible securities that are
not investment grade.
U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may purchase U.S.
Government and Agency Securities. U.S. Government Securities are obligations of
the U.S. Treasury backed by the full faith and credit of the United States. U.S.
Government Agency Securities are issued or guaranteed by U.S. Government
agencies or by instrumentalities of the U.S. Government, such as the Government
23
<PAGE> 24
National Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may be supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank or a securities
dealer and simultaneously agrees to sell it back at a higher price, at a
specified date, usually less than a week later. The underlying securities must
fall within the Portfolio's investment policies and limitations. The Portfolio
also may lend portfolio securities to banks, brokerage firms, or institutional
investors to earn income. Costs, delays, or losses could result if the selling
party to a repurchase agreement or the borrower of portfolio securities becomes
bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
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<PAGE> 25
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
PLAN
Deferred Compensation Plan of the
City of New York and Related Agencies
and Instrumentalities
40 Rector Street, 3rd Floor
New York, NY 10006
(212) 306-7760
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Correspondence should be sent to:
Deferred Compensation Plan of the
City of New York and Related Agencies
and Instrumentalities
40 Rector Street, 3rd Floor
New York, NY 10006
(212) 306-7760
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Neuberger&Berman NYCDC Socially Responsive Trust is a service mark of
Neuberger&Berman Management Inc.
(C) 1997 Neuberger&Berman Management Incorporated.
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<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN NYCDC SOCIALLY RESPONSIVE TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 15, 1997
A NO-LOAD MUTUAL FUND
605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NY 10158-0180
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN NYCDC SOCIALLY RESPONSIVE TRUST ("FUND"), A
SERIES OF NEUBERGER & BERMAN EQUITY TRUST ("TRUST"), IS A NO-LOAD MUTUAL FUND
THAT OFFERS SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER 15, 1997. THE FUND
INVESTS ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER & BERMAN SOCIALLY
RESPONSIVE PORTFOLIO ("PORTFOLIO"). YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY
THROUGH THE DEFERRED COMPENSATION PLAN OF THE CITY OF NEW YORK AND RELATED
AGENCIES AND INSTRUMENTALITIES ("PLAN").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from the Plan by calling 212-306-7760.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
----
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................4
Description of Social Policy...........................................7
Additional Investment Information.....................................11
PERFORMANCE INFORMATION.....................................................26
Total Return Computations.............................................26
Comparative Information...............................................27
Other Performance Information.........................................28
CERTAIN RISK CONSIDERATIONS.................................................28
TRUSTEES AND OFFICERS.......................................................29
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................35
Investment Manager and Administrator..................................35
Sub-Adviser...........................................................37
Investment Companies Managed..........................................38
Management and Control of N&B Management..............................40
DISTRIBUTION ARRANGEMENTS...................................................41
ADDITIONAL REDEMPTION INFORMATION...........................................42
Suspension of Redemptions.............................................42
Redemptions in Kind...................................................42
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................43
ADDITIONAL TAX INFORMATION..................................................43
Taxation of the Fund..................................................43
Taxation of the Portfolio.............................................44
PORTFOLIO TRANSACTIONS......................................................48
Portfolio Turnover....................................................52
i
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REPORTS TO SHAREHOLDERS.....................................................52
CUSTODIAN AND TRANSFER AGENT................................................53
INDEPENDENT ACCOUNTANTS.....................................................53
LEGAL COUNSEL...............................................................53
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................53
REGISTRATION STATEMENT......................................................53
FINANCIAL STATEMENTS........................................................54
Appendix A..................................................................55
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.......................55
ii
<PAGE>
INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company. The Fund seeks its
investment objective by investing all of its net investable assets in the
Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an
investment objective identical to that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. (The Trust and Managers Trust, which
is an open-end management investment company managed by Neuberger & Berman
Management Incorporated ("N&B Management") are together referred to below as the
"Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of (1) 67% of the total units
of beneficial interest ("shares") of the Fund or Portfolio represented at a
meeting at which more than 50% of the outstanding Fund or Portfolio shares are
represented or (2) a majority of the outstanding shares of the Fund or
Portfolio. These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
The Fund has the following fundamental investment policy, to enable
it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets in an open-end management investment
company having substantially the same investment objective, policies, and
limitations as the Fund.
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<PAGE>
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations are
as follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities
or contracts thereon, unless acquired as a result of the ownership of securities
or instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of
the value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
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<PAGE>
business activities in the same industry. This limitation does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolio does not
consider foreign currencies or forward contracts to be physical commodities.
The Portfolio's non-fundamental investment policies and limitations
are as follows:
1. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
2. LENDING. Except for the purchase of debt securities and engaging
in repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
3
<PAGE>
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of
the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any security
if, as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
In addition, although the Portfolio does not have a policy limiting its
investment in warrants, the Portfolio does not currently intend to invest in
warrants unless acquired in units or attached to securities.
INVESTMENT INSIGHT
Securities for the Portfolio are selected through a two-phase
process. The first is financial. The portfolio manager analyzes a universe of
companies according to N&B Management's value-oriented philosophy and looks for
stocks which are undervalued for any number of reasons. The manager focuses on
financial fundamentals, including balance sheet ratios and cash flow analysis,
and meets with company management in an effort to understand how those
unrecognized values might be realized in the market.
The second part of the process is social screening. N&B Management's
social research is based on the same kind of philosophy that governs its
financial approach: N&B Management believes that first-hand knowledge and
experience are its most important tools. Utilizing a database, the portfolio
manager does careful, in-depth tracking and analyzes a large number of companies
on some eighty issues in six broad social categories. The manager uses a wide
variety of sources to determine company practices and policies in these areas.
Performance is analyzed in light of knowledge of the issues and of the best
practices in each industry.
The portfolio manager understands that, for many issues and in many
industries, absolute standards are elusive and often counterproductive. Thus, in
4
<PAGE>
addition to quantitative measurements, the manager places value on such
indicators as management commitment, progress, direction, and industry
leadership.
AN INTERVIEW WITH THE PORTFOLIO MANAGER
Q: First things first. How do you begin your stock selection
process?
A: Our first question is always: On financial grounds alone,
is a company a smart investment? For a company's stock to meet our financial
test, it must pass a number of hurdles.
We look for bargains, just like the portfolio managers of the other
portfolios managed by N&B Management. More specifically, we search for companies
that we believe have terrific products, excellent customer service, and solid
balance sheets -- but because they may have missed quarterly earnings
expectations by a few pennies, because their sectors are currently out of favor,
because Wall Street overreacted to a temporary setback, or because the company's
merits aren't widely known, their stocks are selling at a discount.
While we look at the stock's fundamentals carefully, that's not all
we examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger & Berman each year, and we're also frequently on the
road visiting dozens of corporations. From the Fund's inception, we've met with
representatives of every company we own.
When we're face to face with a CEO, we're searching for answers to
two crucial questions: "Does the company have a vision of where it wants to go?"
and "Can the management team make it happen?" We've analyzed companies for over
three decades, and we always look for companies that have both clear strategies
and management talent.
Q: When you evaluate a company's balance sheet, what matters
the most to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending. Or
increase its dividend payments.
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When a company generates lots of excess cash flow, it has growth
capital at its disposal. It can invest for higher profits down the line and
improve shareholder value. Determining exactly HOW a company intends to spend
its excess cash is an entirely different matter -- and that's where the
information learned in our company meetings comes in. Still, you've got to have
the extra cash in the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and
its management. After a company passes your financial test, what do you do
next?
A: After we're convinced of a company's merits on financial
grounds alone, we review its record as a corporate citizen. In particular,
we look for evidence of leadership in three key areas: concern for the
environment, workplace diversity, and enlightened employment practices.
It should be clear that our social screening always takes place
after we search far and wide for what we believe are the best investment
opportunities available. This is a crucial point, and an analogy can be used to
explain it. Let's assume you're looking to fill a vital position in your
company. What you'd pay attention to first is the candidate's competence: Can he
or she do the job? So after interviewing a number of candidates, you'd narrow
your list to those that are highly qualified. To choose from this smaller group,
you might look at the candidate's personality: Can he or she get along with
everyone in your group?
Obviously, you wouldn't hire an unqualified person simply because he
or she is likable. What you'd probably do is give the job to a highly qualified
person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts.
How do we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of
looking for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
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reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
Q: Why have investors been attracted to the Fund?
A: Our shareholders are looking to invest for the future in more
ways than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
DESCRIPTION OF SOCIAL POLICY
BACKGROUND INFORMATION ON SOCIALLY RESPONSIVE INVESTING
In an era when many people are concerned about the relationship
between business and society, socially responsive investing ("SRI") is a
mechanism for assuring that investors' social values are reflected in their
investment decisions. As such, SRI is a direct descendent of the successful
effort begun in the early 1970's to encourage companies to divest their South
African operations and subscribe to the Sullivan Principles. Today, a growing
number of individuals and institutions are applying similar strategies to a
broad range of problems.
Although there are many strategies available to the socially
responsive investor, including proxy activism, below-market loans to community
projects, and venture capital, the SRI strategies used by the Portfolio
generally fall into two categories:
AVOIDANCE INVESTING. Most socially responsive investors seek to
avoid holding securities of companies whose products or policies are seen as
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being at odds with the social good. The most common exclusions historically have
involved tobacco companies and weapons manufacturers.
LEADERSHIP INVESTING. A growing number of investors actively look
for companies with progressive programs that are exemplary or companies which
make it their business to try to solve some of the problems of today's society.
The marriage of social and financial objectives would not have
surprised Adam Smith, who was, first and foremost, a moral philosopher. THE
WEALTH OF NATIONS is firmly rooted in the Enlightenment conviction that the
purpose of capital is the social good and the related belief that idle capital
is both wasteful and unethical. But, what very likely would have surprised Smith
is the sheer complexity of the social issues we face today and the diversity of
our attitudes toward the social good. War and peace, race and gender, the
distribution of wealth, and the conservation of natural resources -- the social
agenda is long and compelling. It is also something about which reasonable
people differ. What should society's priorities be? What can and should be done
about them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's world, a
growing number of investors feel that a corporation's role cannot be ignored.
This is true of some of the most important issues of the day such as equal
opportunity and the environment.
THE SOCIALLY RESPONSIVE DATABASE
Neuberger & Berman, LLC ("Neuberger & Berman"), the Portfolio's
sub-adviser, maintains a database of information about the social impact of the
companies it follows. N&B Management uses the database to evaluate social issues
after it deems a stock acceptable from a financial standpoint for acquisition by
the Portfolio. The aim of the database is to be as comprehensive as possible,
given that much of the information concerning corporate responsibility comes
from subjective sources. Information for the database is gathered by Neuberger &
Berman in many categories and then analyzed by N&B Management in the following
six categories of corporate responsibility:
WORKPLACE DIVERSITY AND EMPLOYMENT. N&B Management looks for
companies that show leadership in areas such as employee training and promotion
policies and benefits, such as flextime, generous profit sharing, and parental
leave. N&B Management looks for active programs to promote women and minorities
and takes into account their representation among the officers of an issuer and
members of its board of directors. As a basis for exclusion, N&B Management
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looks for Equal Employment Opportunity Act infractions and Occupational Safety
and Health Act violations; examines each case in terms of severity, frequency,
and time elapsed since the incident; and considers actions taken by the company
since the violation. N&B Management also monitors companies' progress and
attitudes toward these issues.
ENVIRONMENT. A company's impact on the environment depends largely
on the industry. Therefore, N&B Management examines a company's environmental
record vis-a-vis those of its peers in the industry. All companies operating in
an industry with inherently high environmental risks are likely to have had
problems in such areas as toxic chemical emissions, federal and state fines, and
Superfund sites. For these companies, N&B Management examines their problems in
terms of severity, frequency, and elapsed time. N&B Management then balances the
record against whatever leadership the company may have demonstrated in terms of
environmental policies, procedures, and practices. N&B Management defines an
environmental leadership company as one that puts into place strong affirmative
programs to minimize emissions, promote safety, reduce waste at the source,
insure energy conservation, protect natural resources, and incorporate recycling
into its processes and products. N&B Management looks for the commitment and
active involvement of senior management in all these areas. Several major
manufacturers which still produce substantial amounts of pollution are among the
leaders in developing outstanding waste source reduction and remediation
programs.
PRODUCT. N&B Management considers company announcements, press
reports, and public interest publications relating to the health, safety,
quality, labeling, advertising, and promotion of both consumer and industrial
products. N&B Management takes note of companies with a strong commitment to
quality and with marketing practices which are ethical and consumer-friendly.
N&B Management pays particular attention to companies whose products and
services promote progressive solutions to social problems.
PUBLIC HEALTH. N&B Management measures the participation of
companies in such industries and markets as alcohol, tobacco, gambling and
nuclear power. N&B Management also considers the impact of products and
marketing activities related to those products on nutritional and other health
concerns, both domestically and in foreign markets.
WEAPONS. N&B Management keeps track of domestic military sales and,
whenever possible, foreign military sales and categorizes them as nuclear
weapons related, other weapons related, and non-weapon military supplies, such
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as micro-chip manufacturers and companies that make uniforms for military
personnel.
CORPORATE CITIZENSHIP. N&B Management gathers information about a
company's participation in community affairs, its policies with respect to
charitable contributions, and its support of education and the arts. N&B
Management looks for companies with a focus, dealing with issues not just by
making financial contributions, but also by asking the questions: What can we do
to help? What do we have to offer? Volunteerism, high-school mentoring programs,
scholarships and grants, and in-kind donations to specific groups are just a few
ways that companies have responded to these questions.
IMPLEMENTATION OF SOCIAL POLICY
Companies deemed acceptable by N&B Management from a financial
standpoint are analyzed using Neuberger & Berman's database. The companies are
then evaluated by the portfolio manager to determine if the companies' policies,
practices, products, and services withstand scrutiny in the following major
areas of concern: the environment and workplace diversity and employment.
Companies are then further evaluated to determine their track record in issues
and areas of concern such as public health, weapons, product, and corporate
citizenship.
The issues and areas of concern that are tracked lend themselves to
objective analysis in varying degrees. Few, however, can be resolved entirely on
the basis of scientifically demonstrable facts. Moreover, a substantial amount
of important information comes from sources that do not purport to be
disinterested. Thus, the quality and usefulness of the information in the
database depend on Neuberger & Berman's ability to tap a wide variety of sources
and on the experience and judgment of the people at N&B Management who interpret
the information.
In applying the information in the database to stock selection for
the Portfolio, N&B Management considers several factors. N&B Management examines
the severity and frequency of various infractions, as well as the time elapsed
since their occurrence. N&B Management also takes into account any remedial
action which has been taken by the company relating to these infractions. N&B
Management notes any quality innovations made by the company in its effort to
create positive change and looks at the company's overall approach to social
issues.
* * * * *
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The Portfolio invests in a wide array of stocks, and no single stock makes
up more than a small fraction of the Portfolio's total assets. Of course, the
Portfolio's holdings are subject to change.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio may make the following investments, among others. It
may not buy all of the types of securities or use all of the investment
techniques that are described.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or from a securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase agreements
generally are for a short period of time, usually less than a week. Repurchase
agreements with a maturity of more than seven days are considered to be illiquid
securities. The Portfolio may not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 15% of the value of
its net assets would then be invested in such repurchase agreements and other
illiquid securities. The Portfolio may enter into a repurchase agreement only if
(1) the underlying securities are of a type that the Portfolio's investment
policies and limitations would allow it to purchase directly, (2) the market
value of the underlying securities, including accrued interest, at all times
equals or exceeds the repurchase price, and (3) payment for the underlying
securities is made only upon satisfactory evidence that the securities are being
held for the Portfolio's account by its custodian or a bank acting as the
Portfolio's agent.
SECURITIES LOANS. In order to realize income, the Portfolio may lend
portfolio securities with a value not exceeding 33-1/3% of its total assets to
banks, brokerage firms, or other institutional investors judged creditworthy by
N&B Management. Borrowers are required continuously to secure their obligations
to return securities on loan from the Portfolio by depositing collateral in a
form determined to be satisfactory by the Portfolio Trustees. The collateral,
which must be marked to market daily, must be equal to at least 100% of the
market value of the loaned securities, which will also be marked to market
daily. N&B Management believes the risk of loss on these transactions is slight
because, if a borrower were to default for any reason, the collateral should
satisfy the obligation. However, as with other extensions of secured credit,
loans of portfolio securities involve some risk of loss of rights in the
collateral should the borrower fail financially.
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RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradable in their
principal market are not considered to be restricted. Regulation S under the
1933 Act permits the sale abroad of securities that are not registered for sale
in the United States.
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. To the extent
restricted securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 15% limit on investments in illiquid
securities. Restricted securities for which no market exists are priced by a
method that the Portfolio Trustees believe accurately reflects fair value.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio sells portfolio securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of the
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, the Portfolio will deposit in a
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segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to the Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
FOREIGN SECURITIES. The Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers (including banks, governments,
and quasi-governmental organizations) and foreign branches of U.S. banks,
including negotiable certificates of deposit ("CDs"), bankers' acceptances and
commercial paper. These investments are subject to the Portfolio's quality
standards. While investments in foreign securities are intended to reduce risk
by providing further diversification, such investments involve sovereign and
other risks, in addition to the credit and market risks normally associated with
domestic securities. These additional risks include the possibility of adverse
political and economic developments (including political instability,
nationalization, expropriation, or confiscatory taxation) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
The Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities may be subject to foreign
taxes, including taxes withheld from those payments. Commissions on foreign
securities exchanges are often at fixed rates and are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolio endeavors to
achieve the most favorable net results on portfolio transactions. The Portfolio
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may invest only in securities of issuers in countries whose governments are
considered stable by N&B Management.
Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices
of foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
In order to limit the risks inherent in investing in foreign
currency denominated securities, the Portfolio may not purchase any such
security if, as a result, more than 10% of its total assets (taken at market
value) would be invested in foreign currency denominated securities. Within that
limitation, however, the Portfolio is not restricted in the amount it may invest
in securities denominated in any one foreign currency.
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FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "HEDGING INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase
and sell interest rate futures contracts, stock and bond index futures
contracts, and foreign currency futures contracts and may purchase and sell
options thereon in an attempt to hedge against changes in the prices of
securities or, in the case of foreign currency futures and options thereon, to
hedge against changes in prevailing currency exchange rates. Because the futures
markets may be more liquid than the cash markets, the use of futures contracts
permits the Portfolio to enhance portfolio liquidity and maintain a defensive
position without having to sell portfolio securities. The Portfolio does not
engage in transactions in futures or options on futures for speculation. The
Portfolio views investment in (i) interest rate and securities index futures and
options thereon as a maturity management device and/or a device to reduce risk
or preserve total return in an adverse environment for the hedged securities,
and (ii) foreign currency futures and options thereon as a means of establishing
more definitely the effective return on, or the purchase price of, securities
denominated in foreign currencies that are held or intended to be acquired by
the Portfolio.
A "sale" of a futures contract (or a "short" futures position)
entails the assumption of a contractual obligation to deliver the securities or
currency underlying the contract at a specified price at a specified future
time. A "purchase" of a futures contract (or a "long" futures position) entails
the assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded
on exchanges that have been designated as "contract markets" by the Commodity
Futures Trading Commission ("CFTC"); futures transactions must be executed
through a futures commission merchant that is a member of the relevant contract
market. The exchange's affiliated clearing organization guarantees performance
of the contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
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of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or a loss.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its
daily net asset value ("NAV"), the Portfolio marks to market the value of its
open futures positions. The Portfolio also must make margin deposits with
respect to options on futures that it has written (but not with respect to
options on futures that it has purchased). If the futures commission merchant
holding the margin deposit goes bankrupt, the Portfolio could suffer a delay in
recovering its funds and could ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts
will benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
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any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
PUT AND CALL OPTIONS. The Portfolio may write and purchase put and
call options on securities. Generally, the purpose of writing and purchasing
these options is to hedge (i.e., to reduce, at least in part, the effect of
price fluctuations of securities held by the Portfolio on the Portfolio's and
the Fund's NAVs). The Portfolio may also write covered call options to earn
premium income. Portfolio securities on which call and put options may be
written and purchased by the Portfolio are purchased solely on the basis of
investment considerations consistent with the Portfolio's investment objective.
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The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser decides to exercise the option. The
Portfolio may be obligated to purchase the underlying security at more than its
current value.
When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio would purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. The Portfolio intends to write only "covered" call
options on securities it owns. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying a call option at
less than the market price.
When the Portfolio purchases a call option, it pays a premium for
the right to purchase a security from the writer at a specified price until a
specified date. The Portfolio would purchase a call option in order to protect
against an increase in the price of securities it intends to purchase or to
offset a previously written call option.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk (in contrast to the
writing of "naked" or uncovered call options, which the Portfolio will not do)
but is capable of enhancing the Portfolio's total return. When writing a covered
call option, the Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. When writing a put option, the Portfolio, in return for the premium,
takes the risk that it must purchase the underlying security at a price that may
be higher than the current market price of the security. If a call or put option
that the Portfolio has written expires unexercised, the Portfolio will realize a
gain in the amount of the premium; however, in the case of a call option, that
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gain may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.
The exercise price of an option may be below, equal to, or above the
market value of the underlying security at the time the option is written.
Options normally have expiration dates between three and nine months from the
date written. American-style options are exercisable at any time prior to their
expiration date. The obligation under any option written by the Portfolio
terminates upon expiration of the option or, at an earlier time, when the
Portfolio offsets the option by entering into a "closing purchase transaction"
to purchase an option of the same series. If an option is purchased by the
Portfolio and is never exercised or closed out, the Portfolio will lose the
entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. N&B Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
The assets used as cover (or held in a segregated account) for OTC
options written by the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
19
<PAGE>
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection
with purchasing or writing options, including those used to close out existing
positions. From time to time, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned to
it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
20
<PAGE>
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
FORWARD FOREIGN CURRENCY CONTRACTS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolio enters into forward contracts in an attempt
to hedge against changes in prevailing currency exchange rates. The Portfolio
does not engage in transactions in forward contracts for speculation; it views
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
21
<PAGE>
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated and which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if N&B Management is incorrect in its judgment of future
exchange rate relationships, the Portfolio could be in a less advantageous
position than if such a hedge had not been established. If the Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of the Portfolio's securities against a decline in the value of a currency
does not eliminate fluctuations in the prices of the underlying securities.
Because forward contracts are not traded on an exchange, the assets used to
cover such contracts may be illiquid. The Portfolio may experience delays in the
settlement of its foreign currency transactions.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies. The Portfolio would engage
in such transactions to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired or to protect the U.S. dollar equivalent of dividends, interest, or
other payments on those securities. Currency options have characteristics and
risks similar to those of securities options, as discussed herein. Certain
options on foreign currencies are traded on the OTC market and involve liquidity
and credit risks that may not be present in the case of exchange-traded currency
options.
REGULATORY LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES, OPTIONS
ON SECURITIES, FORWARD CONTRACTS, AND OPTIONS ON FOREIGN CURRENCIES
(COLLECTIVELY, "HEDGING INSTRUMENTS"). To the extent the Portfolio sells or
purchases futures contracts or writes options thereon or options on foreign
currencies that are traded on an exchange regulated by the CFTC other than for
22
<PAGE>
BONA FIDE hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums on those positions (excluding the amount by which options
are "in-the-money") may not exceed 5% of the Portfolio's net assets.
COVER FOR HEDGING INSTRUMENTS. The Portfolio will comply with SEC
guidelines regarding "cover" for Hedging Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of Hedging Instruments; (2) possible lack of a
liquid secondary market for Hedging Instruments and the resulting inability to
close out Hedging Instruments when desired; (3) the fact that the skills needed
to use Hedging Instruments are different from those needed to select the
Portfolio's securities; (4) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Hedging Instruments.
N&B Management intends to reduce the risk of imperfect correlation by investing
only in Hedging Instruments whose behavior is expected to resemble or offset
that of the Portfolio's underlying securities or currency. N&B Management
intends to reduce the risk that the Portfolio will be unable to close out
Hedging Instruments by entering into such transactions only if N&B Management
believes there will be an active and liquid secondary market. There can be no
assurance that the Portfolio's use of Hedging Instruments will be successful.
23
<PAGE>
The Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with
which it must comply if the Fund is to continue to qualify as a regulated
investment company ("RIC"). See "Additional Tax Information."
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in corporate bonds and
debentures receiving one of the four highest ratings from Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally
recognized statistical rating organization ("NRSRO") or, if not rated by any
NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable
Unrated Securities").
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). Lower-rated securities are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Subsequent to its purchase by the Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by the Portfolio. In such a case, the
Portfolio will engage in an orderly disposition of the downgraded securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt security
issued by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest only in commercial paper receiving the
highest rating from S&P (A-1) or Moody's (P-1) or deemed by N&B Management to be
of comparable quality.
24
<PAGE>
The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, N&B Management
may in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
ZERO COUPON SECURITIES. The Portfolio may invest in zero coupon
securities, which are debt obligations that do not entitle the holder to any
periodic payment of interest prior to maturity or that specify a future date
when the securities begin to pay current interest. Zero coupon securities are
issued and traded at a discount from their face amount or par value. This
discount varies depending on prevailing interest rates, the time remaining until
cash payments begin, the liquidity of the security, and the perceived credit
quality of the issuer.
The discount on zero coupon securities ("original issue discount")
must be taken into account ratably by the Portfolio prior to the receipt of any
actual payments. Because the Fund must distribute substantially all of its net
income (including its share of the Portfolio's accrued original issue discount)
to the Plan each year for income and excise tax purposes, the Portfolio may have
to dispose of portfolio securities under disadvantageous circumstances to
generate cash, or may be required to borrow, to satisfy the Fund's distribution
requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically. Zero
coupon securities are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having a similar maturity and
credit quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security entitles the holder to receive the interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, such securities ordinarily provide a stream of income with generally
higher yields than common stocks of the same or similar issuers, but lower than
the yield on non-convertible debt. Convertible securities are usually
subordinated to comparable-tier non-convertible securities but rank senior to
common stock in a corporation's capital structure. The value of a convertible
security is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a conversion
25
<PAGE>
privilege and (2) its worth if converted into the underlying common stock.
Convertible debt securities are subject to the Portfolio's investment policies
and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objectives.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and
are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)[SUPERSCRIPT]n = ERV
26
<PAGE>
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
The average annual total returns for the Fund for the one-year
period ended August 31, 1997, and for the period from March 14, 1994
(commencement of operations) through August 31, 1997 were +33.20% and +21.44%,
respectively. Had N&B Management not reimbursed certain expenses, total return
would have been lower.
COMPARATIVE INFORMATION
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters,
and financial periodicals) that monitor the performance of mutual funds,
such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
U.S. News & World Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Russell Midcap Growth Index, Dow Jones Industrial Average
("DJIA"), Wilshire 1750 Index, Nasdaq Composite Index, Montgomery
Securities Growth Stock Index, Value Line Index, U.S. Department of Labor
Consumer Price Index ("Consumer Price Index"), College Board Annual Survey
of Colleges, Kanon Bloch's Family Performance Index, the Barra Growth
Index, the Barra Value Index, and various other domestic, international,
and global indices. The S&P 500 Index is a broad index of common stock
prices, while the DJIA represents a narrower segment of industrial
companies. The S&P 600 Index includes stocks that range in market value
from $39 million to $2.7 billion, with an average of $616 million. The S&P
400 Index measures mid-sized companies that have an average market
capitalization of $2.2 billion. Each assumes reinvestment of distributions
27
<PAGE>
and is calculated without regard to tax consequences or the costs of
investing. The Portfolio may invest in different types of securities from
those included in some of the above indices.
The Fund's performance may also be compared to various socially
responsive indices. These include The Domini Social Index and the indices
developed by the quantitative department of Prudential Securities, such as that
department's Large and Mid-Cap portfolio indices for various breakdowns ("Sin"
Stock Free, Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Fund's performance, its total return and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Fund
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements. This information may include the Portfolio's portfolio
diversification by asset type or by the social characteristics of companies
owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that the Portfolio will achieve its
investment objective.
28
<PAGE>
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees
and officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman.
<TABLE>
Name, Age, Positions Held
and Address(1) With the Trusts Principal Occupation(s)2)
- -------------- --------------- -------------------------
<S> <C> <C>
Faith Colish (62) Trustee of each Trust Attorney at Law, Faith Colish,
63 Wall Street A Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (75) Trustee of each Trust Retired. Formerly Senior Vice
435 East 52nd Street President and Director of Exxon
New York, NY 10022 Corporation; Director of
Emigrant Savings Bank.
Stanley Egener* (63) Chairman of the Principal of Neuberger & Berman;
Board, Chief President and Director of N&B
Executive Officer, Management; Chairman of the
and Trustee of each Board, Chief Executive Officer
Trust and Trustee of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Howard A. Mileaf (60) Trustee of each Trust Vice President and Special
WHX Corporation Counsel to WHX Corporation
110 East 59th Street (holding company) since 1992;
30th Floor Director of Kevlin Corporation
New York, NY 10022 (manufacturer of microwave and
other products).
29
<PAGE>
Edward I. O'Brien* (69) Trustee of each Trust Until 1993, President of the
12 Woods Lane Securities Industry Association
Scarsdale, NY 10583 ("SIA") (securities industry's
representative in government
relations and regulatory matters
at the federal and state levels);
until November 1993, employee of
the SIA; Director of Legg Mason,
Inc.
John T. Patterson, Jr. (69) Trustee of each Trust Retired. Formerly, President
183 Ledge Drive of SOBRO (South Bronx Overall
Torrington, CT 06790 Economic Development Corporation).
John P. Rosenthal (64) Trustee of each Trust Senior Vice President of Burnham
Burnham Securities Inc, Securities Inc. (a registered
Burnham Asset Management broker-dealer) since 1991;
Corp. Director, Cancer Treatment
1325 Avenue of the Americas Holdings, Inc.
17th Floor
New York, NY 10019
Cornelius T. Ryan (66) Trustee of each Trust General Partner of Oxford
Oxford Bioscience Partners Partners and Oxford Bioscience
315 Post Road West Partners (venture capital
Westport, CT 06880 partnerships) and President of
Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money market
fund) and Prime Cash Fund.
30
<PAGE>
Gustave H. Shubert (68) Trustee of each Trust Senior Fellow/Corporate Advisor
13838 Sunset Boulevard and Advisory Trustee of Rand (a
Pacific Palisades, CA 90272 non-profit public interest
research institution) since 1989;
Honorary Member of the Board of
Overseers of the Institute for
Civil Justice, the Policy
Advisory Committee of the
Clinical Scholars Program at the
University of California, the
American Association for the
Advancement of Science, the
Counsel on Foreign Relations, and
the Institute for Strategic
Studies (London); advisor to the
Program Evaluation and
Methodology Division of the U.S.
General Accounting Office;
formerly Senior Vice President
and Trustee of Rand.
Lawrence Zicklin* (61) President and Principal of Neuberger & Berman;
Trustee of each Trust Director of N&B Management;
President and/or Trustee of five
other mutual funds for which N&B
Management acts as investment
manager or administrator.
Daniel J. Sullivan (57) Vice President of Senior Vice President of N&B
each Trust Management since 1992; Vice
President of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
31
<PAGE>
Michael J. Weiner (50) Vice President and Senior Vice President of N&B
Principal Financial Management since 1992; Treasurer
Officer of each Trust of N&B Management from 1992 to
1996; Vice President and
Principal Financial Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Claudia A. Brandon (41) Secretary of each Vice President of N&B Management;
Trust Secretary of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Richard Russell (50) Treasurer and Vice President of N&B Management
Principal Accounting since 1993; prior thereto,
Officer of each Trust Assistant Vice President of N&B
Management; Treasurer and
Principal Accounting Officer of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
Stacy Cooper-Shugrue (34) Assistant Secretary Assistant Vice President of N&B
of each Trust Management since 1993; prior
thereto, employee of N&B
Management; Assistant Secretary
of eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
32
<PAGE>
C. Carl Randolph (60) Assistant Secretary Principal of Neuberger & Berman
of each Trust since 1992; Assistant Secretary
of eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Barbara DiGiorgio (38) Assistant Treasurer Assistant Vice President of N&B
of each Trust Management since 1993; prior
thereto, employee of N&B
Management; Assistant Treasurer
since 1996 of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
Celeste Wischerth (36) Assistant Treasurer Assistant Vice President of N&B
of each Trust Management since 1994; prior
thereto, employee of N&B
Management; Assistant Treasurer
since 1996 of eight other mutual
funds for which N&B Management
acts as investment manager or
administrator.
- --------------------
</TABLE>
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within the
meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by
virtue of the fact that they are officers and/or directors of N&B Management and
principals of Neuberger & Berman. Mr. O'Brien is an interested person by virtue
of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary
33
<PAGE>
of which, from time to time, serves as a broker or dealer to the Portfolio and
other funds for which N&B Management serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger & Berman
Funds[REGISTERED] has any retirement plan for its trustees.
Total Compensation
from Investment
Aggregate Companies in the
Name and Position with Compensation Neuberger & Berman Fund
the Trust from the Trust Complex Paid to Trustees
- --------- -------------- ------------------------
Faith Colish $ 2,952 $ 64,000
Trustee (5 other investment
companies)
Donald M. Cox $ 2,952 $ 31,000
Trustee (3 other investment
companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, Chief (9 other investment
Executive Officer, and companies)
Trustee
Alan R. Gruber, Trustee, and $ 1,913 $ 20,000
The Estate of (3 other investment
Alan R. Gruber companies)
34
<PAGE>
Total Compensation
from Investment
Aggregate Companies in the
Name and Position with Compensation Neuberger & Berman Fund
the Trust from the Trust Complex Paid to Trustees
- --------- -------------- ------------------------
Howard A. Mileaf $ 2,995 $ 33,500
Trustee (4 other investment
companies)
Edward I. O'Brien $ 3,321 $ 34,000
Trustee (3 other investment
companies)
John T. Patterson, Jr. $ 3,321 $ 37,500
Trustee (4 other investment
companies)
John P. Rosenthal $ 2,952 $ 32,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $ 2,995 $ 30,500
Trustee (3 other investment
companies)
Gustave H. Shubert $ 2,995 $ 30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment
companies)
At November 28, 1997, the trustees and officers of the Trusts, as a group,
owned beneficially or of record less than 1% of the outstanding shares of the
Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. N&B Management serves
as the investment manager to the Portfolio pursuant to a management agreement
with Managers Trust, on behalf of the Portfolio, dated as of August 2, 1993
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("Management Agreement"). The Management Agreement was approved by the holders
of the interests in the Portfolio on March 9, 1994. The Portfolio was authorized
to become subject to the Management Agreement by vote of the Portfolio Trustees
on October 20, 1993, and became subject to it on March 14, 1994.
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits N&B Management to effect securities
transactions on behalf of the Portfolio through associated persons of N&B
Management. The Management Agreement also specifically permits N&B Management to
compensate, through higher commissions, brokers and dealers who provide
investment research and analysis to the Portfolio, although N&B Management has
no current plans to pay a material amount of such compensation.
N&B Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. N&B Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts. See "Trustees and Officers." The Portfolio pays N&B
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
N&B Management provides facilities, services, and personnel to the
Fund pursuant to an administration agreement with the Trust, dated August 3,
1993, as amended on August 2, 1996 ("Administration Agreement"). The Fund was
authorized to become subject to the Administration Agreement by vote of the Fund
Trustees on October 20, 1993, and became subject to it on March 14, 1994. For
such administrative services, the Fund pays N&B Management a fee based on the
Fund's average daily net assets, as described in the Prospectus.
During the fiscal years ended August 31, 1997, 1996 and 1995, the Fund
accrued management and administration fees of $930,548, $660,441 and $440,649,
respectively. During those same periods, N&B Management reimbursed the Fund for
$206,224, $224,030 and $186,559, respectively, of expenses.
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The Management Agreement continues until August 2, 1998 and is
renewable thereafter from year to year, so long as its continuance is approved
at least annually (1) by the vote of a majority of the Portfolio Trustees who
are not "interested persons" of N&B Management or Managers Trust ("Independent
Portfolio Trustees"), cast in person at a meeting called for the purpose of
voting on such approval, and (2) by the vote of a majority of the Portfolio
Trustees or by a 1940 Act majority vote of the outstanding interests in the
Portfolio. The Administration Agreement continues until August 2, 1998. The
Administration Agreement is renewable from year to year with respect to the
Fund, so long as its continuance is approved at least annually (1) by the vote
of a majority of the Fund Trustees who are not "interested persons" of N&B
Management or the Trust ("Independent Fund Trustees"), cast in person at a
meeting called for the purpose of voting on such approval, and (2) by the vote
of a majority of the Fund Trustees or by a 1940 Act majority vote of the
outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by N&B Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by N&B Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
N&B Management retains Neuberger & Berman, 605 Third Avenue, New
York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolio on March 9, 1994. The Portfolio was authorized to become subject to
the Sub-Advisory Agreement by vote of the Portfolio Trustees on October 20,
1993, and became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, N&B Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger & Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
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with N&B Management. The Sub-Advisory Agreement provides that N&B Management
will pay for the services rendered by Neuberger & Berman based on the direct and
indirect costs to Neuberger & Berman in connection with those services.
Neuberger & Berman also serves as sub-adviser for all of the other mutual funds
managed by N&B Management.
The Sub-Advisory Agreement continues until August 2,1998 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
Portfolio, by N&B Management, or by Neuberger & Berman on not less than 30 nor
more than 60 days' written notice. The Sub-Advisory Agreement also terminates
automatically with respect to the Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and N&B Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
As of September 30, 1997, the investment companies managed by N&B
Management had aggregate net assets of approximately $21.2 billion. N&B
Management currently serves as investment manager of the following investment
companies:
Approximate
Net Assets at
Name September 30, 1997
- ---- ------------------
Neuberger & Berman Cash Reserves Portfolio..................... $667,531,894
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio.....................$248,190,672
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio................$295,393,823
(investment portfolio for Neuberger & Berman Limited Maturity Bond
Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio......................$146,706,408
(investment portfolio for Neuberger & Berman Municipal Money Fund)
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Neuberger & Berman Municipal Securities Portfolio..................$31,573,660
(investment portfolio for Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman Ultra Short Bond Portfolio......................$62,627,463
(investment portfolio for Neuberger & Berman Ultra Short Bond Fund and
Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Focus Portfolio..............................$1,661,565,204
(investment portfolio for Neuberger & Berman Focus Fund, Neuberger &
Berman Focus Trust and Neuberger & Berman Focus Assets)
Neuberger & Berman Genesis Portfolio............................$1,491,048,221
(investment portfolio for Neuberger & Berman Genesis Fund, Neuberger &
Berman Genesis Trust and Neuberger & Berman Genesis Assets)
Neuberger & Berman Guardian Portfolio......................... $9,123,101,599
(investment portfolio for Neuberger & Berman Guardian Fund, Neuberger &
Berman Guardian Trust and Neuberger & Berman Guardian Assets)
Neuberger & Berman International Portfolio........................$127,016,071
(investment portfolio for Neuberger & Berman International Fund and
Neuberger & Berman International Trust)
Neuberger & Berman Manhattan Portfolio............................$655,156,471
(investment portfolio for Neuberger & Berman Manhattan Fund, Neuberger &
Berman Manhattan Trust and Neuberger & Berman Manhattan Assets)
Neuberger & Berman Partners Portfolio...........................$3,783,754,657
(investment portfolio for Neuberger & Berman Partners Fund, Neuberger &
Berman Partners Trust and Neuberger & Berman Partners Assets)
Neuberger & Berman Socially Responsive............................$274,230,723
Portfolio (investment portfolio for Neuberger & Berman Socially
Responsive Fund, Neuberger & Berman Socially Responsive Trust and
Neuberger & Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust.........................................$2,651,503,613
(seven series)
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The investment decisions concerning the Portfolio and the other
mutual funds managed by N&B Management (collectively, "Other N&B Funds") have
been and will continue to be made independently of one another. In terms of
their investment objectives, most of the Other N&B Funds differ from the
Portfolio. Even where the investment objectives are similar, however, the
methods used by the Other N&B Funds and the Portfolio to achieve their
objectives may differ. The investment results achieved by all of the mutual
funds managed by N&B Management have varied from one another in the past and are
likely to vary in the future.
There may be occasions when the Portfolio and one or more of the
Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with N&B Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger & Berman (including the Portfolio, the Other N&B
Funds, and other managed accounts) and personnel of Neuberger & Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger & Berman that
limit the aggregate purchases, by all accounts under management, of the
outstanding shares of public companies.
MANAGEMENT AND CONTROL OF N&B MANAGEMENT
The directors and officers of N&B Management, all of whom have
offices at the same address as N&B Management, are Richard A. Cantor,
Chairman of the Board and director; Stanley Egener, President and director;
Theodore P. Giuliano, Vice President and director; Michael M. Kassen, Vice
President and director; Irwin Lainoff, director; Lawrence Zicklin, director;
Daniel J. Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice
President; Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice
President; Patrick T. Byrne, Vice President; Brooke A. Cobb, Vice President;
Robert W. D'Alelio, Vice President; Roberta D'Orio, Vice President; Clara Del
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Villar, Vice President; Brian J. Gaffney, Vice President; Joseph G. Galli,
Vice President; Robert I. Gendelman, Vice President; Josephine P. Mahaney,
Vice President; Ellen Metzger, Vice President and Secretary; Paul Metzger,
Vice President; Janet W. Prindle, Vice President; Kevin L. Risen, Vice
President; Richard Russell, Vice President; Jennifer K. Silver, Vice
President; Kent C. Simons, Vice President; Frederic B. Soule, Vice President;
Judith M. Vale, Vice President; Susan Walsh, Vice President; Thomas Wolfe,
Vice President; Andrea Trachtenberg, Vice President of Marketing; Robert
Conti, Treasurer; Valerie Chang, Assistant Vice President; Stacy
Cooper-Shugrue, Assistant Vice President; Barbara DiGiorgio, Assistant Vice
President; Michael J. Hanratty, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Robert L. Ladd, Assistant Vice President; Carmen G. Martinez,
Assistant Vice President; Joseph S. Quirk, Assistant Vice President; Ingrid
Saukaitis, Assistant Vice President; Josephine Velez, Assistant Vice
President; Celeste Wischerth, Assistant Vice President; and Loraine
Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Gendelman, Giuliano,
Kassen, Lainoff, Risen, Simons, Sundman and Zicklin and Mmes. Prindle, Silver
and Vale are principals of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Russell, Sullivan, and Weiner, and Mmes. Brandon, Cooper-Shugrue, DiGiorgio,
and Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to the
Plan. In connection with the sale of its shares, the Fund has authorized the
Distributor to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of the Fund's shares to the Plan without sales commission
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or other compensation and bears all advertising and promotion expenses incurred
in the sale of the Fund's shares.
The Trust, on behalf of the Fund, and the Distributor are parties
to a Distribution Agreement that continues until August 2, 1998. The
Distribution Agreement may be renewed annually if specifically approved by (1)
the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the
Fund's outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
The right to redeem the Fund's shares may be suspended or payment
of the redemption price postponed (1) when the New York Stock Exchange ("NYSE")
is closed, (2) when trading on the NYSE is restricted, (3) when an emergency
exists as a result of which it is not reasonably practicable for the Portfolio
to dispose of securities it owns or fairly to determine the value of its net
assets, or (4) for such other period as the SEC may by order permit for the
protection of the Fund's shareholders. Applicable SEC rules and regulations
shall govern whether the conditions prescribed in (2) or (3) exist. If the right
of redemption is suspended, the Plan may withdraw its offers of redemption, or
it will receive payment at the NAV per share in effect at the close of business
on the first day the NYSE is open ("Business Day") after termination of the
suspension.
REDEMPTIONS IN KIND
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the Plan in any 90-day
period) exceeding $250,000 or 1% of the net assets of the Fund, whichever is
less, by making payment in whole or in part in securities valued as described
under "Share Prices and Net Asset Value" in the Prospectus. If payment is made
in securities, the Plan generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
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Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to the Plan substantially all of its share of
any net investment income (after deducting expenses incurred directly by the
Fund), any net realized capital gains, and any net realized gains from foreign
currency transactions earned or realized by the Portfolio. The Portfolio's net
investment income consists of all income accrued on portfolio assets less
accrued expenses, but does not include capital and foreign currency gains and
losses. Net investment income and realized gains and losses are reflected in the
Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. The
Fund calculates its net investment income and NAV per share as of the close of
regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern
time).
Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the Plan elects to receive them in cash
("cash election"). A cash election remains in effect until the Plan notifies the
Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
In order to continue to qualify for treatment as a RIC under the
Code, the Fund must distribute to the Plan for each taxable year at least 90% of
its investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Hedging Instruments) derived with respect to its business of
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<PAGE>
investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios managed by N&B Management
have received rulings from the Internal Revenue Service ("Service") that each
such fund, as an investor in its corresponding portfolio, will be deemed to own
a proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described above to
qualify as a RIC. Although these rulings may not be relied on as precedent by
the Fund, N&B Management believes that the reasoning thereof and, hence, their
conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to
the Fund of distributions to it from the Portfolio, investments by the Portfolio
in certain securities, and hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
Certain portfolios managed by N&B Management, including the other
portfolios of Managers Trust, have received rulings from the Service to the
effect that, among other things, each such portfolio will be treated as a
separate partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as precedent by
the Portfolio, N&B Management believes the reasoning thereof and, hence, their
conclusion apply to the Portfolio as well. As a result, the Portfolio is not
subject to federal income tax; instead, each investor in the Portfolio, such as
the Fund, is required to take into account in determining its federal income tax
liability its share of the Portfolio's income, gains, losses, deductions, and
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<PAGE>
credits, without regard to whether it has received any cash distributions from
the Portfolio. The Portfolio also is not subject to Delaware or New York income
or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's net
income and capital gains and decreased by (1) the amount of cash and the basis
of any property the Portfolio distributes to the Fund and (2) the Fund's share
of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains
realized by the Portfolio, may be subject to income, withholding, or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax treaties between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation -- other than a
"controlled foreign corporation" (I.E., a foreign corporation in which, on any
day during its taxable year, more than 50% of the total voting power of all
voting stock therein or the total value of all stock therein is owned, directly,
indirectly, or constructively, by "U.S. shareholders," defined as U.S. persons
that individually own, directly, indirectly, or constructively, at least 10% of
that voting power) as to which the Portfolio is a U.S. shareholder (effective
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for the taxable year beginning September 1, 1998) -- that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, if the Portfolio
holds stock of a PFIC, the Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
taxable dividend to the Plan. The balance of the Fund's share of the PFIC income
will be included in its investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to the Plan.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund ("QEF")," then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which most likely would have to be
distributed by the Fund to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received by the Portfolio from the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof.
Effective for taxable years beginning after 1997, a holder of stock
in any PFIC may elect to include in ordinary income each taxable year the
excess, if any, of the fair market value of the stock over the adjusted basis
therein as of the end of that year. Pursuant to the election, a deduction (as an
ordinary, not capital, loss) also would be allowed for the excess, if any, of
the holder's adjusted basis in PFIC stock over the fair market value thereof as
of the taxable year-end, but only to the extent of any net mark-to-market gains
with respect to that stock included in income for prior taxable years. The
adjusted basis in each PFIC's stock subject to the election would be adjusted to
reflect the amounts of income included and deductions taken thereunder. Proposed
regulations would provide a similar election with respect to the stock of
certain PFICs.
The Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the amount, character and timing of recognition of the gains and losses the
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Portfolio realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from Hedging Instruments derived by the Portfolio with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for the Fund under the Income Requirement.
Exchange-traded futures contracts, certain forward contracts and
listed options thereon ("Section 1256 contracts") are required to be marked to
market (that is, treated as having been sold at market value) for federal income
tax purposes at the end of the Portfolio's taxable year. Sixty percent of any
net gain or loss recognized as a result of these "deemed sales," and 60% of any
net realized gain or loss from any actual sales, of Section 1256 contracts are
treated as long-term capital gain or loss; the remainder is treated as
short-term capital gain or loss. As of the date of this SAI, it is not entirely
clear whether that 60% portion will qualify for the reduced maximum tax rates on
net capital gain enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 18 months -- instead of the 28% rate in effect before that
legislation, which now applies to gain recognized on capital assets held for
more than one year but not more than 18 months. However, proposed technical
corrections legislation would clarify that the 20% rate applies.
The Portfolio may acquire zero coupon securities or other securities
issued with original issue discount ("OID"). As a holder of those securities,
the Portfolio (and, through it, the Fund) must take into income the OID that
accrues on the securities during the taxable year, even if it receives no
corresponding payment on the securities during the year. Because the Fund
annually must distribute substantially all of its investment company taxable
income (including its share of the Portfolio's accrued OID) to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be
required in a particular year to distribute as a dividend an amount that is
greater than its share of the total amount of cash the Portfolio actually
receives. Those distributions will be made from the Fund's (or its share of the
Portfolio's) cash assets or, if necessary, from the proceeds of sales of the
Portfolio's securities. The Portfolio may realize capital gains or losses from
those sales, which would increase or decrease the Fund's investment company
taxable income and/or net capital gain.
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PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as the Portfolio's principal broker in the
purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market) and in connection with the purchase and sale of
options on its securities.
During the fiscal year ended August 31, 1995, the Portfolio paid
brokerage commissions of $138,378, of which $95,964 was paid to Neuberger &
Berman. During the fiscal year ended August 31, 1996, the Portfolio paid
brokerage commissions of $208,834, of which $124,879 was paid to Neuberger &
Berman.
During the fiscal year ended August 31, 1997, the Portfolio paid
brokerage commissions of $305,640, of which $232,238 was paid to Neuberger &
Berman. Transactions in which the Portfolio used Neuberger & Berman as broker
comprised 80.59% of the aggregate dollar amount of transactions involving the
payment of commissions, and 75.98% of the aggregate brokerage commissions paid
by the Portfolio, during the fiscal year ended August 31, 1997. 78.58% of the
$73,402 paid to other brokers by the Portfolio during that fiscal year
(representing commissions on transactions involving approximately $30,816,054)
was directed to those brokers because of research services they provided. During
the fiscal year ended August 31, 1997, the Portfolio acquired securities of the
following of its "regular brokers or dealers" (as defined in the 1940 Act):
State Street Bank and Trust Company, N.A.; at that date, that Portfolio held
none of the securities of its regular brokers or dealers.
Portfolio securities are, from time to time, loaned by the Portfolio
to Neuberger & Berman in accordance with the terms and conditions of an order
issued by the SEC. The order exempts such transactions from provisions of the
1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. In accordance with the order, securities loans made by the Portfolio
to Neuberger & Berman are fully secured by cash collateral. The portion of the
income on the cash collateral which may be shared with Neuberger & Berman is to
be determined by reference to concurrent arrangements between Neuberger & Berman
and non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger & Berman borrows securities from the Portfolio in
order to re-lend them to others, Neuberger & Berman may be required to pay the
Portfolio, on a quarterly basis, certain of the earnings that Neuberger & Berman
otherwise has derived from the re-lending of the borrowed securities. When
Neuberger & Berman desires to borrow a security that the Portfolio has indicated
48
<PAGE>
a willingness to lend, Neuberger & Berman must borrow such security from the
Portfolio, rather than from an unaffiliated lender, unless the unaffiliated
lender is willing to lend such security on more favorable terms (as specified in
the order) than the Portfolio. If, in any month, a Portfolio's expenses exceed
its income in any securities loan transaction with Neuberger & Berman, Neuberger
& Berman must reimburse the Portfolio for such loss.
During the fiscal year ended August 31, 1997, the Portfolio earned
interest income of $80,484, from the collateralization of securities loans, from
which Neuberger & Berman was paid $51,639. During the fiscal years ended August
31, 1996 and 1995, the Portfolio earned no interest income from the
collateralization of securities loans.
The Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B Management, provided that cash or equivalent collateral,
equal to at least 100% of the market value of the loaned securities, is
continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio.
In effecting securities transactions, the Portfolio generally seeks
to obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger & Berman as its principal broker
where, in the judgment of N&B Management, that firm is able to obtain a price
and execution at least as favorable as other qualified brokers. To the
49
<PAGE>
Portfolio's knowledge, no affiliate of the Portfolio receives give-ups or
reciprocal business in connection with its securities transactions.
The use of Neuberger & Berman as a broker for the Portfolio is
subject to the requirements of Section 11(a) of the Securities Exchange Act of
1934. Section 11(a) prohibits members of national securities exchanges from
retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers Trust and N&B Management have expressly
authorized Neuberger & Berman to retain such compensation, and Neuberger &
Berman has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to Neuberger &
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
& Berman must, in N&B Management's judgment, be (1) at least as favorable as
those charged by other brokers having comparable execution capability and (2) at
least as favorable as commissions contemporaneously charged by Neuberger &
Berman on comparable transactions for its most favored unaffiliated customers,
except for accounts for which Neuberger & Berman acts as a clearing broker for
another brokerage firm and customers of Neuberger & Berman considered by a
majority of the Independent Portfolio Trustees not to be comparable to the
Portfolio. The Portfolio does not deem it practicable and in its best interests
to solicit competitive bids for commissions on each transaction effected by
Neuberger & Berman. However, consideration regularly is given to information
concerning the prevailing level of commissions charged by other brokers on
comparable transactions during comparable periods of time. The 1940 Act
generally prohibits Neuberger & Berman from acting as principal in the purchase
of portfolio securities from, or the sale of portfolio securities to, the
Portfolio unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
50
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To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
The Portfolio expects that it will continue to execute a portion of
its transactions through brokers other than Neuberger & Berman. In selecting
those brokers, N&B Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by those brokers.
A committee comprised of officers of N&B Management and principals
of Neuberger & Berman who are portfolio managers of the Portfolio and/or Other
N&B Funds (collectively, "N&B Funds") and some of Neuberger & Berman's managed
accounts ("Managed Accounts") evaluates semi-annually the nature and quality of
the brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the N&B Funds and the Managed Accounts
that are not effected by Neuberger & Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the N&B Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the N&B
51
<PAGE>
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger & Berman may
be higher than the amount another firm might charge if N&B Management determines
in good faith that the amount of those commissions is reasonable in relation to
the value of the brokerage and research services provided by the broker. N&B
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman in servicing the Managed Accounts. On the other
hand, research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts may
be used for the Portfolio's benefit.
Janet W. Prindle, a Vice President of N&B Management and a principal of
Neuberger & Berman is the person primarily responsible for making decisions as
to specific action to be taken with respect to the investment portfolio of the
Portfolio. She has full authority to take action with respect to portfolio
transactions and may or may not consult with other personnel of N&B Management
prior to taking such action. If Ms. Prindle is unavailable to perform her
responsibilities, Robert Ladd and/or Ingrid Saukaitis, each of whom is an
Assistant Vice President of N&B Management, will assume responsibility for the
Portfolio.
PORTFOLIO TURNOVER
The Portfolio's portfolio turnover rate is calculated by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
accountants for the Fund and Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
52
<PAGE>
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for
their securities and cash. State Street also serves as the Fund's transfer
agent, administering purchases, redemptions, and transfers of Fund shares and
the payment of dividends and other distributions to the Plan. All correspondence
should be mailed to the Plan, 40 Rector Street, 3rd Floor, New York, NY 10006.
In addition, State Street serves as transfer agent for the Portfolio.
INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected Coopers & Lybrand L.L.P., One
Post Office Square, Boston, MA 02109, as the independent accountants who will
audit their financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 1, 1997, the Deferred Compensation Plan of the City
of New York and Related Agencies and Instrumentalities, 40 Rector Street, 3rd
Floor, New York, New York 10006, owned 100% of the outstanding shares of the
Fund; and the Fund held 72.08% of the interests in the Portfolio.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C.
53
<PAGE>
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Fund's Annual Report to shareholders
for the fiscal year ended August 31, 1997:
The audited financial statements of the Fund and Portfolio and
notes thereto for the fiscal year ended August 31, 1997, and the
reports of Coopers & Lybrand L.L.P., independent accountants, with
respect to such audited financial statements of the Fund and the
Portfolio.
54
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issue.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in AAA-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
55
<PAGE>
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and
are considered to be as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for issues
designated A-1.
MOODY'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
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<PAGE>
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions), also
known as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
57
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 12 ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements:
The audited financial statements contained in the Annual Reports to
Shareholders of the Registrant for the fiscal year ended August 31, 1997 for
Neuberger & Berman Equity Trust (with respect to Neuberger & Berman Focus Trust,
Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger &
Berman Manhattan Trust, Neuberger & Berman Partners Trust and Neuberger & Berman
NYCDC Socially Responsive Trust) and Equity Managers Trust (with respect to
Neuberger & Berman Focus Portfolio, Neuberger & Berman Genesis Portfolio,
Neuberger & Berman Guardian Portfolio, Neuberger & Berman Manhattan Portfolio,
Neuberger & Berman Partners Portfolio and Neuberger & Berman NYCDC Socially
Responsive Portfolio) and the reports of the independent auditors/accountants
are incorporated into the Statement of Additional Information by reference.
Included in Part A of this Post-Effective Amendment: FINANCIAL HIGHLIGHTS
for Neuberger & Berman Focus Trust, Neuberger & Berman Genesis Trust, Neuberger
& Berman Guardian Trust, Neuberger & Berman Manhattan Trust, Neuberger & Berman
Partners Trust and Neuberger & Berman NYCDC Socially Responsive Trust.
(b) Exhibits:
Exhibit
Number Description
------ -----------
(1) (a) Certificate of Trust. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Trust Instrument of Neuberger & Berman Equity
Trust. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession
No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger &
Berman Equity Trust. Incorporated by
reference to Post-Effective Amendment No. 12
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000398.
(2) By-laws of Neuberger & Berman Equity Trust.
Incorporated by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(3) Voting Trust Agreement. None.
- 9 -
<PAGE>
Exhibit
Number Description
------ -----------
(4) (a) Trust Instrument of Neuberger & Berman Equity
Trust, Articles IV, V, and VI. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(b) By-laws of Neuberger & Berman Equity Trust,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-95-000427.
(5) (a) (i) Management Agreement Between Equity
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated
by Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(b) (i) Sub-Advisory Agreement Between Neuberger
& Berman Management Incorporated and
Neuberger & Berman, LLC with Respect to
Equity Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
(ii) Schedule A - Series of Equity Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 70 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000314.
- 10 -
<PAGE>
Exhibit
Number Description
------ -----------
(iii) Substitution Agreement Among Neuberger &
Berman Management Incorporated, Equity
Managers Trust, Neuberger & Berman,
L.P., and Neuberger & Berman, LLC.
Incorporated by Reference to Amendment
No. 7 to Registration Statement of
Equity Managers Trust, File No.
811-7910, Edgar Accession No.
0000898432-96-000557.
(c) (i) Management Agreement Between Global
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Management Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-95-000426.
(d) (i) Sub-Advisory Agreement Between Neuberger
& Berman Management Incorporated and
Neuberger & Berman, LLC with Respect to
Global Managers Trust. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers
Trust Currently Subject to the
Sub-Advisory Agreement. Incorporated by
Reference to Post-Effective Amendment
No. 74 to Registration Statement of
Neuberger & Berman Equity Funds, File
Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-000426.
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<PAGE>
Exhibit
Number Description
------ -----------
(iii) Substitution Agreement among Neuberger &
Berman Management Incorporated, Global
Managers Trust, Neuberger & Berman, L.P.
and Neuberger & Berman, LLC.
Incorporated by Reference to the
substantially similar agreement filed in
Amendment No. 7 to the Registration
Statement of Equity Managers Trust, File
No. 811-7910, Edgar Accession No.
0000898432-96-000557 (the documents
differ only with respect to the date of
and the master fund party to the
subadvisory agreement under which
substitution is sought and the name of
the executing master fund).
(6) (a) Distribution Agreement Between Neuberger & Berman
Equity Trust and Neuberger & Berman Management
Incorporated. Filed Herewith.
(b) Schedule A - Series of Neuberger & Berman Equity
Trust Currently Subject to the Distribution
Agreement. Filed Herewith.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger & Berman
Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Schedule of Compensation under the Custodian
Contract. Incorporated by Reference to
Post-Effective No. 10 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession No.
0000898432-96-000532.
(c) Agreement Between Neuberger & Berman Equity
Trust and State Street Bank and Trust Company
Adding Neuberger & Berman International Trust
as a Portfolio Governed by the Custodian
Contract. Incorporated by reference to
Post-Effective Amendment No. 12 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-97-000398.
- 12 -
<PAGE>
Exhibit
Number Description
------ -----------
(9) (a) (i) Transfer Agency and Service Agreement Between
Neuberger & Berman Equity Trust and State
Street Bank and Trust Company. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(ii) Agreement Between Neuberger & Berman Equity
Trust and State Street Bank and Trust Company
Adding Neuberger & Berman NYCDC Socially
Responsive Trust as a Portfolio Governed by
the Transfer Agency Agreement. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(iii) Agreement Between Neuberger & Berman Equity
Trust and State Street Bank and Trust Company
Adding Neuberger & Berman International Trust
as a Portfolio Governed by the Transfer Agency
and Service Agreement. Incorporated by
reference to Post-Effective Amendment No. 12
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000398.
(iv) First Amendment to Transfer Agency and Service
Agreement between Neuberger & Berman Equity
Trust and State Street Bank and Trust
Company. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784, Edgar Accession
No. 0000898432-95-000427.
(v) Schedule of Compensation under the Transfer
Agency and Service Agreement. Incorporated by
Reference to Post-Effective No. 10 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-96-000-532.
(vi) Second Amendment to Transfer Agency and
Service Agreement between Neuberger & Berman
Equity Trust and State Street Bank and Trust
Company. Incorporated by reference to
Post-Effective Amendment No. 12 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784, Edgar Accession No.
0000898432-97-000398.
(b) (i) Administration Agreement Between Neuberger &
Berman Equity Trust and Neuberger & Berman
Management Incorporated. Filed Herewith.
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<PAGE>
Exhibit
Number Description
------ -----------
(ii) Schedule A - Series of Neuberger & Berman
Equity Trust Currently Subject to the
Administration Agreement. Filed Herewith.
(iii) Schedule B - Schedule of Compensation Under
the Administration Agreement. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(10) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger & Berman
Equity Trust. Filed Herewith.
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger & Berman
NYCDC Socially Responsive Trust. Filed Herewith.
(11) (a) Consent of Ernst & Young LLP., Independent
Auditors. Filed Herewith.
(b) Consent of Coopers & Lybrand L.L.P.,
Independent Accountants. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance Quotations.
None.
(17) Financial Data Schedule. Filed Herewith.
(18) Plan Pursuant to Rule 18f-3. None.
Item 25. Persons Controlled By or Under Common Control With Registrant
- -------- -------------------------------------------------------------
No person is controlled by or under common control with the
Registrant. (Registrant is organized in a master/feeder structure
and technically may be considered to control the master fund in
which it invests, Equity Managers Trust.
- 14 -
<PAGE>
Item 26. Number of Holders of Securities
- -------- -------------------------------
The following information is given as of October 31, 1997.
Number of
Title of Class Record Holders
-------------- --------------
Shares of beneficial interest,
$0.001 par value, of:
Neuberger & Berman Focus Trust 81
Neuberger & Berman Genesis Trust 360
Neuberger & Berman Guardian Trust 333
Neuberger & Berman Manhattan Trust 51
Neuberger & Berman Partners Trust 146
Neuberger & Berman NYCDC Socially Responsive Trust 2
Neuberger & Berman International Trust 0
Item 27. Indemnification
- -------- ---------------
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any present
or former shareholder of any series ("Series") of the Registrant shall be held
personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger and Berman
Management Incorporated ("N&B Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
- 15 -
<PAGE>
referred to as the "Managers Trusts") provide that neither N&B Management nor
any director, officer or employee of N&B Management performing services for the
series of the Managers Trusts at the direction or request of N&B Management in
connection with N&B Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relate; provided, that nothing in the Agreements shall be construed
(i) to protect N&B Management against any liability to the Managers Trusts or
any series thereof or their interest holders to which N&B Management would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of N&B Management's
reckless disregard of its obligations and duties under the Agreements, or (ii)
to protect any director, officer or employee of N&B Management who is or was a
trustee or officer of the Managers Trusts against any liability to the Managers
Trusts or any series thereof or their interest holders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
person's office with the Managers Trusts.
Section 1 of the Sub-Advisory Agreements between N&B Management and
Neuberger & Berman, LLC ("Neuberger & Berman") with respect to the Managers
Trusts provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreements, Neuberger & Berman will not be
subject to any liability for any act or omission or any loss suffered by any
series of the Managers Trusts or their interest holders in connection with the
matters to which the Agreements relate.
Section 11 of the Distribution Agreement between the Registrant and N&B
Management provides that N&B Management shall look only to the assets of a
Series for the Registrant's performance of the Agreement by the Registrant on
behalf of such Series, and neither the Trustees nor any of the Registrant's
officers, employees or agents, whether past, present or future, shall be
personally liable therefor.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Adviser and Sub-Adviser
- -------- ---------------------------------------------------------
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each director or officer
of N&B Management and each principal of Neuberger & Berman is, or at any time
during the past two years has been, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee.
- 16 -
<PAGE>
Name Business and Other Connections
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, N&B Management Trust; Secretary, Advisers
Management Managers Trust; Secretary, Neuberger &
Berman Income Funds; Secretary, Neuberger &
Berman Income Trust; Secretary, Neuberger &
Berman Equity Funds; Secretary, Neuberger &
Berman Equity Trust; Secretary, Income
Managers Trust; Secretary, Equity Managers
Trust; Secretary, Global Managers Trust;
Secretary, Neuberger & Berman Equity Assets.
Brooke A. Cobb
Vice President, N&B Chief Investment Officer, Bainco
Management International Investors.1 Senior Vice
President and Senior Portfolio Manager,
Putnam Investments.2
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Income Funds; Assistant Secretary, Neuberger
& Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant
Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger & Berman
Equity Assets.
Robert W. D'Alelio Senior Portfolio Manager, Putnam
Vice President, N&B Investments.3
Management
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer, Neuberger
& Berman Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds; Assistant
Treasurer, Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers Trust;
Assistant Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers Management
N&B Management; Principal, Trust; Chairman of the Board and Trustee,
Neuberger & Berman Advisers Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Income
Funds; Chairman of the Board and Trustee,
Neuberger & Berman Income Trust; Chairman of
the Board and Trustee, Neuberger & Berman
Equity Funds; Chairman of the Board and
Trustee, Neuberger & Berman Equity Trust;
- ----------
1 Until 1997.
2 Until 1995.
3 Until 1996.
- 17 -
<PAGE>
Name Business and Other Connections
- ---- ------------------------------
Chairman of the Board and Trustee, Income
Managers Trust; Chairman of the Board and
Trustee, Equity Managers Trust; Chairman of
the Board and Trustee, Global Managers
Trust; Chairman of the Board and Trustee,
Neuberger & Berman Equity Assets.
Theodore P. Giuliano President and Trustee, Neuberger & Berman
Vice President and Income Funds; President and Trustee,
Director, N&B Management; Neuberger & Berman Income Trust; President
Principal, Neuberger & Berman and Trustee, Income Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger & Berman
Principal, Neuberger & Berman Advisers Management Trust; Assistant
Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Income Funds; Assistant Secretary, Neuberger
& Berman Income Trust; Assistant Secretary,
Neuberger & Berman Equity Funds; Assistant
Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers Trust;
Assistant Secretary, Global Managers Trust;
Assistant Secretary, Neuberger & Berman
Equity Assets.
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
N&B Management Managers Trust; Treasurer, Neuberger &
Berman Income Funds; Treasurer, Neuberger &
Berman Income Trust; Treasurer, Neuberger &
Berman Equity Funds; Treasurer, Neuberger &
Berman Equity Trust; Treasurer, Income
Managers Trust; Treasurer, Equity Managers
Trust; Treasurer, Global Managers Trust;
Treasurer, Neuberger & Berman Equity Assets.
Ingrid Saukaitis Project Director, Council on Economic
Assistant Vice President, Priorities.4
N&B Management
Jennifer K. Silver Portfolio Manager and Director, Putnam
Vice President, N&B Investments.5
Management; Principal,
Neuberger & Berman
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; Vice President, Neuberger &
Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice
President, Neuberger & Berman Equity Funds;
Vice President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman
Equity Assets.
- ----------
4 Until 1997
5 Until 1997.
- 18 -
<PAGE>
Name Business and Other Connections
- ---- ------------------------------
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust; Vice President, Advisers
N&B Management Managers Trust; Vice President, Neuberger &
Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice
President, Neuberger & Berman Equity Funds;
Vice President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger & Berman
Equity Assets.
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman
Assistant Vice President, Advisers Management Trust; Assistant
N&B Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer, Neuberger
& Berman Income Trust; Assistant Treasurer,
Neuberger & Berman Equity Funds; Assistant
Treasurer, Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers Trust;
Assistant Treasurer, Equity Managers Trust;
Assistant Treasurer, Global Managers Trust;
Assistant Treasurer, Neuberger & Berman
Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Management; Advisers Management Trust; President and
Principal, Neuberger & Berman Trustee, Advisers Managers Trust; President
and Trustee, Neuberger & Berman Equity
Funds; President and Trustee, Neuberger &
Berman Equity Trust; President and Trustee,
Equity Managers Trust; President, Global
Managers Trust; President and Trustee,
Neuberger & Berman Equity Assets.
The principal address of N&B Management, Neuberger & Berman, and of each
of the investment companies named above, is 605 Third Avenue, New York, New York
10158.
Item 29. Principal Underwriters
- -------- ----------------------
(a) N&B Management, the principal underwriter distributing securities
of the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Assets
Neuberger & Berman Income Funds
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the master funds in
which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
- 19 -
<PAGE>
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
- ---- --------------------- ---------------------
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Assistant Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the
Board, Chief
Executive Officer,
and Trustee
Brian Gaffney Vice President None
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and Director None
Michael J. Hanratty Assistant Vice President None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Robert L. Ladd Assistant Vice President None
Irwin Lainoff Director None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and Secretary None
Paul Metzger Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Vice President None
- 20 -
<PAGE>
Positions and Offices Positions And Offices
Name With Underwriter With Registrant
- ---- --------------------- ---------------------
Richard Russell Vice President Treasurer and
Principal Accounting
Officer
Ingrid Saukaitis Assistant Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Andrea Trachtenberg Vice President of Marketing None
Judith M. Vale Vice President None
Josephine Velez Assistant Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
Item 30. Location of Accounts and Records
- -------- --------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Equity Managers Trust are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Equity Managers Trust's Declaration of Trust and By-laws, minutes
of meetings of Equity Managers Trust's Trustees and interest holders and Equity
Managers Trust's policies and contracts, which are maintained at the offices of
the Equity Managers Trust, 605 Third Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to Global Managers Trust are maintained at the offices of State
- 21 -
<PAGE>
Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
Item 31. Management Services
- -------- -------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings
- -------- ------------
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
- 22 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY TRUST
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 13 to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City and State of New York on the
10th day of December, 1997.
NEUBERGER & BERMAN EQUITY TRUST
By:/s/ Lawrence Zicklin
----------------------------
Lawrence Zicklin*
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 13 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Faith Colish Trustee December 10, 1997
- -------------------------
Faith Colish*
/s/ Donald M. Cox Trustee December 10, 1997
- -------------------------
Donald M. Cox*
/s/ Stanley Egener Chairman of the Board December 10, 1997
- ------------------------- and Trustee (Chief
Stanley Egener* Executive Officer)
/s/ Howard A. Mileaf Trustee December 10, 1997
- -------------------------
Howard A. Mileaf*
/s/ Edward I. O'Brien Trustee December 10, 1997
- -------------------------
Edward I. O'Brien*
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ John T. Patterson, Jr. Trustee December 10, 1997
- --------------------------
John T. Patterson, Jr.*
/s/ John P. Rosenthal Trustee December 10, 1997
- --------------------------
John P. Rosenthal*
/s/ Cornelius T. Ryan Trustee Decmeber 10, 1997
- --------------------------
Cornelius T. Ryan*
/s/ Gustave H. Shubert Trustee December 10, 1997
- --------------------------
Gustave H. Shubert*
/s/ Lawrence Zicklin President and Trustee December 10, 1997
- --------------------------
Lawrence Zicklin*
/s/ Michael J. Weiner Vice President December 10, 1997
- -------------------------- (Principal Financial
Michael J. Weiner* Officer)
/s/ Richard Russell Treasurer (Principal December 10, 1997
- -------------------------- Accounting Officer)
Richard Russell*
* Signatures affixed by Beth A. Stekler pursuant to a Power of Attorney
dated October 24, 1996, and filed herewith.
<PAGE>
POWER OF ATTORNEY
-----------------
NEUBERGER & BERMAN EQUITY TRUST, a Delaware business trust ("Trust"),
and each of its undersigned officers and trustees hereby nominates, constitutes
and appoints Lawrence Zicklin, Michael J. Weiner, Richard M. Phillips, Arthur C.
Delibert, Dana L. Platt, Susan M. Casey and Beth A. Stekler (with full power to
each of them to act alone) its/his/her true and lawful attorney-in-fact and
agent, for it/him/her and on its/his/her behalf and in its/his/her name, place
and stead in any and all capacities, to make, execute and sign the Trust's
Registration Statement on Form N-1A under the Securities Act of 1933 and/or the
Investment Company Act of 1940, any registration statements on Form N-14, and
any and all amendments to such registration statements on Form N-1A or Form
N-14, and to file with the Securities and Exchange Commission, and any other
regulatory authority having jurisdiction over the offer and sale of shares of
the Beneficial Interest of the Trust, any such registration statement or
amendment, and any and all supplements thereto or to any prospectus or statement
of additional information forming a part thereof, and any and all exhibits and
other documents requisite in connection therewith, granting unto said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises as fully
to all intents and purposes as the Trust and the undersigned officers and
trustees itself/themselves might or could do.
IN WITNESS WHEREOF, NEUBERGER & BERMAN EQUITY TRUST has caused this
power of attorney to be executed in its name by its President, and attested by
its Secretary, and the undersigned officers and trustees have hereunto set their
hands and seals this 24th day of October, 1996.
NEUBERGER & BERMAN EQUITY TRUST
By: /s/ Lawrence Zicklin
--------------------------------------
Lawrence Zicklin, President
[SEAL]
ATTEST:
/s/ Claudia A. Brandon
- ------------------------------
Claudia A. Brandon,
Secretary
<PAGE>
Signature Title
--------- -----
/s/ Stanley Egener
- ---------------------------------- Chairman of the Board, Chief
Stanley Egener Executive Officer, and Trustee
/s/ Lawrence Zicklin
- ---------------------------------- President and Trustee
Lawrence Zicklin
/s/ Michael J. Weiner
- ---------------------------------- Vice President and Principal
Michael J. Weiner Financial Officer
/s/ Richard Russell
- ---------------------------------- Treasurer and Principal
Richard Russell Accounting Officer
/s/ Faith Colish
- ---------------------------------- Trustee
Faith Colish
/s/ Donald M. Cox
- ---------------------------------- Trustee
Donald M. Cox
/s/ Alan R. Gruber
- ---------------------------------- Trustee
Alan R. Gruber
/s/ Howard A. Mileaf
- ---------------------------------- Trustee
Howard A. Mileaf
/s/ Edward I. O'Brien
- ---------------------------------- Trustee
Edward I. O'Brien
[signatures continued on next page]
- 2 -
<PAGE>
Signature Title
--------- -----
/s/ John T. Patterson, Jr.
- ---------------------------------- Trustee
John T. Patterson, Jr.
/s/ John P. Rosenthal
- ---------------------------------- Trustee
John P. Rosenthal
/s/ Cornelius T. Ryan
- ---------------------------------- Trustee
Cornelius T. Ryan
/s/ Gustave H. Shubert
- ---------------------------------- Trustee
Gustave H. Shubert
- 3 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of the Post-Effective Amendment No. 13
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 10th day of December 1997.
EQUITY MANAGERS TRUST
By:/s/ Lawrence Zicklin
-----------------------------
Lawrence Zicklin*
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 13 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Faith Colish Trustee December 10, 1997
- -------------------------
Faith Colish*
/s/ Donald M. Cox Trustee December 10, 1997
- -------------------------
Donald M. Cox*
/s/ Stanley Egener Chairman of the Board December 10, 1997
- ------------------------- and Trustee (Chief
Stanley Egener* Executive Officer)
/s/ Howard A. Mileaf Trustee December 10, 1997
- -------------------------
Howard A. Mileaf*
/s/ Edward I. O'Brien Trustee December 10, 1997
- -------------------------
Edward I. O'Brien*
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ John T. Patterson, Jr. Trustee December 10, 1997
- --------------------------
John T. Patterson, Jr.*
/s/ John P. Rosenthal Trustee December 10, 1997
- --------------------------
John P. Rosenthal*
/s/ Cornelius T. Ryan Trustee Decmeber 10, 1997
- --------------------------
Cornelius T. Ryan*
/s/ Gustave H. Shubert Trustee December 10, 1997
- --------------------------
Gustave H. Shubert*
/s/ Lawrence Zicklin President and Trustee December 10, 1997
- --------------------------
Lawrence Zicklin*
/s/ Michael J. Weiner Vice President December 10, 1997
- -------------------------- (Principal Financial
Michael J. Weiner* Officer)
/s/ Richard Russell Treasurer (Principal December 10, 1997
- -------------------------- Accounting Officer)
Richard Russell*
* Signatures affixed by Beth A. Stekler pursuant to a Power of Attorney
dated October 24, 1996, and filed herewith.
<PAGE>
POWER OF ATTORNEY
-----------------
EQUITY MANAGERS TRUST, a New York trust (the "Trust"), and each of its
undersigned officers and trustees hereby nominates, constitutes and appoints
Lawrence Zicklin, Michael J. Weiner, Richard M. Phillips, Arthur C. Delibert,
Susan M. Casey, Dana L. Platt and Beth A. Stekler (with full power to each of
them to act alone) its/his/her true and lawful attorney-in-fact and agent, for
it/him/her and on its/his/her behalf and in its/his/her name, place and stead in
any and all capacities, to make, execute and sign any feeder fund Registration
Statements on Form N-1A under the Securities Act of 1933 and/or the Investment
Company Act of 1940 and any amendments thereto, any amendments to the Trust's
Registration Statement on Form N-1A under the Investment Company Act of 1940,
any registration statements on Form N-14 and any amendments thereto, and to file
with the Securities and Exchange Commission, and any other regulatory authority
having jurisdiction over the offer and sale of shares of such feeder fund, any
such registration statement or amendments, and any and all supplements thereto
or to any prospectus or statement of additional information forming a part
thereof, and any and all exhibits and other documents requisite in connection
therewith, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as the
Trust and the undersigned officers and trustees itself/themselves might or could
do.
IN WITNESS WHEREOF, EQUITY MANAGERS TRUST has caused this power of
attorney to be executed in its name by its President, and attested by its
Secretary, and the undersigned officers and trustees have hereunto set their
hands this 24th day of October, 1996.
EQUITY MANAGERS TRUST
By: /s/ Lawrence Zicklin
------------------------------
Lawrence Zicklin, President
[SEAL]
ATTEST:
/s/ Claudia A. Brandon
- ------------------------------
Claudia A. Brandon,
Secretary
[Signatures Continued on Next Page]
<PAGE>
Signature Title
--------- -----
/s/ Stanley Egener
- ---------------------------------- Chairman of the Board, Chief
Stanley Egener Executive Officer, and Trustee
/s/ Lawrence Zicklin
- ---------------------------------- President and Trustee
Lawrence Zicklin
/s/ Michael J. Weiner
- ---------------------------------- Vice President and Principal
Michael J. Weiner Financial Officer
/s/ Richard Russell
- ---------------------------------- Treasurer and Principal
Richard Russell Accounting Officer
/s/ Faith Colish
- ---------------------------------- Trustee
Faith Colish
/s/ Donald M. Cox
- ---------------------------------- Trustee
Donald M. Cox
/s/ Alan R. Gruber
- ---------------------------------- Trustee
Alan R. Gruber
/s/ Howard A. Mileaf
- ---------------------------------- Trustee
Howard A. Mileaf
/s/ Edward I. O'Brien
- ---------------------------------- Trustee
Edward I. O'Brien
- 2 -
<PAGE>
Signature Title
--------- -----
/s/ John T. Patterson, Jr.
- ---------------------------------- Trustee
John T. Patterson, Jr.
/s/ John P. Rosenthal
- ---------------------------------- Trustee
John P. Rosenthal
/s/ Cornelius T. Ryan
- ---------------------------------- Trustee
Cornelius T. Ryan
/s/ Gustave H. Shubert
- ---------------------------------- Trustee
Gustave H. Shubert
- 3 -
<PAGE>
NEUBERGER & BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 13 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(1) (a) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Trust Instrument of Neuberger & Berman N.A.
Equity Trust. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(c) Schedule A - Current Series of Neuberger & N.A.
Berman Equity Trust. Incorporated by
reference to Post-Effective Amendment No. 12
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000398.
(2) By-laws of Neuberger & Berman Equity Trust. N.A.
Incorporated by Reference to Post-Effective No. 8
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(3) Voting Trust Agreement. None. N.A.
(4) (a) Trust Instrument of Neuberger & N.A.
Berman Equity Trust, Articles IV, V, and
VI. Incorporated by Reference to
Post-Effective No. 8 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-95-000427.
(b) Bylaws of Neuberger & Berman Equity
Trust, Articles V, VI, and VIII.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(5) (a) (i) Management Agreement Between Equity N.A.
Managers Trust and Neuberger & Berman
Management Incorporated. Incorporated
by Reference to Post-Effective
Amendment No. 70 to Registration
Statement of Neuberger & Berman Equity
Funds, File Nos. 2-11357 and 811-582,
Edgar Accession No. 0000898432-000314.
- 23 -
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Managers Trust Currently
Subject to the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(b) (i) Sub-Advisory Agreement Between N.A.
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
LLC with Respect to Equity Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Managers Trust Currently
Subject to the Sub-Advisory
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357
and 811-582, Edgar Accession No.
0000898432-000314.
(c) (i) Management Agreement Between Global N.A.
Managers Trust and Neuberger & Berman
Management, Incorporated by Reference
to Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers N.A.
Trust Currently Subject to the
Management Agreement. Incorporated
by Reference to Post-Effective
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession
No. 0000898432-95-000426.
- 24 -
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(iii) Schedule B - Schedule of Compensation N.A.
Under the Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(d) (i) Sub-Advisory Agreement Between N.A.
Neuberger & Berman Management
Incorporated and Neuberger & Berman,
LLC with Respect to Global Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registrant's Registration Statement,
File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers N.A.
Trust Currently Subject to the
Sub-Advisory Agreement, Incorporated
by Reference to Post-Effective
Amendment No. 74 to Registrant's
Registration Statement, File Nos.
2-11357 and 811-582, Edgar Accession
No. 0000898432-95-000426.
(6) (a) Distribution Agreement Between Neuberger & Berman _____
Equity Trust and Neuberger & Berman Management.
Filed Herewith.
(b) Schedule A - Series of Neuberger & Berman Equity _____
Trust Currently Subject to the Distribution
Agreement. Filed Herewith.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
- 25 -
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(8) (a) Custodian Contract Between Neuberger & N.A.
Berman Equity Trust and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(b) Schedule of Compensation Under the Custodian N.A.
Contract. Incorporated by Reference to
Post-Effective No. 10 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-96-000532.
(c) Agreement Between Neuberger & Berman Equity N.A.
Trust and State Street Bank Trust Company
Adding Neuberger & Berman International
Trust as a Portfolio Governed by the
Custodian Contract. Incorporated by
reference to Post-Effective Amendment No. 12
to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-97-000398.
(9) (a) (i) Transfer Agency and Service Agreement N.A.
Between Neuberger & Berman Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(ii) Agreement Between Neuberger & Berman Equity N.A.
Trust and State Street Bank and Trust
Company Adding Neuberger & Berman NYCDC
Socially Responsive Trust as a Portfolio
Governed by the Transfer Agency Agreement.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(iii) Agreement Between Neuberger & Berman Equity N.A.
Trust and State Street Bank and Trust
Company Adding Neuberger & Berman
International Trust as a Portfolio Governed
by the Transfer Agency Agreement.
Incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-97-000398.
- 26 -
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----
(iv) First Amendment to Transfer Agency and N.A.
Service Agreement between Equity Trust and
State Street Bank and Trust Company.
Incorporated by Reference to Post-Effective
No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784,
Edgar Accession No. 0000898432-95-000427.
(v) Schedule of Compensation under the Transfer N/A.
Agency and Service Agreement. Incorporated
by Reference to Post-Effective No. 10 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-96-000532.
(vi) Second Amendment to Transfer Agency and N.A.
Service Agreement between Equity Trust and
State Street Bank and Trust Company.
Incorporated by reference to Post-Effective
Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368
and 811-7784, Edgar Accession No.
0000898432-97-000398.
(b) (i) Administration Agreement Between Neuberger & ____
Berman Equity Trust and Neuberger & Berman
Management Incorporated. Filed Herewith.
(ii) Schedule A - Series of Neuberger & Berman ____
Equity Trust Currently Subject to the
Administration Agreement. Filed Herewith.
(iii) Schedule B - Schedule of Compensation Under N.A.
the Administration Agreement. Incorporated
by Reference to Post-Effective No. 8 to
Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784, Edgar Accession
No. 0000898432-95-000427.
(10) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP _____
on Securities Matters with Respect to Neuberger &
Berman Equity Trust. Filed Herewith.
(b) Opinion and Consent of Kirkpatrick & Lockhart LLP _____
on securities matters with Respect to Neuberger &
Berman NYCDC Socially Responsive Trust. Filed
Herewith.
(11) (a) Consent of Ernst & Young LLP, Independent _____
Auditors. Filed Herewith.
(b) Consent of Coopers & Lybrand L.L.P., Independent _____
Accountants. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. N.A.
None.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan Pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance N.A.
Quotations. None.
(17) Financial Data Schedule. Filed Herewith. _____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
- 27 -
DISTRIBUTION AGREEMENT
This Agreement is made as of August 3, 1993, between Neuberger &
Berman Equity Trust, a Delaware business trust ("Trust"), and Neuberger & Berman
Management Incorporated, a New York corporation (the "Distributor"), and is
amended as of August 2, 1996.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end, diversified management investment
company and has established several separate series of shares ("Series"), with
each Series having its own assets and investment policies; and
WHEREAS, the Trust desires to retain the Distributor to furnish
distribution services to each Series listed in Schedule A attached hereto, and
to such other Series of the Trust hereinafter established as agreed to from
time to time by the parties, evidenced by an addendum to Schedule A (hereinafter
"Series" shall refer to each Series which is subject to this Agreement and all
agreements and actions described herein to be made or taken by a Series shall be
made or taken by the Trust on behalf of the Series), and the Distributor is
willing to furnish such services,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. The Trust hereby appoints the Distributor as agent to sell the
shares of beneficial interest of each Series (the "Shares") and the Distributor
hereby accepts such appointment. All sales by the Distributor shall be expressly
subject to acceptance by the Trust, acting on behalf of the Series. The Trust
may suspend sales of the Shares of any one or more Series at any time, and may
resume sales at any later time.
<PAGE>
2. (a) The Distributor agrees that (i) all Shares sold by the
Distributor shall be sold at the net asset value ("NAV") thereof as described in
Section 3 hereof, and (ii) the Series shall receive 100% of such NAV.
(b) The Distributor may enter into agreements, in form and
substance satisfactory to the Trust, with dealers selected by the Distributor,
providing for the sale to such dealers and resale by such dealers of Shares at
their NAV.
3. The Trust agrees to supply to the Distributor, promptly after the
time or times at which NAV is determined, on each day on which the New York
Stock Exchange is open for unrestricted trading and on such other days as the
Board of Trustees of the Trust ("Trustees") may from time to time determine
(each such day being hereinafter called a "business day"), a statement of the
NAV of each Series having been determined in the manner set forth in the
then-current Prospectus and Statement of Additional Information ("SAI") of each
Series. Each determination of NAV shall take effect as of such time or times on
each business day as set forth in the then-current Prospectus of each Series.
4. Upon receipt by the Trust at its principal place of business of a
written order from the Distributor, together with delivery instructions, the
Trust shall, if it elects to accept such order, as promptly as practicable,
cause the Shares purchased by such order to be delivered in such amounts and in
such names as the Distributor shall specify, against payment therefor in such
manner as may be acceptable to the Trust. The Trust may, in its discretion,
refuse to accept any order for the purchase of Shares that the Distributor may
tender to it.
- 2 -
<PAGE>
5. (a) All sales literature and advertisements used by the Distributor
in connection with sales of Shares shall be subject to approval by the Trust.
The Trust authorizes the Distributor, in connection with the sale or arranging
for the sale of Shares of any Series, to provide only such information and to
make only such statements or representations as are contained in the Series's
then-current Prospectus and SAI or in such financial and other statements
furnished to the Distributor pursuant to the next paragraph or as may properly
be included in sales literature or advertisements in accordance with the
provisions of the Securities Act of 1933 (the "1933 Act"), the 1940 Act and
applicable rules of self-regulatory organizations. Neither the Trust nor any
Series shall be responsible in any way for any information provided or
statements or representations made by the Distributor or its representatives or
agents other than the information, statements and representations described in
the preceding sentence.
(b) Each Series shall keep the Distributor fully informed with
regard to its affairs, shall furnish the Distributor with a certified copy of
all of its financial statements and a signed copy of each report prepared for it
by its independent auditors, and shall cooperate fully in the efforts of the
Distributor to negotiate and sell Shares of such Series and in the Distributor's
performance of all its duties under this Agreement.
6. The Distributor, as agent of each Series and for the account and
risk of each Series, is authorized, subject to the direction of the Trust, to
redeem outstanding Shares of such Series when properly tendered by shareholders
pursuant to the redemption right granted to such Series's shareholders by the
Trust Instrument of the Trust, as from time to time in effect, at a redemption
price equal to the NAV per Share of such Series next determined after proper
- 3 -
<PAGE>
tender and acceptance. The Trust has delivered to the Distributor a copy of the
Trust's Trust Instrument as currently in effect and agrees to deliver to the
Distributor any amendments thereto promptly upon filing thereof with the Office
of the Secretary of State of the State of Delaware.
7. The Distributor shall assume and pay or reimburse each Series for
the following expenses of such Series: (i) costs of printing and distributing
reports, prospectuses and SAIs for other than existing shareholders used in
connection with the sale or offering of the Series' Shares; (ii) costs of
preparing, printing and distributing all advertising and sales literature
relating to such Series printed at the instruction of the Distributor; and (iii)
counsel fees and expenses in connection with the foregoing. The Distributor
shall pay all its own costs and expenses connected with the sale of Shares.
8. Each Series shall maintain a currently effective Registration
Statement on Form N-1A with respect to such Series and shall file with the
Securities and Exchange Commission ("SEC") such reports and other documents as
may be required under the 1933 Act and the 1940 Act or by the rules and
regulations of the SEC thereunder.
Each Series represents and warrants that the Registration Statement,
post-effective amendments, Prospectus and SAI (excluding statements relating to
the Distributor and the services it provides that are based upon written
information furnished by the Distributor expressly for inclusion therein) of
such Series shall not contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that all statements or information
furnished to the Distributor, pursuant to Section 5(b) hereof, shall be true and
correct in all material respects.
- 4 -
<PAGE>
9. (a) This Agreement, as amended, shall become effective on August 2,
1996 and shall remain in full force and effect until August 2, 1997 and may be
continued from year to year thereafter; PROVIDED, that such continuance shall be
specifically approved each year by the Trustees or by a majority of the
outstanding voting securities of the Series, and in either case, also by a
majority of the Trustees who are not interested persons of the Trust or the
Distributor ("Disinterested Trustees"). This Agreement may be amended as to any
Series with the approval of the Trustees or of a majority of the outstanding
voting securities of such Series; PROVIDED, that in either case, such amendment
also shall be approved by a majority of the Disinterested Trustees.
(b) Either party may terminate this Agreement without the payment
of any penalty, upon not more than sixty days' nor less than thirty days'
written notice delivered personally or mailed by registered mail, postage
prepaid, to the other party; PROVIDED, that in the case of termination by any
Series, such action shall have been authorized (i) by resolution of the
Trustees, or (ii) by vote of a majority of the outstanding voting securities of
such Series, or (iii) by written consent of a majority of the Disinterested
Trustees.
(c) This Agreement shall automatically terminate if it is assigned
by the Distributor.
(d) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
- 5 -
<PAGE>
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "interested persons," "assignment" and "vote of a
majority of the outstanding voting securities," as used in this Agreement, shall
have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition,
when the effect of a requirement of the 1940 Act reflected in any provision of
this Agreement is modified, interpreted or relaxed by a rule, regulation or
order of the SEC, whether of special or of general application, such provision
shall be deemed to incorporate the effect of such rule, regulation or order. The
Trust and the Distributor may from time to time agree on such provisions
interpreting or clarifying the provisions of this Agreement as, in their joint
opinion, are consistent with the general tenor of this Agreement and with the
specific provisions of this Section 9(d). Any such interpretations or
clarifications shall be in writing signed by the parties and annexed hereto, but
no such interpretation or clarification shall be effective if in contravention
of any applicable federal or state law or regulations, and no such
interpretation or clarification shall be deemed to be an amendment of this
Agreement.
No term or provision of this Agreement shall be construed to
require the Distributor to provide distribution services to any series of the
Trust other than the Series, or to require any Series to pay any compensation or
expenses that are properly allocable, in a manner approved by the Trustees, to a
series of the Trust other than such Series.
(e) This Agreement is made and to be principally performed in the
State of New York, and except insofar as the 1940 Act or other federal laws and
regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York.
- 6 -
<PAGE>
(f) This Agreement is made by the Trust solely with respect to the
Series, and the obligations created hereby with respect to one Series bind only
assets belonging to that Series and are not binding on any other series of the
Trust.
10. The Distributor or one of its affiliates may from time to time
deem it desirable to offer to the list of shareholders of each Series the shares
of other mutual funds for which it acts as Distributor, including other series
of the Trust or other products or services; however, any such use of the list of
shareholders of any Series shall be made subject to such terms and conditions,
if any, as shall be approved by a majority of the Disinterested Trustees.
11. The Distributor shall look only to the assets of a Series for the
performance of this Agreement by the Trust on behalf of such Series, and neither
the shareholders, Trustees nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed by their duly authorized officers and under their respective
seals.
NEUBERGER & BERMAN
EQUITY TRUST
By: /s/ Michael J. Weiner
----------------------------
Title: Vice President
-------------------------
- 7 -
<PAGE>
NEUBERGER & BERMAN
MANAGEMENT INCORPORATED
By: /s/ Stanley Egener
----------------------------
Title: President
-------------------------
- 8 -
DISTRIBUTION AGREEMENT
SCHEDULE A
SERIES DATE MADE A PARTY TO AGREEMENT
- ------ ------------------------------
Neuberger & Berman Focus Trust August 3, 1993
Neuberger & Berman Genesis Trust August 3, 1993
Neuberger & Berman Guardian Trust August 3, 1993
Neuberger & Berman Manhattan Trust August 3, 1993
Neuberger & Berman Partners Trust August 3, 1993
Neuberger & Berman NYCDC Socially Responsive March 14, 1994
Trust
ADMINISTRATION AGREEMENT
This Agreement is made as of August 3, 1993, between Neuberger &
Berman Equity Trust, a Delaware business trust ("Trust"), and Neuberger & Berman
Management Incorporated, a New York corporation ("Administrator"), and is
amended as of August 2, 1996.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end, diversified management investment
company and has established several separate series of shares ("Series"), with
each Series having its own assets and investment policies; and
WHEREAS, the Trust desires to retain the Administrator to furnish
administrative services, including shareholder accounting, recordkeeping, and
other services to shareholders, to each Series listed in Schedule A attached
hereto, and to such other Series of the Trust hereinafter established as agreed
to from time to time by the parties, evidenced by an addendum to Schedule A
(hereinafter "Series" shall refer to each Series which is subject to this
Agreement and all agreements and actions described herein to be made or taken by
a Series shall be made or taken by the Trust on behalf of the Series), and the
Administrator is willing to furnish such services,
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties agree as follows:
1. SERVICES OF THE ADMINISTRATOR.
1.1 ADMINISTRATIVE SERVICES. The Administrator shall supervise each
Series's business and affairs and shall provide such services required for
effective administration of such Series as are not provided by employees or
other agents engaged by such Series; PROVIDED, that the Administrator shall not
have any obligation to provide under this Agreement any direct or indirect
services to a Series's shareholders, any services related to the distribution of
a Series's shares, or any other services that are the subject of a separate
agreement or arrangement between a Series and the Administrator. Subject to the
foregoing, in providing administrative services hereunder, the Administrator
shall:
1.1.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without
cost to each Series, or pay the cost of, such office space, office equipment and
office facilities as are adequate for the Series's needs;
1.1.2 PERSONNEL. Provide, without remuneration from or other cost
to each Series, the services of individuals competent to perform all of the
Series's executive, administrative and clerical functions that are not performed
by employees or other agents engaged by the Series or by the Administrator
acting in some other capacity pursuant to a separate agreement or arrangement
with the Series;
- 2 -
<PAGE>
1.1.3 AGENTS. Assist each Series in selecting and coordinating
the activities of the other agents engaged by the Series, including the Series's
shareholder servicing agent, custodian, independent auditors and legal counsel;
1.1.4 TRUSTEES AND OFFICERS. Authorize and permit the
Administrator's directors, officers or employees who may be elected or appointed
as trustees or officers of the Trust to serve in such capacities, without
remuneration from or other cost to the Trust or any Series;
1.1.5 BOOKS AND RECORDS. Assure that all financial, accounting
and other records required to be maintained and preserved by each Series are
maintained and preserved by it or on its behalf in accordance with applicable
laws and regulations; and
1.1.6 REPORTS AND FILINGS. Assist in the preparation of (but not
pay for) all periodic reports by each Series to shareholders of such Series and
all reports and filings required to maintain the registration and qualification
of the Series and the Series's shares, or to meet other regulatory or tax
requirements applicable to the Series, under federal and state securities and
tax laws.
- 3 -
<PAGE>
1.2 SHAREHOLDER AND RELATED SERVICES. The Administrator shall provide
each of the following services as may be required by any Series, its
shareholders (each of which must be either a broker-dealer, pension plan
administrator, or other institution that provides certain accounting,
recordkeeping and other services to its accounts ("Accounts") and which has
entered into an administrative services agreement with the Administrator (each,
an "Institution"), or the Accounts, as specified; PROVIDED, that the
Administrator's obligation to furnish any service to Accounts or Account holders
of any Institution shall be dependent upon receipt of all necessary information
from that Institution:
1.2.1 PURCHASE ORDERS. Receive for acceptance, as agent for the
Series, orders from Institutions and Accounts for the purchase of Series shares
transmitted or delivered to the office of the Administrator, note the time and
date of each order when received, promptly deliver payment for such purchases to
the Series' custodian ("Custodian"), and coordinate with the Series or its
designees for the issuance of the appropriate number of shares so purchased to
the appropriate Institution or Account;
1.2.2 RECORDS. Maintain records of the number of shares of each
Series attributable to each Account (including name, address and taxpayer
- 4 -
<PAGE>
identification number), record all changes to such shares held in each Account
on a daily basis, and furnish to each Series each business day the total number
of shares of such Series attributable to all Accounts;
1.2.3 REDEMPTION REQUESTS. Receive for acceptance requests and
directions from Institutions and Accounts for the redemption of Series shares
transmitted or delivered to the office of the Administrator, note the time and
date of each request when received, process such requests and directions in
accordance with the redemption procedures set forth in the then current
Prospectus and Statement of Additional Information ("SAI") of the Series, and
deliver the appropriate documentation to the Custodian;
1.2.4 WIRE TRANSFERS. Coordinate and implement bank-to-bank wire
transfers in connection with Series share purchases and redemptions by
Institutions;
1.2.5 REDEMPTION PAYMENTS. Upon receipt of monies paid to it by
the Custodian with respect to any redemption of Series shares, pay or cause such
monies to be paid pursuant to instructions by the appropriate Account or
Institution.
1.2.6 EXCHANGES. Receive and execute orders from Accounts and
Institutions to exchange shares by concurrent purchases and redemptions of
shares of a Series and shares of other Series or of other investment companies
or series thereof pursuant to each Series's then current Prospectus and SAI;
- 5 -
<PAGE>
1.2.7 DIVIDENDS. Based upon information received from a Series
regarding dividends or other distributions on Series shares, calculate the
dividend or distribution attributable to each Account; if such dividend or
distribution is payable in shares or by reinvestment in shares, calculate such
shares for each Account and record same in the share records for each Account,
and if such dividend or distribution is payable in cash, upon receipt of monies
therefor from the Custodian, pay or cause such monies to be paid to the
appropriate Account or as such Account may direct;
1.2.8 INQUIRIES. Respond to telephonic, mail, and in-person
inquiries from Institutions, Account holders, or their representatives
requesting information regarding matters such as shareholder account or
transaction status, net asset value ("NAV") of Series shares, Series
performance, Series services, plans and options, Series investment policies,
Series portfolio holdings, and Series distributions and taxation thereof;
1.2.9 COMPLAINTS. Deal with complaints and correspondence of
Institutions and Account holders directed to or brought to the attention of the
Administrator;
- 6 -
<PAGE>
1.2.10 REPORTS; PROXIES. Distribute as appropriate to all Account
holders all Series reports, dividend and distribution notices, and proxy
material relating to any meeting of Series shareholders, and soliciting,
processing and tabulating proxies for such meetings;
1.2.11 SPECIAL REPORTS. Generate or develop and distribute
special data, notices, reports, programs and literature required by Institutions
or by Account holders generally in light of developments, such as changes in tax
laws; and
1.2.12 AGENTS. Assist any institutional servicing agent ("Agent")
engaged by the Series in the development, implementation and maintenance of the
following special programs and systems to enhance each Series's capability to
service its shareholders and Account holders servicing capability:
(a) Training programs for personnel of such Agent;
(b) Joint programs with such Agent for the development of
systems software, shareholder information reports, and other special reports;
- 7 -
<PAGE>
(c) Automatic data exchange facilities with shareholders and
such Agent;
(d) Automated clearing house transfer procedures between
shareholders and such Agent; and
(e) Touch-tone telephone information and transaction systems
for shareholders.
2. EXPENSES OF EACH SERIES.
2.1 EXPENSES TO BE PAID BY THE ADMINISTRATOR. The Administrator shall
pay all salaries, expenses and fees of the officers, trustees, or employees of
the Trust who are officers, directors or employees of the Administrator. If the
Administrator pays or assumes any expenses of the Trust or a Series not required
to be paid or assumed by the Administrator under this Agreement, the
Administrator shall not be obligated hereby to pay or assume the same or any
similar expense in the future; PROVIDED, that nothing herein contained shall be
deemed to relieve the Administrator of any obligation to the Trust or to a
Series under any separate agreement or arrangement between the parties.
2.2 EXPENSES TO BE PAID BY THE SERIES. Each Series shall bear all
expenses of its operation, except those specifically allocated to the
Administrator under this Agreement or under any separate agreement between such
- 8 -
<PAGE>
Series and the Administrator. Expenses to be borne by such Series shall include
both expenses directly attributable to the operation of that Series and the
offering of its shares, as well as the portion of any expenses of the Trust that
is properly allocable to such Series in a manner approved by the trustees of the
Trust ("Trustees"). Subject to any separate agreement or arrangement between the
Trust or a Series and the Administrator, the expenses hereby allocated to each
Series, and not to the Administrator, include, but are not limited to:
2.2.1 CUSTODY. All charges of depositories, custodians, and other
agents for the transfer, receipt, safekeeping, and servicing of its cash,
securities, and other property;
2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including but not limited to the charges of any
shareholder servicing agent, dividend disbursing agent or other agent (other
than the Administrator hereunder) engaged by a Series to service shareholder
accounts;
2.2.3 SHAREHOLDER REPORTS. All expenses of preparing, setting in
type, printing and distributing reports and other communications to shareholders
of a Series;
- 9 -
<PAGE>
2.2.4 PROSPECTUSES. All expenses of preparing, setting in type,
printing and mailing annual or more frequent revisions of a Series's Prospectus
and SAI and any supplements thereto and of supplying them to shareholders of the
Series and Account holders;
2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of computing
a Series's net asset value ("NAV") per share, including any equipment or
services obtained for the purpose of pricing shares or valuing the Series's
investment portfolio;
2.2.6 COMMUNICATIONS. All charges for equipment or services used
for communications between the Administrator or the Series and any custodian,
shareholder servicing agent, portfolio accounting services agent, or other agent
engaged by a Series;
2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services and
expenses of a Series's legal counsel and independent auditors;
2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of Trustees
other than those affiliated with the Administrator, all expenses incurred in
connection with such unaffiliated Trustees' services as Trustees, and all other
expenses of meetings of the Trustees or committees thereof;
- 10 -
<PAGE>
2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to holding
meetings of shareholders, including the printing of notices and proxy materials,
and proxy solicitation therefor;
2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust and each Series under
the 1940 Act and the registration of each Series's shares under the Securities
Act of 1933 (the "1933 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing, and filing of any
Registration Statement, Prospectus and SAI under the 1933 Act or the 1940 Act,
and any amendments or supplements that may be made from time to time;
2.2.11 STATE REGISTRATION FEES. All fees and expenses of
qualifying and maintaining the qualification of the Trust and each Series and of
each Series's shares for sale under securities laws of various states or
jurisdictions, and of registration and qualification of each Series under all
other laws applicable to a Series or its business activities (including
registering the Series as a broker-dealer, or any officer of the Series or any
person as agent or salesman of the Series in any state);
- 11 -
<PAGE>
2.2.12 SHARE CERTIFICATES. All expenses of preparing and
transmitting a Series's share certificates, if any;
2.2.13 CONFIRMATIONS. All expenses incurred in connection with
the issue and transfer of a Series's shares, including the expenses of
confirming all share transactions;
2.2.14 BONDING AND INSURANCE. All expenses of bond, liability,
and other insurance coverage required by law or regulation or deemed advisable
by the Trustees, including, without limitation, such bond, liability and other
insurance expense that may from time to time be allocated to the Series in a
manner approved by the Trustees;
2.2.15 BROKERAGE COMMISSIONS. All brokers' commissions and other
charges incident to the purchase, sale or lending of a Series's portfolio
securities;
2.2.16 TAXES. All taxes or governmental fees payable by or with
respect to a Series to federal, state or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes;
2.2.17 TRADE ASSOCIATION FEES. All fees, dues and other expenses
incurred in connection with a Series's membership in any trade association or
other investment organization;
- 12 -
<PAGE>
2.2.18 NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring
and extraordinary expenses as may arise, including the costs of actions, suits,
or proceedings to which the Series is a party and the expenses a Series may
incur as a result of its legal obligation to provide indemnification to the
Trust's officers, Trustees and agents;
2.2.19 ORGANIZATIONAL EXPENSES. All organizational expenses of
each Series paid or assessed by the Administrator, which such Series shall
reimburse to the Administrator at such time or times and subject to such
condition or conditions as shall be specified in the Prospectus and SAI pursuant
to which such Series makes the initial public offering of its shares; and
2.2.20 INVESTMENT ADVISORY SERVICES. Any fees and expenses for
investment advisory services that may be incurred or contracted for by a Series.
3. ADMINISTRATION FEE.
3.1 FEE. As compensation for all services rendered, facilities
provided and expenses paid or assumed by the Administrator to or for each Series
under this Agreement, such Series shall pay the Administrator an annual fee as
set out in Schedule B to this Agreement.
- 13 -
<PAGE>
3.2 COMPUTATION AND PAYMENT OF FEE. The administration fee shall
accrue on each calendar day, and shall be payable monthly on the first business
day of the next succeeding calendar month. The daily fee accruals for each
Series shall be computed by multiplying the fraction of one divided by the
number of days in the calendar year by the applicable annual administration fee
rate (as set forth in Schedule B hereto), and multiplying this product by the
NAV of such Series, determined in the manner set forth in such Series's
then-current Prospectus, as of the close of business on the last preceding
business day on which such Series's NAV was determined.
3.3 STATE EXPENSE LIMITATION. If in any fiscal year a Series's
operating expenses plus such Series's pro rata portion of the operating expenses
of any portfolio of Equity Managers Trust in which such Series invests all or
substantially all of its assets ("Aggregate Operating Expenses"), which includes
any fees or expense reimbursements payable to the Administrator pursuant to this
Agreement and any compensation payable to the Administrator pursuant to (i) the
Management Agreement between such portfolio and the Administrator, or (ii) any
other agreement or arrangement with respect to such Series, but excluding
interest, taxes, brokerage commissions, litigation and indemnification expenses,
- 14 -
<PAGE>
and other extraordinary expenses not incurred in the ordinary course of such
Series's business) exceed the lowest applicable percentage expense limitation
imposed under the securities law and regulations of any state in which such
Series's shares are qualified for sale (the "State Expense Limitation"), then
the administration fee payable to the Administrator under this Agreement by such
Series shall be reduced by the amount of such excess; PROVIDED, that the
Administrator shall have no obligation hereunder to reimburse the Series for any
such expenses which exceed such administration fee.
Any reduction in the administration fee shall be made monthly, by
annualizing the Aggregate Operating Expenses of such Series for each month as of
the last day of such month. An adjustment shall be made on or before the last
day of the first month of the next succeeding fiscal year if Aggregate Operating
Expenses for such Series's fiscal year do not exceed the State Expense
Limitation or if for such fiscal year there is no applicable State Expense
Limitation.
4. OWNERSHIP OF RECORDS. All records required to be maintained and
preserved by each Series pursuant to the provisions or rules or regulations of
the Securities and Exchange Commission ("SEC") under Section 31(a) of the 1940
Act and maintained and preserved by the Administrator on behalf of such Series
are the property of such Series and shall be surrendered by the Administrator
promptly on request by the Series; PROVIDED, that the Administrator may at its
own expense make and retain copies of any such records.
- 15 -
<PAGE>
5. REPORTS TO ADMINISTRATOR. Each Series shall furnish or otherwise make
available to the Administrator such copies of that Series's Prospectus, SAI,
financial statements, proxy statements, reports, and other information relating
to its business and affairs as the Administrator may, at any time or from time
to time, reasonably require in order to discharge its obligations under this
Agreement.
6. REPORTS TO EACH SERIES. The Administrator shall prepare and furnish to
each Series such reports, statistical data and other information in such form
and at such intervals as such Series may reasonably request.
7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS. All computer programs,
written procedures and similar items developed or acquired and used by the
Administrator in performing its obligations under this Agreement shall be the
property of the Administrator, and no Series will acquire any ownership interest
therein or property rights with respect thereto.
8. CONFIDENTIALITY. The Administrator agrees, on its own behalf and on
behalf of its employees, agents and contractors, to keep confidential any and
all records maintained and other information obtained hereunder which relates to
- 16 -
<PAGE>
any Series or to any of a Series's former, current or prospective shareholders,
EXCEPT that the Administrator may deliver records or divulge information (a)
when requested to do so by duly constituted authorities after prior notification
to and approval in writing by such Series (which approval will not be
unreasonably withheld and may not be withheld by such Series where the
Administrator advises such Series that it may be exposed to civil or criminal
contempt proceedings or other penalties for failure to comply with such request)
or (b) whenever requested in writing to do so by such Series.
9. THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON SERIES' INSTRUCTIONS, LEGAL
OPINIONS, ETC.; SERIES' COMPLIANCE WITH LAWS.
9.1 The Administrator may at any time apply to an officer of the Trust
for instructions, and may consult with legal counsel for a Series or with the
Administrator's own legal counsel, in respect of any matter arising in
connection with this Agreement; and the Administrator shall not be liable for
any action taken or omitted to be taken in good faith in and with due care in
accordance with such instructions or with the advice or opinion of such legal
counsel. The Administrator shall be protected in acting upon any such
instructions, advice or opinion and upon any other paper or document delivered
by a Series or such legal counsel which the Administrator believes to be genuine
- 17 -
<PAGE>
and to have been signed by the proper person or persons, and the Administrator
shall not be held to have notice of any change of status or authority of any
officer or representative of the Trust, until receipt of written notice thereof
from the Series.
9.2 Except as otherwise provided in this Agreement or in any separate
agreement between the parties and except for the accuracy of information
furnished to each Series by the Administrator, each Series assumes full
responsibility for the preparation, contents, filing and distribution of its
Prospectus and SAI, and full responsibility for other documents or actions
required for compliance with all applicable requirements of the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act, and any other applicable laws,
rules and regulations of governmental authorities having jurisdiction over such
Series.
10. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the
freedom of the Administrator or any affiliated person of the Administrator to
render administrative or shareholder services to other investment companies, to
act as administrator to other persons, firms, or corporations, or to engage in
other business activities.
11. LIMITATION OF LIABILITY REGARDING THE TRUST. The Administrator shall
look only to the assets of each Series for performance of this Agreement by the
Trust on behalf of such Series, and neither the Trustees of the Trust
("Trustees") nor any of the Trust's officers, employees or agents, whether past,
present or future shall be personally liable therefor.
- 18 -
<PAGE>
12. INDEMNIFICATION BY SERIES. Each Series shall indemnify the
Administrator and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by the
Administrator that result from: (i) any claim, action, suit or proceeding in
connection with the Administrator's entry into or performance of this Agreement
with respect to such Series; or (ii) any action taken or omission to act
committed by the Administrator in the performance of its obligations hereunder
with respect to such Series; or (iii) any action of the Administrator upon
instructions believed in good faith by it to have been executed by a duly
authorized officer or representative of the Trust with respect to such Series;
PROVIDED, that the Administrator shall not be entitled to such indemnification
in respect of actions or omissions constituting negligence or misconduct on the
part of the Administrator or its employees, agents or contractors. Before
confessing any claim against it which may be subject to indemnification by a
Series hereunder, the Administrator shall give such Series reasonable
opportunity to defend against such claim in its own name or in the name of the
Administrator.
- 19 -
<PAGE>
13. INDEMNIFICATION BY THE ADMINISTRATOR. The Administrator shall indemnify
each Series and hold it harmless from and against any and all losses, damages
and expenses, including reasonable attorneys' fees and expenses, incurred by
such Series which result from: (i) the Administrator's failure to comply with
the terms of this Agreement with respect to such Series; or (ii) the
Administrator's lack of good faith in performing its obligations hereunder with
respect to such Series; or (iii) the Administrator's negligence or misconduct or
its employees, agents or contractors in connection herewith with respect to such
Series. A Series shall not be entitled to such indemnification in respect of
actions or omissions constituting negligence or misconduct on the part of that
Series or its employees, agents or contractors other than the Administrator
unless such negligence or misconduct results from or is accompanied by
negligence or misconduct on the part of the Administrator, any affiliated person
of the Administrator, or any affiliated person of an affiliated person of the
Administrator. Before confessing any claim against it which may be subject to
indemnification hereunder, a Series shall give the Administrator reasonable
opportunity to defend against such claim in its own name or in the name of the
Trust on behalf of such Series.
14. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to
require the Trust or any Series to take any action contrary to the Trust
Instrument or By-laws of the Trust or any applicable law, regulation or order to
- 20 -
<PAGE>
which it is subject or by which it is bound, or to relieve or deprive the
Trustees of their responsibility for and control of the conduct of the business
and affairs of the Series or Trust.
15. TERM OF AGREEMENT. The term of this Agreement, as amended, shall begin
on August 2, 1996 with respect to each Series and, unless sooner terminated as
hereinafter provided, this Agreement shall remain in effect through August 2,
1997. Thereafter, this Agreement shall continue in effect with respect to each
Series from year to year, subject to the termination provisions and all other
terms and conditions hereof; PROVIDED, such continuance with respect to a Series
is approved at least annually by vote or written consent of the Trustees,
including a majority of the Trustees who are not interested persons of either
party hereto ("Disinterested Trustees"); and PROVIDED FURTHER, that the
Administrator shall not have notified a Series in writing at least sixty days
prior to the first expiration date hereof or at least sixty days prior to any
expiration date in any year thereafter that it does not desire such
continuation. The Administrator shall furnish any Series, promptly upon its
request, such information as may reasonably be necessary to evaluate the terms
of this Agreement or any extension, renewal or amendment thereof.
16. AMENDMENT OR ASSIGNMENT OF AGREEMENT. Any amendment to this Agreement
shall be in writing signed by the parties hereto; PROVIDED, that no such
- 21 -
<PAGE>
amendment shall be effective unless authorized on behalf of any Series (i) by
resolution of the Trustees, including the vote or written consent of a majority
of the Disinterested Trustees, or (ii) by vote of a majority of the outstanding
voting securities of such Series. This Agreement shall terminate automatically
and immediately in the event of its assignment; provided, that with the consent
of a Series, the Administrator may subcontract to another person any of its
responsibilities with respect to such Series.
17. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time
by either party hereto, without the payment of any penalty, upon at least sixty
days' prior written notice to the other party; PROVIDED, that in the case of
termination by any Series, such action shall have been authorized (i) by
resolution of the Trustees, including the vote or written consent of the
Disinterested Trustees, or (ii) by vote of a majority of the outstanding voting
securities of such Series.
18. NAME OF A SERIES. Each Series hereby agrees that if the Administrator
shall at any time for any reason cease to serve as administrator to a Series,
such Series shall, if and when requested by the Administrator, eliminate from
such Series's name the name "Neuberger & Berman" and thereafter refrain from
using the name "Neuberger & Berman" or the initials "N&B" in connection with its
business or activities, and the foregoing agreement of each Series shall survive
any termination of this Agreement and any extension or renewal thereof.
- 22 -
<PAGE>
19. INTERPRETATION AND DEFINITION OF TERMS. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by reference to
such term or provision of the 1940 Act and to interpretation thereof, if any, by
the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC validly issued pursuant
to the 1940 Act. Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested persons," "assignment" and "affiliated person,"
as used in this Agreement shall have the meanings assigned to them by Section
2(a) of the 1940 Act. In addition, when the effect of a requirement of the 1940
Act reflected in any provision of this Agreement is modified, interpreted or
relaxed by a rule, regulation or order of the SEC, whether of special or of
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
20. CHOICE OF LAW. This Agreement is made and to be principally performed
in the State of New York, and except insofar as the Act or other federal laws
and regulations may be controlling, this Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of New
York.
- 23 -
<PAGE>
21. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
22. EXECUTION IN COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
NEUBERGER & BERMAN EQUITY TRUST
By /s/ Michael J. Weiner
----------------------------------
Vice President
----------------------------------
Title
- 24 -
<PAGE>
NEUBERGER & BERMAN
MANAGEMENT INCORPORATED
By /s/ Stanley Egener
---------------------------------
President
---------------------------------
Title
- 25 -
NEUBERGER & BERMAN EQUITY TRUST
ADMINISTRATION AGREEMENT
SCHEDULE A
SERIES DATE MADE A PARTY TO AGREEMENT
- ------ ------------------------------
Neuberger & Berman Focus Trust August 3, 1993
Neuberger & Berman Genesis Trust August 3, 1993
Neuberger & Berman Guardian Trust August 3, 1993
Neuberger & Berman Manhattan Trust August 3, 1993
Neuberger & Berman Partners Trust August 3, 1993
Neuberger & Berman NYCDC Socially Responsive March 14, 1994
KIRKPATRICK & LOCKHART
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, D.C. 20036-5891
June 11, 1993
Neuberger & Berman Equity Trust
605 Third Avenue
New York, New York 10158
Dear Sir or Madam:
You have requested our opinion regarding certain matters in connection with
the issuance of shares of beneficial interest ("Shares") of Neuberger & Berman
Trust ("Trust") in the following designated Series: Neuberger & Berman Genesis
Trust; Neuberger & Berman Guardian Trust; Neuberger & Berman Manhattan Trust;
Neuberger & Berman Partners Trust; and Neuberger & Berman Selected Sectors Trust
(each, a "Series").
We have, as counsel, participated in the preparation of the Trust's
organizational documents and in various other matters concerning the Trust. We
have examined copies, either certified or otherwise proved to be genuine, of the
Trust Instrument dated as of May 6, 1993 ("Trust Instrument") and By-Laws of the
Trust, the minutes of meetings of the trustees, and other documents relating to
the organization and operation of the Trust and the Series, and we generally are
familiar with its business. Based on the foregoing, it is our opinion that the
unlimited number of unissued Shares of each Series, which are currently being
registered, may be legally and validly issued from time to time in accordance
with the Trust Instrument and By-Laws of the Trust and subject to compliance
with the Securities Act of 1933, the Investment Company Act of 1940, and
applicable state laws regulated the offer and sale of securities; and when so
issued, such Shares will be legally issued, fully paid, and nonassessable by the
Trust or any Series.
The Trust is a business trust established pursuant to the Delaware Business
Trust Act ("Delaware Act"). The Delaware Act provides that a shareholder of the
Trust is entitled to the same limitation of personal liability extended to
shareholders of for-profit corporations. To the extent that the Trust or any of
its shareholders become subject to the jurisdiction of courts in states which do
not have statutory or other authority limiting the liability of business trust
shareholders, such courts might not apply the Delaware Act and could subject
Trust shareholders to liability.
<PAGE>
Neuberger & Berman Equity Trust
June 11, 1993
Page 2
To guard against this risk, the Trust Instrument: (i) requires that every
written obligation of the Trust contain a statement that such obligation may
only be enforced against the assets of the Trust; however, the omission of such
a disclaimer will not operate to create personal liability for any shareholders;
and (ii) provides for indemnification out of Trust property of any shareholder
held personally liable for the obligations of the Trust. Thus, the risk of a
Trust shareholder incurring financial loss beyond his or her investment because
of shareholder liability is limited to circumstances in which: (i) a court
refuses to apply Delaware law; (ii) no contractual limitation of liability was
in effect; and (iii) the Trust itself would be unable to meet its obligations.
We hereby consent to the filing of this opinion in connection with the
Trust's Registration statement on Form N-1A to be filed with the Securities and
Exchange Commission and to the reference to our firm under the caption "Legal
Counsel" in the Statements of Additional Information incorporated by reference
into the Series' Prospectuses.
Sincerely yours,
KIRKPATRICK & LOCKHART
By: /s/ Alan Roy Dynner
----------------------
Alan Roy Dynner
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036-1800
TELEPHONE: (202) 778-9000
FACSIMILE: (202) 778-9100
December 12, 1997
Neuberger & Berman Equity Trust
605 Third Avenue
New York, New York 10158
Dear Sir or Madam:
Neuberger & Berman Equity Trust ("Trust") is a business trust organized
under the laws of the State of Delaware and governed by a Trust Instrument dated
May 6, 1993. You have requested our opinion regarding the certain matters in
connection with the Trust's issuance of shares of beneficial interest ("Shares")
in its series, Neuberger & Berman NYCDC Socially Responsive Trust ("Fund").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either certified or
otherwise proved to be genuine, of the Trust Instrument and the By-laws of the
Trust, the minutes of meetings of its board of trustees and other documents
relating to its organization and operation, and we are generally familiar with
its business affairs. Based upon the foregoing, it is our opinion that the
Shares of the Fund may be legally and validly issued in accordance with the
Trust's Trust Instrument and By-laws and subject to compliance with the
Securities Act of 1933, the Investment Company Act of 1940 and applicable state
laws regulating the offer and sale of securities; and when so issued, the Shares
will be legally issued, fully paid and non-assessable by the Trust.
The Trust is a business trust established pursuant to the
Delaware Business Trust Act ("Delaware Act"). The Delaware Act provides that a
shareholder of the Trust is entitled to the same limitation of personal
liability extended to shareholders of for-profit corporations. To the extent
that the Trust or any of its shareholders becomes subject to the jurisdiction of
courts in states which do not have statutory or other authority limiting the
liability of business trust shareholders, such courts might not apply the
Delaware Act and could subject Trust shareholders to liability.
To guard against this risk, the Trust Instrument: (i) requires that
every written obligation of the Trust contain a statement that such obligation
may be enforced only against the assets of the Trust; however, the omission of
such a disclaimer will not operate to create personal liability for any
shareholder; and (ii) provides for indemnification out of Trust property of any
shareholder held personally liable, solely by reason of being a shareholder, for
the obligations of the Trust. Thus, the risk of a Trust shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
<PAGE>
limited to circumstances in which: (i) a court refuses to apply Delaware law;
(ii) no contractual limitation of liability is in effect; and (iii) the Trust
itself is unable to meet its obligations.
We express no opinion as to compliance with the Securities Act of 1933,
the Investment Company Act of 1940, or applicable state securities laws in
connection with the sale of Shares.
We hereby consent to the filing of this opinion in connection with
Post-Effective Amendment No. 13 to the Trust's Registration Statement on Form
N-1A (File Nos. 33-64368 and 811-07784) to be filed with the Securities and
Exchange Commission. We also consent to the reference to our firm under the
caption "Legal Counsel" in the Statement of Additional Information filed as part
of the Registration Statement.
Sincerely,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur C. Delibert
--------------------------
Arthur C. Delibert
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Reports to Shareholders", "Independent
Auditors/Accountants" and "Financial Statements" in the Statement of Additional
Information in Post-Effective Amendment Number 13 to the Registration Statement
(Form N-1A No. 33-64368) of Neuberger & Berman Equity Trust, and to the
incorporation by reference of our reports dated October 3, 1997 on 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, and on 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, included in the 1997 Annual Report to
Shareholders of Neuberger & Berman Equity Trust.
/s/ Ernst & Young LLP
--------------------------
ERNST & YOUNG LLP
Boston, Massachusetts
December 8, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Neuberger & Berman Equity Trust and Equity Managers Trust
We consent to the incorporation by reference in Part B. Statement of
Additional Information in Post-Effective Amendment No. 13 to the Registration
Statement on Form N-1A of Neuberger & Berman Equity Trust of our reports dated
October 3, 1997 on our audits of the financial statements and financial
highlights of Neuberger & Berman Manhattan Trust and Portfolio and Neuberger &
Berman NYCDC Socially Responsive Trust and Portfolio, which reports are included
in the Annual Reports to Shareholders for the fiscal year ended August 31, 1997.
We also consent to the reference to our Firm with respect to Neuberger &
Berman Manhattan Trust and Portfolio and Neuberger & Berman NYCDC Socially
Responsive Trust and Portfolio under the captions "Independent
Auditors/Accountants" and "Financial Statements" in Part B of the Registration
Statement.
By: /s/ Coopers & Lybrand, L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 8, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman NYCDC Socially Responsive Trust Annual Report
and is qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN NYCDC SOCIALLY RESPONSIVE TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 188,817
<RECEIVABLES> 133
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 188,965
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 126,113
<SHARES-COMMON-STOCK> 10,717
<SHARES-COMMON-PRIOR> 8,712
<ACCUMULATED-NII-CURRENT> 1,171
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,988
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53,591
<NET-ASSETS> 188,863
<DIVIDEND-INCOME> 2,192
<INTEREST-INCOME> 465
<OTHER-INCOME> 0
<EXPENSES-NET> (931)
<NET-INVESTMENT-INCOME> 1,726
<REALIZED-GAINS-CURRENT> 9,823
<APPREC-INCREASE-CURRENT> 32,327
<NET-CHANGE-FROM-OPS> 43,876
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,442)
<DISTRIBUTIONS-OF-GAINS> (10,729)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,775
<NUMBER-OF-SHARES-REDEEMED> (1,582)
<SHARES-REINVESTED> 812
<NET-CHANGE-IN-ASSETS> 63,227
<ACCUMULATED-NII-PRIOR> 887
<ACCUMULATED-GAINS-PRIOR> 8,918
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,137
<AVERAGE-NET-ASSETS> 155,177
<PER-SHARE-NAV-BEGIN> 14.42
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 4.38
<PER-SHARE-DIVIDEND> (.16)
<PER-SHARE-DISTRIBUTIONS> (1.19)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.62
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Genesis Trust Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> NEUBERGER&BERMAN GENESIS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 377,916
<RECEIVABLES> 5,074
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 383,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 263
<TOTAL-LIABILITIES> 263
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 304,457
<SHARES-COMMON-STOCK> 17,845
<SHARES-COMMON-PRIOR> 4,353
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,817
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 74,463
<NET-ASSETS> 382,737
<DIVIDEND-INCOME> 1,169
<INTEREST-INCOME> 509
<OTHER-INCOME> 0
<EXPENSES-NET> 1,928
<NET-INVESTMENT-INCOME> (250)
<REALIZED-GAINS-CURRENT> 4,157
<APPREC-INCREASE-CURRENT> 62,917
<NET-CHANGE-FROM-OPS> 66,824
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (846)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,306
<NUMBER-OF-SHARES-REDEEMED> (1,865)
<SHARES-REINVESTED> 51
<NET-CHANGE-IN-ASSETS> 317,501
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 764
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,928
<AVERAGE-NET-ASSETS> 153,745
<PER-SHARE-NAV-BEGIN> 14.99
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 6.61
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.45
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Focus Trust Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN FOCUS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 162,588
<RECEIVABLES> 478
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 163,076
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,179
<TOTAL-LIABILITIES> 2,179
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,423
<SHARES-COMMON-STOCK> 7,565
<SHARES-COMMON-PRIOR> 3,750
<ACCUMULATED-NII-CURRENT> 26
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,658
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 34,790
<NET-ASSETS> 160,897
<DIVIDEND-INCOME> 1,018
<INTEREST-INCOME> 92
<OTHER-INCOME> 0
<EXPENSES-NET> 998
<NET-INVESTMENT-INCOME> 112
<REALIZED-GAINS-CURRENT> 3,645
<APPREC-INCREASE-CURRENT> 32,689
<NET-CHANGE-FROM-OPS> 36,446
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (289)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,127
<NUMBER-OF-SHARES-REDEEMED> (2,329)
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 105,284
<ACCUMULATED-NII-PRIOR> 203
<ACCUMULATED-GAINS-PRIOR> (213)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,100
<AVERAGE-NET-ASSETS> 104,360
<PER-SHARE-NAV-BEGIN> 14.83
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 6.49
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.27
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Guardian Trust Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GUARDIAN TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 2,273,339
<RECEIVABLES> 8,866
<ASSETS-OTHER> 9
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,282,214
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,462
<TOTAL-LIABILITIES> 12,462
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,595,175
<SHARES-COMMON-STOCK> 116,563
<SHARES-COMMON-PRIOR> 94,130
<ACCUMULATED-NII-CURRENT> 2,314
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 143,597
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 528,666
<NET-ASSETS> 2,269,752
<DIVIDEND-INCOME> 18,980
<INTEREST-INCOME> 4,903
<OTHER-INCOME> 0
<EXPENSES-NET> (15,563)
<NET-INVESTMENT-INCOME> 8,320
<REALIZED-GAINS-CURRENT> 142,935
<APPREC-INCREASE-CURRENT> 430,378
<NET-CHANGE-FROM-OPS> 581,633
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,986)
<DISTRIBUTIONS-OF-GAINS> (22,820)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,802
<NUMBER-OF-SHARES-REDEEMED> (23,424)
<SHARES-REINVESTED> 2,055
<NET-CHANGE-IN-ASSETS> 929,664
<ACCUMULATED-NII-PRIOR> 3,980
<ACCUMULATED-GAINS-PRIOR> 21,966
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,563
<AVERAGE-NET-ASSETS> 1,769,474
<PER-SHARE-NAV-BEGIN> 14.24
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> 5.48
<PER-SHARE-DIVIDEND> (.10)
<PER-SHARE-DISTRIBUTIONS> (.23)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.47
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extrated from
the Neuberger&Berman Manhattan Trust Annual Report and is qualified in
its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> NEUBERGER&BERMAN MANHATTAN TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 51,010
<RECEIVABLES> 93
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,113
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50
<TOTAL-LIABILITIES> 50
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,722
<SHARES-COMMON-STOCK> 3,237
<SHARES-COMMON-PRIOR> 3,956
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,031
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,310
<NET-ASSETS> 51,063
<DIVIDEND-INCOME> 279
<INTEREST-INCOME> 72
<OTHER-INCOME> 0
<EXPENSES-NET> (483)
<NET-INVESTMENT-INCOME> (132)
<REALIZED-GAINS-CURRENT> 9,993
<APPREC-INCREASE-CURRENT> 4,760
<NET-CHANGE-FROM-OPS> 14,621
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,874)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,312
<NUMBER-OF-SHARES-REDEEMED> (2,257)
<SHARES-REINVESTED> 226
<NET-CHANGE-IN-ASSETS> 2,865
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,635
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 547
<AVERAGE-NET-ASSETS> 44,547
<PER-SHARE-NAV-BEGIN> 12.18
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 4.55
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.92)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.77
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Partners Trust Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN PARTNERS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 470,161
<RECEIVABLES> 1,224
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 471,395
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 821
<TOTAL-LIABILITIES> 821
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 365,560
<SHARES-COMMON-STOCK> 25,035
<SHARES-COMMON-PRIOR> 9,592
<ACCUMULATED-NII-CURRENT> 1,364
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 40,046
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63,604
<NET-ASSETS> 470,574
<DIVIDEND-INCOME> 3,509
<INTEREST-INCOME> 650
<OTHER-INCOME> 0
<EXPENSES-NET> (2,437)
<NET-INVESTMENT-INCOME> 1,722
<REALIZED-GAINS-CURRENT> 41,373
<APPREC-INCREASE-CURRENT> 55,878
<NET-CHANGE-FROM-OPS> 98,973
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (961)
<DISTRIBUTIONS-OF-GAINS> (7,693)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,951
<NUMBER-OF-SHARES-REDEEMED> (6,046)
<SHARES-REINVESTED> 538
<NET-CHANGE-IN-ASSETS> 342,123
<ACCUMULATED-NII-PRIOR> 603
<ACCUMULATED-GAINS-PRIOR> 6,282
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,527
<AVERAGE-NET-ASSETS> 268,435
<PER-SHARE-NAV-BEGIN> 13.39
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> 6.06
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> (.64)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.80
<EXPENSE-RATIO> .91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Focus Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER&BERMAN FOCUS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 1,001,253
<INVESTMENTS-AT-VALUE> 1,588,776
<RECEIVABLES> 14,751
<ASSETS-OTHER> 41
<OTHER-ITEMS-ASSETS> 8
<TOTAL-ASSETS> 1,603,576
<PAYABLE-FOR-SECURITIES> 20,629
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,506
<TOTAL-LIABILITIES> 30,135
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 639,085
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 33,648
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 316,481
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 584,227
<NET-ASSETS> 1,573,441
<DIVIDEND-INCOME> 12,943
<INTEREST-INCOME> 1,187
<OTHER-INCOME> 0
<EXPENSES-NET> (7,011)
<NET-INVESTMENT-INCOME> 7,119
<REALIZED-GAINS-CURRENT> 176,471
<APPREC-INCREASE-CURRENT> 298,137
<NET-CHANGE-FROM-OPS> 481,727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 451,070
<ACCUMULATED-NII-PRIOR> 26,529
<ACCUMULATED-GAINS-PRIOR> 140,010
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,011
<AVERAGE-NET-ASSETS> 1,330,064
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Guardian Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN GUARDIAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 6,199,099
<INVESTMENTS-AT-VALUE> 8,801,318
<RECEIVABLES> 23,202
<ASSETS-OTHER> 198
<OTHER-ITEMS-ASSETS> 13
<TOTAL-ASSETS> 8,824,731
<PAYABLE-FOR-SECURITIES> 49,050
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,474
<TOTAL-LIABILITIES> 66,524
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,580,149
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 256,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,326,183
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,595,358
<NET-ASSETS> 8,758,207
<DIVIDEND-INCOME> 80,759
<INTEREST-INCOME> 20,405
<OTHER-INCOME> 0
<EXPENSES-NET> (34,306)
<NET-INVESTMENT-INCOME> 66,858
<REALIZED-GAINS-CURRENT> 871,150
<APPREC-INCREASE-CURRENT> 1,570,338
<NET-CHANGE-FROM-OPS> 2,508,346
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,525,665
<ACCUMULATED-NII-PRIOR> 189,659
<ACCUMULATED-GAINS-PRIOR> 455,033
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32,887
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,306
<AVERAGE-NET-ASSETS> 7,502,735
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Manhattan Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> NEUBERGER&BERMAN MANHATTAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 522,622
<INVESTMENTS-AT-VALUE> 615,904
<RECEIVABLES> 20,770
<ASSETS-OTHER> 27
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 636,713
<PAYABLE-FOR-SECURITIES> 14,593
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 377
<TOTAL-LIABILITIES> 14,970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 204,678
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7,173
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 316,610
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,282
<NET-ASSETS> 621,743
<DIVIDEND-INCOME> 3,638
<INTEREST-INCOME> 934
<OTHER-INCOME> 0
<EXPENSES-NET> (3,418)
<NET-INVESTMENT-INCOME> 1,154
<REALIZED-GAINS-CURRENT> 180,525
<APPREC-INCREASE-CURRENT> 10,646
<NET-CHANGE-FROM-OPS> 192,325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 54,317
<ACCUMULATED-NII-PRIOR> 6,019
<ACCUMULATED-GAINS-PRIOR> 136,085
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,093
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,418
<AVERAGE-NET-ASSETS> 581,060
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Partners Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER&BERMAN PARTNERS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 2,882,508
<INVESTMENTS-AT-VALUE> 3,584,061
<RECEIVABLES> 30,758
<ASSETS-OTHER> 94
<OTHER-ITEMS-ASSETS> 19
<TOTAL-ASSETS> 3,614,932
<PAYABLE-FOR-SECURITIES> 32,033
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,326
<TOTAL-LIABILITIES> 39,359
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,754,354
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 77,754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,041,912
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 701,553
<NET-ASSETS> 3,575,573
<DIVIDEND-INCOME> 35,022
<INTEREST-INCOME> 6,410
<OTHER-INCOME> 0
<EXPENSES-NET> (13,116)
<NET-INVESTMENT-INCOME> 28,316
<REALIZED-GAINS-CURRENT> 531,668
<APPREC-INCREASE-CURRENT> 473,597
<NET-CHANGE-FROM-OPS> 1,033,581
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,575,970
<ACCUMULATED-NII-PRIOR> 49,438
<ACCUMULATED-GAINS-PRIOR> 510,244
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,498
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,116
<AVERAGE-NET-ASSETS> 2,705,496
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Genesis Portfolio Annual Report and is
qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> NEUBERGER&BERMAN GENESIS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 858,349
<INVESTMENTS-AT-VALUE> 1,130,629
<RECEIVABLES> 551
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 26
<TOTAL-ASSETS> 1,131,225
<PAYABLE-FOR-SECURITIES> 31,635
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,939
<TOTAL-LIABILITIES> 47,574
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 771,893
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,800
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 36,678
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 272,280
<NET-ASSETS> 1,083,651
<DIVIDEND-INCOME> 4,129
<INTEREST-INCOME> 1,749
<OTHER-INCOME> 0
<EXPENSES-NET> (4,150)
<NET-INVESTMENT-INCOME> 1,728
<REALIZED-GAINS-CURRENT> 18,411
<APPREC-INCREASE-CURRENT> 211,059
<NET-CHANGE-FROM-OPS> 231,198
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 823,787
<ACCUMULATED-NII-PRIOR> 1,072
<ACCUMULATED-GAINS-PRIOR> 18,267
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,881
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,150
<AVERAGE-NET-ASSETS> 539,327
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from
the Neuberger&Berman Socially Responsive Portfolio Annual Report
and is qualified in its entirety by reference to such document.
</LEGEND>
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN SOCIALLY RESPONSIVE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 188,564
<INVESTMENTS-AT-VALUE> 255,850
<RECEIVABLES> 3,248
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 259,113
<PAYABLE-FOR-SECURITIES> 2,668
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 164
<TOTAL-LIABILITIES> 2,832
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 160,218
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 4,851
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 23,926
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 67,286
<NET-ASSETS> 256,281
<DIVIDEND-INCOME> 2,881
<INTEREST-INCOME> 612
<OTHER-INCOME> 0
<EXPENSES-NET> (1,279)
<NET-INVESTMENT-INCOME> 2,214
<REALIZED-GAINS-CURRENT> 11,478
<APPREC-INCREASE-CURRENT> 44,043
<NET-CHANGE-FROM-OPS> 57,735
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 97,796
<ACCUMULATED-NII-PRIOR> 2,637
<ACCUMULATED-GAINS-PRIOR> 12,448
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,279
<AVERAGE-NET-ASSETS> 204,186
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
