Neuberger Berman Management Inc. is proposing a 10 basis point 12b-1 fee on
its Trust series of funds. Enclosed is the proposed Distribution and
Shareholder Services Plan that is subject to shareholder vote.
REASONS FOR THE PROPOSAL
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Over the years plan sponsors have requested more funds and providers have
responded by offering more investment choices. Offering outside funds is now
standard in the DC marketplace and critical to remaining competitive. In the
past, most institutional providers requested fee sharing to offset the costs
associated with servicing outside fund shareholders (i.e., educational
materials, participant communication, electronic trading, etc.). To remain
competitive, providers need to meet the demands of changing technology and of
rising shareholder service expectations. As a Fidelity client, you are
experiencing first hand the innovative technology changes that are occurring in
the servicing of plan participants. Costs associated with these services have
increased. As a result, the provider is faced with 3 options: 1) Raise their
recordkeeping & administrative fees 2) Look to fund partners for additional
financial support 3) Offer fewer outside fund options. Record-keepers have
chosen to require additional revenue from the outside fund companies.
Neuberger Berman Management Inc. expects to pay the additional 10 basis points
to third-party administrators, supermarket sponsors, banks and other
institutions that make shares available to investors and provide services to our
clients. The management fee rates of the portfolios have not increased.
NB REMAINS COMPETITIVE WITH EXPENSES BELOW THEIR PEER GROUPS
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Including the proposed 10 basis point 12b-1 fee, Neuberger Berman Management
Inc. believes its products remain competitively priced.
AVERAGE PEER GROUP* NB TRUST ( + 10 BPTS.)
Large Value 1.33% Guardian .97%
Partners 1.01
Focus 1.07
Socially Responsive 2.15 (Capped at 20
bpts. above its sister
fund, which has a hard
cap of 1.50%)
-----------------------------------------------------
Small Value 1.53 Genesis 1.29
-----------------------------------------------------
Small Growth 1.68 Millennium 2.55 (Capped at 1.75%)
-----------------------------------------------------
Mid Growth 1.60 Manhattan 1.25
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Foreign 1.70 International 2.02 (Capped at 1.70%)
* Source: Morningstar. Based on the Morningstar Category that identifies
funds based on their actual investment style as measured by their underlying
portfolio holdings (portfolio statistics and compositions over the last 3
years). This category was chosen for comparison purposes because the
portfolio compositions of the funds in this category are similar to the
composition of the fund over this period.
PLEASE SEE THE NEUBERGER BERMAN EQUITY TRUST PROXY STATEMENT DATED AUGUST
31, 1999 FOR A MORE COMPLETE DISCUSSION OF THIS PROPOSAL
