As filed with the Securities and Exchange Commission on November 30, 1999
1933 Act Registration No. 033-64368
1940 Act Registration No. 811-7784
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ] [ ]
Post-Effective Amendment No. [25] [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. [23] [ X ]
(Check appropriate box or boxes)
NEUBERGER BERMAN EQUITY TRUST
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Neuberger Berman Equity Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 8, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on ________________pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on _______________pursuant to paragraph (a)(2)
Neuberger Berman Equity Trust is a "master/feeder fund." This Post-Effective
Amendment No. 25 includes a signature page for the master fund, Equity Managers
Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 25 ON FORM N-1A
This post-effective amendment consists of the following papers and documents:
Cover Sheet
Contents of Post-Effective Amendment No. 25 on Form N-1A
Neuberger Berman Socially Responsive Trust
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibit Index
No change is intended to be made by this Post-Effective Amendment No. 25 to the
prospectus or statement of additional information for the other series of
Neuberger Berman Equity Trust.
<PAGE>
<PAGE>
[PHOTO] NEUBERGER BERMAN
NEUBERGER BERMAN
SOCIALLY RESPONSIVE TRUST-SM-
- --------------------------------------------------------------------------------
PROSPECTUS DECEMBER 1, 1999
These securities, like the securities of all mutual
funds, have not been approved or disapproved by the
Securities and Exchange Commission, and the Securities
and Exchange Commission has not determined if this
prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
<PAGE>
CONTENTS
- -----------------
<TABLE>
<C> <S>
NEUBERGER BERMAN EQUITY TRUST
PAGE 2 ...... Socially Responsive Trust
YOUR INVESTMENT
8 ...... Maintaining Your Account
10 ...... Share Prices
11 ...... Distributions and Taxes
13 ...... Fund Structure
</TABLE>
The "Neuberger Berman" name and logo are service
marks of Neuberger Berman, LLC. "Neuberger Berman
Management Inc." and the fund name in this
prospectus are either service marks or registered
trademarks of Neuberger Berman Management Inc.
-C-1999 Neuberger Berman Management Inc.
<PAGE>
- ------------------------------------------------------------
[SIDEBAR]
FUND MANAGEMENT
The fund is managed by Neuberger Berman Management Inc., in conjunction with
Neuberger Berman, LLC, as sub-adviser. Together, the firms manage more than
$51.3 billion in total assets (as of September 30, 1999) and continue an asset
management history that began in 1939.
RISK INFORMATION
This prospectus discusses principal risks of investing in fund shares. These
and other risks are discussed in detail in the Statement of Additional
Information (see back cover).
[MAIN TEXT]
THIS FUND:
- - IS DESIGNED FOR INVESTORS WITH LONG-TERM GOALS IN MIND
- - OFFERS YOU THE OPPORTUNITY TO PARTICIPATE IN FINANCIAL MARKETS THROUGH A
PROFESSIONALLY MANAGED STOCK PORTFOLIO
- - ALSO OFFERS THE OPPORTUNITY TO DIVERSIFY YOUR PORTFOLIO WITH A FUND THAT
INVESTS USING A VALUE APPROACH
- - USES A MASTER/FEEDER STRUCTURE IN ITS PORTFOLIO; SEE PAGE 13 FOR INFORMATION
ON HOW IT WORKS
- - CARRIES CERTAIN RISKS, INCLUDING THE RISK THAT YOU COULD LOSE MONEY IF FUND
SHARES ARE WORTH LESS THAN WHAT YOU PAID
- - IS A MUTUAL FUND, NOT A BANK DEPOSIT, AND IS NOT GUARANTEED OR INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY
1
<PAGE>
NEUBERGER BERMAN
SOCIALLY RESPONSIVE TRUST
- --------------------------------------------------------------------------------
[PHOTO]
PORTFOLIO MANAGER JANET PRINDLE
"WE BELIEVE THAT SOUND PRACTICES IN AREAS LIKE EMPLOYMENT AND THE ENVIRONMENT
CAN HAVE A POSITIVE IMPACT ON A COMPANY'S BOTTOM LINE. WE LOOK FOR COMPANIES
THAT MEET VALUE INVESTING CRITERIA AND ALSO SHOW A COMMITMENT TO UPHOLD OR
IMPROVE THEIR STANDARDS OF CORPORATE CITIZENSHIP."
2
<PAGE>
GOAL & STRATEGY
- ------------------------------------------------------------
[SIDEBAR]
SOCIAL INVESTING
Funds that follow social policies seek something in addition to economic
success. They are designed to allow investors to put their money to work and
also support companies that follow principles of good corporate citizenship.
VALUE INVESTING
At any given time, there are companies whose stock prices are below the market
average, based on earnings, book value, or other financial measures. The value
investor examines these companies, searching for those that may rise in price
when other investors realize their worth.
[MAIN TEXT]
[ICON]
THE FUND SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING PRIMARILY IN
SECURITIES OF COMPANIES THAT MEET THE FUND'S FINANCIAL CRITERIA AND
SOCIAL POLICY.
To pursue this goal, the fund invests mainly in common stocks of mid- to
large-capitalization companies. The fund seeks to reduce risk by investing in a
large number of companies across many different industries.
The managers initially screen companies using value investing criteria. They
look for undervalued companies with solid balance sheets, strong management,
consistent cash flows, and other value-related factors. Among companies that
meet these criteria, the managers look for those that show leadership in three
areas:
- - environmental concerns
- - diversity in the work force
- - progressive employment and workplace practices, and community relations
The managers typically also look at a company's record in public health and
the nature of its products. The managers judge firms on their corporate
citizenship overall, considering their accomplishments as well as their
goals. While these judgments are inevitably subjective, the fund endeavors to
avoid companies that derive revenue from alcohol, tobacco, gambling, or
weapons, or that are involved in nuclear power. The fund also does not invest in
any company that derives its total revenue primarily from non-consumer sales
to the military.
The fund normally invests at least 65% of its total assets in accordance with
its social policy. When a stock no longer meets the fund's investment criteria,
the managers will consider selling it.
The fund has the ability to change its goal without shareholder approval,
although it does not currently intend to do so.
Socially Responsive Trust 3
<PAGE>
MAIN RISKS
- ------------------------------------------------------------
[SIDEBAR]
OTHER RISKS
The fund may use certain practices and securities involving additional risks.
Borrowing, securities lending, and derivatives could create leverage, meaning
that certain gains or losses could be amplified, increasing share price
movements. In using certain derivatives to gain stock market exposure for
excess cash holdings, the fund increases its risk of loss. These investments
are not subject to the fund's social policy.
Although they may add diversification, foreign securities can be riskier,
because foreign markets tend to be more volatile and currency exchange rates
fluctuate.
When the fund anticipates adverse market, economic, political or other
conditions, it may temporarily depart from its goal and invest substantially
in high-quality short-term investments. This could help the fund avoid losses
but may mean lost opportunities.
[MAIN TEXT]
[ICON] Most of the fund's performance depends
on what happens in the stock market. The market's behavior is
unpredictable, particularly in the short term. Because of this, the
value of your investment will rise and fall, and you could lose money.
The fund's social policy could cause it to underperform similar funds that do
not have a social policy. Among the reasons for this are:
- - undervalued stocks that don't meet the social criteria could outperform those
that do
- - economic or political changes could make certain companies less attractive for
investment
- - the social policy could cause the fund to sell or avoid stocks that
subsequently perform well
To the extent that the fund emphasizes mid- or large-cap stocks, it takes on
the associated risks. Mid-cap stocks tend to be more volatile than large-cap
stocks, and are usually more sensitive to economic and market factors. At any
given time, one or both groups of stocks may be out of favor with investors.
With a value approach, there is also the risk that stocks may remain undervalued
during a given period. This may happen because value stocks as a category lose
favor with investors compared to growth stocks or because the managers failed to
anticipate which stocks or industries would benefit from changing market or
economic conditions.
4 Neuberger Berman
<PAGE>
PERFORMANCE
- ------------------------------------------------------------
[SIDEBAR]
PERFORMANCE MEASURES
The information on this page provides different measures of the fund's total
return. Total return includes the effect of distributions as well as changes in
share price. The figures assume that all distributions were reinvested in the
fund.
As a frame of reference, the table includes a broad-based market index. The
fund's performance figures include all of its expenses; the index does not
include costs of investment.
[MAIN TEXT]
[ICON] The charts below provide an indication of the risks of investing in
the fund. The bar chart below shows how performance has varied from
year to year. The table below the chart shows what the returns would
equal if you averaged out actual performance over various lengths of
time and compares the return with that of a broad measure of market
performance. This information is based on past performance; it's not
a prediction of future results.
YEAR-BY-YEAR % RETURNS as of 12/31 each year*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1989
90
91
92
93
94
95 38.94%
96 18.50%
97 24.32%
98 14.81%
BEST QUARTER: Q4 '98, up 20.81%
WORST QUARTER: Q3 '98, down 14.33
Year-to-date performance as of 9/30/99: up 0.44%
</TABLE>
AVERAGE ANNUAL TOTAL % RETURNS as of 12/31/98*
<TABLE>
<CAPTION>
Since
Inception
1 Year 3/16/94
<S> <C> <C>
- --------------------------------------------------------------
SOCIALLY RESPONSIVE TRUST 14.81 18.61
S&P 500 Index 28.52 25.00
</TABLE>
The S&P 500 is an unmanaged index of U.S. stocks.
* THE FUND BEGAN OPERATING IN MARCH 1997. PERFORMANCE RESULTS FROM MARCH 1994 TO
MARCH 1997 ARE ACTUALLY THOSE OF ANOTHER NEUBERGER BERMAN FUND THAT BEGAN
OPERATIONS IN 1994, AND INVESTS IN THE SAME PORTFOLIO OF SECURITIES. BECAUSE
THE OLDER FUND HAD MODERATELY LOWER EXPENSES, ITS PERFORMANCE WAS SLIGHTLY
BETTER THAN SOCIALLY RESPONSIVE TRUST WOULD HAVE HAD. THAT OLDER FUND IS NOT
OFFERED IN THIS PROSPECTUS.
Socially Responsive Trust 5
<PAGE>
INVESTOR EXPENSES
- ------------------------------------------------------------
[SIDEBAR]
MANAGEMENT
JANET PRINDLE, a Vice President of Neuberger Berman Management and a Managing
Director of Neuberger Berman, LLC, joined the latter firm in 1977. She has
been managing assets using social criteria since 1990 and has been manager of
the fund since 1994.
ROBERT LADD and INGRID SAUKAITIS are Vice Presidents of Neuberger Berman
Management and have been Associate Managers of the fund since 1997. Ladd has
been a portfolio manager at the firm since 1992 and is a Managing Director of
Neuberger Berman LLC; Saukaitis was project director for a social research
group from 1995 to 1997.
NEUBERGER BERMAN MANAGEMENT is the fund's investment adviser, and in turn
engages Neuberger Berman, LLC to provide management and related services. For
the 12 months ended 8/31/99, the management/administration fees paid to
Neuberger Berman Management were 0.94% of average net assets.
[MAIN TEXT]
[ICON] The fund does not charge you any fees for
buying, selling, or exchanging shares, or for maintaining your
account. Your only fund cost is your share of annual operating
expenses. The expense example can help you compare costs among funds.
FEE TABLE
SHAREHOLDER FEES None
- -------------------------------------------------------
ANNUAL OPERATING EXPENSES (% of average net assets)*
These are deducted from fund assets, so you pay them indirectly.
<TABLE>
<S> <C> <C>
Management fees 0.94
PLUS: Distribution (12b-1) fees 0.10
Other expenses** 0.78
....
EQUALS: Total annual operating expenses 1.82
</TABLE>
* Neuberger Berman Management reimburses certain expenses of the fund so that
its total annual operating expenses are not more than 0.20% above those of
another Neuberger Berman fund, that invests in the same portfolio of
securities. This arrangement does not cover interest taxes, brokerage
commissions, and extraordinary expenses. Neuberger Berman Management can
terminate these arrangements upon sixty days' notice to the fund. The table
includes costs paid by the fund and its share of master portfolio costs. For
more information on master/feeder funds, see "Fund Structure" on page 13.
** At current asset levels, the fund believes "Management Fees" and "Total
annual operating expenses" will be .95% and 1.83% of average net assets for
the current fiscal year. As described above, however, Neuberger Berman
Management has agreed to reimburse certain expenses of the fund so actual
expenses will be lower.
EXPENSE EXAMPLE
The example assumes that you invested $10,000 for the periods shown, that you
earned a hypothetical 5% total return each year, and that the fund's expenses
were those in the table above. Your costs would be the same whether you sold
your shares or continued to hold them at the end of each period. Actual
performance and expenses may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
- -----------------------------------------------------------
Expenses** $185 $573 $985 $2137
</TABLE>
** UNDER THE FUND'S EXPENSE REIMBURSEMENT ARRANGEMENT DESCRIBED IN THE FOOTNOTE
ABOVE, YOUR COSTS FOR THE ONE-, THREE-, FIVE- AND TEN-YEAR PERIODS WOULD BE
$122, $381, $660, AND $1455, RESPECTIVELY.
6 Neuberger Berman
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended August 31, 1997(1) 1998 1999
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Data apply to a single share throughout each year indicated. You can see what the
fund earned (or lost), what it distributed to investors, and how its share price
changed.
Share price (NAV) at beginning of year 10.00 11.43 10.64
PLUS: Income from investment operations
Net investment income -- 0.03 --
Net gains/losses -- realized and unrealized 1.43 (0.71) 3.90
Subtotal: income from investment operations 1.43 (0.68) 3.90
MINUS: Distributions to shareholders
Income dividends -- 0.01 0.03
Capital gain distributions -- 0.10 0.10
Subtotal: distributions to shareholders -- 0.11 0.13
...............................
EQUALS: Share price (NAV) at end of year 11.43 10.64 14.41
- ----------------------------------------------------------------------------------------------
RATIOS (% of average net assets)
The ratios show the fund's expenses and net investment income -- as they actually
are as well as how they would have been if certain expense reimbursement and offset
arrangements had not been in effect.
Net expenses -- actual 1.58(2) 1.20 1.20
Gross expenses(3) 3.33(2) 2.05 1.72
Expenses(4) 1.58(2) 1.20 1.20
Net investment income -- actual 0.06(2) 0.33 0.01
- ----------------------------------------------------------------------------------------------
OTHER DATA
Total return shows how an investment in the fund would have performed over each
year, assuming all distributions were reinvested. The turnover rate reflects how
actively the fund bought and sold securities.
Total return(6) (%) 14.30(5) (6.05) 36.76
Net assets at end of year (in millions of dollars) 7.7 13.4 25.30
Portfolio turnover rate (%) 51 47 53
</TABLE>
The figures above have been audited by PricewaterhouseCoopers LLP, the fund's
independent accountants. Their report, along with full financial statements,
appears in the fund's most recent shareholder report (see back cover).
(1) PERIOD FROM 3/3/97 (BEGINNING OF OPERATIONS) TO 8/31/97.
(2) ANNUALIZED.
(3) SHOWS WHAT THIS RATIO WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE
REIMBURSEMENT.
(4) SHOWS WHAT EXPENSES WOULD HAVE BEEN IF THERE HAD BEEN NO EXPENSE OFFSET
ARRANGEMENTS. THIS CALCULATION IS REQUIRED FOR ALL PERIODS ENDING AFTER
9/1/95.
(5) NOT ANNUALIZED.
(6) WOULD HAVE BEEN LOWER IF NEUBERGER BERMAN MANAGEMENT HAD NOT REIMBURSED
CERTAIN EXPENSES.
Socially Responsive Trust 7
<PAGE>
YOUR INVESTMENT
MAINTAINING YOUR
ACCOUNT
- ------------------------------------------------------------
[SIDEBAR]
YOUR INVESTMENT PROVIDER
The fund shares described in this prospectus are available only through
investment providers such as banks, brokerage firms, workplace retirement
programs, and financial advisers.
The fees and policies outlined in this prospectus are set by the fund and by
Neuberger Berman Management. However, most of the information you'll need for
managing your investment will come from your investment provider. This includes
information on how to buy and sell shares, investor services, and additional
policies.
In exchange for the services it offers, your investment provider may charge
fees, which are generally in addition to those described in this prospectus.
[MAIN TEXT]
To buy or sell shares of the fund described in this prospectus, contact your
investment provider. All investments must be made in U.S. dollars, and
investment checks must be drawn on a U.S. bank. The fund does not issue
certificates for shares.
Most investment providers allow you to take advantage of the Neuberger Berman
fund exchange program, which is designed for moving money from one Neuberger
Berman fund to another through an exchange of shares. However, this privilege
can be withdrawn from any investor that we believe is trying to "time the
market" or is otherwise making exchanges that we judge to be excessive. Frequent
exchanges can interfere with fund management and affect costs and performance
for other shareholders.
Under certain circumstances, the fund reserves the right to:
- - suspend the offering of shares
- - reject any exchange or investment order
- - change, suspend, or revoke the exchange privilege
- - satisfy an order to sell fund shares with securities rather than cash, for
certain very large orders
- - suspend or postpone the redemption of shares on days when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the SEC
8 Neuberger Berman
<PAGE>
- ------------------------------------------------------------
[SIDEBAR]
BUYING SHARES BEFORE
A DISTRIBUTION
The money the fund earns, either as income or as capital gains, is reflected
in its share price until the fund distributes the money. At that time, the
amount of the distribution is deducted from the share price. The amount of
the distribution is either reinvested in additional fund shares or paid to
shareholders in cash.
Because of this, if you buy shares just before the fund makes a distribution,
you'll end up getting some of your investment back as a taxable distribution.
You can avoid this situation by waiting to invest until after the
distribution has been made.
Generally, if you're investing in a tax-advantaged account, there are no tax
consequences to you.
[MAIN TEXT]
The proceeds from the shares you sold are generally sent out the next
business day after your order is executed, and nearly always within three
business days. There are two cases in which proceeds may be delayed beyond
this time:
- - in unusual circumstances where the law allows additional time if needed
- - if a check you wrote to buy shares hasn't cleared by the time you sell those
shares
If you think you may need to sell shares soon after buying them, you can avoid
the check clearing time (which may be up to 15 days) by investing by wire or
certified check.
DISTRIBUTION AND SHAREHOLDER SERVICING FEE -- The fund has adopted a plan
under which it pays 0.10% of its average net assets every year to support
share distribution and/or shareholder servicing. This fee increases the cost
of investing in the fund. Over the long term, it could result in higher
overall costs than other types of sales charges.
Your Investment 9
<PAGE>
SHARE PRICES
- ------------------------------------------------------------
[SIDEBAR]
SHARE PRICE CALCULATIONS
The fund's share price is the total value of its assets minus its
liabilities, divided by the total number of shares. Because the value of the
fund's securities changes every business day, the share price usually changes
as well.
When valuing portfolio securities, the fund uses market prices. However, in
rare cases, events that occur after certain markets have closed may render
these prices unreliable.
When the fund believes a market price does not reflect a security's true
value, the fund may substitute for the market price a fair-value estimate
derived through methods approved by its trustees. The fund may also use these
methods to value certain types of illiquid securities.
[MAIN TEXT]
Because the fund does not have an initial sales charge, the price you pay for
each share of the fund is the fund's net asset value per share. Similarly,
because the fund does not charge any fee for selling shares, the fund pays
you the full share price when you sell shares. Remember that your investment
provider may charge fees for its services.
The fund is open for business every day the New York Stock Exchange is open.
The Exchange is closed on all national holidays and Good Friday; fund shares
will not be priced on those days. In general, every buy or sell order you
place will go through at the next share price to be calculated after your
order has been accepted; check with your investment provider to find out by
what time your order must be received in order to be processed the same day.
The fund calculates its share price as of the end of regular trading on the
Exchange on business days, usually 4:00 p.m. eastern time. Depending on when
your investment provider accepts orders, it's possible that the fund's share
price could change on days when you are unable to buy or sell shares.
Also, because foreign markets may be open on days when U.S. markets are
closed, the value of foreign securities owned by the fund could change on
days when you can't buy or sell fund shares. Remember, though, any purchase
or sale takes place at the next share price calculated after your order is
received.
10 Neuberger Berman
<PAGE>
DISTRIBUTIONS
AND TAXES
- ------------------------------------------------------------
[SIDEBAR]
TAXES AND YOU
The taxes you actually owe on distributions and transactions can vary with
many factors, such as your tax bracket, how long you held your shares and
whether you owe alternative minimum tax.
How can you figure out your tax liability on fund distributions and share
transactions? One helpful tool is the tax statement that your investment
provider sends you every January. It details the distributions you received
during the past year and shows their tax status. A separate statement covers
your share transactions.
Most importantly, consult your tax professional. Everyone's tax situation is
different, and your professional should be able to help you answer any
questions you may have.
[MAIN TEXT]
DISTRIBUTIONS -- The fund pays out to shareholders any net income and net
capital gains. Ordinarily, the fund makes any distributions once a year in
December.
Consult your investment provider about whether your income and capital gain
distributions from the fund will be reinvested in the fund or paid to you in
cash.
HOW DISTRIBUTIONS ARE TAXED -- Except for tax-advantaged retirement accounts,
all fund distributions you receive are generally taxable to you, regardless
of whether you take them in cash or reinvest them. Fund distributions to Roth
IRAs, other individual retirement accounts and qualified retirement plans
generally are tax-free. Eventual withdrawals from a Roth IRA of those amounts
also may be tax-free, while withdrawals from other retirement accounts and
plans generally are subject to tax.
Distributions are taxable in the year you receive them. In some cases,
distributions you receive in January are taxable as if they had been paid the
previous year. Your tax statement (see sidebar) will help clarify this for you.
Income distributions and short-term capital gain distributions are generally
taxed as regular income. Distributions of other capital gains are generally
taxed as long-term capital gains. The tax treatment of capital gain
distributions depends on how long the fund held the securities it sold, not when
you bought your shares of the fund or whether you reinvested your distributions.
Your Investment 11
<PAGE>
DISTRIBUTIONS
AND TAXES CONTINUED
- -------------------------------------------------------------------
[SIDEBAR]
EURO AND YEAR 2000 ISSUES
Like other mutual funds, the fund could be affected by problems relating to
the conversion of European currencies into the Euro, which extends from
1/1/99 to 7/1/02, and the ability of computer systems to recognize the
year 2000.
At Neuberger Berman, we are taking steps to ensure that our own computer
systems are compliant with Euro and Year 2000 issues and to determine that the
systems used by our major service providers are also compliant. We are also
making efforts to determine whether companies in the fund's portfolio will be
affected by either issue.
At the same time, it is impossible to know whether these problems, which could
disrupt fund operations and investments if uncorrected, have been adequately
addressed until the dates in question arrive.
[MAIN TEXT]
HOW SHARE TRANSACTIONS ARE TAXED -- When you sell fund shares, you generally
realize a gain or loss. The exception, once again, is tax-advantaged
retirement accounts.
UNCASHED CHECKS -- When you receive a check, you may want to deposit or
cash it right away, as you will not receive interest on uncashed checks.
12 Neuberger Berman
<PAGE>
FUND STRUCTURE
- ------------------------------------------------------------
The fund uses a "master/feeder" structure.
Rather than investing directly in securities, the fund is a "feeder fund,"
meaning that it invests in a corresponding "master portfolio." The master
portfolio in turn invests in securities, using the strategies described in this
prospectus. One potential benefit of this structure is lower costs, since the
expenses of the master portfolio can be shared with any other feeder funds. In
this prospectus we have used the word "fund" to mean the feeder fund and its
master portfolio.
For reasons relating to costs or a change in investment goal, among others, the
feeder fund could switch to another master portfolio or decide to manage its
assets itself. The fund is not currently contemplating such a move.
Your Investment 13
<PAGE>
- ------------------------------------------------------------
OBTAINING INFORMATION
You can obtain a shareholder report, SAI, and other information from your
investment provider, or from:
NEUBERGER BERMAN
MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800-877-9700
212-476-8800
Broker/Dealer and
Institutional Services:
800-366-6264
Web site:
www.nbfunds.com
Email:
[email protected]
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549-6009
800-SEC-0330 (Public
Reference Section)
Web site:
www.sec.gov
You can request copies of documents from the SEC for the cost of a duplicating
fee, or view documents at the SEC's Public Reference Room in Washington.
NEUBERGER BERMAN SOCIALLY RESPONSIVE TRUST
- - No load
- - No front-end sales charge
If you'd like further details about this fund, you can request a free copy
of the following documents:
SHAREHOLDER REPORTS -- Published twice a year, the shareholder reports offer
information about the fund's recent performance, including:
- - a discussion by the portfolio managers about strategies and market conditions
- - fund performance data and financial statements
- - complete portfolio holdings
STATEMENT OF ADDITIONAL INFORMATION -- The SAI contains more comprehensive
information about this fund, including:
- - various types of securities and practices, and their risks
- - investment limitations and additional policies
- - information about the fund's management and business structure
The SAI is hereby incorporated by reference into this prospectus, making it
legally part of the prospectus.
Investment manager:
NEUBERGER BERMAN MANAGEMENT INC.
Sub-adviser:
NEUBERGER BERMAN, LLC
[LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue
New York, NY 10158-0180
[RECYCLE LOGO] NMLRX0450999 SEC file number: 811-7784
<PAGE>
- --------------------------------------------------------------------------------
NEUBERGER BERMAN SOCIALLY RESPONSIVE TRUST
AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 1, 1999
A NO-LOAD MUTUAL FUND
605 THIRD AVENUE, 2ND FLOOR, NEW YORK, NY 10158-0180
- --------------------------------------------------------------------------------
NEUBERGER BERMAN SOCIALLY RESPONSIVE TRUST ("FUND"), A SERIES OF
NEUBERGER BERMAN EQUITY TRUST ("TRUST"), IS A NO-LOAD MUTUAL FUND THAT OFFERS
SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER 1, 1999. THE FUND INVESTS ALL OF
ITS NET INVESTABLE ASSETS IN NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO
("PORTFOLIO").
An investor can buy, own, and sell Fund shares ONLY through an
account with an administrator, broker-dealer, or other institution that provides
accounting, recordkeeping, and other services to investors and that has an
administrative services agreement with Neuberger Berman Management Inc. (each an
"Institution").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from Neuberger Berman Management Inc. ("NB Management"), Institutional
Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180, or by calling
800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the fund and portfolio names in this SAI
are either service marks or registered trademarks of Neuberger Berman Management
Inc. (C)1999 Neuberger Berman Management Inc.
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TABLE OF CONTENTS
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INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations....................................1
Investment Insight.....................................................4
Additional Investment Information......................................6
PERFORMANCE INFORMATION.....................................................21
Total Return Computations.............................................21
Comparative Information...............................................21
Other Performance Information.........................................22
CERTAIN RISK CONSIDERATIONS.................................................23
TRUSTEES AND OFFICERS.......................................................23
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................28
Investment Manager and Administrator..................................28
Management and Administration Fees....................................28
Sub-Adviser...........................................................30
Investment Companies Managed..........................................31
Management and Control of NB Management...............................33
DISTRIBUTION ARRANGEMENTS...................................................33
Rule 12b-1 Plan.......................................................34
ADDITIONAL PURCHASE INFORMATION.............................................35
Share Prices and Net Asset Value......................................35
ADDITIONAL EXCHANGE INFORMATION.............................................35
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ADDITIONAL REDEMPTION INFORMATION...........................................36
Suspension of Redemptions.............................................36
Redemptions in Kind...................................................37
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................37
ADDITIONAL TAX INFORMATION..................................................37
Taxation of the Fund..................................................37
Taxation of the Portfolio.............................................38
PORTFOLIO TRANSACTIONS......................................................41
Portfolio Turnover....................................................45
REPORTS TO SHAREHOLDERS.....................................................45
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS..............................45
CUSTODIAN AND TRANSFER AGENT................................................48
INDEPENDENT ACCOUNTANTS.....................................................48
LEGAL COUNSEL...............................................................48
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................48
REGISTRATION STATEMENT......................................................49
FINANCIAL STATEMENTS........................................................49
Appendix A...................................................................1
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER........................1
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INVESTMENT INFORMATION
The Fund is a separate operating series of the Trust, a Delaware
business trust that is registered with the Securities and Exchange Commission
("SEC") as a diversified open-end management investment company. The Fund seeks
its investment objective by investing all of its net investable assets in the
Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an
investment objective identical to that of the Fund. The Portfolio, in turn,
invests in securities in accordance with an investment objective, policies, and
limitations identical to those of the Fund. (The Trust and Managers Trust, which
is an open-end management investment company managed by NB Management are
together referred to below as the "Trusts.")
The following information supplements the discussion in the
Prospectus of the investment objective, policies, and limitations of the Fund
and Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment objective, policy or limitation that is not
fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of
Managers Trust ("Portfolio Trustees") without shareholder approval. The
fundamental investment policies and limitations of the Fund or the Portfolio may
not be changed without the approval of the lesser of:
(1) 67% of the total units of beneficial interest ("shares") of the
Fund or Portfolio represented at a meeting at which more than 50% of the
outstanding Fund or Portfolio shares are represented, or
(2) a majority of the outstanding shares of the Fund or Portfolio.
These percentages are required by the Investment Company Act of 1940
("1940 Act") and are referred to in this SAI as a "1940 Act majority vote."
Whenever the Fund is called upon to vote on a change in a fundamental investment
policy or limitation of the Portfolio, the Fund casts its votes in proportion to
the votes of its shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
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The Fund has the following fundamental investment policy, to enable
it to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund, the Fund may
invest all of its investable assets in an open-end management investment
company having substantially the same investment objective, policies, and
limitations as the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
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Except for the limitation on borrowing, any investment policy or
limitation that involves a maximum percentage of securities or assets will not
be considered to be violated unless the percentage limitation is exceeded
immediately after, and because of, a transaction by the Portfolio.
The Portfolio's fundamental investment policies and limitations are
as follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities
or contracts thereon, unless acquired as a result of the ownership of securities
or instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of
the value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any
security if, as a result, 25% or more of its total assets (taken at current
value) would be invested in the securities of issuers having their principal
business activities in the same industry. This limitation does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
5. LENDING. The Portfolio may not lend any security or make any
other loan if, as a result, more than 33-1/3% of its total assets (taken at
current value) would be lent to other parties, except, in accordance with its
investment objective, policies, and limitations, (i) through the purchase of a
portion of an issue of debt securities or (ii) by engaging in repurchase
agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
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8. UNDERWRITING. The Portfolio may not underwrite securities of
other issuers, except to the extent that the Portfolio, in disposing of
portfolio securities, may be deemed to be an underwriter within the meaning of
the Securities Act of 1933 ("1933 Act").
For purposes of the limitation on commodities, the Portfolio does
not consider foreign currencies or forward contracts to be physical commodities.
The Portfolio's non-fundamental investment policies and limitations
are as follows:
1. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
2. LENDING. Except for the purchase of debt securities and engaging
in repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. MARGIN TRANSACTIONS. The Portfolio may not purchase securities on
margin from brokers or other lenders, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions in futures
contracts and options on futures contracts shall not constitute the purchase of
securities on margin and shall not be deemed to violate the foregoing
limitation.
4. FOREIGN SECURITIES. The Portfolio may not invest more than 10% of
the value of its total assets in securities of foreign issuers, provided that
this limitation shall not apply to foreign securities denominated in U.S.
dollars, including American Depositary Receipts ("ADRs").
5. ILLIQUID SECURITIES. The Portfolio may not purchase any security
if, as a result, more than 15% of its net assets would be invested in illiquid
securities. Illiquid securities include securities that cannot be sold within
seven days in the ordinary course of business for approximately the amount at
which the Portfolio has valued the securities, such as repurchase agreements
maturing in more than seven days.
6. SOCIAL POLICY. The Portfolio may not purchase securities of
issuers who derive more than 5% of their total revenue from alcohol, tobacco,
gambling or weapons, or that are involved in nuclear power.
In addition, although the Portfolio does not have a policy limiting
its investment in warrants, the Portfolio does not currently intend to invest in
warrants unless acquired in units or attached to securities.
Any part of the Portfolio's assets may be retained temporarily in
investment grade fixed income securities of non-governmental issuers, U.S.
Government and Agency securities, repurchase agreements, money market
instruments, commercial paper, and cash and cash equivalents when NB Management
believes that significant adverse market, economic political, or other
circumstances require prompt action to avoid losses. In addition, the feeder
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funds that invest in the Portfolio deal with large institutional investors, and
the Portfolio may hold such instruments pending investment or payout when the
Portfolio has received a large influx of cash due to sales of Fund shares, or
shares of another fund which invests in the Portfolio, or when it anticipates a
substantial redemption. Generally, the foregoing temporary investments for the
Portfolio are selected with a concern for the social impact of each investment.
INVESTMENT INSIGHT
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Neuberger Berman's commitment to its asset management approach is
reflected in the more than $125 million the organization's principals, employees
and their families have invested in the Neuberger Berman mutual funds.
NEUBERGER BERMAN SOCIALLY RESPONSIVE PORTFOLIO
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INVESTMENT PROGRAM
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Seeks long-term capital appreciation through investments primarily
in securities of companies that meet both financial criteria and social policy.
The portfolio co-managers initially screen companies using a value investing
criteria, then look for companies that show leadership in major areas of social
impact such as the environment, workplace diversity and employment.
FINANCIALLY SOUND COMPANIES WITH A SOCIAL CONSCIENCE
The portfolio co-managers look for the stocks of mid- to large-cap
companies that first meet their stringent financial criteria. Their social
screens are then applied to these stocks. The ones considered worthy from a
financial standpoint are then evaluated using a proprietary database that
develops and monitors information on companies in various categories of social
criteria. Ideal investment candidates are companies that show leadership in the
areas of the environment, workplace diversity and employment. Other
considerations are based on companies' records in other areas of concern,
including public health, type of products, and corporate citizenship.
A TRADITIONAL VALUE APPROACH
The portfolio co-managers' initial financial screens select
companies using a traditional value approach. They look for undervalued
companies with solid balance sheets, strong management, consistent cash flows,
and other value-related factors, such as low price-to-earnings and low
price-to-book ratios. Their value approach examines these companies, searching
for those that may rise in price before other investors realize their worth.
They strongly believe in helping investors put their money to work, while
supporting companies that follow principles of good corporate citizenship.
AN EVER-EVOLVING JOURNEY ON THE PATH TO GOOD CORPORATE CITIZENSHIP
The portfolio co-managers believe that most socially responsive
investors are not utopians. They do not expect instant perfection, but rather
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look for signs that a company is evolving and moving toward a corporate
commitment to excellence. As they put it, "Good corporate citizenship is one of
those things that is a journey, not a destination. We've been working in this
field for some time, and know that the social records of most companies are
written in shades of gray. We are pleased to see that more and more companies
are coming to realize that change is a positive force for them."
INVESTMENT PROCESS
(Social Policy)
(Quantitative Financial Criteria)
o Low Price-to-Earnings Ratio (relative & absolute)
o Strong Balance Sheet
o Free Cash Flow
o Risk Management
(Stock Universe)
o Focus Screens
SOCIALLY RESPONSIVE INVESTORS CAN EXPECT:
o Financially sound companies with a social conscience
o A traditional value approach
O An ever-evolving journey on the path to good corporate citizenship
INVESTMENT INSIGHT
The portfolio co-managers believe that sound practices in areas like
employment and the environment can have a positive impact on a company's bottom
line. They look for companies that meet value-investing criteria and also show a
commitment to uphold or improve their standards of corporate citizenship.
* * * * *
The Portfolio invests in a wide array of stocks, and no single stock
makes up more than a small fraction of the Portfolio's total assets. Of course,
the Portfolio's holdings are subject to change.
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ADDITIONAL INVESTMENT INFORMATION
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The Portfolio may make the following investments, among others; some
of which are part of the Portfolio's principal investment strategies and some of
which are not. The principal risks of the Portfolio's strategies are discussed
in the prospectus. It may not buy all of the types of securities or use all of
the investment techniques that are described.
ILLIQUID SECURITIES. Illiquid securities 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 1933 Act,
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 NB Management, acting pursuant to guidelines
established by the trustees of the Manager's Trusts, determines they are liquid.
Generally, foreign securities freely tradable in their principal market are not
considered restricted or illiquid. Illiquid securities may be difficult for a
Portfolio to value or dispose of due to the absence of an active trading market.
The sale of some illiquid securities by the Portfolio may be subject to legal
restrictions which could be costly to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 15% of
its net assets in illiquid securities.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or from a securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase agreements
generally are for a short period of time, usually less than a week. Costs,
delays, or losses could result if the selling party to a repurchase agreement
becomes bankrupt or otherwise defaults. NB Management monitors the
creditworthiness of sellers.
POLICIES AND LIMITATIONS. Repurchase agreements with a maturity of
more than seven days are considered to be illiquid securities. The Portfolio may
not enter into a repurchase agreement with a maturity of more than seven days
if, as a result, more than 15% of the value of its net assets would then be
invested in such repurchase agreements and other illiquid securities. The
Portfolio may enter into a repurchase agreement only if (1) the underlying
securities are of a type that the Portfolio's investment policies and
limitations would allow it to purchase directly, (2) the market value of the
underlying securities, including accrued interest, at all times equals or
exceeds the repurchase price, and (3) payment for the underlying securities is
made only upon satisfactory evidence that the securities are being held for the
Portfolio's account by its custodian or a bank acting as the Portfolio's agent.
SECURITIES LOANS. The Portfolio may lend securities to banks,
brokerage firms, and other institutional investors judged creditworthy by NB
Management, provided that cash or equivalent collateral, equal to at least 100%
of the market value of the loaned securities, is continuously maintained by the
Borrower with the Portfolio. The Portfolio may invest the cash collateral and
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earn income, or it may receive an agreed upon amount of interest income from a
Borrower who has delivered equivalent collateral. During the time securities are
on loan, the Borrower will pay the Portfolio an amount equivalent to any
dividends or interest paid on such securities. These loans are subject to
termination at the option of the Portfolio or the Borrower. The Portfolio may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the Borrower or placing broker. The Portfolio does not have the
right to vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the investment.
NB Management believes the risk of loss on these transactions is slight because,
if a Borrower were to default for any reason, the collateral should satisfy the
obligation. However, as with other extensions of secured credit, loans of
Portfolio securities involve some risk of loss of rights in the collateral
should the Borrower fail financially.
POLICIES AND LIMITATIONS. The Portfolio may lend Portfolio
securities with a value not exceeding 33-1/3% of its total assets to banks,
brokerage firms, or other institutional investors judged creditworthy by NB
Management. Borrowers are required continuously to secure their obligations to
return securities on loan from the Portfolio by depositing collateral in a form
determined to be satisfactory by the Portfolio Trustees. The collateral, which
must be marked to market daily, must be equal to at least 100% of the market
value of the loaned securities, which will also be marked to market daily.
Securities lending by the Portfolio is not subject to the Social Policy.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. NB Management, acting under guidelines established by the Portfolio
Trustees, may determine that certain securities qualified for trading under Rule
144A are liquid. Regulation S under the 1933 Act permits the sale abroad of
securities that are not registered for sale in the United States.
Where registration is required, the Portfolio may be obligated to
pay all or part of the registration expenses, and a considerable period may
elapse between the decision to sell and the time the Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it decided to sell. Restricted
securities for which no market exists are priced by a method that the Portfolio
Trustees believe accurately reflects fair value.
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POLICIES AND LIMITATIONS. To the extent restricted securities,
including Rule 144A securities, are illiquid, purchases thereof will be subject
to the Portfolio's 15% limit on investments in illiquid securities.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement,
the Portfolio sells portfolio securities subject to its agreement to repurchase
the securities at a later date for a fixed price reflecting a market rate of
interest. There is a risk that the counter-party to a reverse repurchase
agreement will be unable or unwilling to complete the transaction as scheduled,
which may result in losses to the Portfolio.
POLICIES AND LIMITATIONS. Reverse repurchase agreements are
considered borrowings for purposes of the Portfolio's investment policies and
limitations concerning borrowings. While a reverse repurchase agreement is
outstanding, the Portfolio will deposit in a segregated account with its
custodian cash or appropriate liquid securities, marked to market daily, in an
amount at least equal to the Portfolio's obligations under the agreement.
FOREIGN SECURITIES. The Portfolio may invest in U.S.
dollar-denominated securities of foreign issuers and foreign branches of U.S.
banks, including negotiable certificates of deposit ("CDs"), bankers'
acceptances and commercial paper. Foreign issuers are issuers organized and
doing business principally outside the U.S. and include banks, non-U.S.
governments, and quasi-governmental organizations. While investments in foreign
securities are intended to reduce risk by providing further diversification,
such investments involve sovereign and other risks, in addition to the credit
and market risks normally associated with domestic securities. These additional
risks include the possibility of adverse political and economic developments
(including political instability, nationalization, expropriation, or
confiscatory taxation) and the potentially adverse effects of unavailability of
public information regarding issuers, less governmental supervision and
regulation of financial markets, reduced liquidity of certain financial markets,
and the lack of uniform accounting, auditing, and financial reporting standards
or the application of standards that are different or less stringent than those
applied in the United States.
The Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph, and the
additional risks of (1) adverse changes in foreign exchange rates, and (2)
adverse changes in investment or exchange control regulations (which could
prevent cash from being brought back to the United States). Additionally,
dividends and interest payable on foreign securities (and gains realized on
disposition thereof) may be subject to foreign taxes, including taxes withheld
from those payments. Commissions on foreign securities exchanges are often at
fixed rates and are generally higher than negotiated commissions on U.S.
exchanges, although the Portfolio endeavors to achieve the most favorable net
results on portfolio transactions.
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Foreign securities often trade with less frequency and in less
volume than domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custody arrangements
and transaction costs of foreign currency conversions.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices
of foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments, often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
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.
POLICIES AND LIMITATIONS. In order to limit the risks inherent in
investing in foreign currency denominated securities, the Portfolio may not
purchase any such security if, as a result, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, the Portfolio is not restricted in
the amount it may invest in securities denominated in any one foreign currency.
Investments in the securities of foreign issuers are subject to the Portfolio's
quality standards. The Portfolio may invest only in securities of issuers in
countries whose governments are considered stable by NB Management.
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FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN
CURRENCIES (COLLECTIVELY, "FINANCIAL INSTRUMENTS")
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and sell
interest rate futures contracts, stock and bond index futures contracts, and
foreign currency futures contracts and may purchase and sell options thereon in
an attempt to hedge against changes in the prices of securities or, in the case
of foreign currency futures and options thereon, to hedge against changes in
prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits the Portfolio
to enhance portfolio liquidity and maintain a defensive position without having
to sell portfolio securities. The Portfolio views investment in (i) interest
rate and securities index futures and options thereon as a maturity management
device and/or a device to reduce risk or preserve total return in an adverse
environment for the hedged securities, and (ii) foreign currency futures and
options thereon as a means of establishing more definitely the effective return
on, or the purchase price of, securities denominated in foreign currencies that
are held or intended to be acquired by the Portfolio. In addition, for purposes
of managing cash flow, the Portfolio may purchase and sell stock index futures
contracts, and may purchase and sell options thereon 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 Commodity
Futures Trading Commission ("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 a loss.
"Margin" with respect to a futures contract is the amount of assets
that must be deposited by the Portfolio with, or for the benefit of, a futures
commission merchant in order to initiate and maintain the Portfolio's futures
positions. The margin deposit made by the Portfolio when it enters into a
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futures contract ("initial margin") is intended to assure its performance of the
contract. If the price of the futures contract changes -- increases in the case
of a short (sale) position or decreases in the case of a long (purchase)
position -- so that the unrealized loss on the contract causes the margin
deposit not to satisfy margin requirements, the Portfolio will be required to
make an additional margin deposit ("variation margin"). However, if favorable
price changes in the futures contract cause the margin deposit to exceed the
required margin, the excess will be paid to the Portfolio. In computing its
daily net asset value ("NAV"), the Portfolio marks to market the value of its
open futures positions. The Portfolio also must make margin deposits with
respect to options on futures that it has written (but not with respect to
options on futures that it has purchased). If the futures commission merchant
holding the margin deposit goes bankrupt, the Portfolio could suffer a delay in
recovering its funds and could ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option. Options on futures have characteristics
and risks similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts
will benefit it, if NB 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 the Portfolio's futures position and the securities held
by or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
Because of the low margin deposits required, futures trading
involves an extremely high degree of leverage; as a result, a relatively small
price movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. Losses that may arise from certain futures
transactions are potentially unlimited.
Most U.S. futures exchanges limit the amount of fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
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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.
POLICIES AND LIMITATIONS. The Portfolio may purchase and sell
futures contracts and may purchase and sell options thereon in an attempt to
hedge against changes in the prices of securities or, in the case of foreign
currency futures and options thereon, to hedge against prevailing currency
exchange rates. For purposes of managing cash flow, the Portfolio may purchase
and sell stock index futures contracts, and may purchase and sell options
thereon, to increase its exposure to the performance of a recognized securities
index, such as the S&P 500 Index. The use of futures and options on futures by
the Portfolio is not subject to the Social Policy.
CALL OPTIONS ON SECURITIES. The Portfolio may write covered call
options and may purchase call options on securities. The purpose of writing call
options is to hedge (I.E., to reduce, at least in part, the effect of price
fluctuations of securities held by the Portfolio on the Portfolio's and the
Fund's NAVs) or to earn premium income. Portfolio securities on which call
options may be written and purchased by the Portfolio are purchased solely on
the basis of investment considerations consistent with the Portfolio's
investment objective.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying a call option at
less than the market price.
The writing of covered call options is a conservative investment
technique that is believed to involve relatively little risk but is capable of
enhancing the Portfolio's total return. When writing a covered call option, the
Portfolio, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security decline.
If a call option that the Portfolio has written expires unexercised,
the Portfolio will realize a gain in the amount of the premium; however, that
gain may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.
When the Portfolio purchases a call option, it pays a premium for
the right to purchase a security from the writer at a specified price until a
specified date.
POLICIES AND LIMITATIONS. The Portfolio may write covered call
options and may purchase call options in related closing transactions. The
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Portfolio writes only "covered" call options on securities it owns (in contrast
to the writing of "naked" or uncovered call options, which the Portfolio will
not do).
The Portfolio would purchase a call option to offset a previously
written call option. The Portfolio also may purchase a call option to protect
against an increase in the price of securities it intends to purchase. The use
of call options on securities by the Portfolio is not subject to the Social
Policy.
PUT OPTIONS ON SECURITIES. The Portfolio may write and purchase put
options on securities. The Portfolio will receive a premium for writing a put
option, which obligates the Portfolio to acquire a security at a certain price
at any time until a certain date if the purchaser decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
When the Portfolio purchases a put option, it pays a premium to the
writer for the right to sell a security to the writer for a specified amount at
any time until a certain date. The Portfolio might purchase a put option in
order to protect itself against a decline in the market value of a security it
owns.
Portfolio securities on which put options may be written and
purchased by the Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective. When
writing a put option, the Portfolio, in return for the premium, takes the risk
that it must purchase the underlying security at a price that may be higher than
the current market price of the security. If a put option that the Portfolio has
written expires unexercised, the Portfolio will realize a gain in the amount of
the premium.
POLICIES AND LIMITATIONS. The Portfolio generally writes and
purchases put options on securities for hedging purposes (I.E., to reduce, at
least in part, the effect of price fluctuations of securities held by the
Portfolio on the Portfolio's and the Fund's NAVs). The use of put options on
securities by the Portfolio is not subject to the Social Policy.
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 recognized
securities index, such as the S&P 500 Index.
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.
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Securities index options have characteristics and risks similar to
those of securities options, as discussed herein.
POLICIES AND LIMITATIONS. 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 recognized 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.
GENERAL INFORMATION ABOUT SECURITIES OPTIONS. The exercise price of
an option may be below, equal to, or above the market value of the underlying
security at the time the option is written. Options normally have expiration
dates between three and nine months from the date written. American-style
options are exercisable at any time prior to their expiration date. The
obligation under any option written by the Portfolio terminates upon expiration
of the option or, at an earlier time, when the Portfolio offsets the option by
entering into a "closing purchase transaction" to purchase an option of the same
series. If an option is purchased by the Portfolio and is never exercised or
closed out, the Portfolio will lose the entire amount of the premium paid.
Options are traded both on national securities exchanges and in the
over-the-counter ("OTC") market. Exchange-traded options in the United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter-party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. NB Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions.
The premium received (or paid) by the Portfolio when it writes (or
purchases) an option is the amount at which the option is currently traded on
the applicable market. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise price
to the market price, the historical price volatility of the underlying security,
the length of the option period, the general supply of and demand for credit,
and the interest rate environment. The premium received by the Portfolio for
writing an option is recorded as a liability on the Portfolio's statement of
assets and liabilities. This liability is adjusted daily to the option's current
market value.
Closing transactions are effected in order to realize a profit (or
minimize a loss) on an outstanding option, to prevent an underlying security
from being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to write
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<PAGE>
another call option on the underlying security with a different exercise price
or expiration date or both. There is, of course, no assurance that the Portfolio
will be able to effect closing transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from writing the call or put option. Because increases in the market
price of a call option generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions or spreads in connection
with purchasing or writing options, including those used to close out existing
positions. From time to time, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned to
it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements can take place in the underlying markets that cannot be
reflected in the options markets.
POLICIES AND LIMITATIONS. The Portfolio may use American-style
options. The assets used as cover (or held in a segregated account) for OTC
options written by the Portfolio will be considered illiquid unless the OTC
options are sold to qualified dealers who agree that the Portfolio may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC call option
written subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option. The use of put and call options by the Portfolio is not subject
to the Social Policy.
FOREIGN CURRENCY TRANSACTIONS. The Portfolio may enter into
contracts for the purchase or sale of a specific currency at a future date
(usually less than one year from the date of the contract) at a fixed price
("forward contracts"). The Portfolio also may engage in foreign currency
exchange transactions on a spot (I.E., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Portfolio enters into forward contracts in an attempt to hedge
against changes in prevailing currency exchange rates. The Portfolio does not
engage in transactions in forward contracts for speculation; it views
investments in forward contracts as a means of establishing more definitely the
effective return on, or the purchase price of, securities denominated in foreign
currencies. Forward contract transactions include forward sales or purchases of
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<PAGE>
foreign currencies for the purpose of protecting the U.S. dollar value of
securities held or to be acquired by the Portfolio or protecting the U.S. dollar
equivalent of dividends, interest, or other payments on those securities.
Forward contracts are traded in the interbank market directly
between dealers (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades; foreign exchange dealers realize a profit based on the
difference (the spread) between the prices at which they are buying and selling
various currencies.
At the consummation of a forward contract to sell currency, the
Portfolio may either make delivery of the foreign currency or terminate its
contractual obligation to deliver by purchasing an offsetting contract. If the
Portfolio chooses to make delivery of the foreign currency, it may be required
to obtain such currency through the sale of portfolio securities denominated in
such currency or through conversion of other assets of the Portfolio into such
currency. If the Portfolio engages in an offsetting transaction, it will incur a
gain or a loss to the extent that there has been a change in forward contract
prices. Closing purchase transactions with respect to forward contracts are
usually made with the currency dealer who is a party to the original forward
contract.
NB Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated and which is available on
more advantageous terms.
However, a hedge or proxy-hedge cannot protect against exchange rate
risks perfectly, and, if NB Management is incorrect in its judgment of future
exchange rate relationships, the Portfolio could be in a less advantageous
position than if such a hedge had not been established. If the Portfolio uses
proxy-hedging, it may experience losses on both the currency in which it has
invested and the currency used for hedging if the two currencies do not vary
with the expected degree of correlation. Using forward contracts to protect the
value of the Portfolio's securities against a decline in the value of a currency
does not eliminate fluctuations in the prices of the underlying securities.
Because forward contracts are not traded on an exchange, the assets used to
cover such contracts may be illiquid. The Portfolio may experience delays in the
settlement of its foreign currency transactions.
POLICY AND LIMITATIONS. The Portfolio may enter into forward
contracts for the purpose of hedging and not for speculation. The use of
forward contracts by the Portfolio is not subject to the Social Policy.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies. Currency options have
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characteristics and risks similar to those of securities options, as discussed
herein. Certain options on foreign currencies are traded on the OTC market and
involve liquidity and credit risks that may not be present in the case of
exchange-traded currency options.
POLICY AND LIMITATIONS. The Portfolio would use options on
foreign currencies to protect against declines in the U.S. dollar value of
portfolio securities or increases in the U.S. dollar cost of securities to be
acquired or to protect the U.S. dollar equivalent of dividends, interest, or
other payments on those securities. The use of options on currencies by the
Portfolio is not subject to the Social Policy.
REGULATORY LIMITATIONS ON USING FINANCIAL INSTRUMENTS. To the extent
the Portfolio sells or purchases futures contracts or writes options thereon or
options on foreign currencies that are traded on an exchange regulated by the
CFTC other than for BONA FIDE hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums on those positions (excluding the amount
by which options are "in-the-money") may not exceed 5% of the Portfolio's net
assets.
COVER FOR FINANCIAL INSTRUMENTS. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable to promptly dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
POLICIES AND LIMITATIONS. The Portfolio will comply with SEC
guidelines regarding "cover" for Financial Instruments and, if the guidelines so
require, set aside in a segregated account with its custodian the prescribed
amount of cash or appropriate liquid securities.
GENERAL RISKS OF FINANCIAL INSTRUMENTS. The primary risks in using
Financial Instruments are (1) imperfect correlation or no correlation between
changes in market value of the securities or currencies held or to be acquired
by the Portfolio and the prices of 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 the skills
needed to use Financial Instruments are different from those needed to select
the Portfolio's securities; (4) the fact that, although use of these instruments
for hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in hedged investments; and (5) the possible inability of the Portfolio
to purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain cover
or to segregate securities in connection with its use of Financial Instruments.
There can be no assurance that the Portfolio's use of Financial Instruments will
be successful.
The Portfolio's use of Financial Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
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company ("RIC"). See "Additional Tax Information." Financial Instruments may not
be available with respect to some currencies, especially those of so-called
emerging market countries.
POLICIES AND LIMITATIONS. NB Management intends to reduce the risk
of imperfect correlation by investing only in Financial Instruments whose
behavior is expected to resemble or offset that of the Portfolio's underlying
securities or currency. NB Management intends to reduce the risk that the
Portfolio will be unable to close out Financial Instruments by entering into
such transactions only if NB Management believes there will be an active and
liquid secondary market.
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in corporate bonds and
debentures.
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 (also known as Federal National Mortgage
Association), Freddie Mac (also known as Federal Home Loan Mortgage
Corporation), Student Loan Marketing Association (commonly known as "Sallie
Mae"), and the Tennessee Valley Authority. Some U.S. Government Agency
Securities are supported by the full faith and credit of the United States,
while others may by supported by the issuer's ability to borrow from the U.S.
Treasury, subject to the Treasury's discretion in certain cases, or only by the
credit of the issuer. U.S. Government Agency Securities include U.S. Government
Agency mortgage-backed securities. The market prices of U.S. Government and
Agency Securities are not guaranteed by the Government.
"Investment grade" debt securities are those receiving one of the
four highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard
& Poor's ("S&P"), or another nationally recognized statistical rating
organization ("NRSRO") or, if unrated by any NRSRO, deemed by NB Management to
be comparable to such rated securities ("Comparable Unrated Securities").
Securities rated by Moody's in its fourth highest rating category (Baa) or
Comparable Unrated Securities may be deemed to have speculative characteristics.
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). The value of the fixed income securities in which the
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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. Foreign debt securities are subject to risks
similar to those of other foreign securities.
POLICIES AND LIMITATIONS. The Portfolio normally may invest up to
35% of its total assets in debt securities. Subsequent to its purchase by the
Portfolio, an issue of debt securities may cease to be rated or its rating may
be reduced, so that the securities would no longer be eligible for purchase by
the Portfolio. In such a case, the Portfolio will engage in an orderly
disposition of the downgraded securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt security
issued by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest in commercial paper that cannot be resold
to the public without an effective registration statement under the 1933 Act.
While restricted commercial paper normally is deemed illiquid, NB Management may
in certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
POLICIES AND LIMITATIONS. The Portfolio may invest in commercial
paper only if it receives the highest rating from S&P (A-1) or Moody's (P-1) or
is deemed by NB Management to be of comparable quality.
ZERO COUPON SECURITIES. The Portfolio may invest in zero coupon
securities, which are debt obligations that do not entitle the holder to any
periodic payment of interest prior to maturity or that specify a future date
when the securities begin to pay current interest. Zero coupon securities are
issued and traded at a discount from their face amount or par value. This
discount varies depending on prevailing interest rates, the time remaining until
cash payments begin, the liquidity of the security, and the perceived credit
quality of the issuer.
The discount on zero coupon securities ("original issue discount")
must be taken into account ratably by the Portfolio prior to the receipt of any
actual payments. Because the Fund must distribute substantially all of its net
income (including its share of the Portfolio's accrued original issue discount)
to the Plan each year for income and excise tax purposes, the Portfolio may have
to dispose of portfolio securities under disadvantageous circumstances to
generate cash, or may be required to borrow, to satisfy the Fund's distribution
requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more
volatile than the prices of securities that pay interest periodically. Zero
coupon securities are likely to respond to changes in interest rates to a
greater degree than other types of debt securities having a similar maturity and
credit quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock,
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities generally
have features of both common stocks and debt securities. A convertible security
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entitles the holder to receive the interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks of
the same or similar issuers, but lower than the yield on non-convertible debt.
Convertible securities are usually subordinated to comparable-tier
non-convertible securities but rank senior to common stock in a corporation's
capital structure. The value of a convertible security is a function of (1) its
yield in comparison to the yields of other securities of comparable maturity and
quality that do not have a conversion privilege and (2) its worth if converted
into the underlying common stock.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objectives.
POLICIES AND LIMITATIONS. The Portfolio may invest up to 20% of its
net assets in convertible securities. The Portfolio does not intend to purchase
any convertible securities that are not investment grade. Convertible debt
securities are subject to the Portfolio's investment policies and limitations
concerning fixed income securities.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
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 NB Management, the potential benefits of such
investment justify the payment of any applicable premium or sales charge.
POLICIES AND LIMITATIONS. 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.
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PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and
are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
- -------------------------
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)n = ERV
Average annual total return smoothes out year-to-year variations in
performance and, in that respect, differs from actual year-to-year results.
Average Annual Total Returns
Fund Periods Ended 8/31/1999
ONE YEAR FIVE YEARS TEN YEARS PERIOD FROM INCEPTION
-------- ---------- --------- ---------------------
SOCIALLY +36.76% +19.14% N/A +17.53%
RESPONSIVE
Had NB Management not reimbursed certain expenses, total return would have been
lower.
COMPARATIVE INFORMATION
- -----------------------
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings) published by
independent services or publications (including newspapers, newsletters,
and financial periodicals) that monitor the performance of mutual funds,
such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies,
Inc., Wiesenberger Investment Companies Service, Investment Company Data
Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund
rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and
U.S. News & World Report magazines, The Wall Street Journal, The New York
Times, Kiplinger's Personal Finance, and Barron's Newspaper, or
(2) recognized stock and other indices, such as the S&P 500
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
21
<PAGE>
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000
Stock Index, Russell Midcap Index, Dow Jones Industrial Average ("DJIA"),
Wilshire 1750 Index, Nasdaq Composite Index, Montgomery Securities Growth
Stock Index, Value Line Index, U.S. Department of Labor Consumer Price
Index ("Consumer Price Index"), College Board Annual Survey of Colleges,
Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra
Value Index, and various other domestic, international, and global
indices. The S&P 500 Index is a broad index of common stock prices, while
the DJIA represents a narrower segment of industrial companies. The S&P
600 Index includes stocks that range in market value from $35 million to
$6.1 billion, with an average of $572 million. The S&P 400 Index measures
mid-sized companies that have an average market capitalization of $2.1
billion. Each assumes reinvestment of distributions and is calculated
without regard to tax consequences or the costs of investing. The
Portfolio may invest in different types of securities from those included
in some of the above indices.
The Fund's performance may also be compared to various socially
responsive indices. These include The Domini Social Index and the indices
developed by the quantitative department of Prudential Securities, such as that
department's Large and Mid-Cap portfolio indices for various breakdowns ("Sin"
Stock Free, Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Fund's performance, its total return and
comparisons may be used in advertisements and in information furnished to
current and prospective shareholders (collectively, "Advertisements"). The Fund
may also be compared to individual asset classes such as common stocks,
small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson
and Sinquefield.
OTHER PERFORMANCE INFORMATION
- -----------------------------
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements. This information may include the Portfolio's portfolio
diversification by asset type or by the social characteristics of companies
owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
Information regarding the effects of investing at market highs
and/or lows, and investing early versus late for retirement plans also may be
included in Advertisements, if appropriate.
22
<PAGE>
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that the Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees
and officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by NB Management and Neuberger
Berman.
<TABLE>
<CAPTION>
Positions Held
With the Trust and
Name, Age, and EQUITY MANAGERS
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- ------------ ----- --------------------------
<S> <C> <C>
Claudia A. Brandon (42) Secretary of the Director, Corporate
Trust and Equity Secretarial, of NB Management
Managers Trust since 1999; formerly Vice
President of NB Management;
Secretary of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.
Faith Colish (64) Trustee of the Attorney at Law, Faith Colish,
63 Wall Street Trust and Equity A Professional Corporation.
24th Floor Managers Trust
New York, NY 10005
Stacy Cooper-Shugrue (36) Assistant Assistant Director, Corporate
Secretary of the Secretarial, of NB Management;
Trust and Equity formerly Assistant Vice
Managers Trust President of NB Management;
Assistant Secretary of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.
Barbara DiGiorgio (40) Assistant Assistant Treasurer since 1996
Treasurer of of nine other mutual funds for
the Trust and which NB Management acts as
Equity Mangers investment manager or
Trust administrator.
Michael M. Kassen* (46) President and Executive Vice President,
23
<PAGE>
Positions Held
With the Trust and
Name, Age, and EQUITY MANAGERS
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- ------------ ----- --------------------------
<S> <C> <C>
Trustee of the Chief Investment Officer and
Trust and Equity Director of Neuberger Berman;
Managers Trust Director of NB Management;
President and/or Trustee of
six other mutual funds for
which NB Management acts as
investment manager or
administrator.
Howard A. Mileaf (62) Trustee of the Vice President and Special
WHX Corporation Trust and Equity Counsel to WHX Corporation
110 East 59th Street Managers Trust (holding company) since 1992;
30th Floor Director of Kevlin Corporation
New York, NY 10022 (manufacturer of microwave and
other products).
Edward I. O'Brien* (71) Trustee of the Until 1993, President of the
12 Woods Lane Trust and Equity Securities Industry
Scarsdale, NY 10583 Managers Trust Association ("SIA")
(securities industry's
representative in government
relations and regulatory
matters at the federal and
state levels); until November
1993, employee of the SIA;
Director of Legg Mason, Inc.
John T. Patterson, Jr. (71) Trustee of the Retired. Formerly,
7082 Siena Court Trust and Equity President of SOBRO (South
Boca Raton, FL 33433 Managers Trust Bronx Overall Economic
Development Corporation).
C. Carl Randolph (61) Assistant Senior Vice President, General
Secretary of the Counsel and Secretary of
Trust and Equity Neuberger Berman since 1992;
Managers Trust Assistant Secretary of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.
John P. Rosenthal (66) Trustee of the Senior Vice President of
Burnham Securities Inc. Trust and Equity Burnham Securities Inc. (a
Burnham Asset Management Corp. Managers Trust registered broker-dealer)
1325 Avenue of the Americas since 1991; Director, Cancer
17th Floor Treatment Holdings, Inc.
New York, NY 10019
Richard Russell (52) Treasurer and Employee of NB Management;
24
<PAGE>
Positions Held
With the Trust and
Name, Age, and EQUITY MANAGERS
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- ------------ ----- --------------------------
<S> <C> <C>
Principal Treasurer and Principal
Accounting Officer Accounting Officer of nine
of the Trust and other mutual funds for which
Equity Managers NB Management acts as
Trust investment manager or
administrator.
Cornelius T. Ryan (68) Trustee of the General Partner of Oxford
Oxford Bioscience Trust and Equity Partners and Oxford Bioscience
Partners Managers Trust Partners (venture capital
315 Post Road West partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money
market fund) and Prime Cash
Fund.
Gustave H. Shubert (70) Trustee of the Senior Fellow/Corporate
13838 Sunset Boulevard Trust and Equity Advisor and Advisory Trustee
Pacific Palisades, CA 90272 Managers Trust of Rand (a non-profit public
interest research
institution) since 1989;
Honorary Member of the Board
of Overseers of the Institute
for Civil Justice, the Policy
Advisory Committee of the
Clinical Scholars Program at
the University of California,
the American Association for
the Advancement of Science,
the Counsel on Foreign
Relations, and the Institute
for Strategic Studies
(London); advisor to the
Program Evaluation and
Methodology Division of the
U.S. General Accounting
Office; formerly Senior Vice
President and Trustee of
Rand.
Daniel J. Sullivan (59) Vice President of Senior Vice President of NB
the Trust and Management since 1992; Vice
Equity Managers President of nine other mutual
Trust funds for which NB Management
acts as investment manager or
administrator.
Peter E. Sundman* (40) Chairman of the Executive Vice President and
Board, Chief Director of Neuberger Berman;
Executive Officer, President and Director of NB
and Trustee of the Management; Chairman of the
25
<PAGE>
Positions Held
With the Trust and
Name, Age, and EQUITY MANAGERS
ADDRESS(1) TRUST PRINCIPAL OCCUPATION(S)(2)
- ------------ ----- --------------------------
<S> <C> <C>
Trust and Equity Board, Chief Executive Officer
Managers Trust and Trustee of nine other
mutual funds for which NB
Management acts as investment
manager or administrator.
Michael J. Weiner (51) Vice President and Senior Vice President of NB
Principal Management from 1992-1999;
Financial Officer Treasurer of NB Management
of the Trust and from 1992 to 1996; Vice
Equity Managers President and Principal
Trust Financial Officer of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.
Celeste Wischerth (38) Assistant Assistant Vice President of NB
Treasurer of the Management since 1994; prior
Trust and Equity thereto, employee of NB
Managers Trust Management; Assistant
Treasurer since 1996 of nine
other mutual funds for which
NB Management acts as
investment manager or
administrator.
</TABLE>
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust within
the meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons
by virtue of the fact that they are officers and/or directors of NB Management
and principals of Neuberger Berman. Mr. O'Brien is an interested person by
virtue of the fact that he is a director of Legg Mason, Inc., a wholly owned
subsidiary of which, from time to time, serves as a broker or dealer to the
Portfolio and other funds for which NB Management serves as investment manager.
The Trust's Trust Instrument and Managers Trust's Declaration of
Trust provide that each such Trust will indemnify its trustees and officers
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
26
<PAGE>
Trust, unless it is adjudicated that they (a) engaged in bad faith, willful
misfeasance, gross negligence, or reckless disregard of the duties involved in
the conduct of their offices, or (b) did not act in good faith in the reasonable
belief that their action was in the best interest of the Trust. In the case of
settlement, such indemnification will not be provided unless it has been
determined (by a court or other body approving the settlement or other
disposition, by a majority of disinterested trustees based upon a review of
readily available facts, or in a written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger Berman
Funds(R) has any retirement plan for its trustees.
<TABLE>
<CAPTION>
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/99
-----------------------------
Total Compensation from
Name and Position Aggregate Compensation Investment Companies in the
from Neuberger Berman Neuberger Berman Fund
WITH EACH TRUST EQUITY TRUST COMPLEX PAID TO TRUSTEES
- --------------- ------------ ------------------------
<S> <C> <C>
Faith Colish $7,284 $93,900
Trustee (9 other investment companies)
Stanley Egener $0 $0
Chairman of the Board, (5 other investment companies)
Chief Executive
Officer, and Trustee
Howard A. Mileaf $7,570 $64,250
Trustee (4 other investment companies)
Edward I. O'Brien Trustee $7,797 $61,750
(3 other investment companies)
John T. Patterson, Jr. $7,895 $66,500
Trustee (4 other investment companies)
John P. Rosenthal $7,572 $64,250
Trustee (4 other investment companies)
Cornelius T. Ryan $6,636 $52,750
Trustee (3 other investment companies)
Gustave H. Shubert $7,505 $59,500
Trustee (3 other investment companies)
Lawrence Zicklin $0 $0
President and Trustee (5 other investment companies)
At November 22,1999, the trustees and officers of the Trusts, as a
group, owned beneficially or of record less than 1% of the outstanding shares of
the Fund.
</TABLE>
27
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
- ------------------------------------
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. NB Management serves as
the investment manager to the Portfolio pursuant to a management agreement with
Equity Managers Trust, on behalf of the Portfolio, dated as of August 2, 1993
("Management Agreement").
The Management Agreement was approved by the holders of the
interests in the Portfolio on March 9, 1994. The Portfolio was authorized to
become subject to the Management Agreement by vote of the Portfolio Trustees on
October 20, 1993, and became subject to it on March 14, 1994.
The Management Agreement provides, in substance, that NB Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits NB Management to effect securities transactions
on behalf of the Portfolio through associated persons of NB Management. The
Management Agreement also specifically permits NB Management to compensate,
through higher commissions, brokers and dealers who provide investment research
and analysis to the Portfolio, although NB Management has no current plans to
pay a material amount of such compensation.
NB Management provides to the Portfolio, without separate cost,
office space, equipment, and facilities and the personnel necessary to perform
executive, administrative, and clerical functions. NB Management pays all
salaries, expenses, and fees of the officers, trustees, and employees of
Managers Trust who are officers, directors, or employees of NB Management. Two
directors of NB Management (who also are principals of Neuberger Berman), one of
whom also serves as an officer of NB Management, presently serve as trustees and
officers of the Trusts. See "Trustees and Officers." The Portfolio pays NB
Management a management fee based on the Portfolio's average daily net assets,
as described below.
NB Management provides facilities, services, and personnel, as well
as accounting, recordkeeping, and other services to the Fund pursuant to an
administration agreement with the Trust, dated August 3, 1993, as amended on
August 2, 1996 ("Administration Agreement"). For such administrative services,
the Fund pays NB Management a fee based on the Fund's average daily net assets,
as described below.
MANAGEMENT AND ADMINISTRATION FEES
- ----------------------------------
For investment management services, the Portfolio pays NB Management
a fee at the annual rate of 0.55% of the first $250 million of the Portfolio's
average daily net assets, 0.525% of the next $250 million, 0.50% of the next
$250 million, 0.475% of the next $250 million, 0.45% of the next $500 million,
and 0.425% of average daily net assets in excess of $1.5 billion.
28
<PAGE>
NB 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 NB Management a fee at the annual rate of 0.40% of the Fund's
average daily net assets, plus certain out-of-pocket expenses for technology
used for shareholder servicing and shareholder communications subject to the
prior approval of the Trust's Board of Trustees, including a majority of the
Trustees who are not interested persons of NB Management, and periodic reports
to the Board of Trustees on actual expenses. With the Fund's consent NB
Management may subcontract 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 the
Fund shares held through that Institution.
During the fiscal years ended August 31, 1999, 1998 and 1997, the
Fund accrued management and administration fees as follows:
Management and Administration Fees
Accrued for Fiscal Years
Ended August 31
1999 1998 1997
---- ---- ----
$183,688 $111,257 $16,656*
* From March 3, 1997 (commencement of operations) to August 31,
1997.
NB 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 of another Neuberger Berman fund that invests in the
same portfolio of securities ("Sister Fund") by more than 0.20% of the Fund's
average daily net assets. This undertaking can be terminated by NB Management by
giving the Fund at least 60 days' prior written notice.
Amount of Total Operating Expenses
Reimbursed by NB Management
for Fiscal Years Ended August 31
1999 1998 1997
---- ---- ----
$101,048 $100,537 $30,470*
*From March 3, 1997 (commencement of operations) to August
31, 1997.
The Management Agreement continues until August 2, 2000 and is
renewable thereafter from year to year, so long as its continuance is approved
29
<PAGE>
at least annually (1) by the vote of a majority of the Portfolio Trustees who
are not "interested persons" of NB Management or Managers Trust ("Independent
Portfolio Trustees"), cast in person at a meeting called for the purpose of
voting on such approval, and (2) by the vote of a majority of the Portfolio
Trustees or by a 1940 Act majority vote of the outstanding interests in the
Portfolio. The Administration Agreement continues until August 2, 2000. The
Administration Agreement is renewable from year to year with respect to the
Fund, so long as its continuance is approved at least annually (1) by the vote
of a majority of the Fund Trustees who are not "interested persons" of NB
Management or the Trust ("Independent Fund Trustees"), cast in person at a
meeting called for the purpose of voting on such approval, and (2) by the vote
of a majority of the Fund Trustees or by a 1940 Act majority vote of the
outstanding shares in the Fund.
The Management Agreement is terminable, without penalty, with
respect to the Portfolio on 60 days' written notice either by Managers Trust or
by NB Management. The Administration Agreement is terminable, without penalty,
with respect to the Fund on 60 days' written notice either by NB Management or
by the Trust. Each Agreement terminates automatically if it is assigned.
SUB-ADVISER
- -----------
NB Management retains Neuberger Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement").
The Sub-Advisory Agreement was approved by the holders of the
interests in the Portfolio on March 9, 1994. The Portfolio was authorized to
become subject to the Sub-Advisory Agreement by vote of the Portfolio Trustees
on October 20, 1993, and became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger
Berman will furnish to NB Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, NB Management expects to have available to it, in
addition to research from other professional sources, the capability of the
research staff of Neuberger Berman. This staff consists of numerous investment
analysts, each of whom specializes in studying one or more industries, under the
supervision of the Director of Research, who is also available for consultation
with NB Management. The Sub-Advisory Agreement provides that NB Management will
pay for the services rendered by Neuberger Berman based on the direct and
indirect costs to Neuberger Berman in connection with those services. Neuberger
Berman also serves as sub-adviser for all of the other mutual funds managed by
NB Management.
The Sub-Advisory Agreement continues until August 2, 2000 and is
renewable from year to year, subject to approval of its continuance in the same
manner as the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the Portfolio
Trustees or a 1940 Act majority vote of the outstanding interests in the
30
<PAGE>
Portfolio, by NB Management, or by Neuberger Berman on not less than 30 nor more
than 60 days' prior written notice. The Sub-Advisory Agreement also terminates
automatically with respect to the Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger Berman organization
have at least fifteen years experience. Neuberger Berman and NB Management
employ experienced professionals that work in a competitive environment.
INVESTMENT COMPANIES MANAGED
- ----------------------------
As of September 30, 1999, the investment companies managed by NB
Management had aggregate net assets of approximately $17.8 billion. NB
Management currently serves as investment manager of the following investment
companies:
<TABLE>
<CAPTION>
Approximate
Net Assets at
NAME SEPTEMBER 30, 1999
- ---- ------------------
<S> <C>
Neuberger Berman Cash Reserves Portfolio..........................$1,129,792,312
(investment portfolio for Neuberger Berman Cash Reserves)
Neuberger Berman Government Money Portfolio.........................$701,999,455
(investment portfolio for Neuberger Berman Government Money Fund)
Neuberger Berman High Yield Bond Portfolio...........................$25,041,449
(investment portfolio for Neuberger Berman High Yield Bond Fund)
Neuberger Berman Limited Maturity Bond Portfolio....................$274,532,907
(investment portfolio for Neuberger Berman Limited Maturity Bond Fund
and Neuberger Berman Limited Maturity Bond Trust)
Neuberger Berman Municipal Money Portfolio..........................$275,065,503
(investment portfolio for Neuberger Berman Municipal Money Fund)
Neuberger Berman Century Portfolio.............(in registration as of 9/30/99)
(investment portfolio for Neuberger Berman Century Fund and Neuberger
Berman Century Trust)
Neuberger Berman Focus Portfolio..................................$1,463,580,020
(investment portfolio for Neuberger Berman Focus Fund, Neuberger Berman
Focus Trust and Neuberger Berman Focus Assets)
Neuberger Berman Genesis Portfolio................................$1,647,532,448
(investment portfolio for Neuberger Berman Genesis Fund, Neuberger Berman
Genesis Trust, Neuberger Berman Genesis Assets and Neuberger Berman
Genesis Institutional)
Neuberger Berman Guardian Portfolio...............................$4,423,729,801
31
<PAGE>
(investment portfolio for Neuberger Berman Guardian Fund, Neuberger
Berman Guardian Trust and Neuberger Berman Guardian Assets)
Neuberger Berman International Portfolio............................$117,925,499
(investment portfolio for Neuberger Berman International Fund and
Neuberger Berman International Trust)
Neuberger Berman Manhattan Portfolio................................$606,962,000
(investment portfolio for Neuberger Berman Manhattan Fund, Neuberger
Berman Manhattan Trust and Neuberger Berman Manhattan Assets)
Neuberger Berman Millennium Portfolio................................$78,666,423
(investment portfolio for Neuberger Berman Millennium Fund, Neuberger
Berman Millennium Trust and Neuberger Berman Millennium Assets)
Neuberger Berman Partners Portfolio...............................$3,553,329,259
(investment portfolio for Neuberger Berman Partners Fund, Neuberger
Berman Partners Trust and Neuberger Berman Partners Assets)
Neuberger Berman Regency Portfolio...................................$30,848,996
(investment portfolio for Neuberger Berman Regency Fund and Neuberger
Berman Regency Trust)
Neuberger Berman Socially Responsive Portfolio......................$376,629,789
(investment portfolio for Neuberger Berman Socially Responsive Fund,
Neuberger Berman Socially Responsive Trust, and Neuberger Berman Socially
Responsive Assets)
Advisers Managers Trust...........................................$2,026,088,252
(eight series)
</TABLE>
The investment decisions concerning the Portfolio and the other
mutual funds managed by NB Management (collectively, "Other NB Funds") have been
and will continue to be made independently of one another. In terms of their
investment objectives, most of the Other NB Funds differ from the Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other NB Funds and the Portfolio to achieve their objectives may differ. The
investment results achieved by all of the mutual funds managed by NB Management
have varied from one another in the past and are likely to vary in the future.
There may be occasions when the Portfolio and one or more of the
Other NB Funds or other accounts managed by Neuberger Berman are
contemporaneously engaged in purchasing or selling the same securities from or
to third parties. When this occurs, the transactions are averaged as to price
and allocated, in terms of amount, in accordance with a formula considered to be
equitable to the funds involved. Although in some cases this arrangement may
have a detrimental effect on the price or volume of the securities as to the
Portfolio, in other cases it is believed that the Portfolio's ability to
32
<PAGE>
participate in volume transactions may produce better executions for it. In any
case, it is the judgment of the Portfolio Trustees that the desirability of the
Portfolio's having its advisory arrangements with NB Management outweighs any
disadvantages that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all
advisory clients of Neuberger Berman (including the Portfolio, the Other NB
Funds, and other managed accounts) and personnel of Neuberger Berman and its
affiliates. These include, for example, limits that may be imposed in certain
industries or by certain companies, and policies of Neuberger Berman that limit
the aggregate purchases, by all accounts under management, of the outstanding
shares of public companies.
MANAGEMENT AND CONTROL OF NB MANAGEMENT
- ---------------------------------------
The directors and officers of NB Management, all of whom have offices
at the same address as NB Management, are Richard A. Cantor, Chairman;
Theodore P. Giuliano, Vice President; Michael M. Kassen, Executive Vice
President and Chief Investment Officer; Barbara Katersky, Senior Vice
President; Daniel J. Sullivan, Senior Vice President; Philip Ambrosio, Senior
Vice President and Chief Financial Officer; Peter E. Sundman, President;
Michael J. Weiner, Senior Vice President; Brooke A. Cobb, Vice President;
Valerie Chang, Vice President; Robert W. D'Alelio, Vice President; Clara Del
Villar, Vice President; Robert S. Franklin, Vice President; Robert I.
Gendelman, Vice President; Thomas Gengler, Vice President; Josephine P.
Mahaney, Vice President; Michael F. Malouf, Vice President; S. Basu Mullick,
Vice President; Janet W. Prindle, Vice President; Kevin L. Risen, Vice
President; Jennifer K. Silver, Vice President; Kent C. Simons, Vice
President; Judith M. Vale, Vice President; Catherine Waterworth, Vice
President; Allan R. White III, Vice President; Robert Conti, Treasurer;
Ramesh Babu, Vice President; Robert L. Ladd, Vice President; Ingrid
Saukaitis, Vice President; Benjamin E. Segal, Vice President; Josephine
Velez, Vice President; and Ellen Metzger, Secretary. Messrs. Cantor,
D'Alelio, Gendelman, Giuliano, Kassen, Risen, Simons, Sundman, Weiner and
White and Mmes. Prindle, Silver and Vale are employees of Neuberger Berman.
Mr. Sundman is a trustee and officer of the Trust and the Managers
Trusts. Mr. Kassen is a trustee of the Trust and Equity Managers Trust and
an officer of the Trust and the Managers Trusts. Messrs. Sullivan and Weiner
are officers of the Trust and Managers Trusts.
Neuberger Berman and NB Management are wholly owned subsidiaries of
Neuberger Berman Inc., a publicly owned holding company owned primarily by the
employees of Neuberger Berman.
DISTRIBUTION ARRANGEMENTS
NB Management serves as the distributor ("Distributor") in
connection with the offering of the Fund's shares on a no-load basis to the
Plan. In connection with the sale of its shares, the Fund has authorized the
Distributor to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
33
<PAGE>
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
arranging for the sale of the Fund's shares to the Plan without sales commission
or other compensation and bears all advertising and promotion expenses incurred
in the sale of the Fund's shares.
The Trust, on behalf of the Fund, and the Distributor are parties to
a Distribution Agreement that continues until August 2, 2000. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
RULE 12B-1 PLAN
- ---------------
The Plan was adopted by the Trustees on July 29, 1999. The Plan
provides that the Fund will compensate NB Management for administrative and
other services provided to the Fund, its activities and expenses related to the
sale and distribution of Fund shares, and ongoing services to investors in the
Fund. Under the Plan, NB Management receives from the Fund a fee at the annual
rate of 0.10% of the Fund's average daily net assts. NB Management may pay up to
the full amount of this fee to Institutions that distribute or make available
Fund shares and/or provide services to the Fund and its shareholders. The fee
paid to an Institution is based on the level of such services provided.
Institutions may use the payments for, among other purposes, compensating
employees engaged in sales and/or shareholder servicing. The amount of fees paid
by the Fund during any year may be more or less than the cost of distribution
and other services provided to the Fund. NASD rules limit the amount of annual
distribution and service fees that may be paid by a mutual fund and impose a
ceiling on the cumulative distribution fees paid. The Trust's plan complies with
these rules.
The Plan provides that a written report identifying the amounts
expended by the Fund and the purposes for which such expenditures were made must
be provided to the Fund Trustees for their review at least quarterly.
Prior to approving the Plan, the Fund Trustees considered various
factors relating to the implementation of the Plan and determined that there is
a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Fund Trustees noted that the purpose of the master/feeder fund
structure is to permit access to a variety of markets. To the extent the Plan
allows the Fund to penetrate markets to which it would not otherwise have
access, the Plan may result in additional sales of Fund shares; this, in turn,
may enable the Fund to achieve economies of scale that could reduce expenses. In
addition, certain on-going shareholder services may be provided more effectively
by Institutions with which shareholders have an existing relationship.
The Plan continues until December 1, 2000. The Plan is renewable
34
<PAGE>
thereafter from year to year with respect to the Fund, so long as its
continuance is approved at least annually (1) by the vote of a majority of the
Fund Trustees and (2) by a vote of the majority of Rule 12b-1 Trustees, cast in
person at a meeting called for the purpose of voting on such approval. The Plan
may not be amended to increase materially the amount of fees paid by the Fund
thereunder unless such amendment is approved by a 1940 Act majority vote of the
outstanding shares of the Fund and by the Fund Trustees in the manner described
above. The Plan is terminable with respect to the Fund at any time by a vote of
a majority of the Rule 12b-1 Trustees or by a 1940 Act majority vote of the
outstanding shares of the Fund.
ADDITIONAL PURCHASE INFORMATION
SHARE PRICES AND NET ASSET VALUE
- --------------------------------
The Fund's shares are bought or sold at a price that is the Fund's
NAV per share. The NAVs for the Fund and the Portfolio are calculated by
subtracting total liabilities from total assets (in the case of the Portfolio,
the market value of the securities the Portfolio holds plus cash and other
assets; in the case of the Fund, its percentage interest in the Portfolio,
multiplied by the Portfolio's NAV, plus any other assets). The Fund's per share
NAV is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values securities (including options) listed on the
NYSE, the American Stock Exchange or other national securities exchanges or
quoted on The Nasdaq Stock Market, and other securities for which market
quotations are readily available, at the last sale price on the day the
securities are being valued. If there is no reported sale of such a security on
that day, the security is valued at the mean between its closing bid and asked
prices on that day. The Portfolio values all other securities and assets,
including restricted securities, by a method that the trustees of Equity
Managers Trust believe accurately reflects fair value.
If NB 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 the corresponding Managers Trust believe accurately
reflects fair value.
ADDITIONAL EXCHANGE INFORMATION
An Institution may exchange shares of the Fund for shares of one or
more of the Neuberger Berman Funds or the Neuberger Berman Income Fund that are
briefly described below, if made available through that Institution.
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<PAGE>
EQUITY FUNDS
- ------------
Neuberger Berman Focus Trust
Neuberger Berman Genesis Trust
Neuberger Berman Guardian Trust
Neuberger Berman Manhattan Trust
Neuberger Berman Millennium
Trust
Neuberger Berman Partners Trust
Neuberger Berman Regency Trust
INCOME FUND
- -----------
Neuberger Berman
Limited Maturity Bond Trust
The Fund and these Neuberger Berman funds may terminate or modify
their exchange privileges in the future.
Fund shareholders who are considering exchanging shares into the
Neuberger Berman Income Fund described herein should note that it (1) is a
series of a Delaware business trust (named "Neuberger Berman Income Trust") that
is registered with the SEC as an open-end management investment company, and (2)
invests all of its net investable assets in a corresponding portfolio that has
an investment objective, policies, and limitations identical to those of the
fund.
Before effecting an exchange, Fund shareholders must obtain and
should review a currently effective prospectus of the fund into which the
exchange is to be made. An exchange is treated as a sale for federal income tax
purposes and, depending on the circumstances, a capital gain or loss may be
realized.
ADDITIONAL REDEMPTION INFORMATION
SUSPENSION OF REDEMPTIONS
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the NYSE is closed, (2) when trading on
the NYSE is restricted, (3) when an emergency exists as a result of which it is
not reasonably practicable for the Portfolio to dispose of securities it owns or
fairly to determine the value of its net assets, or (4) for such other period as
36
<PAGE>
the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended, the
Plan may withdraw its offers of redemption, or it will receive payment at the
NAV per share in effect at the close of business on the first day the NYSE is
open ("Business Day") after termination of the suspension.
REDEMPTIONS IN KIND
- -------------------
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the Plan in any 90-day
period) exceeding $250,000 or 1% of the net assets of the Fund, whichever is
less, by making payment in whole or in part in securities valued as described
under "Share Prices and Net Asset Value" above. If payment is made in
securities, the Plan generally will incur brokerage expenses or other
transaction costs in converting those securities into cash and will be subject
to fluctuation in the market prices of those securities until they are sold. The
Fund does not redeem in kind under normal circumstances, but would do so when
the Fund Trustees determined that it was in the best interests of the Fund's
shareholders as a whole.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to the Plan substantially all of its share of
any net investment income (after deducting expenses incurred directly by the
Fund), any net realized capital gains, and any net realized gains from foreign
currency transactions earned or realized by the Portfolio. The Portfolio's net
investment income consists of all income accrued on portfolio assets less
accrued expenses, but does not include capital and foreign currency gains and
losses. Net investment income and realized gains and losses are reflected in the
Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. The
Fund calculates its net investment income and NAV per share as of the close of
regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern
time).
Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the Plan elects to receive them in cash
("cash election"). A cash election remains in effect until the Plan notifies the
Fund in writing to discontinue the election.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND
- --------------------
To continue to qualify for treatment as a RIC under the Code, the
Fund must distribute to the Plan for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
37
<PAGE>
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Financial Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); and (2) at
the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer. If the Fund failed to
qualify as a RIC for any taxable year, it would be taxed on the full amount of
its taxable income for that year without being able to deduct the distributions
it makes to its shareholders and the shareholders would treat all those
distributions, including distributions of net capital gain (the excess of net
long-term capital gain over net short-term capital loss), as dividends (that is,
ordinary income) to the extent of the Fund's earnings and profits.
Certain funds that invest in portfolios managed by NB Management
have received rulings from the Internal Revenue Service ("Service") that each
such fund, as an investor in its corresponding portfolio, will be deemed to own
a proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described above to
qualify as a RIC. Although these rulings may not be relied on as precedent by
the Fund, NB Management believes that the reasoning thereof and, hence, their
conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to
the Fund of distributions to it from the Portfolio, investments by the Portfolio
in certain securities, and hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO
- -------------------------
Certain portfolios managed by NB Management, including the other
portfolios of Managers Trust, have received rulings from the Service to the
effect that, among other things, each such portfolio will be treated as a
separate partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as precedent by
the Portfolio, NB Management believes the reasoning thereof and, hence, their
conclusion apply to the Portfolio as well. As a result, the Portfolio is not
subject to federal income tax; instead, each investor in the Portfolio, such as
38
<PAGE>
the Fund, is required to take into account in determining its federal income tax
liability its share of the Portfolio's income, gains, losses, deductions, and
credits, without regard to whether it has received any cash distributions from
the Portfolio. The Portfolio also is not subject to Delaware or New York income
or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to
continue to conduct its operations so that the Fund will be able to continue to
satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's net
income and capital gains and decreased by (1) the amount of cash and the basis
of any property the Portfolio distributes to the Fund and (2) the Fund's share
of the Portfolio's losses.
Dividends and interest received by the Portfolio, and gains
realized by the Portfolio, may be subject to income, withholding, or other taxes
imposed by foreign countries and U.S. possessions ("foreign taxes") that would
reduce the yield and/or total return on its securities. Tax treaties between
certain countries and the United States may reduce or eliminate foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.
The Portfolio may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is any foreign corporation (with certain
exceptions) that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, if the Portfolio holds stock of a PFIC, the Fund (indirectly
through its interest in the Portfolio) will be subject to federal income tax on
its share of a portion of any "excess distribution" received by the Portfolio on
the stock or of any gain on the Portfolio's disposition of the stock
(collectively, "PFIC income"), plus interest thereon, even if the Fund
distributes its share of the PFIC income as a taxable dividend to the Plan. The
balance of the Fund's share of the PFIC income will be included in its
investment company taxable income and, accordingly, will not be taxable to it to
the extent that it distributes income to its shareholders.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund ("QEF")," then in lieu of the Fund's incurring the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its share of the Portfolio's pro rata share of the QEF's annual
ordinary earnings and net capital gain -- which the Fund most likely would have
39
<PAGE>
to distribute to satisfy the Distribution Requirement and avoid imposition of
the Excise Tax -- even if the Portfolio did not receive those earnings and gain
from the QEF. In most instances it will be very difficult, if not impossible, to
make this election because of certain requirements thereof.
A holder of stock in any PFIC may elect to include in ordinary
income for each taxable year the excess, if any, of the fair market value of the
stock over the adjusted basis therein as of the end of that year. Pursuant to
the election, a deduction (as an ordinary, not capital, loss) also would be
allowed for the excess, if any, of the holder's adjusted basis in PFIC stock
over the fair market value thereof as of the taxable year-end, but only to the
extent of any net mark-to-market gains with respect to that stock included in
income for prior taxable years (and under the election and under regulations
proposed in 1992 that provided a similar election with respect to the stock of
certain PFICs). The adjusted basis in each PFIC's stock subject to the election
would be adjusted to reflect the amounts of income included and deductions taken
thereunder.
The Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the amount, character, and timing of recognition of the gains and losses the
Portfolio realizes in connection therewith. Gains from the disposition of
foreign currencies (except certain gains that may be excluded by future
regulations), and gains from Financial Instruments derived by the Portfolio with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income for the Fund under the Income Requirement.
Exchange-traded futures contracts and certain forward contracts,
subject to Section 1256 of the Code ("Section 1256 contracts") are required to
be marked to market (that is, treated as having been sold at market value) for
federal income tax purposes at the end of the Portfolio's taxable year. Sixty
percent of any net gain or loss recognized as a result of these "deemed sales,"
and 60% of any net realized gain or loss from any actual sales, of Section 1256
contracts are treated as long-term capital gain or loss; the remainder is
treated as short-term capital gain or loss. Section 1256 contracts also may be
marked-to-market for purposes of the Excise Tax. These rules may operate to
increase the amount that a Fund must distribute to satisfy the Distribution
Requirement, which will be taxable to the shareholders as ordinary income, and
to increase the net capital gain recognized by the Fund, without in either case
increasing the cash available to the Fund. The Portfolio may elect to exclude
certain transactions from the operation of section 1256, although doing so may
have the effect of increasing the relative proportion of net short-term capital
gain (taxable to its corresponding Fund's shareholders as ordinary income when
distributed to them) and/or increasing the amount of dividends that must be
distributed to meet the Distribution Requirement and avoid imposition of the
Excise Tax.
If the Portfolio has an "appreciated financial position" --
generally, an interest (including an interest through an option, futures or
forward contract, or short sale) with respect to any stock, debt instrument
(other than "straight debt"), or partnership interest the fair market value of
which exceeds its adjusted basis -- and enters into a "constructive sale" of the
position, the Portfolio will be treated as having made an actual sale thereof,
40
<PAGE>
with the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract,
or a futures or forward contract entered into by the Fund or a related person
with respect to the same or substantially identical property. In addition, if
the appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially identical property will
be deemed a constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end of
that year and the Portfolio holds the appreciated financial position unhedged
for 60 days after that closing (I.E., at no time during that 60-day period is
the Portfolio's risk of loss regarding that position reduced by reason of
certain specified transactions with respect to substantially identical or
related property, such as having an option to sell, being contractually
obligated to sell, making a short sale, or granting an option to buy
substantially identical stock or securities).
The Portfolio may acquire zero coupon securities or other securities
issued with original issue discount ("OID"). As a holder of those securities,
the Portfolio (and, through it, the Fund) must take into income the OID that
accrues on the securities during the taxable year, even if it receives no
corresponding payment on them during the year. Because the Fund annually must
distribute substantially all of its investment company taxable income (including
its share of the Portfolio's accrued OID) to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax, the Fund may be required in
a particular year to distribute as a dividend an amount that is greater than its
share of the total amount of cash the Portfolio actually receives. Those
distributions will be made from the Fund's (or its share of the Portfolio's)
cash assets or, if necessary, from the proceeds of sales of the Portfolio's
securities. The Portfolio may realize capital gains or losses from those sales,
which would increase or decrease the Fund's investment company taxable income
and/or net capital gain.
PORTFOLIO TRANSACTIONS
Neuberger Berman acts as the Portfolio's principal broker in the
purchase and sale of its portfolio securities (other than certain securities
traded on the OTC market). In effecting securities transactions, the Portfolio
seeks to obtain the best price and execution of orders.
During the fiscal year ended August 31, 1997, the Portfolio paid
brokerage commissions of $305,640, of which $232,238 was paid to Neuberger
Berman. During the fiscal year ended August 31, 1998, the Portfolio paid
brokerage commissions of $401,601, of which $296,353 was paid to Neuberger
Berman.
During the fiscal year ended August 31, 1999, the Portfolio paid
brokerage commissions of $305,640 of which $232,238 was paid to Neuberger
Berman. Transactions in which the Portfolio used Neuberger Berman as broker
comprised 69.99% of the aggregate dollar amount of transactions involving the
payment of commissions, and 67.97% of the aggregate brokerage commissions paid
by the Portfolio, during the fiscal year ended August 31, 1999. 99.97% of the
$155,324 paid to other brokers by the Portfolio during that fiscal year
(representing commissions on transactions involving approximately $97,201,802)
was directed to those brokers because of research services they provided. During
41
<PAGE>
the fiscal year ended August 31, 1999, the Portfolio acquired securities of the
following of its "regular brokers or dealers" (as defined in the 1940 Act):
Goldman, Sachs & Co. and State Street Bank and Trust Company; at that date, the
Portfolio held the securities of its regular brokers or dealers with an
aggregate value as follows: Goldman, Sachs & Co., $556,256; and State Street
Bank & Trust Company, $8,370,000.
Portfolio securities may, from time to time, be loaned by the
Portfolio to Neuberger Berman in accordance with the terms and conditions of an
order issued by the SEC. The order exempts such transactions from provisions of
the 1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. In accordance with the order, securities loans made by the Portfolio
to Neuberger Berman are fully secured by cash collateral. The portion of the
income on the cash collateral which may be shared with Neuberger Berman is to be
determined by reference to concurrent arrangements between Neuberger Berman and
non-affiliated lenders with which it engages in similar transactions. In
addition, where Neuberger Berman borrows securities from the Portfolio in order
to re-lend them to other Neuberger Berman Portfolios, Neuberger Berman may be
required to pay the Portfolio, on a quarterly basis, certain of the earnings
that Neuberger Berman otherwise has derived from the re-lending of the borrowed
securities. When Neuberger Berman desires to borrow a security that the
Portfolio has indicated a willingness to lend, Neuberger Berman must borrow such
security from the Portfolio, rather than from an unaffiliated lender, unless the
unaffiliated lender is willing to lend such security on more favorable terms (as
specified in the order) than the Portfolio. If, in any month, the Portfolio's
expenses exceed its income in any securities loan transaction with Neuberger
Berman, Neuberger Berman must reimburse the Portfolio for such loss.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio. The following information reflects interest income earned by the
Portfolio from the cash collateralization of securities loans through Neuberger
Berman during the fiscal years ended 1998, and 1997. As reflected below,
Neuberger Berman received a portion of the interest income from the cash
collateral.
<TABLE>
<CAPTION>
Interest Income
from
Collateralization Amount Paid to
NAME OF PORTFOLIO FISCAL YEAR END of SECURITIES LOANS NEUBERGER BERMAN
- ----------------- --------------- ------------------- ----------------
<S> <C> <C> <C>
Neuberger Berman 8/31/98 $ 20,023 $ 10,803
SOCIALLY RESPONSIVE 8/31/97 $ 80,484 $ 51,639
Portfolio
</TABLE>
- --------------------------------------------------------------------------------
In effecting securities transactions, the Portfolio generally seeks
to obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger Berman as its principal broker
where, in the judgment of NB Management, that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the Portfolio's
knowledge, no affiliate of the Portfolio receives give-ups or reciprocal
business in connection with its securities transactions.
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<PAGE>
The use of Neuberger Berman as a broker for the Portfolio is subject
to the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. Managers Trust and NB Management have expressly
authorized Neuberger Berman to retain such compensation, and Neuberger Berman
has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to Neuberger
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger
Berman must, in NB Management's judgment, be (1) at least as favorable as those
charged by other brokers having comparable execution capability and (2) at least
as favorable as commissions contemporaneously charged by Neuberger Berman on
comparable transactions for its most favored unaffiliated customers, except for
accounts for which Neuberger Berman acts as a clearing broker for another
brokerage firm and customers of Neuberger Berman considered by a majority of the
Independent Portfolio Trustees not to be comparable to the Portfolio. The
Portfolio does not deem it practicable and in its best interests to solicit
competitive bids for commissions on each transaction effected by Neuberger
Berman. However, consideration regularly is given to information concerning the
prevailing level of commissions charged by other brokers on comparable
transactions during comparable periods of time. The 1940 Act generally prohibits
Neuberger Berman from acting as principal in the purchase of portfolio
securities from, or the sale of portfolio securities to, the Portfolio unless an
appropriate exemption is available.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger Berman may combine orders placed on
behalf of clients, including advisory accounts in which affiliated persons have
an investment interest, for the purpose of negotiating brokerage commissions or
obtaining a more favorable price. Where appropriate, securities purchased or
sold may be allocated, in terms of amount, to a client according to the
proportion that the size of the order placed by that account bears to the
aggregate size of orders contemporaneously placed by the other accounts, subject
to de minimis exceptions. All participating accounts will pay or receive the
same price.
Under policies adopted by the Board of Trustees, Neuberger Berman
may enter into agency cross-trades on behalf of a Portfolio. An agency
43
<PAGE>
cross-trade is a securities transaction in which the same broker acts as agent
on both sides of the trade and the broker or an affiliate has discretion over
one of the participating accounts. In this situation, Neuberger Berman would
receive brokerage commissions from both participants in the trade. The other
account participating in an agency cross-trade with a Portfolio cannot be an
account over which Neuberger Berman exercises investment discretion. A member of
the Board of Trustees who is not affiliated with Neuberger Berman reviews
confirmations of each agency cross-trade that the Portfolios participate in.
The Portfolio expects that it will continue to execute a portion of
its transactions through brokers other than Neuberger Berman. In selecting those
brokers, NB Management considers the quality and reliability of brokerage
services, including execution capability, performance, and financial
responsibility, and may consider research and other investment information
provided by those brokers.
A committee comprised of officers of NB Management and principals of
Neuberger Berman who are portfolio managers of the Portfolio and/or Other NB
Funds (collectively, "NB Funds") and some of Neuberger Berman's managed accounts
("Managed Accounts") evaluates semi-annually the nature and quality of the
brokerage and research services provided by other brokers. Based on this
evaluation, the committee establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the NB Funds and the Managed Accounts
that are not effected by Neuberger Berman. However, in any semi-annual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from the
projected rankings. These variations reflect the following factors, among
others: (1) brokers not on the list or ranking below other brokers on the list
may be selected for particular transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of or research provided by particular brokers or in the execution
or research needs of the NB Funds and/or the Managed Accounts; and (3) the
aggregate amount of brokerage commissions generated by transactions for the NB
Funds and the Managed Accounts may change substantially from one semi-annual
period to the next.
The commissions paid to a broker other than Neuberger Berman may be
higher than the amount another firm might charge if NB Management determines in
good faith that the amount of those commissions is reasonable in relation to the
value of the brokerage and research services provided by the broker. NB
Management believes that those research services benefit the Portfolio by
supplementing the information otherwise available to NB Management. That
research may be used by NB Management in servicing Other NB Funds and, in some
cases, by Neuberger Berman in servicing the Managed Accounts. On the other hand,
research received by NB Management from brokers effecting portfolio transactions
on behalf of the Other NB Funds and by Neuberger Berman from brokers effecting
portfolio transactions on behalf of the Managed Accounts may be used for the
Portfolio's benefit.
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<PAGE>
Janet W. Prindle, a Vice President of NB Management and a Managing
Director of Neuberger Berman, is the person primarily responsible for making
decisions as to specific action to be taken with respect to the investment
portfolio of the Portfolio. She has full authority to take action with respect
to portfolio transactions and may or may not consult with other personnel of NB
Management prior to taking such action. If Ms. Prindle is unavailable to perform
her responsibilities, Robert Ladd and/or Ingrid Saukaitis, each of whom is a
Vice President of NB Management, will assume responsibility for the Portfolio.
PORTFOLIO TURNOVER
- ------------------
The Portfolio's portfolio turnover rate is calculated by dividing
(1) the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
accountants for the Fund and Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
ORGANIZATION, CAPITALIZATION AND OTHER MATTERS
THE FUND
- --------
The Fund is a separate ongoing series of Neuberger Berman Equity
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 as a diversified, open-end management investment company, commonly known as
a mutual fund. Equity Trust has nine separate series. The Fund invests all of
net investable assets in the Portfolio, in each case 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
the series belong only to that series, and the liabilities of each series are
borne solely by that series and no other.
Prior to December 1, 1999, the Fund was a series of Neuberger Berman
Equity Assets. Prior to November 9, 1998, the term Neuberger Berman in the
Fund's name was "Neuberger Berman."
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
45
<PAGE>
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 the Plan, a client of the Plan may be unable to purchase
additional shares and/or may be required to redeem shares (and possibly incur a
tax liability) if the client no longer has a relationship with the Plan or if
the Plan no longer has a contract with NB Management to perform services.
THE PORTFOLIO
- -------------
The Portfolio is a separate operating series of Equity Managers
Trust, a New York common law trust organized as of December 1, 1992. The Manager
Trust is registered under the 1940 Act as a diversified, open-end management
investment company. Equity Managers Trust has seven separate Portfolios. The
assets of the Portfolio belong only to the Portfolio, and the liabilities of the
Portfolio are borne solely by the Portfolio and no other.
FUND INVESTMENTS IN THE PORTFOLIO. The Fund is a "feeder fund" that
seeks to achieve its investment objective by investing all of its net investable
assets in the Portfolio, which is a "master fund." The Portfolio, which has the
same investment objective, policies, and limitations as the Fund, in turn
invests in securities; the Fund thus acquires an indirect interest in those
securities.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. The Sister Funds that are series of
Neuberger Berman Equity Funds(R) ("Equity Funds") and the other mutual funds
that are series of other trusts invest all of their respective net assets in
corresponding Portfolios of Equity Managers Trust. The shares of each series of
Equity Funds are available for purchase by members of the general public. The
Trusts do not sell their shares directly to members of the general public.
The Portfolio may also permit other investment companies and/or
other institutional investors to invest in the Portfolio. All investors will
46
<PAGE>
invest in the Portfolio on the same terms and conditions as the Fund and will
pay a proportionate share of the Portfolio's expenses. Other investors in the
Portfolio (including the series of Equity Funds) 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 Equity Funds) 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 the Funds that invest in the Portfolio
is available from NB Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio
by a series of Equity Funds 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 its corresponding Portfolio may
be affected by the actions of other large investors in the Portfolio, if any.
For example, if a large investor in 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 its corresponding
Portfolio at any time, if the trustees of the respective Trust determine that it
is in the best interests of the Fund and its shareholders to do so. 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 respective Trust. A withdrawal could
result in a distribution in kind of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. That distribution could result in a
less diversified portfolio of investments for the Fund and could affect
adversely the liquidity of the Fund's investment portfolio. If the Fund decided
to convert those securities to cash, it usually would incur brokerage fees or
other transaction costs. If the Fund withdrew its investment from the Portfolio,
the trustees of the respective Trust would consider what actions might be taken,
including the investment of all of the Fund's net investable assets in another
pooled investment entity having substantially the same investment objective as
the Fund or the retention by the Fund of its own investment manager to manage
its assets in accordance with its investment objective, policies, and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. 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
47
<PAGE>
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.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and Trust
Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for
their securities and cash. State Street also serves as the Fund's transfer
agent, administering purchases, redemptions, and transfers of Fund shares and
the payment of dividends and other distributions to the Plan. All correspondence
should be mailed to the Plan, 40 Rector Street, 3rd Floor, New York, NY 10006.
In addition, State Street serves as transfer agent for the Portfolio.
INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected PricewaterhouseCoopers LLP, One
Post Office Square, Boston, MA 02109, as the independent accountants who will
audit their financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as
their legal counsel.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth the name, address, and percentage of
ownership of each person who was known by each Fund to own beneficially or of
record 5% or more of that Fund's outstanding shares at October 30, 1999:
<TABLE>
<CAPTION>
Percentage of
Ownership at
Name and Address October 30, 1999
-------------------------------------------------------
<S> <C> <C>
Neuberger Berman ICMA Retirement Trust 65.31%
SOCIALLY RESPONSIVE Trust 777 N. Capitol Street, NE
Washington, D.C. 20002-4239
</TABLE>
48
<PAGE>
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information
included in the Trust's registration statement filed with the SEC under the 1933
Act with respect to the securities offered by the Prospectus. The registration
statement, including the exhibits filed therewith, may be examined at the SEC's
offices in Washington, D.C. The SEC maintains a Website (http://www.sec.gov)
that contains this SAI, material incorporated by reference, and other
information regarding the Fund and Portfolio.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
The following financial statements and related documents are
incorporated herein by reference from the Annual Report to shareholders of
Neuberger Berman Equity Assets for the fiscal year ended August 31, 1999:
The audited financial statements of the Fund and Portfolio and
notes thereto for the fiscal year ended August 31, 1999, and the
reports of PricewaterhouseCoopers LLP, independent accountants,
with respect to such audited financial statements of the Fund and
the Portfolio.
49
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
- -----------------------------------------------
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
------------------------------
Aaa - Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issue.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A - Bonds rated A possess many favorable investment attributes and
are considered to be as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.
A-1
<PAGE>
Baa - Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in
each generic rating classification described above. The modifier 1 indicates
that the security ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the
issuer ranks in the lower end of its generic rating category.
S&P commercial paper ratings:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's commercial paper ratings:
Issuers rated PRIME-1 (or related supporting institutions), also
known as P-1, have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- Well-established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions), also
known as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
A-2
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 25 ON FORM N-1A
PART C
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
- -------- ---------------------------------
Exhibit
Number Description
------ -----------
(a) (1) Certificate of Trust. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(2) Restated Certificate of Trust. Incorporated by
Reference to Post- Effective Amendment No. 18 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(3) Trust Instrument of Neuberger Berman Equity Trust.
Incorporated by Reference to Post-Effective Amendment
No. 8 to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784.
(4) Schedule A - Current Series of Neuberger Berman
Equity Trust. Incorporated by Reference to
Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(b) By-laws of Neuberger Berman Equity Trust.
Incorporated by Reference to Post-Effective Amendment
No. 8 to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784.
(c) (1) Trust Instrument of Neuberger Berman Equity Trust,
Articles IV, V, and VI. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(2) By-laws of Neuberger Berman Equity Trust, Articles V,
VI, and VIII. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(d) (1) (i) Management Agreement Between Equity Managers
Trust and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582.
<PAGE>
Exhibit
Number Description
------ -----------
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No. 87
to Registration Statement of Neuberger Berman
Equity Funds, File Nos. 2-11357 and 811-582.
(2) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger Berman,
LLC with Respect to Equity Managers Trust.
Incorporated by Reference to Post-Effective
Amendment No. 70 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Sub-Advisory
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 87 to
Registration Statement of Neuberger Berman
Equity Funds, File Nos. 2-11357 and 811-582.
(iii) Substitution Agreement Among Neuberger Berman
Management Inc., Equity Managers Trust,
Neuberger Berman, L.P., and Neuberger Berman,
LLC. Incorporated by Reference to
Post-Effective Amendment No. 7 to Registration
Statement of Equity Managers Trust, File No.
811-7910.
(3) (i) Management Agreement Between Global Managers
Trust and Neuberger Berman Management Inc..
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582.
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582.
(iii) Schedule B - Schedule of Compensation Under
the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No. 74
to Registration Statement of Neuberger Berman
Equity Funds, File Nos. 2-11357 and 811-582.
(4) (i) Sub-Advisory Agreement Between Neuberger
Berman Management Inc. and Neuberger Berman,
LLC with Respect to Global Managers Trust.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos.
2-11357 and 811-582.
2
<PAGE>
Exhibit
Number Description
------ -----------
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Sub-Advisory
Agreement. Incorporated by Reference to
Post-Effective Amendment No. 74 to
Registration Statement of Neuberger Berman
Equity Funds, File Nos. 2-11357 and 811-582.
(iii) Substitution Agreement among Neuberger Berman
Management Inc., Global Managers Trust,
Neuberger Berman, L.P. and Neuberger Berman,
LLC. Incorporated by Reference to the
substantially similar agreement filed in
Post-Effective Amendment No. 7 to the
Registration Statement of Equity Managers
Trust, File No. 811-7910 (the documents differ
only with respect to the date of and the
master fund party to the subadvisory agreement
under which substitution is sought and the
name of the executing master fund).
(e) (1) Distribution Agreement Between Neuberger Berman Equity Trust
and Neuberger Berman Management Inc. Incorporated by
Reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(2) Schedule A - Series of Neuberger Berman Equity Trust
Currently Subject to the Distribution Agreement.
Incorporated by Reference to Post-Effective Amendment No. 24
to Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
(3) Distribution and Services Agreement between Neuberger Berman
Equity Trust and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective Amendment No. 24
to Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
(4) Schedule A - Series of Neuberger Berman Equity Trust
Currently Subject to the Distribution and Services
Agreement. Incorporated by Reference to Post-Effective
Amendment No. 24 to Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) (1) Custodian Contract Between Neuberger Berman Equity Trust and
State Street Bank and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(2) Schedule of Compensation under the Custodian Contract.
Incorporated by Reference to Post-Effective Amendment No. 10
to Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
3
<PAGE>
Exhibit
Number Description
------ -----------
(h) (1) (i) Transfer Agency and Service Agreement Between
Neuberger Berman Equity Trust and State Street Bank
and Trust Company. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(ii) First Amendment to Transfer Agency and Service
Agreement between Neuberger Berman Equity Trust and
State Street Bank and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(iii) Schedule of Compensation under the Transfer Agency
and Service Agreement. Incorporated by Reference to
Post-Effective Amendment No. 10 to Registrant's
Registration Statement, File Nos. 33-64368 and
811-7784.
(iv) Second Amendment to Transfer Agency and Service
Agreement between Neuberger Berman Equity Trust and
State Street Bank and Trust Company. Incorporated by
reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(2) (i) Administration Agreement Between Neuberger Berman
Equity Trust and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective Amendment
No. 24 to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784.
(ii) Schedule A - Series of Neuberger Berman Equity Trust
Currently Subject to the Administration Agreement.
Incorporated by Reference to Post-Effective Amendment
No. 24 to Registrant's Registration Statement, File
Nos. 33-64368 and 811-7784.
(iii) Schedule B - Schedule of Compensation Under
the Administration Agreement. Incorporated
by Reference to Post-Effective Amendment
No. 24 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784.
(i) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman
Socially Responsive Assets. Incorporated by Reference
to Post-Effective Amendment No. 1 to the Registration
Statement of Neuberger Berman Equity Series, File Nos.
33- 82568 and 811-8106.
(b) Consent of Kirkpatrick & Lockhart LLP to use Previously
Filed Opinions and Consents on Securities Matters.
Filed herewith.
(j) Consent of Independent Auditors. Filed herewith.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
4
<PAGE>
Exhibit
Number Description
------ -----------
(m) Form of Plan Pursuant to Rule 12b-1. Incorporated by
Reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(n) Financial Data Schedule. Not Applicable.
(o) Plan Pursuant to Rule 18f-3. None.
5
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
Item 25. Indemnification.
- -------- ----------------
A Delaware business trust may provide in its governing instrument for
indemnification of its officers and trustees from and against any and all claims
and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides
that the Registrant shall indemnify any present or former trustee, officer,
employee or agent of the Registrant ("Covered Person") to the fullest extent
permitted by law against liability and all expenses reasonably incurred or paid
by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office" ("Disabling Conduct"), or not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreements between Neuberger and Berman
Management Incorporated ("NB Management") and Equity Managers Trust and Global
Managers Trust (Equity Managers Trust and Global Managers Trust are collectively
referred to as the "Managers Trusts") provide that neither NB Management nor any
director, officer or employee of NB Management performing services for the
series of the Managers Trusts at the direction or request of NB Management in
connection with NB Management's discharge of its obligations under the
Agreements shall be liable for any error of judgment or mistake of law or for
any loss suffered by a series in connection with any matter to which the
Agreements relate; provided, that nothing in the Agreements shall be construed
(i) to protect NB Management against any liability to the Managers Trusts or any
series thereof or their interest holders to which NB Management would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of NB Management's reckless
disregard of its obligations and duties under the Agreements, or (ii) to protect
any director, officer or employee of NB Management who is or was a trustee or
officer of the Managers Trusts against any liability to the Managers Trusts or
any series thereof or their interest holders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
6
<PAGE>
negligence or reckless disregard of the duties involved in the conduct of such
person's office with the Managers Trusts.
Section 1 of the Sub-Advisory Agreements between NB Management and
Neuberger Berman, LLC ("Neuberger Berman") with respect to the Managers Trusts
provides that, in the absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or of reckless disregard of its
duties and obligations under the Agreements, Neuberger Berman will not be
subject to any liability for any act or omission or any loss suffered by any
series of the Managers Trusts or their interest holders in connection with the
matters to which the Agreements relate.
Section 11 of the Distribution Agreement between the Registrant and NB
Management provides that NB Management shall look only to the assets of a Series
for the Registrant's performance of the Agreement by the Registrant on behalf of
such Series, and neither the Trustees nor any of the Registrant's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of Adviser and Sub-Adviser.
- -------- ----------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of NB Management and each principal of Neuberger Berman is,
or at any time during the past two years has been, engaged for his or her own
account or in the capacity of director, officer, employee, partner or trustee.
7
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Philip Ambrosio Senior Vice President and Chief
Senior Vice President and Financial Officer, Neuberger Berman
Chief Financial Officer, Inc.
Neuberger Berman
Brooke A. Cobb Chief Investment Officer, Bainco
Vice President, International Investors. Senior Vice
NB Management President and Senior Portfolio Manager,
Putnam Investments.(1)
Barbara DiGiorgio, Assistant Treasurer, Neuberger Berman
Assistant Vice President, Advisers Management Trust; Assistant
NB Management Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman
Income Funds; Assistant Treasurer,
Neuberger Berman Income Trust;
Assistant Treasurer, Neuberger Berman
Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust;
Assistant Treasurer, Income Managers
Trust; Assistant Treasurer, Equity
Managers Trust; Assistant Treasurer,
Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity
Assets; Assistant Treasurer, Neuberger
Berman Equity Series.
Theodore P. Giuliano President and Trustee, Neuberger Berman
Vice President, NB Income Funds; President and Trustee,
Management; Managing Neuberger Berman Income Trust;
Director, Neuberger Berman President and Trustee, Income Managers
Trust.
Michael M. Kassen Executive Vice President, Chief
Executive Vice President, Investment Officer and Director,
Neuberger Berman Neuberger Berman Inc.
Jeffrey B. Lane President, Chief Executive Officer and
President and Chief Director of Neuberger Berman, Inc.
Executive Officer, Neuberger
Berman
Michael F. Malouf Portfolio Manager, Dresdner RCM Global
Vice President Investors.(2)
NB Management
Robert Matza Executive Vice President, Chief
Executive Vice President and Administrative Officer and Director,
Chief Administrative Neuberger Berman, Inc.
Officer, Neuberger Berman
- ----------------
(1) Until 1997.
(2) Until 1998.
8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
S. Basu Mullick Portfolio Manager, Ark Asset Management(3)
Vice President,
NB Management
C. Carl Randolph Secretary and General Counsel,
Senior Vice President, Neuberger Berman, Inc. Assistant
General Counsel and Secretary, Neuberger Berman Advisers
Secretary, Management Trust; Assistant Secretary,
Neuberger Berman Advisers Managers Trust; Assistant
Secretary, Neuberger Berman Income
Funds; Assistant Secretary, Neuberger
Berman Income Trust; Assistant
Secretary, Neuberger Berman Equity
Funds; Assistant Secretary, Neuberger
Berman Equity Trust; Assistant
Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers
Trust; Assistant Secretary, Global
Managers Trust; Assistant Secretary,
Neuberger Berman Equity Assets;
Assistant Secretary, Neuberger Berman
Equity Series.
Richard Russell Treasurer, Neuberger Berman Advisers
Vice President, Management Trust; Treasurer, Advisers
NB Management Managers Trust; Treasurer, Neuberger
Berman Income Funds; Treasurer,
Neuberger Berman Income Trust;
Treasurer, Neuberger Berman Equity
Funds; Treasurer, Neuberger Berman
Equity Trust; Treasurer, Income
Managers Trust; Treasurer, Equity
Managers Trust; Treasurer, Global
Managers Trust; Treasurer, Neuberger
Berman Equity Assets; Treasurer,
Neuberger Berman Equity Series.
Ingrid Saukaitis Project Director, Council on Economic
Vice President, NB Management Priorities.(4)
Heidi L. Schneider Executive Vice President and Director,
Executive Vice President, Neuberger Berman, Inc.
Neuberger Berman
Benjamin E. Segal Assistant Portfolio Manager, GT Global
Vice President, NB Investment Management*/; Consultant,
Management, Managing Bain & Company, Inc.**/
Director, Neuberger Berman
- ------------
(3) Until 1987.
(4) Until 1997.
*/ Until 1997.
**/ Until 1997.
9
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Jennifer K. Silver Portfolio Manager and Director, Putnum
Vice President, NB Investments.(5)
Management, Managing
Director, Neuberger Berman
Daniel J. Sullivan Vice President, Neuberger Berman
Senior Vice President, Advisers Management Trust; Vice
NB Management President, Advisers Managers Trust;
Vice President, Neuberger Berman
Income Funds; Vice President,
Neuberger Berman Income Trust; Vice
President, Neuberger Berman Equity
Funds; Vice President, Neuberger
Berman Equity Trust; Vice President,
Income Managers Trust; Vice President,
Equity Managers Trust; Vice President,
Global Managers Trust; Vice President,
Neuberger Berman Equity Assets; Vice
President, Neuberger Berman Equity
Series.
Peter E. Sundman Executive Vice President and Director,
President, NB Management; Neuberger Berman Inc.
Executive Vice President,
Neuberger Berman
Michael J. Weiner Vice President, Neuberger Berman
Senior Vice President, Advisers Management Trust; Vice
NB Management; Senior Vice President, Advisers Managers Trust;
President, Neuberger Berman Vice President, Neuberger Berman Income
Funds; Vice President, Neuberger
Berman Income Trust; Vice President,
Neuberger Berman Equity Funds; Vice
President, Neuberger Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger
Berman Equity Assets; Vice President,
Neuberger Berman Equity Series.
- ------------------
(5) Until 1997.
10
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Allan R. White, III Portfolio Manager, Salomon Asset
Vice President, NB Management.(6)
Management; Managing
Director, Neuberger Berman
Celeste Wischerth, Assistant Treasurer, Neuberger Berman
NB Management Advisers Management Trust; Assistant
Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger Berman
Income Funds; Assistant Treasurer,
Neuberger Berman Income Trust;
Assistant Treasurer, Neuberger Berman
Equity Funds; Assistant Treasurer,
Neuberger Berman Equity Trust;
Assistant Treasurer, Income Managers
Trust; Assistant Treasurer, Equity
Managers Trust; Assistant Treasurer,
Global Managers Trust; Assistant
Treasurer, Neuberger Berman Equity
Assets; Assistant Treasurer, Neuberger
Berman Equity Series.
The principal address of NB Management, Neuberger Berman, and of
each of the investment companies named above, is 605 Third Avenue, New York, New
York 10158.
The principal address of NB Management, Neuberger Berman, and of each of
the investment companies named above, is 605 Third Avenue, New York, New York
10158.
Item 27. Principal Underwriters.
- -------- -----------------------
(a) NB Management, the principal underwriter distributing securities of
the Registrant, is also the principal underwriter and distributor for each of
the following investment companies:
Neuberger Berman Advisers Management Trust
Neuberger Berman Equity Funds
Neuberger Berman Equity Series
Neuberger Berman Equity Trust
Neuberger Berman Income Funds
Neuberger Berman Income Trust
NB Management is also the investment manager to the master funds
in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and officers
of the Registrant's principal underwriter. The principal business address of
each of the persons listed is 605 Third Avenue, New York, New York 10158-0180,
which is also the address of the Registrant's principal underwriter.
- --------------------
(6) Until 1998.
11
<PAGE>
NAME POSITIONS AND OFFICES POSITIONS AND OFFICES
---- --------------------- ---------------------
WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------
Ramesh Babu Vice President None
Richard A. Cantor Chairman of the Board None
Valerie Chang Vice President None
Brooke A. Cobb Vice President None
Robert Conti Treasurer None
Robert W. D'Alelio Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Robert S. Franklin Vice President None
Robert I. Gendelman Vice President None
Theodore P. Giuliano Vice President and None
Director
Michael M. Kassen Vice President and None
Director
Robert L. Ladd Vice President None
Josephine Mahaney Vice President None
Michael F. Malouf Vice President None
Ellen Metzger Secretary None
S. Basu Mullick Vice President None
Janet W. Prindle Vice President None
Kevin L. Risen Vice President None
Ingrid Saukaitis Vice President None
Benjamin Segal Vice President None
Jennifer K. Silver Vice President None
Kent C. Simons Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman President None
Judith M. Vale Vice President None
Josephine Velez Vice President None
Catherine Waterworth Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
Allan R. White, III Vice President None
12
<PAGE>
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
Item 28. Location of Accounts and Records.
- -------- ---------------------------------
All accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act, as amended, and the rules promulgated
thereunder with respect to the Registrant are maintained at the offices of State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
except for the Registrant's Trust Instrument and By-laws, minutes of meetings of
the Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
All accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act, as amended, and the rules promulgated
thereunder with respect to Equity Managers Trust are maintained at the offices
of State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, except for the Equity Managers Trust's Declaration of Trust
and By-laws, minutes of meetings of Equity Managers Trust's Trustees and
interest holders and Equity Managers Trust's policies and contracts, which are
maintained at the offices of the Equity Managers Trust, 605 Third Avenue, New
York, New York 10158.
All accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act, as amended, and the rules promulgated
thereunder with respect to Global Managers Trust are maintained at the offices
of State Street Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984,
George Town, Grand Cayman, Cayman Islands, BWI.
Item 29. Management Services.
- -------- --------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 30. Undertakings.
- -------- -------------
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER BERMAN EQUITY TRUST
certifies that it meets all of the requirements for effectiveness of
Post-Effective Amendment No. 25 to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City and State of New York on the
30th day of November, 1999.
NEUBERGER BERMAN EQUITY TRUST
By: / s / Michael K. Kassen
------------------------
Michael M. Kassen
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 25 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/ s / Peter E. Sundman Chairman of the Board 11/30/99
- ------------------------------- and Trustee (Chief
Peter E. Sundman Executive Officer)
/ s / Michael M. Kassen President and Trustee 11/30/99
- -------------------------------
Michael M. Kassen
/ s / Michael J. Weiner Vice President 11/30/99
- ------------------------------- (Principal Financial
Michael J. Weiner Officer)
/ s / Richard Russell Treasurer (Principal 11/30/99
- ------------------------------- Accounting Officer)
Richard Russell
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/ s / Faith Colish Trustee 11/30/99
- -------------------------------
Faith Colish
/ s / Howard A. Mileaf Trustee 11/30/99
- -------------------------------
Howard A. Mileaf
/ s / Edward I. O'Brien Trustee 11/30/99
- -------------------------------
Edward I. O'Brien
/ s / John T. Patterson, Jr. Trustee 11/30/99
- -------------------------------
John T. Patterson, Jr.
/ s / John P. Rosenthal Trustee 11/30/99
- -------------------------------
John P. Rosenthal
/ s / Cornelius T. Ryan Trustee 11/30/99
- -------------------------------
Cornelius T. Ryan
/ s / Gustave H. Shubert Trustee 11/30/99
- -------------------------------
Gustave H. Shubert
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of Post-Effective Amendment No. 25 to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 30th day of November, 1999.
EQUITY MANAGERS TRUST
By: / s / Michael M. Kassen
-----------------------
Michael M. Kassen
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 25 has been signed below by the following persons
in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/ s / Peter E. Sundman Chairman of the Board 11/30/99
- ------------------------------ and Trustee (Chief
Peter E. Sundman Executive Officer)
/ s / Michael M. Kassen President and Trustee 11/30/99
- ------------------------------
Michael M. Kassen
/ s / Michael J. Weiner Vice President
- ------------------------------ (Principal Financial
Michael J. Weiner Officer) 11/30/99
/ s / Richard Russell Treasurer (Principal 11/30/99
- ------------------------------ Accounting Officer)
Richard Russell
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/ s / Faith Colish Trustee 11/30/99
- ------------------------------
Faith Colish
/ s / Howard A. Mileaf Trustee 11/30/99
- ------------------------------
Howard A. Mileaf
/ s / Edward I. O'Brien Trustee 11/30/99
- ------------------------------
Edward I. O'Brien
/ s / John T. Patterson, Jr. Trustee 11/30/99
- ------------------------------
John T. Patterson, Jr.
/ s / John P. Rosenthal Trustee 11/30/99
- ------------------------------
John P. Rosenthal
/ s / Cornelius T. Ryan Trustee 11/30/99
- ------------------------------
Cornelius T. Ryan
/ s / Gustave H. Shubert Trustee 11/30/99
- ------------------------------
Gustave H. Shubert
<PAGE>
NEUBERGER BERMAN EQUITY TRUST
POST-EFFECTIVE AMENDMENT NO. 25 ON FORM N-1A
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
(a) (1) Certificate of Trust. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(2) Restated Certificate of Trust. Incorporated by
Reference to Post- Effective Amendment No. 18 to
Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
(3) Trust Instrument of Neuberger Berman Equity Trust.
Incorporated by Reference to Post-Effective Amendment No.
8 to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(4) Schedule A - Current Series of Neuberger Berman Equity
Trust. Incorporated by Reference to Post-Effective
Amendment No. 24 to Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784.
(b) By-laws of Neuberger Berman Equity Trust. Incorporated
by Reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
(c) (1) Trust Instrument of Neuberger Berman Equity Trust,
Articles IV, V, and VI. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(2) By-laws of Neuberger Berman Equity Trust, Articles V,
VI, and VIII. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(d) (1) (i) Management Agreement Between Equity Managers
Trust and Neuberger Berman Management Inc.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registration Statement of
Neuberger Berman Equity Funds, File Nos. 2-11357
and 811-582.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registration Statement of
Neuberger Berman Equity Funds, File Nos. 2-11357
and 811-582.
14
<PAGE>
Exhibit
Number Description
- ------ -----------
(iii) Schedule B - Schedule of Compensation Under the
Management Agreement. Incorporated by Reference to
Post-Effective Amendment No. 87 to Registration
Statement of Neuberger Berman Equity Funds, File
Nos. 2-11357 and 811-582.
(2) (i) Sub-Advisory Agreement Between Neuberger Berman
Management Inc. and Neuberger Berman, LLC with
Respect to Equity Managers Trust. Incorporated
by Reference to Post-Effective Amendment No. 70
to Registration Statement of Neuberger Berman
Equity Funds, File Nos. 2-11357 and 811-582.
(ii) Schedule A - Series of Equity Managers Trust
Currently Subject to the Sub-Advisory Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 87 to Registration Statement of
Neuberger Berman Equity Funds, File Nos. 2-11357
and 811-582.
(iii) Substitution Agreement Among Neuberger Berman
Management Inc., Equity Managers Trust, Neuberger
Berman, L.P., and Neuberger Berman, LLC.
Incorporated by Reference to Post-Effective
Amendment No. 7 to Registration Statement of Equity
Managers Trust, File No. 811-7910.
(3) (i) Management Agreement Between Global Managers
Trust and Neuberger Berman Management Inc..
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos. 2-11357
and 811-582.
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Management Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos. 2-11357
and 811-582.
(iii) Schedule B - Schedule of Compensation Under the
Management Agreement. Incorporated by Reference to
Post-Effective Amendment No. 74 to Registration
Statement of Neuberger Berman Equity Funds, File
Nos. 2-11357 and 811-582.
(4) (i) Sub-Advisory Agreement Between Neuberger Berman
Management Inc. And Neuberger Berman, LLC with
Respect to Global Managers Trust. Incorporated by
Reference to Post-Effective Amendment No. 74 to
Registration Statement of Neuberger Berman Equity
Funds, File Nos. 2-11357 and 811-582.
15
<PAGE>
Exhibit
Number Description
- ------ -----------
(ii) Schedule A - Series of Global Managers Trust
Currently Subject to the Sub-Advisory Agreement.
Incorporated by Reference to Post-Effective
Amendment No. 74 to Registration Statement of
Neuberger Berman Equity Funds, File Nos. 2-11357
and 811-582.
(iii) Substitution Agreement among Neuberger Berman
Management Inc., Global Managers Trust, Neuberger
Berman, L.P. and Neuberger Berman, LLC.
Incorporated by Reference to the substantially
similar agreement filed in Post-Effective
Amendment No. 7 to the Registration Statement of
Equity Managers Trust, File No. 811-7910, (the
documents differ only with respect to the date of
and the master fund party to the subadvisory
agreement under which substitution is sought and
the name of the executing master fund).
(e) (1) Distribution Agreement Between Neuberger Berman Equity Trust and
Neuberger Berman Management Inc. Incorporated by Reference to
Post-Effective Amendment No. 24 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784.
(2) Schedule A - Series of Neuberger Berman Equity Trust Currently
Subject to the Distribution Agreement. Incorporated by
Reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(3) Distribution and Services Agreement between Neuberger Berman
Equity Trust and Neuberger Berman Management Inc. Incorporated by
Reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(4) Schedule A - Series of Neuberger Berman Equity Trust Currently
Subject to the Distribution and Services Agreement. Incorporated
by Reference to Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(f) Bonus, Profit Sharing or Pension Plans. None.
(g) (1) Custodian Contract Between Neuberger Berman Equity Trust and
State Street Bank and Trust Company. Incorporated by Reference
to Post-Effective Amendment No. 8 to Registrant's Registration
Statement, File Nos. 33-64368 and 811-7784.
(2) Schedule of Compensation under the Custodian Contract.
Incorporated by Reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement, File Nos. 33-64368 and
811-7784.
16
<PAGE>
Exhibit
Number Description
- ------ -----------
(h) (1) (i) Transfer Agency and Service Agreement Between Neuberger
Berman Equity Trust and State Street Bank and Trust
Company. Incorporated by Reference to Post-Effective
Amendment No. 8 to Registrant's Registration Statement,
File Nos. 33-64368 and 811-7784.
(ii) First Amendment to Transfer Agency and Service Agreement
between Neuberger Berman Equity Trust and State Street
Bank and Trust Company. Incorporated by Reference to
Post-Effective Amendment No. 8 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(iii) Schedule of Compensation under the Transfer Agency and
Service Agreement. Incorporated by Reference to
Post-Effective Amendment No. 10 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(iv) Second Amendment to Transfer Agency and Service Agreement
between Neuberger Berman Equity Trust and State Street
Bank and Trust Company. Incorporated by reference to
Post-Effective Amendment No. 12 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(2) (i) Administration Agreement Between Neuberger Berman Equity
Trust and Neuberger Berman Management Inc. Incorporated
by Reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
(ii) Schedule A - Series of Neuberger Berman Equity Trust
Currently Subject to the Administration Agreement.
Incorporated by Reference to Post-Effective Amendment No.
24 to Registrant's Registration Statement, File Nos.
33-64368 and 811-7784.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. Incorporated by Reference to
Post-Effective Amendment No. 24 to Registrant's
Registration Statement, File Nos. 33-64368 and 811-7784.
(i) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with Respect to Neuberger Berman Socially
Responsive Assets. Incorporated by Reference to Post-Effective
Amendment No. 1 to the Registration Statement of Neuberger
Berman Equity Series, File Nos. 33- 82568 and 811-8106.
(b) Consent of Kirkpatrick & Lockhart LLP to use Previously
Filed Opinions and Consents on Securities Matters. Filed
herewith.
(j) Consent of Independent Auditors. Filed herewith.
(k) Financial Statements Omitted from Prospectus. None.
(l) Letter of Investment Intent. None.
17
<PAGE>
Exhibit
Number Description
- ------ -----------
(m) Form of Plan Pursuant to Rule 12b-1. Incorporated by
Reference to Post-Effective Amendment No. 24 to
Registrant's Registration Statement, File Nos. 33-64368
and 811-7784.
(n) Financial Data Schedule. Not Applicable.
(o) Plan Pursuant to Rule 18f-3. None.
18
CONSENT AUTHORIZING USE OF PREVIOUSLY-FILED LEGAL OPINION
FOR NEUBERGER BERMAN EQUITY TRUST ("REGISTRANT")
In connection with Post-Effective Amendment Nos. 25 and 26 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-64368 and 811-7784) to be
filed with the Securities and Exchange Commission on or about November 30, 1999,
we hereby consent to the continued use of the Opinion and Consent of Kirkpatrick
& Lockhart LLP on Securities Matters with respect to Neuberger Berman Equity
Trust and its series Neuberger Berman Focus Trust, Neuberger Berman Genesis
Trust, Neuberger Berman Guardian Trust, Neuberger Berman International Trust,
Neuberger Berman Manhattan Trust, and Neuberger Berman Partners Trust previously
filed in Post-Effective Amendment No. 13 to Registrant's Registration Statement
on Form N-1A (File Nos. 33-64368 and 811-7784); the Opinion and Consent of
Kirkpatrick & Lockhart LLP on Securities Matters with respect to Neuberger
Berman Socially Responsive Trust previously filed in Post-Effective Amendment
No. 3 to the Registration Statement of Neuberger Berman Equity Assets (File Nos.
33-82568 and 811-8106); the Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters with respect to Neuberger Berman Regency Trust previously
filed in Post-Effective Amendment No. 22 to Registrant's Registration Statement
on Form N-1A (File Nos. 33-64368 and 811-7784); and the Opinion and Consent of
Kirkpatrick & Lockhart LLP on Securities Matters with respect to Neuberger
Berman Century Trust previously filed in Post-Effective Amendment No. 24 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-64368 and
811-7784). We further consent to the filing of this consent in connection with
Post-Effective Amendment Nos. 25 and 26 to Registrant's Registration Statement.
We also consent to the reference to our firm in the Statement of Additional
Information filed as part of the Registration Statement.
Sincerely,
/s/ KIRKPATRICK & LOCKHART LLP
------------------------------
KIRKPATRICK & LOCKHART LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference into the Prospectus and
Statement of Additional Information constituting the Post-Effective Amendment
No. 25 and 26 to the Registration Statement on Form N-1A (the "Registration
Statement") of Neuberger Berman Equity Trust (the "Trusts") on the financial
statements and financial highlights appearing in the August 31, 1999 Annual
Report to the Shareholders. We further consent to the references to our Firm
under the heading "Financial Highlights" in the Prospectus and "Experts" in the
Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 24, 1999
