NEUBERGER&BERMAN
EQUITY TRUST
NEUBERGER&BERMAN GUARDIAN TRUST
Supplement to the Prospectus dated December 15, 1997, as amended April 16, 1998
I. The section "Investment Program" on page 10 of the Prospectus is revised by
adding the following paragraph:
For purposes of managing cash flow, the Portfolio at times may invest
in financial instruments, the return on which is intended to approximate the
performance of a recognized securities index, such as the S&P "500" Index. These
may include options and futures on securities indices, options on such futures,
and instruments structured as investment companies.
II. The following paragraphs are added to the section "Description of
Investments" on page 24 of the Prospectus:
DESCRIPTION OF INVESTMENTS
OTHER INVESTMENT COMPANIES. The Portfolio at times may invest in
instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P "500" Index. As a
shareholder in an investment company, the Portfolio would bear its pro rata
share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. The Portfolio does not intend to invest in such funds
unless, in the judgment of N&B Management, the potential benefits of such
investment justify the payment of any applicable premium or sales charge.
The Portfolio's investment in such securities is limited to (i) 3% of
the total voting stock of any one investment company, (ii) 5% of the Portfolio's
total assets with respect to any one investment company and (iii) 10% of the
Portfolio's total assets in the aggregate.
GENERAL RISKS OF OPTIONS, FUTURES, AND FORWARD CONTRACTS. The Portfolio
may use options and futures on securities indices, and options on such futures,
to increase its exposure to the broad equity markets. Such contracts are often
closed out prior to the delivery date. The primary risks in using put and call
options, futures contracts, and options on futures contracts ("Financial
Instruments") are (1) imperfect correlation or no correlation between changes in
market value of the securities index and the prices of the Financial
Instruments; (2) possible lack of a liquid secondary market for Financial
Instruments and the resulting inability to close them out when desired; and (3)
the fact that the use of Financial Instruments is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of
portfolio securities. When the Portfolio uses Financial Instruments, it will
place cash or appropriate liquid securities in a segregated account or will
"cover" its position, to the extent required by SEC staff policy. Another risk
of Financial Instruments is the possible inability of a 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 a Portfolio to sell a security at a disadvantageous time,
due to its need to maintain cover or to segregate securities in connection with
its use of Financial Instruments. Losses that may arise from certain futures
transactions are potentially unlimited.
The date of this Supplement is October 1, 1998.
<PAGE>
NEUBERGER&BERMAN
EQUITY TRUST
GUARDIAN TRUST
Supplement to the Statement of Additional Information dated December 15, 1997
I. The final paragraph in the section "Investment Information - Investment
Policies and Limitations" (page 4) is
revised to read as follows:
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.
II. The following sections are added to the section "Additional Investment
Information" (beginning on page 5):
Futures Contracts and Options Thereon.
The Portfolio may purchase and sell stock index futures contracts, and
may purchase and sell options thereon. For purposes of managing cash flow, the
managers may use such futures and options to increase the Portfolio's exposure
to the performance of a recognized securities index, such as the S&P "500"
Index.
A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
While futures contracts entered into by the Portfolio will usually be liquidated
in this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
<PAGE>
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
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
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.
<PAGE>
Put and Call Options on Securities Indices.
For purposes of managing cash flow, the Portfolio may purchase put and call
options on securities indices to increase the Portfolio's exposure to the
performance of a recognize securities index, such as the S&P "500" Index . All
securities index options purchased by the Portfolio will be listed and traded on
an exchange.
The Portfolio may write securities index options to close out positions
in such options that it has purchased. The Portfolio currently does not expect
to invest a substantial portion of its assets in securities index options.
Unlike a securities option, which gives the holder the right to
purchase or sell a specified security at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (1) the difference between the exercise price of the
option and the value of the underlying securities index on the exercise date (2)
multiplied by a fixed "index multiplier." A securities index fluctuates with
changes in the market values of the securities included in the index. Options on
stock indices are currently traded on the Chicago Board Options Exchange, the
New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S.
and foreign exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks
similar to those of securities options, as discussed herein.
The date of this Supplement is October 1, 1998.
<PAGE>
NEUBERGER&BERMAN
EQUITY TRUST
NEUBERGER&BERMAN GUARDIAN TRUST
Supplement to the Prospectus dated December 15, 1997, as amended April 16, 1998
I. The section "Investment Program" on page 10 of the Prospectus is revised by
adding the following paragraph:
For purposes of managing cash flow, the Portfolio at times may invest
in financial instruments, the return on which is intended to approximate the
performance of a recognized securities index, such as the S&P "500" Index. These
may include options and futures on securities indices, options on such futures,
and instruments structured as investment companies.
II. The following paragraphs are added to the section "Description of
Investments" on page 24 of the Prospectus:
DESCRIPTION OF INVESTMENTS
OTHER INVESTMENT COMPANIES. The Portfolio at times may invest in
instruments structured as investment companies to gain exposure to the
performance of a recognized securities index, such as the S&P "500" Index. As a
shareholder in an investment company, the Portfolio would bear its pro rata
share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. The Portfolio does not intend to invest in such funds
unless, in the judgment of N&B Management, the potential benefits of such
investment justify the payment of any applicable premium or sales charge.
The Portfolio's investment in such securities is limited to (i) 3% of
the total voting stock of any one investment company, (ii) 5% of the Portfolio's
total assets with respect to any one investment company and (iii) 10% of the
Portfolio's total assets in the aggregate.
GENERAL RISKS OF OPTIONS, FUTURES, AND FORWARD CONTRACTS. The Portfolio
may use options and futures on securities indices, and options on such futures,
to increase its exposure to the broad equity markets. Such contracts are often
closed out prior to the delivery date. The primary risks in using put and call
options, futures contracts, and options on futures contracts ("Financial
Instruments") are (1) imperfect correlation or no correlation between changes in
market value of the securities index and the prices of the Financial
Instruments; (2) possible lack of a liquid secondary market for Financial
Instruments and the resulting inability to close them out when desired; and (3)
the fact that the use of Financial Instruments is a highly specialized activity
that involves skills, techniques, and risks (including price volatility and a
high degree of leverage) different from those associated with selection of
portfolio securities. When the Portfolio uses Financial Instruments, it will
place cash or appropriate liquid securities in a segregated account or will
"cover" its position, to the extent required by SEC staff policy. Another risk
of Financial Instruments is the possible inability of a 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 a Portfolio to sell a security at a disadvantageous time,
due to its need to maintain cover or to segregate securities in connection with
its use of Financial Instruments. Losses that may arise from certain futures
transactions are potentially unlimited.
<PAGE>
III. The paragraph regarding the portfolio management of Neuberger&Berman
Guardian Portfolio in the section "Management and Administration - Investment
Manager, Administrator, Distributor, and Sub-Adviser" (page 18) is revised to
read as follows:
MANAGEMENT AND ADMINISTRATION
Investment Manager, Administrator, Distributor and Sub-Adviser
Kevin L. Risen and Rick White are co-managers of the Portfolio. Mr. Risen
is a Vice President of N&B Management and a principal of Neuberger&Berman. Mr.
Risen has had responsibility for Neuberger&Berman Guardian Portfolio since 1996,
and during the prior year, he was a portfolio manager for Neuberger&Berman. He
was a research analyst at Neuberger&Berman from 1992 to 1995. Mr. White is a
Vice President of N&B Management. He has had responsibility for Neuberger&Berman
Guardian Portfolio since September 1998. From 1989 to September 1998, he was a
portfolio manager for a mutual fund managed by a prominent investment adviser.
The date of this Supplement is October 1, 1998.
<PAGE>
NEUBERGER&BERMAN
EQUITY TRUST
GUARDIAN TRUST
Supplement to the Statement of Additional Information dated December 15, 1997
I. The final paragraph in the section "Investment Information - Investment
Policies and Limitations" (page 4) is revised to read as follows:
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.
II. The following sections are added to the section "Additional Investment
Information" (beginning on page 5):
Futures Contracts and Options Thereon.
The Portfolio may purchase and sell stock index futures contracts, and
may purchase and sell options thereon. For purposes of managing cash flow, the
managers may use such futures and options to increase the Portfolio's exposure
to the performance of a recognized securities index, such as the S&P "500"
Index.
A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual
delivery or acquisition of the underlying securities or currency, in most cases
the contractual obligation is extinguished by being offset before the expiration
of the contract. A futures position is offset by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures contract
calling for delivery in the same month. This may result in a profit or loss.
While futures contracts entered into by the Portfolio will usually be liquidated
in this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
<PAGE>
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
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
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.
<PAGE>
Put and Call Options on Securities Indices.
For purposes of managing cash flow, the Portfolio may purchase put and call
options on securities indices to increase the Portfolio's exposure to the
performance of a recognize securities index, such as the S&P "500" Index . All
securities index options purchased by the Portfolio will be listed and traded on
an exchange.
The Portfolio may write securities index options to close out positions
in such options that it has purchased. The Portfolio currently does not expect
to invest a substantial portion of its assets in securities index options.
Unlike a securities option, which gives the holder the right to
purchase or sell a specified security at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (1) the difference between the exercise price of the
option and the value of the underlying securities index on the exercise date (2)
multiplied by a fixed "index multiplier." A securities index fluctuates with
changes in the market values of the securities included in the index. Options on
stock indices are currently traded on the Chicago Board Options Exchange, the
New York Stock Exchange ("NYSE"), the American Stock Exchange, and other U.S.
and foreign exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks
similar to those of securities options, as discussed herein.
The date of this Supplement is October 1, 1998.
