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As filed with the Securities and Exchange Commission on December 29, 1995
File No. 811-7910
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5
EQUITY MANAGERS TRUST
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(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue
New York, New York 10158-0180
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (212) 476-8800
Lawrence Zicklin, President
Equity Managers Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, DC 20036-5891
(Names and Addresses of agents for service)
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EXPLANATORY NOTE
This Registration Statement is being filed by the Registrant
pursuant to Section 8(b) of the Investment Company Act of 1940, as
amended. However, beneficial interests in the series of the Registrant
are not being registered under the Securities Act of 1933, as amended,
("1933 Act") because such interests are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. Investments in the Registrant's series
may be made only by regulated investment companies, segregated asset
accounts, foreign investment companies, common trust funds, group trusts,
or other investment arrangements, whether organized within or without the
United States (excluding individuals, S corporations, partnerships, and
grantor trusts beneficially owned by any individuals, S corporations, or
partnerships). This Registration Statement does not constitute an offer
to sell, or the solicitation of an offer to buy, any beneficial interests
in any series of the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
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Equity Managers Trust ("Trust") is a diversified, no-load, open-
end management investment company that was organized as a trust under the
laws of the State of New York pursuant to a Declaration of Trust dated as
of December 1, 1992.
Beneficial interests in the Trust are divided into six separate
subtrusts or "series," each having a distinct investment objective and
distinct investment policies. Five of these series -- Neuberger&Berman
Manhattan Portfolio, Neuberger&Berman Genesis Portfolio, Neuberger&Berman
Focus Portfolio, Neuberger&Berman Guardian Portfolio, and Neuberger&Berman
Partners Portfolio (each a "Portfolio") -- commenced operations on August
2, 1993. The sixth series, Neuberger&Berman Socially Responsive
Portfolio, commenced investment operations on March 14, 1994. The assets
of each Portfolio belong only to that Portfolio, and the liabilities of
each Portfolio are borne solely by that Portfolio and no other.
Beneficial interests in the Portfolios are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. Investments in the
Portfolios may be made only by regulated investment companies, segregated
asset accounts, foreign investment companies, common trust funds, group
trusts, or other investment arrangements, whether organized within or
without the United States (excluding individuals, S corporations,
partnerships, and grantor trusts beneficially owned by any individuals,
S corporations, or partnerships). This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
Neuberger&Berman Management Incorporated ("N&B Management")
serves as the investment manager and Neuberger&Berman, L.P.
("Neuberger&Berman") serves as the sub-adviser of each Portfolio.
Investment Programs
The investment objective of each Portfolio is not fundamental.
Although any investment objective may be changed by the trustees of the
Trust ("Trustees") without investor approval, each Portfolio intends to
notify its investors before implementing any material change in its
investment objective. There can be no assurance that any Portfolio will
achieve its investment objective.
The Portfolios' investment policies and limitations are not
fundamental unless otherwise specified in this Registration Statement.
Although non-fundamental policies or limitations may be changed by the
Trustees without investor approval, each Portfolio intends to notify its
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investors before making any material change to such policies or
limitations. Fundamental policies and limitations may not be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940, as amended ("1940 Act")) of
the Portfolio.
For an explanation of some types of investments, see "Description
of Investments." Additional investment techniques, features, and
restrictions concerning the Portfolios' investment programs are described
in Part B.
Neuberger&Berman Manhattan Portfolio
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The investment objective of Neuberger&Berman Manhattan Portfolio
is to seek capital appreciation without regard to income.
The Portfolio generally invests in securities of medium- to
large-capitalization companies believed to have the maximum potential for
long-term capital appreciation. It does not seek to invest in securities
that pay dividends or interest, and any such income is incidental. The
Portfolio expects to be almost fully invested in common stocks, often of
companies that may be temporarily out of favor in the market.
The Portfolio's growth investment program involves greater risks
and share price volatility than programs that invest in more conservative
securities. Moreover, the Portfolio does not follow a policy of active
trading for short-term profits. Accordingly, the Portfolio may be more
appropriate for investors with a longer-range perspective. The Portfolio
uses a "growth at a reasonable price" investment approach. When N&B
Management believes that particular securities have greater potential for
long-term capital appreciation, the Portfolio may purchase such securities
at prices with relatively higher multiples to measures of economic value
(such as earnings or cash flow) than other Portfolios. In addition, the
Portfolio focuses on companies with strong balance sheets and reasonable
valuations relative to their growth rates. It also diversifies its
investments into many companies and industries.
Neuberger&Berman Genesis Portfolio
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The investment objective of the Neuberger&Berman Genesis
Portfolio is to seek capital appreciation.
The Portfolio invests principally in common stocks of companies
with small market capitalizations ("small-cap companies"). Market
capitalization means the total market value of a company's outstanding
common stock. The Portfolio regards companies with market capitalizations
of up to $750 million as small-cap companies. There is no necessary
correlation between market capitalization and the financial attributes --
such as levels of assets, revenues, or income -- commonly used to measure
the size of a company.
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Studies indicate that the market values of small-cap company
stocks, such as those included in the Russell 2000 Index and the Wilshire
1750 or quoted on Nasdaq, have a cyclical relationship with larger
capitalization stocks. Over the last 30 years, small-cap company stocks
have outperformed larger capitalization stocks about two-thirds of the
time, even though small-cap stocks have usually declined more than larger
capitalization stocks in declining markets. There can be no assurance
that this pattern will continue.
Small-cap company stocks generally are considered to offer
greater potential for appreciation than securities of companies with
larger market capitalization. Most small-cap company stocks pay low or no
dividends, and the Portfolio seeks long-term appreciation, rather than
income. Small-cap company stocks also have higher risk and volatility,
because most are not as broadly traded as stocks of companies with larger
capitalization and their prices thus may fluctuate more widely and
abruptly. Small-cap company securities are also less researched and often
overlooked and undervalued in the market.
The Portfolio tries to enhance the potential for appreciation and
limit the risk of decline in the value of its securities by employing the
value-oriented investment approach. The Portfolio seeks securities that
appear to be underpriced and are issued by companies with proven
management, sound finances, and strong potential for market growth. To
reduce risk, the Portfolio diversifies its holdings among many companies
and industries. The Portfolio focuses on the fundamentals of each small-
cap company, instead of trying to anticipate what changes might occur in
the stock market, the economy or the political environment. This approach
differs from that used by many other funds investing in small-cap company
stocks, which often buy stocks of companies they believe will have above-
average earnings growth, based on anticipated future developments. In
contrast, the Portfolio's securities are generally selected in the belief
that they are currently undervalued, based on existing conditions.
The Portfolio generally expects to be almost fully invested in
small-cap stocks, but it may invest up to 15% of its total assets in
securities of companies whose market capitalizations exceed $750 million.
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Neuberger&Berman Socially Responsive Portfolio
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The investment objective of Neuberger&Berman Socially Responsive
Portfolio is to seek long-term capital appreciation by investing primarily
in securities of companies that meet both financial criteria and the
Social Policy.
In seeking capital appreciation, the Portfolio generally follows
a value-oriented investment approach to the selection of individual
securities. Prospective investments are first subjected to detailed
financial analysis and are not studied further unless N&B Management
believes that they are currently undervalued relative to the issuer's
assets and potential earning power.
The Portfolio expects to be nearly fully invested at all times,
primarily in common stock. It may also invest in convertible securities
and preferred stock and in foreign securities and American Depositary
Receipts ("ADRs") of foreign companies that meet the Social Policy. On
occasion, deposits with community banks and credit unions may be
considered for investment. Under normal conditions, at least 65% of the
Portfolio's total assets are invested in accordance with the Social
Policy, and at least 65% of total assets are invested in equity
securities.
The Portfolio may also engage in portfolio management techniques
that are not subject to the Social Policy, such as selling short against-
the-box, lending securities, and purchasing and selling put and call
options on securities or currencies, futures contracts, options on futures
contracts, and forward contracts.
Social Policy. Companies deemed acceptable from a financial
standpoint are evaluated by N&B Management using a proprietary database
that Neuberger&Berman has designed to develop and monitor information on
companies in various categories of social criteria. N&B Management seeks
to invest in issuers that show leadership in the following major areas of
social impact: environment, and workplace diversity and employment. N&B
Management also evaluates investments based on companies' records in other
areas of concern: public health, type of products, and corporate
citizenship.
The Portfolio's social orientation is predicated in part on the
belief that good corporate citizenship is good business; that is, good
policies with respect to such social criteria as employment and
environmental practices may often have a positive impact on the company's
"bottom line." N&B Management recognizes, however, that many social
criteria represent goals rather than achievements and that goals are often
difficult to quantify. In each area, N&B Management seeks to elicit and
understand management's vision of the company's social role, giving weight
to enlightened, progressive policies. N&B Management attempts to assess
the objectivity of all information included in the database. However,
decisions made by N&B Management inevitably involve some level of
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subjective judgment.
N&B Management seeks to invest in companies that show leadership
in addressing environmental problems effectively and in promoting
progressive workplace policies, especially as they affect women and
minorities. It seeks to identify companies committed to improving their
environmental performance by examining their policies and programs in such
areas as energy conservation, pollution reduction and control, waste
management, recycling and careful stewardship of natural resources. In a
similar manner, N&B Management seeks to identify companies whose policies
and practices recognize the importance of human resources to corporate
productivity and the centrality of the work experience to the quality of
life of all employees. N&B Management seeks to invest in companies that
demonstrate leadership in such areas as providing and promoting equal
opportunity, investing in the training and re-training of workers,
promoting a safe working environment, providing family-oriented flexible
benefits, and involving workers in job and workflow engineering.
In making investment decisions, N&B Management takes into account
a company's record as a member of the various communities of which it is a
part and its commitment to product quality and value. Currently, the
Social Policy screens out any company which derives more than (i) 5% of
its total annual revenue from manufacturing and selling alcohol and/or
tobacco, (ii) 5% of its total annual revenue from sales in or services
related to gambling, or (iii) 10% of its total annual revenue from the
manufacturing of weapons systems. Additionally, the Portfolio does not
invest in any company that derives its total annual revenue primarily from
non-consumer sales to the military, or that owns or operates one or more
nuclear power facilities or is a major supplier of nuclear power services.
The information used by N&B Management in evaluating prospective
investments for conformity with the Social Policy is obtained primarily
from services that specialize in reporting information from issuers or
from agencies that oversee issuers' activities or compliance with laws and
regulations. Additionally, the information may come from public interest
groups and from N&B Management's discussions with company representatives.
Not every issuer selected by N&B Management will demonstrate
leadership in each category of the Social Policy. The social records of
most companies are written in shades of gray. For example, a company may
have a progressive record in employee relations and community affairs but
a poor one on product marketing issues. Another company may have a mixed
record within a single area. Finally, it is often difficult to
distinguish between substantive commitment and public relations. This
principle works both ways: there are many companies with excellent
records on social issues that maintain a low profile for one reason or
another. Taking these factors into consideration, N&B Management
emphasizes the overall direction that companies take toward demonstrating
leadership in the areas of social impact, paying particular attention to
progress achieved toward these goals.
If securities held by the Portfolio no longer satisfy the Social
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Policy, the Portfolio will seek to dispose of the securities as soon as
reasonably practicable, which may cause the Portfolio to sell the
securities at a time not desirable from a purely financial standpoint.
Neuberger&Berman Focus Portfolio
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The investment objective of Neuberger&Berman Focus Portfolio is
to seek long-term capital appreciation.
The Portfolio invests principally in common stocks selected from
the following 13 multi-industry sectors of the economy:
<TABLE>
<S> <C> <C>
. Autos & Housing . Health Care . Retailing
. Consumer Goods & Services . Heavy Industry . Technology
. Defense & Aerospace . Machinery & Equipment . Transportation
. Energy . Media & Entertainment . Utilities
. Financial Services
</TABLE>
To maximize potential return, the Portfolio normally makes at
least 90% of its investments in not more than six sectors it identifies as
undervalued. Where a particular industry may fall within more than one
sector, N&B Management uses its judgment and experience to determine the
placement of that industry within a sector. The Portfolio uses the value-
oriented investment approach to identify stocks believed to be
undervalued, including stocks that are temporarily out of favor in the
market. The Portfolio then focuses its investments in the sectors in
which the undervalued stocks are clustered. These sectors are believed to
offer the greatest potential for capital growth. This investment approach
is different from that of most other mutual funds that emphasize sector
investment. Those funds either invest in only a single economic sector or
choose a number of sectors by analyzing general economic trends. The
sectors are more fully described in Part B.
The Portfolio may be affected more by any single economic,
political, or regulatory development than a more diversified mutual fund.
The risk of decline in the Portfolio's asset value due to an adverse
development may be partially offset by the value-oriented investment
approach. To further reduce this risk, the Portfolio may not (1) invest
more than 50% of its total assets in any one sector, (2) as a fundamental
policy, concentrate 25% or more of its total assets in the securities of
companies having their principal business activities in any one industry,
or (3) invest more than 5% of its total assets in the securities of any
one company.
Neuberger&Berman Guardian Portfolio
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The investment objective of Neuberger&Berman Guardian Portfolio
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is to seek capital appreciation and, secondarily, current income.
The Portfolio invests primarily in a large number of common
stocks of long-established, high-quality companies. The Portfolio uses
the value-oriented investment approach in selecting securities. Thus, N&B
Management looks for such factors as low price-to- earnings ratios, strong
balance sheets, solid management, and consistent earnings. The Portfolio
diversifies its holdings among many different companies and industries.
Neuberger&Berman Partners Portfolio
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The investment objective of Neuberger&Berman Partners Portfolio
is to seek capital growth.
The Portfolio invests principally in common stocks of medium-to
large-capitalization established companies, using the value-oriented
investment approach. The Portfolio seeks capital growth through an
investment approach that is designed to increase capital with reasonable
risk. Its investment program seeks securities believed to be undervalued
based on strong fundamentals, including low price-to-earnings ratios,
consistent cash flow, and the company's track record through all parts of
the market cycle.
The Portfolio considers additional factors when selecting
securities, including ownership by a company's management of the company's
stock and the dominance of a company in its particular field.
Short-Term Trading; Portfolio Turnover
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Although the Portfolios do not purchase securities with the
intention of profiting from short-term trading, each Portfolio may sell
securities when N&B Management believes such action is advisable. The
portfolio turnover rates for the year ended August 31, 1995 for
Neuberger&Berman Manhattan Portfolio, Neuberger&Berman Genesis Portfolio,
Neuberger&Berman Focus Portfolio, Neuberger&Berman Guardian Portfolio,
Neuberger&Berman Partners Portfolio, and Neuberger&Berman Socially
Responsive Portfolio were 44%, 37%, 36%, 26%, 98%, and 58%, respectively.
It is anticipated that the annual turnover rate of Neuberger&Berman
Manhattan Portfolio and of Neuberger&Berman Partners Portfolio in some
fiscal years may exceed 100%. Turnover rates in excess of 100% may result
in higher transaction costs (which are borne directly by the Portfolio)
and a possible increase in short-term capital gains (or losses).
Borrowings
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Each Portfolio has a fundamental policy that it may not borrow
money, except that it may (1) borrow money from banks for temporary or
emergency purposes and not for leveraging or investment and (2) enter into
reverse repurchase agreements for any purpose, so long as the aggregate of
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borrowings and reverse repurchase agreements does not exceed one-third of
the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings). None of the Portfolios expects to
borrow money. As a non-fundamental policy, none of the Portfolios may
purchase portfolio securities if its outstanding borrowings, including
reverse repurchase agreements, exceed 5% of its total assets.
Other Investments
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For temporary defensive purposes, each Portfolio (except
Neuberger&Berman Socially Responsive Portfolio) may invest up to 100% of
its total assets in cash and cash equivalents, U.S. Government and Agency
Securities, commercial paper and certain other money market instruments,
as well as repurchase agreements collateralized by the foregoing.
Any part of Neuberger&Berman Socially Responsive Portfolio's
assets may be retained temporarily in investment grade debt securities and
other investment grade fixed income securities of non-governmental
issuers, U.S. Government and Agency Securities, repurchase agreements,
money market instruments, commercial paper, and cash and cash equivalents
when N&B Management believes that significant adverse market, economic,
political, or other circumstances require prompt action to avoid losses.
In addition, because of the master/feeder fund structure, Neuberger&Berman
Socially Responsive Portfolio and certain of its investors 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 shares by one of its investors or when it
anticipates a substantial redemption. Generally, the foregoing temporary
investments for Neuberger&Berman Socially Responsive Portfolio are
selected with a concern for the social impact of each investment.
Description of Investments
In addition to common stocks and other securities referred to in
"Investment Programs" herein, each Portfolio may make the following
investments, among others, individually or in combination, although it may
not necessarily buy all of the types of securities or use all of the
investment techniques that are described. For additional information on
the following investments or other types of investments which the
Portfolios may make, see Part B.
Illiquid Securities. Each Portfolio may invest up to 10% of its
net assets (5% in the case of Neuberger&Berman Genesis Portfolio) in
illiquid securities, which are securities that cannot be expected to be
sold within seven days at approximately the price at which they are
valued. Due to the absence of an active trading market, a Portfolio may
experience difficulty in valuing or disposing of illiquid securities. N&B
Management determines the liquidity of the Portfolios' securities, under
supervision of the Trustees. Securities that are freely tradeable in
their country of origin or in their principal market are not considered
illiquid securities even if they are not registered for sale in the U.S.
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Restricted and Rule 144A Securities. Each Portfolio may invest
in restricted securities and Rule 144A securities. Restricted securities
cannot be sold to the public without registration under the 1933 Act.
Unless registered for sale, these securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid. Rule 144A
securities, although not registered, may be resold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S
under the 1933 Act. N&B Management, acting pursuant to guidelines
established by the Trustees, may determine that some restricted securities
are liquid.
Foreign Securities. Each Portfolio may invest up to 10% of the
value of its total assets in foreign securities. The 10% limitation does
not apply to foreign securities that are denominated in U.S. dollars,
including ADRs.
Factors affecting investments in foreign securities include, but
are not limited to, varying custody, brokerage and settlement practices;
difficulty in pricing some foreign securities; less public information
about issuers of securities; less governmental regulation and supervision
of issuance and trading of securities; the unavailability of financial
information or the difficulty of interpreting financial information
prepared under foreign accounting standards; less liquidity and more
volatility in foreign securities markets; the possibility of
expropriation; the imposition of foreign withholding and other taxes;
political, social, or diplomatic developments; limitations on the movement
of funds or other assets of a Portfolio between different countries;
difficulties in invoking legal process abroad and enforcing contractual
obligations; and the difficulty of assessing economic trends in foreign
countries. Investment in foreign securities also involves higher
brokerage and custodial expenses than does investment in domestic
securities.
In addition, investing in securities of foreign companies and
governments may involve other risks which are not ordinarily associated
with investing in domestic securities. These risks include changes in
currency exchange rates and currency exchange control regulations or other
foreign or U.S. laws or restrictions applicable to such investments or
devaluations of foreign currencies. A decline in the exchange rate
between the U.S. dollar and another currency would reduce the value of
portfolio securities denominated in that currency irrespective of the
performance of the underlying investments. In addition, a Portfolio may
incur costs in connection with conversion between various currencies.
Investments in depositary receipts (whether or not denominated in U.S.
dollars) may be subject to exchange controls and changes in rates of
exchange with the U.S. dollar because the underlying security is usually
denominated in foreign currency.
All of the foregoing risks may be intensified in emerging
industrialized and less developed countries.
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Covered Call Options. Each Portfolio may try to reduce the risk
of securities price changes (hedge) or generate income by writing
(selling) covered call options against securities held in its portfolio
having a market value not exceeding 10% of its net assets and may purchase
call options in related closing transactions. The purchaser of a call
option acquires the right to buy a portfolio security at a fixed price
during a specified period. The maximum price the seller may realize on
the security during the option period is the fixed price; the seller
continues to bear the risk of a decline in the security's price, although
this risk is reduced by the premium received for the option.
The primary risks in using call options are (1) possible lack of
a liquid secondary market for options and the resulting inability to close
out options when desired; (2) the fact that the skills needed to use
options are different from those needed to select a Portfolio's
securities; (3) the fact that, although use of these instruments for
hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, by offsetting favorable price movements in
underlying investments; and (4) the possible inability of a Portfolio to
sell a security at a time that would otherwise be favorable for it to do
so, or the possible need for a Portfolio to sell a security at a
disadvantageous time, due to its need to maintain "cover" in connection
with its use of these instruments. Options are considered "derivatives."
Short Sales Against-the-Box. Each Portfolio may make short sales
against-the-box, in which it sells securities short only if it owns or has
the right to obtain without payment of additional consideration an equal
amount of the same type of securities sold. Short selling against-the-box
may defer recognition of gains or losses into a later tax period.
Repurchase Agreements/Securities Loans. In a repurchase
agreement, a Portfolio buys a security from a Federal Reserve member bank
or a securities dealer and simultaneously agrees to sell it back at a
higher price, at a specified date, usually less than a week later. The
underlying securities must fall within the Portfolio's investment policies
and limitations. Each Portfolio also may lend portfolio securities to
banks, brokerage firms, or institutional investors to earn income. Costs,
delays, or losses could result if the selling party to a repurchase
agreement or the borrower of portfolio securities becomes bankrupt or
otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
Other Investments. Although each Portfolio invests primarily in
common stocks, when market conditions warrant it may invest in preferred
stocks, securities convertible into or exchangeable for common stocks,
U.S. Government and Agency Securities, investment grade debt securities,
or money market instruments, or may retain assets in cash or cash
equivalents.
"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
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rating organization ("NRSRO") or, if unrated by any NRSRO, deemed
comparable by N&B Management to such rated securities ("Comparable Unrated
Securities") under guidelines established by the Trustees. The value of
the fixed income securities in which a Portfolio may invest is likely to
decline in times of rising interest rates. Conversely, when rates fall,
the value of a Portfolio's fixed income investments is likely to rise.
U.S. Government securities are obligations of the U.S. Treasury
backed by the full faith and credit of the United States. U.S. Government
Agency Securities are issued or guaranteed by U.S. Government agencies or
instrumentalities; by other U.S. Government-sponsored enterprises, such as
the Government National Mortgage Association, Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Student Loan
Marketing Association, and Tennessee Valley Authority; and by various
federally chartered or sponsored banks. Some U.S. Government Agency
Securities are supported by the full faith and credit of the United
States, while others may be supported by the issuer's ability to borrow
from the U.S. Treasury, subject to the Treasury's discretion in certain
cases, or only by the credit of the issuer. U.S. Government Agency
Securities include U.S. Government mortgage-backed securities. The market
prices of U.S. Government securities are not guaranteed by the Government
and generally fluctuate with changing interest rates.
Neuberger&Berman Socially Responsive Portfolio may invest up to
20% of its net assets in convertible securities. A convertible security
is a bond, debenture, note, preferred stock, or other security that may be
converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a
specified price or formula. The Portfolio does not intend to purchase any
convertible securities that are not investment grade.
Neuberger&Berman Partners Portfolio may invest up to 15% of its
net assets in debt securities rated below investment grade or Comparable
Unrated Securities. Such securities, as well as those rated by Moody's in
its fourth highest category (Baa) or Comparable Unrated Securities, may be
considered predominantly speculative, although, as debt securities, they
generally have priority over equity securities of the same issuer and are
generally better secured. Debt securities in the lowest rating categories
may involve a substantial risk of default or may be in default. Changes in
economic conditions or developments regarding the individual issuer are
more likely to cause price volatility and weaken the capacity of the
issuer of such securities to make principal and interest payments than is
the case for higher grade debt securities. An economic downturn affecting
the issuer may result in an increased incidence of default. The market
for lower-rated securities may be thinner and less active than for higher-
rated securities. Neuberger&Berman Partners Portfolio will invest in such
securities only when N&B Management concludes that the anticipated return
to the Portfolio on such an investment warrants exposure to the additional
level of risk. A further description of Moody's and S&P's ratings is
included in Part B.
Item 5. Management of the Fund.
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Trustees and Officers
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The Trustees have oversight responsibility for the operations of
each Portfolio. Part B contains general background information about each
Trustee and officer of the Trust. The Trustees and officers of the Trust
who are officers and/or directors of N&B Management and/or partners of
Neuberger&Berman serve without compensation from the Portfolios. The
Trustees, including a majority of those Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, have adopted written
procedures reasonably appropriate to deal with potential conflicts of
interest, including, if necessary, creating a separate board of trustees
of the Trust.
Investment Manager and Sub-Adviser
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N&B Management, 605 Third Avenue, 2nd Floor, New York, New York
10158-0180, serves as the investment manager of each Portfolio.
N&B Management and its predecessor firms have specialized in the
management of no-load mutual funds since 1950. In addition to serving the
six Portfolios, N&B Management currently serves as investment manager of
other mutual funds. Neuberger&Berman, 605 Third Avenue, New York, New
York, 10158-3698, which acts as sub-adviser for the Portfolios and other
mutual funds managed by N&B Management, also serves as investment adviser
of three investment companies. The mutual funds managed by N&B Management
and Neuberger&Berman had aggregate net assets of approximately $11.4
billion as of September 30, 1995.
As sub-adviser, Neuberger&Berman furnishes N&B Management with
investment recommendations and research without added cost to the
Portfolios. Neuberger&Berman is a member firm of the New York Stock
Exchange ("NYSE") and other principal exchanges and acts as the
Portfolios' principal broker in the purchase and sale of their securities.
Neuberger&Berman and its affiliates, including N&B Management, manage
securities accounts that had approximately $37.6 billion of assets as of
September 30, 1995. All of the voting stock of N&B Management is owned by
individuals who are general partners of Neuberger&Berman.
The following is information about the individuals who are
primarily responsible for the day-to-day management of the Portfolios:
Neuberger&Berman Manhattan Portfolio -- Mark R. Goldstein and
Susan Switzer. Mr. Goldstein is a Vice President of N&B Management and a
general partner of Neuberger&Berman. Previously he was a securities
analyst and portfolio manager with that firm. He has had responsibility
for Neuberger&Berman Manhattan Portfolio and Neuberger&Berman Manhattan
Fund's predecessor since June 1992. Ms. Switzer has been an Assistant
Vice President of N&B Management since March 1995 and a portfolio manager
for Neuberger&Berman since January 1995. Ms. Switzer was a research
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<PAGE>
analyst and assistant portfolio manager for another money management firm
from 1989 to 1994.
Neuberger&Berman Genesis Portfolio -- Judith M. Vale. Ms. Vale,
who has been a member of Neuberger&Berman's Small Cap Group since 1992 and
a Vice President of N&B Management since November 1994, has been primarily
responsible for the day-to-day management of the Neuberger&Berman Genesis
Portfolio since February 1994. Ms. Vale was a portfolio manager for
another investment management group from 1990 to 1992, and was a senior
fund analyst at another prominent investment adviser from 1987 to 1990.
Neuberger&Berman Socially Responsive Portfolio -- Janet Prindle
and Farha-Joyce Haboucha. Ms. Prindle, a Vice President of N&B Management
since November 1993, has been a general partner of Neuberger&Berman since
1985. Ms. Haboucha has been a Vice President of N&B Management since
November 1994 and an employee of Neuberger&Berman since 1986. Mmes.
Prindle and Haboucha, who are Co-Directors of Socially Responsive
Investment Services at Neuberger&Berman, have been researching and
developing corporate responsibility criteria as they apply to investments
since 1989. They have been managing money using these criteria since
1990. Ms. Prindle has been responsible for Neuberger&Berman Socially
Responsive Portfolio since its inception in March 1994.
Neuberger&Berman Focus Portfolio and Neuberger&Berman Guardian
Portfolio -- Kent C. Simons and Lawrence Marx III. Mr. Simons and Mr.
Marx are Vice Presidents of N&B Management and are general partners of
Neuberger&Berman. Mr. Simons has had responsibility for Neuberger&Berman
Focus Portfolio and Neuberger & Berman Focus Fund's predecessor since
1988, and for Neuberger&Berman Guardian Portfolio and Neuberger&Berman
Guardian Fund's predecessor since 1983. Mr. Marx has had those
responsibilities since 1988.
Neuberger&Berman Partners Portfolio -- Michael M. Kassen and
Robert I. Gendelman. Mr. Kassen is a Vice President of N&B Management and
a general partner of Neuberger&Berman. He has had responsibility for
Neuberger&Berman Partners Portfolio and Neuberger&Berman Partners Fund's
predecessor since June 1990. Mr. Gendelman is a senior portfolio manager
for Neuberger&Berman and an Assistant Vice President of N&B Management.
Mr. Gendelman has had responsibility for Neuberger&Berman Partners
Portfolio since October 1994. He was a portfolio manager for another
mutual fund manager from 1992 to 1993 and was managing partner of an
investment partnership from 1988 to 1992.
Neuberger&Berman acts as the principal broker for the Portfolios
in the purchase and sale of portfolio securities and in the sale of
covered call options, and for those services receives brokerage
commissions. In effecting securities transactions, each Portfolio seeks
to obtain the best price and execution of orders. For more information,
see Part B.
The partners and employees of Neuberger&Berman and officers and
employees of N&B Management, together with their families, have invested
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over $100 million of their own money in Neuberger&Berman Funds .
To mitigate the possibility that a Portfolio will be adversely
affected by personal trading of employees, the Trust, N&B Management, and
Neuberger&Berman have adopted policies that restrict securities trading in
personal accounts of the portfolio managers and others who normally come
into possession of information on portfolio transactions.
Expenses
--------
N&B Management provides investment management services to each
Portfolio that include, among other things, making and implementing
investment decisions and providing facilities and personnel necessary to
operate the Portfolio. For investment management services, each Portfolio
(except Neuberger&Berman Genesis Portfolio) pays N&B Management a fee at
the annual rate of 0.55% of the first $250 million of that Portfolio's
average daily net assets, 0.525% of the next $250 million, 0.50% of the
next $250 million, 0.475% of the next $250 million, 0.45% of the next
$500 million, and 0.425% of average daily net assets in excess of
$1.5 billion. Neuberger&Berman Genesis Portfolio has contracted to pay
N&B Management a fee for investment management services at the annual rate
of 0.85% of the first $250 million of that Portfolio's average daily net
assets, 0.80% of the next $250 million, 0.75% of the next $250 million,
0.70% of the next $250 million, and 0.65% of average daily net assets in
excess of $1 billion. N&B Management has agreed to waive an amount equal
to 0.10% per annum of the average daily net assets of Neuberger & Berman
Genesis Portfolio.
Each Portfolio bears all expenses of its operations other than
those borne by N&B Management as investment manager of the Portfolio.
These expenses include, but are not limited to, legal and accounting fees,
compensation for Trustees who are not affiliated with N&B Management, and
custodial fees for securities.
Item 6. Capital Stock and Other Securities.
-------------------------------------------
The Trust was organized as a common law trust under the laws of
the State of New York. Under the Declaration of Trust, the Trustees are
authorized to issue beneficial interests in separate subtrusts or "series"
of the Trust. The Trust currently has six series; the Trust reserves the
right to create and issue additional series.
Each investor in a Portfolio is entitled to participate equally
in the Portfolio's earnings and assets and to vote in proportion to the
amount of its investment in the Portfolio. Investments in a Portfolio may
not be transferred, but an investor may withdraw all or any portion of its
investment at any time at the net asset value ("NAV") of such investment.
Each investor in a Portfolio is liable for all obligations of the
Portfolio. However, the risk of an investor in a Portfolio incurring
financial loss on account of such liability would be limited to
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<PAGE>
circumstances in which the Portfolio had inadequate insurance and was
unable to meet its obligations (including indemnification obligations) out
of its assets. Upon liquidation of a Portfolio, investors would be
entitled to share pro rata in the net assets of the Portfolio available
for distribution to investors.
Investments in a Portfolio have no preemptive or conversion
rights and are fully paid and non-assessable. The Trust is not required
and has no current intention to hold annual meetings of investors, but the
Trust will hold special meetings of investors when, in the Trustees'
judgment, it is necessary or desirable to submit matters to an investor
vote. Changes in fundamental policies or limitations will be submitted to
investors for approval. Investors have the right to remove one or more
Trustees without a meeting by a declaration in writing signed by a
specified number of investors.
Each Portfolio's NAV is determined each day the NYSE is open for
trading ("Business Day"). This determination is made as of the close of
regular trading on the NYSE, usually 4 p.m. Eastern time ("Valuation
Time").
Each investor in a Portfolio may add to or reduce its investment
in the Portfolio. At the Valuation Time on each Business Day, the value
of each investor's beneficial interest in a Portfolio will be determined
by multiplying the Portfolio's NAV by the percentage, effective for that
day, that represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions to or withdrawals of those
interests which are to be effected on that day will then be effected.
Each investor's share of the aggregate beneficial interests in the Portfo-
lio then will be recomputed using the percentage equal to the fraction
(1) the numerator of which is the value of the investor's investment in
the Portfolio as of the Valuation Time on that day plus or minus, as the
case may be, the amount of any additions to or withdrawals from such
investment effected on that day and (2) the denominator of which is the
Portfolio's aggregate NAV as of the Valuation Time on that day plus or
minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investments in the Portfolio by all
investors. The percentages so determined then will be applied to
determine the value of each investor's respective interest in the
Portfolio as of the Valuation Time on the following Business Day.
A Portfolio's net income consists of (1) all dividends, accrued
interest (including earned discount, both original issue and market dis-
count), and other income, including any net realized gains or losses on
the Portfolio's assets, less (2) all actual and accrued expenses of the
Portfolio, and amortization of any premium, all as determined in
accordance with generally accepted accounting principles. All of a
Portfolio's net income is allocated pro rata among the investors in the
Portfolio. A Portfolio's net income generally is not distributed to the
investors in the Portfolio, except as determined by the Trustees from time
to time, but instead is included in the value of the investors' respective
beneficial interests in the Portfolio.
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<PAGE>
Under the current method of the Portfolios' operations, they are
not subject to any income tax. However, each investor in a Portfolio is
taxable on its share (as determined in accordance with the Trust's
governing instruments and the Internal Revenue Code of 1986, as amended
("Code"), and the regulations promulgated thereunder) of the Portfolio's
ordinary income and capital gain. It is intended that each Portfolio's
assets, income, and distributions will continue to be managed in such a
way that an investor in a Portfolio will be able to satisfy the
requirements of Subchapter M of the Code, assuming that the investor
invests all of its assets in the Portfolio. See Part B for a discussion
of the foregoing tax matters and certain other matters.
Neuberger & Berman Equity Funds ("Equity Funds") owns a majority
interest in the Trust and each Portfolio thereof (except Neuberger &
Berman Socially Responsive Portfolio). Neuberger & Berman NYCDC Socially
Responsive Trust, a series of Neuberger & Berman Equity Trust ("Equity
Trust"), owns a majority interest in Neuberger & Berman Socially
Responsive Portfolio. However, Equity Funds and Equity Trust have
undertaken that, with respect to most matters on which the Trust seeks a
vote of its interestholders, Equity Funds or Equity Trust will seek a vote
of its shareholders and will vote its interest in the Trust in accordance
with their instructions.
Item 7. Purchase of Securities.
-------------------------------
Beneficial interests in the Portfolios are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. See "General
Description of Registrant" above. All investments in the Portfolios are
made without a sales load, at the NAV next determined after an order is
received by the Portfolio. The NAV of each Portfolio is determined on
each Business Day as of the Valuation Time.
Each Portfolio values securities (including options) listed on
the NYSE, the American Stock Exchange or other national securities
exchanges or quoted on Nasdaq, and other securities for which market
quotations are readily available, at the last sale price on the day the
securities are being valued. If there is no sale of such a security on
that day, that security is valued at the mean between its closing bid and
asked prices. The Portfolios value all other securities and assets,
including restricted securities, by a method that the Trustees believe
accurately reflects fair value.
There is no minimum initial or subsequent investment in any
Portfolio. However, because each Portfolio intends to be as fully
invested at all times as is reasonably practicable, investments in each
Portfolio must be made in federal funds (i.e., monies credited to the
account of the Trust's custodian bank by a Federal Reserve Bank). The
Trust reserves the right to cease accepting investments in a Portfolio at
any time or to reject any investment order.
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<PAGE>
The Trust's placement agent is N&B Management. Its principal
business address is 605 Third Avenue, New York, NY 10158-0180. N&B
Management receives no compensation for serving as the Trust's placement
agent.
Item 8. Redemption or Repurchase.
---------------------------------
An investor in any Portfolio may withdraw all or any portion of
its investment at the NAV next determined after a withdrawal request in
proper form is furnished by the investor to the Trust. The proceeds of a
withdrawal will be paid by the Portfolio in federal funds normally on the
Business Day the withdrawal is effected, but in any event within three
days, except as extensions may be permitted by law.
Investments in a Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended, or the payment of the withdrawal proceeds
postponed, during any period in which the NYSE is closed (other than
weekends or holidays) or trading on the NYSE is restricted or to the
extent otherwise permitted by the 1940 Act.
Item 9. Pending Legal Proceedings.
----------------------------------
Not applicable.
A-17
<PAGE>
PART B
Item 10. Cover Page.
---------------------
Not applicable.
Item 11. Table of Contents. . . . . . . . . . . . . . . . . . . . . Page
--------------------------- ----
General Information and History . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . B-1
Management of the Trust . . . . . . . . . . . . . . . . . . B-32
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . B-39
Investment Management and Other Services . . . . . . . . . . B-40
Brokerage Allocation and Other Practices . . . . . . . . . . B-46
Capital Stock and Other Securities . . . . . . . . . . . . . B-52
Purchase, Redemption and Pricing of
Securities . . . . . . . . . . . . . . . . . . . . . . B-53
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . B-53
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . B-56
Calculation of Performance Data . . . . . . . . . . . . . . B-56
Financial Statements . . . . . . . . . . . . . . . . . . . . B-57
Item 12. General Information and History.
-----------------------------------------
Registrant added the words "Neuberger & Berman" to the
name of each series of Registrant on October 20, 1993. Prior to January
1, 1995, the name of Neuberger & Berman Focus Portfolio was "Neuberger &
Berman Selected Sectors Portfolio."
Item 13. Investment Objectives and Policies.
--------------------------------------------
Part A contains information about the investment
objectives, policies and limitations of Neuberger & Berman Manhattan
Portfolio, Neuberger & Berman Genesis Portfolio, Neuberger & Berman Focus
Portfolio, Neuberger & Berman Guardian Portfolio, Neuberger & Berman
Partners Portfolio and Neuberger & Berman Socially Responsive Portfolio
(each a "Portfolio"), series of Equity Managers Trust ("Trust"). This
Part B should be read only in conjunction with Part A. This section
contains supplemental information concerning the Portfolios' investment
policies and limitations, the portfolio strategies that the Portfolios may
utilize, the types of securities and other instruments in which the Port-
folios may invest, and certain risks attendant to those investments,
policies and strategies.
<PAGE>
Investment Policies and Limitations
-----------------------------------
Except for the limitation on borrowing and the limitation
on ownership of portfolio securities by officers and trustees, any
investment policy or limitation that involves a maximum percentage of
securities or assets will not be considered to be violated unless the
percentage limitation is exceeded immediately after, and because of, a
transaction by a Portfolio. The policies and limitations described in
this Part B are non-fundamental unless otherwise stated.
The Portfolios' fundamental investment limitations are as
follows:
1. Borrowing. No Portfolio may borrow money, except
that a Portfolio may (i) borrow money from banks for temporary or
emergency purposes and not for leveraging or investment and (ii) enter
into reverse repurchase agreements for any purpose; provided that (i) and
(ii) in combination do not exceed 33-1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings).
If at any time borrowings exceed 33-1/3% of the value of a Portfolio's
total assets, that Portfolio will reduce its borrowings within three days
(excluding Sundays and holidays) to the extent necessary to comply with
the 33-1/3% limitation.
2. Commodities. No Portfolio may purchase physical
commodities or contracts thereon, unless acquired as a result of the
ownership of securities or instruments, but this restriction shall not
prohibit a Portfolio from purchasing futures contracts or options
(including options on futures contracts, but excluding options or futures
contracts on physical commodities) or from investing in securities of any
kind.
3. Diversification. No Portfolio may, with respect
to 75% of the value of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities) if, as a result, (i) more
than 5% of the value of the Portfolio's total assets would be invested in
the securities of that issuer or (ii) the Portfolio would hold more than
10% of the outstanding voting securities of that issuer.
4. Industry Concentration. No Portfolio may
purchase any security if, as a result, 25% or more of its total assets
(taken at current value) would be invested in the securities of issuers
having their principal business activities in the same industry. This
limitation does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
5. Lending. No Portfolio may lend any security or
make any other loan if, as a result, more than 33-1/3% of its total assets
(taken at current value) would be lent to other parties, except, in
accordance with its investment objective, policies, and limitations, (i)
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<PAGE>
through the purchase of a portion of an issue of debt securities or (ii)
by engaging in repurchase agreements.
6. Real Estate. No Portfolio may purchase real
estate unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit a Portfolio from
purchasing securities issued by entities or investment vehicles that own
or deal in real estate or interests therein or instruments secured by real
estate or interests therein.
7. Senior Securities. No Portfolio may issue senior
securities, except as permitted under the Investment Company Act of 1940
("1940 Act").
8. Underwriting. No Portfolio may underwrite
securities of other issuers, except to the extent that a Portfolio, in
disposing of portfolio securities, may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 ("1933 Act").
The following non-fundamental investment policies and
limitations apply to all Portfolios (except Neuberger & Berman Socially
Responsive Portfolio):
1. Borrowing. No Portfolio may purchase securities
if outstanding borrowings, including any reverse repurchase agreements,
exceed 5% of its total assets.
2. Lending. Except for the purchase of debt
securities and engaging in repurchase agreements, no Portfolio may make
any loans other than securities loans.
3. Investments in Other Investment Companies. No
Portfolio may purchase securities of other investment companies, except to
the extent permitted by the 1940 Act and in the open market at no more
than customary brokerage commission rates. This limitation does not apply
to securities received or acquired as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
4. Margin Transactions. No Portfolio may purchase
securities on margin from brokers or other lenders, except that a
Portfolio may obtain such short-term credits as are necessary for the
clearance of securities transactions. Margin payments in connection with
transactions in futures contracts and options on futures contracts shall
not constitute the purchase of securities on margin and shall not be
deemed to violate the foregoing limitation.
5. Short Sales. No Portfolio may sell securities
short unless it owns, or has the right to obtain without payment of
additional consideration, securities equivalent in kind and amount to the
securities sold. Transactions in forward contracts, futures contracts,
and options shall not constitute selling securities short.
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<PAGE>
6. Ownership of Portfolio Securities by Officers and
Trustees. No Portfolio may purchase or retain the securities of any
issuer if, to the knowledge of the Portfolio's investment manager,
Neuberger & Berman Management Incorporated ("N&B Management"), those
officers and trustees of the Trust ("Trustees") and officers and directors
of N&B Management who each owns individually more than 1/2 of 1% of the
outstanding securities of such issuer, together own more than 5% of such
securities.
7. Unseasoned Issuers. No Portfolio may purchase
the securities of any issuer (other than securities issued or guaranteed
by domestic or foreign governments or political subdivisions thereof) if,
as a result, more than 5% of the Portfolio's total assets would be
invested in the securities of business enterprises that, including
predecessors, have a record of less than three years of continuous
operation.
8. Puts, Calls, Straddles, or Spreads. No Portfolio
may invest in puts, calls, straddles, spreads, or any combination thereof,
except that each Portfolio may (i) write (sell) covered call options
against portfolio securities having a market value not exceeding 10% of
its net assets and (ii) purchase call options in related closing transac-
tions. The Portfolios do not construe the foregoing limitation to pre-
clude them from purchasing or writing options on futures contracts or from
purchasing securities with rights to put the securities to the issuer or a
guarantor.
9. Illiquid Securities. No Portfolio may purchase
any security if, as a result, more than 10% (5% in the case of Neuberger &
Berman Genesis Portfolio) 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.
10. Foreign Securities. No Portfolio may invest more
than 10% of the value of its total assets in securities of foreign
issuers, provided that this limitation shall not apply to foreign
securities denominated in U.S. dollars, including American Depositary
Receipts ("ADRs").
11. Oil and Gas Programs. No Portfolio may invest in
participations or other direct interests in oil, gas, or other mineral
leases or exploration or development programs, but each Portfolio may
purchase securities of companies that own interests in any of the
foregoing.
12. Real Estate. No Portfolio may purchase or sell real
property (including interests in real estate limited partnerships, but
excluding readily marketable interests in real estate investment trusts
and readily marketable securities of companies that invest in real
estate); provided that no Portfolio may purchase any security if, as a
B-4
<PAGE>
result, more than 10% of its total assets would be invested in securities
of real estate investment trusts.
In addition to the foregoing non-fundamental investment
policies and limitations, which apply to each Portfolio (except Neuberger
& Berman Socially Responsive Portfolio), the following non-fundamental
investment policies and limitations apply to the indicated Portfolios:
13. Investments in Any One Issuer (Neuberger & Berman
Genesis, Neuberger & Berman Focus, and Neuberger & Berman Guardian
Portfolios). None of these Portfolios may purchase the securities of any
one issuer (other than securities issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities) if, as a result,
more than 5% of the Portfolio's total assets would be invested in the
securities of that issuer.
14. Warrants (Neuberger & Berman Genesis, Neuberger &
Berman Focus, and Neuberger & Berman Guardian Portfolios). None of these
Portfolios may invest more than 5% of its net assets in warrants,
including warrants that are not listed on the New York Stock Exchange
("NYSE") or American Stock Exchange, or more than 2% of its net assets in
such unlisted warrants. For purposes of this limitation, warrants are
valued at the lower of cost or market value, and warrants acquired by a
Portfolio in units or attached to securities may be deemed to be without
value.
15. Pledging (Neuberger & Berman Genesis and
Neuberger & Berman Guardian Portfolios). Neither of these Portfolios may
pledge or hypothecate any of its assets, except that (i) for Neuberger &
Berman Genesis Portfolio, this limitation does not apply to the deposit of
portfolio securities as collateral in connection with short sales against-
the-box, and the Portfolio may pledge or hypothecate up to 15% of its
total assets to collateralize a borrowing permitted under fundamental
policy 1 above or a letter of credit issued for a purpose set forth in
that policy and (ii) each Portfolio may pledge or hypothecate up to 5% of
its total assets in connection with its entry into any agreement or
arrangement pursuant to which a bank furnishes a letter of credit to
collateralize a capital commitment made by the Portfolio to a mutual
insurance company of which the Portfolio is a member.
16. Sector Concentration (Neuberger & Berman Focus
Portfolio). This Portfolio may not invest more than 50% of its total
assets in any one economic sector.
Each Portfolio (except Neuberger & Berman Socially
Responsive Portfolio), as an operating policy, does not intend to invest
in futures contracts and options thereon during the coming year.
The following non-fundamental investment policies and
limitations apply to Neuberger & Berman Socially Responsive Portfolio:
B-5
<PAGE>
1. Borrowing. The Portfolio may not purchase secu-
rities if outstanding borrowings, including any reverse repurchase agree-
ments, 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. Investments in Other Investment Companies. The
Portfolio may not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act and in the open market at
no more than customary brokerage commission rates. This limitation does
not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of a reorganization, consolidation, or merger.
4. 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.
5. Short Sales. The Portfolio may not sell
securities short unless it owns, or has the right to obtain without
payment of additional consideration, securities equivalent in kind and
amount to the securities sold. Transactions in forward contracts, futures
contracts, and options shall not constitute selling securities short.
6. Ownership of Portfolio Securities by Officers and
Trustees. The Portfolio may not purchase or retain the securities of any
issuer if, to the knowledge of N&B Management, those officers and trustees
of the Trust and officers and directors of N&B Management who each owns
individually more than 1/2 of 1% of the outstanding securities of such
issuer, together own more than 5% of such securities.
7. Unseasoned Issuers. The Portfolio may not
purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of the Portfolio's total assets
would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of
continuous operation.
8. Illiquid Securities. The Portfolio may not
purchase any security if, as a result, more than 10% of its net assets
would be invested in illiquid securities. Illiquid securities include
securities that cannot be sold within seven days in the ordinary course of
business for approximately the amount at which the Portfolio has valued
the securities, such as repurchase agreements maturing in more than seven
days.
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<PAGE>
9. 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 ADRs.
10. Oil and Gas Programs. The Portfolio may not
invest in participations or other direct interests in oil, gas, or other
mineral leases or exploration or development programs, but the Portfolio
may purchase securities of companies that own interests in any of the
foregoing.
11. Real Estate. The Portfolio may not invest in real
estate limited partnerships.
12. Warrants. The Portfolio does not intend to invest
in warrants (but may hold warrants obtained in units or attached to
securities).
Mark R. Goldstein, Portfolio Manager of Neuberger & Berman Manhattan
Portfolio
--------------------------------------------------------------------
Neuberger & Berman Manhattan Portfolio's objective is
capital appreciation, without regard to income. "The Portfolio differs
from the other Portfolios in its willingness to invest in stocks with
price/earnings ratios or price-to-cash-flow ratios that are reasonable
relative to a company's growth prospects and that of the general market,"
says Mark Goldstein, its portfolio manager. Mr. Goldstein has
consistently followed this approach as a portfolio manager at N&B
Management. He looks for stocks of financially sound companies with a
special market capability, a competitive advantage or a product that makes
them particularly attractive over the long term, but likes to purchase
them at a reasonable price relative to their growth rates. Mr. Goldstein
calls this approach "GARP" -- growth at a reasonable price. "An investor
shouldn't try to beat the market by trading funds like stocks. The hard-
est thing to do -- but the best thing to do -- is to put in some money
when the market is down and keep it there. That's how one really builds
wealth over the long term -- a mutual fund is a great long-term
investment."
"We view value both on a relative and an absolute basis,
so we may buy stocks with somewhat above-market historical growth rates,"
Mr. Goldstein explains. "We also tend to stay more fully invested when we
think the market is attractive for quality growth companies. But we will
get out of stocks and into cash when we think there are no reasonable
values available."
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Judith M. Vale, Portfolio Manager of Neuberger & Berman Genesis Portfolio
-------------------------------------------------------------------------
The predecessor of Neuberger & Berman Genesis Fund was
established in 1988. A long-term growth fund dedicated to small capitali-
zation stocks (companies with total market value of outstanding capital
stock of less than $750 million), Neuberger & Berman Genesis Portfolio is
devoted to the same value principles as the other equity funds managed by
N&B Management. "Neuberger & Berman Genesis Portfolio buys stocks that we
believe are currently undervalued, unlike small capitalization stock funds
offered by many other firms, which look for companies whose earnings
reflect future developments," says its portfolio manager Judith Vale.
"Many people think that small capitalization stock funds
are predominantly invested in high-risk, high-tech companies. Not
Neuberger & Berman Genesis Portfolio. We look for the same fundamentals
in small capitalization stocks as our other funds look for in stocks of
larger companies. We stick to the areas we understand. I'm looking for
the most persistent earnings growth at the lowest multiple." Ms. Vale
looks for well-established companies with entrepreneurial management and
sound finances. She also looks for catalysts to exposing value, such as
management changes and new product lines. Often, these are firms that
have suffered temporary setbacks or undergone a restructuring.
Why a small capitalization stock fund? Research has
demonstrated that, over the last 30 years, smaller capitalization stocks
as a group have outperformed larger capitalization stocks two-thirds of
the time.1/ Ms. Vale points out, "This Portfolio offers the ability to
share in the growth potential of small capitalization stocks."
Kent C. Simons and Lawrence Marx III, Portfolio Managers of Neuberger &
Berman Focus and Neuberger & Berman Guardian Portfolios
--------------------------------------------------------------------------
These Portfolios are managed by two veterans of N&B Man-
agement who have consistently followed their value-oriented philosophy
over many years: Kent Simons and Larry Marx.
Neuberger & Berman Focus Portfolio's investment objective
is long-term capital appreciation. Like the other Portfolios that use a
value-oriented investment approach, it seeks to buy undervalued securities
that offer opportunities for growth, but then focuses its assets in those
sectors where undervalued stocks are clustered. "We begin by looking for
stocks that are selling for less than we think they're worth, a 'bottom-up
approach,'" says Mr. Simons. "More often than not, such stocks are in a
few economic sectors that are out of favor and are undervalued as a group.
I think 90% of cheap stocks deserve to be cheap. My job is to find the
10% that don't."
1/ Source: Ibbotson and Sinquefield.
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"We don't pick sectors for Neuberger & Berman Focus
Portfolio based on our perception of how the economy is going to do. Nor
do we engage in making economic or currency predictions. We look for
stocks with either low relative or low absolute valuations," explains Mr.
Marx. "Often, these stocks will be found in a particular sector, but we
didn't start out being bullish on that sector. It's just where we
happened to find the values. We find that if one company comes under a
cloud, it tends to happen to its whole industry. If an investment manager
rotated the sectors in a portfolio by buying sectors when they are under-
valued and selling them when they become fully valued, the manager would
be able to achieve above-average performance."
Neuberger & Berman Guardian Portfolio subscribes to the
same stock-picking philosophy followed since Neuberger & Berman Guardian
Fund's predecessor was founded by Roy R. Neuberger in 1950.
It's no great trick for a mutual fund to make money when
the market is rising. The tide that lifts stock values will carry most
funds along. The true test of management is its ability to make money
even when the market is flat or declining. By that measure, Neuberger &
Berman Guardian Fund and its predecessor have served shareholders well and
have paid a dividend every quarter and a capital gain distribution every
year since 1950. Of course, there can be no assurance that this trend
will continue.
Both Mr. Simons and Mr. Marx place a high premium on
being knowledgeable about the companies whose stocks they buy for
Neuberger & Berman Guardian Portfolio. That knowledge is important,
because sometimes it takes courage to buy stocks that the rest of the
market has forsaken. Says Mr. Marx, "We're usually early in and early
out. We'd rather buy an undervalued stock because we expect it to become
fairly valued than buy one fairly valued and hope it becomes overvalued.
We like a stock 'under a rock' or with a cloud over it; you are not going
to get great companies at great valuations when the market perception is
great."
"People who switch around a lot are not going to benefit
from our approach. They're following the market -- we're looking at
fundamentals."
Michael M. Kassen and Robert I. Gendelman, Portfolio Managers of
Neuberger & Berman Partners Portfolio
--------------------------------------------------------------------------
"Neuberger & Berman Partners Portfolio's objective is
capital growth," say its portfolio managers Michael Kassen and Robert
Gendelman. "We want to make money in good markets and not give up those
gains during rough times."
"Our investors seek consistent performance and have a
moderate risk tolerance. They do know, however, that stock investments
can provide the long-term upside potential essential to meeting their
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long-term investment goals, particularly a comfortable retirement and
planning for a college education."
"We look for stocks that are undervalued in the market-
place either in relation to strong current fundamentals, such as low
price-to-earnings ratios, consistent cash flow, and support from asset
values, or in relation to the growth of their future earnings, as
projected by N&B Management. If the market goes down, those stocks we
elect to hold, historically, go down less."
The co-portfolio managers monitor stocks of medium- to
large-sized companies that often are not closely scrutinized by other
investors. The managers research these companies in order to determine if
they will produce a new product, become an acquisition target, or undergo
a financial restructuring.
What else catches Mr. Kassen's and Mr. Gendelman's eyes?
"We like managements that own their own stock. These companies usually
seek to build shareholder wealth by buying back shares or making
acquisitions that have a swift and positive impact on the bottom line."
To increase the upside potential, the managers zero in on
companies that dominate their industries or their specialized niches.
Their reasoning? "Market leaders tend to earn higher levels of profits."
Neuberger & Berman Partners 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.
Janet W. Prindle, Portfolio Manager of Neuberger & Berman Socially
Responsive Portfolio
--------------------------------------------------------------------------
How does Janet Prindle manage Neuberger & Berman Socially
Responsive Portfolio? "We select securities through a two-phase detection
process. The first is financial. We analyze a universe of companies
according to N&B Management's value-oriented philosophy, looking for
stocks which are undervalued for any number of reasons. We focus on
financial fundamentals including balance sheet ratios and cash flow
analysis, and we meet with company management in an effort to understand
how those unrecognized values might be realized in the market. The second
part of the process is social screening. Our social research is based on
the same kind of philosophy that governs our financial approach: we
believe that first-hand knowledge and experience are our most important
tools. Utilizing a proprietary database, we do careful, in-depth tracking
and we analyze a large number of companies on some 80 issues in six broad
social categories. We use a wide variety of sources to determine company
practices and policies in these areas, and we analyze performance in light
of our knowledge of the issues and of the best practices in each industry.
We understand that, for many issues and in many industries, absolute
standards are elusive and often counterproductive. Thus, in addition to
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quantitative measurements, we place value on such indicators as management
commitment, progress, direction, and industry leadership."
Additional Investment Information
---------------------------------
Some or all of the Portfolios, as indicated below, may
make the following investments, among others, although they may not buy
all of the types of securities or use all of the investment techniques
that are described.
Repurchase Agreements (All Portfolios). Repurchase
agreements are agreements under which a Portfolio purchases securities
from a bank that is a member of the Federal Reserve System or from a
securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase
agreements generally are for a short period of time, usually less than a
week. No Portfolio may enter into a repurchase agreement with a maturity
of more than seven days if, as a result, more than 10% (5% in the case of
Neuberger & Berman Genesis Portfolio) of the value of its net assets would
then be invested in such repurchase agreements and other illiquid
securities. A Portfolio may enter into a repurchase agreement only if
(1) the underlying securities are of the 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 value of the repurchase
agreement, 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 (All Portfolios). In order to realize
income, each Portfolio may lend portfolio securities with a value not
exceeding 33-1/3% of its total assets to banks, brokerage firms, or
institutional investors judged creditworthy by N&B Management. Borrowers
are required continuously to secure their obligations to return securities
on loan from the Portfolio by depositing collateral in a form determined
to be satisfactory by the Trustees. The collateral, which must be marked
to market daily, must be equal to at least 100% of the market value of the
loaned securities, which will also be marked to market daily. N&B
Management believes the risk of loss on these transactions is slight
because, if a borrower were to default for any reason, the collateral
should satisfy the obligation. However, as with other extensions of
secured credit, loans of portfolio securities involve some risk of loss of
rights in the collateral should the borrower fail financially.
Restricted Securities and Rule 144A Securities (All
Portfolios). Each Portfolio may invest in restricted securities, which
are securities that may not be sold to the public without an effective
registration statement under the 1933 Act or, if they are unregistered,
may be sold only in a privately negotiated transaction or pursuant to an
exemption from registration. In recognition of the increased size and
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liquidity of the institutional market for unregistered securities and the
importance of institutional investors in the formation of capital, the
Securities and Exchange Commission ("SEC") has adopted Rule 144A under the
1933 Act. Rule 144A is designed further to facilitate efficient trading
among institutional investors by permitting the sale of certain
unregistered securities to qualified institutional buyers. To the extent
privately placed securities held by a Portfolio qualify under Rule 144A,
and an institutional market develops for those securities, the Portfolio
likely will be able to dispose of the securities without registering them
under the 1933 Act. To the extent that institutional buyers become, for a
time, uninterested in purchasing these securities, investing in Rule 144A
securities could increase the level of a Portfolio's illiquidity. N&B
Management, acting under guidelines established by the Trustees, may
determine that certain securities qualified for trading under Rule 144A
are liquid. Foreign securities that can be freely sold in the markets in
which they are principally traded are not considered to be restricted.
Regulation S under the 1933 Act permits the sale abroad of securities that
are not registered for sale in the United States.
Where registration is required, a Portfolio may be
obligated to pay all or part of the registration expenses, and a
considerable period may elapse between the decision to sell and the time
the Portfolio may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market
conditions were to develop, the Portfolio might obtain a less favorable
price than prevailed when it decided to sell. To the extent privately
placed securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to each Portfolio's 10% (5% in the case of
Neuberger & Berman Genesis Portfolio) limit on investments in illiquid
securities. Restricted securities for which no market exists are priced
at fair value as determined in accordance with procedures approved and
periodically reviewed by the Trustees.
Reverse Repurchase Agreements (All Portfolios). In a
reverse repurchase agreement, a Portfolio sells portfolio securities
subject to its agreement to repurchase the securities at a later date for
a fixed price reflecting a market rate of interest; these agreements are
considered borrowings for purposes of the Portfolios' investment policies
and limitations concerning borrowings. While a reverse repurchase
agreement is outstanding, a Portfolio will maintain with its custodian in
a segregated account cash, U.S. Government or Agency Securities, or other
liquid, high-grade debt securities, marked to market daily, in an amount
at least equal to the Portfolio's obligations under the agreement. There
is a risk that the contra-party to a reverse repurchase agreement will be
unable or unwilling to complete the transaction as scheduled, which may
result in losses to the Portfolio.
Foreign Securities (All Portfolios). Each Portfolio may
invest in U.S. dollar-denominated securities issued by foreign issuers
(including banks, governments, and quasi-governmental organizations) and
foreign branches of U.S. banks, including negotiable certificates of depo-
sit ("CDs"), bankers' acceptances and commercial paper. These investments
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<PAGE>
are subject to each Portfolio's quality standards. While investments in
foreign securities are intended to reduce risk by providing further diver-
sification, 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) 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 standards or the
application of standards that are different or less stringent than those
applied in the United States.
Each Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign
banks, (3) obligations of other corporations, and (4) obligations of
foreign governments or their subdivisions, agencies, and instrumentali-
ties, international agencies, and supranational entities. Investing in
foreign currency denominated securities includes the special risks asso-
ciated with investing in non-U.S. issuers described in the preceding para-
graph and the additional risks of (1) adverse changes in foreign exchange
rates, (2) nationalization, expropriation, or confiscatory taxation,
(3) adverse changes in investment or exchange control regulations (which
could prevent cash from being brought back to the United States), and
(4) expropriation or nationalization of foreign portfolio companies.
Additionally, dividends and interest payable on foreign securities may be
subject to foreign taxes, including taxes withheld from those payments.
Commissions on foreign securities exchanges are often at fixed rates and
are generally higher than negotiated commissions on U.S. exchanges,
although the Portfolios endeavor to achieve the most favorable net results
on portfolio transactions. Each Portfolio may invest only in securities
of issuers in countries whose governments are considered stable by N&B
Management.
Foreign securities often trade with less frequency and in
less volume than domestic securities and therefore may exhibit greater
price volatility. Additional costs associated with an investment in
foreign securities may include higher custodial fees than apply to
domestic custody arrangements, and transaction costs of foreign currency
conversions.
Prices of foreign securities and exchange rates for
foreign currencies may be affected by the interest rates prevailing in
other countries. Interest rates in other countries are often affected by
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. 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.
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<PAGE>
Foreign markets also have different clearance and
settlement procedures, and, 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. Such
delays in settlement could result in temporary periods when a portion of
the assets of a Portfolio are uninvested and no return is earned thereon.
The inability of a Portfolio to make intended security purchases due to
settlement problems could cause the Portfolio to miss attractive
investment opportunities. Inability to dispose of portfolio securities
due to settlement problems could result in losses to a Portfolio due to
subsequent declines in value of the portfolio securities, or, if the
Portfolio has entered into a contract to sell the securities, could result
in possible liability to the purchaser.
In order to limit the risk inherent in investing in for-
eign currency denominated securities, a Portfolio may not purchase any
such security if, after such purchase, more than 10% of its total assets
(taken at market value) would be invested in foreign currency denominated
securities. Within that limitation, however, no Portfolio is restricted
in the amount it may invest in securities denominated in any one foreign
currency.
Futures Contracts and Options Thereon (Neuberger & Berman
Socially Responsive Portfolio). The Portfolio may purchase and sell
interest rate futures contracts, stock and bond index futures contracts,
and foreign currency futures contracts and 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 expected
changes in prevailing currency exchange rates. Because the futures
markets may be more liquid than the cash markets, the use of futures
contracts permits the Portfolio to enhance portfolio liquidity and
maintain a defensive position without having to sell portfolio securities.
The Portfolio does not engage in transactions in futures or options on
futures for speculation. The Portfolio views investment in (i) interest
rate and securities index futures and options thereon as a maturity
management device and/or a device to reduce risk or preserve total return
in an adverse environment for the hedged securities, and (ii) foreign
currency futures and options thereon as a means of establishing more
definitely the effective return on securities denominated in foreign
currencies that are held or intended to be acquired by the Portfolio.
Futures contracts and options thereon are traded only on national futures
exchanges.
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.
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<PAGE>
"Margin" with respect to a futures contract is the amount
of assets that must be deposited by the Portfolio with, or for the benefit
of, a futures commission merchant in order to initiate and maintain the
Portfolio's futures positions. The margin deposit made by the Portfolio
when it enters into a futures contract ("initial margin") is intended to
assure its performance of the contract. If the price of the futures
contract changes -- increases in the case of a short (sale) position or
decreases in the case of a long (purchase) position -- so that the
unrealized loss on the contract causes the margin deposit not to satisfy
margin requirements, the Portfolio will be required to make an additional
margin deposit ("variation margin"). However, if favorable price changes
in the futures contract cause the margin deposit to exceed the required
margin, the excess will be paid to the Portfolio. In computing its daily
net asset value ("NAV"), the Portfolio marks to market the current value
of its open futures positions. The Portfolio also must make margin
deposits with respect to options on futures that it has written. 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.
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"), an agency of the U.S.
Government; futures transactions must be executed through a futures
commission merchant that is a member of the relevant contract market. The
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the
actual delivery or acquisition of the underlying securities or currency,
in most cases the contractual obligation is extinguished by being offset
before the expiration of the contract, without the parties having to make
or take delivery of the assets. 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.
Although the Portfolio believes that the use of futures
contracts will benefit it, if N&B Management's judgment about the general
direction of the markets is incorrect, the Portfolio's overall return
would be lower than if it had not entered into any such contracts.
Moreover, the spread between values in the cash and futures markets is
subject to distortion due to differences in the character of those
markets. Because of the possibility of distortion, even a correct
forecast of general market trends by N&B Management may not result in a
successful transaction.
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
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long futures position (if the option is a put). Upon exercise of the
option, the assumption of offsetting futures positions by the writer and
holder of the option is accompanied by delivery of the accumulated cash
balance in the writer's futures margin account. 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.
The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in
interest 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 the
securities being hedged can be only approximate. Decisions regarding
whether, when, and how to hedge involve skill and judgment. Even a well-
conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends or lack of correlation between the
futures markets and the securities markets. 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 fluctua-
tion in the price of a futures contract or option thereon during a single
trading day; once the daily limit has been reached, no trades thereof may
be made on that day at a price beyond that limit. The daily limit only
governs price movements during a particular trading day, however; it thus
does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Prices can move to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing liquidation of 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.
Covered Call Options (All Portfolios). Neuberger &
Berman Socially Responsive Portfolio may write or purchase covered call
options on securities it owns. Each of the other Portfolios may write or
purchase covered call options on securities it owns valued at up to 10% of
its net assets. Generally, the purpose of writing and purchasing these
options is to reduce the effect of price fluctuations of securities held
by the Portfolio on the Portfolio's NAV. Neuberger & Berman Socially
Responsive Portfolio may also write covered call options to earn premium
income. Portfolio securities on which call options may be written and
purchased by a Portfolio are purchased solely on the basis of investment
considerations consistent with the Portfolio's investment objective.
When a Portfolio writes a call option, it is obligated to
sell a security to a purchaser at a specified price at any time the
purchaser requests until a certain date, and receives a premium for
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writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it
to deliver the underlying security against payment of the exercise price.
The Portfolio may be obligated to deliver securities underlying an option
at less than the market price, thereby giving up any additional gain on
the security.
Each Portfolio writes only "covered" call options on
securities it owns. The writing of covered call options is a conservative
investment technique that is believed to involve relatively little risk
(in contrast to the writing of "naked" or uncovered call options, which
the Portfolios will not do), but is capable of enhancing the Portfolios'
total return. When writing a covered call option, a Portfolio, in return
for the premium, gives up the opportunity for profit from a price increase
in the underlying security above the exercise price, but conversely
retains the risk of loss should the price of the security decline.
If a call option that a Portfolio has written expires
unexercised, the Portfolio will realize a gain in the amount of the
premium; however, that gain may be offset by a decline in the market value
of the underlying security during the option period. If the call option
is exercised, the Portfolio will realize a gain or loss from the sale of
the underlying security.
When a Portfolio purchases a call option, it pays a
premium for the right to purchase a security from the writer at a
specified price until a specified date. A Portfolio would purchase a call
option to offset a previously written call option. Neuberger & Berman
Socially Responsive Portfolio also may purchase a call option to protect
against an increase in the price of the securities it intends to purchase.
Put Options (Neuberger & Berman Socially Responsive
Portfolio). The Portfolio may write or purchase put options on
securities. Generally, the purpose of writing and purchasing these
options is to reduce the effect of price fluctuations of securities held
by the Portfolio on the Portfolio's NAV.
The Portfolio will receive a premium for writing a put
option, which obligates the Portfolio to acquire a certain security at a
certain price at any time until a certain date if the purchaser of the
option decides to sell such security. The Portfolio may be obligated to
purchase the underlying security at more than its current value.
When the Portfolio purchases a put option, it pays a
premium to the writer for the right to sell a security to the writer for a
specified amount at any time until a certain date. The Portfolio would
purchase a put option in order to protect itself against a decline in the
market value of a security it owns.
Portfolio securities on which put options may be written
and purchased by the Portfolio are purchased solely on the basis of
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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
the exercise price, which 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. A Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than
the premium received from writing the put option.
Put and Call Options, In General. The obligation under
any option terminates upon expiration of the option or, at an earlier
time, when the writer 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, 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 U.S. 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 its 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 a Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be
able to liquidate securities used as cover until the option expires or is
exercised or until different cover is substituted. In the event of the
counter-party's insolvency, a Portfolio may be unable to liquidate its
options position and the associated cover. N&B Management monitors the
creditworthiness of dealers with which a Portfolio may engage in OTC
options transactions, and limits the Portfolios' counter-parties in such
transactions to dealers with a net worth of at least $20 million as
reported in their latest financial statements.
The assets used as cover for OTC options written by a
Portfolio will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Portfolio may repurchase any OTC
option it writes at a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC call option written
subject to this procedure will be considered illiquid only to the extent
that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
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 exchange, less (or plus) a commission.
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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 general 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, which is the sales
price on the option's last reported trade on that day before the time the
Portfolio's NAV is computed or, in the absence of any trades thereof on
that day, the mean between the bid and ask prices.
Closing transactions are effected in order to realize a
profit on an outstanding option, to prevent an underlying security from
being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits Neuberger & Berman
Socially Responsive Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or
both. If any Portfolio desires to sell a security on which it has written
a call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security. There is, of course, no
assurance that a Portfolio will be able to effect closing transactions at
favorable prices. If a Portfolio cannot enter into such a transaction, it
may be required to hold a security that it might otherwise have sold (or
purchase a security that it would not have otherwise bought), in which
case it would continue to be at market risk on the security.
A Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than
the premium received from writing the call or put option. However,
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.
A Portfolio pays brokerage commissions in connection with
purchasing or writing options, including those used to close out existing
positions. These brokerage commissions normally are higher than those
applicable to purchases and sales of portfolio securities.
Options normally have expiration dates between three and
nine months from the date written. 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. From time to time, Neuberger & Berman
Socially Responsive Portfolio may purchase an underlying security for
delivery in accordance with an exercise notice of a call option assigned
to it, rather than delivering the security from its portfolio. In those
cases, additional brokerage commissions are incurred.
B-19
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Forward Foreign Currency Contracts (All Portfolios).
Each Portfolio may enter into contracts for the purchase or sale of a
specific currency at a future date at a fixed price ("forward contracts")
in amounts not exceeding 5% of its net assets. The Portfolios enter into
forward contracts in an attempt to hedge against expected changes in
prevailing currency exchange rates. The Portfolios do not engage in
transactions in forward contracts for speculation; they view investments
in forward contracts as a means of establishing more definitely the effec-
tive return on securities denominated in foreign currencies that are held
or intended to be acquired by them. Forward contract transactions include
forward sales or purchases of foreign currencies for the purpose of pro-
tecting the U.S. dollar value of securities held or to be acquired by a
Portfolio or protecting the U.S. dollar equivalent of dividends, interest,
or other payments on those securities.
N&B Management believes that the use of foreign currency
hedging techniques, including "cross-hedges," can help protect against
declines in the U.S. dollar value of income available for distribution and
declines in a Portfolio's NAV resulting from adverse changes in currency
exchange rates. For example, the return available from securities denomi-
nated 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 cross-hedge
involving a forward contract to sell a different foreign currency, where
the contract is available on terms more advantageous to a Portfolio than a
contract to sell the currency in which the securities being hedged are
denominated. N&B Management believes that hedges and cross-hedges can,
therefore, provide significant protection of NAV in the event of a general
rise in the U.S. dollar against foreign currencies. However, a hedge or
cross-hedge cannot protect against exchange rate risks perfectly, and, if
N&B Management is incorrect in its judgment of future exchange rate
relationships, a Portfolio could be in a less advantageous position than
if such a hedge had not been established. In addition, because forward
contracts are not traded on an exchange, the assets used to cover such
contracts may be illiquid.
Options on Foreign Currencies (All Portfolios). Each
Portfolio may write and purchase covered call and put options on foreign
currencies, in amounts not exceeding 5% of its net assets. A Portfolio
would engage in such transactions to protect against declines in the U.S.
dollar value of portfolio securities or increases in the U.S. dollar cost
of securities to be acquired or to protect the U.S. dollar equivalent of
dividends, interest, or other payments on those securities. As with other
types of options, however, writing an option on foreign currency consti-
tutes only a partial hedge, up to the amount of the premium received, and
a Portfolio could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The risks of
currency options are similar to the risks of other options, discussed
herein. Certain options on foreign currencies are traded on the OTC
market and involve liquidity and credit risks that may not be present in
the case of exchange-traded currency options.
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General Considerations Involving Futures, Options on Futures,
Options on Securities, Forward Contracts,
and Options on Foreign Currencies
(collectively, "Hedging Instruments")
Futures Contracts and Options Thereon; Put and Call
Options. To the extent a Portfolio sells or purchases futures contracts
and/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. As noted
above, the Portfolios (except Neuberger & Berman Socially Responsive
Portfolio) do not intend to invest in futures contracts and options
thereon during the coming year.
In addition, pursuant to state securities laws, (1) the
aggregate premiums paid by a Portfolio on all options (both exchange-
traded and OTC) held by it at any time may not exceed 20% of its net
assets, and (2) the aggregate margin deposits required on all exchange-
traded futures contracts and related options held by a Portfolio at any
time may not exceed 5% of its total assets. Also, pursuant to an
undertaking to a state securities law administrator, Neuberger & Berman
Socially Responsive Portfolio will not purchase puts, calls, straddles,
spreads, or any combination thereof if, by reason of such purchase, the
value of its aggregate investment in such instruments will exceed 5% of
its total assets.
Risks Involved in Using Hedging Instruments. The primary
risks in using Hedging Instruments are (1) imperfect correlation or no
correlation between changes in market value of the securities held or to
be acquired by a Portfolio and changes in market value of Hedging
Instruments; (2) possible lack of a liquid secondary market for Hedging
Instruments and the resulting inability to close out Hedging Instruments
when desired; (3) the fact that the skills needed to use Hedging Instru-
ments are different from those needed to select a 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 a Portfolio to
purchase or sell a portfolio security at a time that would otherwise be
favorable for it to do so, or the possible need for a Portfolio to sell a
portfolio security at a disadvantageous time, due to its need to maintain
"cover" or to segregate securities in connection with its use of Hedging
Instruments. N&B Management intends to reduce the risk of imperfect
correlation by investing only in Hedging Instruments whose behavior is
expected to resemble that of a Portfolio's underlying securities. N&B
Management intends to reduce the risk that a Portfolio will be unable to
close out Hedging Instruments by entering into such transactions only if
N&B Management believes there will be an active and liquid secondary
market. Hedging Instruments used by the Portfolios are generally
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considered "derivatives." There can be no assurance that a Portfolio's
use of Hedging Instruments will be successful.
The Portfolios' use of Hedging Instruments may be limited
by the requirements of the Internal Revenue Code of 1986, as amended
("Code"), that apply to certain investors in the Portfolios for
qualification for federal income tax purposes as a regulated investment
company ("RIC"). See "Tax Status."
Cover for Hedging Instruments. Each Portfolio will
comply with SEC guidelines regarding cover for Hedging Instruments and, if
the guidelines so require, set aside in a segregated account with its
custodian cash, U.S. Government or Agency Securities, or other liquid,
high-grade debt securities in the prescribed amount. Securities held in a
segregated account cannot be sold while the futures, option, or forward
strategy covered by those securities is outstanding, unless they are
replaced with other suitable assets. As a result, segregation of a large
percentage of a Portfolio's assets could impede portfolio management or
the Portfolio's ability to meet current obligations. A Portfolio may be
unable promptly to dispose of assets which cover, or are segregated with
respect to, an illiquid futures, option, or forward position; this
inability may result in a loss to the Portfolio.
Fixed Income Securities (All Portfolios). While the
emphasis of the Portfolios' investment programs is on common stocks and
other equity securities (including preferred stocks and securities
convertible into or exchangeable for common stocks), the Portfolios may
also invest in money market instruments, U.S. Government or Agency
Securities, and other fixed income securities. Each Portfolio may invest
in corporate bonds and debentures receiving one of the four highest
ratings from Standard & Poor's ("S&P"), Moody's Investors Service, Inc.
("Moody's"), or any other nationally recognized statistical rating
organization ("NRSRO"), or if not rated by any NRSRO, deemed comparable by
N&B Management to such rated securities ("Comparable Unrated Securities").
In addition, Neuberger & Berman Partners Portfolio may invest up to 15% of
its net assets in corporate debt securities rated below investment grade
or Comparable Unrated Securities. The ratings of an NRSRO represent its
opinion as to the quality of securities it undertakes to rate. Ratings
are not absolute standards of quality; consequently, securities with the
same maturity, coupon, and rating may have different yields. The Port-
folios rely primarily on ratings assigned by S&P and Moody's, which are
described in the Appendix to this Part B.
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 general market liquidity ("market
risk"). Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities,
which react primarily to movements in the general level of interest rates.
Debt securities in the lowest rating categories may involve a substantial
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risk of default or may be in default. Changes in economic conditions or
developments regarding the individual issuer are more likely to cause
price volatility and weaken the capacity of the issuer of such securities
to make principal and interest payments than is the case for higher-grade
debt securities. An economic downturn affecting the issuer may result in
an increased incidence of default. The market for lower-rated securities
may be thinner and less active than for higher-rated securities. Pricing
of thinly traded securities requires greater judgment than pricing of
securities for which market transactions are regularly reported. N&B
Management will invest in such securities only when it concludes that the
anticipated return on such an investment to Neuberger & Berman Partners
Portfolio warrants exposure to the additional level of risk.
Subsequent to its purchase by a Portfolio, an issue of
debt securities may cease to be rated or its rating may be reduced, so
that the securities would not be eligible for purchase by that Portfolio.
In such a case, Neuberger & Berman Socially Responsive Portfolio will
engage in an orderly disposition of the downgraded securities, and each
other Portfolio will engage in an orderly disposition of the downgraded
securities to the extent necessary to ensure that the Portfolio's holdings
of such securities will not exceed 5% of its net assets.
Commercial Paper (All Portfolios). Commercial paper is a
short-term debt security issued by a corporation or bank for purposes such
as financing current operations. The Portfolios may invest in commercial
paper receiving the highest rating from S&P (A-1) or Moody's (P-1), or
deemed by N&B Management to be of equivalent quality.
Each Portfolio may invest in commercial paper that cannot
be resold to the public without an effective registration statement under
the 1933 Act. While restricted commercial paper normally is deemed
illiquid, N&B Management may in certain cases determine that such paper is
liquid, pursuant to guidelines established by the Trustees.
Zero Coupon Securities (Neuberger & Berman Partners and
Neuberger & Berman Socially Responsive Portfolios). Each of these Port-
folios may invest up to 5% of its net assets 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") is taken into account by each Portfolio prior to the receipt of
any actual payments. Because each Portfolio's RIC investors must
distribute substantially all of their income (including their pro rata
share of the Portfolio's original issue discount) to their shareholders
for income and excise tax purposes (see "Tax Status" below), a Portfolio
may have to dispose of portfolio securities under disadvantageous
B-23
<PAGE>
circumstances to generate cash, or may be required to borrow, to satisfy
its RIC investors' distribution requirements.
The market prices of zero coupon securities generally are
more volatile than the prices of securities that pay interest periodi-
cally. Zero coupon securities are likely to respond to changes in
interest rates to a greater degree than other types of debt securities
having similar maturities and credit quality.
Convertible Securities (All Portfolios). The Portfolios
may invest in convertible securities. A convertible security entitles the
holder to receive interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed,
converted or exchanged. Before conversion, such securities ordinarily
provide a stream of income with generally higher yields than common stocks
of the same or similar issuers, but lower than the yield on non-
convertible debt. Convertible securities are usually subordinated to
comparable-tier non-convertible securities but rank senior to common stock
in a corporation's capital structure. The value of a convertible security
is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a
conversion privilege and (2) its worth if converted into the underlying
common stock.
Convertible securities are typically issued by smaller
capitalization companies whose stock prices may be volatile. The price of
a convertible security often reflects variations in the price of the
underlying common stock in a way that non-convertible debt does not. 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 a Portfolio is called for redemption, the
Portfolio will be required to convert it into the underlying common stock,
sell it to a third party or permit that issuer to redeem the security.
Any of these actions could have an adverse effect on the Portfolio's
ability to achieve its investment objective.
Preferred Stock (All Portfolios). The Portfolios 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, although preferred shareholders may have
certain rights if dividends are not paid. Shareholders may suffer a loss
of value if dividends are not paid and generally have no legal recourse
against the issuer. The market prices of preferred stocks are generally
more sensitive to changes in the issuer's creditworthiness than are the
prices of debt securities.
Neuberger & Berman Focus Portfolio - Description of Economic Sectors.
--------------------------------------------------------------------
Neuberger & Berman Focus Portfolio seeks to achieve its
investment objective by investing principally in common stocks in the
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following thirteen multi-industry economic sectors, normally concentrating
at least 90% of its investments in not more than six such sectors:
(1) Autos and Housing Sector: Companies engaged in
design, production, or sale of automobiles, automobile parts, mobile
homes, or related products ("automobile industries") or design, construc-
tion, renovation, or refurbishing of residential dwellings. The value of
securities of companies in the automobile industries is affected by, among
other things, foreign competition, the level of consumer confidence and
consumer debt, and installment loan rates. The housing construction
industry may be affected by the level of consumer confidence and consumer
debt, mortgage rates, tax laws, and the inflation outlook.
(2) Consumer Goods and Services Sector: Companies
engaged in providing consumer goods or services, including design, pro-
cessing, production, sale, or storage of packaged, canned, bottled, or
frozen foods and beverages and design, production, or sale of home
furnishings, appliances, clothing, accessories, cosmetics, or perfumes.
Certain of these companies are subject to government regulation affecting
the use of various food additives and production methods, which could
affect profitability. Also, the success of food- and fashion-related
products may be strongly affected by fads, marketing campaigns, health
concerns, and other factors affecting supply and demand.
(3) Defense and Aerospace Sector: Companies engaged in
research, manufacture, or sale of products or services related to the
defense or aerospace industries, including air transport; data processing
or computer-related services; communications systems; military weapons or
transportation; general aviation equipment, missiles, space launch
vehicles, or spacecraft; machinery for guidance, propulsion, or control of
flight vehicles; and airborne or ground-based equipment essential to the
test, operation, or maintenance of flight vehicles. Because these
companies rely largely on U.S. (and foreign) governmental demand for their
products and services, their financial conditions are heavily influenced
by defense spending policies.
(4) Energy Sector: Companies involved in the
production, transmission, or marketing of energy from oil, gas, or coal,
as well as nuclear, geothermal, oil shale, or solar sources of energy (but
excluding public utility companies). Also included are companies that
provide component products or services for those activities. The value of
these companies' securities varies based on the price and supply of energy
fuels and may be affected by international politics, energy conservation,
the success of exploration projects, environmental considerations, and the
tax and other regulatory policies of various governments.
(5) Financial Services Sector: Companies providing
financial services to consumers or industry, including commercial banks
and savings and loan associations, consumer and industrial finance
companies, securities brokerage companies, leasing companies, and
insurance companies. These companies are subject to extensive
governmental regulations. Their profitability may fluctuate significantly
B-25
<PAGE>
as a result of volatile interest rates, concerns about particular banks
and savings institutions, and general economic conditions.
(6) Health Care Sector: Companies engaged in design,
manufacture, or sale of products or services used in connection with the
provision of health care, including pharmaceutical companies; firms that
design, manufacture, sell, or supply medical, dental, or optical products,
hardware, or services; companies involved in biotechnology, medical
diagnostic, or biochemical research and development; and companies that
operate health care facilities. Many of these companies are subject to
government regulation and potential health care reforms, which could
affect the price and availability of their products and services. Also,
products and services of these companies could quickly become obsolete.
(7) Heavy Industry Sector: Companies engaged in
research, development, manufacture, or marketing of products, processes,
or services related to the agriculture, chemicals, containers, forest
products, non-ferrous metals, steel, or pollution control industries,
including synthetic and natural materials (for example, chemicals,
plastics, fertilizers, gases, fibers, flavorings, or fragrances), paper,
wood products, steel, and cement. Certain of these companies are subject
to state and federal regulation, which could require alteration or
cessation of production of a product, payment of fines, or cleaning of a
disposal site. Furthermore, because some of the materials and processes
used by these companies involve hazardous components, there are additional
risks associated with their production, handling, and disposal. The risk
of product obsolescence also is present.
(8) Machinery and Equipment Sector: Companies engaged
in the research, development, or manufacture of products, processes, or
services relating to electrical equipment, machinery, pollution control,
or construction services, including transformers, motors, turbines, hand
tools, earth-moving equipment, and waste disposal services. The
profitability of most of these companies may fluctuate significantly in
response to capital spending and general economic conditions. As is the
case for the heavy industry sector, there are risks associated with the
production, handling, and disposal of materials and processes that involve
hazardous components and the risk of product obsolescence.
(9) Media and Entertainment Sector: Companies engaged
in design, production, or distribution of goods or services for the media
industries (including television or radio broadcasting or manufacturing,
publishing, recordings and musical instruments, motion pictures, and
photography) and the entertainment industries (including sports arenas,
amusement and theme parks, gaming casinos, sporting goods, camping and
recreational equipment, toys and games, travel-related services, hotels
and motels, and fast food and other restaurants). Many products produced
by companies in this sector -- for example, video and electronic games --
may become obsolete quickly. Additionally, companies engaged in tele-
vision and radio broadcast are subject to government regulation.
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(10) Retailing Sector: Companies engaged in retail
distribution of home furnishings, food products, clothing,
pharmaceuticals, leisure products, or other consumer goods, including
department stores, supermarkets, and retail chains specializing in
particular items such as shoes, toys, or pharmaceuticals. The value of
these companies' securities fluctuates based on consumer spending pat-
terns, which depend on inflation and interest rates, the level of consumer
debt, and seasonal shopping habits. The success or failure of a company
in this highly competitive sector depends on its ability to predict
rapidly changing consumer tastes.
(11) Technology Sector: Companies that are expected to
have or develop products, processes, or services that will provide, or
will benefit significantly from, technological advances and improvements
or future automation trends, including semiconductors, computers and
peripheral equipment, scientific instruments, computer software,
telecommunications equipment, and electronic components, instruments, and
systems. These companies are sensitive to foreign competition and import
tariffs. Also, many of their products may become obsolete quickly.
(12) Transportation Sector: Companies involved in
providing transportation of people and products, including airlines, rail-
roads, and trucking firms. Revenues of these companies are affected by
fluctuations in fuel prices and government regulation of fares.
(13) Utilities Sector: Companies in the public
utilities industry and companies that derive a substantial majority of
their revenues through supplying public utilities (including companies
engaged in the manufacture, production, generation, transmission, or sale
of gas and electric energy) and that provide telephone, telegraph,
satellite, microwave, and other communication facilities to the public.
The gas and electric public utilities industries are subject to various
uncertainties, including the outcome of political issues concerning the
environment, prices of fuel for electric generation, availability of
natural gas, and risks associated with the construction and operation of
nuclear power facilities.
Neuberger & Berman Socially Responsive Portfolio - Description of Social
Policy
------------------------------------------------------------------------
Background Information on Socially Responsive Investing
In an era when many people are concerned about the
relationship between business and society, socially responsive investing
("SRI") is a mechanism for assuring that investors' social values are
reflected in their investment decisions. As such, SRI is a direct
descendent of the successful effort begun in the early 1970's to encourage
companies to divest their South African operations and subscribe to the
Sullivan Principles. Today, a growing number of individuals and
institutions are applying similar strategies to a broad range of problems.
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Although there are many strategies available to the
socially responsive investor, including proxy activism, below-market loans
to community projects, and venture capital, the SRI strategies used by the
Portfolio generally fall into two categories:
Avoidance Investing. Most socially responsive investors
seek to avoid holding securities of companies whose products or policies
are seen as being at odds with the social good. The most common
exclusions historically have involved tobacco companies and weapons
manufacturers.
Leadership Investing. A growing number of investors
actively look for companies with progressive programs that are exemplary
or companies which make it their business to try to solve some of the
problems of today's society.
The marriage of social and financial objectives would not
have surprised Adam Smith who was, first and foremost, a moral
philosopher. The Wealth of Nations is firmly rooted in the Enlightenment
conviction that the purpose of capital is the social good and the related
belief that idle capital is both wasteful and unethical. But, what very
likely would have surprised Smith is the sheer complexity of the social
issues we face today and the diversity of our attitudes toward the social
good. War and peace, race and gender, the distribution of wealth, and the
conservation of natural resources -- the social agenda is long and
compelling. It is also something about which reasonable people differ.
What should society's priorities be? What can and should be done about
them? And what is the role of business in addressing them? Since
corporations are on the front lines of so many key issues in today's
world, a growing number of investors feel that a corporation's role cannot
be ignored. This is true of some of the most important issues of the day
such as equal opportunity and the environment.
The Socially Responsive Database
Neuberger & Berman, L.P. ("Neuberger & Berman"), the
Portfolio's sub-adviser, maintains a proprietary database of information
about the social impact of the companies it follows. N&B Management uses
the database to evaluate social issues after it deems a stock acceptable
from a financial standpoint for acquisition by the Portfolio. More and
more frequently, however, N&B Management is finding that, by monitoring
social issues, it gains insight into the financial well-being of a company
because of a convergence of social and financial criteria on a company's
bottom line. This is especially evident in the areas of product quality
and marketing, workforce diversity, and the environment. The aim of the
database is to be as accurate, comprehensive, and flexible as possible,
given that much of the information concerning corporate responsibility
comes from subjective sources. Information for the database is gathered
by Neuberger & Berman in many categories and then analyzed by N&B
Management in the following six categories of corporate responsibility:
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Workplace Diversity and Employment. N&B Management looks
for companies that show leadership in areas such as employee training and
promotion policies and benefits, such as flextime, generous profit
sharing, and parental leave. N&B Management looks for active programs to
promote women and minorities and takes into account their representation
among the officers and members of an issuer's board of directors. As a
basis for exclusion, N&B Management looks for Equal Employment Opportunity
Act infractions and Occupational Safety and Health Act violations;
examines each case in terms of severity, frequency, and time elapsed since
the incident; and considers actions taken by the company since the
violation. N&B Management also monitors companies' progress and attitudes
toward these issues.
Environment. A company's impact on the environment
depends largely on the industry. Therefore, N&B Management examines a
company's environmental record vis-a-vis those of its peers in the
industry. All companies operating in an industry with inherently high
environmental risks are likely to have had problems in such areas as toxic
chemical emissions, federal and state fines, and Superfund sites. For
these companies, N&B Management examines their problems in terms of
severity, frequency, and elapsed time. N&B Management then balances the
record against whatever leadership the company may have demonstrated in
terms of environmental policies, procedures, and practices. N&B
Management defines an environmental leadership company as one that puts
into place strong affirmative programs to minimize emissions, promote
safety, reduce waste at the source, insure energy conservation, protect
natural resources, and incorporate recycling into its processes and
products. N&B Management looks for the commitment and active involvement
of senior management in all these areas. Several major manufacturers
which still produce substantial amounts of pollution are among the leaders
in developing outstanding waste source reduction and remediation programs.
Product. N&B Management considers company announcements,
press reports, and public interest publications relating to the health,
safety, quality, labeling, advertising, and promotion of both consumer and
industrial products. N&B Management takes note of companies with a strong
commitment to quality and with marketing practices which are ethical and
consumer-friendly. N&B Management pays particular attention to companies
whose products and services promote progressive solutions to social
problems.
Public Health. N&B Management measures the participation
of companies in such industries and markets as alcohol, tobacco, gambling
and nuclear power. N&B Management also considers the impact of products
and marketing activities related to those products on nutritional and
other health concerns, both domestically and in foreign markets.
Weapons. N&B Management keeps track of domestic military
sales and, whenever possible, foreign military sales and categorizes them
as nuclear weapons related, other weapons related, and non-weapon military
supplies, such as micro-chip manufacturers and companies that make
uniforms for military personnel.
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<PAGE>
Corporate Citizenship. N&B Management gathers
information about a company's participation in community affairs, its
policies with respect to charitable contributions, and its support of
education and the arts. N&B Management looks for companies with a focus,
dealing with issues not just by making financial contributions, but also
by asking the questions: What can we do to help? What do we have to
offer? Volunteerism, high-school mentoring programs, scholarships and
grants, and in-kind donations to specific groups are just a few ways that
companies have responded to these questions.
Implementation of Social Policy
Companies deemed acceptable by N&B Management from a
financial standpoint are analyzed using Neuberger & Berman's database.
The companies are then evaluated by the portfolio managers to determine if
the companies' policies, practices, products, and services withstand
scrutiny in the following major areas of concern: the environment and
workplace diversity and employment. Companies are then further evaluated
to determine their track record in issues and areas of concern such as
public health, weapons, product, and corporate citizenship.
The issues and areas of concern that are tracked lend
themselves to objective analysis in varying degrees. Few, however, can be
resolved entirely on the basis of scientifically demonstrable facts.
Moreover, a substantial amount of important information comes from sources
that do not purport to be disinterested. Thus, the quality and usefulness
of the information in the database depend on Neuberger & Berman's ability
to tap a wide variety of sources and on the experience and judgment of the
people at N&B Management who interpret the information.
In applying the information in the database to stock
selection for the Portfolio, N&B Management considers several factors.
N&B Management examines the severity and frequency of various infractions,
as well as the time elapsed since their occurrence. N&B Management also
takes into account any remedial action which has been taken by the company
relating to these infractions. N&B Management notes any quality
innovations made by the company in its effort to create positive change
and looks at the company's overall social trend.
Certain Risk Considerations
Although each Portfolio seeks to reduce risk by investing
in a diversified portfolio, diversification does not eliminate all risk.
There can, of course, be no assurance that any Portfolio will achieve its
investment objective, and an investment in a Portfolio involves certain
risks that are described in the sections entitled "Investment Programs"
and "Description of Investments" in Item 4 in Part A and in the applicable
"Additional Investment Information" sections above.
B-30
<PAGE>
Item 14. Management of the Trust.
---------------------------------
Trustees and Officers
The following table sets forth information concerning the
Trustees and officers of the Trust, including their addresses and
principal business experience during the past five years. Some persons
named as Trustees and officers also serve in similar capacities for other
funds, and (where applicable) their corresponding portfolios, administered
or managed by N&B Management and Neuberger & Berman.
<TABLE>
<CAPTION>
Name, Age, Positions Held
and Address(1) With the Trust Principal Occupation(s)(2)
-------------- -------------- -----------------------
<S> <C> <C>
Faith Colish (60) Trustee Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (73) Trustee Retired. Formerly Senior Vice President
435 East 52nd Street and Director of Exxon Corporation;
New York, NY 10022 Director of Emigrant Savings Bank.
Stanley Egener* (61) Chairman of the Partner of Neuberger & Berman; President
Board, Chief and Director of N&B Management;
Executive Officer, Chairman of the Board, Chief Executive
and Trustee Officer, and Trustee of nine other
mutual funds for which N&B Management
acts as investment manager or
administrator.
Alan R. Gruber (68) Trustee Chairman and Chief Executive Officer of
Orion Capital Orion Capital Corporation (property and
Corporation casualty insurance); Director of
600 Fifth Avenue Trenwick Group, Inc. (property and
24th Floor casualty reinsurance); Chairman of the
New York, NY 10020 Board and Director of Guaranty National
Corporation (property and casualty
insurance); formerly Director of Ketema,
Inc. (diversified manufacturer).
B-31
<PAGE>
Name, Age, Positions Held
and Address(1) With the Trust Principal Occupation(s)(2)
-------------- -------------- -----------------------
Howard A. Mileaf (57) Trustee Vice President and Special Counsel to
Wheeling Pittsburgh Corporation Wheeling Pittsburgh Corporation (holding
110 East 59th Street company) since 1992; formerly Vice
New York, NY 10022 President and General Counsel of Keene
Corporation (manufacturer of industrial
products); Director of Kevlin
Corporation (manufacturer of microwave
and other products).
Edward I. O'Brien* (67) Trustee Until 1993, President of the Securities
12 Woods Lane Industry Association ("SIA") (securities
Scarsdale, NY 10583 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. (67) Trustee President of SOBRO (South Bronx Overall
90 Riverside Drive Economic Development Corporation).
Apartment 1B
New York, NY 10024
John P. Rosenthal (63) Trustee Senior Vice President of Burnham
Burnham Securities Inc. Securities Inc. (a registered broker-
Burnham Asset Management Corp. dealer) since 1991; formerly Partner of
1325 Avenue of the Silberberg, Rosenthal & Co. (member of
Americas National Association of Securities
17th Floor Dealers, Inc.); Director, Cancer
New York, NY 10019 Treatment Holdings, Inc.
Cornelius T. Ryan (64) Trustee General Partner of Oxford Partners and
Oxford Bioscience Partners Oxford Bioscience Partners (venture
315 Post Road West capital partnerships) and President of
Westport, CT 06880 Oxford Venture Corporation; Director of
Capital Cash Management Trust (money
market fund) and Prime Cash Fund.
B-32
<PAGE>
Name, Age, Positions Held
and Address(1) With the Trust Principal Occupation(s)(2)
-------------- -------------- -----------------------
Gustave H. Shubert (66) Trustee Senior Fellow/Corporate Advisor and
13838 Sunset Boulevard Advisory Trustee of Rand (a non-profit
Pacific Palisades, CA 90272 public interest research institution)
since 1989; Honorary Member of the Board
of Overseers of the Institute for Civil
Justice, the Policy Advisory Committee
of the Clinical Scholars Program at the
University of California, the American
Association for the Advancement of
Science, the Counsel on Foreign
Relations, and the Institute for
Strategic Studies (London); advisor to
the Program Evaluation and Methodology
Division of the U.S. General Accounting
Office; formerly Senior Vice President
and Trustee of Rand.
Lawrence Zicklin* (59) President and Partner of Neuberger & Berman; Director
Trustee of N&B Management; President and/or
Trustee of six other mutual funds for
which N&B Management acts as investment
manager or administrator.
Daniel J. Sullivan (55) Vice President Senior Vice President of N&B Management
since 1992; prior thereto, Vice Presi-
dent of N&B Management; Vice President
of nine other mutual funds for which N&B
Management acts as investment manager or
administrator.
Michael J. Weiner (48) Vice President and Senior Vice President and Treasurer of
Principal Finan- N&B Management since 1992; prior
cial Officer thereto, Vice President and Treasurer of
N&B Management and Treasurer of certain
mutual funds for which N&B Management
acted as investment adviser; Vice
President and Principal Financial
Officer of nine other mutual funds for
which N&B Management acts as investment
manager or administrator.
Claudia A. Brandon (38) Secretary Vice President of N&B Management;
Secretary of nine other mutual funds for
which N&B Management acts as investment
manager or administrator.
B-33
<PAGE>
Name, Age, Positions Held
and Address(1) With the Trust Principal Occupation(s)(2)
-------------- -------------- -----------------------
Richard Russell (48) Treasurer and Vice President of N&B Management since
Principal Account- 1993; prior thereto, Assistant Vice
ing Officer President of N&B Management; Treasurer
and Principal Accounting Officer of nine
other mutual funds for which N&B
Management acts as investment manager or
administrator.
Stacy Cooper-Shugrue (32) Assistant Secre- Assistant Vice President of N&B
tary Management since 1993; employee of N&B
Management since 1989; Assistant
Secretary of nine other mutual funds for
which N&B Management acts as investment
manager or administrator.
C. Carl Randolph (57) Assistant Secre- Partner of Neuberger & Berman since
tary 1992; employee thereof since 1971;
Assistant Secretary of nine other mutual
funds for which N&B Management acts as
investment manager or administrator.
</TABLE>
____________________
(1) Unless otherwise indicated, the business address of each listed
person is 605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
* Indicates an "interested person" of the Trust within the meaning of
the 1940 Act. Messrs. Egener and Zicklin are interested persons by virtue
of the fact that they are officers and/or directors of N&B Management and
partners of Neuberger & Berman. Mr. O'Brien is an interested person by
virtue of the fact that he is a director of Legg Mason, Inc., a wholly
owned subsidiary of which, from time to time, serves as a broker or dealer
to the Portfolios and other funds for which N&B Management serves as
investment manager.
The Trust's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses
reasonably incurred in connection with litigation in which they may be
involved because of their offices with the Trust, unless it is adjudicated
that they engaged in bad faith, willful misfeasance, gross negligence, or
reckless disregard of the duties involved in the conduct of their offices.
In the case of settlement, such indemnification will not be provided
unless it has been determined (by a court or other body approving the
B-34
<PAGE>
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 and officers of the Trust. None of the
Neuberger & Berman Funds has any retirement plan for its trustees or
officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/95
-----------------------------
<TABLE>
<CAPTION>
Aggregate
Compensation Total Compensation from the Neuberger &
Name and Position with the Trust from the Trust Berman Fund Complex Paid to Trustees
-------------------------------- -------------- ----------------------------------------
<S> <C> <C>
Faith Colish $15,274 $39,000
Trustee (5 other investment companies)
Donald M. Cox $15,524 $31,000
Trustee (3 other investment companies)
Stanley Egener $ 0 $ 0
Chairman of the Board, (9 other investment companies)
Chief Executive Officer, and Trustee
Alan R. Gruber $15,524 $31,000
Trustee (3 other investment companies)
Howard A. Mileaf $17,024 $36,500
Trustee (4 other investment companies)
Edward I. O'Brien $15,524 $31,500
Trustee (3 other investment companies)
John T. Patterson, Jr. $15,524 $34,500
Trustee (4 other investment companies)
John P. Rosenthal $14,774 $33,000
Trustee (4 other investment companies)
Cornelius T. Ryan $16,524 $33,500
Trustee (3 other investment companies)
B-35
<PAGE>
Aggregate
Compensation Total Compensation from the Neuberger &
Name and Position with the Trust from the Trust Berman Fund Complex Paid to Trustees
-------------------------------- -------------- ----------------------------------------
Gustave H. Shubert $14,774 $30,000
Trustee (3 other investment companies)
Lawrence Zicklin $ 0 $ 0
President and Trustee (5 other investment companies)
</TABLE>
Item 15. Control Persons and Principal Holders of Securities.
-------------------------------------------------------------
As of December 26, 1995, each Portfolio could be deemed
to be under the control of a corresponding series of Neuberger & Berman
Equity Funds or Neuberger & Berman Equity Trust (each series, a "Fund").
As of that date, the controlling series of Neuberger & Berman Equity Funds
owned the indicated value of the outstanding interests in the Portfolios:
Neuberger & Berman Manhattan Fund owned 93.60% of the value of the
outstanding interests in Neuberger & Berman Manhattan Portfolio;
Neuberger & Berman Genesis Fund owned 77.70% of the value of the
outstanding interests in Neuberger & Berman Genesis Portfolio; Neuberger &
Berman Focus Fund owned 97.75% of the value of the outstanding interests
in Neuberger & Berman Focus Portfolio; Neuberger & Berman Guardian Fund
owned 82.69% of the value of the outstanding interests in Neuberger &
Berman Guardian Portfolio; and Neuberger & Berman Partners Fund owned
96.02% of the value of the outstanding interests in Neuberger & Berman
Partners Portfolio. Neuberger & Berman NYCDC Socially Responsive Trust, a
series of Neuberger & Berman Equity Trust, owned 90.01% of the value of
the outstanding interests in Neuberger & Berman Socially Responsive
Portfolio. So long as a Fund owns more than 50% of the value of the
outstanding interests in a Portfolio, such Fund may take actions without
the approval of any other registered investment company that invests in
the Portfolio. The remaining outstanding interests in each Portfolio are
owned by a series of Neuberger & Berman Equity Trust (or, in the case of
Neuberger & Berman Socially Responsive Portfolio, by a series of Neuberger
& Berman Equity Funds) that has a similar name and identical investment
objective and policies as such Portfolio.
Neuberger & Berman Equity Funds and Neuberger & Berman
Equity Trust have informed the Trust that whenever a Fund is requested to
vote on matters pertaining to its corresponding Portfolio, the Fund
affected 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. It is anticipated that other registered investment
companies investing in any Portfolio will follow the same or a similar
practice.
B-36
<PAGE>
The address of each of the above-described control
persons is 605 Third Avenue, 2nd Floor, New York, New York 10158-0180.
Item 16. Investment Management and Other Services.
--------------------------------------------------
Investment Manager. N&B Management serves as the invest-
ment manager to all the Portfolios pursuant to a management agreement with
the Trust, dated as of August 2, 1993 ("Management Agreement"). The
Management Agreement was approved by the holders of the interests in all
the Portfolios (except Neuberger & Berman Socially Responsive Portfolio)
on August 2, 1993, and by the holders of the interests in Neuberger &
Berman Socially Responsive Portfolio on March 9, 1994. That Portfolio was
authorized to become subject to the Management Agreement by vote of the
Trustees on October 20, 1993, and became subject to it on March 14, 1994.
The Management Agreement provides, in substance, that
N&B Management will make and implement investment decisions for the
Portfolios in its discretion and will continuously develop an investment
program for the Portfolios' assets. The Management Agreement permits
N&B Management to effect securities transactions on behalf of each
Portfolio through associated persons of N&B Management. The Management
Agreement also specifically permits N&B Management to compensate, through
higher commissions, brokers and dealers who provide investment research
and analysis to the Portfolios, although N&B Management has no current
plans to do so.
N&B Management provides to each Portfolio, without
separate cost, office space, equipment, and facilities and the personnel
necessary to perform executive, administrative, and clerical functions.
N&B Management pays all salaries, expenses, and fees of the officers,
Trustees, and employees of the Trust who are officers, directors, or
employees of N&B Management. Two directors of N&B Management (who also
are partners of Neuberger & Berman), one of whom also serves as an officer
of N&B Management, presently serve as Trustees and officers of the Trust.
See "Trustees and Officers" above. Each Portfolio pays N&B Management a
management fee based on the Portfolio's average daily net assets, as
described in Part A.
The Management Agreement continues with respect to each
Portfolio for a period of two years after the date the Portfolio became
subject thereto. The Management Agreement is renewable thereafter from
year to year with respect to each Portfolio, so long as its continuance is
approved at least annually (1) by the vote of a majority of the Trustees
who are not "interested persons" of N&B Management or the Trust
("Independent 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 Trustees or by a 1940 Act majority vote of the outstanding interests
in the Portfolio. The Management Agreement is terminable, without
penalty, with respect to a Portfolio on 60 days' written notice either by
the Trust or by N&B Management. The Management Agreement terminates
automatically if it is assigned.
B-37
<PAGE>
The total management fees accrued and paid by each Portfolio to
N&B Management under the Management Agreement for the fiscal years ended
August 31, 1995 and 1994 were:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Neuberger & Berman Manhattan Portfolio $2,772,956 $2,831,648
Neuberger & Berman Genesis Portfolio $1,068,567 $1,134,694
Neuberger & Berman Guardian Portfolio $9,790,220 $1,427,453,315
Neuberger & Berman Partners Portfolio $6,232,134 $6,830,493
Neuberger & Berman Focus Portfolio $3,173,551 $3,758,266
Neuberger & Berman Socially Responsive $167,035* $431,196
Portfolio
</TABLE>
* For the fiscal period from March 14, 1994 (commencement of
operations) to August 31, 1994.
The total management fees paid by each Portfolio to N&B
Management under the Management Agreement for the period from August 2,
1993 (commencement of operations) to August 31, 1993 was:
<TABLE>
<CAPTION>
<S> <C>
Neuberger & Berman Manhattan $237,505
Portfolio
Neuberger & Berman Genesis $ 82,569
Portfolio
Neuberger & Berman Guardian $702,032
Portfolio
Neuberger & Berman Partners $486,737
Portfolio
Neuberger & Berman Focus $254,311
Portfolio
</TABLE>
B-38
<PAGE>
Sub-Adviser. N&B Management retains Neuberger & Berman, 605
Third Avenue, New York, New York 10158-3698, as sub-adviser with respect
to each Portfolio pursuant to a sub-advisory agreement dated August 2,
1993 ("Sub-Advisory Agreement"). The Sub-Advisory Agreement was approved
by the holders of the interests in the Portfolios (except Neuberger &
Berman Socially Responsive Portfolio) on August 2, 1993 and by the holders
of the interests in Neuberger & Berman Socially Responsive Portfolio on
March 9, 1994. That Portfolio was authorized to become subject to the
Sub-Advisory Agreement by vote of the Trustees on October 20, 1993, and
became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same
type of investment recommendations and research that Neuberger & Berman,
from time to time, provides to its partners and employees for use in
managing client accounts. In this manner, N&B Management expects to have
available to it, in addition to research from other professional sources,
the capability of the research staff of Neuberger & Berman. This staff
consists of approximately fourteen investment analysts, each of whom
specializes in studying one or more industries, under the supervision of
the Director of Research, who is also available for consultation with
N&B Management. The Sub-Advisory Agreement provides that N&B Management
will pay for the services rendered by Neuberger & Berman based on the
direct and indirect costs to Neuberger & Berman in connection with those
services. Neuberger & Berman also serves as sub-adviser for all of the
other mutual funds managed by N&B Management.
The Sub-Advisory Agreement continues with respect to each
Portfolio for a period of two years after the date the Portfolio became
subject thereto, 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 each Portfolio by the Trustees, by a 1940 Act majority vote of
the outstanding Portfolio interests, by N&B Management, or by Neuberger &
Berman on not less than 30 nor more than 60 days' written notice. The
Sub-Advisory Agreement also terminates automatically with respect to each
Portfolio if it is assigned or if the Management Agreement terminates with
respect to that Portfolio.
Most money managers that come to the Neuberger & Berman
organization have at least fifteen years experience. Neuberger & Berman
and N&B Management employ experienced professionals that work in a
competitive environment.
Investment Companies Managed
----------------------------
N&B Management currently serves as investment manager of the
following investment companies. As of September 30, 1995, these
companies, along with three investment companies advised by Neuberger &
B-39
<PAGE>
Berman, had aggregate net assets of approximately $11.4 billion, as shown
in the following list:
Approximate
Net Assets at
Name September 30, 1995
---- -------------------
Neuberger & Berman Cash Reserves Portfolio . . . . . . . . . $377,608,619
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Income Portfolio . . . . . . . $12,053,656
(investment portfolio for Neuberger & Berman Government Income
Fund and Neuberger & Berman Government Income Trust)
Neuberger & Berman Government Money Portfolio . . . . . . . . $346,898,132
(investment portfolio for Neuberger & Berman Government Money
Fund)
Neuberger & Berman Limited Maturity Bond Portfolio . . . . . $309,540,451
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio . . . . . . . . $149,657,613
(investment portfolio for Neuberger & Berman Municipal Money
Fund)
Neuberger & Berman Municipal Securities Portfolio . . . . . . $44,568,635
(investment portfolio for Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured Intermediate
Portfolio . . . . . . . . . . . . . . . . . . . . . $10,679,324
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Ultra Short Bond Portfolio . . . . . . . . $102,903,312
(investment portfolio for Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Focus Portfolio . . . . . . . . . . . . $1,031,915,664
(investment portfolio for Neuberger & Berman Focus Fund and
Neuberger & Berman Focus Trust)
Neuberger & Berman Genesis Portfolio . . . . . . . . . . . . $145,188,783
(investment portfolio for Neuberger & Berman Genesis Fund and
Neuberger & Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio . . . . . . . . . . $4,943,764,830
(investment portfolio for Neuberger & Berman Guardian Fund and
Neuberger & Berman Guardian Trust)
B-40
<PAGE>
Approximate
Net Assets at
Name September 30, 1995
---- -------------------
Neuberger & Berman International Portfolio . . . . . . . . . $29,990,616
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio . . . . . . . . . . . $670,916,038
(investment portfolio for Neuberger & Berman Manhattan Fund and
Neuberger & Berman Manhattan Trust)
Neuberger & Berman Partners Portfolio . . . . . . . . . . . $1,664,460,688
(investment portfolio for Neuberger & Berman Partners Fund and
Neuberger & Berman Partners Trust)
Neuberger & Berman Socially Responsive
Portfolio . . . . . . . . . . . . . . . . . . . . $102,675,093
(investment portfolio for Neuberger & Berman Socially Responsive
Fund, Neuberger & Berman Socially Responsive Trust, and Neuberger
& Berman NYCDC Socially Responsive Trust)
Neuberger & Berman Advisers Managers
Trust (six series) . . . . . . . . . . . . . . . . $1,257,506,124
In addition, Neuberger & Berman serves as investment
adviser to three investment companies, Plan Investment Fund, Inc., AHA
Investment Fund, Inc., and AHA Full Maturity, with assets of $85,110,472,
$110,683,193, and $23,891,472, respectively, at September 30, 1995.
The investment decisions concerning the Portfolios and
the other funds and portfolios managed by N&B Management (collectively,
"Other N&B Funds") have been and will continue to be made independently of
one another. In terms of their investment objectives, most of the Other
N&B Funds differ from the Portfolios. Even where the investment
objectives are similar, however, the methods used by the Other N&B Funds
and the Portfolios to achieve their objectives may differ.
There may be occasions when a Portfolio and one or more
of the Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities
from or to third parties. When this occurs, the transactions are averaged
as to price and allocated as to amounts in accordance with a formula
considered to be equitable to the funds involved. Although in some cases
this arrangement may have a detrimental effect on the price or volume of
the securities as to a Portfolio, in other cases it is believed that a
Portfolio's ability to participate in volume transactions may produce
better executions for it. In any case, it is the judgment of the Trustees
that the desirability of the Portfolios' having their advisory
arrangements with N&B Management outweighs any disadvantages that may
result from contemporaneous transactions. The investment results achieved
B-41
<PAGE>
by all of the funds managed by N&B Management have varied from one another
in the past and are likely to vary in the future.
Management and Control of N&B Management
----------------------------------------
The directors and officers of N&B Management, all of whom
have offices at the same address as N&B Management, are Richard A. Cantor,
Chairman of the Board and director; Stanley Egener, President and
director; Theresa A. Havell, Vice President and director; Irwin Lainoff,
director; Marvin C. Schwartz, director; Lawrence Zicklin, director; Daniel
J. Sullivan, Senior Vice President; Michael J. Weiner, Senior Vice
President and Treasurer; Claudia A. Brandon, Vice President; William
Cunningham, Vice President; Clara Del Villar, Vice President; Mark R.
Goldstein, Vice President; Farha-Joyce Haboucha, Vice President; Michael
M. Kassen, Vice President; Michael Lamberti, Vice President; Josephine P.
Mahaney, Vice President; Lawrence Marx III, Vice President; Ellen Metzger,
Vice President and Secretary; Janet W. Prindle, Vice President; Felix
Rovelli, Vice President; Richard Russell, Vice President; Kent C. Simons,
Vice President; Frederick B. Soule, Vice President; Judith M. Vale, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Patrick T. Byrne, Assistant Vice President; Robert
Conti, Assistant Vice President; Stacy Cooper-Shugrue, Assistant Vice
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Roberta D'Orio, Assistant Vice President; Robert
I. Gendelman, Assistant Vice President; Leslie Holliday-Soto, Assistant
Vice President; Carmen G. Martinez, Assistant Vice President; Paul
Metzger, Assistant Vice President; Susan Switzer, Assistant Vice
President; Susan Walsh, Assistant Vice President; and Celeste Wischerth,
Assistant Vice President. Messrs. Cantor, Egener, Lainoff, Schwartz,
Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Havell and Prindle
are general partners of Neuberger & Berman.
Messrs. Egener and Zicklin are Trustees and officers, and
Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue
are officers, of the Trust. C. Carl Randolph, a general partner of
Neuberger & Berman, also is an officer of the Trust.
All of the outstanding voting stock in N&B Management is
owned by persons who are also general partners of Neuberger & Berman.
Custodian. Each Portfolio has selected State Street Bank
and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, as
custodian for its securities and cash.
Independent Auditors. Each Portfolio (except Neuberger &
Berman Manhattan Portfolio and Neuberger & Berman Socially Responsive
Portfolio) has selected Ernst & Young LLP as the independent auditors who
will audit its financial statements. The principal business address of
Ernst & Young LLP is 200 Clarendon Street, Boston, Massachusetts 02116.
Neuberger & Berman Manhattan Portfolio and Neuberger & Berman Socially
Responsive Portfolio have selected Coopers & Lybrand L.L.P. as the
B-42
<PAGE>
independent accountants who will audit their financial statements. The
principal business address of Coopers & Lybrand L.L.P. is One Post Office
Square, Boston, Massachusetts 02109.
Legal Counsel. Each Portfolio has selected Kirkpatrick &
Lockhart LLP, 1800 M Street, N.W., Washington, D.C. 20036, as its legal
counsel.
Item 17. Brokerage Allocation and Other Practices.
--------------------------------------------------
Neuberger & Berman acts as each Portfolio's principal
broker in the purchase and sale of its portfolio securities (other than
the substantial portion of the portfolio transactions of Neuberger &
Berman Genesis Portfolio that involves securities traded on the OTC
market, which that Portfolio purchases and sells in principal transactions
with dealers who are the principal market makers for the securities) and
in connection with the purchase and sale of options on its securities.
Transactions in portfolio securities for which Neuberger & Berman or any
other affiliate serves as broker will be effected in accordance with Rule
17e-1 under the 1940 Act.
During the period August 3 to August 31, 1993, Neuberger
& Berman Manhattan Portfolio paid brokerage commissions of $42,780, of
which $32,922 was paid to Neuberger & Berman. During the fiscal year
ended August 31, 1994, that Portfolio paid brokerage commissions of
$655,640, of which $525,610 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman Manhattan Portfolio paid brokerage commissions of $654,982, of
which $436,568 was paid to Neuberger & Berman. Transactions in which that
Portfolio used Neuberger & Berman as broker comprised 73.70% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 66.65% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 94.53% of the
$218,414 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$81,737,328) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its "regular brokers or
dealers" (as defined in the 1940 Act) ("Regular B/Ds"): Bear Stearns &
Co. Inc., and Morgan Stanley & Co., Inc.; at that date, that Portfolio
held the securities of its Regular B/Ds with an aggregate value as
follows: Bear Stearns & Co. Inc., $6,187,500, and Morgan Stanley & Co.,
Inc., $10,859,370.
During the period August 3 to August 31, 1993,
Neuberger & Berman Genesis Portfolio paid brokerage commissions of
$13,580, of which $10,660 was paid to Neuberger & Berman. During the
fiscal year ended August 31, 1994, that Portfolio paid brokerage
commissions of $287,587, of which $170,883 was paid to Neuberger & Berman.
B-43
<PAGE>
During the fiscal year ended August 31, 1995, Neuberger &
Berman Genesis Portfolio paid brokerage commissions of $199,718, of which
$118,014 was paid to Neuberger & Berman. Transactions in which that
Portfolio used Neuberger & Berman as broker comprised 55.55% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 59.09% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 80.60% of the
$81,704 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$21,361,399) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: EXXON
Credit Corp., and General Electric Capital Corp.; at that date, that
Portfolio held the securities of its Regular B/Ds with an aggregate value
as follows: None.
During the period August 3 to August 31, 1993,
Neuberger & Berman Focus Portfolio paid brokerage commissions of $46,296,
of which $42,606 was paid to Neuberger & Berman. During the fiscal year
ended August 31, 1994, that Portfolio paid brokerage commissions of
$719,994, of which $567,972 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman Focus Portfolio paid brokerage commissions of $1,031,245, of which
$617,957 was paid to Neuberger & Berman. Transactions in which that
Portfolio used Neuberger & Berman as broker comprised 66.83% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 59.92% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 89.62% of the
$413,288 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$160,855,610) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: EXXON
Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce,
Fenner & Smith, Inc.; at that date, that Portfolio held the securities of
its Regular B/Ds with an aggregate value as follows: General Electric
Capital Corp., $2,300,000, and Merrill Lynch, Pierce, Fenner & Smith,
Inc., $14,406,250.
During the period August 3 to August 31, 1993,
Neuberger & Berman Guardian Portfolio paid brokerage commissions of
$201,981, of which $149,496 was paid to Neuberger & Berman. During the
fiscal year ended August 31, 1994, that Portfolio paid brokerage
commissions of $2,207,401, of which $1,647,807 was paid to Neuberger &
Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman Guardian Portfolio paid brokerage commissions of $3,751,206, of
which $2,521,523 was paid to Neuberger & Berman. Transactions in which
that Portfolio used Neuberger & Berman as broker comprised 70.49% of the
aggregate dollar amount of transactions involving the payment of
B-44
<PAGE>
commissions, and 67.22% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 82.78% of the
$1,229,683 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$509,609,733) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: EXXON
Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce,
Fenner & Smith, Inc.; at that date, that Portfolio held the securities of
its Regular B/Ds with an aggregate value as follows: General Electric
Capital Corp., $1,500,000, and Merrill Lynch, Pierce, Fenner & Smith,
Inc., $48,116,875.
During the period August 3 to August 31, 1993, Neuberger
& Berman Partners Portfolio paid brokerage commissions of $373,486, of
which $272,542 was paid to Neuberger & Berman. During the fiscal year
ended August 31, 1994, that Portfolio paid brokerage commissions of
$2,994,540, of which $2,031,570 was paid to Neuberger & Berman.
During the fiscal year ended August 31, 1995, Neuberger &
Berman Partners Portfolio paid brokerage commissions of $4,608,156, of
which $3,092,789 was paid to Neuberger & Berman. Transactions in which
that Portfolio used Neuberger & Berman as broker comprised 71.83% of the
aggregate dollar amount of transactions involving the payment of
commissions, and 67.12% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 95.02% of the
$1,515,367 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$600,676,631) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds:
Salomon Brothers, Inc., EXXON Credit Corp., and General Electric Capital
Corp.; at that date, that Portfolio held the securities of its Regular
B/Ds with an aggregate value as follows: General Electric Capital Corp.,
$7,600,000.
During the period from March 16, 1994 (commencement of
operations) through August 31, 1994, and the fiscal year ended August 31,
1995, Neuberger & Berman Socially Responsive Portfolio paid brokerage
commissions of $46,374 and $138,378, respectively, of which $46,050 and
$95,964, respectively, were paid to Neuberger & Berman. Transactions in
which that Portfolio used Neuberger & Berman as broker comprised 72.32% of
the aggregate dollar amount of transactions involving the payment of
commissions, and 69.35% of the aggregate brokerage commissions paid by the
Portfolio, during the fiscal year ended August 31, 1995. 93.17% of the
$42,414 paid to other brokers by that Portfolio during that fiscal year
(representing commissions on transactions involving approximately
$17,590,257) was directed to those brokers because of research services
they provided. During the fiscal year ended August 31, 1995, that
Portfolio acquired securities of the following of its Regular B/Ds: None;
at that date, that Portfolio held the securities of its Regular B/Ds with
an aggregate value as follows: None.
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Insofar as portfolio transactions of Neuberger & Berman
Partners Portfolio result from active management of equity securities, and
insofar as portfolio transactions of Neuberger & Berman Manhattan
Portfolio result from seeking capital appreciation by selling securities
whenever sales are deemed advisable without regard to the length of time
the securities may have been held, it may be expected that the aggregate
brokerage commissions paid by those Portfolios to brokers (including
Neuberger & Berman where it acts in that capacity) may be greater than if
securities were selected solely on a long-term basis.
Portfolio securities are, from time to time, loaned by a
Portfolio to Neuberger & Berman in accordance with the terms and
conditions of an order issued by the Securities and Exchange Commission.
The order exempts such transactions from provisions of the 1940 Act that
would otherwise prohibit such transactions, subject to certain conditions.
Among the conditions of the order, securities loans made by a Portfolio to
Neuberger & Berman must be fully secured by cash collateral. Under the
order, the portion of the income on the cash collateral which may be
shared with Neuberger & Berman is determined with reference to concurrent
arrangements between Neuberger & Berman and non-affiliated lenders with
which it engages in similar transactions. In addition, where Neuberger &
Berman borrows securities from a Portfolio in order to re-lend them to
others, Neuberger & Berman is required to pay that Portfolio, on a
quarterly basis, certain "excess earnings" that Neuberger & Berman
otherwise has derived from the relending of the borrowed securities. When
Neuberger & Berman desires to borrow a security that a Portfolio has
indicated a willingness to lend, Neuberger & Berman must borrow such
security from 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 that Portfolio. If a
Portfolio's expenses exceed its income in any securities loan transaction
with Neuberger & Berman, Neuberger & Berman must reimburse that Portfolio
for such loss.
During the fiscal years ended August 31, 1995 and 1994,
the Portfolios earned the following amounts of interest income from the
collateralization of securities loans, from which Neuberger & Berman was
paid the indicated amounts:
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<PAGE>
<TABLE>
<CAPTION>
1994 1995
---- ----
<C> <C>
Payment to Payment to
<S> <C> Neuberger & <C> Neuberger &
Portfolio Interest Berman Interest Berman
Neuberger & Berman $147,103 $119,620 $1,430,672 $1,252,190
Guardian Portfolio
Neuberger & Berman Focus 38,627 33,225 327,447 291,207
Portfolio
Neuberger & Berman 16,085 13,880 52,410 48,736
Partners Portfolio
Neuberger & Berman 0 0 0 0
Genesis Portfolio
Neuberger & Berman 0 0 507,239 270,594
Manhattan Portfolio
</TABLE>
During the period August 3 to August 31, 1993, Neuberger
& Berman Guardian Portfolio earned interest income of $3,164 from the
collateralization of securities loans, from which Neuberger & Berman was
paid $2,881. During the same period, none of the other Portfolios earned
interest income from the collateralization of securities loans.
During the fiscal year ended August 31, 1995, and the
period March 16, 1994 (commencement of operations) to August 31, 1994,
Neuberger & Berman Socially Responsive Portfolio did not earn any interest
income from the collateralization of securities loans.
Each Portfolio may also lend securities to unaffiliated
entities, including brokers or dealers, banks and other recognized
institutional borrowers of securities, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the securities
loaned, is continuously maintained by the borrower with the Portfolio.
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. The Portfolio may invest the cash collateral and earn income,
or it may receive an agreed upon amount of interest income from a borrower
who has delivered equivalent collateral. These loans are subject to
termination at the option of the Portfolio or the borrower. Each
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
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<PAGE>
broker. The Portfolio does not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
A committee of Independent Trustees from time to time
reviews, among other things, information relating to securities loans by
each Portfolio.
In effecting securities transactions, each Portfolio gen-
erally seeks to obtain the best price and execution of orders. Commission
rates, being a component of price, are considered along with other
relevant factors. Each Portfolio plans to continue to use Neuberger &
Berman as its principal broker where, in the judgment of N&B Management
(the Portfolio's investment manager and an affiliate of Neuberger &
Berman), that firm is able to obtain a price and execution at least as
favorable as other qualified brokers. To the Portfolios' knowledge,
however, no affiliate of any Portfolio receives give-ups or reciprocal
business in connection with their securities transactions.
The use of Neuberger & Berman as broker for each
Portfolio is subject to the requirements of Section 11(a) of the
Securities Exchange Act of 1934. Section 11(a) prohibits members of
national securities exchanges from retaining compensation for executing
exchange transactions for accounts which they or their affiliates manage,
except where they have the authorization of the persons authorized to
transact business for the account and comply with certain annual reporting
requirements. The Trustees have expressly authorized Neuberger & Berman
to retain such compensation, and Neuberger & Berman complies with the
reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by a Portfolio to
Neuberger & Berman in connection with a purchase or sale of securities on
a securities exchange may not exceed the usual and customary broker's
commission. Accordingly, it is each Portfolio's policy that the
commissions paid to Neuberger & Berman must, in N&B Management's judgment,
be (1) at least as favorable as those charged by other brokers having
comparable execution capability and (2) at least as favorable as
commissions contemporaneously charged by Neuberger & Berman on comparable
transactions for its most favored unaffiliated customers, except for
accounts for which Neuberger & Berman acts as a clearing broker for
another brokerage firm and customers of Neuberger & Berman considered by a
majority of the Independent Trustees not to be comparable to the
Portfolio. The Portfolios do not deem it practicable and in their best
interests to solicit competitive bids for commissions on each transaction
effected by Neuberger & Berman. However, consideration regularly is given
to information concerning the prevailing level of commissions charged by
other brokers on comparable transactions during comparable periods of
time. The 1940 Act generally prohibits Neuberger & Berman from acting as
principal in the purchase or sale of securities for a Portfolio's account,
unless an appropriate exemption is available.
B-48
<PAGE>
A committee of Independent Trustees from time to time
reviews, among other things, information relating to the commissions
charged by Neuberger & Berman to the Portfolios and to its other customers
and information concerning the prevailing level of commissions charged by
other brokers having comparable execution capability. In addition, the
procedures pursuant to which Neuberger & Berman effects brokerage
transactions for the Portfolios must be reviewed and approved no less
often than annually by a majority of the Independent Trustees.
Each Portfolio expects that it will continue to execute a
portion of its transactions through brokers other than Neuberger & Berman.
In selecting those brokers, N&B Management considers the quality and
reliability of brokerage services, including execution capability,
performance, and financial responsibility, and may consider research and
other investment information provided by, and sale of fund shares effected
through, those brokers.
To ensure that accounts of all investment clients,
including a Portfolio, are treated fairly in the event that transaction
instructions for more than one investment account regarding the same
security are received by Neuberger & Berman at or about the same time,
Neuberger & Berman may combine transaction 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 transaction order
actually placed by the account bears to the aggregate size of transaction
orders simultaneously made by the other accounts, subject to de minimis
exceptions, with all participating accounts paying or receiving the same
price.
A committee comprised of officers of N&B Management and
partners of Neuberger & Berman who are portfolio managers of some of the
Portfolios and Other N&B Funds (collectively, "N&B Funds") and some of
Neuberger & Berman's managed accounts ("Managed Accounts") evaluates semi-
annually the nature and quality of the brokerage and research services
provided by other brokers. Based on this evaluation, the committee estab-
lishes a list and projected rankings of preferred brokers for use in
determining the relative amounts of commissions to be allocated to those
brokers. Ordinarily, the brokers on the list effect a large portion of
the brokerage transactions for the N&B Funds and the Managed Accounts that
are not effected by Neuberger & Berman. However, in any semi-annual
period, brokers not on the list may be used, and the relative amounts of
brokerage commissions paid to the brokers on the list may vary
substantially from the projected rankings. These variations reflect the
following factors, among others: (1) brokers not on the list or ranking
below other brokers on the list may be selected for particular transac-
tions 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 or research
capabilities of particular brokers, or in the execution or research needs
B-49
<PAGE>
of the N&B Funds and/or the Managed Accounts; and (3) the aggregate amount
of brokerage commissions generated by transactions for the N&B Funds and
the Managed Accounts may change substantially from one semi-annual period
to the next.
The commissions charged by a broker other than
Neuberger & Berman may be higher than the amount another firm might charge
if N&B Management determines in good faith that the amount of those
commissions is reasonable in relation to the value of the brokerage and
research services provided by the broker. N&B Management believes that
those research services benefit the Portfolios by supplementing the
research otherwise available to N&B Management. That research may be used
by N&B Management in servicing the Managed Accounts. On the other hand,
research received by N&B Management from brokers effecting portfolio
transactions on behalf of the Other N&B Funds and by Neuberger & Berman
from brokers effecting portfolio transactions on behalf of the Managed
Accounts may be used for the Portfolios' benefit.
Mark R. Goldstein, Judith M. Vale, Lawrence Marx III and
Kent C. Simons, Michael M. Kassen and Robert I. Gendelman, and Janet
Prindle, each of whom is a Vice President of N&B Management (except for
Mr. Gendelman, who is an Assistant Vice President) and a general partner
of Neuberger & Berman (except for Ms. Vale and Mr. Gendelman), are the
persons primarily responsible for making decisions as to specific action
to be taken with respect to the investment portfolios of Neuberger &
Berman Manhattan, Neuberger & Berman Genesis, Neuberger & Berman Focus and
Neuberger & Berman Guardian, Neuberger & Berman Partners, and Neuberger &
Berman Socially Responsive Portfolios, respectively. Each of them has
full authority to take action with respect to portfolio transactions and
may or may not consult with other personnel of N&B Management prior to
taking such action. If Mr. Goldstein is unavailable to perform his
responsibilities, Susan Switzer, who is an Assistant Vice President of N&B
Management, will assume responsibility for the portfolio of Neuberger &
Berman Manhattan Portfolio. If Ms. Prindle is unavailable to perform her
responsibilities, Farha-Joyce Haboucha, who is a Vice President of N&B
Management, will assume responsibility for the portfolio of Neuberger &
Berman Socially Responsive Portfolio.
Item 18. Capital Stock and Other Securities.
--------------------------------------------
Each investor in a Portfolio is entitled to a vote in
proportion to the amount of its investment therein. Investors in the
Portfolios will all vote together in certain circumstances (e.g., election
of the Trustees and ratification of the selection of auditors, as provided
by the 1940 Act and the rules thereunder). One or more Portfolios could
control the outcome of these votes. Investors do not have cumulative vot-
ing rights, and investors holding more than 50% of the aggregate
beneficial interests in the Trust or in a Portfolio, as the case may be,
may control the outcome of votes. The Trust is not required and has no
current intention to hold annual meetings of investors, but the Trust will
hold special meetings of investors when (1) a majority of the Trustees
B-50
<PAGE>
determines to do so or (2) investors holding at least 10% of the interests
in the Trust (or a Portfolio) request in writing a meeting of investors in
the Trust (or Portfolio).
The Trust, with respect to a Portfolio, may enter into a
merger or consolidation or sell all or substantially all of its assets, if
approved by a 1940 Act majority vote. A Portfolio may be terminated
(1) upon liquidation and distribution of its assets, if approved by the
vote of at least two-thirds of its investors, or (2) by the Trustees on
written notice to the Portfolio's investors.
The Trust is organized as a trust under the laws of the
State of New York. Investors in a Portfolio will be held personally
liable for its obligations and liabilities, subject, however, to
indemnification by the Trust in the event that there is imposed upon an
investor a greater portion of the liabilities and obligations than its
proportionate beneficial interest. The Declaration of Trust also provides
that the Trust shall maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the protection of the
Portfolios, investors, Trustees, officers, employees, and agents covering
possible tort and other liabilities. Thus, the risk of an investor
incurring financial loss on account of such liability is limited to
circumstances in which the Portfolio had inadequate insurance and was
unable to meet its obligations out of its assets.
The Declaration of Trust further provides that
obligations of a Portfolio are not binding upon the Trustees individually
but only upon the property of the Portfolio and that the Trustees will not
be liable for any action or failure to act; however, nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
Upon liquidation or dissolution of any Portfolio, the
investors therein would be entitled to share pro rata in its net assets
available for distribution to investors.
Item 19. Purchase, Redemption and Pricing of Securities.
--------------------------------------------------------
Beneficial interests in the Portfolios are issued solely
in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. See Items
4, 7, and 8 in Part A.
Item 20. Tax Status.
--------------------
The Portfolios (except Neuberger & Berman Socially
Responsive Portfolio) have received a ruling from the Internal Revenue
Service ("Service") to the effect that, among other things, each such
B-51
<PAGE>
Portfolio will be treated as a separate partnership for federal income tax
purposes and will not be a "publicly traded partnership." Although this
ruling may not be relied on as precedent by Neuberger & Berman Socially
Responsive Portfolio, N&B Management believes the reasoning thereof and,
hence, this conclusion apply to that Portfolio as well. As a result, no
Portfolio is subject to federal income tax; instead, each investor in a
Portfolio is required to take into account in determining its federal
income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any
cash distributions from the Portfolio. Each Portfolio also is not subject
to Delaware or New York income or franchise tax.
Because each investor in a Portfolio that intends to
qualify as a RIC for federal income tax purposes ("RIC investor") is
deemed to own a proportionate share of the Portfolio's assets and income
for purposes of determining whether the investor satisfies the require-
ments to so qualify, each Portfolio intends to continue to conduct its
operations so that its RIC investors will be able to satisfy or continue
to satisfy such requirements.
Distributions to an investor from a Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result
in the investor'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 investor'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 investor's entire interest in
the Portfolio and includes a disproportionate share of any unrealized
receivables held by the Portfolio, (3) loss will be recognized if a
liquidation distribution consists solely of cash and/or unrealized
receivables, and (4) gain or loss may be recognized on a distribution to
an investor that contributed property to a Portfolio. An investor's basis
for its interest in a Portfolio generally equals the amount of cash and
the basis of any property it invests in the Portfolio, increased by the
investor's share of the Portfolio's net income and gains and decreased by
(a) the amount of cash and the basis of any property the Portfolio
distributes to the investor and (b) the investor's share of the Port-
folio's losses.
Dividends and interest received by a Portfolio may be
subject to income, withholding, or other taxes imposed by foreign
countries and U.S. possessions that would reduce the yield on its
securities. Tax treaties between certain countries and the United States
may reduce or eliminate these foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments
by foreign investors.
A Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation 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
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<PAGE>
circumstances, if a Portfolio holds stock of a PFIC, an investor
(indirectly through its interest in the Portfolio) will be subject to
federal income tax on a portion of any "excess distribution" received on
the stock or of any gain on disposition of the stock (collectively "PFIC
income"), plus interest thereon, even if, in the case of a RIC investor,
the RIC investor distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the RIC
investor's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its
shareholders.
If a Portfolio invests in a PFIC and elects to treat the
PFIC as a "qualified electing fund," then in lieu of an investor's
incurring the foregoing tax and interest obligation, each investor would
be required to include in income each year its pro rata share of the
Portfolio's pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which, in the case of a
RIC investor, most likely would have to be distributed to satisfy the
distribution requirement to qualify for treatment as a RIC ("Distribution
Requirement") and to avoid imposition of an excise tax on certain
undistributed income and gain of RICs ("Excise Tax") -- even if those
earnings and gain were not received by the Portfolio. In most instances
it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs would be
entitled to elect to mark to market their stock in certain PFICs. Marking
to market, in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of
each such PFIC's stock over the adjusted basis in that stock (including
mark to market gain for each prior year for which an election was in
effect).
The Portfolios' use of hedging strategies, such as writ-
ing (selling) and purchasing options and futures contracts and entering
into forward contracts, involves complex rules that will determine for
income tax purposes the character and timing of recognition of the gains
and losses the Portfolios realize in connection therewith. For each Port-
folio, income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in
Hedging Instruments derived by the Portfolio with respect to its business
of investing in securities or foreign currencies, will qualify as
permissible income for the Portfolio's RIC investors under a requirement
applicable to RICs regarding permissible sources of income. However, for
certain of the Portfolio's RIC investors, income from the disposition by a
Portfolio of Hedging Instruments (other than those on foreign currencies)
will be subject to a limit on income that may be derived by a RIC from
certain short-term investments ("Short-Short Limitation") if they are held
for less than three months. Income from the disposition of foreign
currencies, and Hedging Instruments on foreign currencies, that are not
directly related to a Portfolio's principal business of investing in
B-53
<PAGE>
securities (or options and futures with respect thereto) also will be
subject to the Short-Short Limitation if they are held for less than three
months.
If a Portfolio satisfies certain requirements, any in-
crease in value of a position that is part of a "designated hedge" will be
offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of the hedge for purposes of
determining whether the Portfolio's RIC investors satisfy the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. Each
Portfolio will consider whether it should seek to qualify for this
treatment for its hedging transactions. To the extent a Portfolio does
not so qualify, it may be forced to defer the closing out of certain
Hedging Instruments beyond the time when it otherwise would be
advantageous to do so, in order for its RIC investors to qualify or
continue to qualify as RICs.
Exchange-traded futures contracts and listed options
thereon ("Section 1256 contracts") are required to be "marked to market"
(that is, treated as having been sold at market value) at the end of a
Portfolio's taxable year. Sixty percent of any 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, and the remainder is treated as short-term capital
gain or loss.
Neuberger & Berman Partners Portfolio and Neuberger &
Berman Socially Responsive Portfolio each may acquire zero coupon
securities or other securities issued with original issue discount
("OID"). As a holder of those securities, each Portfolio (and, through
it, its investors) must take into account the OID that accrues on the
securities during the taxable year, even if it receives no corresponding
payment on the securities during the year. Because each RIC investor in a
Portfolio 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 to avoid imposition of
the Excise Tax, a RIC investor may be required in a particular year to
distribute as a dividend an amount that is greater than its proportionate
share of the total amount of cash the Portfolio actually receives. Those
distributions will be made from the RIC investor's (or its proportionate
share of the Portfolio's) cash assets or, if necessary, from the proceeds
of sales of the Portfolio's securities. A Portfolio may realize capital
gains or losses from those sales, which would increase or decrease a RIC
investor's investment company taxable income and/or net capital gain. In
addition, any such gains may be realized on the disposition of securities
held for less than three months. Because of the Short-Short Limitation,
any such gains would reduce a Portfolio's ability to sell other
securities, or certain Hedging Instruments, held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
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Item 21. Underwriters.
---------------------
N&B Management, 605 Third Avenue, New York, NY 10158-
0180, a New York corporation that is the Portfolios' investment manager,
serves as the Trust's placement agent. N&B Management receives no
compensation for such placement agent services.
Item 22. Calculation of Performance Data.
-----------------------------------------
Not applicable.
Item 23. Financial Statements.
------------------------------
Audited financial statements for the Portfolios for the
fiscal year ended August 31, 1995, and the reports of Ernst & Young LLP,
independent auditors, with respect to such financial statements of
Neuberger & Berman Focus Portfolio, Neuberger & Berman Genesis Portfolio,
Neuberger & Berman Guardian Portfolio, Neuberger & Berman Partners
Portfolio and the reports of Coopers & Lybrand L.L.P., independent
accountants, with respect to such financial statements of Neuberger &
Berman Manhattan Portfolio and Neuberger & Berman Socially Responsive
Portfolio are incorporated by reference to the Annual Report to
Shareholders of Neuberger & Berman Equity Funds for the period ended
August 31, 1995, File Nos. 2-11357 and 811-582, EDGAR Accession No.
0000898432-95-000353.
B-55
<PAGE>
Appendix A
RATINGS OF SECURITIES
S&P corporate bond ratings:
AAA - Bonds rated AAA have the highest rating assigned by
S&P. Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only
in small degree.
A - Bonds rated A have a strong capacity to pay interest
and repay principal, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in higher
rated categories.
BB, B, CCC, CC, C - Bonds rated BB, B, CCC, CC, and C are
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CI - The rating CI is reserved for income bonds on which
no interest is being paid.
D - Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus (-) - The ratings above may be modified
by the addition of a plus or minus sign to show relative standing within
the major categories.
Moody's corporate bond ratings:
Aaa - Bonds rated Aaa are judged to be of the best qual-
ity. 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
B-56
<PAGE>
visualized are most unlikely to impair the fundamentally strong position
of the issuer.
Aa - Bonds rated Aa are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what are
generally known as "high grade bonds." They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa-rated
securities, fluctuation of protective elements may be of greater
amplitude, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa-rated securities.
A - Bonds rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present that suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. These bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - Bonds rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - Bonds rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
Ca - Bonds rated Ca represent obligations that are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C - Bonds rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Modifiers - Moody's may apply numerical modifiers 1, 2,
and 3 in each generic rating classification described above. The modifier
1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
B-57
<PAGE>
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 (+).
Moody's commercial paper ratings
Issuers rated Prime-1 (or related supporting institu-
tions), 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.
B-58
<PAGE>
EQUITY MANAGERS TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
-------- ---------------------------------
(a) Financial Statements
Audited financial statements of the six series of Equity Managers
Trust, Neuberger & Berman Manhattan Portfolio, Neuberger & Berman
Genesis Portfolio, Neuberger & Berman Focus Portfolio, Neuberger &
Berman Guardian Portfolio, Neuberger & Berman Partners Portfolio, and
Neuberger & Berman Socially Responsive Portfolio, are incorporated
into Part B by reference to the Annual Report to Shareholders of
Neuberger & Berman Equity Funds for the period ended August 31, 1995,
File Nos. 2-11357 and 811-582, EDGAR Accession No. 0000898432-95-
000353.
(b) Exhibits:
Exhibit
Number Description
------- ---------------
(1) (a) Declaration of Trust of Equity Managers
Trust. Filed herewith.
(b) Schedule A - Current Series of Equity
Managers Trust. Filed herewith.
(2) By-laws of Equity Managers Trust. Filed
herewith.
(3) Voting Trust Agreement. None.
(4) Specimen Share Certificate. None.
(5) (a) (i) Management Agreement Between Equity
Managers Trust and Neuberger & Berman
Management Incorporated.
Incorporated by Reference to Post-
Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-
11357 and 811-582, EDGAR Accession
No. 0000898432-95-000314.
<PAGE>
(ii) Schedule A - Series of Equity
Managers Trust Currently Subject to
the Management Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-
11357 and 811-582, EDGAR Accession
No. 0000898432-95-000314.
(iii) Schedule B - Schedule of
Compensation Under the
Management Agreement.
Incorporated by
Reference to Post-
Effective Amendment No.
70 to Registration
Statement of Neuberger &
Berman Equity Funds,
File Nos. 2-11357 and
811-582, EDGAR Accession
No. 0000898432-95-
000314.
(b) (i) Sub-Advisory Agreement Between
Neuberger & Berman Management
Incorporated and Neuberger & Berman
With Respect to Equity Managers
Trust. Incorporated by Reference to
Post-Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-
11357 and 811-582, EDGAR Accession
No. 0000898432-95-000314.
(ii) Schedule A - Series of Equity
Managers Trust Currently Subject to
the Sub-Advisory Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 70 to
Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-
11357 and 811-582, EDGAR Accession
No. 0000898432-95-000314.
(6) Distribution Agreement. None.
(7) Bonus, Profit Sharing or Pension Plans. None.
C-2
<PAGE>
(8) (a) Custodian Contract Between Equity Managers
Trust and State Street Bank and Trust
Company. Filed herewith.
(b) Schedule A - Approved Foreign Banking
Institutions and Securities Depositories
Under the Custodian Contract. Filed
herewith.
(9) Transfer Agency and Service Agreement Between
Equity Managers Trust and State Street Bank and
Trust Company. Incorporated by Reference to
Amendment No. 4 to Registrant's Registration
Statement, File No. 811-7910.
(10) Opinion and Consent of Kirkpatrick & Lockhart on
Securities Matters. None.
(11) Opinions, Appraisals, Rulings and Consents:
Consent of Independent Auditors. None.
(12) Financial Statements Omitted from Prospectus.
None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) Plan Pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance
Quotations. None.
(17) Financial Data Schedule. Filed herewith.
(18) Plan Pursuant to Rule 18f-3. None.
Item 25. Persons Controlled By or Under Common Control with Registrant.
-------- --------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
-------- --------------------------------
The following information is given as of December 27, 1995.
C-3
<PAGE>
Number of
Title of Class Record Holders
-------------- --------------
Neuberger & Berman Socially Responsive Portfolio 4
Neuberger & Berman Manhattan Portfolio 4
Neuberger & Berman Genesis Portfolio 4
Neuberger & Berman Focus Portfolio 4
Neuberger & Berman Guardian Portfolio 4
Neuberger & Berman Partners Portfolio 4
Item 27. Indemnification.
-------- ----------------
A New York trust may provide in its governing instrument for
indemnification of its officers and trustees from and against all claims
and demands whatsoever. Article V, Section 5.4 of the Declaration of
Trust provides that the Registrant shall indemnify, to the fullest extent
permitted by law (including the Investment Company Act of 1940, as amended
(the "1940 Act")), each trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Registrant
(including any individual, corporation, partnership, trust, association,
joint venture or other entities, whether or not legal entities, and
governments and agencies and political subdivision thereof ("Person"), who
serves at the Registrant's request as a director, officer or trustee of
another organization in which the Registrant has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by such
Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which such Person may
be involved or with which such Person may be threatened, while in office
or thereafter, by reason of such Person being or having been such a
trustee, officer, employee, agent or independent contractor, except with
respect to any matter as to which such Person shall have been adjudicated
to have acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of such Person's duties, such liabilities and expenses
being liabilities only of the series out of which such claim for
indemnification arises; provided, however, that as to any matter disposed
of by a compromise payment by such Person, pursuant to a consent decree or
otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless there has been a determination that such
Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
Person's office: (i) by the court or other body approving the settlement
or other disposition; or (ii) based upon a review of readily available
facts (as opposed to a full trial-type inquiry), by written opinion from
independent legal counsel approved by the trustees; or (iii) by a majority
of the trustees who are neither "interested persons" (as defined in the
1940 Act) of the Registrant nor parties to the matter, based upon a review
C-4
<PAGE>
of readily available facts (as opposed to a full trial-type inquiry). The
rights accruing to any Person under these provisions shall not exclude any
other right to which such Person may be lawfully entitled; provided that
no Person may satisfy any right of indemnity or reimbursement granted in
the Registrant's Declaration of Trust or to which such Person may be
otherwise entitled except out of the Trust Property (as defined in the
Declaration of Trust). The rights of indemnification provided herein may
be insured against by policies maintained by the Registrant. The trustees
may make advance payments in connection with this indemnification,
provided that the indemnified Person shall have given a written
undertaking to reimburse the Registrant in the event it is subsequently
determined that such Person is not entitled to such indemnification, and
provided further that either: (i) such Person shall have provided
appropriate security for such undertaking; or (ii) the Registrant is
insured against losses arising out of any such advance payments; or
(iii) either a majority of the trustees who are neither "interested
persons" (as defined in the 1940 Act) of the Registrant nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to
a trial-type inquiry or full investigation), that there is reason to
believe that such Person will not be disqualified from indemnification.
Pursuant to Article V Section 5.1 of the Registrant's Declaration of
Trust, each holder of an interest in a series of the Registrant shall be
jointly and severally liable with every other holder of an interest in
that series (with rights of contribution inter se in proportion to their
respective interests in the series) for the liabilities and obligations of
that series (and of no other series) in the event that the Registrant
fails to satisfy such liabilities and obligations from the assets of that
series; provided, however, that, to the extent assets of that series are
available, the Registrant shall indemnify and hold each holder harmless
from and against any claim or liability to which such holder may become
subject by reason of being or having been a holder of an interest in that
series to the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other holders of interests in that series, is
greater than such holder's interest (proportionate share), and shall
reimburse such holder for all legal and other expenses reasonably incurred
by such holder in connection with any such claim or liability. The rights
accruing to a holder under the Registrant's Declaration of Trust shall not
exclude any other right to which such holder may be lawfully entitled, nor
shall anything contained herein restrict the right of the Registrant to
indemnify or reimburse a holder in any appropriate situation even though
not specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each holder of an interest
in a series shall remain jointly and severally liable to the creditors of
that series as a legal matter. The liabilities of a particular series and
the right to indemnification granted hereunder to holders of interests in
such series shall not be enforceable against any other series or holders
of interests in any other series.
C-5
<PAGE>
Section 9 of the Management Agreement between the Registrant and
Neuberger & Berman Management Incorporated ("N&B Management") provides
that neither N&B Management nor any director, officer or employee of N&B
Management performing services for the series of the Registrant at the
direction or request of N&B Management in connection with N&B Management's
discharge of its obligations under the agreement 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 agreement relates; provided,
that nothing in the agreement shall be construed (i) to protect N&B
Management against any liability to the Registrant or any series thereof
or its holders to which N&B Management would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of N&B Management's duties, or by reason of N&B Management's
reckless disregard of its obligations and duties under the agreement, or
(ii) to protect any director, officer or employee of N&B Management who is
or was a trustee or officer of the Registrant against any liability to the
Registrant or any series thereof or its interest holders to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such person's office with the Registrant.
Section 1 of the Sub-Advisory Agreement between the Registrant and
Neuberger & Berman ("Sub-Adviser") 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
agreement, the Sub-Adviser will not be subject to liability for any act or
omission or any loss suffered by any series of the Registrant or its
security holders in connection with the matters to which the agreement
relates.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "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 1933 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.
C-6
<PAGE>
Item 28. Business and Other Connections of Investment Manager and
Sub-Adviser.
-------- --------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of N&B Management and each partner of the Sub-Adviser
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.
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Claudia A. Brandon Secretary, Neuberger & Berman Advisers
Vice President, Management Trust (Delaware business trust);
N&B Management Secretary, Advisers Managers Trust; Secretary,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); Secretary,
Neuberger & Berman Income Funds; Secretary,
Neuberger & Berman Income Trust; Secretary,
Neuberger & Berman Equity Funds; Secretary,
Neuberger & Berman Equity Trust; Secretary,
Income Managers Trust; Secretary, Equity
Managers Trust; Secretary, Global Managers
Trust; Secretary, Neuberger & Berman Equity
Assets.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman
Assistant Vice Advisers Management Trust (Delaware business
President, trust); Assistant Secretary, Advisers Managers
N&B Management Trust; Assistant Secretary, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); Assistant Secretary,
Neuberger & Berman Income Funds; Assistant
Secretary, Neuberger & Berman Income Trust;
Assistant Secretary, Neuberger & Berman Equity
Funds; Assistant Secretary, Neuberger & Berman
Equity Trust; Assistant Secretary, Income
Managers Trust; Assistant Secretary, Equity
Managers Trust; Assistant Secretary, Global
Managers Trust; Assistant Secretary, Neuberger
& Berman Equity Assets.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global
Assistant Vice Asset Management L.P. (joint venture of
President, Neuberger & Berman and Banque Nationale de
N&B Management Paris) (2); Assistant Portfolio Manager,
Vontobel (Swiss bank) (3).
C-7
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Stanley Egener Chairman of the Board and Trustee, Neuberger &
President and Berman Advisers Management Trust (Delaware
Director, business trust); Chairman of the Board and
N&B Management; Trustee, Advisers Managers Trust; Chairman of
General Partner, the Board and Trustee, Neuberger & Berman
Neuberger & Berman Advisers Management Trust (Massachusetts
business trust) (1); Chairman of the Board and
Trustee, Neuberger & Berman Income Funds;
Chairman of the Board and Trustee, Neuberger &
Berman Income Trust; Chairman of the Board and
Trustee, Neuberger & Berman Equity Funds;
Chairman of the Board and Trustee, Neuberger &
Berman Equity Trust; Chairman of the Board and
Trustee, Income Managers Trust; Chairman of the
Board and Trustee, Equity Managers Trust;
Chairman of the Board and Trustee, Global
Managers Trust; Chairman of the Board and
Trustee, Neuberger & Berman Equity Assets.
Robert I. Gendelman Senior Portfolio Manager, Harpel Advisors (4).
Assistant Vice
President,
N&B Management
Theodore P. Giuliano Executive Vice President and Trustee,
Vice President, N&B Neuberger & Berman Income Funds (6); Executive
Management (5); Vice President and Trustee, Neuberger & Berman
General Partner, Income Trust (6); Executive Vice President and
Neuberger & Berman Trustee, Income Managers Trust (6).
Theresa A. Havell President and Trustee, Neuberger & Berman
Vice President and Income Funds; President and Trustee,
Director, N&B Neuberger & Berman Income Trust; President and
Management; General Trustee, Income Managers Trust
Partner, Neuberger &
Berman
C-8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
C. Carl Randolph Assistant Secretary, Neuberger & Berman
General Partner, Advisers Management Trust (Delaware business
Neuberger & Berman trust); Assistant Secretary, Advisers Managers
Trust; Assistant Secretary, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); 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.
Felix Rovelli Senior Vice President-Senior Equity Portfolio
Vice President, N&B Manager, BNP-N&B Global Asset Management L.P.
Management (joint venture of Neuberger & Berman and Banque
Nationale de Paris) (2); Portfolio Manager,
Vontobel (Swiss bank) (7).
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, N&B Management Trust (Delaware business trust);
Management Treasurer, Advisers Managers Trust; Treasurer,
Neuberger & Berman Advisers Management Trust
(Massachusetts business trust) (1); 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.
C-9
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust);
N&B Management Vice President, Advisers Managers Trust; Vice
President, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust)
(1); 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.
Susan Switzer Portfolio Manager, Mitchell Hutchins Asset
Assistant Vice Management Inc., 1285 Avenue of the Americas,
President, New York, New York 10019 (8).
N&B Management
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President Management Trust (Delaware business trust);
and Vice President, Advisers Managers Trust; Vice
Treasurer, N&B President, Neuberger & Berman Advisers
Management Management Trust (Massachusetts business trust)
(1); 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.
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Advisers Management Trust (Delaware business
Management; trust); President and Trustee, Advisers
General Partner, Managers Trust; President and Trustee,
Neuberger & Neuberger & Berman Advisers Management Trust
Berman (Massachusetts business trust) (1); President
and Trustee, Neuberger & Berman Equity Funds;
President and Trustee, Neuberger & Berman
Equity Trust; President and Trustee, Equity
Managers Trust; President, Global Managers
Trust; President and Trustee, Neuberger &
Berman Equity Assets
C-10
<PAGE>
The principal address of N&B Management, Neuberger & Berman, BNP-N&B
Global Asset Management L.P. and of each of the investment companies named
above, is 605 Third Avenue, New York, New York 10158. Other addresses to
be provided by amendment.
------------------
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until May 1994.
(4) Until 1993.
(5) Until November 4, 1994.
(6) Until June 22, 1994.
(7) Until April 1994.
(8) Until 1994.
Item 29. Principal Underwriters.
-------- -----------------------
Not applicable.
Item 30. Location of Accounts and Records.
-------- ---------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act 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 Declaration of Trust and By-laws, minutes of
meetings of the Registrant's Trustees and investors and the Registrant's
policies and contracts, which are maintained at the offices of the
Registrant, 605 Third Avenue, New York, New York 10158.
Item 31. Management Services.
-------- --------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings.
-------- -------------
None.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
as amended, the Registrant has duly caused this Amendment No. 5 to its
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the
State of New York on the 20th day of December, 1995.
EQUITY MANAGERS TRUST
By /s/ Stanley Egener
-----------------------------
Stanley Egener
Chairman of the Board, Chief
Executive Officer, and Trustee
C-12
<PAGE>
EQUITY MANAGERS TRUST
REGISTRATION STATEMENT ON FORM N-1A
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Description Sequentially
Number Numbered Page
-------- --------------------------------------------- -------------
(1) (a) Declaration of Trust of Equity Managers --
Trust. Filed herewith.
(b) Schedule A - Current Series of Equity --
Managers Trust. Filed herewith.
(2) By-laws of Equity Managers Trust. Filed --
herewith.
(3) Voting Trust Agreement. None. N.A.
(4) Specimen Share Certificate. None. N.A.
(5) (a) (i) Management Agreement between N.A.
Equity Managers Trust and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective
Amendment No. 70 to
Registration Statement of
Neuberger & Berman Equity
Funds, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000314.
(ii) Schedule A - Series of Equity N.A.
Managers Trust Currently
Subject to the Management
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 70 to
Registration Statement of
Neuberger & Berman Equity
Funds, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000314.
<PAGE>
(iii) Schedule B - Schedule of N.A.
Compensation Under the
Management Agreement.
Incorporated by Reference to
Post-Effective Amendment No.
70 to Registration Statement
of Neuberger & Berman Equity
Funds, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000314.
(b) (i) Sub-Advisory Agreement Between N.A.
Neuberger & Berman Management
Incorporated and Neuberger &
Berman with Respect to Equity
Managers Trust. Incorporated
by Reference to Post-Effective
Amendment No. 70 to
Registration Statement of
Neuberger & Berman Equity
Funds, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000314.
(ii) Schedule A - Series of Equity N.A.
Managers Trust Currently
Subject to the Sub-Advisory
Agreement. Incorporated by
Reference to Post-Effective
Amendment No. 70 to
Registration Statement of
Neuberger & Berman Equity
Funds, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000314.
(6) Distribution Agreement. None. N.A.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Equity Managers ____
Trust and State Street Bank and Trust
Company. Filed herewith.
(b) Schedule A - Approved Foreign Banking ____
Institutions and Securities Depositories
Under the Custodian Contract. Filed
herewith.
<PAGE>
(9) Transfer Agency and Service Agreement Between N.A.
Equity Managers Trust and State Street Bank and
Trust Company. Incorporated by Reference to
Amendment No. 4 to Registrant's Registration
Statement, File No. 811-7910.
(10) Opinion and Consent of Kirkpatrick & Lockhart N.A.
on Securities Matters. None.
(11) Opinions, Appraisals, Rulings and Consents: N.A.
Consent of Independent Auditors. None.
(12) Financial Statements Omitted from Prospectus. N.A.
None.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance N.A.
Quotations. None.
(17) Financial Data Schedule. Filed herewith. --
(18) Plan Pursuant to Rule 18f-3. None. N.A.
</TABLE>
<PAGE>
<PAGE>
EQUITY MANAGERS TRUST
DECLARATION OF TRUST
Dated as of December 1, 1992
<PAGE>
DECLARATION OF TRUST
OF
EQUITY MANAGERS TRUST
This DECLARATION OF TRUST of Equity Managers Trust is
made as of the 1st day of December, 1992 by the parties signatory hereto,
as Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a master trust fund
under the law of the State of New York consisting of one or more subtrusts
or series for the investment and reinvestment of assets contributed
thereto; and
WHEREAS, it is proposed that the trust assets be composed
of money and other property contributed to the subtrusts of the trust fund
established hereby, such assets to be held and managed in trust for the
benefit of the holders of beneficial interests in such subtrusts;
NOW, THEREFORE, the Trustees hereby declare that they
will hold in trust all money and other property contributed to the master
trust fund established hereby and will manage and dispose of the same for
the benefit of such holders of beneficial interests and subject to the
provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the master trust fund
established hereby (the "Trust") shall be Equity Managers Trust and so far
as may be practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name (and
the word "Trust" wherever hereinafter used) shall refer to the Trustees as
Trustees, and not individually, and shall not refer to the officers,
employees, agents or independent contractors of the Trust or its holders
of beneficial interests.
1.2. Definitions. As used in this Declaration, the
following terms shall have the following meanings:
"Administrator" shall mean any party furnishing services
to the Trust pursuant to any administration contract described in Section
4.1 hereof.
"Book Capital Account" shall mean, for any Holder (as
hereinafter defined) at any time, the Book Capital Account of the Holder
<PAGE>
at such time with respect to the Holder's beneficial interest in the Trust
Property (as hereinafter defined) of any Series (as hereinafter defined),
determined in accordance with the method established by the Trustees
pursuant to Section 8.1 hereof. Each Holder shall have a separate Book
Capital Account for each such Series.
"Code" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time, as well as any non-superseded
provisions of the Internal Revenue Code of 1954, as amended (or any
corresponding provision or provisions of succeeding law).
"Commission" shall mean the United States Securities and
Exchange Commission.
"Declaration" shall mean this Declaration of Trust as
amended from time to time. References in this Declaration to
"Declaration", "hereof", "herein" and "hereunder" shall be deemed to refer
to this Declaration rather than the article or section in which any such
word appears.
"Fiscal Year" shall mean an annual period determined by
the Trustees which ends on December 31 of each year or on such other day
as is permitted or required by the Code.
"Holders" shall mean as of any particular time all
holders of record of beneficial interests in the Trust Property of any
Series.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company,
common trust fund, group trust or other investment arrangement, whether
organized within or without the United States of America, other than an
individual, S corporation, partnership or grantor trust beneficially owned
by any individual, S corporation or partnership.
"Interested Person" shall have the meaning given it in
the 1940 Act (as hereinafter defined).
"Interest(s)" shall mean the beneficial interest of a
Holder in the Trust Property of any Series, including all rights, powers
and privileges accorded to Holders by this Declaration, which interest may
be expressed as a percentage, determined by calculating for a particular
Series, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to
the total of all Holders' Book Capital Account balances. Reference
herein to a specified percentage of, or fraction of, Interests, means
Holders whose combined Book Capital Account balances represent such
specified percentage or fraction of the combined Book Capital Account
balances of all, or a specified group of, Holders.
"Investment Adviser" shall mean any party furnishing
services to one or more Series of the Trust pursuant to any investment
advisory contract described in Section 4.1 hereof.
<PAGE>
"Majority Interests Vote" shall mean the vote, at a
meeting of Holders (or Holders of one or more Series as the context may
require), of (A) 67% or more of the Interests present or represented at
such meeting, if Holders of more than 50% of all Interests are present or
represented by proxy, or (B) more than 50% of all Interests, whichever is
less.
"1940 Act" shall mean the United States Investment
Company Act of 1940, as amended from time to time, and the rules and
regulations thereunder.
"Person" shall mean and include individuals,
corporations, partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an
Interest of a Holder the result of which is to reduce the Book Capital
Account balance of that Holder to zero, and the term "redeem" shall mean
to effect a Redemption.
"Series" shall mean the subtrusts of the trust fund
established hereby as the same are established and designated pursuant to
Article VI hereof, each of which shall be a separate subtrust.
"Trust" shall mean the master trust fund established
hereby and shall include each Series hereof.
"Trust Property" shall mean as of any particular time any
and all assets or other property, real or personal, tangible or
intangible, which at such time is owned or held by or for the account of
the Trust or the Trustees, each component of which shall be allocated and
belong to a specific Series to the exclusion of all other Series.
"Trustees" shall mean each signatory to this Declaration,
so long as such signatory shall continue in office in accordance with the
terms hereof, and all other individuals who at the time in question have
been duly elected or appointed and have qualified as Trustees in
accordance with the provisions hereof and are then in office, and
reference in this Declaration to a Trustee or Trustees shall refer to such
individual or individuals in their capacity as Trustees hereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees
shall be fixed from time to time by action of the Trustees taken as
provided in Section 2.5 hereof; provided, however, that the number of
Trustees so fixed shall in no event be less than two. Any vacancy created
by an increase in the number of Trustees may be filled by the appointment
of an individual having the qualifications described in this Section 2.1
made by action of the Trustees taken as provided in Section 2.5 hereof.
<PAGE>
Any such appointment shall not become effective, however, until the
individual named in the written instrument of appointment shall have
accepted in writing such appointment and agreed in writing to be bound by
the terms of this Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office. Whenever a
vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Declaration. A Trustee shall
be an individual at least 21 years of age who is not under legal
disability.
2.2. Term and Election. Each Trustee named herein, or
elected or appointed prior to the first meeting of Holders, shall (except
in the event of resignations, retirements, removals or vacancies pursuant
to Section 2.3 or Section 2.4 hereof) hold office until a successor to
such Trustee has been elected at such meeting and has qualified to serve
as Trustee, as required under the 1940 Act. Subject to the provisions of
Section 16(a) of the 1940 Act and except as provided in Section 2.3
hereof, each Trustee shall hold office during the lifetime of the Trust
and until its termination as hereinafter provided.
2.3. Resignation. Removal and Retirement. Any Trustee
may resign his or her trust (without need for prior or subsequent
accounting) by an instrument in writing executed by such Trustee and
delivered or mailed to the Chairman, if any, the President or the
Secretary of the Trust and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the instrument.
Any Trustee may be removed with or without cause by the affirmative vote
of Holders of two-thirds of the Interests or (provided the aggregate
number of Trustees, after such removal and after giving effect to any
appointment made to fill the vacancy created by such removal, shall not be
less than the number required by Section 2.1 hereof) by the action of
two-thirds of the remaining Trustees. Any Trustee who has attained a
mandatory retirement age, if any, established pursuant to any written
policy adopted from time to time by a majority of the Trustees shall,
automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such
policy, effective as of the date determined in accordance with such
policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the
date of such Trustee's retirement. Upon the resignation, retirement or
removal of a Trustee, or a Trustee otherwise ceasing to be a Trustee, such
resigning, retired, removed or former Trustee shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held
in the name of such resigning, retired, removed or former Trustee. Upon
the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of
such deceased, removed, retired or resigning Trustee shall execute and
deliver on behalf of such deceased, removed, retired or resigning Trustee
such documents as the remaining Trustees shall require for the purpose set
forth in the preceding sentence.
<PAGE>
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, retirement or removal of a Trustee. No such vacancy shall
operate to annul this Declaration or to revoke any existing agency created
pursuant to the terms of this Declaration. In the case of a vacancy,
Holders of at least a majority of the Interests entitled to vote, acting
at any meeting of Holders held in accordance with Section 9.2 hereof, or,
to the extent permitted by the 1940 Act, a majority vote of the Trustees
continuing in office acting by written instrument or instruments, may fill
such vacancy, and any Trustee so elected by the Trustees or the Holders
shall hold office as provided in this Declaration. The Trustees may
appoint a new Trustee as provided above in anticipation of a vacancy
expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such
appointment shall become effective only when or after the expected vacancy
occurs. As soon as any Trustee has accepted his appointment in writing,
the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he or she
shall be deemed a Trustee hereunder. The power of appointment is subject
to Section 16(a) of the 1940 Act.
2.5. Meetings. Meetings of the Trustees shall be held
from time to time upon the call of the Chairman, if any, the President,
the Secretary, an Assistant Secretary or any two Trustees. Regular
meetings of the Trustees may be held without call or notice at a time and
place fixed by the By-Laws or by resolution of the Trustees. Notice of
any other meeting shall be mailed or otherwise given not less than 24
hours before the meeting but may be waived in writing by any Trustee
either before or after such meeting. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except in the
situation in which a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting was not lawfully called or convened. The Trustees may act with or
without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration,
any action of the Trustees may be taken at a meeting by vote of a majority
of the Trustees present (a quorum being present) or without a meeting by
written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority of the members thereof.
Unless provided otherwise in this Declaration, any action of any such
committee may be taken at a meeting by vote of a majority of the members
present (a quorum being present) or without a meeting by written consent
of a majority of the members.
Any notice, waiver or written consent hereunder may be
provided and delivered to the Trust or a Trustee by facsimile or other
similar electronic mechanism.
With respect to actions of the Trustees and any committee
of the Trustees, Trustees who are Interested Persons of the Trust or
otherwise interested in any action to be taken may be counted for quorum
<PAGE>
purposes under this Section 2.5 and shall be entitled to vote to the
extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a
meeting of the Trustees or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all
individuals participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
Any Trustee may, by power of attorney, delegate his or
her powers as Trustee for a period not exceeding six months at any one
time to any other Trustee or Trustees.
2.6. Officers; Chairman of the Board. The Trustees
shall, from time to time, elect a President, a Secretary and a Treasurer.
The Trustees may elect or appoint, from time to time, a Chairman of the
Board who shall preside at all meetings of the Trustees and carry out such
other duties as the Trustees may designate. The Trustees may elect or
appoint or authorize the President to appoint such other officers, agents
or independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to
time, amend or repeal By-Laws for the conduct of the business of the
Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the
Trust and each Series to the same extent as if the Trustees were the sole
owners of the Trust Property and such business in their own right, but
with such powers of delegation as may be permitted by this Declaration.
The Trustees may perform such acts as in their sole discretion they deem
proper for conducting the business of the Trust and any Series. The
enumeration of or failure to mention any specific power herein shall not
be construed as limiting such exclusive and absolute control. The powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have the power
with respect to the Trust and each Series to:
(a) conduct, operate and carry on the business of
an investment company;
(b) subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute or otherwise deal in or dispose of United States and
foreign currencies and related instruments including forward contracts,
<PAGE>
and securities, including common and preferred stock, warrants, bonds,
debentures, time notes and all other evidences of indebtedness, negotiable
or non-negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, options, futures contracts, and other
securities, including, without limitation, those issued, guaranteed or
sponsored by any state, territory or possession of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by the United States Government, any foreign
government, or any agency, instrumentality or political subdivision of the
United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of any kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust, nor
shall the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees
shall have the power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the
Trust or any Series, or in the name or nominee name of any other Person on
behalf of the Trust or any Series, on such terms as the Trustees may
determine.
The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each individual who may
hereafter become a Trustee upon his due election and qualification. Upon
the resignation, removal or death of a Trustee, such resigning, removed or
deceased Trustee shall automatically cease to have any right, title or
interest in any Trust Property, and the right, title and interest of such
resigning, removed or deceased Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in
their discretion, may, from time to time, without a vote of the Holders,
permit any Institutional Investor to purchase an Interest in a Series, or
increase such Interest, for such type of consideration, including cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best, and may in
such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
<PAGE>
businesses. Individuals, S corporations, partnerships and grantor trusts
that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. The Trustees, in their
discretion, may refuse to sell an Interest in a Series to any person
without any cause or reason therefor. A Holder which has redeemed its
Interest in a Series may not be permitted to purchase an Interest in such
Series until the later of 60 calendar days after the date of such
Redemption or the first day of the Fiscal Year next succeeding the Fiscal
Year during which such Redemption occurred.
3.5. Decreases and Redemptions of Interests. Subject to
Article VII hereof, the Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit a Holder to redeem its
Interest in a Series, or decrease such Interest, for either cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to
borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the Trust
Property, including the lending of portfolio securities, and to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have
power, consistent with their continuing exclusive and absolute control
over the Trust Property and over the business of the Trust or any Series,
to delegate from time to time to such of their number or to officers,
employees, agents or independent contractors of the Trust or any Series
the doing of such things and the execution of such instruments in either
the name of the Trust or any Series or the names of the Trustees or
otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have
power to collect all property due to the Trust or any Series; and to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust or any
Series or the Trust Property; to foreclose any security interest securing
any obligation, by virtue of which any property is owed to the Trust or
any Series; and to enter into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur
and pay any expenses from the Trust Property or the assets belonging to a
particular Series which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to
pay reasonable compensation from the Trust Property or the assets
belonging to a particular Series to themselves as Trustees. Permitted
expenses of the Trust or a particular Series include, but are not limited
to, interest charges, taxes, brokerage fees and commissions; expenses of
sales, increases, decreases or redemptions of Interests; certain insurance
premiums; applicable fees, interest charges and expenses of third parties,
including the Trust's investment advisers, managers, administrators,
placement agents, custodians transfer agents and fund accountants; fees of
pricing, interest, dividend, credit and other reporting services; costs of
<PAGE>
membership in trade associations; telecommunications expenses; costs of
forming the Trust and its Series and maintaining its existence; costs of
preparing and printing the registration statements and Holder reports of
the Trust and each Series and delivering them to Holders; expenses of
meetings of Holders; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust or any Series; costs of
Trustee meetings; Commission registration fees and related expenses; state
or foreign securities laws registration fees and related expenses; and for
such non-recurring items as may arise, including litigation to which the
Trust or a Series (or a Trustee or officer of the Trust acting as such) is
a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets
belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Holders thereto, for the
reimbursement to them of such expenses, disbursements, losses and
liabilities. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal and brokerage services, as they in
good faith may deem reasonable, and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust or any Series.
3.10. Miscellaneous Powers. The Trustees shall have
power to: (a) employ or contract with such Persons as the Trustees may
deem appropriate for the transaction of the business of the Trust or any
Series and terminate such employees or contractual relationships as they
consider appropriate; (b) enter into joint ventures, partnerships and any
other combinations or associations; (c) purchase, and pay for out of Trust
Property, insurance policies insuring the Investment Adviser,
Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust or any Series against all
claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or
not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing and other retirement,
incentive and benefit plans for the Trustees, officers, employees or
agents of the Trust or any Series; (e) prosecute, defend and settle
lawsuits in the name of the Trust or any Series and pay settlements and
judgments out of the Trust Property; (f) to the extent permitted by law,
indemnify any Person with whom the Trust or any Series has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the
Trust or any Series, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine
and change the Fiscal Year of the Trust or any Series and the method by
which its accounts shall be kept; and (i) adopt a seal for the Trust or
any Series, but the absence of such a seal shall not impair the validity
of any instrument executed on behalf of the Trust or such Series.
3.11. Further Powers. The Trustees shall have power to
conduct the business of the Trust or any Series and carry on its
operations in any and all of its branches and maintain offices, whether
<PAGE>
within or without the State of New York, in any and all states of the
United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies
or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such
instruments as they deem necessary, proper, appropriate or desirable in
order to promote the interests of the Trust or any Series although such
things are not herein specifically mentioned. Any determination as to
what is in the interests of the Trust or any Series which is made by the
Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration, the presumption shall be in favor of a grant of power
to the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements; Custodian
4.1. Investment Advisory and Other Arrangements. The
Trustees may in their discretion, from time to time, enter into investment
advisory and administration contracts or placement agent agreements
whereby the other party to such contract or agreement shall undertake to
furnish with respect to one or more particular Series such investment
advisory, administration, placement agent and/or other services as the
Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole
discretion determine, provided that any investment advisory contract shall
be subject to a Majority Interests Vote. Notwithstanding any provision of
this Declaration, the Trustees may authorize any Investment Adviser
(subject to such general or specific instructions as the Trustees may,
from time to time, adopt) to employ one or more subadvisers and to effect
purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any
such Investment Adviser (all without any further action by the Trustees).
Any such purchase, sale, loan or exchange shall be deemed to have been
authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 or Section 4.3 hereof or in the By-Laws of the
Trust may be entered into with any corporation, firm, trust or
association, although one or more of the Trustees or officers of the Trust
may be an officer, director, Trustee, shareholder or member of such other
party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor
shall any individual holding such relationship be liable merely by reason
of such relationship for any loss or expense to the Trust or any Series
under or by reason of any such contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the By-Laws. The same Person may be the
other party to one or more contracts entered into pursuant to Section 4.1
<PAGE>
or Section 4.3 hereof or the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.2 or in
the By-Laws.
4.3. Custodian. The Trustees shall at all times place
and maintain the securities and similar investments of the Trust and of
each Series in custody meeting the requirements of Section 17(f) of the
1940 Act and the rules thereunder. The Trustees, on behalf of the Trust
or any Series, may enter into an agreement with a custodian on terms and
conditions acceptable to the Trustees, providing for the custodian, among
other things, (a) to hold the securities owned by the Trust or any Series
and deliver the same upon written order or oral order confirmed in
writing, (b) to receive and receipt for any moneys due to the Trust or any
Series and deposit the same in its own banking department or elsewhere,
(c) to disburse such funds upon orders or vouchers, and (d) to employ one
or more subcustodians.
4.4. 1940 Act Governance. Any contract referred to in
Section 4.1 hereof shall be consistent with and subject to the applicable
requirements of Section 15 of the 1940 Act and the rules and orders
thereunder with respect to its continuance in effect, its termination, and
the method of authorization and approval of such contract or renewal. No
amendment to a contract referred to in Section 4.1 hereof shall be
effective unless assented to in a manner consistent with the requirements
of Section 15 of the 1940 Act, and the rules and orders thereunder.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each
Holder of an Interest in a Series shall be jointly and severally liable
with every other Holder of an Interest in that Series (with rights of
contribution inter se in proportion to their respective Interests in the
Series) for the liabilities and obligations of that Series (and of no
other Series) in the event that the Trust fails to satisfy such
liabilities and obligations from the assets of that Series; provided,
however, that, to the extent assets of that Series are available in the
Trust, the Trust shall indemnify and hold each Holder harmless from and
against any claim or liability to which such Holder may become subject by
reason of being or having been a Holder of an Interest in that Series to
the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders of Interests in that Series, is
greater than such Holder's Interest (proportionate share), and shall
reimburse such Holder for all legal and other expenses reasonably incurred
by such Holder in connection with any such claim or liability. The
rights accruing to a Holder under this Section 5.1 shall not exclude any
other right to which such Holder may be lawfully entitled, nor shall
anything contained herein restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not
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specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each Holder of an Interest
in a Series shall remain jointly and severally liable to the creditors of
that Series as a legal matter. The liabilities of a particular Series and
the right to indemnification granted hereunder to Holders of Interests in
such Series shall not be enforceable against any other Series or Holders
of Interests in any other Series.
5.2. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Third Parties. No Trustee,
officer, employee, agent or independent contractor (except in the case of
an agent or independent contractor to the extent expressly provided by
written contract) of the Trust or any Series shall be subject to any
personal liability whatsoever to any Person, other than the Trust or the
Holders, in connection with Trust Property or the affairs of the Trust;
and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee,
agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written
contract) of the Trust arising in connection with the affairs of the
Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust shall be liable to the Trust or
the Holders for any action or failure to act (including, without
limitation, the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for such Person's own bad faith,
willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall
indemnify, to the fullest extent permitted by law (including the 1940
Act), each Trustee, officer, employee, agent or independent contractor
(except in the case of an agent or independent contractor to the extent
expressly provided by written contract) of the Trust (including any Person
who serves at the Trust's request as a director, officer or trustee of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to
any matter as to which such Person shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of such Person's duties, such liabilities and expenses being
liabilities only of the Series out of which such claim for indemnification
arises; provided, however, that as to any matter disposed of by a
compromise payment by such Person, pursuant to a consent decree or
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otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless there has been a determination that such
Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
Person's office (i) by the court or other body approving the settlement or
other disposition; or (ii) based upon a review of readily available facts
(as opposed to a full trial-type inquiry), by written opinion from
independent legal counsel approved by the Trustees; or (iii) by a majority
of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, based upon a review of readily available facts (as
opposed to a full trial-type inquiry). The rights accruing to any Person
under these provisions shall not exclude any other right to which such
Person may be lawfully entitled; provided that no Person may satisfy any
right of indemnity or reimbursement granted in this Section 5.4 or in
Section 5.2 hereof or to which such Person may be otherwise entitled
except out of the Trust Property. The rights of indemnification provided
herein may be insured against by policies maintained by the Trust. The
Trustees may make advance payments in connection with indemnification
under this Section 5.4, provided that the indemnified Person shall have
given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification, and provided further that either (i) such Person shall
have provided appropriate security for such undertaking, or (ii) the Trust
is insured against losses arising out of any such advance payments, or
(iii) either a majority of the Trustees who are neither Interested Persons
of the Trust nor parties to the matter, or independent legal counsel in a
written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Person will not
be disqualified from indemnification under this Section 5.4.
5.5. No Bond Required of Trustees. No Trustee shall, as
such, be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instru-
ments, etc. No purchaser, lender or other Person dealing with any
Trustee, officer, employee, agent or independent contractor of the Trust
or any Series shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by such Trustee, officer,
employee, agent or independent contractor or be liable for the application
of money or property paid, loaned or delivered to or on the order of such
Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series, and every other act or thing
whatsoever executed in connection with the Trust or any Series shall be
conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees, officers, employees, agents or
independent contractors of the Trust or any Series. Every written
obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series made or sold by any Trustee,
officer, employee, agent or independent contractor of the Trust or any
Series, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent
<PAGE>
contractor of the Trust or any Series shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for
the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust or any
Series. Subject to the provisions of the 1940 Act, the Trust may
maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, employees, agents and independent contractors
of the Trust and any Series in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust and any Series
shall, in the performance of such Person's duties, be fully and completely
justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust or any Series (whether or not the Trust or any Series
would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust or any
Series by any of its officers or employees or by any Investment Adviser or
Administrator, accountant, appraiser or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of
the Trust or any Series, regardless of whether such counsel or expert may
also be a Trustee.
5.8. No Repeal or Modification. Any repeal or modifi-
cation of this Article V by the Holders, or adoption or modification of
any other provision of this Declaration or the By-Laws inconsistent with
this Article V, shall be prospective only, to the extent that such repeal
or modification would, if applied retrospectively, adversely affect any
limitation on the liability of any Person or indemnification available to
any indemnified Person with respect to any act or omission which occurred
prior to such repeal, modification or adoption.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust
Property shall consist of non-transferable Interests. Interests may be
sold only to Institutional Investors, as may be approved by the Trustees,
for cash or other consideration acceptable to the Trustees, subject to the
requirements of the 1940 Act. The Interests shall be personal property
giving only the rights in this Declaration specifically set forth. The
value of an Interest shall be equal to the Book Capital Account balance of
the Holder of the Interest.
The Trustees shall have authority, from time to time, to
establish Series, each of which shall be a separate subtrust and the
Interests in which shall be separate and distinct from the Interests in
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any other Series. The Series shall include, without limitation, the
Series specifically established and designated pursuant to Section 6.2
hereof, and such other Series as the Trustees may deem necessary or
desirable. The Trustees shall have exclusive power without the
requirement of Holder approval to establish and designate such separate
and distinct Series, and, subject to the provisions of this Declaration
and the 1940 Act, to fix and determine the rights of Holders of Interests
in such Series, including with respect to the price, terms and manner of
purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have
separate voting rights or no voting rights.
6.2. Establishment and Designation of Series. The
establishment and designation of any Series shall be effective upon the
execution by the Secretary or an Assistant Secretary of the Trust,
pursuant to authorization by a majority of the Trustees, of an instrument
setting forth such establishment and designation and the relative rights
and preferences of the Interests in such Series, or as otherwise provided
in such instrument. At any time that there are no Interests outstanding
of any particular Series previously established and designated, the
Trustees may by resolution adopted by a majority of their number, and
evidenced by an instrument executed by the Secretary or an Assistant
Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth
above to establish and designate further Series, the Trustees hereby
establish and designate the subtrust or Series set forth on Schedule A
hereto. The Interests in this Series and any Interests in any further
Series that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to
some further Series at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Series. All
consideration received by the Trust for the issue or sale of Interests in
a particular Series, together with all assets in which such consideration
is invested or reinvested, all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in a separate trust for the benefit of the Holders of
Interests in that Series and shall irrevocably belong to that Series for
all purposes, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets belonging to" that Series. No Series shall
have any right to or interest in the assets belonging to any other Series,
and no Holder shall have any right or interest with respect to the assets
belonging to any Series in which it does not hold an Interest.
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(b) Liabilities Belonging to Series. The assets
belonging to each particular Series shall be charged with the liabilities
in respect of that Series and all expenses, costs, charges and reserves
attributable to that Series. The liabilities, expenses, costs, charges
and reserves so charged to a Series are herein referred to as "liabilities
belonging to" that Series. No Series shall be liable for or charged with
the liabilities belonging to any other Series, and no Holder shall be
subject to any liabilities belonging to any Series in which it does not
hold an Interest.
(c) Voting. On each matter submitted to a vote
of the Holders, each Holder of an Interest in each Series shall be
entitled to a vote proportionate to its Interest in such Series as
recorded on the books of the Trust and all Holders of Interests in each
Series shall vote as a separate class except as to voting for Trustees and
as otherwise required by the 1940 Act. As to any matter which does not
affect the interest of a particular Series, only the Holders of Interests
in the one or more affected Series shall be entitled to vote.
6.3. Non-Transferability. A Holder may not transfer its
Interest.
6.4. Register of Interests. A register shall be kept at
the Trust under the direction of the Trustees which shall contain the
name, address and Book Capital Account balance of each Holder in each
Series. Such register shall be conclusive as to the identity of the
Holders. No Holder shall be entitled to receive payment of any
distribution, nor to have notice given to it as herein provided, until it
has given its address to such officer or agent of the Trust as is keeping
such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted
by the Trustees, each Holder may vary its Interest in any Series at any
time by increasing (through a capital contribution) or decreasing (through
a capital withdrawal) or by a Redemption of its Interest. An increase in
the Interest of a Holder in a Series shall be reflected as an increase in
the Book Capital Account balance of that Holder in that Series and a
decrease in the Interest of a Holder in a Series or the Redemption of the
Interest of that Holder shall be reflected as a decrease in the Book
Capital Account balance of that Holder in that Series. The Trust shall,
upon appropriate and adequate notice from any Holder, increase, decrease
or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the
Trustees; provided that (a) the amount received by the Holder upon any
such decrease or Redemption shall not exceed the decrease in the Holder's
Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at
any time and from time to time, charge fees for effecting any such
<PAGE>
decrease or Redemption, at such rates as the Trustees may establish, and
may, at any time and from time to time, suspend such right of decrease or
Redemption. The procedures for effecting decreases or Redemptions shall
be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital
Account balance of Holders with respect to a particular Series shall be
determined on such days and at such time or times as the Trustees may
determine. The Trustees shall adopt resolutions setting forth the method
of determining the Book Capital Account balance of each Holder. The power
and duty to make calculations pursuant to such resolutions may be
delegated by the Trustees to the Investment Adviser or Administrator,
custodian, or such other Person as the Trustees may determine. Upon the
Redemption of an Interest, the Holder of that Interest shall be entitled
to receive the balance of its Book Capital Account. A Holder may not
transfer its Book Capital Account balance.
8.2. Allocations and Distributions to Holders. The
Trustees shall, in compliance with the Code, the 1940 Act and generally
accepted accounting principles, establish the procedures by which the
Trust shall make with respect to each Series (i) the allocation of
unrealized gains and losses, taxable income and tax loss, and profit and
loss, or any item or items thereof, to each Holder, (ii) the payment of
distributions, if any, to Holders, and (iii) upon liquidation, the final
distribution of items of taxable income and expense. Such procedures
shall be set forth in writing and be furnished to the Trust's accountants.
The Trustees may amend the procedures adopted pursuant to this Section 8.2
from time to time. The Trustees may retain from the net profits of each
Series such amount as they may deem necessary to pay the liabilities and
expenses of that Series.
8.3. Power to Modify Foregoing Procedures. Notwith-
standing any of the foregoing provisions of this Article VIII, the
Trustees may prescribe, in their absolute discretion, such other bases and
times for determining the net income and net assets of the Trust and of
each Series, the allocation of income of the Trust and of each Series, the
Book Capital Account balance of each Holder, or the payment of
distributions to the Holders as they may deem necessary or desirable to
enable the Trust or a Series to comply with any provision of the 1940 Act
or any order of exemption issued by the Commission or with the Code.
<PAGE>
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust
Property and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests
and they shall have no power or right to call for any partition or
division of any Trust Property. In addition, the Holders shall have power
to vote only with respect to (a) the election of Trustees as provided in
Article II, Section 2.4; (b) the removal of Trustees as provided in
Article II, Section 2.3; (c) any investment advisory contract as provided
in Article IV, Section 4.1; (d) dissolution of a Series, to the extent
provided in Article X, Section 10.2; (e) the amendment of this Declaration
to the extent and as provided in Article X, Section 10.4; (f) any merger,
consolidation or sale of assets as provided in Article X, Section 10.5;
and (9) such additional matters relating to the Trust as may be required
or authorized by law, by this Declaration or the By-Laws or any
registration statement of the Trust filed with the Commission, or as the
Trustees may consider desirable.
9.2. Meetings of Holders. Meetings of Holders may be
called at any time by a majority of the Trustees and shall be called by
any Trustee upon written request of Holders holding, in the aggregate, not
less than 10% of the Interests in a Series (if the meeting relates solely
to that Series), or not less than 10% of the Interests in the Trust (if
the meeting relates to the Trust and not solely to a particular Series),
such request specifying the purpose or purposes for which such meeting is
to be called. Any such meeting shall be held within or without the State
of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of at least
one-third of the Interests in the Series (if the meeting relates solely to
that Series) or Holders of at least one-third of the Interests in the
Trust (if the meeting relates to the Trust and not solely to a particular
Series), present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the
1940 Act, other applicable law, this Declaration or the By-Laws. If a
quorum is present at a meeting, an affirmative vote of the Holders
present, in person or by proxy, holding more than 50% of the total
Interests of the Holders present, either in person or by proxy, at such
meeting constitutes the action of the Holders, unless a greater number of
affirmative votes is required by the 1940 Act, other applicable law, this
Declaration or the By-Laws, and except that a plurality of the total
Interests of the Holders present shall elect a Trustee. All or any one or
more Holders may participate in a meeting of Holders by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
9.3. Notice of Meetings. Notice of each meeting of
Holders, stating the time, place and purposes of the meeting, shall be
<PAGE>
given by the Trustees by mail to each Holder of the Series or the Trust,
as the case may be, at its registered address, mailed at least 10 days and
not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of
such meeting except in the situation in which a Holder attends a meeting
for the express purpose of objecting to the transaction of any business on
the ground that the meeting was not lawfully called or convened. At any
meeting, any business properly before the meeting may be considered
whether or not stated in the notice of the meeting. Any adjourned meeting
may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For
the purpose of determining the Holders who are entitled to notice of and
to vote at any meeting, or to participate in any distribution, or for the
purpose of any other action, the Trustees may from time to time fix a
date, not more than 90 days prior to the date of any meeting of Holders or
the payment of any distribution or the taking of any other action, as the
case may be, as a record date for the determination of the Persons to be
treated as Holders of the Series or the Trust, as the case may be, for
such purpose.
9.5. Proxies, etc. At any meeting of Holders, any
Holder entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as
the Secretary may direct, for verification prior to the time at which such
vote is to be taken. A proxy may be revoked by a Holder at any time
before it has been exercised by placing on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the
Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such
Holder shall be entitled to a vote proportionate to its Interest in the
Series or the Trust, as the case may be. When an Interest is held jointly
by several Persons, any one of them may vote at any meeting in person or
by proxy in respect of such Interest, but if more than one of them is
present at such meeting in person or by proxy, and such joint owners or
their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Interest. A proxy purporting to
be executed by or on behalf of a Holder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger.
9.6. Reports. The Trustees shall cause to be prepared
and furnished to each Holder, at least annually as of the end of each
Fiscal year, a report of operations containing a balance sheet and a
statement of income of each Series prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
with respect to each Series furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of
the end of such period and an unaudited statement of income for the period
<PAGE>
from the beginning of the then-current Fiscal year to the end of such
period.
9.7. Inspection of Records. The records of the Trust
shall be open to inspection by Holders during normal business hours for
any purpose not harmful to the Trust.
9.8. Holder Action by Written Consent. Any action
which may be taken on behalf of the Trust or any Series by Holders may be
taken without a meeting if Holders holding more than 50% of all Interests
entitled to vote (or such larger proportion thereof as shall be required
by any express provision of this Declaration or of applicable law) consent
to the action in writing and the written consents are filed with the
records of the meetings of Holders. Such consents shall be treated for
all purposes as a vote taken at a meeting of Holders. Each such written
consent shall be executed by or on behalf of the Holder delivering such
consent and shall bear the date of such execution. No such written
consent shall be effective to take the action referred to therein unless,
within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the
records of the meetings of Holders.
9.9. Notices. Any and all communications, including any
and all notices to which any Holder may be entitled, shall be deemed duly
served or given if mailed, postage prepaid, addressed to a Holder at its
last known address as recorded on the register of the Trust or if
delivered to a Holder by courier or by facsimile or other similar
electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible dissolution or
termination in accordance with the provisions of Section 10.2 and Section
10.3 hereof, respectively, the Trust created hereby shall continue until
the expiration of 20 years after the death of the last survivor of the
initial Trustees named herein and the following named persons:
Name Address Date of Birth
---- ------- -------------
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Amanda Jehan Sher 483 Pleasant Street, No. 08/16/89
Coolidge 9, Belmont, MA 02178
David Cornelius Johnson 752 West End Avenue, Apt. 04/10/91
10J, New York, NY 10025
<PAGE>
Name Address Date of Birth
---- ------- -------------
Conner Leahy McCabe 100 Parkway Road, Apt. 3C, 02/22/89
Bronxville, NY 10708
Andrea Hellegers 530 East 84th Street, Apt. 12/22/88
5H, New York, NY 10028
Emilie Blair Ruble 65 Duck Pond Road Glen 02/24/89
Cove, NY 11542
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Carolina Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
or until such later date as may be permitted by the applicable law of the
State of New York.
lO.2. Dissolution. Any Series shall be dissolved (a)
by the affirmative vote of the Holders of not less than two-thirds of the
Interests in the Series at any meeting of the Holders or by an instrument
in writing, without a meeting, signed by a majority of the Trustees and
consented to by the Holders of not less than two-thirds of such Interests,
or (b) by the Trustees by written notice of dissolution to the Holders of
the Interests in the Series, or (c) 120 days after a Holder of an Interest
in the Series either (i) makes an assignment for the benefit of creditors,
or (ii) files a voluntary petition in bankruptcy, or (iii) is adjudged a
bankrupt or insolvent, or has entered against it an order for relief in
any bankruptcy or insolvency proceeding, or (iv) files a petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy statute or regulation, (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against it in any proceeding referred to in clauses (iii) or (iv),
or (vi) seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of such Holder or of all or any substantial part of
its properties, whichever shall first occur; provided, however, that if
within such 120 days Holders (excluding the Holder with respect to which
such event of dissolution has occurred) owning a majority of the Interests
in such Series vote to continue the Series, such Series shall not dissolve
and shall continue as if such event of dissolution had not occurred.
10.3. Termination.
(a) Upon an event of dissolution of the Trust
or a Series, the Trust or Series shall be terminated
in accordance with the following provisions:
(i) the Trust or Series, as applicable, shall
carry on no business except for the purpose of winding up its affairs;
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(ii) the Trustees shall proceed to wind up
the affairs of the Trust or Series, as applicable, and all of the powers
of the Trustees under this Declaration shall continue until the affairs of
the Trust or Series have been wound up, including the power to fulfill or
discharge the contracts of the Trust or Series, collect the assets of the
Trust of Series, sell, convey, assign, exchange or otherwise dispose of
all or any part of the Trust Property affected to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
the liabilities of the Trust or Series, and do all other acts appropriate
to liquidate the business of the Trust or Series; provided that any sale,
conveyance, assignment, exchange or other disposition of all or
substantially all the Trust Property or substantially all of the assets
belonging to a particular Series, other than for cash, shall require
approval of the principal terms of the transaction and the nature and
amount of the consideration by the vote of Holders holding more than 50%
of the total Interests in the Trust or Series, as applicable; and
(iii) after paying or adequately providing
for the payment of all liabilities of the Trust or of the Series being
terminated, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees shall
distribute the remaining Trust Property of the Trust or Series, as
applicable, in cash or in kind or partly each, among the Holders according
to their respective rights as set forth in the procedures established
pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust or Series
and distribution to the Holders as herein provided, a majority of the
Trustees shall execute and file with the records of the Trust an
instrument in writing setting forth the fact of such termination and
distribution. Upon termination of the Trust, the Trustees shall thereupon
be discharged from all further liabilities and duties hereunder, and the
rights and interests of all Holders shall thereupon cease.
10.4. Amendment Procedure.
(a) The Trustees may, without any vote of
Holders, amend or otherwise supplement this Declaration by an instrument
in writing executed by a majority of the Trustees, provided that Holders
shall have the right to vote on any amendment (a) which would affect the
voting rights of Holders granted in Article IX, Section 9.1, (b) to this
Section 10.4, (c) required to be approved by Holders by law or by the
Trust's registration statement filed with the Commission, or (d) submitted
to them by the Trustees. Any amendment submitted to Holders which the
Trustees determine would affect the Holders of any Series shall be
authorized by vote of the Holders of such Series and no vote shall be
required of Holders of a Series not affected. Notwithstanding anything
else herein, any amendment to Article V which would have the effect of
reducing the indemnification and other rights provided thereby and any
repeal or amendment of this sentence shall each require the affirmative
vote of the Holders of two-thirds of the Interests entitled to vote
thereon.
<PAGE>
(b) No amendment may be made under Section
10.4(a) hereof which would change any rights with respect to any Interest
by reducing the amount payable thereon upon liquidation of the Trust or
any Series or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of Holders of two-thirds of all
Interests which would be so affected by such amendment.
(c) A certification in recordable form
executed by a majority of the Trustees setting forth an amendment and
reciting that it was duly adopted by the Holders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable form,
and executed by a majority of the Trustees, shall be conclusive evidence
of such amendment when filed with the records of the Trust.
Notwithstanding any other provision hereof, until such
time as Interests are first sold, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees at any meeting of Trustees or by an instrument executed by a
majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The
Trust or any Series may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange
all or substantially all of the Trust Property, or assets belonging to
such Series, as applicable, including good will, upon such terms and
conditions and for such consideration when and as authorized at any
meeting of Holders called for such purpose by Majority Interests Vote of
Interests in the Series affected by such action, or by an instrument in
writing without a meeting, consented to by Holders of not less than a
majority of the Interests in the Series affected by such action, and any
such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the law of
the State of New York.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service
of Process. If required by New York law, the Trust shall file, with the
Department of State of the State of New York, a certificate, in the name
of the Trust and executed by an officer of the Trust, designating the
Secretary of State of the State of New York as an agent upon whom process
in any action or proceeding against the Trust or any Series may be served.
11.2. Governing Law. This Declaration is executed by
the Trustees and delivered in the State of New York and with reference to
the law thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
in accordance with the law of the State of New York and reference shall be
specifically made to the trust law of the State of New York as to the
<PAGE>
construction of matters not specifically covered herein or as to which an
ambiguity exists.
11.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be
deemed to be an original, and such counterparts, together, shall
constitute one and the same instrument, which shall be sufficiently
evidenced by any one such original counterpart.
11.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust or of
any recording office in which this Declaration may be recorded, appears to
be a Trustee hereunder, certifying to: (a) the number or identity of
Trustees or Holders, (b) the due authorization of the execution of any
instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Holders, (d) the fact that the number of Trustees or Holders
present at any meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-Laws adopted by
or the identity of any officer elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs
of the Trust, shall be conclusive evidence as to the matters so certified
in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940 Act, or
with other applicable law and regulations, the conflicting provision shall
be deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration
shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in any
other jurisdiction or any other provision of this Declaration in any
jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration
of Trust of Equity Managers Trust as of the day and year first above
written.
/s/ Ellen Metzger
-------------------------------
Ellen Metzger
As Trustee and not individually
/s/ Daniel J. Sullivan
-------------------------------
Daniel J. Sullivan
As Trustee and not individually
/s/ Claudia A. Brandon
-------------------------------
Claudia A. Brandon
As Trustee and not individually
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . 2
1.1. Name . . . . . . . . . . . . . . . . . . . . . 2
1.2. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . 5
2.1. Number and Qualification . . . . . . . . . . . 5
2.2. Term and Election . . . . . . . . . . . . . . 5
2.3. Resignation Removal and Retirement . . . . . . 5
2.4. Vacancies . . . . . . . . . . . . . . . . . . 6
2.5. Meetings . . . . . . . . . . . . . . . . . . . 6
2.6. Officers; Chairman of the Board . . . . . . . 7
2.7. By-Laws . . . . . . . . . . . . . . . . . . . 8
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . 8
3.1. General . . . . . . . . . . . . . . . . . . . 8
3.2. Investments . . . . . . . . . . . . . . . . . 8
3.3. Legal Title . . . . . . . . . . . . . . . . . 9
3.4. Sale and Increases of Interests . . . . . . . 9
3.5. Decreases and Redemptions of Interests . . . . 10
3.6. Borrow Money . . . . . . . . . . . . . . . . . 10
3.7. Delegation; Committees . . . . . . . . . . . . 10
3.8. Collection and Payment . . . . . . . . . . . . 10
3.9. Expenses . . . . . . . . . . . . . . . . . . . 10
3.10. Miscellaneous Powers . . . . . . . . . . . . . 11
3.11. Further Powers . . . . . . . . . . . . . . . . 12
ARTICLE IV--Investment Advisory, Administration and
Placement Agent Arrangements; Custodian . . . . . 12
4.1. Investment Advisory and Other Arrangements . . 12
4.2. Parties to Contract . . . . . . . . . . . . . 13
4.3. Custodian . . . . . . . . . . . . . . . . . . 13
4.4. 1940 Act Governance . . . . . . . . . . . . . 13
ARTICLE V--Liability of Holders; Limitations of
Liability of Trustees, Officers, etc. . . . . . . 13
5.1. Liability of Holders; Indemnification . . . . 13
5.2. Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties . . . . . . . . . 14
5.3. Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. . . . . . 14
5.4. Mandatory Indemnification . . . . . . . . . . 15
5.5. No Bond Required of Trustees . . . . . . . . . 16
<PAGE>
5.6. No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . 16
5.7. Reliance on Experts, etc. . . . . . . . . . . 17
5.8. No Repeal or Modification . . . . . . . . . . 17
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . 17
6.1. Interests . . . . . . . . . . . . . . . . . . 17
6.2. Establishment and Designation of Series. . . . 18
6.3. Non-Transferability . . . . . . . . . . . . . 19
6.4. Register of Interests . . . . . . . . . . . . 19
ARTICLE VII-- Increases, Decreases And Redemptions of
Interests . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII-- Determination of Book Capital Account
Balances and Distributions . . . . . . . . . . 20
8.1. Book Capital Account Balances . . . . . . . . 20
8.2. Allocations and Distributions to Holders . . . 20
8.3. Power to Modify Foregoing Procedures . . . . . 20
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . 21
9.1. Rights of Holders . . . . . . . . . . . . . . 21
9.2. Meetings of Holders . . . . . . . . . . . . . 21
9.3. Notice of Meetings . . . . . . . . . . . . . . 22
9.4. Record Date for Meetings,
Distributions, etc. . . . . . . . . . . . . 22
9.5. Proxies, etc. . . . . . . . . . . . . . . . . 22
9.6. Reports . . . . . . . . . . . . . . . . . . . 23
9.7. Inspection of Records . . . . . . . . . . . . 23
9.8. Holder Action by Written Consent . . . . . . . 23
9.9. Notices . . . . . . . . . . . . . . . . . . . 23
ARTICLE X--Duration; Termination; Termination; Dissolution;
Amendment; Mergers; Etc. . . . . . . . . . . . . . . . . . . 24
10.1. Duration . . . . . . . . . . . . . . . . . . 24
lO.2. Dissolution . . . . . . . . . . . . . . . . . 24
10.3. Termination . . . . . . . . . . . . . . . . . 25
10.4. Amendment Procedure . . . . . . . . . . . . . 26
10.5. Merger, Consolidation and Sale of Assets . . 27
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . 27
11.1. Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . . 27
11.2. Governing Law . . . . . . . . . . . . . . . . 27
11.3. Counterparts . . . . . . . . . . . . . . . . . 27
11.4. Reliance by Third Parties . . . . . . . . . . 28
11.5. Provisions in Conflict with Law or
Regulations. . . . . . . . . . . . . . . . . . 28
<PAGE>
AMENDMENT TO ARTICLE X, SECTION 10.2
------------------------------------
On April 27, 1993, Article X, Section 10.2, of the
Declaration of Trust was amended in its entirety as follows:
10.2. DISSOLUTION. Any Series shall be dissolved (a) by
the affirmative vote of the Holders of not less than two-thirds of
the Interests in the Series at any meeting of the Holders or by an
instrument in writing, without a meeting, signed by a majority of
the Trustees and consented to by the Holders of not less than two-
thirds of such Interests, or (b) by the Trustees by written notice
of dissolution to the Holders of the Interests in the Series, or
(c) 120 days after a Holder of an Interest in the Series either (i)
makes an assignment for the benefit of creditors, or (ii) files a
voluntary petition in bankruptcy, or (iii) is adjudged a bankrupt
or insolvent, or has entered against it an order for relief in any
bankruptcy or insolvency proceeding, or (iv) files a petition or
answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any bankruptcy statute or regulation, (v) files an
answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any
proceeding referred to in clauses (iii) or (iv), or (vi) seeks,
consents to or acquiesces in the appointment of a trustee, receiver
or liquidator of such Holder or of all or any substantial part of
its properties, whichever shall first occur; provided, however,
that if within such 120 days Holders (excluding the Holder with
respect to which such event of dissolution has occurred) owning a
majority of the Interests in such Series vote to continue the
Series, such Series shall not dissolve and shall continue as if
such event of dissolution had not occurred.
<PAGE>
<PAGE>
EQUITY MANAGERS TRUST
DECLARATION OF TRUST
SCHEDULE A
Initial Series
--------------
Genesis Portfolio
Focus Portfolio
Partners Portfolio
Manhattan Portfolio
Guardian Portfolio
Additional Series
-----------------
Socially Responsive Portfolio
<PAGE>
<PAGE>
EQUITY MANAGERS TRUST
BY-LAWS
January 13, 1993
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
PRINCIPAL OFFICE AND SEAL . . . . . . . . . . . . . . . . . 1
Section 1. Principal Office . . . . . . . . . . . . 1
Section 2. Seal . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF TRUSTEES . . . . . . . . . . . . . . . . . . . . 1
Section 1. Action by Trustees . . . . . . . . . . . 1
Section 2. Compensation of Trustees . . . . . . . . 1
ARTICLE III
COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Establishment . . . . . . . . . . . . . 1
Section 2. Proceedings; Quorum; Action . . . . . . 2
Section 3. Executive Committee . . . . . . . . . . 2
Section 4. Nominating Committee . . . . . . . . . . 2
Section 5. Audit Committee . . . . . . . . . . . . 2
Section 6. Compensation of Committee Members . . . 2
ARTICLE IV
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1. General . . . . . . . . . . . . . . . . 2
Section 2. Election, Tenure and Qualifications
of Officers . . . . . . . . . . . . . . . 2
Section 3. Vacancies and Newly Created Offices . . 3
Section 4. Removal and Resignation . . . . . . . . 3
Section 5. Chairman . . . . . . . . . . . . . . . . 3
Section 6. President . . . . . . . . . . . . . . . 3
Section 7. Vice President(s) . . . . . . . . . . . 3
Section 8. Treasurer and Assistant Treasurer(s) . . 4
Section 9. Secretary and Assistant Secretaries . . 4
Section 10. Compensation of Officers . . . . . . . . 4
Section 11. Surety Bond . . . . . . . . . . . . . . 4
ARTICLE V
MEETINGS OF HOLDERS . . . . . . . . . . . . . . . . . . . . 5
Section 1. No Annual Meetings . . . . . . . . . . . 5
Section 2. Special Meetings . . . . . . . . . . . . 5
Section 3. Notice of Meetings; Waiver . . . . . . . 5
Section 4. Adjourned Meetings . . . . . . . . . . . 5
Section 5. Validity of Proxies . . . . . . . . . . 6
Section 6. Record Date . . . . . . . . . . . . . . 6
Section 7. Action Without a Meeting . . . . . . . . 7
ARTICLE VI
INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. No Interest Certificates . . . . . . . . 7
Section 2. Transfer of Interests . . . . . . . . . 7
- i -
<PAGE>
ARTICLE VII
FISCAL YEAR AND ACCOUNTANT . . . . . . . . . . . . . . . . . 7
Section 1. Fiscal Year . . . . . . . . . . . . . . 7
Section 2. Accountant . . . . . . . . . . . . . . . 7
ARTICLE VIII
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. General . . . . . . . . . . . . . . . . 8
Section 2. By Holders Only . . . . . . . . . . . . 8
ARTICLE IX
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE X
CONFLICT OF INTEREST PROCEDURES . . . . . . . . . . . . . . 8
Section 1. Monitoring and Reporting Conflicts . . . 8
Section 2. Annual Report . . . . . . . . . . . . . 9
Section 3. Resolution of Conflicts . . . . . . . . 9
- ii -
<PAGE>
BY-LAWS
OF
EQUITY MANAGERS TRUST
These By-laws of Equity Managers Trust (the "Trust"), a New York
common law trust, are subject to the Declaration of Trust of the Trust
dated December 1, 1992, as from time to time amended, supplemented or
restated (the "Declaration"). Capitalized terms used herein have the same
meanings as in the Declaration.
ARTICLE I
----------
PRINCIPAL OFFICE AND SEAL
-------------------------
Section 1. Principal Office. The principal office of the Trust shall be
located in New York, New York, or such other location as the Trustees
determine. The Trust may establish and maintain other offices and places
of business as the Trustees determine.
Section 2. Seal. The Trustees may adopt a seal for the Trust in such
form and with such inscription as the Trustees determine. Any Trustee or
officer of the Trust shall have authority to affix the seal to any
document.
ARTICLE II
----------
MEETINGS OF TRUSTEES
--------------------
Section 1. Action By Trustees. Trustees may take actions at meetings
held at such places and times as the Trustees may determine, or without
meetings, all as provided in Article II, Section 2.5, of the Declaration.
Section 2. Compensation Of Trustees. Each Trustee who is neither an
employee of an investment adviser of the Trust or any Series nor an
employee of an entity affiliated with the investment adviser may receive
such compensation from the Trust for services and reimbursement for
expenses as the Trustees may determine.
ARTICLE III
-----------
COMMITTEES
----------
Section 1. Establishment. The Trustees may designate one or more
committees of the Trustees, which shall include an Executive Committee, a
Nominating Committee, and an Audit Committee (collectively, the
"Established Committees"). The Trustees shall determine the number of
<PAGE>
members of each committee and its powers and shall appoint its members and
its chair. Each committee member shall serve at the pleasure of the
Trustees. The Trustees may abolish any committee, other than the
Established Committees, at any time. Each committee shall maintain
records of its meetings and report its actions to the Trustees. The
Trustees may rescind any action of any committee, but such rescission
shall not have retroactive effect. The Trustees may delegate to any
committee any of its powers, subject to the limitations of applicable law.
Section 2. Proceedings; Quorum; Action. Each committee may adopt such
rules governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable. In the absence of such rules, a majority of
any committee shall constitute a quorum, and a committee shall act by the
vote of a majority of a quorum.
Section 3. Executive Committee. The Executive Committee shall have all
the powers of the Trustees when the Trustees are not in session. The
Chairman shall be a member and the chair of the Executive Committee. A
majority of the members of the Executive Committee shall be trustees who
are not "interested persons" of the Trust, as defined in the 1940 Act
("Disinterested Trustees").
Section 4. Nominating Committee. The Nominating Committee shall nominate
individuals to serve as Trustees (including Disinterested Trustees), as
members of committees, and as officers of the Trust. The members of the
Committee shall be Disinterested Trustees.
Section 5. Audit Committee. The Audit Committee shall review and
evaluate the audit function, including recommending the selection of
independent certified public accountants for each Series.
Section 6. Compensation Of Committee Members. Each committee member who
is a Disinterested Trustee may receive such compensation from the Trust
for services and reimbursement for expenses as the Trustees may determine.
ARTICLE IV
----------
OFFICERS
--------
Section 1. General. The officers of the Trust shall be a Chairman, a
President, one or more Vice Presidents, a Treasurer, and a Secretary, and
may include one or more Assistant Treasurers or Assistant Secretaries and
such other officers ("Other Officers") as the Trustees may determine.
Section 2. Election, Tenure And Qualifications Of Officers. The Trustees
shall elect the officers of the Trust, except those appointed as provided
in Section 9 of this Article. Each officer elected by the Trustees shall
hold office until his or her successor shall have been elected and
qualified or until his or her earlier death, inability to serve, or
resignation. Any person may hold one or more offices, except that the
- 2 -
<PAGE>
Chairman and the Secretary may not be the same individual. A person who
holds more than one office in the Trust may not act in more than one
capacity to execute, acknowledge, or verify an instrument required by law
to be executed, acknowledged, or verified by more than one officer. No
officer other than the Chairman need be a Trustee or Holder.
Section 3. Vacancies And Newly Created Offices. Whenever a vacancy shall
occur in any office or if any new office is created, the Trustees may fill
such vacancy or new office.
Section 4. Removal And Resignation. Officers serve at the pleasure of
the Trustees and may be removed at any time with or without cause. The
Trustees may delegate this power to the Chairman or President with respect
to any Other Officer. Such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer may resign
from office at any time by delivering a written resignation to the
Trustees, Chairman, or the President. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
Section 5. Chairman. The Chairman shall be the chief executive officer
of the Trust. Subject to the direction of the Trustees, the Chairman
shall have general charge, supervision and control over the Trust's
business affairs and shall be responsible for the management thereof and
the execution of policies established by the Trustees. The Chairman shall
preside at any Holders' meetings and at all meetings of the Trustees and
shall in general exercise the powers and perform the duties of the
Chairman of the Trustees. Except as the Trustees may otherwise order, the
Chairman shall have the power to grant, issue, execute or sign such powers
of attorney, proxies, agreements or other documents. The Chairman also
shall have the power to employ attorneys, accountants and other advisers
and agents for the Trust. The Chairman shall exercise such other powers
and perform such other duties as the Trustees may assign to the Chairman.
Section 6. President. The President shall have such powers and perform
such duties as the Trustees or the Chairman may determine. At the request
or in the absence or disability of the Chairman, the President shall
perform all the duties of the President and, when so acting, shall have
all the powers of the President.
Section 7. Vice President(s). The Vice President(s) shall have such
powers and perform such duties as the Trustees or the Chairman may
determine. At the request or in the absence or disability of the
President, the Vice President (or, if there are two or more Vice
Presidents, then the senior of the Vice Presidents present and able to
act) shall perform all the duties of the President and, when so acting,
shall have all the powers of the President. The Trustees may designate a
Vice President as the principal financial officer of the Trust or to serve
one or more other functions. If a Vice President is designated as
principal financial officer of the Trust, he or she shall have general
charge of the finances and books of the Trust and shall report to the
Trustees annually regarding the financial condition of each Series as soon
- 3 -
<PAGE>
as possible after the close of such Series's fiscal year. The Trustees
also may designate one of the Vice Presidents as Executive Vice President.
Section 8. Treasurer And Assistant Treasurer(s). The Treasurer may be
designated as the principal financial officer or as the principal
accounting officer of the Trust. If designated as principal financial
officer, the Treasurer shall have general charge of the finances and books
of the Trust, and shall report to the Trustees annually regarding the
financial condition of each Series as soon as possible after the close of
such Series' fiscal year. The Treasurer shall be responsible for the
delivery of all funds and securities of the Trust to such company as the
Trustees shall retain as Custodian. The Treasurer shall furnish such
reports concerning the financial condition of the Trust as the Trustees
may request. The Treasurer shall perform all acts incidental to the
office of Treasurer, subject to the Trustees' supervision, and shall
perform such additional duties as the Trustees may designate.
Any Assistant Treasurer may perform such duties of the Treasurer
as the Trustees or the Treasurer may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
Section 9. Secretary And Assistant Secretaries. The Secretary shall
record all votes and proceedings of the meetings of Trustees and Holders
in books to be kept for that purpose. The Secretary shall be responsible
for giving and serving notices of the Trust. The Secretary shall have
custody of any seal of the Trust and shall be responsible for the records
of the Trust, including the Interest register and such other books and
documents as may be required by the Trustees or by law. The Secretary
shall perform all acts incidental to the office of Secretary, subject to
the supervision of the Trustees, and shall perform such additional duties
as the Trustees may designate.
Any Assistant Secretary may perform such duties of the Secretary
as the Trustees or the Secretary may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
Section 10. Compensation Of Officers. Each officer may receive such
compensation from the Trust for services and reimbursement for expenses as
the Trustees may determine.
Section 11. Surety Bond. The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond
required by the 1940 Act and the rules and regulations of the Securities
and Exchange Commission ("Commission")) to the Trust in such sum and with
such surety or sureties as the Trustees may determine, conditioned upon
the faithful performance of his or her duties to the Trust, including
responsibility for negligence and for the accounting of any of the Trust's
property, funds or securities that may come into his or her hands.
ARTICLE V
----------
- 4 -
<PAGE>
MEETINGS OF HOLDERS
--------------------
Section 1. No Annual Meetings. There shall be no annual Holders'
meetings, unless required by law.
Section 2. Special Meetings. The Secretary shall call a special meeting
of Holders of any Series or Class whenever ordered by the Trustees.
The Secretary also shall call a special meeting of Holders of any
Series or Class upon the written request of Holders owning at least ten
percent of the Interests of such Series or Class entitled to vote at such
meeting; provided, that (1) such request shall state the purposes of such
meeting and the matters proposed to be acted on, and (2) the Holders
requesting such meeting shall have paid to the Trust the reasonably esti-
mated cost of preparing and mailing the notice thereof, which the
Secretary shall determine and specify to such Holders. If the Secretary
fails for more than thirty days to call a special meeting when required to
do so, the Trustees or the Holders requesting such a meeting may, in the
name of the Secretary, call the meeting by giving the required notice.
The Secretary shall not call a special meeting upon the request of Holders
of any Series or Class to consider any matter that is substantially the
same as a matter voted upon at any special meeting of Holders of such
Series or Class held during the preceding twelve months, unless requested
by the holders of a majority of the Interests of such Series or Class
entitled to be voted at such meeting.
A special meeting of Holders of any Series or Class shall be held
at such time and place as is determined by the Trustees and stated in the
notice of that meeting.
Section 3. Notice Of Meetings; Waiver. The Secretary shall call a
special meeting of Holders by giving written notice of the place, date,
time, and purposes of that meeting at least fifteen days before the date
of such meeting. The Secretary may deliver or mail, postage prepaid, the
written notice of any meeting to each Holder entitled to vote at such
meeting. If mailed, notice shall be deemed to be given when deposited in
the United States mail directed to the Holder at his or her address as it
appears on the records of the Trust.
Section 4. Adjourned Meetings. A Holders' meeting may be adjourned one
or more times for any reason, including the failure of a quorum to attend
the meeting. No notice of adjournment of a meeting to another time or
place need be given to Holders if such time and place are announced at the
meeting at which the adjournment is taken or reasonable notice is given to
persons present at the meeting, and if the adjourned meeting is held
within a reasonable time after the date set for the original meeting. Any
business that might have been transacted at the original meeting may be
transacted at any adjourned meeting. If after the adjournment a new
record date is fixed for the adjourned meeting, the Secretary shall give
notice of the adjourned meeting to Holders of record entitled to vote at
such meeting. Any irregularities in the notice of any meeting or the
- 5 -
<PAGE>
nonreceipt of any such notice by any of the Holders shall not invalidate
any action otherwise properly taken at any such meeting.
Section 5. Validity Of Proxies. Subject to the provisions of the
Declaration, Holders entitled to vote may vote either in person or by
proxy; provided, that either (1) the Holder or his or her duly authorized
attorney has signed and dated a written instrument authorizing such proxy
to act, or (2) the Trustees adopt by resolution an electronic, telephonic,
computerized or other alternative to execution of a written instrument
authorizing the proxy to act, but if a proposal by anyone other than the
officers or Trustees is submitted to a vote of the Holders of any Series
or Class, or if there is a proxy contest or proxy solicitation or proposal
in opposition to any proposal by the officers or Trustees, Interests may
be voted only in person or by written proxy. Unless the proxy provides
otherwise, it shall not be valid for more than eleven months before the
date of the meeting. All proxies shall be delivered to the Secretary or
other person responsible for recording the proceedings before being voted.
A proxy with respect to Interests held in the name of two or more persons
shall be valid if executed by one of them unless at or prior to exercise
of such proxy the Trust receives a specific written notice to the contrary
from any one of them. Unless otherwise specifically limited by their
terms, proxies shall entitle the Holder to vote at any adjournment of a
Holders' meeting. A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the
challenger. At every meeting of Holders, unless the voting is conducted
by inspectors, the chairman of the meeting shall decide all questions
concerning the qualifications of voters, the validity of proxies, and the
acceptance or rejection of votes. Subject to the provisions of the
Delaware Business Trust Act, Declaration or these By-laws, the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, shall govern all matters concerning the
giving, voting or validity of proxies, as if the Trust were a Delaware
corporation and the Holders were shareholders of a Delaware corporation.
Section 6. Record Date. The Trustees may fix in advance a date up to
ninety days before the date of any Holders' meeting as a record date for
the determination of the Holders entitled to notice of, and to vote at,
any such meeting. The Holders of record entitled to vote at a Holders'
meeting shall be deemed the Holders of record at any meeting reconvened
after one or more adjournments, unless the Trustees have fixed a new
record date. If the Holders' meeting is adjourned for more than sixty
days after the original date, the Trustees shall establish a new record
date.
Section 7. Action Without A Meeting. Holders may take any action without
a meeting if a majority (or such greater amount as may be required by law)
of the Interests entitled to vote on the matter consent to the action in
writing and such written consents are filed with the records of Holders'
meetings. Such written consent shall be treated for all purposes as a
vote at a meeting of the Holders.
- 6 -
<PAGE>
ARTICLE VI
----------
INTERESTS
--------
Section 1. No Interest Certificates. Neither the Trust nor any Series or
Class shall issue certificates certifying the ownership of Interests,
unless the Trustees authorize such certificates.
Section 2. Transfer Of Interests. Interests held by Holders are non-
transferable.
ARTICLE VII
-----------
FISCAL YEAR AND ACCOUNTANT
--------------------------
Section 1. Fiscal Year. The fiscal year of the Trust shall end on August
31.
Section 2. Accountant. The Trust shall employ independent certified
public accountants as its Accountant to examine the accounts of the Trust
and to sign and certify financial statements filed by the Trust. The
Accountant's certificates and reports shall be addressed both to the
Trustees and to the Holders. A majority of the Disinterested Trustees
shall select the Accountant at any meeting held within ninety days before
or after the beginning of the fiscal year of the Trust, acting upon the
recommendation of the Audit Committee. The Trust shall submit the
selection for ratification or rejection at the next succeeding Holders'
meeting, if such a meeting is to be held within the Trust's fiscal year.
If the selection is rejected at that meeting, the Accountant shall be
selected by majority vote of the Trust's outstanding voting Interests,
either at the meeting at which the rejection occurred or at a subsequent
meeting of Holders called for the purpose of selecting an Accountant. The
employment of the Accountant shall be conditioned upon the right of the
Trust to terminate such employment without any penalty by vote of a
Majority Holder Vote at any Holders' meeting called for that purpose.
ARTICLE VIII
------------
AMENDMENTS
----------
Section 1. General. Except as provided in Section 2 of this Article,
these By-laws may be amended by the Trustees, or by the affirmative vote
of a majority of the Interests entitled to vote at any meeting.
Section 2. By Holders Only. After the issue of any Interests, this
Article may only be amended by the affirmative vote of the holders of the
lesser of (a) at least two-thirds of the Interests present and entitled to
vote at any meeting, or (b) at least fifty percent of the Interests.
- 7 -
<PAGE>
ARTICLE IX
----------
NET ASSET VALUE
---------------
The term "Net Asset Value" of any Series shall mean that amount
by which the assets belonging to that Series exceed its liabilities, all
as determined by or under the direction of the Trustees. Net Asset Value
per Interest shall be determined separately for each Series and shall be
determined on such days and at such times as the Trustees may determine.
The Trustees shall make such determination with respect to securities for
which market quotations are readily available, at the market value of such
securities, and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees; provided, however, that
the Trustees, without Holder approval, may alter the method of appraising
portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by
the SEC or insofar as permitted by any order of the SEC applicable to the
Series. The Trustees may delegate any of their powers and duties under
this Article X with respect to appraisal of assets and liabilities. At
any time the Trustees may cause the Net Asset Value per Interest last
determined to be determined again in a similar manner and may fix the time
when such redetermined values shall become effective.
ARTICLE X
----------
CONFLICT OF INTEREST PROCEDURES
-------------------------------
Section 1. Monitoring And Reporting Conflicts. The trustees of Equity
Managers Trust, Neuberger & Berman Equity Trust and Neuberger & Berman
Equity Funds (collectively, the "Trusts") and every other Holder are the
same individuals. Set forth in this Article are procedures established to
address potential conflicts of interest that may arise between the Trusts.
On an ongoing basis, the investment adviser ("Manager") of Equity Managers
Trust shall be responsible for monitoring the Trusts for the existence of
any material conflicts of interest between the Trusts. The Manager shall
be responsible for reporting any potential or existing conflicts to
trustees of the Trusts as they may develop.
Section 2. Annual Report. The Manager shall report to the trustees of
the Trusts annually regarding its monitoring of the Trusts for conflicts
of interest.
Section 3. Resolution Of Conflicts. If a potential conflict of interest
arises, the Trustees shall take such action as is reasonably appropriate
to deal with the conflict, up to and including recommending a change in
the trustees and implementing such recommendation, consistent with
applicable law.
- 8 -
<PAGE>
ARTICLE I
PRINCIPAL OFFICE AND SEAL . . . . . . . . . 1
Section 1. Principal Office . . . . . . . . . . . . 1
Section 2. Seal . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF TRUSTEES . . . . . . . . . . 1
Section 1. Action by Trustees . . . . . . . . . . . 1
Section 2. Compensation of Trustees . . . . . . . . 1
ARTICLE III
COMMITTEES . . . . . . . . . . . . . 1
Section 1. Establishment . . . . . . . . . . . . . 1
Section 2. Proceedings; Quorum; Action . . . . . . 2
Section 3. Executive Committee . . . . . . . . . . 2
Section 4. Nominating Committee . . . . . . . . . . 2
Section 5. Audit Committee . . . . . . . . . . . . 2
Section 6. Compensation of Committee Members . . . 2
ARTICLE IV
OFFICERS . . . . . . . . . . . . . 2
Section 1. General . . . . . . . . . . . . . . . . 2
Section 2. Election, Tenure and Qualifications
of Officers . . . . . . . . . . . . . . . . . . . . 2
Section 3. Vacancies and Newly Created Offices . . 3
Section 4. Removal and Resignation . . . . . . . . 3
Section 5. Chairman . . . . . . . . . . . . . . . . 3
Section 6. President . . . . . . . . . . . . . . . 3
Section 7. Vice President(s) . . . . . . . . . . . 3
Section 8. Treasurer and Assistant Treasurer(s) . . 4
Section 9. Secretary and Assistant Secretaries . . 4
Section 10. Compensation of Officers . . . . . . . 4
Section 11. Surety Bond . . . . . . . . . . . . . . 4
ARTICLE V
MEETINGS OF HOLDERS . . . . . . . . . . . 5
Section 1. No Annual Meetings . . . . . . . . . . . 5
Section 2. Special Meetings . . . . . . . . . . . . 5
Section 3. Notice of Meetings; Waiver . . . . . . . 5
Section 4. Adjourned Meetings . . . . . . . . . . . 5
Section 5. Validity of Proxies . . . . . . . . . . 6
Section 6. Record Date . . . . . . . . . . . . . . 6
Section 7. Action Without a Meeting . . . . . . . . 7
ARTICLE VI
INTERESTS . . . . . . . . . . . . . 7
Section 1. No Interest Certificates . . . . . . . . 7
Section 2. Transfer of Interests . . . . . . . . . 7
ARTICLE VII
- 9 -
<PAGE>
FISCAL YEAR AND ACCOUNTANT . . . . . . . . . 7
Section 1. Fiscal Year . . . . . . . . . . . . . . 7
Section 2. Accountant . . . . . . . . . . . . . . . 7
ARTICLE VIII
AMENDMENTS . . . . . . . . . . . . . 8
Section 1. General . . . . . . . . . . . . . . . . 8
Section 2. By Holders Only . . . . . . . . . . . . 8
ARTICLE IX
NET ASSET VALUE . . . . . . . . . . . . 8
ARTICLE X
CONFLICT OF INTEREST PROCEDURES . . . . . . . . 8
Section 1. Monitoring and Reporting Conflicts . . . 8
Section 2. Annual Report . . . . . . . . . . . . . 9
Section 3. Resolution of Conflicts . . . . . . . . 9
- 10 -
<PAGE>
<PAGE>
CUSTODIAN CONTRACT
Between
EQUITY MANAGERS TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By It . . . . 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States . . . . 2
2.1 Holding Securities . . . . . . . . . . . . . . . . . . 2
2.2 Delivery of Securities . . . . . . . . . . . . . . . . 2
2.3 Registration of Securities . . . . . . . . . . . . . . 5
2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . 5
2.5 Availability of Federal Funds . . . . . . . . . . . . 5
2.6 Collection of Income . . . . . . . . . . . . . . . . . 6
2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . 6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . 8
2.9 Appointment of Agents . . . . . . . . . . . . . . . . 8
2.10 Deposit of Fund Assets in Securities System . . . . . 8
2.11 Fund Assets Held in the Custodian's
Direct Paper System . . . . . . . . . . . . . . . . . 9
2.12 Segregated Account . . . . . . . . . . . . . . . . . . 10
2.13 Ownership Certificates for Tax Purposes . . . . . . . 11
2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 Communications Relating to Portfolio Securities . . . 11
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States . . . . . . . . . . 12
3.1 Appointment of Foreign Sub-Custodians . . . . . . . 12
3.2 Assets to be Held . . . . . . . . . . . . . . . . . . 12
3.3 Foreign Securities Depositories . . . . . . . . . . . 12
3.4 Agreements with Foreign Banking Institutions . . . . . 12
3.5 Access of Independent Accountants of the Fund . . . . 13
3.6 Reports by Custodian . . . . . . . . . . . . . . . . . 13
3.7 Transactions in Foreign Custody Account . . . . . . . 13
3.8 Liability of Foreign Sub-Custodians . . . . . . . . . 14
3.9 Liability of Custodian . . . . . . . . . . . . . . . . 14
3.10 Reimbursement for Advances . . . . . . . . . . . . . . 15
3.11 Monitoring Responsibilities . . . . . . . . . . . . . 16
3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . 16
3.13 Foreign Exchange Transactions . . . . . . . . . . . . 17
3.14 Tax Law . . . . . . . . . . . . . . . . . . . . . . . 17
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . 18
5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . 19
6. Actions Permitted Without Express Authority . . . . . . . . . 19
7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income . . . . . . . . 20
9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Opinion of Fund's Independent Accountants . . . . . . . . . . 21
11. Reports to Fund by Independent Public Accountants . . . . . . 21
12. Compensation of Custodian . . . . . . . . . . . . . . . . . . 21
13. Responsibility of Custodian . . . . . . . . . . . . . . . . . 22
14. Effective Period, Termination and Amendment . . . . . . . . . 23
15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . 24
16. Interpretive and Additional Provisions . . . . . . . . . . . . 24
17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . 25
18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 25
19. Limitation of Trustee, Officer and Shareholder Liability . . . 25
20. No Liability of Other Portfolios . . . . . . . . . . . . . . . 26
21. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 26
22. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 26
23. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 26
24. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . 26
25. Shareholder Communications Election . . . . . . . . . . . . . 26
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Equity Managers Trust, a common law trust
organized and existing under the laws of New York, having its principal
place of business at 605 Third Avenue, New York, New York 10158
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in six
series, Neuberger & Berman Genesis Portfolio, Neuberger & Berman Guardian
Portfolio, Neuberger & Berman Partners Portfolio, Neuberger & Berman
Manhattan Portfolio, and Neuberger & Berman Selected Sectors Portfolio
(such series together with all other series subsequently established by
the Fund and made subject to this Contract in accordance with paragraph
17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the
assets of each Portfolio, including securities which the Fund, on behalf
of the applicable Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to be held
outside the United States ("foreign securities") pursuant to the
provisions of the Trust Instrument. The Fund on behalf of each Portfolio
agrees to deliver to the Custodian all securities and cash of the
Portfolios, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it
for such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be issued or
sold from time to time. The Custodian shall not be responsible for any
property of a Portfolio held or received by the Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Article 5), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians, located in the United
States but only in accordance with an applicable vote by the Board of
1
<PAGE>
Trustees of the Fund on behalf of the applicable Portfolio(s), and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the
Custodian. The Custodian may employ as sub-custodian for the Fund's
foreign securities on behalf of the applicable Portfolio(s) the foreign
banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held
By the Custodian in the United States
-----------------------------------------------------------------
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash
property, to be held by it in the United States including all
domestic securities owned by such Portfolio, other than (a)
securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities System"
and (b) commercial paper of an issuer for which State Street Bank
and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by a Portfolio held by the Custodian or
in a Securities System account of the Custodian or in the
Custodian's Direct Paper book entry system account ("Direct Paper
System Account") only upon receipt of Proper Instructions from
the Fund on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties,
and only in the following cases:
1) Upon sale of such securities for the account of the
Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Portfolio;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10
hereof;
4) To the depository agent in connection with tender or
other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become
2
<PAGE>
payable; provided that, in any such case, the cash or
other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into
the name of the Portfolio or into the name of any nominee
or nominees of the Custodian or into the name or nominee
name of any agent appointed pursuant to Section 2.9 or
into the name or nominee name of any sub-custodian
appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of
units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery" custom; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants,
rights or similar securities or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities
made by the Portfolio, BUT ONLY against receipt of
adequate collateral as agreed upon from time to time by
the Custodian and the Fund on behalf of the Portfolio,
which may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities, except that in connection with any
loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized
by the U.S. Department of the Treasury, the Custodian
will not be held liable or responsible for the delivery
3
<PAGE>
of securities owned by the Portfolio prior to the receipt
of such collateral;
11) For delivery as security in connection with any
borrowings by the Fund on behalf of the Portfolio
requiring a pledge of assets by the Fund on behalf of the
Portfolio, BUT ONLY against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and
a member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any
similar organization or organizations, regarding escrow
or other arrangements in connection with transactions by
the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits
in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Portfolio, for delivery to such
Transfer Agent or to the holders of shares in connection
with distributions in kind, as may be described from time
to time in the currently effective prospectus and
statement of additional information of the Fund, related
to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, BUT ONLY upon
receipt of, in addition to Proper Instructions from the
Fund on behalf of the applicable Portfolio, a certified
copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary,
specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be
made.
4
<PAGE>
2.3 Registration of Securities. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in
the name of the Portfolio or in the name of any nominee of the
Fund on behalf of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned exclusively to the
Portfolio, UNLESS the Fund has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same investment
adviser as the Portfolio, or in the name or nominee name of any
agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Portfolio
under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the
Custodian to maintain securities in "street name", the Custodian
shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best
efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or
exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the United States in the name of each
Portfolio of the Fund which shall contain only property held by
the Custodian as custodian for that Portfolio, subject only to
draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or
for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for a Portfolio may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or
desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Trustees of the
Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the
Fund on behalf of each applicable Portfolio and the Custodian,
the Custodian shall, upon the receipt of Proper Instructions from
the Fund on behalf of a Portfolio, make federal funds available
to such Portfolio as of specified times agreed upon from time to
time by the Fund and the Custodian in the amount of checks
5
<PAGE>
received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3,
the Custodian shall collect on a timely basis all income and
other payments with respect to registered domestic securities
held hereunder to which each Portfolio shall be entitled either
by law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other payments
with respect to bearer domestic securities if, on the date of
payment by the issuer, such securities are held by the Custodian
or its agent and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality
of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation
as and when they become due and shall collect interest when due
on securities held hereunder. Collection of income due each
Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Custodian so
long as the securities are registered and remain in the name of
the Fund, the Custodian, or its nominee, or in the Depository
Trust Company account of the Custodian, but otherwise shall be
the responsibility of the Fund and the Custodian will have no
duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be
necessary to assist the Fund in arranging for the timely delivery
to the Custodian of the income to which the Portfolio is properly
entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from
the Fund on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out monies of a Portfolio in the
following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for the
account of the Portfolio but only (a) against the
delivery of such securities or evidence of title to such
options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or
trust company doing business in the United States or
abroad which is qualified under the Investment Company
Act of 1940, as amended, to act as a custodian and has
been designated by the Custodian as its agent for this
purpose) registered in the name of the Portfolio or in
the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in
Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
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conditions set forth in Section 2.11; (d) in the case of
repurchase agreements entered into between the Fund on
behalf of the Portfolio and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate
form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities
or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement by
the Custodian to repurchase such securities from the
Portfolio or (e) for transfer to a time deposit account
of the Fund in any bank, whether domestic or foreign;
such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined
in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by
the Portfolio, including but not limited to the following
payments for the account of the Portfolio: interest,
taxes, management, accounting, transfer agent and legal
fees, and operating expenses of the Fund whether or not
such expenses are to be in whole or part capitalized or
treated as deferred expenses;
5) For the payment of any dividends on Shares of the
Portfolio declared pursuant to the governing documents of
the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on
behalf of the Portfolio, a certified copy of a resolution
of the Board of Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified
by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
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2.8 Liability for Payment in Advance of Receipt of Securities
Purchased. Except as specifically stated otherwise in this
Contract, in any and every case where payment for purchase of
domestic securities for the account of a Portfolio is made by the
Custodian in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the
Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, and its rules or
regulations to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from
time to time direct; PROVIDED, however, that the appointment of
any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets
of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities
of the Portfolio which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from
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the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making
of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the
Portfolio. Copies of all advices from the Securities
System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for
the Portfolio by the Custodian and be provided to the
Fund at its request. Upon request, the Custodian shall
furnish the Fund on behalf of the Portfolio confirmation
of each transfer to or from the account of the Portfolio
in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's
transactions in the Securities System for the account of
the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio
with any report obtained by the Custodian (or by any
agent appointed by the Custodian pursuant to Section 2.9)
on the Securities System's accounting system, internal
accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf
of the Portfolio the certificate required by Article 14
hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the
Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the
Securities System; at the election of the Fund, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if
and to the extent that the Portfolio has not been made
whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to
the following provisions:
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1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are
represented in an account ("Account") of the Custodian in
the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities
of the Portfolio which are maintained in the Direct Paper
System shall identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio.
The Custodian shall transfer securities sold for the
account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and
receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the
account of the Portfolio, in the form of a written advice
or notice, of Direct Paper on the next business day
following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction
sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on the Custodian's system of
internal accounting control as the Fund may reasonably
request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and
on behalf of each such Portfolio, into which account or accounts
may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section
2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity
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Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written
by the Portfolio or commodity futures contracts or options
thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures
required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, BUT ONLY, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions from the Fund on
behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to domestic securities of
each Portfolio held by it and in connection with transfers of
securities.
2.14 Proxies. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the
registered holder of such securities, if the securities are
registered otherwise than in the name of the Portfolio or a
nominee of the Portfolio, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly
to the Fund for each Portfolio all written information
(including, without limitation, pendency of calls and maturities
of domestic securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio) received by
the Custodian from issuers of the securities being held for the
Portfolio. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Portfolio all written
information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the
Portfolio desires to take action with respect to any tender
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offer, exchange offer or any other similar transaction, the
Portfolio shall when reasonably possible notify the Custodian at
least three business days prior to the date on which the
Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
-----------------------------------------------------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby
authorizes and instructs the Custodian to employ as
sub-custodians for each Portfolio's securities and other assets
maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on
Schedule A hereto ("foreign sub-custodians"). Upon receipt of
"Proper Instructions", as defined in Section 5 of this Contract,
together with a certified resolution of the Fund's Board of
Trustees, the Custodian and the Fund may agree to amend Schedule
A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act
as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or
more such sub-custodians for maintaining custody of a Portfolio's
assets.
3.2 Assets to be Held. The Custodian shall limit the securities and
other assets maintained in the custody of the foreign
sub-custodians to: (a) "foreign securities", as defined in
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act
of 1940, and (b) cash and cash equivalents in such amounts as
the Custodian or the Fund may determine to be reasonably
necessary to effect a Portfolio's foreign securities
transactions. The Custodian shall identify on its books as
belonging to each Portfolio, the foreign securities of the
Portfolio held by each foreign sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be
agreed upon in writing by the Custodian and the Fund, assets of
each Portfolio shall be maintained in foreign securities
depositories only through arrangements implemented by the foreign
banking institutions serving as sub-custodians pursuant to the
terms hereof. Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in
Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement
with a foreign banking institution shall be substantially in the
form set forth in Exhibit 1 hereto and shall provide that: (a)
the assets of each Portfolio will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of
the foreign banking institution or its creditors or agent, except
a claim of payment for their safe custody or administration; (b)
beneficial ownership for the assets of each Portfolio will be
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freely transferable without the payment of money or value other
than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants
for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its
agreement with the Custodian; and (e) assets of each Portfolio
held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of
the Fund, the Custodian will use its best efforts to arrange for
the independent accountants of the Fund to be afforded access to
the books and records of any foreign banking institution employed
as a foreign sub-custodian insofar as such books and records
relate to the performance of such foreign banking institution
under its agreement with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from
time to time, as mutually agreed upon, statements in respect of
the securities and other assets of each Portfolio held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of each Portfolio's securities and
other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a
foreign banking institution for the Custodian on behalf of each
applicable Portfolio indicating, as to securities acquired for a
Portfolio, the identity of the entity having physical possession
of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS
MUTANDIS to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the
contrary, settlement and payment for securities received for the
account of each applicable Portfolio and delivery of securities
maintained for the account of each applicable Portfolio may be
effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser
or dealer.
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(c) Securities maintained in the custody of a foreign
sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless
from any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to
which the Custodian employs a foreign banking institution as a
foreign sub-custodian shall require the institution to exercise
reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Custodian and the Fund from and
against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a foreign banking institution
as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense,
liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the
acts or omissions of a foreign banking institution to the same
extent as set forth with respect to sub-custodians generally in
this Contract and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated
by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or
acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.9, in delegating custody
duties to State Street London Ltd., the Custodian shall not be
relieved of any responsibility to the Fund for any loss due to
such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other
losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or the like, in each case under circumstances
where the Custodian and State Street London Ltd. have exercised
reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian
to advance cash or securities for any purpose for the benefit of
a Portfolio including the purchase or sale of foreign exchange or
of contracts for foreign exchange ("Advance"), or in the event
that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as
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<PAGE>
may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct ("Liability") then
in such event property equal in value to not more than 125% of
such Advance and accrued interest on the Advance or the
anticipated amount of such Liability, held at any time for the
account of the appropriate Portfolio by the Custodian or sub-
custodian may be held as security for such Liability or for such
Advance and accrued interest on the Advance. The Custodian shall
designate the security or securities constituting security for an
Advance or Liability (the "Designated Securities") by notice in
writing to the Fund (which may be sent by tested telefax or
telex). In the event the value of the Designated Securities shall
decline to less than 110% of the amount of such Advance and
accrued interest on the Advance or the anticipated amount of such
Liability, then the Custodian may designate in the same manner an
additional security for such obligation ("Additional
Securities"), but the aggregate value of the Designated
Securities and Additional Securities shall not be in excess of
125% of the amount of such Advance and the accrued interest on
the Advance or the anticipated amount of such Liability. At the
request of the Fund, on behalf of a Portfolio, the Custodian
shall agree to substitution of a security or securities which
have a value equal to the value of the Designated or Additional
Securities which the Fund desires be released from their status
as security, and such release from status as security shall be
effective upon the Custodian and the Fund agreeing in writing as
to the identity of the substituted security or securities, which
shall thereupon become Designated Securities.
Notwithstanding the above, the Custodian shall, at the request of
the Fund, on behalf of a Portfolio, immediately release from
their status as security any or all of the Designated Securities
or Additional Securities upon the Custodian's receipt from such
of Portfolio cash or cash equivalents in an amount equal to 100%
of the value of the Designated Securities or Additional
Securities that the Fund desires to be released from their status
as security pursuant to this Section. The applicable Portfolio
shall reimburse or indemnify the Custodian in respect of a
Liability and shall pay any Advances upon demand; provided,
however, that the Custodian first notified the Fund on behalf of
the Portfolio of such demand for repayment, reimbursement or
indemnification. If, upon notification, the Portfolio shall fail
to pay such Advance or interest when due or shall fail to
reimburse or indemnify the Custodian promptly in respect of a
Liability, the Custodian shall be entitled to dispose of the
Designated Securities and Additional Securities to the extent
necessary to obtain repayment, reimbursement or indemnification.
Interest, dividends and other distributions paid or received on
the Designated Securities and Additional Securities, other than
payments of principal or payments upon retirement, redemption or
repurchase, shall remain the property of the Portfolio, and shall
not be subject to this Section. To the extent that the
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<PAGE>
disposition of the Portfolio's property, designated as security
for such Advance or Liability, results in an amount less than
necessary to obtain repayment, reimbursement or indemnification,
the Portfolio shall continue to be liable to the Custodian for
the differences between the proceeds of the disposition of the
Portfolio's property, designated as security for such Advance or
Liability, and the amount of the repayment, reimbursement or
indemnification due to the Custodian and the Custodian shall have
the right to designate in the same manner described above an
additional security for such obligation which shall constitute
Additional Securities hereunder.
3.11 Monitoring Responsibilities. The Custodian shall furnish
annually to the Fund, during the month of June, information
concerning the foreign sub-custodians employed by the Custodian.
Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial approval of
this Contract. In addition, the Custodian will promptly inform
the Fund in the event that the Custodian learns of a material
adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or
in the case of any foreign sub-custodian not the subject of an
exemptive order from the Securities and Exchange Commission is
notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in
each case computed in accordance with generally accepted U.S.
accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in
this Contract, the provisions hereof shall not apply where the
custody of a Portfolio's assets are maintained in a foreign
branch of a banking institution which is a "bank" as defined by
Section 2(a)(5) of the Investment Company Act of 1940 meeting the
qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United
Kingdom shall be maintained in an interest bearing account
established for the Fund with the Custodian's London branch,
which account shall be subject to the direction of the Custodian,
State Street London Ltd. or both.
3.13 Foreign Exchange Transactions. (a) Upon receipt of Proper
Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for
spot and future delivery on behalf of and for the account of a
Portfolio with such brokers, banks or trust companies other than
the Custodian ("Currency Brokers") as the Fund may determine and
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<PAGE>
direct pursuant to Proper Instructions or as the Custodian may
select ("Transactions Other Than As Principal").
(b) The Custodian shall not be obligated to enter into foreign
exchange transactions as principal ("Transactions As Principal").
However, if the Custodian has made available to the Fund its
services as a principal in foreign exchange transactions and
subject to any separate agreement between the parties relating to
such transactions, the Custodian shall enter into foreign
exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf of and for the
account of a Portfolio, with the Custodian as principal.
(c) If, in a Transaction Other Than As Principal, a Currency
Broker is selected by the Fund, on behalf of a Portfolio, the
Custodian shall have no duty with respect to the selection of the
Currency Broker, or, so long as the Custodian acts in accordance
with Proper Instructions, for the failure of such Currency Broker
to comply with the terms of any contract or option. If, in a
Transaction Other Than As Principal, the Currency Broker is
selected by the Custodian or if the Custodian enters into a
Transaction As Principal, the Custodian shall be responsible for
the selection of the Currency Broker and the failure of such
Currency Broker to comply with the terms of nay contract or
option.
(d) In Transactions Other Than As Principal and Transactions
As Principal, the Custodian shall be responsible for any transfer
of cash, the transmission of instructions to and from a Currency
Broker, if any, the safekeeping of all certificates and other
documents and agreements evidencing or relating to such foreign
exchange transactions and the maintenance of proper records as
set forth in Section 9 of this Contract.
3.14 Tax Law. Except to the extent that imposition of any tax
liability arises from State Street's failure to perform in
accordance with the terms of this Section 3.14 or from the
failure of any sub-custodian to perform in accordance with the
terms of the applicable subcustody agreement, State Street shall
have no responsibility or liability for any obligations now or
hereafter imposed on each Portfolio by the tax law of the
domicile of each Portfolio or of any jurisdiction in which each
Portfolio is invested or any political subdivision thereof. It
shall be the responsibility of State Street to use due care to
perform such steps as are required to collect any tax refund, to
ascertain the appropriate rate of tax withholding and to provide
such information and documents as may be required to enable each
Portfolio to receive appropriate tax treatment under applicable
tax laws and any applicable treaty provisions. Unless otherwise
informed by each Portfolio, State Street, in performance of its
duties under this Section, shall be entitled to apply categorical
treatment of each Portfolio according to the nationality of each
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Portfolio, the particulars of its organization and other relevant
details that shall be supplied by each Portfolio. State Street
shall be entitled to rely on any information supplied by each
Portfolio. State Street may engage reasonable professional
advisors disclosed to each Portfolio by State Street, which may
include attorneys, accountants or financial institutions in the
regular business of investment administration and may rely upon
advice received therefrom. It shall be the duty of each
Portfolio to inform State Street of any change in the
organization, domicile or other relevant fact concerning tax
treatment of each Portfolio and further to inform State Street if
each Portfolio is or becomes the beneficiary of any special
ruling or treatment not applicable to the general nationality and
category of entity of which each Portfolio is a part under
general laws and treaty provisions.
4. Payments for Sales or Repurchases or Redemptions of Shares of the
Fund
-----------------------------------------------------------------
The Custodian shall receive from the distributor for the Shares
or from the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian
will provide timely notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
From such funds as may be available for the purpose but subject
to the limitations of the Trust Instrument and any applicable votes of the
Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with
the redemption or repurchase of Shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares
of the Fund, the Custodian shall honor checks drawn on the Custodian by a
holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a
writing signed or initialled by two or more person or persons as the Board
of Trustees shall have from time to time authorized. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
18
<PAGE>
requested. Oral instructions will be considered Proper Instructions if
the Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board
of Trustees, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that
the Fund and the Custodian are satisfied that such procedures afford
adequate safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which requires a
segregated asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority
from the Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to
its duties under this Contract, PROVIDED that all such
payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Portfolio except as otherwise
directed by the Board of Trustees of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly executed by or on
behalf of the Fund. The Custodian may receive and accept a certified copy
of a vote of the Board of Trustees of the Fund as conclusive evidence (a)
of the authority of any person to act in accordance with such vote or (b)
of any determination or of any action by the Board of Trustees pursuant to
the Trust Instrument as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
19
<PAGE>
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
------------------------------------------------------------
If, and to the extent requested by the Fund, the Custodian shall
cooperate with and supply necessary information to the entity or entities
appointed by the Board of Trustees of the Fund to keep the books of
account of each Portfolio and/or compute the net asset value per share of
the outstanding shares of each Portfolio or, if directed in writing to do
so by the Fund on behalf of the Portfolio, shall itself keep such books of
account and/or compute such net asset value per share. If so directed,
the Custodian shall also calculate daily the net income of the Portfolio
as described in the Fund's currently effective prospectus related to such
Portfolio and shall advise the Fund and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent periodically
of the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time
in the Fund's currently effective prospectus related to such Portfolio.
9. Records
-------
The Custodian shall with respect to each Portfolio create and
maintain all records relating to its activities and obligations under this
Contract in such manner as will meet the obligations of the Fund under the
Investment Company Act of 1940, with particular attention to Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be
the property of the Fund and shall at all times during the regular
business hours of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each
Portfolio and held by the Custodian and shall, when requested to do so by
the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund on
behalf of each applicable Portfolio may from time to time request, to
obtain from year to year favorable opinions from the Fund's independent
accountants with respect to its activities hereunder in connection with
the preparation of the Fund's Form N-1A, and Form N-SAR or other annual
reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
20
<PAGE>
The Custodian shall provide the Fund, on behalf of each Portfolio
at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the services
provided by the Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required
by the Fund to provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for
its services and expenses as Custodian, as agreed upon from time to time
between the Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall be
held harmless in acting upon any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed
by the proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options
agreement. The Custodian shall be held to the exercise of reasonable care
in carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice.
As a condition to the indemnification provided for in this
Section 13, if in any case the indemnifying party is asked to indemnify
and hold the indemnified party harmless, the indemnified party shall fully
and promptly advise the indemnifying party of all pertinent facts
concerning the situation in question, and shall use all reasonable care to
identify, and promptly notify the indemnifying party of, any situation
which presents or appears likely to present the probability of such a
claim for indemnification against the indemnifying party. The
indemnifying party shall be entitled, at its own expense, to participate
in the investigation and to be consulted as to the defense of any such
claim, and in such event, the indemnified party shall keep the
indemnifying party fully and currently informed of all developments
relating to such investigation or defense. At any time, the indemnifying
party shall be entitled at its own expense to conduct the defense of any
21
<PAGE>
such claim, provided that the indemnifying party: (a) reasonably
demonstrates to the other party its ability to pay the full amount of
potential liability in connection with such claim and (b) first admits in
writing to the other party that such claim is one in respect of which the
indemnifying party is obligated to indemnify the other party hereunder.
Upon satisfaction of the foregoing conditions, the indemnifying party
shall take over complete defense of the claim, and the indemnified party
shall initiate no further legal or other expenses for which it shall seek
indemnification. The indemnified party shall in no case confess any claim
or make any compromise in any case in which the indemnifying party may be
asked to indemnify the indemnified party, except with the indemnifying
party's prior written consent.
If the Fund on behalf of a Portfolio requires the Custodian to
take any action with respect to securities, which action involves the
payment of money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund or the
Portfolio being liable for the payment of money or incurring liability of
some other form, the Fund on behalf of the Portfolio, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect with respect to each Portfolio until
terminated as hereinafter provided, may be amended at any time by mutual
agreement of the parties hereto and may be terminated by either party by
an instrument in writing delivered or mailed, postage prepaid to the other
party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; PROVIDED, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10
hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the
Fund has approved the use of a particular Securities System by such
Portfolio as required by Rule 17f-4 under the Investment Company Act of
1940, as amended and that the Custodian shall not with respect to a
Portfolio act under Section 2.11 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System
by such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has
reviewed the use by such Portfolio of the Direct Paper System; PROVIDED
FURTHER, however, that the Fund shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or any
provision of the Trust Instrument, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its
Board of Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the
22
<PAGE>
Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may
be due as of the date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements. Termination of the
Contract with respect to one Portfolio (but less than all of the
Portfolios) will not constitute termination of the Contract, and the terms
of the Contract continue to apply to the other Portfolios.
15. Successor Custodian
-------------------
If a successor custodian for the Fund, of one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer,
all securities of each applicable Portfolio then held by it hereunder and
shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of Trustees of the Fund, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall have
been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as defined
in the Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less
than $25,000,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held
by the Custodian relative thereto and all other property held by it under
this Contract on behalf of each applicable Portfolio and to transfer to an
account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain
in the possession of the Custodian after the date of termination hereof
owing to failure of the Fund to procure the certified copy of the vote
referred to or of the Board of Trustees to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities,
funds and other properties and the provisions of this Contract relating to
23
<PAGE>
the duties and obligations of the Custodian shall remain in full force and
effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian
and the Fund on behalf of each of the Portfolios, may from time to time
agree on such provisions interpretive of or in addition to the provisions
of this Contract as may in their joint opinion be consistent with the
general tenor of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional
provisions shall contravene any applicable federal or state regulations or
any provision of the Trust Instrument of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of
Shares in addition to Neuberger & Berman Genesis Portfolio, Neuberger &
Berman Guardian Portfolio, Neuberger & Berman Partners Portfolio,
Neuberger & Berman Manhattan Portfolio, and Neuberger & Berman Selected
Sectors Portfolio with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify
the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio
hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
19. Limitation of Trustee, Officer and Shareholder Liability
--------------------------------------------------------
It is expressly agreed that the obligations of the Fund and each
Portfolio hereunder shall not be binding upon any of the Trustees,
officers, agents or employees of the Fund or upon the shareholders of any
Portfolio personally, but shall only bind the assets and property of the
Fund, as provided in its Trust Instrument. The execution and delivery of
this Contract have been authorized by the Trustees of the Fund, and this
Contract has been executed and delivered by an authorized officer of the
Fund acting as such; neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them
24
<PAGE>
personally, but shall bind only the assets and property of the Fund, as
provided in its Trust Instrument.
20. No Liability of Other Portfolios
--------------------------------
Notwithstanding any other provision of this Contract, the parties
agree that the assets and liabilities of each Portfolio are separate and
distinct from the assets and liabilities of each other Portfolio and that
no Portfolio shall be liable or shall be charged for any debt, obligation
or liability of any other Portfolio, whether arising under this Contract
or otherwise.
21. Confidentiality
---------------
The Custodian agrees that all books, records, information and
data pertaining to the business of the Fund which are exchanged or
received pursuant to the negotiation or carrying out of this Contract
shall remain confidential, shall not be voluntarily disclosed to any
other person, except as may be required by law, and shall not be used by
the Custodian for any purpose not directly related to the business of the
Fund, except with the Fund's written consent.
22. Assignment
----------
Neither the Fund nor the Custodian shall have the right to assign
any of its rights or obligations under this Contract without the prior
written consent of the other party.
23. Severability
------------
If any provision of this Contract is held to be unenforceable as
a matter of law, the other terms and provisions hereof shall not be
affected thereby and shall remain in full force and effect.
24. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund on behalf of each of the Portfolios,
or any predecessor(s) thereto, and the Custodian relating to the custody
of the Fund's assets.
25. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks
which hold securities for the account of customers to respond to requests
by issuers of securities for the names, addresses and holdings of
25
<PAGE>
beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information.
In order to comply with the rule, the Custodian needs the Fund to indicate
whether it authorizes the Custodian to provide the Fund's name, address,
and share position to requesting companies whose securities the Fund owns.
If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian
"yes" or does not check either "yes" or "no" below, the Custodian is
required by the rule to treat the Fund as consenting to disclosure of this
information for all securities owned by the Fund or any funds or accounts
established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below
whether the Fund consents or objects by checking one of the alternatives
below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [x] The Custodian is not authorized to release the
Fund's name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 2nd day of
August, 1993.
ATTEST EQUITY MANAGERS TRUST
/s/ Claudia A. Brandon /s/ Stanley Egener
---------------------- By ------------------------------
Claudia A. Brandon Stanley Egener
CEO
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Officer /s/ Ronald E. Logue
_____________________ By ---------------------------------
Ronald E. Logue
Executive Vice President
26
<PAGE>
<PAGE>
SCHEDULE A
EQUITY MANAGERS TRUST
NEUBERGER & BERMAN EQUITY FUNDS
NEUBERBER & BERMAN EQUITY TRUST
(Focus, Genesis, Guardian, Manhattan, Partners,
and Socially Responsive Series)
The following foreign banking institutions and foreign securities
depositories have been approved by the boards of trustees of the above-
mentioned trusts for use by the indicated series of the trust as sub-
custodians for the securities and other assets:
Westpac Banking Corp. (Austraclear Ltd. and Reserve Bank Information and
Transfer System) (Australia)
GiroCredit Bank Aktiengesellschaft der Sparkassen (OEKB)
(Austria)
Generale Bank (Banque Nationale de Belgique) (C.I.K.) (Belgium)
Canada Trustco Mortgage Company (CDS) (Canada)
Den Danske Bank (VP-Centralen) (Denmark)
Merita Bank Limited (Central Share Register) (Finland)
Banque Paribas (Banque de France) (SICOVAM) (France)
BHF-Bank Aktiengesellschaft (Kassenverein) (Germany)
Standard Chartered Bank Hong Kong (CCASS) (Hong Kong)
Bank of Ireland (The Gilt Settlement Office) (Ireland)
Morgan Guaranty Trust Company (Banca d'Italia and Monte Titoli S.p.A.)
(Italy)
Daiwa Bank, Limited, and Sumitomo Trust & Banking Company, Limited
(JASDEC/Bank of Japan) (Japan)
Standard Chartered Bank Malaysia Berhad (MCD) (Malaysia)
Citibank, S.A.-Mexico (Banco de Mexico and INDEVAL) (Mexico)
MeesPierson N.V. (NECIGEF) (The Netherlands)
ANZ Banking Group (NZ) Ltd. (Austraclear N.Z.) (New Zealand)
Christiania Bank Og Kreditkasse (VPS) (Norway)
Banco Comercial Portugues (Central de Valores Mobiliarios) (Portugal)
<PAGE>
The Development Bank of Singapore, Ltd. (CDP) (Singapore)
Banco Santander, S.A. (SCLU/Banco de Espana) (Spain)
Skandinaviska Enskilda Banken (VPC) (Sweden)
Union Bank of Switzerland (SEGA) (Switzerland)
State Street Bank and Trust Co., and State Street London Limited (The
Central Gilts Office and The Central Moneymarkets Office) (United Kingdom)
Euroclear
A-2
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger & Berman Focus Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 04
<NAME> NEUBERGER & BERMAN FOCUS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 674,159
<INVESTMENTS-AT-VALUE> 984,159
<RECEIVABLES> 6,693
<ASSETS-OTHER> 36
<OTHER-ITEMS-ASSETS> 96
<TOTAL-ASSETS> 990,984
<PAYABLE-FOR-SECURITIES> 17,447
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,364
<TOTAL-LIABILITIES> 21,811
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 557,907
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 15,139
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 88,309
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 307,818
<NET-ASSETS> 969,173
<DIVIDEND-INCOME> 10,454
<INTEREST-INCOME> 1,097
<OTHER-INCOME> 0
<EXPENSES-NET> (4,055)
<NET-INVESTMENT-INCOME> 7,496
<REALIZED-GAINS-CURRENT> 50,732
<APPREC-INCREASE-CURRENT> 139,750
<NET-CHANGE-FROM-OPS> 197,978
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 324,162
<ACCUMULATED-NII-PRIOR> 7,643
<ACCUMULATED-GAINS-PRIOR> 37,577
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,758
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,055
<AVERAGE-NET-ASSETS> 714,153
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger & Berman Genesis Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 03
<NAME> NEUBERGER & BERMAN GENESIS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 108,413
<INVESTMENTS-AT-VALUE> 141,999
<RECEIVABLES> 487
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 178
<TOTAL-ASSETS> 142,675
<PAYABLE-FOR-SECURITIES> 385
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129
<TOTAL-LIABILITIES> 515
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,366
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 601
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,607
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,586
<NET-ASSETS> 142,160
<DIVIDEND-INCOME> 1,508
<INTEREST-INCOME> 77
<OTHER-INCOME> 0
<EXPENSES-NET> (1,250)
<NET-INVESTMENT-INCOME> 335
<REALIZED-GAINS-CURRENT> 6,666
<APPREC-INCREASE-CURRENT> 17,448
<NET-CHANGE-FROM-OPS> 24,449
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,591
<ACCUMULATED-NII-PRIOR> 266
<ACCUMULATED-GAINS-PRIOR> 5,941
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,135
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,295
<AVERAGE-NET-ASSETS> 133,493
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger & Berman Guardian Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER & BERMAN GUARDIAN PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 3,590,685
<INVESTMENTS-AT-VALUE> 4,736,345
<RECEIVABLES> 25,961
<ASSETS-OTHER> 125
<OTHER-ITEMS-ASSETS> 32
<TOTAL-ASSETS> 4,762,463
<PAYABLE-FOR-SECURITIES> 61,722
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87,545
<TOTAL-LIABILITIES> 149,267
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,237,636
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 91,725
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 147,623
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,136,212
<NET-ASSETS> 4,613,196
<DIVIDEND-INCOME> 51,765
<INTEREST-INCOME> 17,135
<OTHER-INCOME> 0
<EXPENSES-NET> (15,110)
<NET-INVESTMENT-INCOME> 53,790
<REALIZED-GAINS-CURRENT> 124,394
<APPREC-INCREASE-CURRENT> 627,968
<NET-CHANGE-FROM-OPS> 806,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,132,860
<ACCUMULATED-NII-PRIOR> 37,935
<ACCUMULATED-GAINS-PRIOR> 23,229
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,274
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,110
<AVERAGE-NET-ASSETS> 3,123,421
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger & Berman Manhattan Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> NEUBERGER & BERMAN MANHATTAN PORTFOLIO
<SERIES>
<NUMBER> 02
<NAME> EQUITY MANAGERS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 502,959
<INVESTMENTS-AT-VALUE> 659,762
<RECEIVABLES> 1,833
<ASSETS-OTHER> 37
<OTHER-ITEMS-ASSETS> 1,047
<TOTAL-ASSETS> 662,679
<PAYABLE-FOR-SECURITIES> 2,583
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,690
<TOTAL-LIABILITIES> 17,273
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 406,837
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5,190
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 76,576
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 156,803
<NET-ASSETS> 645,406
<DIVIDEND-INCOME> 4,992
<INTEREST-INCOME> 344
<OTHER-INCOME> 0
<EXPENSES-NET> (3,130)
<NET-INVESTMENT-INCOME> 2,206
<REALIZED-GAINS-CURRENT> 44,742
<APPREC-INCREASE-CURRENT> 85,917
<NET-CHANGE-FROM-OPS> 132,865
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 123,671
<ACCUMULATED-NII-PRIOR> 2,984
<ACCUMULATED-GAINS-PRIOR> 31,834
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,832
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,130
<AVERAGE-NET-ASSETS> 528,830
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger & Berman Partners Portfolio Annual Report and is qualified in its
entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 05
<NAME> NEUBERGER & BERMAN PARTNERS PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 1,358,401
<INVESTMENTS-AT-VALUE> 1,616,574
<RECEIVABLES> 20,084
<ASSETS-OTHER> 81
<OTHER-ITEMS-ASSETS> 6
<TOTAL-ASSETS> 1,636,745
<PAYABLE-FOR-SECURITIES> 12,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 780
<TOTAL-LIABILITIES> 13,219
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,069,830
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26,044
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 269,479
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 258,173
<NET-ASSETS> 1,623,526
<DIVIDEND-INCOME> 20,770
<INTEREST-INCOME> 2,770
<OTHER-INCOME> 0
<EXPENSES-NET> (7,309)
<NET-INVESTMENT-INCOME> 15,524
<REALIZED-GAINS-CURRENT> 165,254
<APPREC-INCREASE-CURRENT> 109,257
<NET-CHANGE-FROM-OPS> 290,035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 283,242
<ACCUMULATED-NII-PRIOR> 10,520
<ACCUMULATED-GAINS-PRIOR> 104,225
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,830
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,309
<AVERAGE-NET-ASSETS> 1,378,999
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger & Berman Socially Responsive Portfolio Annual Report and is qualified
in its entirety by reference to such document.
</LEGEND>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER & BERMAN SOCIALLY RESPONSIVE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 83,395
<INVESTMENTS-AT-VALUE> 97,603
<RECEIVABLES> 135
<ASSETS-OTHER> 24
<OTHER-ITEMS-ASSETS> 56
<TOTAL-ASSETS> 97,818
<PAYABLE-FOR-SECURITIES> 998
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73
<TOTAL-LIABILITIES> 1,071
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 80,146
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,330
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,063
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,208
<NET-ASSETS> 96,747
<DIVIDEND-INCOME> 1,189
<INTEREST-INCOME> 269
<OTHER-INCOME> 0
<EXPENSES-NET> (533)
<NET-INVESTMENT-INCOME> 925
<REALIZED-GAINS-CURRENT> 1,842
<APPREC-INCREASE-CURRENT> 12,075
<NET-CHANGE-FROM-OPS> 14,842
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 283,242
<ACCUMULATED-NII-PRIOR> 405
<ACCUMULATED-GAINS-PRIOR> (779)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 533
<AVERAGE-NET-ASSETS> 78,399
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
