Neuberger&Berman
INTERNATIONAL TRUST(SERVICEMARK)
A NO-LOAD EQUITY FUND
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Neuberger&Berman INTERNATIONAL TRUST (the "Fund") seeks long-term capital
appreciation through a diversified portfolio consisting primarily of equity
securities of foreign issuers.
YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION THAT PROVIDES ACCOUNTING,
RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE
SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT INCORPORATED (EACH AN
"INSTITUTION").
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The Fund, which is a series of Neuberger&Berman Equity Trust (the
"Trust"), invests all of its net investable assets in Neuberger&Berman
International Portfolio (the "Portfolio") of Global Managers Trust ("Managers
Trust"), an open-end management investment company managed by Neuberger & Berman
Management Incorporated ("N&B Management"). The Portfolio invests in securities
in accordance with an investment objective, policies, and limitations identical
to those of the Fund. The investment performance of the Fund directly
corresponds with the investment performance of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
For more information on this structure that you should consider, see "Summary"
on page 3, and "Information Regarding Organization, Capitalization, and Other
Matters," on page 20.
Please read this Prospectus before investing in the Fund and keep it for
future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 31, 1997, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED DECEMBER 31, 1997, AS AMENDED MAY 22, 1998
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.
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TABLE OF CONTENTS
SUMMARY.....................................................................3
The Fund and Portfolio; Risk Factors..................................3
Management............................................................4
The Neuberger&Berman Investment Approach..............................4
EXPENSE INFORMATION.........................................................6
Shareholder Transaction Expenses......................................6
Annual Fund Operating Expenses........................................6
Example...............................................................7
INVESTMENT PROGRAM..........................................................8
Special Considerations of Mid-Cap Company Stocks......................9
Short-Term Trading; Portfolio Turnover................................9
Borrowings............................................................9
Other Investments....................................................10
PERFORMANCE INFORMATION....................................................11
Total Return Information.............................................11
SHAREHOLDER SERVICES.......................................................12
How To Buy Shares....................................................12
How To Sell Shares...................................................12
Exchanging Shares....................................................13
SHARE PRICES AND NET ASSET VALUE...........................................14
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES..................................15
Distribution Options.................................................15
Taxes ...............................................................15
MANAGEMENT AND ADMINISTRATION..............................................17
Trustees and Officers................................................17
Investment Manager, Administrator, Distributor, and Sub-Adviser......17
Expenses.............................................................18
Transfer Agent.......................................................19
INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS......20
The Fund.............................................................20
The Portfolio........................................................21
DESCRIPTION OF INVESTMENTS.................................................23
DIRECTORY..................................................................30
FUNDS ELIGIBLE FOR EXCHANGE................................................31
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SUMMARY
THE FUND AND PORTFOLIO; RISK FACTORS
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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:
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: SHAREHOLDERS :
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: BUY SHARES IN
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: FUND :
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: INVESTS IN
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: PORTFOLIO :
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: INVESTS IN
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: STOCKS & OTHER SECURITIES :
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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
20. 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 8 and "Description
of Investments" on page 23.
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.
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NEUBERGER&BERMAN
EQUITY TRUST INVESTMENT STYLE PORTFOLIO CHARACTERISTICS
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INTERNATIONAL TRUST Broadly Seeks long-term capital appreciation
diversified, by investing primarily in foreign
medium- to stocks, both in developed economies
large-cap and in emerging markets. Portfolio
international manager seeks undervalued companies in
equity fund. countries with strong potential for
Capitalization growth.
is determined in
relation to the
principal market
in which
securities are
traded.
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MANAGEMENT
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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 17. If you want to know how to buy and sell shares of the Fund or exchange
them for shares of other Neuberger&Berman Funds(REGISTERED) made available
through an Institution, see "Shareholder Services - How to Buy Shares" on page
12, "Shareholder Services - How to Sell Shares" on page 12, and "Shareholder
Services - Exchanging Shares" on page 13, and the policies of the Institution
through which you are purchasing shares.
THE NEUBERGER&BERMAN INVESTMENT APPROACH
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The Portfolio uses an investment process that includes a combination of
country selection and individual security selection primarily based on a
value-oriented investment approach. A value-oriented portfolio manager buys
stocks that are selling for a price that is lower than what the manager believes
they are worth. These include stocks that are currently under-researched or are
temporarily out of favor on Wall Street.
Portfolio managers identify value stocks in several ways. One of the most
common identifiers is a low price-to-earnings ratio -- that is, stocks selling
at multiples of earnings per share that are lower than that of the market as a
whole. Other criteria are high dividend yield, a strong balance sheet and
financial position, a recent company restructuring with the potential to realize
hidden values, strong management, and low price-to-book value (net value of the
company's assets). A value-oriented manager believes that, over time, securities
that are undervalued are more likely to appreciate in price and be subject to
less risk of price decline than securities whose market prices have already
reached their perceived economic values. This approach also contemplates selling
portfolio securities when N&B Management believes they have reached their
potential.
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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
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As shown by this table, the Fund imposes no transaction charges when you
buy or sell Fund shares.
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
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The following table shows anticipated annual operating expenses for the
Fund, which are paid out of the assets of the Fund and which include the Fund's
pro rata portion of the operating expenses of the Portfolio ("Total Operating
Expenses"). "Total Operating Expenses" exclude interest, taxes, brokerage
commissions, and extraordinary expenses.
The Fund pays N&B Management an administration fee based on the Fund's
average daily net assets. The Portfolio pays N&B Management a management fee
based on the Portfolio's average daily net assets; a pro rata portion of this
fee is borne indirectly by the Fund. "Management and Administration Fees" in the
following table are based upon current administration fees for the Fund and
current management fees for the Portfolio and the current expense reimbursement
undertaking. For more information, see "Management and Administration" and the
SAI.
The Fund and Portfolio incur other expenses for things such as accounting
and legal fees, transfer agency fees, custodial fees, printing and furnishing
shareholder statements and Fund reports and compensating trustees who are not
affiliated with N&B Management ("Other Expenses"). "Other Expenses" in the
following table are estimated amounts for the Fund and the Portfolio for the
current fiscal year and assume average daily net assets of $25,000,000. There
can be no assurance that the Fund will achieve that asset level. All expenses
are factored into the Fund's share prices and dividends and are not charged
directly to Fund shareholders.
MANAGEMENT AND 12B-1 OTHER TOTAL
NEUBERGER&BERMAN ADMINISTRATION FEES EXPENSES OPERATING
EQUITY TRUST FEES (ESTIMATED) EXPENSES
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INTERNATIONAL TRUST 1.05%* None 0.75% 1.80%*
*Reflects N&B Management's expense reimbursement undertaking described below.
As set forth in "Expenses" on page 18, N&B Management has voluntarily
undertaken to reimburse the Fund if its Total Operating Expenses exceed certain
limits. Absent the reimbursement, Management and Administration Fees and Total
Operating Expenses would be 1.25% and 2.00%, respectively, of the Fund's average
daily net assets.
For more information, see "Expenses" on page 18.
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EXAMPLE
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To illustrate the effect of Total Operating Expenses, let's assume that
the Fund's annual return is 5% and that it had Total Operating Expenses
described in the table above. For every $1,000 you invested in the Fund, you
would have paid the following amounts of total expenses if you closed your
account at the end of each of the following time periods:
NEUBERGER&BERMAN
EQUITY TRUST 1 YEAR 3 YEARS
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INTERNATIONAL TRUST $18 $57
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
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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 23.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
The investment objective of the Portfolio and Fund is to seek long-term
capital appreciation by investing primarily in a diversified portfolio of equity
securities of foreign issuers. Foreign issuers are issuers organized and doing
business principally outside the United States and include non-U.S. governments,
their agencies, and instrumentalities. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
The Portfolio invests primarily in equity securities of medium- to
large-capitalization companies traded on foreign exchanges. A company's
capitalization is determined in relation to the principal market in which its
securities are traded. The strategy of N&B Management is to select attractive
investment opportunities outside the United States, allocating the Portfolio's
assets among investments in economically mature countries and emerging
industrialized countries. The criteria for security selection focus on companies
with leadership in specific markets or with niches in specific industries that
appear to exhibit positive fundamentals and seem undervalued relative to their
earnings potential or the worth of their assets. At least 65% of the Portfolio's
total assets normally are invested in equity securities of foreign issuers. The
Portfolio may invest more heavily in certain countries than in others. From time
to time, the Portfolio may invest a significant portion of its assets in Japan.
The Portfolio may invest in foreign securities in the form of American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs), International Depositary Receipts (IDRs) or other
similar securities representing an interest in securities of foreign issuers.
Because the Portfolio invests primarily in foreign securities, it may be
subject to greater risks and higher expenses than equity funds that invest
primarily in securities of U.S. issuers. Such risks may be even greater in
emerging industrialized and less developed countries. Most of the securities
held by the Portfolio are denominated in foreign currencies, and the value of
these investments can be adversely affected by fluctuations in foreign currency
values.
The Portfolio may use techniques such as options, futures, forward foreign
currency exchange contracts ("forward contracts"), swaps, and short selling for
hedging purposes and in an attempt to realize income. The Portfolio may use
leverage to facilitate transactions it enters into for hedging purposes. The use
of these strategies may entail special risks.
For more information, see "Special Considerations of Mid-Cap Company
Stocks" below and "Description of Investments" on page 23.
SPECIAL CONSIDERATIONS OF MID-CAP COMPANY STOCKS
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Investments in stocks of medium-capitalization companies ("mid-cap
companies") may present greater opportunities for capital appreciation than
investments in stocks of large-capitalization companies ("large-cap companies").
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However, mid-cap company stocks may have higher risk and volatility. These
stocks generally are not as broadly traded as large-cap company stocks and their
prices thus may fluctuate more widely and abruptly. Any such movements in stocks
held by the Portfolio would be reflected in the Fund's net asset value. Mid-cap
company stocks also are less researched than large-cap company stocks and are
often overlooked in the market.
SHORT-TERM TRADING; PORTFOLIO TURNOVER
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Although the Portfolio does not purchase securities with the intention of
profiting from short-term trading, the Portfolio may sell portfolio securities
when N&B Management believes that such action is advisable. It is anticipated
that the annual turnover rate of the Portfolio normally will not exceed 100%.
BORROWINGS
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The Portfolio has a fundamental policy that it may not borrow money,
except that it may (1) borrow money from banks for temporary or emergency
purposes and for leveraging or investment and (2) enter into reverse repurchase
agreements for any purpose, so long as the aggregate amount of borrowings and
reverse repurchase agreements does not exceed one-third of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than borrowings).
The Portfolio may borrow money from banks to facilitate transactions that
it enters into for hedging purposes, which is a form of leverage. This leverage
may amplify the gains and losses on the Portfolio's investments and changes in
the net asset value of the Fund's shares. Leverage also creates interest
expenses; if those expenses exceed the return on the transactions that the
borrowings facilitate, the Portfolio will be in a worse position than if it had
not borrowed. The use of derivatives in connection with leverage may create the
potential for significant losses. The Portfolio may pledge assets in connection
with permitted borrowings.
OTHER INVESTMENTS
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For temporary defensive purposes, the Portfolio may invest up to 100% of
its total assets in short-term foreign and U.S. investments, such as cash or
cash equivalents, commercial paper, short-term bank obligations, government and
agency securities, and repurchase agreements. The Portfolio may also invest in
such instruments to increase liquidity or to provide collateral to be held in
segregated accounts.
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PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This evens out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
As of the date of this Prospectus, the Fund has no past performance.
However, a mutual fund that is a series of Neuberger&Berman Equity Funds ("N&B
Equity Funds"), which has a name similar to the Fund and the same investment
objective, policies, and limitations as the Fund ("Sister Fund"), also invests
in the Portfolio. The following table shows the average annual total returns of
the Sister Fund for the 1-year period ended August 31, 1997 and for the period
from June 15, 1994 (commencement of operations) to August 31, 1997. The table
also shows a comparison with the EAFE(REGISTERED) Index. The EAFE(REGISTERED)
Index is the Morgan Stanley Capital International Europe, Australasia, Far East
Index, an unmanaged index of non-U.S. equity market performance. Please note
that an index does not take into account any fees or expenses of investing in
the individual securities that it tracks.
AVERAGE ANNUAL TOTAL RETURNS
(PERFORMANCE RESULTS OF THE SISTER FUND)
PERIODS ENDED
AUGUST 31, 1997
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SINCE INCEPTION
1 YEAR INCEPTION DATE
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INTERNATIONAL +24.71% +13.33% 6/15/94
EAFE(REGISTERED) INDEX +9.36 +6.82* N/A
* From the inception date of the Sister Fund.
TOTAL RETURN INFORMATION. You can obtain current performance information
about the Fund by calling N&B Management at 800-877-9700.
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SHAREHOLDER SERVICES
HOW TO BUY SHARES
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YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
INSTITUTION. N&B Management and the Fund do not recommend, endorse, or receive
payments from any Institution. N&B Management compensates Institutions for
services they provide under an administrative services agreement. N&B Management
does not provide investment advice to any Institution or its clients or make
decisions regarding their investments.
Each Institution will establish its own procedures for the purchase of
Fund shares, including minimum initial and additional investments for shares of
the Fund and the acceptable methods of payment for shares. Shares are purchased
at the next price calculated on a day the New York Stock Exchange ("NYSE") is
open, after a purchase order is received and accepted by an Institution.
Investors should consult their Institution to determine the time by which it
must receive an order so that Fund shares can be purchased at that day's price.
Prices for Fund shares are calculated as of the close of regular trading on the
NYSE, usually 4 p.m. Eastern time.
Other Information:
o An Institution must pay for shares it purchases on its clients' behalf
in U.S. dollars.
o The Fund has the right to suspend the offering of its shares for a
period of time. The Fund also has the right to accept or reject a
purchase order in its sole discretion, including certain purchase
orders using an exchange of shares. See "Shareholder Services --
Exchanging Shares."
o The Fund does not issue certificates for shares.
o Some Institutions may charge their clients a fee in connection with
purchases of shares of the Fund.
HOW TO SELL SHARES
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You can sell (redeem) all or some of your Fund shares only through an
account with an Institution. Each Institution will establish its own procedures
for the sale of Fund shares and the payment of redemption proceeds. Shares are
sold at the next price calculated on a day the NYSE is open, after a sales order
is received and accepted by an Institution. Investors should consult their
Institution to determine the time by which it must receive an order so that Fund
shares can be sold at that day's price. Prices for Fund shares are calculated as
of the close of trading on the NYSE, usually 4 p.m. Eastern time.
Other Information:
o 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.
o 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.
o Some Institutions may charge their clients a fee in connection with
redemptions of shares of the Fund.
EXCHANGING SHARES
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Through an account with an Institution, you may be able to exchange shares
of the Fund for shares of another Neuberger&Berman Fund. Each Institution will
establish its own exchange policy and procedures. Shares are exchanged at the
next price calculated on a day the NYSE is open, after an exchange order is
received and accepted by an Institution.
o Shares can be exchanged only between accounts registered in the same
name, address, and taxpayer ID number of the Institution.
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o An exchange can be made only into a fund whose shares are eligible for
sale in the state where the Institution is located.
o An exchange may have tax consequences.
o The Fund may refuse any exchange orders from any Institution if, for
any reason, they are deemed not to be in the best interests of the
Fund and its shareholders.
o The Fund may impose other restrictions on the exchange privilege, or
modify or terminate the privilege, but will try to give each
Institution advance notice whenever it can reasonably do so.
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SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net
asset value ("NAV") per share. The NAVs for the Fund and the Portfolio are
calculated by subtracting liabilities from total assets (in the case of the
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of the Fund, its percentage interest in the Portfolio,
multiplied by the Portfolio's NAV, plus any other assets). The Fund's per share
NAV is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values equity securities at the last sale price on the
principal exchange or in the principal over-the-counter market in which such
securities are traded, as of the close of regular trading on the NYSE on the day
the securities are being valued or, if there are no sales, at the last available
bid price on that day. Debt obligations are valued at the last available bid
price for such securities or, if such prices are not available, at prices for
securities of comparable maturity, quality, and type. Foreign securities are
translated from the local currency into U.S. dollars using current exchange
rates. The Portfolio values all other types of securities and assets, including
restricted securities and securities for which market quotations are not readily
available, by a method that the trustees of Managers Trust believe accurately
reflects fair value.
The Portfolio's portfolio securities are traded primarily in foreign
markets which may be open on days when the NYSE is closed. As a result, the NAV
of the Fund may be significantly affected on days when shareholders have no
access to the Fund.
If N&B Management believes that the price of a security obtained under the
Portfolio's valuation procedures (as described above) does not represent the
amount that the Portfolio reasonably expects to receive on a current sale of the
security, the Portfolio will value the security based on a method that the
trustees of Managers Trust believe accurately reflects fair value.
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DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes, normally in December, substantially all of its share
of any net investment income (net of the Fund's expenses), any net capital gains
from investment transactions, and any net gains from foreign currency
transactions earned or realized by the Portfolio.
DISTRIBUTION OPTIONS
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REINVESTMENT IN SHARES. All dividends and other distributions paid on
shares of the Fund are automatically reinvested in additional shares of the
Fund, unless an Institution elects to receive them in cash. Dividends and other
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
TAXES
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An investment has certain tax consequences, depending on the type of
account through which the investment is made. FOR AN ACCOUNT UNDER A QUALIFIED
RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax
and generally also are subject to state and local income taxes. Distributions
are taxable when they are paid, whether in cash or by reinvestment in additional
Fund shares, except that distributions declared in December to shareholders of
record on a date in that month and paid in the following January are taxable as
if they were paid on December 31 of the year in which the distributions were
declared. Investors who buy Fund shares just before the Fund deducts a dividend
or other distribution from its NAV will pay the full price for the shares and
then receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares in December should
take this into account.
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally taxed as long-term capital gain, no matter how long an
investor has owned Fund shares. Distributions of net capital gain may include
gains from the sale of portfolio securities that appreciated in value before an
investor bought Fund shares. Under the Taxpayer Relief Act of 1997, different
maximum tax rates apply to the Fund's distributions of net capital gain
depending on the Portfolio's holding period.
Every January, the Fund will send each Institution that is a shareholder
therein a statement showing the amount of distributions paid in cash or
reinvested in Fund shares for the previous year. Each Institution will also
receive information showing (1) the portion, if any, of those distributions that
generally is not subject to state and local income taxes in certain states and
(2) capital gain distributions broken down in a manner that will enable
investors or their tax advisers to determine the appropriate rate of capital
gains tax on such distributions.
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.
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When an Institution sells Fund shares, it will receive a confirmation
statement showing the number of shares sold and the price.
OTHER. Every January, Institutions will receive a consolidated
transaction statement for the previous year.
Each Institution is required annually to send each investor in its account
a statement showing the investor's distribution and transaction information for
the previous year. The Fund intends to qualify for treatment as a regulated
investment company for federal income tax purposes so that it will not have to
pay federal income tax on that part of its taxable income and realized gains
that it distributes to its shareholders.
The foregoing is only a summary of some of the important income tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local, or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
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MANAGEMENT AND ADMINISTRATION
TRUSTEES AND OFFICERS
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The trustees of the Trust and the trustees of Managers Trust have
oversight responsibility for the operations of the Fund and the Portfolio,
respectively. The SAI contains general background information about each trustee
and officer of the Trust and of Managers Trust. The trustees and officers of the
Trust and of Managers Trust who are officers and/or directors of N&B Management
and/or principals of Neuberger&Berman serve without compensation from the Fund
or the Portfolio. All trustees of Managers Trust also serve as trustees of the
Trust.
INVESTMENT MANAGER, ADMINISTRATOR,
DISTRIBUTOR, AND SUB-ADVISER
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N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman acts as sub-adviser for the Portfolio and other mutual funds
managed by N&B Management. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $21.2 billion as of
September 30, 1997.
As sub-adviser, Neuberger&Berman furnishes N&B Management with investment
recommendations and research without added cost to the Portfolio. N&B Management
compensates Neuberger&Berman for its costs in connection with those services.
Neuberger&Berman is a member firm of the NYSE and other principal exchanges.
Neuberger&Berman and its affiliates, including N&B Management, manage securities
accounts that had approximately $54.1 billion of assets as of September 30,
1997. All of the voting stock of N&B Management is owned by individuals who are
principals of Neuberger&Berman.
State Street Cayman Trust Company, Ltd., located in George Town, Grand
Cayman, Cayman Islands, British West Indies, provides certain administrative,
fund accounting and transfer agency services for the Portfolio, which has its
principal offices in the Cayman Islands.
Valerie Chang is manager of the Portfolio. Ms. Chang, an Assistant Vice
President of N&B Management and an assistant portfolio manager for the Portfolio
from December 1996 until June 1997, has been responsible for the management of
the Portfolio since June 1997. She served in the investment banking division of
Salomon Brothers and Morgan Stanley & Co., Inc. from 1993 until 1995 and as a
senior securities analyst for TIAA/CREF from 1995 until December 1996.
Neuberger&Berman may act as broker for the Portfolio in the purchase and
sale of portfolio securities and in the purchase and sale of options, and for
those services receives brokerage commissions. In effecting securities
transactions, the Portfolio seeks to obtain the best price and execution of
orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and
employees of N&B Management, together with their families, have invested over
$100 million of their own money in Neuberger&Berman Funds.
To mitigate the possibility that the Portfolio will be adversely affected
by employees' personal trading, the Trust, Managers Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in the
personal accounts of portfolio managers and others who normally come into
possession of information on portfolio transactions.
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YEAR 2000. Like other financial and business organizations, the Fund and
Portfolio could be adversely affected if computer systems they rely on do not
properly process date-related information and data involving the years 2000 and
after. N&B Management and Neuberger&Berman are taking steps that they believe
are reasonable to address this problem in their own computer systems and to
obtain assurances that comparable steps are being taken by the Fund's and
Portfolio's other service providers. N&B Management also attempts to evaluate
the potential impact of this problem on the issuers of investment securities
that the Portfolio purchases. However, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Fund and Portfolio.
EXPENSES
- --------------------------------------------------------------------------------
N&B Management provides investment management services to the Portfolio
that include, among other things, making and implementing investment decisions
and providing facilities and personnel necessary to operate the Portfolio. The
Portfolio pays N&B Management a fee for investment management services at the
annual rate of 0.85% of the first $250 million of the Portfolio's average daily
net assets, 0.825% of the next $250 million, 0.80% of the next $250 million,
0.775% of the next $250 million, 0.75% of the next $500 million, and 0.725% of
average daily net assets in excess of $1.5 billion.
N&B Management provides administrative services to the Fund that include
furnishing facilities and personnel for the Fund and performing accounting,
recordkeeping and other services. For such administrative services, the Fund
pays N&B Management a fee at the annual rate of 0.40% of the Fund's average
daily net assets. With the Fund's consent, N&B Management may subcontract to
Institutions some of its responsibilities to the Fund under the administration
agreement and may compensate each Institution that provides such services at an
annual rate of up to 0.25% of the average net asset value of Fund shares held
through that Institution.
The Fund bears all expenses of its operations other than those borne by
N&B Management as administrator of the Fund and as distributor of its shares.
The Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include the
"Other Expenses" described on page ___.
See "Expense Information -- Annual Fund Operating Expenses" for
information about how these fees and expenses may affect the value of your
investment.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Total Operating Expenses so that the Fund's expense ratio per annum will not
exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the
Fund's average daily net assets. The Fund's per annum "expense ratio" is the sum
of the Fund's Total Operating Expenses divided by the Fund's average daily net
assets for the year. N&B Management may terminate this undertaking to the Fund
by giving at least 60 days' prior written notice to the Fund. The effect of
reimbursement by N&B Management is to reduce the Fund's expenses and thereby
increase its total return.
TRANSFER AGENT
- --------------------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to
Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180.
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INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS
THE FUND
- --------------------------------------------------------------------------------
The Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated as of May 6, 1993. The Trust is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company, commonly known as a mutual
fund. The Trust has seven separate series. The Fund invests all of its net
investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number
of shares of beneficial interest (par value $0.001 per share). Shares of the
Fund represent equal proportionate interests in the assets of the Fund only and
have identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold
annual meetings of shareholders of the Fund. The trustees will call special
meetings of shareholders of the Fund only if required under the 1940 Act or in
their discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund will not be personally liable for the obligations of
the Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of a corporation. To guard against the risk that
Delaware law might not be applied in other states, the Trust Instrument requires
that every written obligation of the Trust or the Fund contain a statement that
such obligation may be enforced only against the assets of the Trust or Fund and
provides for indemnification out of Trust or Fund property of any shareholder
nevertheless held personally liable for Trust or Fund obligations, respectively.
OTHER. Because Fund shares can be bought, owned and sold only through an
account with an Institution, a client of an Institution may be unable to
purchase additional shares and/or may be required to redeem shares (and possibly
incur a tax liability) if the client no longer has a relationship with the
Institution or if the Institution no longer has a contract with N&B Management
to perform services. Depending on the policies of the Institutions involved, an
investor may be able to transfer an account from one Institution to another.
THE PORTFOLIO
- --------------------------------------------------------------------------------
The Portfolio is a separate operating series of Managers Trust, a New York
common law trust organized as of March 18, 1994. Managers Trust is registered
under the 1940 Act as a diversified, open-end management investment company.
Managers Trust currently has one operating Portfolio. The assets of the
Portfolio belong only to the Portfolio, and the liabilities of the Portfolio are
borne solely by the Portfolio and no other.
FUND'S INVESTMENT IN PORTFOLIO. The Fund is a "feeder fund" that seeks to
achieve its investment objective by investing all of its net investable assets
in the Portfolio, which is a "master fund." The Portfolio, which has the same
investment objective, policies, and limitations as the Fund, in turn invests in
securities; the Fund thus acquires an indirect interest in those securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. The Sister Fund invests all of its
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net investable assets in the Portfolio. The shares of the Sister Fund are
available for purchase by members of the general public. The Fund does not sell
its shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or other
institutional investors to invest in the Portfolio. All investors will invest in
the Portfolio on the same terms and conditions as the Fund and will pay a
proportionate share of the Portfolio's expenses. Other investors in the
Portfolio (including the Sister Fund) are not required to sell their shares at
the same public offering price as the Fund, could have a different
administration fee and expenses than the Fund, and (except the Sister Fund)
might charge a sales commission. Therefore, Fund shareholders may have different
returns than shareholders in another investment company that invests exclusively
in the Portfolio. Information regarding any fund that invests in the Portfolio
is available from N&B Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by the
Sister Fund or by other potential investors in addition to the Fund may enable
the Portfolio to realize economies of scale that could reduce its operating
expenses, thereby producing higher returns and benefiting all shareholders.
However, the Fund's investment in the Portfolio may be affected by the actions
of other large investors in the Portfolio, if any. For example, if a large
investor in the Portfolio (other than the Fund) redeemed its interest in the
Portfolio, the Portfolio's remaining investors (including the Fund) might, as a
result, experience higher pro rata operating expenses, thereby producing lower
returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the trustees of the Trust determine that it is in the best interests of
the Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective,
policies, or limitations of the Portfolio in a manner not acceptable to the
trustees of the Trust. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio to the
Fund. That distribution could result in a less diversified portfolio of
investments for the Fund and could affect adversely the liquidity of the Fund's
investment portfolio. If the Fund decided to convert those securities to cash,
it usually would incur brokerage fees or other transaction costs. If the Fund
withdrew its investment from the Portfolio, the trustees of the Trust would
consider what actions might be taken, including the investment of all of the
Fund's net investable assets in another pooled investment entity having
substantially the same investment objective as the Fund or the retention by the
Fund of its own investment manager to manage its assets in accordance with its
investment objective, policies, and limitations. The inability of the Fund to
find a suitable replacement could have a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold
meetings of investors except as required by the 1940 Act. Each investor in the
Portfolio will be entitled to vote in proportion to its relative beneficial
interest in the Portfolio. On most issues subjected to a vote of investors, the
Fund will solicit proxies from its shareholders and will vote its interest in
the Portfolio in proportion to the votes cast by the Fund's shareholders. If
there are other investors in the Portfolio, there can be no assurance that any
issue that receives a majority of the votes cast by Fund shareholders will
receive a majority of votes cast by all Portfolio investors; indeed, if other
investors hold a majority interest in the Portfolio, they could have voting
control of the Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund,
will be liable for all obligations of the Portfolio. However, the risk of an
investor in the Portfolio incurring financial loss beyond the amount of its
investment on account of such liability would be limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
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DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in
"Investment Program" herein, the Portfolio may make the following investments,
among others, individually or in combination, although it may not necessarily
buy all of the types of securities or use all of the investment techniques that
are described. For additional information on the following investments and on
other types of investments which the Portfolio may make, see the SAI.
ILLIQUID, RESTRICTED AND RULE 144A SECURITIES. The Portfolio may invest up
to 15% of its net assets in illiquid securities which are securities that cannot
be expected to be sold within seven days at approximately the price at which
they are valued. These may include unregistered or other restricted securities
and repurchase agreements maturing in greater than seven days. Illiquid
securities may also include commercial paper under section 4(2) of the
Securities Act of 1933, as amended, and Rule 144A securities (restricted
securities that may be traded freely among qualified institutional buyers
pursuant to an exemption from the registration requirements of the securities
laws); these securities are considered illiquid unless N&B Management, acting
pursuant to guidelines established by the trustees of Managers Trust, determines
they are liquid. Generally, foreign securities freely tradable in their
principal market are not considered restricted or illiquid. Illiquid securities
may be difficult for the Portfolio to value or dispose of due to the absence of
an active trading market. The sale of some illiquid securities by the Portfolio
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 invests primarily in foreign securities. The Portfolio
may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or unsponsored) are
receipts typically issued by a U.S. bank or trust company evidencing its
ownership of the underlying foreign securities. Most ADRs are denominated in
U.S. dollars and are traded on a U.S. stock exchange. Issuers of the
securities underlying sponsored ADRs, but not unsponsored ADRs, are
contractually obligated to disclose material information in the United
States. Therefore, the market value of unsponsored ADRs may not reflect the
effect of such information. EDRs and IDRs are receipts typically issued by a
European bank or trust company evidencing its ownership of the underlying
foreign securities. GDRs are receipts issued by either a U.S. or non-U.S.
banking institution evidencing its ownership of the underlying foreign
securities and are often denominated in U.S. dollars.
Factors affecting investments in foreign securities include, but are not
limited to, varying custody, brokerage and settlement practices, which may cause
delays and expose the Portfolio to the creditworthiness of a foreign broker;
difficulty in pricing some foreign securities; less public information about
issuers of securities; less governmental regulation and supervision of issuance
and trading of securities; the unavailability of financial information or the
difficulty of interpreting financial information prepared under foreign
accounting standards; less liquidity and more volatility in foreign securities
markets; the possibility of expropriation, nationalization, or confiscatory
taxation; the imposition of foreign withholding and other taxes; potentially
adverse local political, economic, social, or diplomatic developments;
limitations on the movement of funds or other assets of the Portfolio between
different countries; difficulties in invoking legal process and enforcing
contractual obligations abroad; and the difficulty of assessing economic trends
in foreign countries. Investment in foreign securities also may involve higher
brokerage and custodial expenses than investment in domestic securities.
In addition, investing in foreign securities may involve other risks which
are not ordinarily associated with investing in domestic securities. These risks
include changes in currency exchange rates and currency exchange control
regulations (or other foreign or U.S. laws or restrictions applicable to such
investments) and devaluations of foreign currencies. Some foreign currencies may
be volatile. A decline in the exchange rate between the U.S. dollar and another
currency will reduce the value of portfolio securities denominated in that
currency irrespective of the performance of the underlying investment. In
addition, the Portfolio generally will incur costs in connection with conversion
between various currencies. Investments in depositary receipts (whether or not
denominated in U.S. dollars) may be subject to exchange controls and changes in
rates of exchange with the U.S. dollar because the underlying security is
usually denominated in foreign currency.
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All of the foregoing risks may be intensified in emerging industrialized
and less developed countries.
JAPANESE INVESTMENTS. From time to time, the Portfolio may invest a
significant portion of its assets in securities of Japanese issuers. The
performance of the Portfolio may therefore be significantly affected by events
influencing the Japanese economy and the exchange rate between the Japanese yen
and the U.S. dollar. Japan has experienced a severe recession, including a
decline in real estate values and other events that adversely affected the
balance sheets of many financial institutions and indicate that there may be
structural weaknesses in the Japanese financial system. The effects of this
economic downturn may be felt for a considerable period and are being
exacerbated by the currency exchange rate. Japan is heavily dependent on foreign
oil. Japan is located in a seismically active area, and severe earthquakes may
damage important elements of the country's infrastructure. Japan's economic
prospects may be affected by the political and military situations of its near
neighbors, notably North and South Korea, China and Russia.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its
total assets in the shares of other investment companies. Such investment may be
the most practical or only manner in which the Portfolio can participate in
certain foreign markets because of the expenses involved or because other
vehicles for investing in those countries may not be available at the time the
Portfolio is ready to make an investment. As a shareholder in an investment
company, the Portfolio would bear its pro rata share of that investment
company's expenses. Investment in other funds may involve the payment of
substantial premiums above the value of such issuers' portfolio securities. The
Portfolio does not intend to invest in such funds unless, in the judgment of N&B
Management, the potential benefits of such investment justify the payment of any
applicable premium or sales charge.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into forward
contracts in order to protect against adverse changes in foreign currency
exchange rates. The Portfolio may enter into contracts to purchase foreign
currencies to protect against an anticipated rise in the U.S. dollar price of
securities it intends to purchase. The Portfolio may also enter into contracts
to sell foreign currencies to protect against a decline in the value of its
foreign currency denominated portfolio securities due to a decline in the value
of foreign currencies against the U.S. dollar.
The Portfolio may also enter into forward contracts for non-hedging
purposes when N&B Management anticipates that a foreign currency will appreciate
or depreciate in value, but securities denominated in that currency do not
present attractive investment opportunities and are not held in the Portfolio.
The Portfolio may also engage in proxy-hedging by using forward contracts in one
currency to hedge against fluctuations in the value of securities denominated in
a different currency if N&B Management believes that there is a pattern of
correlation between the two currencies. Proxy-hedges may result in losses if the
currency used to hedge does not perform similarly to the currency in which the
securities are denominated.
PUT AND CALL OPTIONS ON FOREIGN CURRENCIES, SECURITIES, AND SECURITIES
INDICES. The Portfolio may purchase and write put and call options on foreign
currencies to protect against declines in the dollar value of foreign portfolio
securities and against increases in the U.S. dollar cost of foreign securities
to be acquired. The Portfolio may also use options on foreign currencies to
proxy-hedge. In addition, the Portfolio may purchase put and call options on
currencies for non-hedging purposes when N&B Management expects that a currency
will appreciate or depreciate in value, but securities denominated in that
currency do not present attractive investment opportunities and are not held in
the Portfolio. Options on foreign currencies may be traded on U.S. or foreign
exchanges or over-the-counter. Options on foreign currencies which are traded in
the over-the-counter market may be considered illiquid and subject to the
restriction on illiquid securities.
To realize greater income than would be realized on portfolio securities
transactions alone, the Portfolio may purchase and write put and call options on
any securities in which it may invest or options on any securities index based
on securities in which the Portfolio may invest.
The Portfolio will not write a call option on a security or currency
unless it owns the underlying security or currency or has the right to obtain it
at no additional cost. The Portfolio pays brokerage commissions or spreads in
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connection with its options transactions, as well as for purchases and sales of
underlying securities or currencies. The use of options could result in
significant increases in the Portfolio's turnover rate.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolio may
enter into futures contracts on currencies, debt securities, interest rates, and
securities indices and may purchase and sell options on such contracts on both
U.S. and foreign exchanges. The Portfolio may engage in such transactions for
hedging or non-hedging purposes. When the Portfolio purchases or sells a futures
contract it generally becomes obligated to accept or make delivery of the
currencies or securities underlying the contract at a specified price at a
specified future time. The obligations of the parties under a futures contract
are often closed out before the delivery date.
GENERAL RISKS OF OPTIONS, FUTURES AND FORWARD CONTRACTS. The primary risks
in using put and call options, futures contracts, options on futures contracts,
and forward contracts ("Financial Instruments") are (1) imperfect correlation or
no correlation between changes in market value of the securities or currencies
held by the Portfolio and the prices of Financial Instruments; (2) possible lack
of a liquid secondary market for Financial Instruments and the resulting
inability to close out Financial Instruments when desired; (3) the fact that use
of Financial Instruments is a highly specialized activity that involves skills,
techniques, and risks (including price volatility and a high degree of leverage)
different from those associated with selection of the Portfolio's securities;
and (4) the fact that, although use of Financial Instruments for hedging
purposes can reduce the risk of loss, they also can reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
hedged investments. When the Portfolio uses Financial Instruments, the Portfolio
will place cash or appropriate liquid securities in a segregated account, or
will "cover" its position, to the extent required by SEC staff policy. Another
risk of Financial Instruments is the possible inability of the Portfolio to
purchase or sell a security at a time that would otherwise be favorable for it
to do so, or the possible need for the Portfolio to sell a security at a
disadvantageous time, due to its need to maintain cover or to segregate
securities in connection with its use of Financial Instruments. Losses that may
arise from certain futures transactions are potentially unlimited.
SHORT SALES. The Portfolio may attempt to limit exposure to a possible
decline in the market value of portfolio securities through short sales of
securities that N&B Management believes possess volatility characteristics
similar to those being hedged. The Portfolio also may use short sales in an
attempt to realize gain. To effect a short sale, the Portfolio borrows a
security from a brokerage firm to make delivery to the buyer. The Portfolio then
is obligated to replace the borrowed security by purchasing it at the market
price at the time of replacement. Until the security is replaced, the Portfolio
is required to pay the lender any dividends and may be required to pay a premium
or interest.
The Portfolio will realize a gain if the security declines in price
between the date of the short sale and the date on which the Portfolio replaces
the borrowed security. The Portfolio will incur a loss if the price of the
security increases between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium or
interest the Portfolio is required to pay in connection with a short sale. A
short position may be adversely affected by imperfect correlation between
movements in the price of the securities sold short and the securities being
hedged.
The Portfolio also may make short sales against-the-box, in which it sells
securities short only if it owns or has the right to obtain without payment of
additional consideration an equal amount of the same type of securities sold.
FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. In a when-issued or
forward commitment transaction, the Portfolio commits to purchase securities at
a future date (generally within two months) and pays for the securities when
they are delivered. If the seller fails to complete the sale, the Portfolio may
lose the opportunity to obtain a favorable price. When-issued securities or
securities subject to a forward commitment may decline or increase in value
during the period from the Portfolio's investment commitment to the settlement
of the purchase, which may magnify fluctuations in the Fund's NAV.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the
Portfolio buys a security from a Federal Reserve member bank, a foreign bank or
a U.S. branch or agency of a foreign bank, or a securities dealer and
simultaneously agrees to sell it back at a higher price, at a specified date,
usually less than a week later. The underlying securities must fall within the
Portfolio's investment policies and limitations. The Portfolio also may lend
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portfolio securities to banks, brokerage firms, or institutional investors to
earn income. Costs, delays, or losses could result if the selling party to a
repurchase agreement or the borrower of portfolio securities becomes bankrupt or
otherwise defaults. N&B Management monitors the creditworthiness of sellers and
borrowers.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In such a transaction, the Portfolio sells a security to
a bank or securities dealer and simultaneously agrees to repurchase it at a
higher price on a specific date. The Portfolio will place cash or appropriate
liquid securities in a segregated account to cover its obligations under reverse
repurchase agreements. Such transactions may increase fluctuations in the Fund's
NAV and may be viewed as a form of leverage.
OTHER INVESTMENTS. Although the Portfolio invests primarily in common
stocks, when market conditions warrant it may invest in preferred stocks,
securities convertible into or exchangeable for common stocks, U.S. Government
and Agency Securities, investment grade debt securities, or money market
instruments, or may retain assets in cash or cash equivalents.
"Investment grade" debt securities are those receiving one of the four
highest ratings from Moody's, S&P or another nationally recognized statistical
rating organization ("NRSRO") or, if unrated by any NRSRO, deemed comparable by
N&B Management to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest category (Baa) or Comparable
Unrated Securities may be deemed to have speculative characteristics. The value
of the fixed income securities in which the Portfolio may invest is likely to
decline in times of rising market interest rates. Conversely, when rates fall,
the value of the Portfolio's fixed income investments is likely to rise.
U.S. Government Securities are obligations of the U.S. Treasury backed by
the full faith and credit of the United States. U.S. Government Agency
Securities are issued or guaranteed by U.S. Government agencies or by
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association, Fannie Mae (formerly, Federal National Mortgage
Association), Freddie Mac (formerly, Federal Home Loan Mortgage Corporation),
Student Loan Marketing Association (commonly known as "Sallie Mae"), and
Tennessee Valley Authority. Some U.S. Government Agency Securities are supported
by the full faith and credit of the United States, while others may be supported
by the issuer's ability to borrow from the U.S. Treasury, subject to the
Treasury's discretion in certain cases, or only by the credit of the issuer.
U.S. Government Agency Securities include U.S. Government Agency mortgage-backed
securities. The market prices of U.S. Government and Agency Securities are not
guaranteed by the Government.
The Portfolio may invest in domestic and foreign debt securities of any
rating, including those rated below investment grade and Comparable Unrated
Securities. Such securities may be considered predominantly speculative,
although, as debt securities, they generally have priority over equity
securities of the same issuer and are generally better secured. Debt securities
in the lowest rating categories may involve a substantial risk of default or may
be in default. Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuer of such securities to make principal and interest
payments than is the case for higher-grade debt securities. An economic downturn
affecting the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-rated
securities. The Portfolio will invest in such securities only when N&B
Management concludes that the anticipated return to the Portfolio on such an
investment warrants exposure to the additional level of risk. A further
description of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
("S&P") ratings is included in the Appendix to the SAI.
The Portfolio may invest in indexed securities whose values are linked to
currencies, interest rates, commodities, indices, or other financial indicators.
Most indexed securities are short- to intermediate-term fixed income securities
whose values at maturity or interest rates rise or fall according to the change
in one or more specified underlying instruments. The value of indexed securities
may increase or decrease if the underlying instrument appreciates, and they may
have return characteristics similar to direct investment in the underlying
instrument or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself.
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DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue
2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
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FUNDS ELIGIBLE FOR EXCHANGE
EQUITY TRUSTS
Neuberger&Berman Focus 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.
(COPYRIGHT)1997 Neuberger&Berman Management Inc.
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