As filed with the Securities and Exchange Commission on December 24, 1996
1933 Act Registration No. 33-82568
1940 Act Registration No. 811-8106
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [__X__]
Pre-Effective Amendment No. _____ [_____]
Post-Effective Amendment No. __4__ [__X__]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [__X__]
Amendment No. __6__ [__X__]
(Check appropriate box or boxes)
NEUBERGER & BERMAN EQUITY ASSETS
(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
Neuberger & Berman Equity Assets
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington, D.C. 20036-1800
(Names and Addresses of agents for service)
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective:
_X_ immediately upon filing pursuant to paragraph (b)
___ on __________ pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on __________ pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on __________ pursuant to paragraph (a)(2)
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended, and filed the notice required by
such rule for its 1996 fiscal year on October 29, 1996.
Neuberger & Berman Equity Assets is a "master/feeder fund." This Post-
Effective Amendment No. 4 includes a signature page for the master fund, Equity
Managers Trust, and appropriate officers and trustees thereof.
Page _______ of _______
Exhibit Index Begins on
Page _______
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 4 on Form N-1A
Cross Reference Sheet
NEUBERGER & BERMAN SOCIALLY RESPONSIVE TRUST
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
No change is intended to be made by this Post-Effective Amendment No. 4
to the prospectus or statement of additional information for Neuberger & Berman
Manhattan Assets, Neuberger & Berman Focus Assets, Neuberger & Berman Guardian
Assets, and Neuberger & Berman Partners Assets.
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
Cross Reference Sheet
This cross reference sheet relates to the Prospectus
and Statement of Additional Information for:
Neuberger & Berman Socially Responsive Trust
--------------------------------------------
<TABLE>
<CAPTION>
Form N-1A Item No. Caption In Part A Prospectus
------------------ ----------------------------
<S> <C> <C>
Item 1. Cover Page Front Cover Page
Item 2. Synopsis Expense Information; Summary
Item 3. Condensed Financial Performance Information
Information
Item 4. General Description of Investment Program; Description of
Registrant Investments; Special Information Regarding
Organization, Capitalization, and Other
Matters
Item 5. Management of the Fund Management and Administration;
Other Information;
Back Cover Page
Item 6. Capital Stock and Front Cover Page; Dividends, Other
Other Securities Distributions, and Taxes; Special
Information Regarding Organization,
Capitalization, and Other Matters
Item 7. Purchase of Securities Shareholder Services; Share Prices and Net
Being Offered Asset Value; Management and Administration
Item 8. Redemption or Shareholder Services; Share
Repurchase Prices and Net Asset Value
Item 9. Pending Legal Not Applicable
Proceedings
<PAGE>
Caption in Part B
Form N-1A Item No. Statement Of Additional Information
----------------- -----------------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information Not Applicable
and History
Item 13. Investment Objectives Investment Information; Certain
and Policies Risk Considerations
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Not Applicable
Principal Holders of
Securities
Item 16. Investment Advisory Investment Management and
and Other Services Administration Services; Trustees and
Officers; Distribution Arrangements;
Reports To Shareholders; Custodian and
Transfer Agent; Independent Accountants
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Investment Information; Additional
Other Securities Redemption Information; Dividends and
Other Distributions
Item 19. Purchase and Additional Exchange Information;
Redemption Additional Redemption Information;
Distribution Arrangements
Item 20. Tax Status Dividends and Other Distributions;
Additional Tax Information
Item 21. Underwriters Investment Management and Administration
Services; Distribution Arrangements
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective Amendment No. 4.
<PAGE>
Neuberger&Berman SOCIALLY RESPONSIVE TRUST(SERVICEMARK)
- --------------------------------------------------------------------------------
A NO-LOAD EQUITY FUND
Neuberger&Berman SOCIALLY RESPONSIVE TRUST ("Fund") is an equity fund that seeks
long-term capital appreciation through investments primarily in securities of
companies that meet both financial and social criteria.
The Fund was created for investors who are concerned about the
relationship between business and society and are seeking to invest their assets
in a manner consistent with their social sensibilities.
You can buy, own, and sell fund shares only through an account with a
pension plan administrator, broker-dealer, or other institution (each an
"Institution") that provides accounting, recordkeeping, and other services to
investors and that has an administrative services agreement with
Neuberger&Berman Management Incorporated ("N&B Management").
- --------------------------------------------------------------------------------
THE FUND, WHICH IS A SERIES OF NEUBERGER&BERMAN EQUITY ASSETS (THE
"TRUST"), INVESTS ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER&BERMAN SOCIALLY
RESPONSIVE PORTFOLIO ("PORTFOLIO") OF EQUITY MANAGERS TRUST ("MANAGERS TRUST"),
AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY N&B MANAGEMENT. THE
PORTFOLIO INVESTS IN SECURITIES IN ACCORDANCE WITH AN INVESTMENT OBJECTIVE,
POLICIES, AND LIMITATIONS IDENTICAL TO THOSE OF THE FUND. THE INVESTMENT
PERFORMANCE OF THE FUND DIRECTLY CORRESPONDS WITH THE INVESTMENT PERFORMANCE OF
THE PORTFOLIO. THIS "MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF
MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES. FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU
SHOULD CONSIDER, SEE "SUMMARY" ON PAGE 1 AND "SPECIAL INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS" ON PAGE 7.
The Portfolio seeks to achieve its objective by investing in securities
considered by N&B Management to be undervalued in relation to recognized
measures of their fundamental economic values, such as earnings, cash flow,
tangible book value, and asset value. For a description of the investment
policies and techniques of the Portfolio, see "Investment Program" and
"Description of Investments."
The Fund is a no-load mutual fund, so you pay no sales commissions or
other charges when you buy or redeem shares. The Fund does not pay "12b-1 fees"
to promote or distribute its shares.
Please read this Prospectus before investing in the Fund and keep it
for future reference. It contains information about the Fund that a prospective
investor should know before investing. A Statement of Additional Information
("SAI") about the Fund and Portfolio, dated December 24, 1996, is on file with
the Securities and Exchange Commission ("SEC"). The SAI is incorporated herein
by reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy by calling N&B Management at 800-877-9700.
<PAGE>
PROSPECTUS DATED DECEMBER 24, 1996
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE
FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
ii
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TABLE OF CONTENTS
Page
----
SUMMARY.................................................................... 1
The Fund and Portfolio; Risk Factors....................................... 2
Management................................................................. 2
The Neuberger&Berman Investment Approach................................... 2
EXPENSE INFORMATION........................................................ 2
Shareholder Transaction Expenses........................................... 2
Annual Fund Operating Expenses............................................. 3
Example.................................................................... 3
INVESTMENT PROGRAM......................................................... 4
Social Policy.............................................................. 5
Short-Term Trading; Portfolio Turnover..................................... 6
Borrowings................................................................. 6
PERFORMANCE INFORMATION.................................................... 6
Total Return Information................................................... 7
SPECIAL INFORMATION REGARDING ORGANIZATION................................. 7
The Fund................................................................... 7
The Portfolio.............................................................. 7
SHAREHOLDER SERVICES....................................................... 9
How to Buy Shares.......................................................... 9
How to Sell shares......................................................... 10
Exchanging Shares.......................................................... 10
SHARE PRICES AND NET ASSET VALUE........................................... 11
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES.................................. 11
Distribution Options....................................................... 11
Taxes...................................................................... 11
MANAGEMENT AND ADMINISTRATION.............................................. 12
Trustees and Officers...................................................... 12
Investment Manager, Administrator, Distributor, and Sub-Adviser............ 13
Expenses................................................................... 13
Transfer Agent............................................................. 15
DESCRIPTION OF INVESTMENTS................................................. 15
OTHER INFORMATION.......................................................... 18
Director................................................................... 18
Funds Eligible for Exchange................................................ 18
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SUMMARY
The Fund and Portfolio; Risk Factors
The Fund is a series of the Trust and invests in the Portfolio which,
in turn, invests in securities in accordance with an investment objective,
policies and limitations that are identical to those of the Fund. This is
sometimes called a master/feeder fund structure, because the Fund "feeds"
shareholders' investments into the Portfolio, a "master" fund. The structure
looks like this:
------------------------------------------------------------------
Shareholders
------------------------------------------------------------------
BUY SHARES IN
------------------------------------------------------------------
Fund
-------------------------------------------------------------------
INVESTS IN
-------------------------------------------------------------------
Portfolio
-------------------------------------------------------------------
INVESTS IN
-------------------------------------------------------------------
Stocks and Other Securities
-------------------------------------------------------------------
The trustees who oversee the Fund believe that this structure may
benefit shareholders; investment in the Portfolio by investors in addition to
the Fund may enable the Portfolio to achieve economies of scale that could
reduce expenses. The Portfolio seeks long-term capital appreciation by investing
primarily in securities considered by N&B Management to be undervalued relative
to the market as a whole and whose issuers meet certain social criteria
established by N&B Management ("Social Policy"). N&B Management evaluates
companies to determine if they meet the Social Policy in the following major
areas of concern: the environment and workplace diversity and employment.
Companies are further evaluated to determine if they meet other aspects of the
Social Policy, such as public health, type of products, and corporate
citizenship. The Portfolio does not invest in companies which derive a
significant portion of their total annual revenue from the following industries:
nuclear power, tobacco, alcohol, gambling, or weapons. The Portfolio will seek
to dispose of a security as soon as reasonably practicable if the issuer no
longer meets the Social Policy, even though a sale at that time might not be
desirable from a purely financial standpoint.
For more information about the organization of the Fund and the
Portfolio, including certain features of the master/feeder fund structure, see
"Special Information Regarding Organization, Capitalization, and Other Matters"
on page 7. An investment in the Fund involves certain risks, depending upon the
types of investments made by the Portfolio. For more details about the
Portfolio, its investments and their risks, see "Investment Program" on page 4,
"Social Policy" on page 5, and "Description of Investments" on page 15.
<PAGE>
INVESTMENT STYLE. Broadly diversified, large-cap value fund.
PORTFOLIO CHARACTERISTICS. Seeks long-term capital appreciation by investing in
common stocks of companies that meet both financial and social criteria.
Management
N&B Management, with the assistance of Neuberger&Berman, LLC
("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B
Management also provides administrative services to the Portfolio and the Fund
and acts as distributor of Fund shares. See "Management and Administration" on
page 12. If you want to know how to buy and sell shares of the Fund or exchange
them for shares of other Neuberger&Berman Funds(servicemark) made available
through an Institution, see "Shareholder Services - How to Buy Shares" on page
9, "Shareholder Services - How to Sell Shares" on page 10, "Shareholder Services
- - Exchanging Shares" on page 10, and the policies of the Institution through
which you are purchasing shares.
The Neuberger&Berman Investment Approach
In general, the Portfolio adheres to a value-oriented investment
approach. A value-oriented portfolio manager buys stocks that are selling for
less than their perceived market values. These include stocks that are currently
under-researched or are temporarily out of favor on Wall Street.
Portfolio managers identify value stocks in several ways. One of the
most common identifiers is a low price-to-earnings ratio - that is, stocks
selling at multiples of earnings per share that are lower than that of the
market as a whole. Other criteria are high dividend yield, a strong balance
sheet and financial position, a recent company restructuring with the potential
to realize hidden values, strong management, and low price-to-book value (net
value of the company's assets).
Neuberger&Berman believes that, over time, securities that are
undervalued are more likely to appreciate in price and be subject to less risk
of price decline than securities whose market prices have already reached their
perceived economic values. This approach also contemplates selling portfolio
securities when they are considered to have reached their potential.
EXPENSE INFORMATION
This section gives you certain information about the expenses of the
Fund and the Portfolio. See "Performance Information" for important facts about
investment performance of the Fund, after taking expenses into account.
Shareholder Transaction Expenses
As shown by this table, the Fund imposes no transaction charges when
you buy or sell Fund shares.
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested
Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
2
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
The following table shows anticipated annual Total Operating Expenses
for the Fund, which are paid out of the assets of the Fund and which include the
Fund's pro rata portion of the Operating Expenses of the Portfolio. The Fund
pays N&B Management an administration fee based on the Fund's average daily net
assets. The Portfolio pays N&B Management a management fee based on the
Portfolio's average daily net assets; a pro rata portion of this fee is borne
indirectly by the Fund. Therefore, the table combines management and
administration fees. The Fund and Portfolio also incur other expenses for things
such as accounting and legal fees, maintaining shareholder records, and
furnishing shareholder statements and Fund reports. "Operating Expenses" exclude
interest, taxes, brokerage commissions, and extraordinary expenses. The Fund's
expenses are factored into its share price and dividends and are not charged
directly to Fund shareholders. For more information, see "Management and
Administration" and the SAI.
MANAGEMENT AND 12B-1 OTHER EXPENSES TOTAL OPERATING
ADMINISTRATION FEES FEES (ESTIMATED) EXPENSES
0.94%* None 0.46% 1.40%*
* (Reflects N&B Management's expense reimbursement undertaking described below)
"Management and Administration Fees" for the Fund are based upon
current administration fees for the Fund and management fees for the Portfolio,
with "Other Expenses" being estimated amounts for the current fiscal year. The
trustees of the Trust believe that the aggregate per share expenses of the Fund
and the Portfolio will be approximately equal to the expenses the Fund would
incur if its assets were invested directly in the type of securities held by the
Portfolio. The trustees of the Trust also believe that investment in the
Portfolio by investors in addition to the Fund may enable the Fund to achieve
economies of scale which could reduce expenses. The expenses and, accordingly,
the returns of other funds that may invest in the Portfolio may differ from
those of the Fund.
The previous table reflects N&B Management's voluntary undertaking to
reimburse the Fund for its Operating Expenses and its pro rata share of the
Portfolio's Operating Expenses which, in the aggregate, exceed 1.40% per annum
of the Fund's average daily net assets. Absent the reimbursement, Management and
Administration Fees and Total Operating Expenses would be 0.95% and 1.41%,
respectively, per annum of the Fund's average daily net assets.
Example
To illustrate the effect of Operating Expenses, let's assume that the
Fund's annual return is 5% and that it had Total Operating Expenses described in
the table above. For every $1,000 you invested in the Fund, you would have paid
the following amounts of total expenses if you closed your account at the end of
each of the following time periods:
3
<PAGE>
1 YEAR 3 YEARS
$14 $44
The assumption in this example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. THE INFORMATION IN THE
PREVIOUS TABLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS
THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE.
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to
those of the Portfolio. The Fund invests only in the Portfolio. Therefore, the
following shows you the kinds of securities in which the Portfolio invests. For
an explanation of some types of investments, see "Description of Investments,"
on page 15.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning
the Portfolio's investment program are described in the SAI.
The investment objective of the Fund and Portfolio is to seek long-term
capital appreciation by investing primarily in securities of companies that meet
both financial criteria and the Social Policy. This investment objective is not
fundamental. There can be no assurance that the Fund or Portfolio will achieve
its objective. The Fund, by itself, does not represent a comprehensive
investment program.
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 Depository Receipts
("ADRs") of foreign companies that meet the Social Policy. On occasion, deposits
with community banks and credit unions may be considered for investment.
However, any part of the Portfolio's assets may be retained temporarily in
investment grade fixed income securities of non-governmental issuers, U.S.
Government and Agency securities, repurchase agreements, money market
instruments, commercial paper, and cash and cash equivalents when N&B Management
believes that significant adverse market, economic, political or other
circumstances require prompt action to avoid losses. In addition, the feeder
funds that invest in the Portfolio deal with large institutional investors, and
4
<PAGE>
the Portfolio may hold such instruments pending investment or payout when the
Portfolio has received a large influx of cash due to sales of Fund shares, or
shares of another fund that invests in the Portfolio, or when it anticipates a
substantial redemption. Generally, the foregoing temporary investments are
selected with a concern for the social impact of each 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 its 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 and 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 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 and, in making investment decisions, gives weight to enlightened,
progressive policies. 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. N&B
Management attempts to assess the objectivity of all information that it
receives. However, decisions made by N&B Management inevitably involve some
level of subjective judgment.
The Portfolio 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. N&B
Management 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. The
Portfolio 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
5
<PAGE>
screens out any company that 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.
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 a 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 approach that companies take toward the areas of social impact and pays
particular attention to progress achieved toward the goals of the Social Policy.
If securities held by the Portfolio no longer satisfy the Social
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.
Short-Term Trading; Portfolio Turnover
Although the Portfolio does not purchase securities with the intention
of profiting from short-term trading, the Portfolio may sell portfolio
securities when N&B Management believes such action is advisable. The estimated
annual turnover rate of the Portfolio generally will not exceed 100%.
Borrowings
The Portfolio has a fundamental policy that it may not borrow money,
except that it may (1) borrow money from banks for temporary or emergency
purposes and not for leveraging or investment and (2) enter into reverse
repurchase agreements for any purpose, so long as the aggregate amount of
borrowings and reverse repurchase agreements does not exceed one-third of the
Portfolio's total assets (including the amount borrowed) less liabilities (other
than borrowings). The Portfolio does not expect to borrow money or to enter into
reverse repurchase agreements. As a non-fundamental policy, the Portfolio may
not purchase portfolio securities if its outstanding borrowings, including
reverse repurchase agreements, exceed 5% of its total assets.
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
6
<PAGE>
An average annual total return is a hypothetical rate of return that,
if achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This smoothes out year-to-year variations in
actual performance. Past results do not, of course, guarantee future
performance. Share prices may vary, and your shares when redeemed may be worth
more or less than your original purchase price.
Total Return Information
You can obtain current performance information about the Fund by
calling N&B Management at 800-877-9700.
SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS
The Fund
The Fund is a separate series of the Trust, a Delaware business trust
organized pursuant to a Trust Instrument dated October 18, 1993. The Trust is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
diversified, open-end management investment company, commonly known as a mutual
fund. The Trust has five separate series. The Fund invests all of its net
investable assets in the Portfolio, receiving a beneficial interest in the
Portfolio. The trustees of the Trust may establish additional series or classes
of shares without the approval of shareholders. The assets of a series belong
only to that series, and the liabilities of a series are borne solely by that
series and no other.
DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number of
shares of beneficial interest (par value $0.001 per share). Shares of the Fund
represent equal proportionate interests in the assets of the Fund only and have
identical voting, dividend, redemption, liquidation, and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other rights to subscribe to any additional shares.
SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual
meetings of shareholders of the Fund. The trustees will call special meetings of
shareholders of the Fund only if required under the 1940 Act or in their
discretion or upon the written request of holders of 10% or more of the
outstanding shares of the Fund entitled to vote.
CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders of
the Fund will not be personally liable for the obligations of the Fund; a
shareholder is entitled to the same limitation of personal liability extended to
shareholders of a corporation. To guard against the risk that Delaware law might
not be applied in other states, the Trust Instrument requires that every written
obligation of the Trust or the Fund contain a statement that such obligation may
be enforced only against the assets of the Trust or Fund and provides for
indemnification out of Trust or Fund property of any shareholder nevertheless
held personally liable for Trust or Fund obligations, respectively.
The Portfolio
The Portfolio is a separate operating series of Managers Trust, a New
York common law trust organized as of December 1, 1992. Managers Trust is
registered under the 1940 Act as a diversified, open-end management investment
company. Managers Trust has six separate portfolios. The assets of the Portfolio
belong only to the Portfolio, and the liabilities of the Portfolio are borne
solely by the Portfolio and no other.
7
<PAGE>
FUND'S INVESTMENT IN THE PORTFOLIO. The Fund is a "feeder fund" that seeks to
achieve its investment objective by investing all of its net investable assets
in the Portfolio, which is a "master fund." The Portfolio, which has the same
investment objective, policies and limitations as the Fund, in turn invests in
securities; the Fund thus acquires an indirect interest in those securities.
This "master/feeder fund" structure is depicted in the "Summary" on page 1.
The Fund's investment in the Portfolio is in the form of a
non-transferable beneficial interest. Members of the general public may not
purchase a direct interest in the Portfolio. Neuberger&Berman Socially
Responsive Fund, a mutual fund that is a series of Neuberger & Berman Equity
Funds ("N&B Equity Funds"), invests all of its net investable assets in the
Portfolio. Neuberger&Berman NYCDC Socially Responsive Trust, a mutual fund that
is a series of Neuberger&Berman Equity Trust ("N&B Equity Trust"), invests all
of its net investable assets in the Portfolio. The shares of Neuberger&Berman
Socially Responsive Fund (but not of Neuberger&Berman NYCDC Socially Responsive
Trust) are available for purchase by members of the general public. The
Portfolio may also permit other investment companies and/or other institutional
investors to invest in the Portfolio. All investors will invest in the Portfolio
on the same terms and conditions as the Fund and will pay a proportionate share
of the Portfolio's expenses. The Fund does not sell its shares directly to
members of the general public. Other investors in the Portfolio (including the
series of N&B Equity Funds and N&B Equity Trust) are not required to sell their
shares at the same public offering price as the Fund, could have a different
administration fee and expenses than the Fund, and (except the series of N&B
Equity Funds and N&B Equity Trust) might charge a sales commission. Therefore,
Fund shareholders may have different returns than shareholders in another
investment company that invests exclusively in the Portfolio. Information
regarding any fund that may invest in the Portfolio in the future will be
available from N&B Management by calling 800-877-9700.
The trustees of the Trust believe that investment in the Portfolio by
the series of N&B Equity Funds or N&B Equity Trust or by other potential
investors in addition to the Fund may enable the Portfolio to realize economies
of scale that could reduce its operating expenses, thereby producing higher
returns and benefitting all shareholders. However, the Fund's investment in the
Portfolio may be affected by the actions of other large investors in the
Portfolio, if any. For example, if a large investor in the Portfolio (other than
the Fund) redeemed its interest in the Portfolio, the Portfolio's remaining
investors (including the Fund) might, as a result, experience higher pro rata
operating expenses, thereby producing lower returns.
The Fund may withdraw its entire investment from the Portfolio at any
time, if the trustees of the Trust determine that it is in the best interests of
the Fund and its shareholders to do so. The Fund might withdraw, for example, if
there were other investors in the Portfolio with power to, and who did by a vote
of all investors (including the Fund), change the investment objective,
policies, or limitations of the Portfolio in a manner not acceptable to the
trustees of the Trust. A withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio to the
Fund. That distribution could result in a less diversified portfolio of
investments for the Fund and could affect adversely the liquidity of the Fund's
investment portfolio. If the Fund decided to convert those securities to cash,
it usually would incur brokerage fees or other transaction costs. If the Fund
withdrew its investment from the Portfolio, the trustees of the Trust would
consider what actions might be taken, including the investment of all of the
Fund's net investable assets in another pooled investment entity having
substantially the same investment objective as the Fund or the retention by the
Fund of its own investment manager to manage its assets in accordance with its
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investment objective, policies, and limitations. The inability of the Fund to
find a suitable replacement could have a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings of
investors except as required by the 1940 Act. Each investor in the Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, the Fund will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in the Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all Portfolio investors; indeed, if other investors
hold a majority interest in the Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund, will be
liable for all obligations of the Portfolio. However, the risk of an investor in
the Portfolio incurring financial loss beyond the amount of its investment on
account of such liability would be limited to circumstances in which the
Portfolio had inadequate insurance and was unable to meet its obligations out of
its assets. Upon liquidation of the Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
SHAREHOLDER SERVICES
How to Buy Shares
YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN
INSTITUTION THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO
INVESTORS AND THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH N&B MANAGEMENT.
N&B Management and the Fund do not recommend, endorse, or receive payments from
any Institution. N&B Management compensates Institutions for services they
provide under an administrative services agreement. N&B Management does not
provide investment advice to any Institution or its clients or make decisions
regarding their investments.
Each Institution will establish its own procedures for the purchase of
Fund shares, including minimum initial and additional investments for shares of
the Fund and the acceptable methods of payment for shares. Shares are purchased
at the next price calculated on a day the New York Stock Exchange ("NYSE") is
open, after a purchase order is received and accepted by an Institution. Prices
for Fund shares are usually calculated as of 4 p.m. Eastern time. Your
Institution may be closed on days when the NYSE is open. As a result, prices for
Fund shares may be significantly affected on days when you have no access to
your Institution to buy shares.
Other Information:
- An Institution must pay for shares it purchases in U.S. dollars.
- The Fund has the right to suspend the offering of its shares for a
period of time. The Fund also has the right to accept or reject a
purchase order in its sole discretion, including certain purchase
orders using an exchange of shares. See "Shareholder Services -
Exchanging Shares."
- The Fund will not issue a certificate for your shares.
- Some Institutions may charge their clients a fee in connection
with purchases of shares of the Fund.
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How to Sell Shares
You can sell (redeem) all or some of your Fund shares only through an
account with an Institution. Each Institution will establish its own procedures
for the sale of Fund shares. Shares are sold at the next price calculated on a
day the NYSE is open, after a sales order is received and accepted by an
Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern
time. Your Institution may be closed on days when the NYSE is open. As a result,
prices for Fund shares may be significantly affected on days when you have no
access to your Institution to sell shares.
Other Information:
- Redemption proceeds will be paid to Institutions as agreed with
N&B Management, but in any case within three business days (under
unusual circumstances the Fund may take longer, as permitted by
law).
- The Fund may suspend redemptions or postpone payments on days when
the NYSE is closed (besides weekends and holidays), when trading
on the NYSE is restricted, or as permitted by the SEC.
- Some Institutions may charge their clients a fee in connection
with redemptions of shares of the Fund.
Exchanging Shares
Through an account with an Institution, you may be able to exchange
shares of the Fund for shares of another Neuberger&Berman Fund. Each Institution
will establish its own exchange policy and procedures. Shares are exchanged at
the next price calculated on a day the NYSE is open, after an exchange order is
received and accepted by an Institution.
- Shares can be exchanged ONLY between accounts registered in the
same name, address, and taxpayer ID number of the Institution.
- An exchange can be made only into a fund whose shares are eligible
for sale in the state where the Institution is located.
- An exchange may have tax consequences.
- The Fund may refuse any exchange orders from any Institution if,
for any reason, they are deemed not to be in the best interests of
the Fund and its shareholders.
- The Fund may impose other restrictions on the exchange privilege,
or modify or terminate the privilege, but will try to give each
Institution advance notice whenever it can reasonably do so.
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SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net
asset value ("NAV") per share. The NAVs for the Fund and the Portfolio are
calculated by subtracting liabilities from total assets (in the case of the
Portfolio, the market value of the securities the Portfolio holds plus cash and
other assets; in the case of the Fund, its percentage interest in the Portfolio,
multiplied by the Portfolio's NAV, plus any other assets). The Fund's per share
NAV is calculated by dividing its NAV by the number of Fund shares outstanding
and rounding the result to the nearest full cent. The Fund and the Portfolio
calculate their NAVs as of the close of regular trading on the NYSE, usually 4
p.m. Eastern time, on each day the NYSE is open.
The Portfolio values 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 reported sale of such a security on that day, the security is valued at the
mean between its closing bid and asked prices. The Portfolio values all other
securities and assets, including restricted securities, by a method that the
trustees of Managers Trust believe accurately reflects fair value.
DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES
The Fund distributes, normally in December, substantially all of its
share of any net investment income (net of the Fund's expenses), net realized
capital gains, and net realized gains from foreign currency transactions earned
or realized by the Portfolio.
Distribution Options
REINVESTMENT IN SHARES. All dividends and other distributions paid on shares of
the Fund are automatically reinvested in additional shares of the Fund, unless
an Institution elects to receive them in cash. Dividends and other distribution
of capital gains are reinvested at the Fund's per share NAV, usually as of the
date the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in cash,
with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
Taxes
The Fund intends to qualify for treatment as a regulated investment
company for federal income tax purposes so that it will be relieved of federal
income tax on that part of its taxable income and realized gains that it
distributes to its shareholders.
An investment has certain tax consequences, depending on the type of
account in which you invest. IF YOU HAVE AN ACCOUNT UNDER A QUALIFIED RETIREMENT
PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED.
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TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and may
also be subject to state and local income taxes. Distributions are taxable when
they are paid, whether in cash or by reinvestment in additional Fund shares,
except that distributions declared in December to shareholders of record on a
date in that month and paid in the following January are taxable as if they were
paid on December 31 of the year in which the distributions were declared.
Investors who buy Fund shares just before the Fund declares a dividend or other
distribution from its NAV will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
Investors who are considering the purchase of Fund shares in December should
take this into account.
For federal income tax purposes, dividends and distributions of net
short-term capital gain and net gains from certain foreign currency transactions
are taxed as ordinary income. Distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), when designated as
such, are generally taxed as long-term capital gain, no matter how long you have
owned your shares. Distributions of net capital gain may include gains from the
sale of portfolio securities that appreciated in value before you bought your
shares.
Every January, the Fund will send each Institution a statement showing
the amount of distributions paid (or deemed paid) in the previous year.
Information accompanying that statement will show the portion, if any, of those
distributions that generally are not taxable in certain states.
TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares,
including redemptions in connection with exchanges to other Neuberger&Berman
Funds, are subject to tax. A capital gain or loss is the difference between the
amount paid for shares (including the amount of any dividends and other
distributions that were reinvested) and the amount received when shares are
sold.
When an Institution sells shares it will receive a confirmation
statement showing the number of shares sold and the price. Every January,
Institutions will also receive a consolidated transaction statement for the
previous year.
Each Institution is required annually to send investors in its accounts
statements showing distribution and transaction information for the previous
year.
The foregoing is only a summary of some of the important income tax
considerations affecting the Fund and its shareholders. See the SAI for
additional tax information. There may be other federal, state, local or foreign
tax considerations applicable to a particular investor. Therefore, investors
should consult their tax advisers.
MANAGEMENT AND ADMINISTRATION
Trustees and Officers
The trustees of the Trust and the trustees of Managers Trust, who are
currently the same individuals, have oversight responsibility for the operations
of the Fund and the Portfolio, respectively. The SAI contains general background
information about each trustee and officer of the Trust and of Managers Trust.
The trustees and officers of the Trust and of Managers Trust who are officers
and/or directors of N&B Management and/or principals of Neuberger&Berman serve
without compensation from the Fund or the Portfolio. The trustees of the Trust
and of Managers Trust, including a majority of those trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust or Managers
Trust, have adopted written procedures reasonably appropriate to deal with
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potential conflicts of interest between the Trust and Managers Trust, including,
if necessary, creating a separate board of trustees of Managers Trust.
Investment Manager, Administrator, Distributor, and Sub-Adviser
N&B Management serves as the investment manager of the Portfolio, as
administrator of the Fund, and as distributor of the shares of the Fund. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio, N&B
Management currently serves as investment manager of other mutual funds.
Neuberger&Berman, which acts as sub-adviser for the Portfolio and other mutual
funds managed by N&B Management, also serves as investment adviser of three
other investment companies. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $13.9 billion as of
September 30, 1996.
As sub-adviser, Neuberger&Berman furnishes N&B Management with
investment recommendations and research without added cost to the Portfolio.
Neuberger&Berman has advised clients in selecting socially responsive
investments since 1990. Neuberger&Berman is a member firm of the NYSE and other
principal exchanges and acts as the Portfolio's principal broker in the purchase
and sale of its securities. Neuberger&Berman and its affiliates, including N&B
Management, manage securities accounts that had approximately $42.9 billion of
assets as of September 30, 1996. All of the voting stock of N&B Management is
owned by individuals who are principals of Neuberger&Berman.
Janet Prindle is primarily responsible for the day-to-day management of
the Portfolio. Ms. Prindle, a Vice President of N&B Management since November
1993, has been a principal of Neuberger&Berman since 1983. Ms. Prindle is
Director of Socially Responsive Investment Services at Neuberger&Berman and has
been researching and developing corporate responsibility criteria as they apply
to investments since 1989. She has been managing money using these criteria
since 1990. Ms. Prindle has been responsible for the Portfolio since its
inception in March 1994.
Neuberger&Berman acts as the principal broker for the Portfolio 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, the Portfolio seeks to obtain the best price and
execution of orders. For more information, see the SAI.
The principals and employees of Neuberger&Berman and officers and
employees of N&B Management, together with their families, have invested over
$100 million of their own money in Neuberger&Berman Funds.
To mitigate the possibility that the Portfolio will be adversely
affected by employees' personal trading, the Trust, Managers Trust, N&B
Management, and Neuberger&Berman have adopted policies that restrict securities
trading in the personal accounts of the portfolio managers and others who
normally come into possession of information on portfolio transactions.
Expenses
N&B Management provides investment management services to the Portfolio
that include, among other things, making and implementing investment decisions
and providing facilities and personnel necessary to operate the Portfolio. N&B
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Management provides administrative services to the Fund that include furnishing
similar facilities and personnel for the Fund and performing accounting,
recordkeeping, and other services for Institutions and their accounts. For such
administrative services, the Fund pays N&B Management a fee at the annual rate
of 0.40% of the Fund's average daily net assets. With the Fund's consent, N&B
Management may subcontract to Institutions some of its responsibilities to the
Fund under the administration agreement and may compensate each Institution that
provides such services at an annual rate of no more than 0.25% of the value of
Fund shares held through that Institution. For investment management services,
the Portfolio pays N&B Management a fee at the annual rate of 0.55% of the first
$250 million of the Portfolio's average daily net assets, 0.525% of the next
$250 million, 0.50% of the next $250 million, 0.475% of the next $250 million,
0.45% of the next $500 million, and 0.425% of average daily net assets in excess
of $1.5 billion.
The Fund bears all expenses of its operations other than those borne by
N&B Management as administrator of the Fund and as distributor of its shares.
The Portfolio bears all expenses of its operations other than those borne by N&B
Management as investment manager of the Portfolio. These expenses include, but
are not limited to, for the Fund and Portfolio, legal and accounting fees and
compensation for trustees who are not affiliated with N&B Management; for the
Fund, transfer agent fees and the cost of printing and sending reports and proxy
materials to shareholders; and for the Portfolio, custodial fees for securities.
See "Expense Information -- Annual Fund Operating Expenses" for
information about how these fees and expenses may affect the value of your
investment.
N&B Management has voluntarily undertaken to reimburse the Fund for its
Operating Expenses and its pro rata share of the Portfolio's Operating Expenses
which exceed, in the aggregate, 1.40% per annum of the Fund's average daily net
assets. N&B Management may terminate this undertaking to the Fund by giving at
least 60 days' prior written notice to the Fund. The effect of any reimbursement
by N&B Management is to reduce the Fund's expenses and thereby increase its
total return.
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Transfer Agent
The Fund's transfer agent is State Street Bank and Trust Company
("State Street"). State Street administers purchases, redemptions, and transfers
of Fund shares with respect to Institutions and the payment of dividends and
other distributions to Institutions. All correspondence should be addressed to
Neuberger & Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor,
New York, NY 10158-0180.
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in
"Investment Program" herein, the Portfolio may make the following investments,
among others, individually or in combination, although it may not necessarily
buy all of the types of securities or use all of the investment techniques that
are described. For additional information on the following investments and on
other types of investments which the Portfolio may make, see the SAI.
ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net assets in
illiquid securities, which are securities that cannot be expected to be sold
within seven days at approximately the price at which they are valued. Due to
the absence of an active trading market, the Portfolio may experience difficulty
in valuing or disposing of illiquid securities. N&B Management determines the
liquidity of the Portfolio's securities, under general supervision of the
trustees of Managers Trust.
RESTRICTED SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities cannot be
sold to the public without registration under the Securities Act of 1933 ("1933
Act"). Unless registered for sale, these securities can be sold only in
privately negotiated transactions or pursuant to an exemption from registration.
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. Foreign securities that are freely tradable in their principal
market are not considered restricted securities even if they are not registered
for sale in the United States. Restricted securities are generally considered
illiquid. N&B Management, acting pursuant to guidelines established by the
trustees of Managers Trust, may determine that some restricted or Rule 144A
securities are liquid.
FOREIGN SECURITIES. Foreign securities are those of issuers organized and doing
business principally outside the United States, including non-U.S. governments,
their agencies, and instrumentalities. The Portfolio 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. Foreign securities (including those denominated in U.S. dollars, such as
ADRs) are affected by political and economic developments in foreign countries.
Foreign companies may not be subject to accounting standards or governmental
supervision comparable to U.S. companies, and there may be less public
information about their operations. In addition, foreign markets may be less
liquid and more volatile than U.S. markets and may offer less protection to
investors. Investments in foreign securities that are not denominated in U.S.
dollars (including those made through ADRs) may be subject to special risks,
such as governmental regulation of foreign exchange transactions and changes in
rates of exchange with the U.S.dollar, irrespective of the performance of the
underlying investment.
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COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of securities
price changes (hedge) or generate income by writing (selling) covered call
options against portfolio securities 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 Portfolio may
realize on the security during the option period is the fixed price; the
Portfolio continues to bear the risk of a decline in the securities price,
although this risk is reduced, at least in part, by the premium received for
writing 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 use of options is a highly specialized
activity that involves skills, techniques, and risks (including price volatility
and a high degree of leverage) different from those associated with selection of
the Portfolio's securities; (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 hedged
investments; and (4) the possible inability of the Portfolio to purchase or sell
a security at a time that would otherwise be favorable for it to do so, or the
possible need for the Portfolio to sell a security at a disadvantageous time,
due to its need to maintain "cover" in connection with its use of these
instruments. Options are considered "derivatives".
FIXED INCOME SECURITIES. "Investment grade" debt securities are those receiving
one of the four highest ratings from Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's, or another nationally recognized statistical
rating organization ("NRSRO") or, if unrated by any NRSRO, deemed by N&B
Management to be of comparable quality to such rated securities ("Comparable
Unrated Securities"). Securities rated by Moody's in its fourth highest category
(Baa) or Comparable Unrated Securities may be deemed to have speculative
characteristics. The value of the fixed income securities in which the Portfolio
may invest is likely to decline in times of rising market interest rates.
Conversely, when rates fall, the value of the Portfolio's fixed income
investments is likely to rise.
CONVERTIBLE SECURITIES. The 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. Convertible
securities generally have features of both common stocks and debt securities.
The Portfolio does not intend to purchase any convertible securities that are
not investment grade.
U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may purchase U.S.
Government and Agency Securities. U.S. Government Securities are obligations of
the U.S. Treasury backed by the full faith and credit of the United States. U.S.
Government Agency Securities are issued or guaranteed by U.S. Government
agencies or by instrumentalities of the U.S. Government, such as the Government
National Mortgage Association ("GNMA"), Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Student Loan
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Marketing Association, and Tennessee Valley Authority. Some U.S. Government
Agency Securities are supported by the full faith and credit of the United
States, while others may be supported by the issuer's ability to borrow from the
U.S. Treasury, subject to the Treasury's discretion in certain cases, or only by
the credit of the issuer. U.S. Government Agency Securities include U.S.
Government mortgage-backed securities. The market prices of U.S. Government
Securities are not guaranteed by the Government.
SHORT SALES AGAINST-THE-BOX. The 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 to a later tax period.
REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the 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. The 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.
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OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR,
AND DISTRIBUTOR
Neuberger&Berman Management Incorporated
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SUB-ADVISER
Neuberger&Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Correspondence should be sent to:
Neuberger & Berman Funds, Institutional Services
605 Third Avenue, 2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
FUNDS ELIGIBLE FOR EXCHANGE
EQUITY TRUST
Neuberger & Berman Focus Trust
Neuberger & Berman Genesis Trust
Neuberger & Berman Guardian Trust
Neuberger & Berman Manhattan Trust
Neuberger & Berman Partners Trust
INCOME TRUST
Neuberger & Berman Ultra Short Bond Trust
Neuberger & Berman Limited Maturity Bond Trust
<PAGE>
NEUBERGER & BERMAN SOCIALLY RESPONSIVE TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 24, 1996
A No-load Mutual Fund
605 Third Avenue, 2nd Floor, New York, NY 10158-0180
________________________________________________________________________________
NEUBERGER & BERMAN SOCIALLY RESPONSIVE TRUST ("FUND"), A SERIES OF
NEUBERGER & BERMAN EQUITY ASSETS ("TRUST"), IS A NO-LOAD MUTUAL FUND THAT OFFERS
SHARES PURSUANT TO A PROSPECTUS DATED DECEMBER 24, 1996. THE FUND INVESTS ALL OF
ITS NET INVESTABLE ASSETS IN NEUBERGER & BERMAN SOCIALLY RESPONSIVE PORTFOLIO
("PORTFOLIO").
AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN
ACCOUNT WITH A PENSION PLAN ADMINISTRATOR, BROKER- DEALER, OR OTHER INSTITUTION
(EACH AN "INSTITUTION") THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER
SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH
NEUBERGER & BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT").
The Fund's Prospectus provides basic information that an investor
should know before investing. A copy of the Prospectus may be obtained, without
charge, from N&B Management, Institutional Services, 605 Third Avenue, 2nd
Floor, New York, NY 10158-0180, or by calling 800-877-9700.
This Statement of Additional Information ("SAI") is not a prospectus
and should be read in conjunction with the Prospectus.
No person has been authorized to give any information or to make any
representations not contained in the Prospectus or in this SAI in connection
with the offering made by the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The Prospectus and this SAI do not constitute an
offering by the Fund or its distributor in any jurisdiction in which such
offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
PAGE
INVESTMENT INFORMATION....................................................... 1
Investment Policies and Limitations................................. 1
Janet W. Prindle, Portfolio Manager of the Portfolio................ 5
Background Information on Socially Responsive Investing............. 5
The Socially Responsive Database.................................... 6
Implementation of Social Policy..................................... 8
Additional Investment Information................................... 8
PERFORMANCE INFORMATION......................................................22
Total Return Computations...........................................22
Comparative Information.............................................23
Other Performance Information.......................................24
CERTAIN RISK CONSIDERATIONS..................................................24
TRUSTEES AND OFFICERS........................................................25
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES............................31
Investment Manager and Administrator................................31
Sub-Adviser.........................................................34
Investment Companies Managed........................................35
Management and Control of N&B Management............................37
DISTRIBUTION ARRANGEMENTS....................................................38
ADDITIONAL EXCHANGE INFORMATION..............................................38
ADDITIONAL REDEMPTION INFORMATION............................................41
Suspension of Redemptions...........................................
Redemption in Kind..................................................
DIVIDENDS AND OTHER DISTRIBUTIONS............................................42
ADDITIONAL TAX INFORMATION...................................................42
Taxation of the Fund................................................42
Taxation of the Portfolio...........................................43
PORTFOLIO TRANSACTIONS.......................................................46
Portfolio Turnover..................................................51
REPORTS TO SHAREHOLDERS......................................................51
CUSTODIAN AND TRANSFER AGENT.................................................51
INDEPENDENT ACCOUNTANTS......................................................51
LEGAL COUNSEL................................................................51
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REGISTRATION STATEMENT.......................................................52
FINANCIAL STATEMENTS.........................................................52
Appendix A...................................................................53
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER.....................53
Appendix B...................................................................56
THE ART OF INVESTMENT: A CONVERSATION WITH ROY
NEUBERGER...........................................................56
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INVESTMENT INFORMATION
The Fund is a separate series of the Trust, a Delaware business trust
that is registered with the Securities and Exchange Commission ("SEC") as an
open-end management investment company. The Fund seeks its investment objective
by investing all of its net investable assets in the Portfolio, a series of
Equity Managers Trust ("Managers Trust") that has an investment objective
identical to that of the Fund. The Portfolio, in turn, invests in securities in
accordance with an investment objective, policies, and limitations identical to
those of the Fund. (The Trust and Managers Trust, which is an open-end
management investment company managed by N&B Management are together referred to
below as the "Trusts.")
The following information supplements the discussion in the Prospectus
of the investment objective, policies, and limitations of the Fund and
Portfolio. The investment objective and, unless otherwise specified, the
investment policies and limitations of the Fund and Portfolio are not
fundamental. Any investment policy or limitation that is not fundamental may be
changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust
("Portfolio Trustees") without shareholder approval. The fundamental investment
policies and limitations of the Fund or the Portfolio may not be changed without
the approval of the lesser of (1) 67% of the total units of beneficial interest
("shares") of the Fund or Portfolio represented at a meeting at which more than
50% of the outstanding Fund or Portfolio shares are represented or (2) a
majority of the outstanding shares of the Fund or Portfolio. These percentages
are required by the Investment Company Act of 1940 ("1940 Act") and are referred
to in this SAI as a "1940 Act majority vote." Whenever the Fund is called upon
to vote on a change in a fundamental investment policy or limitation of the
Portfolio, the Fund casts its votes in proportion to the votes of its
shareholders at a meeting thereof called for that purpose.
INVESTMENT POLICIES AND LIMITATIONS
The Fund has the following fundamental investment policy, to enable it
to invest in the Portfolio:
Notwithstanding any other investment policy of the Fund,
the Fund may invest all of its investable assets in an
open-end management investment company having substantially
the same investment objective, policies, and limitations as
the Fund.
All other fundamental investment policies and limitations and the
non-fundamental investment policies and limitations of the Fund are identical to
<PAGE>
those of the Portfolio. Therefore, although the following discusses the
investment policies and limitations of the Portfolio, it applies equally to the
Fund.
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 the Portfolio.
The Portfolio's fundamental investment policies and limitations are as
follows:
1. BORROWING. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money from banks for temporary or emergency purposes
and not for leveraging or investment and (ii) enter into reverse repurchase
agreements for any purpose; provided that (i) and (ii) in combination do not
exceed 33-1/3% of the value of its total assets (including the amount borrowed)
less liabilities (other than borrowings). If at any time borrowings exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce
its borrowings within three days (excluding Sundays and holidays) to the extent
necessary to comply with the 33-1/3% limitation.
2. COMMODITIES. The Portfolio may not purchase physical commodities or
contracts thereon, unless acquired as a result of the ownership of securities or
instruments, but this restriction shall not prohibit the Portfolio from
purchasing futures contracts or options (including options on futures contracts,
but excluding options or futures contracts on physical commodities) or from
investing in securities of any kind.
3. DIVERSIFICATION. The Portfolio may not, with respect to 75% of the
value of its total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that issuer or
(ii) the Portfolio would hold more than 10% of the outstanding voting securities
of that issuer.
4. INDUSTRY CONCENTRATION. The Portfolio may not purchase any security
if, as a result, 25% or more of its total assets (taken at current value) would
be invested in the securities of issuers having their principal business
activities in the same industry. This limitation does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or instrumental-
ities.
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<PAGE>
5. LENDING. The Portfolio may not lend any security or make any other
loan if, as a result, more than 33-1/3% of its total assets (taken at current
value) would be lent to other parties, except, in accordance with its investment
objective, policies, and limitations, (i) through the purchase of a portion of
an issue of debt securities or (ii) by engaging in repurchase agreements.
6. REAL ESTATE. The Portfolio may not purchase real estate unless
acquired as a result of the ownership of securities or instruments, but this
restriction shall not prohibit the Portfolio from purchasing securities issued
by entities or investment vehicles that own or deal in real estate or interests
therein or instruments secured by real estate or interests therein.
7. SENIOR SECURITIES. The Portfolio may not issue senior securities,
except as permitted under the 1940 Act.
8. UNDERWRITING. The Portfolio may not underwrite securities of other
issuers, except to the extent that the Portfolio, in disposing of portfolio
securities, may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 ("1933 Act").
The Portfolio's non-fundamental investment policies and limitations are
as follows:
1. BORROWING. The Portfolio may not purchase securities if
outstanding borrowings, including any reverse repurchase agreements, exceed 5%
of its total assets.
2. LENDING. Except for the purchase of debt securities and engaging in
repurchase agreements, the Portfolio may not make any loans other than
securities loans.
3. 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.
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<PAGE>
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 Managers 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. For purposes of this limitation,
pass-through entities and other special purpose vehicles or pools of financial
assets are not considered to be business enterprises.
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.
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 American Depositary Receipts ("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 partnership or similar
interests 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).
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<PAGE>
Janet W. Prindle, Portfolio Manager Of The Portfolio
- ----------------------------------------------------
How does Janet Prindle manage the 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
and look 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 database, we do careful, in-depth tracking, and we
analyze a large number of companies on some eighty 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
quantitative measurements, we place value on such indicators as management
commitment, progress, direction, and industry leadership."
An Interview With Janet Prindle
- -------------------------------
Q: First things first. How do you begin your stock selection process?
A: Our first question is always: On financial grounds alone, is a
company a smart investment? For a company's stock to meet our financial test, it
must pass a number of hurdles.
We look for bargains, just like the portfolio managers of the other
portfolios managed by N&B Management. More specifically, we search for companies
that we believe have terrific products, excellent customer service, and solid
balance sheets -- but because they may have missed quarterly earnings
expectations by a few pennies, because their sectors are currently out of favor,
because Wall Street overreacted to a temporary setback, or because the company's
merits aren't widely known, their stocks are selling at a discount.
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While we look at the stock's fundamentals carefully, that's not all we
examine. We meet an awful lot of CEOs and CFOs. Top officers of over 400
companies visit Neuberger & Berman each year, and I'm also frequently on the
road visiting dozens of corporations. From the Fund's inception, we've met with
representatives of every company we own.
When I'm face to face with a CEO, I'm searching for answers to two
crucial questions: "Does the company have a vision of where it wants to go?" and
"Can the management team make it happen?" I've analyzed companies for over three
decades, and I always look for companies that have both clear strategies and
management talent.
Q: When you evaluate a company's balance sheet, what matters the most
to you?
A: Definitely a company's "free cash flow." Compare it to your
household's discretionary income -- the money you have left over each month
after you pay off your monthly debt and other expenses. With ample free cash
flow, a company can do any number of things. It can buy back its stock. Make
important acquisitions. Expand its research and development spending. Or
increase its dividend payments.
When a company generates lots of excess cash flow, it has growth
capital at its disposal. It can invest for higher profits down the line and
improve shareholder value. Determining exactly HOW a company intends to spend
its excess cash is an entirely different matter -- and that's where the
information learned in our company meetings comes in. Still, you've got to have
the extra cash in the first place. Which is why we pay so much attention to it.
Q: So you take a hard look at a company's balance sheet and its
management. After a company passes your financial test, what do you do next?
A: After we're convinced of a company's merits on financial grounds
alone, we review its record as a corporate citizen. In particular, we look for
evidence of leadership in three key areas: concern for the environment,
workplace diversity, and enlightened employment practices.
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It should be clear that our social screening always takes place after
we search far and wide for what we believe are the best investment opportunities
available. This is a crucial point, and I'll use an analogy to explain it. Let's
assume you're looking to fill a vital position in your company. What you'd pay
attention to first is the candidate's competence: Can he or she do the job? So
after interviewing a number of candidates, you'd narrow your list to those that
are highly qualified. To choose from this smaller group, you might look at the
candidate's personality: Can he or she get along with everyone in your group?
Obviously, you wouldn't hire an unqualified person simply because he or
she is likable. What you'd probably do is give the job to a highly qualified
person who is ALSO compatible with your group.
Now, let's turn to the companies that do make our financial cuts. How
do we decide whether they meet our social criteria? Once again, our regular
meetings with CEOs are key. We look for top management's support of programs
that put more women and minorities in the pipeline to be future officers and
board members; that minimize emissions, reduce waste, conserve energy, and
protect natural resources; and that enable employees to balance work and family
life with benefits such as flextime and generous maternal AND paternal leave.
We realize that companies are not all good or all bad. Instead of
looking for ethical perfection, we analyze how a company responds to troublesome
problems. If a company is cited for breaking a pollution law, we evaluate its
reaction. We also ask: Is it the first time? Do its top executives have a plan
for making sure it doesn't happen again -- and how committed are they?
If we're satisfied with the answers, a company makes it into our
portfolio. When all is said and done, we invest in companies that have diverse
work forces, strong CEOs, tough environmental standards, AND terrific balance
sheets. In our judgment, financially strong companies that are also good
corporate citizens are more likely to enjoy a competitive advantage. These days,
more and more people won't buy a product unless they know it's environmentally
friendly. In a similar vein, companies that treat their workers well may be more
productive and profitable.
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<PAGE>
Q: Why have investors been attracted to the Fund?
A: Our shareholders are looking to invest for the future in more ways
than one. While they care deeply about their own financial futures, they're
equally passionate about the world they leave to later generations. They want to
be able to meet their college bills and leave a world where the air is a little
cleaner and where the doors to the executive suite are a little more open.
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.
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
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<PAGE>
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, LLC ("Neuberger & Berman"), the Portfolio's
sub-adviser, maintains a 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. The aim of the database is to be as comprehensive 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:
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 of an issuer and members of
its 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
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<PAGE>
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.
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 manager 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
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<PAGE>
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 upon 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 approach to social
issues.
Additional Investment Information
- ---------------------------------
The Portfolio may make the following investments, among others. It may
not buy all of the types of securities or use all of the investment techniques
that are described.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio
purchases securities from a bank that is a member of the Federal Reserve System
or from a securities dealer that agrees to repurchase the securities from the
Portfolio at a higher price on a designated future date. Repurchase agreements
generally are for a short period of time, usually less than a week. Repurchase
agreements with a maturity of more than seven days are considered to be illiquid
securities. The Portfolio may not enter into such a repurchase agreement if, as
a result, more than 10% of the value of its net assets would then be invested in
such repurchase agreements and other illiquid securities. The Portfolio may
enter into a repurchase agreement only if (1) the underlying securities are of a
type that the Portfolio's investment policies and limitations would allow it to
purchase directly, (2) the market value of the underlying securities, including
accrued interest, at all times equals or exceeds the repurchase price, and (3)
payment for the underlying securities is made only upon satisfactory evidence
that the securities are being held for the Portfolio's account by its custodian
or a bank acting as the Portfolio's agent.
SECURITIES LOANS. In order to realize income, the Portfolio may lend
portfolio securities with a value not exceeding 33-1/3% of its total assets to
banks, brokerage firms, or other institutional investors judged creditworthy by
N&B Management. Borrowers are required continuously to secure their obligations
to return securities on loan from the Portfolio by depositing collateral in a
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<PAGE>
form determined to be satisfactory by the Portfolio Trustees. The collateral,
which must be marked to market daily, must be equal to at least 100% of the
market value of the loaned securities, which will also be marked to market
daily. 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. The Portfolio may
invest in restricted securities, which are securities that may not be sold to
the public without an effective registration statement under the 1933 Act.
Before they are registered, such securities may be sold only in a privately
negotiated transaction or pursuant to an exemption from registration. In
recognition of the increased size and liquidity of the institutional market for
unregistered securities and the importance of institutional investors in the
formation of capital, the SEC has adopted Rule 144A under the 1933 Act. Rule
144A is designed to facilitate efficient trading among institutional investors
by permitting the sale of certain unregistered securities to qualified
institutional buyers. To the extent privately placed securities held by the
Portfolio qualify under Rule 144A and an institutional market develops for those
securities, the Portfolio likely will be able to dispose of the securities
without registering them under the 1933 Act. To the extent that institutional
buyers become, for a time, uninterested in purchasing these securities,
investing in Rule 144A securities could increase the level of the Portfolio's
illiquidity. N&B Management, acting under guidelines established by the
Portfolio Trustees, may determine that certain securities qualified for trading
under Rule 144A are liquid. Foreign securities that are freely tradeable in
their principal market 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, the Portfolio may be obligated to pay
all or part of the registration expenses, and a considerable period may elapse
between the decision to sell and the time the Portfolio may be permitted to sell
a security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell. To the extent restricted
securities, including Rule 144A securities, are illiquid, purchases thereof will
be subject to the Portfolio's 10% limit on investments in illiquid securities.
Restricted securities for which no market exists are priced by a method that the
Portfolio Trustees believe accurately reflects fair value.
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<PAGE>
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, the
Portfolio sells portfolio securities subject to its agreement to repurchase the
securities at a later date for a fixed price reflecting a market rate of
interest; these agreements are considered borrowings for purposes of the
Portfolio's investment policies and limitations concerning borrowings. While a
reverse repurchase agreement is outstanding, the Portfolio will deposit in a
segregated account with its custodian cash or appropriate liquid securities,
marked to market daily, in an amount at least equal to the Portfolio's
obligations under the agreement. There is a risk that the counter-party to a
reverse repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
FOREIGN SECURITIES. The Portfolio may invest in U.S. dollar-denominated
securities of foreign issuers (including banks, governments, and
quasi-governmental organizations) and foreign branches of U.S. banks, including
negotiable certificates of deposit ("CDs"), bankers' acceptances and commercial
paper. These investments are subject to the Portfolio's quality standards. While
investments in foreign securities are intended to reduce risk by providing
further diversification, such investments involve sovereign and other risks, in
addition to the credit and market risks normally associated with domestic
securities. These additional risks include the possibility of adverse political
and economic developments (including political instability) and the potentially
adverse effects of unavailability of public information regarding issuers, less
governmental supervision and regulation of financial markets, reduced liquidity
of certain financial markets, and the lack of uniform accounting, auditing, and
financial reporting standards or the application of standards that are different
or less stringent than those applied in the United States.
The Portfolio also may invest in equity, debt, or other
income-producing securities that are denominated in or indexed to foreign
currencies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign banks,
(3) obligations of other corporations, and (4) obligations of foreign
governments and their subdivisions, agencies, and instrumentalities,
international agencies, and supranational entities. Investing in foreign
currency denominated securities involves the special risks associated with
investing in non-U.S. issuers, as described in the preceding paragraph and the
additional risks of (1) adverse changes in foreign exchange rates, (2)
nationalization, expropriation, or confiscatory taxation, and (3) adverse
changes in investment or exchange control regulations (which could prevent cash
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<PAGE>
from being brought back to the United States). 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 Portfolio endeavors to achieve the
most favorable net results on portfolio transactions. The 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.
Foreign markets also have different clearance and settlement
procedures. In certain markets, there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when a portion of the assets of the Portfolio are uninvested
and no return is earned thereon. The inability of the Portfolio to make intended
security purchases due to settlement problems could cause the Portfolio to miss
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the Portfolio
due to subsequent declines in value of the securities or, if the Portfolio has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
Interest rates prevailing in other countries may affect the prices of
foreign securities and exchange rates for foreign currencies. Local factors,
including the strength of the local economy, the demand for borrowing, the
government's fiscal and monetary policies, and the international balance of
payments often affect interest rates in other countries. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
In order to limit the risks inherent in investing in foreign currency
denominated securities, the Portfolio may not purchase any such security if, as
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a result, more than 10% of its total assets (taken at market value) would be
invested in foreign currency denominated securities. Within that limitation,
however, the Portfolio is not restricted in the amount it may invest in
securities denominated in any one foreign currency.
FUTURES CONTRACTS AND OPTIONS THEREON. The Portfolio may purchase and
sell interest rate futures contracts, stock and bond index futures contracts,
and foreign currency futures contracts and may purchase and sell options thereon
in an attempt to hedge against changes in the prices of securities or, in the
case of foreign currency futures and options thereon, to hedge against changes
in prevailing currency exchange rates. Because the futures markets may be more
liquid than the cash markets, the use of futures contracts permits the Portfolio
to enhance portfolio liquidity and maintain a defensive position without having
to sell portfolio securities. The Portfolio 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, or the purchase price of, securities denominated in foreign
currencies that are held or intended to be acquired by the Portfolio.
A "sale" of a futures contract (or a "short" futures position) entails
the assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the Commodity
Futures Trading Commission ("CFTC"); futures transactions must be executed
through a futures commission merchant that is a member of the relevant contract
market. 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
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selling (to offset an earlier purchase) an identical futures contract calling
for delivery in the same month.
"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 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.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in the contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume a short futures
position (if the option is a call) or a long futures position (if the option is
a put). Upon exercise of the option, the accumulated cash balance in the
writer's futures margin account is delivered to the holder of the option. That
balance represents the amount by which the market price of the futures contract
at exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option.
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. The prices of futures contracts are
volatile and are influenced by, among other things, actual and anticipated
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changes in interest or currency exchange rates, which in turn are affected by
fiscal and monetary policies and by national and international political and
economic events. At best, the correlation between changes in prices of futures
contracts and of the securities and currencies 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 or currency exchange 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 fluctuation in the
price of a futures contract or option thereon during a single trading day; once
the daily limit has been reached, no trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day, however; it thus does not limit potential losses. In
fact, if may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
subjecting traders to substantial losses. If this were to happen with respect to
a position held by the Portfolio, it could (depending on the size of the
position) have an adverse impact on the NAV of the Portfolio.
PUT AND CALL OPTIONS. The Portfolio may write and purchase put and call
options on securities. Generally, the purpose of writing and purchasing these
options is to reduce, at least in part, the effect of price fluctuations of
securities held by the Portfolio on the Portfolio's and the Fund's NAVs. The
Portfolio may also write covered call options to earn premium income. Portfolio
securities on which call and put options may be written and purchased by the
Portfolio are purchased solely on the basis of investment considerations
consistent with the Portfolio's investment objective.
The Portfolio will receive a premium for writing a put option, which
obligates the Portfolio to acquire a security at a certain price at any time
until a certain date if the purchaser of the option decides to exercise the
option. The Portfolio may be obligated to purchase the underlying security at
more than its current value.
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<PAGE>
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.
When the Portfolio writes a call option, it is obligated to sell a
security to a purchaser at a specified price at any time until a certain date if
the purchaser decides to exercise the option. The Portfolio receives a premium
for writing the call option. The Portfolio intends to write only "covered" call
options on securities it owns. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it to
deliver the underlying security against payment of the exercise price. The
Portfolio may be obligated to deliver securities underlying a call option at
less than the market price, thereby giving up any additional gain on the
security.
When the Portfolio purchases a call option, it pays a premium for the
right to purchase a security from the writer at a specified price until a
specified date. The Portfolio would purchase a call option in order to protect
against an increase in the price of securities it intends to purchase or to
offset a previously written call option.
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 Portfolio will not do)
but is capable of enhancing the Portfolio's total return. When writing a covered
call option, the Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security above the exercise
price, but conversely retains the risk of loss should the price of the security
decline. When writing a put option, the Portfolio, in return for the premium,
takes the risk that it must purchase the underlying security at a price that may
be higher than the current market price of the security. If a call or put option
that the Portfolio has written expires unexercised, the Portfolio will realize a
gain in the amount of the premium; however, in the case of a call option, 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.
The exercise price of an option may be below, equal to, or above the
market value of the underlying security at the time the option is written.
Options normally have expiration dates between three and nine months from the
date written. The obligation under any option terminates upon expiration of the
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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 United States
are issued by a clearing organization affiliated with the exchange on which the
option is listed; the clearing organization in effect guarantees completion of
every exchange-traded option. In contrast, OTC options are contracts between the
Portfolio and a counter-party, with no clearing organization guarantee. Thus,
when the Portfolio sells (or purchases) an OTC option, it generally will be able
to "close out" the option prior to its expiration only by entering into a
closing transaction with the dealer to whom (or from whom) the Portfolio
originally sold (or purchased) the option. There can be no assurance that the
Portfolio would be able to liquidate an OTC option at any time prior to
expiration. Unless the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option it has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
until different cover is substituted. In the event of the counter- party's
insolvency, the Portfolio may be unable to liquidate its options position and
the associated cover. N&B Management monitors the creditworthiness of dealers
with which the Portfolio may engage in OTC options transactions, and limits the
Portfolio's 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 the Portfolio will
be considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio may repurchase any OTC option it writes at a maximum
price to be calculated by a formula set forth in the option agreement. The cover
for an OTC call option written subject to this procedure will be considered
illiquid only to the extent that the maximum repurchase price under the formula
exceeds the intrinsic value of the option.
The 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. The premium may reflect,
among other things, the current market price of the underlying security, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security, the length of the option period, the
general supply of and demand for credit, and the interest rate environment. The
premium received by the Portfolio for writing an option is recorded as a
liability on the Portfolio's statement of assets and liabilities. This liability
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is adjusted daily to the option's current market value, which is the last sales
price on the day the option is being valued or, in the absence of any trades
thereof on that day, the mean between the closing bid and asked 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 the Portfolio to write another call option on the
underlying security with a different exercise price or expiration date or both.
If the 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 the
Portfolio will be able to effect closing transactions at favorable prices. If
the Portfolio cannot enter into such a transaction, it may be required to hold a
security that it might otherwise have sold (or purchase a security that it would
not have otherwise bought), in which case it would continue to be at market risk
on the security.
The Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than the
premium received from writing the call or put option. Because increases in the
market price of a call option generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase of a call option
is likely to be offset, in whole or in part, by appreciation of the underlying
security owned by the Portfolio; however, the Portfolio could be in a less
advantageous position than if it had not written the call option.
The Portfolio pays brokerage commissions 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.
From time to time, the Portfolio may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned to
it, rather than delivering the security from its portfolio. In those cases,
additional brokerage commissions are incurred.
FORWARD FOREIGN CURRENCY CONTRACTS. The 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 Portfolio enters into forward contracts in an attempt to hedge against
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changes in prevailing currency exchange rates. The Portfolio does not engage in
transactions in forward contracts for speculation; it views investments in
forward contracts as a means of establishing more definitely the effective
return on, or the purchase price of, securities denominated in foreign
currencies that are held or intended to be acquired by it. Forward contract
transactions include forward sales or purchases of foreign currencies for the
purpose of protecting the U.S. dollar value of securities held or to be acquired
by the Portfolio or protecting the U.S. dollar equivalent of dividends,
interest, or other payments on those securities.
N&B Management believes that the use of foreign currency hedging
techniques, including "proxy-hedges," can provide significant protection of NAV
in the event of a general rise in the U.S. dollar against foreign currencies.
For example, the return available from securities denominated in a particular
foreign currency would diminish if the value of the U.S. dollar increased
against that currency. Such a decline could be partially or completely offset by
an increase in value of a hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell that
foreign currency or a proxy-hedge involving a forward contract to sell a
different foreign currency whose behavior is expected to resemble the currency
in which the securities being hedged are denominated and which is available on
more advantageous terms. However, a hedge or proxy-hedge cannot protect against
exchange rate risks perfectly, and, if N&B Management is incorrect in its
judgment of future exchange rate relationships, the Portfolio could be in a less
advantageous position than if such a hedge had not been established. If the
Portfolio uses proxy-hedging, it may experience losses on both the currency in
which it has invested and the currency used for hedging if the two currencies do
not vary with the expected degree of correlation. Because forward contracts are
not traded on an exchange, the assets used to cover such contracts may be
illiquid.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write and purchase
covered call and put options on foreign currencies, in amounts not exceeding 5%
of its net assets. The 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
constitutes only a partial hedge, up to the amount of the premium received. The
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, as discussed herein. Certain
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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.
REGULATORY LIMITATIONS ON USING FUTURES, OPTIONS ON FUTURES, OPTIONS ON
SECURITIES, FORWARD CONTRACTS, AND OPTIONS ON FOREIGN CURRENCIES (COLLECTIVELY,
"HEDGING INSTRUMENTS"). To the extent the Portfolio sells or purchases futures
contracts 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.
In addition, (1) the aggregate premiums paid by the 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 the Portfolio at
any time may not exceed 5% of its total assets. The Portfolio does not currently
intend to 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.
COVER FOR HEDGING INSTRUMENTS. The 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 the prescribed
amount of cash or appropriate liquid securities. Securities held in a segregated
account cannot be sold while the futures, options, or forward strategy covered
by those securities is outstanding, unless they are replaced with other suitable
assets. As a result, segregation of a large percentage of the Portfolio's assets
could impede portfolio management or the Portfolio's ability to meet current
obligations. The Portfolio may be unable promptly to dispose of assets which
cover, or are segregated with respect to, an illiquid futures, options, or
forward position; this inability may result in a loss to the Portfolio.
GENERAL RISKS OF HEDGING INSTRUMENTS. The primary risks in using
Hedging Instruments are (1) imperfect correlation or no correlation between of
the securities or currencies held or to be acquired by the Portfolio and the
prices of Hedging Instruments; (2) possible lack of a liquid secondary market
for these instruments and the resulting inability to close out Hedging
Instruments when desired; (3) the fact that the skills needed to use Hedging
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Instruments are different from those needed to select the Portfolio's
securities; (4) the fact that, although use of these instruments for hedging
purposes can reduce the risk of loss, they also can reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
hedged investments; and (5) the possible inability of the Portfolio to purchase
or sell a portfolio security at a time that would otherwise be favorable for it
to do so, or the possible need for the Portfolio to sell a portfolio security at
a disadvantageous time, due to its need to maintain cover or to segregate
securities in connection with its use of 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 or offset that of the
Portfolio's underlying securities or currency. N&B Management intends to reduce
the risk that the 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 Portfolio
are generally considered "derivatives." There can be no assurance that the
Portfolio's use of Hedging Instruments will be successful.
The Portfolio's use of Hedging Instruments may be limited by the
provisions of the Internal Revenue Code of 1986, as amended ("Code"), with which
it must comply if the Fund is to continue to qualify as a regulated investment
company ("RIC"). See "Additional Tax Information."
FIXED INCOME SECURITIES. While the emphasis of the Portfolio's
investment program is on common stocks and other equity securities, it may also
invest in money market instruments, U.S. Government and Agency Securities, and
other fixed income securities. The Portfolio may invest in corporate bonds and
debentures 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").
The ratings of an NRSRO represent its opinion as to the quality of
securities it undertakes to rate. Ratings are not absolute standards of quality;
consequently, securities with the same maturity, coupon, and rating may have
different yields. Although the Portfolio may rely on the ratings of any NRSRO,
the Portfolio primarily refers to ratings assigned by S&P and Moody's, which are
described in Appendix A to this SAI.
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<PAGE>
Fixed income securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer, and market
liquidity ("market risk"). 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. Subsequent to its purchase by the Portfolio, an issue of debt securities
may cease to be rated or its rating may be reduced, so that the securities would
no longer be eligible for purchase by the Portfolio. In such a case, the
Portfolio will engage in an orderly disposition of the downgraded securities.
COMMERCIAL PAPER. Commercial paper is a short-term debt security issued
by a corporation or bank, usually for purposes such as financing current
operations. The Portfolio may invest only 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 comparable quality.
The Portfolio may invest in commercial paper that cannot be resold to
the public without an effective registration statement under the 1933 Act. While
restricted commercial paper normally is deemed illiquid, N&B Management may in
certain cases determine that such paper is liquid, pursuant to guidelines
established by the Portfolio Trustees.
ZERO COUPON SECURITIES. The Portfolio 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 ratably by the Portfolio prior to the receipt of any actual
payments. Because the Fund must distribute substantially all of its net income
(including its share of the Portfolio's original issue discount) to its
shareholders each year for income and excise tax purposes, the Portfolio may
have to dispose of portfolio securities under disadvantageous circumstances to
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generate cash, or may be required to borrow, to satisfy the Fund's distribution
requirements. See "Additional Tax Information."
The market prices of zero coupon securities generally are more volatile
than the prices of securities that pay interest periodically. Zero coupon
securities are likely to respond to changes in interest rates to a greater
degree than other types of debt securities having similar maturity and credit
quality.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible
securities. A convertible security entitles the holder to receive the interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, such securities ordinarily provide a stream of income with generally
higher yields than common stocks of the same or similar issuers, but lower than
the yields 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 debt securities are subject to the Portfolio's investment policies
and limitations concerning fixed income securities.
The price of a convertible security often reflects variations in the
price of the underlying common stock in a way that non-convertible debt may not.
Convertible securities are typically issued by smaller capitalization companies
whose stock prices may be volatile. A convertible security may be subject to
redemption at the option of the issuer at a price established in the security's
governing instrument. If a convertible security held by the Portfolio is called
for redemption, the Portfolio will be required to convert it into the underlying
common stock, sell it to a third party or permit the issuer to redeem the
security. Any of these actions could have an adverse effect on the Portfolio's
and the Fund's ability to achieve their investment objective.
PREFERRED STOCK. The Portfolio may invest in preferred stock. Unlike
interest payments on debt securities, dividends on preferred stock are generally
payable at the discretion of the issuer's board of directors. Preferred
shareholders may have certain rights if dividends are not paid but generally
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have no legal recourse against the issuer. Shareholders may suffer a loss of
value if dividends are not paid. The market prices of preferred stocks are
generally more sensitive to changes in the issuer's creditworthiness than are
the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results and are
not intended to indicate future performance. The share price and total return of
the Fund will vary, and an investment in the Fund, when redeemed, may be worth
more or less than an investor's original cost.
Total Return Computations
- -------------------------
The Fund may advertise certain total return information. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $1,000 ("P") over a period of time ("n") according to the formula:
P(1+T)[SUPERSCRIPT]n = ERV
Average annual total return smooths out year-to-year
variations in performance and, in that respect, differs from actual year-to-year
results.
COMPARATIVE INFORMATION
From time to time the Fund's performance may be compared with:
(1) data (that may be expressed as rankings or ratings)
published by independent services or publications (including
newspapers, newsletters, and financial periodicals) that monitor the
performance of mutual funds, such as Lipper Analytical Services, Inc.,
C.D.A. Investment Technologies, Inc., Wiesenberger Investment Companies
Service, Investment Company Data Inc., Morningstar, Inc., Micropal
Incorporated, and quarterly mutual fund rankings by Money, Fortune,
Forbes, Business Week, Personal Investor, and U.S. News & World Report
magazines, The Wall Street Journal, The New York Times, Kiplinger's
Personal Finance, and Barron's Newspaper, or
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(2) recognized stock and other indices, such as the S&P "500"
Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index
("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell
2000 Stock Index, Dow Jones Industrial Average ("DJIA"), Wilshire 1750
Index, Nasdaq Composite Index, Value Line Index, U.S. Department of
Labor Consumer Price Index ("Consumer Price Index"), College Board
Annual Survey of Colleges, Kanon Bloch's Family Performance Index, the
Barra Growth Index, the Barra Value Index, and various other domestic,
international, and global indices. The S&P 500 Index is a broad index
of common stock prices, while the DJIA represents a narrower segment of
industrial companies. The S&P 600 Index includes stocks that range in
market value from $40 million to $2.3 billion, that have an average of
$451 million. The S&P 400 Index measures mid-sized companies that have
an average market capitalization of $1.6 billion. Each assumes
reinvestment of distributions and is calculated without regard to tax
consequences or the costs of investing. The Portfolio may invest in
different types of securities from those included in some of the above
indices.
The Fund's performance may also be compared to various socially
responsive indices. These include The Domini Social Index and the indices
developed by the quantitative department of Prudential Securities, such as that
department's Large and Mid-Cap portfolio indices for various breakdowns ("Sin"
Stock Free, Cigarette-Stock Free, S&P Composite, etc.).
Evaluations of the Fund's performance, its total return and comparisons
may be used in advertisements and in information furnished to current and
prospective shareholders (collectively, "Advertisements"). The Fund may also be
compared to individual asset classes such as common stocks, small-cap stocks, or
Treasury bonds, based on information supplied by Ibbotson and Sinquefield.
Other Performance Information
- ------------------------------
From time to time, information about the Portfolio's portfolio
allocation and holdings as of a particular date may be included in
Advertisements. This information may include the Portfolio's portfolio
diversification by asset type or by the social characteristics of companies
owned. Information used in Advertisements may include statements or
illustrations relating to the appropriateness of types of securities and/or
mutual funds that may be employed to meet specific financial goals, such as (1)
funding retirement, (2) paying for children's education, and (3) financially
supporting aging parents.
- 27 -
<PAGE>
Information relating to inflation and its effects on the dollar also
may be included in Advertisements. For example, after ten years, the purchasing
power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100,
respectively, if the annual rates of inflation during that period were 4%, 5%,
6%, and 7%, respectively. (To calculate the purchasing power, the value at the
end of each year is reduced by the inflation rate for the ten-year period.)
From time to time the investment philosophy of N&B Management's
founder, Roy R. Neuberger, may be included in the Fund's Advertisements. This
philosophy is described in further detail in "The Art of Investing: A
Conversation with Roy Neuberger," attached as Appendix B to this SAI.
CERTAIN RISK CONSIDERATIONS
Although the Portfolio seeks to reduce risk by investing in a
diversified portfolio of securities, diversification does not eliminate all
risk. There can, of course, be no assurance that the Portfolio will achieve its
investment objective.
TRUSTEES AND OFFICERS
The following table sets forth information concerning the trustees and
officers of the Trusts, including their addresses and principal business
experience during the past five years. Some persons named as trustees and
officers also serve in similar capacities for other funds and their
corresponding portfolios administered or managed by N&B Management and Neuberger
& Berman.
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address(1) With The Trusts Principal Occupation(s)(2)
- -------------- --------------- --------------------------
<S> <C> <C>
Faith Colish (61) Trustee of each Trust Attorney at Law, Faith Colish, A
63 Wall Street Professional Corporation.
24th Floor
New York, NY 10005
Donald M. Cox (74) Trustee of each Trust Retired. Formerly Senior Vice
435 East 52nd Street President and Director of Exxon
New York, NY 10022 Corporation; Director of
Emigrant Savings Bank.
- 28 -
<PAGE>
Stanley Egener* (62) Chairman of the Board, Principal of Neuberger & Berman;
Chief Executive Officer, President and Director of N&B
and Trustee of each Trust Management; Chairman of the
Board, Chief Executive Officer,
and Trustee of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
Alan R. Gruber (69) Trustee of each Trust Chairman and Chief Executive
Orion Capital Corporation Officer of Orion Capital
600 Fifth Avenue Corporation (property and
24th Floor casualty insurance); Director of
New York, NY 10020 Trenwick Group, Inc. (property
and casualty reinsurance);
Chairman of the Board and
Director of Guaranty National
Corporation (property and
casualty insurance); formerly
Director of Ketema, Inc.
(diversified manufacturer).
Howard A. Mileaf (59) Trustee of each Trust Vice President and Special
WHX Corporation Counsel to WHX Corporation
110 East 59th Street (holding company) since 1992;
30th Floor formerly Vice President and
New York, NY 10022 General Counsel of Keene
Corporation (manufacturer of
industrial products); Director
of Kevlin Corporation
(manufacturer of microwave and
other products).
Edward I. O'Brien* (68) Trustee of each Trust Until 1993, President of the
12 Woods Lane Securities Industry Association
Scarsdale, NY 10583 ("SIA") (securities industry's
representative in government
relations and regulatory matters
at the federal and state
levels); until November 1993,
employee of the SIA; Director of
Legg Mason, Inc.
John T. Patterson, Jr. (68) Trustee of each Trust Retired. Formerly President of
183 Ledge Drive SOBRO (South Bronx Overall Econ-
Torrington, CT 06790 omic Development Corporation).
- 29 -
<PAGE>
John P. Rosenthal (63) Trustee of each Trust Senior Vice President of Burnham
Burnham Securities Inc. Securities Inc. (a registered
Burnham Asset Management Corp. broker-dealer) since 1991;
1325 Avenue of the Americas formerly Partner of Silberberg,
17th Floor Rosenthal & Co. (member of
New York, NY 10019 National Association of
Securities Dealers, Inc.);
Director, Cancer Treatment
Holdings, Inc.
Cornelius T. Ryan (65) Trustee of each Trust General Partner of Oxford
Oxford Bioscience Partners Partners and Oxford Bioscience
315 Post Road West Partners (venture capital
Westport, CT 06880 partnerships) and President of
Oxford Venture Corporation;
Director of Capital Cash
Management Trust (money market
fund) and Prime Cash Fund.
Gustave H. Shubert (67) Trustee of each Trust Senior Fellow/Corporate Advisor
13838 Sunset Boulevard and Advisory Trustee of Rand (a
Pacific Palisades, CA 90272 non-profit public interest
research institution) since
1989; Honorary Member of the
Board of Overseers of the
Institute for Civil Justice, the
Policy Advisory Committee of the
Clinical Scholars Program at the
University of California, the
American Association for the
Advancement of Science, the
Counsel on Foreign Relations,
and the Institute for Strategic
Studies (London); advisor to the
Program Evaluation and
Methodology Division of the U.S.
General Accounting Office;
formerly Senior Vice President
and Trustee of Rand.
Lawrence Zicklin* (60) President and Trustee of Principal of Neuberger & Berman;
each Trust Director of N&B Management;
President and/or Trustee of five
other mutual funds for which N&B
Management acts as investment
manager or administrator.
Daniel J. Sullivan (56) Vice President of each Senior Vice President of N&B
Trust Management since 1992; prior
thereto, Vice President of N&B
Management; Vice President of
eight other mutual funds for
which N&B Management acts as
investment manager or
administrator.
- 30 -
<PAGE>
Michael J. Weiner (49) Vice President and Senior Vice President of N&B
Principal Financial Management since 1992; Treasurer
Officer of each Trust of N&B Management from 1992 to
1996; prior 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 eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
Claudia A. Brandon (40) Secretary of each Trust Vice President of N&B Manage-
ment; Secretary of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
Richard Russell (49) Treasurer and Principal Vice President of N&B Management
Accounting Officer of each since 1993; prior thereto,
Trust Assistant Vice President of N&B
Management; Treasurer and
Principal Accounting Officer of
eight other mutual funds for which
N&B Management acts as investment
manager or administrator.
Stacy Cooper-Shugrue (33) Assistant Secretary of Assistant Vice President of N&B
each Trust Management since 1993; prior
thereto, employee of N&B
Management; Assistant Secretary of
eight other mutual funds for which
N&B Management acts as investment
manager or administrator.
C. Carl Randolph (59) Assistant Secretary of Principal of Neuberger & Berman
each Trust since 1992; prior thereto,
employee of Neuberger & Berman;
Assistant Secretary of eight other
mutual funds for which N&B
Management acts as investment
manager or administrator.
- 31 -
<PAGE>
Barbara DiGiorgio (37) Assistant Treasurer of Assistant Vice President of N&B
each Trust Management since 1993; prior
thereto, employee of N&B Manage-
ment; Assistant Treasurer of eight
other mutual funds for which N&B
Management acts as investment
manager or administrator since
1996.
Celeste Wischerth (35) Assistant Treasurer of Assistant Vice President of N&B
each Trust Management since 1994; prior
thereto, employee of N&B Manage-
ment; Assistant Treasurer of eight
other mutual funds for which N&B
Management acts as investment
manager or administrator since
1996.
- --------------------
</TABLE>
(1) Unless otherwise indicated, the business address of each listed person is
605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
* Indicates a trustee who is an "interested person" of each Trust
within the meaning of the 1940 Act. Messrs. Egener and Zicklin are interested
persons by virtue of the fact that they are officers and/or directors of N&B
Management and principals of Neuberger & Berman. Mr. O'Brien is an interested
person by virtue of the fact that he is a director of Legg Mason, Inc., a wholly
owned subsidiary of which, from time to time, serves as a broker or dealer to
the Portfolio and other funds for which N&B Management serves as investment
manager.
The Trust's Trust Instrument and Managers Trust's Declaration of Trust
provide that each such Trust will indemnify its trustees and officers against
liabilities and expenses reasonably incurred in connection with litigation in
which they may be involved because of their offices with the Trust, unless it is
adjudicated that they (a) engaged in bad faith, willful misfeasance, gross
negligence, or reckless disregard of the duties involved in the conduct of their
offices, or (b) did not act in good faith in the reasonable belief that their
action was in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined (by a court
or other body approving the settlement or other disposition, by a majority of
disinterested trustees based upon a review of readily available facts, or in a
- 32 -
<PAGE>
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(R) has any retirement plan for its trustees or officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/96
Total Compensation
Aggregate from Trusts in the
Compensation Neuberger & Berman
Name and Position with from the Fund Complex Paid
The Trust Trust To Trustees
- ---------------------- ------------- --------------------
Faith Colish $0 $38,500
Trustee
(5 other investment
companies)
Donald M. Cox $0
Trustee $31,000
(3 other investment
companies)
Stanley Egener $0
Chairman of the Board, $0
Chief Executive (9 other investment
Officer, and Trustee companies)
Alan R. Gruber $0
Trustee $28,000
(3 other investment
companies)
- 33 -
<PAGE>
Howard A. Mileaf $0
Trustee $37,000
(4 other investment
companies)
Edward I. O'Brien $0
Trustee $31,500
(3 other investment
companies)
John T. Patterson, Jr. $0
Trustee $40,500
(4 other investment
companies)
John P. Rosenthal $0
Trustee $36,500
(4 other investment
companies)
Cornelius T. Ryan $0
Trustee $30,500
(3 other investment
companies)
Gustave H. Shubert $0
Trustee $30,500
(3 other investment
companies)
Lawrence Zicklin $0
President and Trustee $0
(5 other investment
companies)
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Investment Manager And Administrator
- ------------------------------------
Because all of the Fund's net investable assets are invested in the
Portfolio, the Fund does not need an investment manager. N&B Management serves
as the Portfolio's investment manager pursuant to a management agreement with
Managers Trust, dated as of August 2, 1993 ("Management Agreement"). The
Management Agreement was approved by the holders of the interests in the
Portfolio on March 9, 1994. The Portfolio was authorized to become subject to
the Management Agreement by vote of the Portfolio Trustees, on October 20, 1993,
and became subject to it on March 14, 1994.
- 34 -
<PAGE>
The Management Agreement provides, in substance, that N&B Management
will make and implement investment decisions for the Portfolio in its discretion
and will continuously develop an investment program for the Portfolio's assets.
The Management Agreement permits N&B Management to effect securities
transactions on behalf of the 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 Portfolio, although N&B Management has
no current plans to pay a material amount of such compensation.
N&B Management provides to the 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
Managers Trust who are officers, directors, or employees of N&B Management. Two
directors of N&B Management (who also are principals of Neuberger & Berman), one
of whom also serves as an officer of N&B Management, presently serve as trustees
and officers of the Trusts. See "Trustees and Officers." The Portfolio pays N&B
Management a management fee based on the Portfolio's average daily net assets,
as described in the Prospectus.
N&B Management provides similar facilities, services and personnel, as
well as accounting, recordkeeping, and other services, to the Fund pursuant to
an administration agreement with the Trust, dated November 1, 1994
("Administration Agreement"). For such administrative services, the Fund pays
N&B Management a fee based on the Fund's average daily net assets, as described
in the Prospectus. N&B Management enters into administrative services agreements
with Institutions, pursuant to which it compensates Institutions for accounting,
recordkeeping and other services that they provide to investors who purchase
shares of the Fund.
The Management Agreement continues with respect to the 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
the Portfolio, so long as its continuance is approved at least annually (1) by
the vote of a majority of the Portfolio Trustees who are not "interested
persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"),
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act
majority vote of the outstanding interests in the Portfolio. The Administration
Agreement continues with respect to the Fund for a period of two years after the
date the Fund became subject thereto. The Administration Agreement is renewable
from year to year with respect to the Fund, so long as its continuance is
- 35 -
<PAGE>
approved at least annually (1) by the vote of a majority of the Fund Trustees
who are not "interested persons" of N&B Management or the Trust ("Independent
Fund Trustees"), cast in person at a meeting called for the purpose of voting on
such approval, and (2) by the vote of a majority of the Fund Trustees or by a
1940 Act majority vote of the outstanding shares in the Fund. Each Agreement
terminates automatically if it is assigned.
The Management Agreement is terminable, without penalty, with respect
to the Portfolio on 60 days' written notice either by Managers Trust or by N&B
Management. The Administration Agreement is terminable, without penalty, with
respect to the Fund on 60 days' written notice either by N&B Management or by
the Trust.
Sub-adviser
- -----------
N&B Management retains Neuberger & Berman, 605 Third Avenue, New York,
NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a
sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the holders of the interests in the
Portfolio on March 9, 1994. The Portfolio was authorized to become subject to
the Sub-Advisory Agreement by vote of the Portfolio Trustees on October 20, 1993
and became subject to it on March 14, 1994.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same type of
investment recommendations and research that Neuberger & Berman, from time to
time, provides to its principals and employees for use in managing client
accounts. In this manner, 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.
- 36 -
<PAGE>
The Sub-Advisory Agreement continues with respect to the 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 the Portfolio by the Portfolio
Trustees or by a 1940 Act majority vote of the outstanding interests in the
Portfolio, 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 the Portfolio if it is assigned or if the
Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger & Berman organization
have at least fifteen years experience. Neuberger & Berman and 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, 1996, these companies, along with
three other investment companies advised by Neuberger & Berman, had aggregate
net assets of approximately $13.9 billion, as shown in the following list:
<TABLE>
<CAPTION>
Approximate
Net Assets at
NAME SEPTEMBER 30, 1996
<S> <C>
Neuberger & Berman Cash Reserves Portfolio....................................................$527,447,493
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio.................................................$319,705,018
(investment portfolio for Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond Portfolio............................................$268,892,148
(investment portfolio for Neuberger & Berman Limited Maturity Bond
Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio..................................................$141,116,062
(investment portfolio for Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities Portfolio..............................................$38,416,801
(investment portfolio for Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured Intermediate
Portfolio .............................................................................$9,575,489
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
- 37 -
<PAGE>
Neuberger & Berman Ultra Short Bond Portfolio..................................................$96,306,004
(investment portfolio for Neuberger & Berman Ultra Short Bond Fund
and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Focus Portfolio..........................................................$1,174,138,341
(investment portfolio for Neuberger & Berman Focus Fund, Neuberger
& Berman Focus Trust, and Neuberger & Berman Focus Assets)
Neuberger & Berman Genesis Portfolio..........................................................$287,653,131
(investment portfolio for Neuberger & Berman Genesis Fund and
Neuberger & Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio..................................................... $6,513,577,557
(investment portfolio for Neuberger & Berman Guardian Fund and
Neuberger & Berman Guardian Trust, and Neuberger & Berman Guardian
Assets)
Neuberger & Berman International Portfolio.....................................................$59,969,278
(investment portfolio for Neuberger & Berman International Fund)
Neuberger & Berman Manhattan Portfolio........................................................$592,681,290
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and Neuberger & Berman
Manhattan Assets)
Neuberger & Berman Partners Portfolio.......................................................$2,112,475,324
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust, and Neuberger & Berman Partners
Assets)
Neuberger & Berman Socially Responsive
Portfolio ...........................................................................$167,005,429
(investment portfolio for Neuberger & Berman Socially Responsive
Fund, Neuberger & Berman Socially Responsive Trust, and Neuberger
& Berman NYCDC Socially Responsive Trust)
Advisers Managers Trust (six series)........................................................$1,468,727,224
</TABLE>
In addition, Neuberger & Berman serves as investment adviser to three
investment companies, Plan Investment Fund, Inc., AHA Investment Fund, Inc., and
- 38 -
<PAGE>
AHA Full Maturity, with assets of respectively, $61,738,329, $77,498,236, and
$26,954,887 at September 30, 1996.
The investment decisions concerning the Portfolio and the other mutual
funds 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 Portfolio.
Even where the investment objectives are similar, however, the methods used by
the Other N&B Funds and the Portfolio to achieve their objectives may differ.
The investment results achieved by all of the mutual funds managed by N&B
Management have varied from one another in the past and are likely to vary in
the future.
There may be occasions when the Portfolio and one or more of the Other
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, in
terms of amount, in accordance with a formula considered to be equitable to the
funds involved. Although in some cases this arrangement may have a detrimental
effect on the price or volume of the securities as to the Portfolio, in other
cases it is believed that the Portfolio's ability to participate in volume
transactions may produce better executions for it. In any case, it is the
judgment of the Portfolio Trustees that the desirability of the Portfolio's
having its advisory arrangements with N&B Management outweighs any disadvantages
that may result from contemporaneous transactions.
The Portfolio is subject to certain limitations imposed on all advisory
clients of Neuberger & Berman (including the Portfolio, the Other N&B Funds, and
other managed accounts) and personnel of Neuberger & Berman and its affiliates.
These include, for example, limits that may be imposed in certain industries or
by certain companies, and policies of Neuberger & Berman that limit the
aggregate purchases, by all accounts under management, of the outstanding shares
of public companies.
Management And Control Of 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; Theodore P.
Giuliano, Vice President and director; Michael M. Kassen, Vice President and
director; Irwin Lainoff, director; Lawrence Zicklin, director; Daniel J.
Sullivan, Senior Vice President; Peter E. Sundman, Senior Vice President;
Michael J. Weiner, Senior Vice President; Claudia A. Brandon, Vice President;
Patrick T. Byrne, Vice President; William Cunningham, Vice President; Clara Del
- 39 -
<PAGE>
Villar, Vice President; Mark R. Goldstein, Vice President; Farha-Joyce Haboucha,
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; Susan Walsh, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice President of
Marketing; Robert Conti, Treasurer; Stacy Cooper-Shugrue, Assistant Vice
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio, Assistant
Vice President; Roberta D'Orio, Assistant Vice President; Joseph G. Galli,
Assistant Vice President; Robert I. Gendelman, Assistant Vice President; Leslie
Holliday-Soto, Assistant Vice President; Jody L. Irwin, Assistant Vice
President; Carmen G. Martinez, Assistant Vice President; Paul Metzger, Assistant
Vice President; Joseph S. Quirk, Assistant Vice President; Kevin L. Risen,
Assistant Vice President; Susan Switzer, Assistant Vice President; Celeste
Wischerth, Assistant Vice President; KimMarie Zamot, Assistant Vice President;
and Loraine Olavarria, Assistant Secretary. Messrs. Cantor, Egener, Giuliano,
Lainoff, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Prindle and Vale
are principals of Neuberger & Berman.
Messrs. Egener and Zicklin are trustees and officers, and Messrs.
Sullivan, Weiner, and Russell and Mmes. Brandon, Cooper- Shugrue, DiGiorgio, and
Wischerth are officers, of each Trust. C. Carl Randolph, a principal of
Neuberger & Berman, also is an officer of each Trust.
All of the outstanding voting stock in N&B Management is owned by
persons who are also principals of Neuberger & Berman.
DISTRIBUTION ARRANGEMENTS
N&B Management serves as the distributor ("Distributor") in connection
with the offering of the Fund's shares on a no-load basis to Institutions. In
connection with the sale of its shares, the Fund has authorized the Distributor
to give only the information, and to make only the statements and
representations, contained in the Prospectus and this SAI or that properly may
be included in sales literature and advertisements in accordance with the 1933
Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales
may be made only by the Prospectus, which may be delivered personally, through
the mails, or by electronic means. The Distributor is the Fund's "principal
underwriter" within the meaning of the 1940 Act and, as such, acts as agent in
- 40 -
<PAGE>
arranging for the sale of the Fund's shares to Institutions without sales
commission or other compensation and bears all advertising and promotion
expenses incurred in the sale of the Fund's shares.
The Distributor or one of its affiliates may, from time to time, deem
it desirable to offer to shareholders of the Fund, through use of its
shareholder list, the shares of other mutual funds for which the Distributor
acts as distributor or other products or services. Any such use of the Fund's
shareholder list, however, will be made subject to terms and conditions, if any,
approved by a majority of the Independent Fund Trustees. The list will not be
used to offer the Fund's shareholders any investment products or services other
than those managed or distributed by N&B Management or Neuberger & Berman.
From time to time, N&B Management may enter into arrangements pursuant
to which it compensates a registered broker-dealer or other third party for
services in connection with the distribution of Fund shares.
The Trust, on behalf of the Fund, and the Distributor are parties to a
Distribution Agreement that continues until November 1, 1997. The Distribution
Agreement may be renewed annually if specifically approved by (1) the vote of a
majority of the Fund Trustees or a 1940 Act majority vote of the Fund's
outstanding shares and (2) the vote of a majority of the Independent Fund
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement may be terminated by either party and will
terminate automatically on its assignment, in the same manner as the Management
Agreement.
- 41 -
<PAGE>
ADDITIONAL EXCHANGE INFORMATION
As more fully set forth in the section of the Prospectus
entitled "Exchanging Shares," an Institution may exchange shares of the Fund for
shares of one or more of the equity and income funds that are briefly described
below.
EQUITY FUNDS
Neuberger & Berman Seeks long-term capital appreciation through
Focus Trust investments principally in common stocks
selected from 13 multi-industry eco- nomic
sectors. The corresponding portfolio uses a
value-oriented approach to select individual
securities and then focuses its investments in
the sectors in which the undervalued stocks are
clustered. Through this approach, 90% or more of
the Neuberger & Berman Seeks capital
appreciation through portfolio's investments are
normally made Genesis Trust investments
primarily in common stocks of in not more than
six sectors. companies with small market
capitalizations (i.e., up to $1.5 billion) at
the time of the Portfolio's investment. The
corresponding portfolio uses a value- oriented
approach to the selection of individual
securities.
Neuberger & Berman Seeks capital appreciation through investments
Genesis Trust primarily in common stocks of companies with
small market capitalizations (i.e., up to $1.5
billion) at the time of the Portfolio's
investment. The corresponding portfolio uses a
value-oriented approach to the selection of
individual securities.
Neuberger & Berman Seeks capital appreciation through investments
Guardian Trust primarily in common stocks of long-established,
high-quality companies that N&B Management
believes are well-managed. The corresponding
portfolio uses a value-oriented approach to the
selection of individual securities. Current
income is a secondary objective. The sister fund
(and its predecessor) have paid its shareholders
an income dividend every quarter, and a capital
gain distribution every year, since its
inception in 1950, although there can be no
assurance that it will be able to continue to do
so.
Neuberger & Berman Seeks capital appreciation, without regard to
Manhattan Trust income, through investments generally in
securities of small-, medium- and large-
capitalization companies that N&B Management
believes have the maximum potential for
increasing total NAV. The corresponding
portfolio's "growth at a reasonable price"
investment approach involves greater risks and
share price volatility than programs that invest
in securities thought to be undervalued.
- 42 -
<PAGE>
Neuberger & Berman Seeks capital growth through an investment
Partners Trust approach that is designed to increase capital
with reasonable risk. Its investment program
seeks securities believed to be undervalued
based on strong fundamentals such as a low
price-to- earnings ratio, consistent cash flow,
and the company's track record through all parts
of the market cycle. The corresponding portfolio
uses the value- oriented investment approach to
the selection of individual securities.
INCOME FUNDS
- ------------
Neuberger & Berman Seeks current income with minimal risk to
Ultra Short Bond Trust principal and liquidity. The corresponding
portfolio invests in money market instruments
and investment grade debt securities of
government and non-government issuers. Maximum
average duration of two years.
Neuberger & Berman Seeks the highest current income con- sistent
Limited Maturity Bond with low risk to principal and liquidity and,
Trust secondarily, total return. The corresponding
portfolio invests in debt securities, primarily
investment grade; maximum 10% below investment
grade, but no lower than B.* Maximum average
duration of four years.
The Fund and any of the Equity or Income Funds may terminate or modify
its exchange privilege in the future.
Fund shareholders who are considering exchanging shares into any of the
funds listed above should note that (1) the Income Funds are series of a
Delaware business trust (named "Neuberger & Berman Income Trust") that is
- ---------------------------
*/ As rated by Moody's or S&P or, if unrated by either of those entities,
determined by N&B Management to be of comparable quality.
- 43 -
<PAGE>
registered with the SEC as an open-end management investment company, (2) the
Equity Funds are series of a Delaware business trust (named "Neuberger & Berman
Equity Trust") that is registered with the SEC as an open-end management
investment company, (3) each such fund invests all of its net investable assets
in a corresponding portfolio that has an investment objective, policies, and
limitations identical to those of the fund.
Before effecting an exchange, Fund shareholders must obtain and should
review a currently effective prospectus of the fund into which the exchange is
to be made. The Income Funds share a prospectus and the Equity Funds share a
prospectus. An exchange is treated as a sale for federal income tax purposes
and, depending on the circumstances, a short- or long-term capital gain or loss
may be realized.
ADDITIONAL REDEMPTION INFORMATION
Suspension Of Redemptions
- -------------------------
The right to redeem the Fund's shares may be suspended or payment of
the redemption price postponed (1) when the New York Stock Exchange ("NYSE") is
closed (other than weekend and holiday closings), (2) when trading on the NYSE
is restricted, (3) when an emergency exists as a result of which it is not
reasonably practicable for the Portfolio to dispose of securities it owns or
fairly to determine the value of its net assets, or (4) for such other period as
the SEC may by order permit for the protection of the Fund's shareholders.
Applicable SEC rules and regulations shall govern whether the conditions
prescribed in (2) or (3) exist. If the right of redemption is suspended,
shareholders may withdraw their offers of redemption, or they will receive
payment at the NAV per share in effect at the close of business on the first day
the NYSE is open ("Business Day") after termination of the suspension.
Redemptions In Kind
- -------------------
The Fund reserves the right, under certain conditions, to honor any
request for redemption (or a combination of requests from the same shareholder
in any 90-day period) exceeding $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part in securities valued as
described under "Share Prices and Net Asset Value" in the Prospectus. If payment
is made in securities, a shareholder generally will incur brokerage expenses or
other transaction costs in converting those securities into cash and will be
subject to fluctuation in the market prices of those securities until they are
sold. The Fund does not redeem in kind under normal circumstances, but would do
so when the Fund Trustees determined that it was in the best interests of the
Fund's shareholders as a whole.
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<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund distributes to its shareholders amounts equal to substantially
all of its share of any net investment income (after deducting expenses incurred
directly by the Fund), any net realized capital gains (both long-term and
short-term), and any net realized gains from foreign currency transactions
earned or realized by the Portfolio. The Fund calculates its net investment
income and NAV per share as of the close of regular trading on the NYSE on each
Business Day (usually 4:00 p.m. Eastern time).
The Portfolio's net investment income consists of all income accrued on
portfolio assets less accrued expenses, but does not include capital and foreign
currency gains and losses. Net investment income and realized gains and losses
are reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until they are
distributed. Dividends from net investment income and distributions of net
realized capital and foreign currency gains, if any, normally are paid once
annually, in December.
Dividends and other distributions are automatically reinvested in
additional shares of the Fund, unless the Institution elects to receive them in
cash ("cash election"). To the extent dividends and other distributions are
subject to federal, state, or local income taxation, they are taxable to the
shareholders whether received in cash or reinvested in Fund shares. A cash
election remains in effect until the Institution notifies the Fund in writing to
discontinue the election.
ADDITIONAL TAX INFORMATION
Taxation Of The Fund
- --------------------
In order to qualify for treatment as a RIC under the Code, the Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from Hedging Instruments) derived with respect to its business of
investing in securities or those currencies ("Income Requirement"); (2) the Fund
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<PAGE>
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months -- Hedging Instruments (other than those on foreign
currencies), or foreign currencies (or Hedging Instruments thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and futures with respect thereto) ("Short- Short Limitation"); and (3)
at the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs, and other securities limited,
in respect of any one issuer, to an amount that does not exceed 5% of the value
of the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities, and (ii) not more than 25% of the value
of its total assets may be invested in securities (other than U.S. Government
securities or securities of other RICs) of any one issuer.
Certain funds that invest in portfolios managed by N&B Management have
received rulings from the Internal Revenue Service ("Service") that each such
fund, as an investor in its corresponding portfolio will be deemed to own a
proportionate share of the portfolio's assets and income for purposes of
determining whether the fund satisfies all the requirements described above to
qualify as a RIC. Although these rulings may not be relied on as precedent by
the Fund, N&B Management believes that the reasoning thereof and, hence, their
conclusion apply to the Fund as well.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ended on October 31 of that year, plus certain
other amounts.
See the next section for a discussion of the tax consequences to the
Fund of distributions to it from the Portfolio, investments by the Portfolio in
certain securities, and hedging transactions engaged in by the Portfolio.
Taxation Of The Portfolio
- -------------------------
Certain portfolios managed by N&B Management, including the other
portfolios of Managers Trust, have received rulings from the Service to the
effect that, among other things, each such portfolio will be treated as a
separate partnership for federal income tax purposes and will not be a "publicly
traded partnership." Although these rulings may not be relied on as precedent by
the Portfolio, N&B Management believes the reasoning thereof and, hence, their
conclusion apply to the Portfolio as well. As a result, the Portfolio is not
subject to federal income tax; instead, each investor in the Portfolio, such as
the Fund, is required to take into account in determining its federal income tax
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<PAGE>
liability its share of the Portfolio's income, gains, losses, deductions, and
credits, without regard to whether it has received any cash distributions from
the Portfolio. The Portfolio also is not subject to Delaware or New York income
or franchise tax.
Because the Fund is deemed to own a proportionate share of the
Portfolio's assets and income for purposes of determining whether the Fund
qualifies as a RIC, the Portfolio intends to continue to conduct its operations
so that the Fund will be able to continue to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally equals the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's net
income and capital gains and decreased by (1) the amount of cash and the basis
of any property the Portfolio distributes to the Fund and (2) the Fund's share
of the Portfolio's losses.
Dividends and interest received by the Portfolio 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.
The 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 circumstances, if the Portfolio
holds stock of a PFIC, the Fund (indirectly through its interest in the
Portfolio) will be subject to federal income tax on its share of a portion of
any "excess distribution" received by the Portfolio on the stock or of any gain
on the Portfolio's disposition of the stock (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes its share of the PFIC income as a
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<PAGE>
taxable dividend to the Plan. The balance of the Fund's share of the PFIC income
will be included in its investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to the Plan.
If the Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the Fund's incurring the foregoing
tax and interest obligation, the Fund would be required to include in income
each year its share of the Portfolio's pro rata share of the 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 most likely
would have to be distributed by the Fund to satisfy the Distribution Requirement
and avoid imposition of the 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, such as the Fund,
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 Portfolio's use of hedging strategies, such as writing (selling)
and purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax purposes
the character and timing of recognition of the gains and losses the Portfolio
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from 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 Fund under the Income Requirement. However, income
from the disposition by the Portfolio of Hedging Instruments (other than those
on foreign currencies) will be subject to the Short-Short Limitation for the
Fund 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 the Portfolio's principal business of investing in
securities (or options and futures with respect thereto) also will be subject to
the Short-Short Limitation for the Fund if they are held for less than three
months.
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<PAGE>
If the Portfolio satisfies certain requirements, any increase 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 Fund
satisfies 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. The Portfolio will consider whether it should seek to satisfy those
requirements to enable the Fund to qualify for this treatment for hedging
transactions. To the extent the Portfolio does not do so, it may be forced to
defer the closing out of certain Hedging Instruments or foreign currency
positions beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
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 the 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; the remainder is
treated as short-term capital gain or loss.
The Portfolio may acquire zero coupon securities or other securities
issued with original issue discount ("OID"). As a holder of those securities,
the Portfolio (and, through it, the Fund) must take into 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 the Fund
annually must distribute substantially all of its investment company taxable
income (including its share of the Portfolio's accrued OID) to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax, the Fund may be
required in a particular year to distribute as a dividend an amount that is
greater than its share of the total amount of cash the Portfolio actually
receives. Those distributions will be made from the Fund's (or its share of the
Portfolio's) cash assets or, if necessary, from the proceeds of sales of the
Portfolio's securities. The Portfolio may realize capital gains or losses from
those sales, which would increase or decrease the Fund's investment company
taxable income and/or net capital gain. In addition, any such gains may be
realized on the disposition of securities or foreign currency positions, held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce the Portfolio's ability to sell other securities, or certain
Hedging Instruments or foreign currency positions held for less than three
months that it might wish to sell in the ordinary course of its portfolio
management.
- 49 -
<PAGE>
Taxation Of The Fund's Shareholders
- -----------------------------------
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.
PORTFOLIO TRANSACTIONS
Neuberger & Berman acts as the Portfolio's principal broker in the
purchase and sale of its portfolio securities and in connection with the
purchase and sale of options on its securities.
During the period from March 14, 1994 (commencement of operations)
through August 31, 1994, and the fiscal years ended August 31, 1995 and 1996,
the Portfolio paid brokerage commissions of $46,374, $138,378, and $208,834,
respectively, of which $46,050, $95,964, and $124,879 respectively, were paid to
Neuberger & Berman. Transactions in which the Portfolio used Neuberger & Berman
as broker comprised 59.67% of the aggregate dollar amount of transactions
involving the payment of commissions, and 59.80% of the aggregate brokerage
commissions paid by the Portfolio, during the fiscal year ended August 31, 1996.
90.09% of the $83,955 paid to other brokers by that Portfolio during that fiscal
year (representing commissions on transactions involving approximately
$38,877,483) was directed to those brokers because of research services they
provided. During the fiscal year ended August 31, 1996, the Portfolio acquired
securities of the following of its "regular brokers or dealers "(as defined in
the 1940 Act) ("Regular B/Ds"): None; at that date, the Portfolio held the
securities of its Regular B/Ds with an aggregate value as follows: None.
Portfolio securities are, from time to time, loaned by the Portfolio to
Neuberger & Berman in accordance with the terms and conditions of an order
issued by the SEC. The order exempts such transactions from provisions of the
1940 Act that would otherwise prohibit such transactions, subject to certain
conditions. Among the conditions of the order, securities loans made by the
Portfolio to Neuberger & Berman must be fully secured by cash collateral. The
portion of the income on cash collateral which may be shared with Neuberger &
Berman is determined by reference to concurrent arrangements between Neuberger &
Berman and non-affiliated lenders by which it engages in similar transactions.
In addition, where Neuberger & Berman borrows securities from the Portfolio in
order to re-lend them to others, Neuberger & Berman is required to pay the
Portfolio, on a quarterly basis, certain "excess earnings" that Neuberger &
Berman otherwise has derived from the re-lending of the borrowed securities.
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<PAGE>
When Neuberger & Berman desires to borrow a security that the Portfolio has
indicated a willingness to lend, Neuberger & Berman must borrow such security
from the Portfolio, rather than from an unaffiliated lender, unless the
unaffiliated lender is willing to lend such security on more favorable terms (as
specified in the order) than the Portfolio. If the Portfolio's expenses exceed
its income in any securities loan transaction with Neuberger & Berman, Neuberger
& Berman must reimburse the Portfolio for such loss.
During the fiscal years ended August 31, 1996 and 1995, and the period
March 14, 1994 (commencement of operations) to August 31, 1994, the Portfolio
earned no interest income from the collateralization of securities loans.
The Portfolio may also lend securities to unaffiliated entities,
including banks, brokerage firms, and other institutional investors judged
creditworthy by N&B Management, provided that cash or equivalent collateral,
equal to at least 100% of the market value of the loaned securities, is
continuously maintained by the borrower with the Portfolio. The Portfolio may
invest the cash collateral and earn income, or it may receive an agreed upon
amount of interest income from a borrower who has delivered equivalent
collateral. During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. These loans are subject to termination at the option of the
Portfolio or the borrower. The Portfolio may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
A committee of Independent Portfolio Trustees from time to time
reviews, among other things, information relating to securities loans by the
Portfolio.
In effecting securities transactions, the Portfolio generally seeks to
obtain the best price and execution of orders. Commission rates, being a
component of price, are considered along with other relevant factors. The
Portfolio plans to continue to use Neuberger & Berman as its principal broker
where, in the judgment of N&B Management (the Portfolio's investment manager and
an affiliate of the broker), that firm is able to obtain a price and execution
at least as favorable as other qualified brokers. To the Portfolio's knowledge,
no affiliate of the Portfolio receives give-ups or reciprocal business in
connection with its securities transactions.
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<PAGE>
The use of Neuberger & Berman as a broker for the Portfolio is subject
to the requirements of Section 11(a) of the Securities Exchange Act of 1934.
Section 11(a) prohibits members of national securities exchanges from retaining
compensation for executing exchange transactions for accounts which they or
their affiliates manage, except where they have the authorization of the persons
authorized to transact business for the account and comply with certain annual
reporting requirements. The Portfolio 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 the Portfolio to Neuberger &
Berman in connection with a purchase or sale of securities on a securities
exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions to be 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 Portfolio Trustees not to be
comparable to the Portfolio. The Portfolio does not deem it practicable and in
its best interest to solicit competitive bids for commissions on each
transaction effected by Neuberger & Berman. However, consideration regularly is
given to information concerning the prevailing level of commissions charged by
other brokers on comparable transactions during comparable periods of time. The
1940 Act generally prohibits Neuberger & Berman from acting as principal in the
purchase of portfolio securities from, or the sale of portfolio securities to,
the Portfolio, unless an appropriate exemption is available.
A committee of Independent Portfolio Trustees, from time to time
reviews, among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolio and to its other customers and information
concerning the prevailing level of commissions charged by other brokers having
comparable execution capability. In addition, the procedures pursuant to which
Neuberger & Berman effects brokerage transactions for the Portfolio must be
reviewed and approved no less often than annually by a majority of the
Independent Portfolio Trustees.
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<PAGE>
To ensure that accounts of all investment clients, including the
Portfolio, are treated fairly in the event that Neuberger & Berman receives
transaction instructions regarding a security for more than one investment
account at or about the same time, Neuberger & Berman may combine orders placed
on behalf of clients, including advisory accounts in which affiliated persons
have an investment interest, for the purpose of negotiating brokerage
commissions or obtaining a more favorable price. Where appropriate, securities
purchased or sold may be allocated, in terms of amount, to a client according to
the proportion that the size of the order placed by that account bears to the
aggregate size of orders simultaneously placed by the other accounts, subject to
de minimis exceptions all participating accounts will pay or receive the same
price.
The 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.
A committee comprised of officers of N&B Management and principals of
Neuberger & Berman who are portfolio managers of the Portfolio and/or 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 establishes a list and projected rankings of preferred
brokers for use in determining the relative amounts of commissions to be
allocated to those brokers. Ordinarily, the brokers on the list effect a large
portion of the brokerage transactions for the 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 transactions because they provide better price
and/or execution, which is the primary consideration in allocating brokerage;
(2) adjustments may be required because of periodic changes in the execution
capabilities of, or research provided by, particular brokers or in the execution
or research needs of the 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.
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<PAGE>
The commissions paid to 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 Portfolio by
supplementing the information otherwise available to N&B Management. That
research may be used by N&B Management in servicing Other N&B Funds and, in some
cases, by Neuberger & Berman 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 Portfolio's benefit.
Janet Prindle, a Vice President of N&B Management and a principal of
Neuberger & Berman, is the person primarily responsible for making decisions as
to specific action to be taken with respect to the investment portfolio of the
Portfolio. She has full authority to take action with respect to portfolio
transactions and may or may not consult with other personnel of N&B Management
prior to taking such action.
Portfolio Turnover
- ------------------
The Portfolio's portfolio turnover rate is calculated by dividing (1)
the lesser of the cost of the securities purchased or the proceeds from the
securities sold by the Portfolio during the fiscal year (other than securities,
including options, whose maturity or expiration date at the time of acquisition
was one year or less) by (2) the month-end average of the value of such
securities owned by the Portfolio during the fiscal year.
REPORTS TO SHAREHOLDERS
Shareholders of the Fund receive unaudited semi-annual financial
statements, as well as year-end financial statements audited by the independent
accountants for the Fund and Portfolio. The Fund's statements show the
investments owned by the Portfolio and the market values thereof and provide
other information about the Fund and its operations, including the Fund's
beneficial interest in the Portfolio.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected Street Bank and Trust Company
("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for their
securities and cash. State Street also serves as the Fund's transfer agent,
administering purchases, redemptions, and transfers of Fund shares with respect
to Institutions and the payment of dividends and other distributions to
Institutions. All correspondence should be mailed to Neuberger & Berman Funds,
Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. In
addition, State Street serves as transfer agent for the Portfolio.
INDEPENDENT ACCOUNTANTS
The Fund and Portfolio have selected Coopers & Lybrand L.L.P., One Post
Office Square, Boston, MA 02109, as the independent accountants who will audit
their financial statements.
LEGAL COUNSEL
The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., 2nd Floor, Washington, D.C. 20036-1800, as their
legal counsel.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included
in the Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered by the Prospectus. The registration statement,
including the exhibits filed therewith, may be examined at the SEC's offices in
Washington, D.C.
Statements contained in this SAI and in the Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance where reference is made to the copy of any contract
or other document filed as an exhibit to the registration statement, each such
statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
Unaudited financial statements for the Fund for the fiscal year ended
August 31, 1996, appear on the following pages.
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<PAGE>
NEUBERGER&BERMAN SOCIALLY RESPONSIVE TRUST
STATEMENT OF ASSETS AND LIABILITIES
AS OF AUGUST 31, 1996
(Unaudited)
ASSETS:
Cash $100,000
Deferred organization costs (Note 1) 120,000
--------
Total assets 220,000
--------
LIABILITIES:
Accrued organization costs (Note 1) 120,000
--------
NET ASSETS $100,000
========
Shares Outstanding ($.001 par value:
unlimited shares of beneficial
interest authorized) 10,000
========
Net Asset Value, offering and redemption
price per share ($100,000 divided by
10,000 shares outstanding) $ 10.00
========
The accompanying notes are an integral part of this statement.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
NOTE 1 - Significant Accounting Policies:
(a) General: Neuberger&Berman Equity Assets (the "Trust") is a
diversified, open-end management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"), as
amended. The Trust was established as a Delaware business
trust organized pursuant to a Trust Instrument dated October
18, 1993. Neuberger&Berman Socially Responsive Trust (the
"Fund") is a separate series of the Trust. The Trust has four
other operating series. The Fund will invest all of its
investable assets in a corresponding Portfolio of Equity
Managers Trust which is registered under the 1940 Act as a
diversified, open-end management investment company. As of
August 31, 1996, the Fund had no operations other than
organizational matters and the issuance and sale of initial
shares to Neuberger&Berman Management Incorporated
("Management") on October 26, 1994.
- 56 -
<PAGE>
(b) Organizational Expenses: Costs incurred by the Trust in
connection with its organization and the initial offering of
its shares have been deferred and will be amortized on a
straight-line basis from the date upon which the Trust will
commence its investment activities, over a period of five
years. In the event that any of the initial shares of the Fund
are redeemed during the amortization period, the redemption
proceeds will be reduced by any unamortized organization and
registration expenses in the same proportion as the number of
shares being redeemed bears to the number of initial shares
outstanding at the time of such redemptions. The accrued
organization expenses are payable to Management, the
administrator and distributor of the shares of the Fund.
(c) Federal Income Taxes: The Fund intends to comply with the
requirements of the Internal Revenue Code of 1986, as amended,
and intends to qualify as a regulated investment company and
to make requisite distributions of income to its shareholders
that will be sufficient to relieve if from substantially all
federal income taxes.
- 57 -
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P Corporate Bond Ratings:
---------------------------
AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
Moody's Corporate Bond Ratings:
-------------------------------
AAA - Bonds rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or an exceptionally stable
margin, and principal is secure. Although the various protective elements are
likely to change, the changes that can be visualized are most unlikely to impair
the fundamentally strong position of the issue.
- 58 -
<PAGE>
AA - Bonds rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as "high
grade bonds." They are rated lower than the best bonds because margins of
protection may not be as large as in AAA-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in AAA-rated
securities.
A - Bonds rated A possess many favorable investment attributes and are
considered to be as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
BAA - Bonds which are rated BAA are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. These bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
MODIFIERS - Moody's may apply numerical modifiers 1, 2, and 3 in each
generic rating classification described above. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating category.
S&P COMMERCIAL PAPER RATINGS:
A-1 - This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+).
A-2 - This designation denotes satisfactory capacity for timely
payment. However, the relative degree of safety is not as high as for issues
designated A-1.
- 59 -
<PAGE>
MOODY'S COMMERCIAL PAPER RATINGS:
Issuers rated PRIME-1 (or related supporting institutions), also known
as P-1, have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions), also known
as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
- 58 -
<PAGE>
Appendix B
The Art of Investing:
A Conversation with Roy Neuberger
"I firmly believe that if you want to manage your own
money, you must be a student of the market. If you
are unwilling or unable to do that, find someone else
to manage your money for you."
NEUBERGER & BERMAN
<PAGE>
[THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE]
<PAGE>
[PICTURE OF ROY NEUBERGER]
During my more than sixty-five years of buying and selling
securities, I've been asked many questions about my approach to
investing. On the pages that follow are a variety of my thoughts,
ideas and investment principles which have served me well over the
years. If you gain useful knowledge in the pursuit of profit as well
as enjoyment from these comments, I shall be more than content.
\s\ Roy R. Neuberger
- 1 -
<PAGE>
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE
CHARACTERISTICS OF SUCCESSFUL INVESTING INTO
FIVE "RULES." WHAT ARE THEY?
Rule #1: Be flexible. My philosophy has
necessarily changed from time to time because
of events and because of mistakes. My views
change as economic, political, and
technological changes occur both on and
sometimes off our planet. It is imperative
that you be willing to change your thoughts
to meet new conditions.
Rule #2: Take your temperament into account.
Recognize whether you are by nature very
speculative or just the opposite -- fearful,
timid of taking risks. But in any event --
Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure
that some of your investments, make sure that some of your principal is kept
safe, and principal is kept safe, and try to increase try to increase your
income your income as well as your capital. as well as your capital.
[PICTURE OF ROY NEUBERGER]
Rule #4: Always remember there are many ways
to skin a cat! Ben Graham and David Dodd did
it by understanding basic values. Warren
Buffet invested his portfolio in a handful of
long-term holdings, while staying involved
with the companies' managements. Peter Lynch
chose to understand, first-hand, the products
of many hundreds of the companies he invested
in. George Soros showed his genius as a hedge
fund investor who could decipher world
currency trends. Each has been successful in
his own way. But to be successful, remember
to-
- 2 -
<PAGE>
Rule #5: Be skeptical. To repeat a few well-
worn useful phrases:
A. Dig for yourself.
B. Be from Missouri.
C. If it sounds too good to be true, it
probably is.
IN YOUR 65 YEARS OF INVESTING ARE THERE ANY
GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW
THE MARKET BEHAVES?
Every decade that I've been involved with
Wall Street has a nuance of its own, an
economic and social climate that influences
investors. But generally, bull markets tend
to be longer than bear markets, and stock
prices tend to go up more slowly and
erratically than they go down. Bear markets
tend to be shorter and of greater intensity.
The market rarely rises or declines
concurrently with business cycles longer than
six months.
AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU
DEFINE VALUE INVESTING?
Value investing means finding the best values
- - either absolute or relative. Absolute
means a stock has a low market price relative
to its own fundamentals. Relative value means
the price is attractive relative to the
market as a whole.
COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"?
A classic example is a company that has a low
price to earnings ratio, a low price to book
ratio, free cash flow, a strong balance
sheet, undervalued corporate assets,
unrecognized earnings turnaround and is
selling at a discount to private market
value.
These characteristics usually lead to
companies that are under-researched and have
a high degree of inside ownership and
entrepreneurial management.
- 3 -
<PAGE>
One of my colleagues at Neuberger & Berman
says he finds his value stocks either "under
a cloud" or "under a rock." "Under a cloud"
stocks are those Wall Street in general
doesn't like, because an entire industry is
out of favor and even the good stocks are
being dropped. "Under a rock" stocks are
those Wall Street is ignoring, so you have to
uncover them on your own.
ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE
STOCKS?
I'm more interested in longer-term trends in
earnings than short-term trends. Earnings
gains should be the product of long-term
strategies, superior management, taking
advantage of business opportunities and so
on. If these factors are in their proper
place, short-term earnings should not be of
major concern. Dividends are an important
extra because, if they're stable, they help
support the price of the stock.
WHAT ABOUT SELLING STOCKS?
Most individual investors should invest for
the long term but not mindlessly. A sell
discipline, often neglected by investors, is
vitally important.
"One should fall in love One should fall in love with ideas, with
with ideas, with people or people, or with idealism. But in my book, the
with idealism. But in my last thing to fall in love with is a
book, the last thing to particular security. It is after all just a
fall in love with is a sheet of paper indicating a part ownership in
particular security." a corporation and its use is purely
mercenary. If you must love a security, stay
in love with it until it gets overvalued;
then let somebody else fall in love.
[PICTURE OF ROY NEUBERGER]
- 4 -
<PAGE>
ANY OTHER ADVICE FOR INVESTORS?
I firmly believe that if you want to manage
your own money, you must be a student of the
market. If you're unwilling or unable to do
that, find someone else to manage your money
for you. Two options are a well-managed
no-load mutual fund or, if you have enough
assets for separate account management, a
money manager you trust with a good record.
HOW WOULD YOU DESCRIBE YOUR PERSONAL
INVESTING STYLE?
Every stock I buy is bought to be sold. The
market is a daily event, and I continually
review my holdings looking for selling
opportunities. I take a profit occasionally
on something that has gone up in price over
what was expected and simultaneously take
losses whenever misjudgment seems evident.
This creates a reservoir of buying power that
can be used to make fresh judgments on what
are the best values in the market at that
time. My active investing style has worked
well for me over the years, but for most
investors I recommend a longer-term approach.
I tend not to worry very must about the day
to day swings of the market, which are very
hard to comprehend. Instead, I try to be
rather clever in diagnosing values and trying
to win 70 to 80 percent of the time.
YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR
EXPERIENCE WITH THE "GREAT CRASH"?
- 5 -
<PAGE>
The only money I managed in the Panic of 1929
was my own. My portfolio was down about 12
percent, and I had an uneasy feeling about
the market and conditions in general. Those
were the days of 10 percent margin. I studied
the lists carefully for a stock that was
overvalued in my opinion and which I could
sell short as a hedge. I came across RCA at
about $100 per share. It had recently split 5
for 1 and appeared overvalued. There were no
dividends, little income, a low net worth and
a weak financial position. I sold RCA short
in the amount equal to the dollar value of my
long portfolio. It proved to be a timely and
profitable move.
HOW DID THE CRASH OF 1929 AFFECT YOUR
INVESTING STYLE?
I am prematurely bearish when the market goes
up for a long time and everybody is happy
because they are richer. I am very bullish
when the market has gone down perceptibly and
I feel it has discounted any troubles we are
going to have.
HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO
MARKET BEHAVIOR?
There are many factors in addition to
economic statistics or security analysis in a
buy or sell decision. I believe psychology
plays an important role in the Market. Some
people follow the crowd in hopes they'll be
swept along in the right direction, but if
the crowd is late in acting, this can be a
bad move.
I like to be contrary. When things look bad,
I become optimistic. When everything looks
rosy, and the crowd is optimistic, I like to
be a seller. Sometimes I'm too early, but I
generally profit.
AS A RENOWNED ART COLLECTOR, DO YOU FIND
SIMILARITIES BETWEEN SELECTING STOCKS AND
SELECTING WORKS OF ART?
- 6 -
<PAGE>
Both are an art, although picking stocks is a
minor art compared with painting, sculpture
"When things look bad, I or literature. I started buying art in the
become optimistic. When 30s, and in the 40s it was a daily, almost
everything looks rosy, and hourly occurrence. My inclination to buy the
the crowd is optimistic, I works of living artists comes from Van Gogh,
like to be a seller." who sold only one painting during his
lifetime. He died in poverty, only then to
become a legend and have his work sold for
millions of dollars.
[PICTURE OF ROY NEUBERGER]
There are more variables to consider now in
both buying art and picking stocks. In the
modern stock markets, the heavy use of
futures and options has changed the nature of
the investment world. In past times, the
stock market was much less complicated, as
was the art world.
Artists rose and fell on their own merits
without a lot of publicity and attention. As
more and more dealers are involved with
artists, the price of their work becomes
inflated. So I almost always buy works of
unknown, relatively undiscovered artists,
which, I suppose is similar to value
investing.
But the big difference in my view of art and
stocks is that I buy a stock to sell it and
make money. I never bought paintings or
sculptures for investment in my life. The
objective is to enjoy their beauty.
- 7 -
<PAGE>
WHAT DO YOU CONSIDER THE BUSINESS MILESTONES
IN YOUR LIFE?
Being a founder of Neuberger & Berman and
creating one of the first no-load mutual
funds. I started on Wall Street in 1929, and
during the depression I managed my own money
and that of my clientele. We all prospered,
but I wanted to have my own firm. In 1939 I
became a founder of Neuberger & Berman, and
for about 10 years we managed money for
individuals with substantial financial
assets. But I also wanted to offer the
smaller investor the benefits of professional
money management, so in 1950 I created the
Guardian Mutual Fund (now known as the
Neuberger & Berman Guardian Fund). The Fund
was kind of an innovation in its time because
it didn't charge a sales commission. I
thought the public was being overcharged for
mutual funds, so I wanted to create a fund
that would be offered directly to the public
without a sales charge. Now of course the
"no-load" fund business is a huge industry. I
managed the Fund myself for over 28 years.
[PICTURE OF ROY NEUBERGER]
YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO
THE OFFICE EVERY DAY TO MANAGE YOUR
INVESTMENTS. WHY?
I like the fun of being nimble in the stock
market, and I'm addicted to the market's
fascinations.
WHAT CLOSING WORDS OF ADVICE DO YOU HAVE
ABOUT INVESTING?
Realize that there are opportunities at all
times for the adventuresome investor. And
stay in good physical condition. It's a
strange thing. You do not dissipate your
energies by using them. Exercise your body
and your brain every day, and you'll do
better in investments and in life.
- 8 -
<PAGE>
ROY NEUBERGER: A BRIEF BIOGRAPHY
Roy Neuberger is a founder of the investment
management firm Neuberger & Berman, and a
renowned value investor. He is also a
recognized collector of contemporary American
art, much of which he has given away to
museums and colleges across the country.
During the 1920s, Roy studied art in
Paris. When he realized he didn't possess the
talent to become an artist, he decided to
collect art, and to support this passion, Roy
turned to investing -- a pursuit for which
his talents have proven more than adequate.
A TALENT FOR INVESTING
Roy began his investment career by
joining a brokerage firm in 1929, seven
months before the "Great Crash." Just weeks
before "Black Monday," he shorted the stock
of RCA, thinking it was overvalued. He
profited from the falling market and gained a
reputation for market prescience and stock
selection that has lasted his entire career.
NEUBERGER & BERMAN'S FOUNDING
Roy's investing acumen attracted many
people who wished to have him manage their
money. In 1939, at the age of 36, after
purchasing a seat on the New York Stock
Exchange, Roy founded Neuberger & Berman to
provide money management services to people
who lacked the time, interest or expertise to
manage their own assets.
- 9 -
<PAGE>
NEUBERGER & BERMAN -- OVER FIVE DECADES OF
GROWTH
Neuberger & Berman has grown through
the years and now manages approximately $30
billion of equity and fixed income assets,
both domestic and international, for
individuals, institutions, and its family of
no-load mutual funds. Today, as when the firm
was founded, Neuberger & Berman follows a
value approach to investing, designed to
enable clients to advance in good markets and
minimize losses when conditions are less
favorable.
For more complete information about the
Neuberger & Berman Guardian Fund,
including fees and expenses, call
Neuberger & Berman Management at
800-877- 9700 for a free prospectus.
Please read it carefully, before you
invest or send money.
- 10 -
<PAGE>
Neuberger & Berman Management
Inc.[SERVICE MARK]
605 Third Avenue, 2nd Floor
New York, NY 10158-0006
Shareholder Services
(800) 877-9700
[COPYRIGHT SYMBOL]1995
Neuberger & Berman
PRINTED ON RECYCLED PAPER
WITH SOY BASED INKS
================================================================================
- 11 -
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. Financial Statements And Exhibits
- ------- ---------------------------------
(a) Financial Statements:
Unaudited financial statements for Neuberger & Berman Socially
Responsive Trust appear in Part B.
(b) Exhibits:
Exhibit
Number Description
------ -----------
(1) (a) Certificate of Trust. Incorporated by Reference to
Post-Effective Amendment No. 1 to Registrant's
Registration Statement, File Nos. 33-82568 and 811-
8106, EDGAR Accession No. 0000898432-95-000393.
(b) Trust Instrument of Neuberger & Berman Equity Assets.
Incorporated by Reference to Post-Effective Amendment
No. 1 to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, EDGAR Accession No.
0000898432-95-000393.
(c) Schedule A - Current Series of Neuberger & Berman
Equity Assets. Incorporated by Reference to Post-
Effective Amendment No. 1 to Registrant's
Registration Statement, File Nos. 33-82568 and
811-8106, EDGAR Accession No. 0000898432-95-000393.
(2) By-Laws of Neuberger & Berman Equity Assets.
Incorporated by Reference to Post-Effective Amendment
No. 1 to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, EDGAR Accession No.
0000898432-95-000393.
(3) Voting Trust Agreement. None.
(4) (a) Trust Instrument of Neuberger & Berman Equity Assets,
Articles IV, V, and VI. Incorporated by Reference to
Post-Effective Amendment No. 1 to Registrant's
Registration Statement, File Nos. 33-82568 and 811-
8106, EDGAR Accession No. 0000898432-95-000393.
C-1
<PAGE>
(b) By-Laws of Neuberger & Berman Equity Assets, Articles
V, VI, and VIII. Incorporated by Reference to Post-
Effective Amendment No. 1 to Registrant's
Registration Statement, File Nos. 33-82568 and
811-8106, EDGAR Accession No. 0000898432-95-000393.
(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.
(ii) Schedule A - Series of Neuberger & Berman
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) (a) (i) Distribution Agreement Between Neuberger &
Berman Equity Assets and Neuberger & Berman
Management Incorporated with Respect to
Neuberger & Berman Socially Responsive Trust.
Incorporated by Reference to Post-Effective
Amendment No. 1 to Registrant's Registration
C-2
<PAGE>
Statement, File Nos. 33-82568 and 811-8106,
EDGAR Accession No. 0000898432-95-000393.
(ii) Schedule A - Series of Neuberger & Berman
Equity Assets Currently Subject to the
Distribution Agreement. Incorporated by
Reference to Post- Effective Amendment No. 1 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, EDGAR Accession No.
0000898432-95- 000393.
(b) (i) Distribution and Services Agreement between
Neuberger & Berman Equity Assets and Neuberger
& Berman Management Incorporated with Respect
to Other Series. To Be Filed by Amendment.
(ii) Schedule A - Series of Neuberger & Berman
Equity Assets Currently Subject to Distribution
and Services Agreement. To Be Filed by
Amendment.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) (a) Custodian Contract Between Neuberger & Berman Equity
Assets and State Street Bank and Trust Company.
Incorporated by Reference to Post- Effective
Amendment No. 3 to Registrant's Registration
Statement, File Nos. 33-82568 and 811-8106, Edgar
Accession No. 0000898432-96- 000048.
(b) Schedule A - Approved Foreign Banking Institutions
and Securities Depositories Under the Custodian
Contract. Incorporated by Reference to Post-Effective
Amendment No. 3 to Registrant's Registration
Statement, File Nos. 33-82568 and 811-8106, Edgar
Accession No. 0000898432-96-000048.
(c) Schedule of Compensation under the Custodian
Contract. Filed Herewith.
(9) (a) (i) Transfer Agency Agreement Between Neuberger &
Berman Equity Assets and State Street Bank and
Trust Company. Incorporated by Reference to
Post-Effective Amendment No. 3 to Registrant's
Registration Statement, File Nos. 33-82568 and
811-8106, Edgar Accession No. 0000898432-96-
000048.
(ii) Schedule of Compensation under the Transfer
Agency Agreement. Filed Herewith.
C-3
<PAGE>
(b) (i) Administration Agreement Between Neuberger &
Berman Equity Assets and Neuberger & Berman
Management Incorporated. Incorporated by
Reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, Edgar Accession No.
0000898432-96-000048.
(ii) Schedule A - Series of Neuberger & Berman
Equity Assets Currently Subject to the
Administration Agreement. Incorporated by
Reference to Post- Effective Amendment No. 3 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, Edgar Accession No.
0000898432-96- 000048.
(iii) Schedule B - Schedule of Compensation Under the
Administration Agreement. Incorporated by
Reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, Edgar Accession No.
0000898432-96-000048.
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP on
Securities Matters. Incorporated by Reference to
Registrant's Rule 24f-2 Notice for the Fiscal Year
Ended August 31, 1996, File Nos. 33-82568 and 811-
8106, Edgar Accession No. 0000898432-96-000463.
(11) Opinions, Appraisals, Rulings and Consents. 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 with Respect to Other
Series. To be Filed by Amendment.
(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.
C-4
<PAGE>
ITEM 26. Number Of Holders Of Securities.
- ------- -------------------------------
The following information is given as of December 16, 1996:
Number of
Title Of Class Record Holders
-------------- --------------
Shares of beneficial
interest, $0.001 par value, of:
Neuberger & Berman Focus Assets 1
Neuberger & Berman Guardian Assets 2
Neuberger & Berman Manhattan Assets 1
Neuberger & Berman Partners Assets 3
Neuberger & Berman Socially Responsive Trust 1
Item 27. Indemnification.
- ------- ---------------
A Delaware business trust may provide in its governing instrument
for indemnification of its officers and trustees from and against any and all
claims and demands whatsoever. Article IX, Section 2 of the Trust Instrument
provides that the Registrant shall indemnify any present or former trustee,
officer, employee or agent of the Registrant ("Covered Person") to the fullest
extent permitted by law against liability and all expenses reasonably incurred
or paid by him or her in connection with any claim, action, suit or proceeding
("Action") in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been a Covered Person and against amounts paid or
incurred by him or her in settlement thereof. Indemnification will not be
provided to a person adjudged by a court or other body to be liable to the
Registrant or its shareholders by reason of "willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office" ("Disabling Conduct"), or not to have acted in good faith in
the reasonable belief that his or her action was in the best interest of the
Registrant. In the event of a settlement, no indemnification may be provided
unless there has been a determination that the officer or trustee did not engage
in Disabling Conduct (i) by the court or other body approving the settlement;
(ii) by at least a majority of those trustees who are neither interested
persons, as that term is defined in the Investment Company Act of 1940 ("1940
Act"), of the Registrant ("Independent Trustees"), nor are parties to the matter
based upon a review of readily available facts; or (iii) by written opinion of
independent legal counsel based upon a review of readily available facts.
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
C-5
<PAGE>
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management Agreement between Equity Managers Trust
("Managers Trust") and Neuberger & Berman Management Inc. ("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 Managers Trust 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 Managers Trust or any series thereof or its interest 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 Managers Trust against any
liability to Managers Trust 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 Managers Trust.
Section 1 of the Sub-Advisory Agreement between N&B Management and
Neuberger & Berman, LLC ("Neuberger & Berman")with respect to Managers Trust
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, Neuberger & Berman will not be
subject to liability for any act or omission or any loss suffered by any series
of Managers Trust or its interest holders in connection with the matters to
which the Agreement relates.
Section 8 of the Administration Agreement between the Registrant and
N&B Management provides that N&B Management shall look only to the assets of
each Series for performance of the Agreement by the Registrant on behalf of such
Series, and neither the Shareholders of the Registrant, its Trustees nor any of
the Registrant's officers, employees or agents, whether past, present or future
shall be personally liable therefor. Section 9 of the Agreement provides that
each Series shall indemnify N&B Management and hold it harmless from and against
any and all losses, damages and expenses, including reasonable attorneys' fees
and expenses, incurred by N&B Management that result from: (i) any claim,
action, suit or proceeding in connection with N&B Management's entry into or
performance of the Agreement with respect to such Series; or (ii) any action
taken or omission to act committed by N&B Management in the performance of its
obligations under the Agreement with respect to such Series; or (iii) any action
of N&B Management upon instructions believed in good faith by it to have been
executed by a duly authorized officer or representative of the Registrant with
respect to such Series; provided, that N&B Management shall not be entitled to
such indemnification in respect of actions or omissions constituting negligence
or
C-6
<PAGE>
misconduct on the part of N&B Management, or its employees, agents or
contractors. Section 10 of the Agreement provides that N&B Management shall
indemnify each Series and hold it harmless from and against any and all losses,
damages and expenses, including reasonable attorneys' fees and expenses,
incurred by such Series which result from: (i) N&B Management's failure to
comply with the terms of the Agreement with respect to such Series; or (ii) N&B
Management's lack of good faith in performing its obligations under the
Agreement with respect to such Series; or (iii) the negligence or misconduct of
N&B Management, or its employees, agents or contractors in connection with the
Agreement with respect to such Series. A Series shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence or
misconduct on the part of that Series or its employees, agents or contractors
other than N&B Management, unless such negligence or misconduct results from or
is accompanied by negligence or misconduct on the part of N&B Management, any
affiliated person of N&B Management, or any affiliated person of an affiliated
person of N&B Management.
Section 11 of the Distribution Agreement between the Registrant and
N&B Management provides that N&B Management shall look only to the assets of a
Series for the Registrant's performance of the Agreement by the Registrant on
behalf of such Series, and neither the Shareholders, the Trustees nor any of the
Registrant's officers, employees or agents, whether past, present or future,
shall be personally liable therefor.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("1933 Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 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.
Item 28. Business And Other Connections Of Adviser And Sub-adviser.
- ------- ---------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of N&B Management and each principal of Neuberger & Berman
is, or at any time during the past two years has been, engaged for his or her
own account or in the capacity of director, officer, employee, partner or
trustee.
C-7
<PAGE>
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 Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management 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.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global
Assistant Vice President, Asset Management L.P. (joint venture of
N&B Management Neuberger & Berman and Banque Nationale de
Paris) (2).
C-8
<PAGE>
Barbara DiGiorgio, Assistant Treasurer, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger & Berman
Income Trust; Assistant Treasurer, Neuberger &
Berman Equity Funds; Assistant Treasurer,
Neuberger & Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger & Berman Equity Assets.
Stanley Egener Chairman of the Board and Trustee, Neuberger &
President and Director, Berman Advisers Management Trust (Delaware
N&B Management; Principal, business trust); Chairman of the Board and
Neuberger & Berman Trustee, Advisers Managers Trust; Chairman of
the Board and Trustee, 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.
Theodore P. Giuliano President and Trustee, Neuberger & Berman Income
Vice President and Director, Funds; President and Trustee, Neuberger & Berman
N&B Management; Principal, Income Trust; President and Trustee, Income
Neuberger & Berman Managers Trust.
C-9
<PAGE>
C. Carl Randolph Assistant Secretary, Neuberger & Berman Advisers
Principal, Management Trust (Delaware business trust);
Neuberger & Berman 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, Manager, BNP-N&B Global Asset Management L.P.
N&B Management (joint venture of Neuberger & Berman and Banque
Nationale de Paris) (2).
Richard Russell Treasurer, Neuberger & Berman Advisers
Vice President, Management Trust (Delaware business trust);
N&B 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-10
<PAGE>
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust); Vice
N&B Management 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 President, Management Inc., 1285 Avenue of the Americas,
N&B Management New York, New York 10019 (3).
Michael J. Weiner Vice President, Neuberger & Berman Advisers
Senior Vice President, Management Trust (Delaware business trust); Vice
N&B Management 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.
C-11
<PAGE>
Celeste Wischerth, Assistant Treasurer, Neuberger & Berman Advisers
Assistant Vice President, Management Trust (Delaware business trust);
N&B Management Assistant Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman Income
Funds; Assistant Treasurer, Neuberger & Berman
Income Trust; Assistant Treasurer, Neuberger &
Berman Equity Funds; Assistant Treasurer,
Neuberger & Berman Equity Trust; Assistant
Treasurer, Income Managers Trust; Assistant
Treasurer, Equity Managers Trust; Assistant
Treasurer, Global Managers Trust; Assistant
Treasurer, Neuberger & Berman Equity Assets.
Lawrence Zicklin President and Trustee, Neuberger & Berman
Director, N&B Management; Advisers Management Trust (Delaware business
Principal, Neuberger & Berman trust); President and Trustee, Advisers Managers
Trust; President and Trustee, Neuberger & Berman
Advisers Management Trust (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
The principal address of N&B Management, Neuberger & Berman, LLC,
and of each of the investment companies named above, is 605 Third Avenue, New
York, New York 10158.
- --------------------------
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until 1994.
Item 29. Principal Underwriters.
- ------- ----------------------
(a) N&B Management, the principal underwriter distributing
securities of the Registrant, is also the principal underwriter and distributor
for each of the following investment companies:
C-12
<PAGE>
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Equity Funds
Neuberger & Berman Equity Trust
Neuberger & Berman Income Funds
Neuberger & Berman Income Trust
N&B Management is also the investment manager to the master
funds in which the above-named investment companies invest.
(b) Set forth below is information concerning the directors and
officers of the Registrant's principal underwriter. The principal business
address of each of the persons listed is 605 Third Avenue, New York, New York
10158-0180, which is also the address of the Registrant's principal underwriter.
Positions And Offices Positions And Offices
Name With Underwriter With Registrant
- ---- ---------------- ---------------
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board and None
Director
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
Robert Cresci Assistant Vice President None
William Cunningham Vice President None
Clara Del Villar Vice President None
Barbara DiGiorgio Assistant Vice President Assistant Treasurer
Roberta D'Orio Assistant Vice President None
Stanley Egener President and Director Chairman of the Board
of Trustees
(Chief Executive
Officer)
Joseph G. Galli Assistant Vice President None
Robert I. Gendelman Assistant Vice President None
Mark R. Goldstein Vice President None
Theodore P. Giuliano Vice President and Director None
C-13
<PAGE>
Farha-Joyce Haboucha Vice President None
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and Director None
Irwin Lainoff Director None
Michael Lamberti Vice President None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Lawrence Marx III Vice President None
Ellen Metzger Vice President and None
Secretary
Paul Metzger Assistant Vice President None
Loraine Olavarria Assistant Secretary None
Janet W. Prindle Vice President None
Joseph S. Quirk Assistant Vice President None
Kevin L. Risen Assistant Vice President None
Felix Rovelli Vice President None
Richard Russell Vice President Treasurer (Principal
Accounting Officer)
Kent C. Simons Vice President None
Frederick B. Soule Vice President None
Daniel J. Sullivan Senior Vice President Vice President
Peter E. Sundman Senior Vice President None
Susan Switzer Assistant Vice President None
Andrea Trachtenberg Vice President of Marketing None
C-14
<PAGE>
Judith M. Vale Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President
(Principal Financial
Officer)
Celeste Wischerth Assistant Vice President Assistant Treasurer
Thomas Wolfe Vice President None
KimMarie Zamot Assistant Vice President None
Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or
indirectly from the Registrant by any principal underwriter who was not an
affiliated person of the Registrant.
Item 30. Location Of Accounts And Records.
- ------- --------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act, as amended, and the rules promulgated thereunder
with respect to the Registrant are maintained at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except
for the Registrant's Trust Instrument and By-Laws, minutes of meetings of the
Registrant's Trustees and shareholders and the Registrant's policies and
contracts, which are maintained at the offices of the Registrant, 605 Third
Avenue, New York, New York 10158.
Item 31. Management Services
- -------- -------------------
Other than as set forth in Parts A and B of this Post-Effective
Amendment, the Registrant is not a party to any management-related service
contract.
Item 32. Undertakings
- ------- ------------
Registrant hereby undertakes to file a Post-Effective Amendment to
its Registration Statement, containing financial statements with respect to
Neuberger & Berman Socially Responsive Trust, which need not be certified,
within four to six months from the date of the Fund's commencement of
operations.
C-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY ASSETS
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 4 to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City and State of New York on the
20th day of December, 1996.
NEUBERGER & BERMAN EQUITY ASSETS
By: /s/ Lawrence Zicklin
-------------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Faith Colish Trustee December 20, 1996
- -------------------------
Faith Colish*
/s/ Donald M. Cox Trustee December 20, 1996
- -------------------------
Donald M. Cox*
/s/ Stanley Egener Chairman of the Board December 20, 1996
- ------------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf Trustee December 20, 1996
- -------------------------
Howard A. Mileaf*
(Signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Edward I. O'Brien Trustee December 20, 1996
- -------------------------
Edward I. O'Brien*
/s/ John T. Patterson, Jr. Trustee December 20, 1996
- -------------------------
John T. Patterson, Jr.*
/s/ John P. Rosenthal Trustee December 20, 1996
- -------------------------
John P. Rosenthal*
/s/ Cornelius T. Ryan Tustee December 20, 1996
- -------------------------
Cornelius T. Ryan*
/s/ Gustave H. Shubert Trustee December 20, 1996
- -------------------------
Gustave H. Shubert*
/s/ Alan R. Gruber
- ------------------------- Trustee December 20, 1996
Alan R. Gruber*
/s/ Lawrence Zicklin President and Trustee December 20, 1996
- -------------------------
Lawrence Zicklin
/s/ Michael J. Weiner Vice President (Principal December 20,1996
- ------------------------- Financial Officer)
Michael J. Weiner
/s/ Richard Russell Treasurer (Principal December 20, 1996
- ------------------------- Financial Officer
Richard Russell
* Signatures affixed by Beth A. Stekler pursuant to a Power of Attorney
dated October 24, 1996, and filed herewith.
<PAGE>
POWER OF ATTORNEY
NEUBERGER & BERMAN EQUITY ASSETS, a Delaware business trust ("Trust"),
and each of its undersigned officers and trustees hereby nominates, constitutes
and appoints Lawrence Zicklin, Michael J. Weiner, Richard M. Phillips, Arthur C.
Delibert, Dana L. Platt, Susan M. Casey and Beth A. Stekler (with full power to
each of them to act alone) its/his/her true and lawful attorney-in-fact and
agent, for it/him/her and on its/his/her behalf and in its/his/her name, place
and stead in any and all capacities, to make, execute and sign the Trust's
Registration Statement on Form N-1A under the Securities Act of 1933 and/or the
Investment Company Act of 1940, any registration statements on Form N-14, and
any and all amendments to such registration statements on Form N-1A or Form
N-14, and to file with the Securities and Exchange Commission, and any other
regulatory authority having jurisdiction over the offer and sale of shares of
the Beneficial Interest of the Trust, any such registration statement or
amendment, and any and all supplements thereto or to any prospectus or statement
of additional information forming a part thereof, and any and all exhibits and
other documents requisite in connection therewith, granting unto said attorneys,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises as fully
to all intents and purposes as the Trust and the undersigned officers and
trustees itself/themselves might or could do.
IN WITNESS WHEREOF, NEUBERGER & BERMAN EQUITY ASSETS has caused this
power of attorney to be executed in its name by its President, and attested by
its Secretary, and the undersigned officers and trustees have hereunto set their
hands and seals this 24th day of October, 1996.
NEUBERGER & BERMAN EQUITY ASSETS
/s/ Lawrence Zicklin
By: ---------------------------
Lawrence Zicklin, President
[SEAL]
ATTEST:
/s/ Claudia A. Brandon
- ------------------------------
Claudia A. Brandon,
Secretary
<PAGE>
Signature Title
--------- -----
/s/ Stanley Egener
- ---------------------------- Chairman of the Board, Chief Executive
Stanley Egener Officer, and Trustee
/s/ Lawrence Zicklin
- ---------------------------- President and Trustee
Lawrence Zicklin
/s/ Michael J. Weiner
- ---------------------------- Vice President and Principal Financial
Michael J. Weiner Officer
/s/ Richard Russell
- ---------------------------- Treasurer and Principal Accounting Officer
Richard Russell
/s/ Faith Colish
- ---------------------------- Trustee
Faith Colish
/s/ Donald M. Cox
- ---------------------------- Trustee
Donald M. Cox
/s/ Alan R. Gruber
- ---------------------------- Trustee
Alan R. Gruber
/s/ Howard A. Mileaf
- ---------------------------- Trustee
Howard A. Mileaf
/s/ Edward I. O'Brien
- ---------------------------- Trustee
Edward I. O'Brien
<PAGE>
Signature Title
--------- -----
/s/ John T. Patterson, Jr.
- ---------------------------- Trustee
John T. Patterson, Jr.
/s/ John P. Rosenthal
- ---------------------------- Trustee
John P. Rosenthal
/s/ Cornelius T. Ryan
- ---------------------------- Trustee
Cornelius T. Ryan
/s/ Gustave H. Shubert
- ---------------------------- Trustee
Gustave H. Shubert
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, EQUITY MANAGERS TRUST certifies that it meets
all of the requirements for effectiveness of the Post-Effective Amendment No. 4
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City and State of New York on the 20th day of December, 1996.
EQUITY MANAGERS TRUST
By: /s/ Lawrence Zicklin
------------------------
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 4 has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ Faith Colish
- ---------------------- Trustee December 20, 1996
Faith Colish
/s/ Donald M. Cox
- ---------------------- Trustee December 20, 1996
Donald M. Cox
/s/ Stanley Egener Chairman of the Board December 20, 1996
- ---------------------- and Trustee (Chief
Stanley Egener Executive Officer)
/s/ Howard A. Mileaf
- ---------------------- Trustee December 20, 1996
Howard A. Mileaf
/s/ Edward I. O'Brien
- ---------------------- Trustee December 20, 1996
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
SIGNATURE TITLE DATE
/s/ John T. Patterson Trustee December 20, 1996
- ----------------------
John T. Patterson, Jr.
/s/ John P. Rosenthal Trustee December 20, 1996
- ----------------------
John P. Rosenthal
/s/ Cornelius T. Ryan Trustee December 20, 1996
- ----------------------
Cornelius T. Ryan
/s/ Gustave H. Shubert Trustee December 20, 1996
- ----------------------
Gustave H. Shubert
/s/ Alan R. Gruber Trustee December 20, 1996
- ----------------------
Alan R. Gruber
/s/ Lawrence Zicklin President and Trustee December 20, 1996
- ----------------------
Lawrence Zicklin
/s/ Michael J. Weiner Vice President (Principal December 20, 1996
- ---------------------- Financial Officer
Michael J. Weiner
/s/ Richard Russell Treasurer (Principal December 20, 1996
- ---------------------- Accounting Officer)
Richard Russell
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
POST-EFFECTIVE AMENDMENT NO. 4 ON FORM N-1A
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------ --------------------------------------------------------- -------------
<S> <C> <C>
(1) (a) Certificate of Trust. Incorporated by N.A.
Reference to Post-Effective Amendment No. 1
to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, EDGAR Accession
No. 0000898432-95-000393.
(b) Trust Instrument of Neuberger & Berman N.A.
Equity Assets. Incorporated by Reference to
Post-Effective Amendment No. 1 to
Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, EDGAR Accession
No. 0000898432-95-000393.
(c) Schedule A - Current Series of Neuberger & N.A.
Berman Equity Assets. Incorporated by
Reference to Post-Effective Amendment No. 1
to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, EDGAR Accession
No. 0000898432-95-000393.
(2) By-Laws of Neuberger & Berman Equity Assets. N.A.
Incorporated by Reference to Post-Effective
Amendment No. 1 to Registrant's Registration
Statement, File Nos. 33-82568 and 811-8106,
Edgar Accession No. 0000898432-95-000393.
(3) Voting Trust Agreement. None. N.A.
(4) (a) Trust Instrument of Neuberger & Berman
Equity Assets, Articles IV, V, and VI.
Incorporated by Reference to Post-Effective
Amendment No. 1 to Registrant's Registration
Statement, File Nos. 33-82568 and 811-8106,
EDGAR Accession No. 0000898432-95-000393.
(b) By-Laws of Neuberger & Berman Equity Assets,
Articles V, VI, and VIII. Incorporated by
Reference to Post-Effective Amendment No. 1
to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, EDGAR Accession
No. 0000898432-95-000393.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ --------------------------------------------------------- -------------
(5) (a) (i) Management Agreement Between Equity N.A.
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.
N.A.
(ii) Schedule A - Series of Neuberger &
Berman 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 N.A.
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 Equity
Managers Trust, File Nos. 2-11357 and
811-582, EDGAR Accession No.
0000898432-95-000314.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ --------------------------------------------------------- -------------
(6) (a) (i) Distribution Agreement Between N.A.
Neuberger & Berman Equity Assets and
Neuberger & Berman Management
Incorporated with Respect to
Neuberger & Berman Socially
Responsive Trust. Incorporated by
Reference to Post-Effective Amendment
No. 1 to Registrant's Registration
Statement, File Nos. 33-82568 and
811-8106, EDGAR Accession No.
0000898432-95-000393.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Assets Currently
Subject to the Distribution
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 1 to
Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106,
EDGAR Accession No. 0000898432-95-
000393.
(b) (i) Distribution and Services Agreement N.A.
between Neuberger & Berman Equity
Assets and Neuberger & Berman
Management Incorporated with Respect
to Other Series. To Be Filed by
Amendment.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Assets Currently
Subject to Distribution and Services
Agreement. To Be Filed by Amendment.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
(8) (a) Custodian Contract Between Neuberger & N.A.
Berman Equity Assets and State Street Bank
and Trust Company. Incorporated by
Reference to Post-Effective Amendment No. 3
to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, Edgar Accession
No. 0000898432-96-000048.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ --------------------------------------------------------- -------------
(b) Schedule A - Approved Foreign Banking N.A.
Institutions and Securities Depositories
Under the Custodian Contract. Incorporated
by Reference to Post-Effective Amendment No.
3 to Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106, Edgar
Accession No. 0000898432-96-000048.
(c) Schedule of Compensation under the Custodian
Contract. Filed Herewith.
(9) (a) (i) Transfer Agency Agreement Between N.A.
Neuberger & Berman Equity Assets and
State Street Bank and Trust Company.
Incorporated by Reference to Post-
Effective Amendment No. 3 to
Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106,
Edgar Accession No. 0000898432-96-
000048.
(ii) Schedule of Compensation under the
Transfer Agency Agreement. Filed
Herewith.
(b) (i) Administration Agreement Between N.A.
Neuberger & Berman Equity Assets and
Neuberger & Berman Management
Incorporated. Incorporated by
Reference to Post-Effective Amendment
No. 3 to Registrant's Registration
Statement, File Nos. 33-82568 and
811-8106, Edgar Accession No.
0000898432-96-000048.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Assets Currently
Subject to the Administration
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 3 to
Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106,
EDGAR Accession No. 0000898432-96-
000048.
<PAGE>
Sequentially
Exhibit Numbered
Number Description Page
- ------ --------------------------------------------------------- -------------
(iii) Schedule B - Schedule of Compensation N.A.
Under the Administration Agreement.
Incorporated by Reference to Post-
Effective Amendment No. 3 to
Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106,
EDGAR Accession No. 0000898432-96-
000048.
(10) Opinion and Consent of Kirkpatrick & Lockhart LLP N.A.
on Securities Matters. Incorporated by Reference
to Registrant's Rule 24f-2 Notice for the Fiscal
Year Ended August 31, 1996, File Nos. 33-82568 and
811-8106, Edgar Accession No.0000898432-96-000463.
(11) Opinions, Appraisals, Rulings and Consents. None. N.A.
(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 with Respect to Other N.A.
Series. To be Filed by Amendment.
(16) Schedule of Computation of Performance Quotations. N.A.
None.
(17) Financial Data Schedule. Filed Herewith. N.A.
(18) Plan Pursuant to Rule 18f-3. None. N.A.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000914228
<NAME> NEUBERGER&BERMAN EQUITY ASSETS
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN SOCIALLY RESPONSIVE TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 120,000
<OTHER-ITEMS-ASSETS> 100,000
<TOTAL-ASSETS> 220,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 120,000
<TOTAL-LIABILITIES> 120,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,000
<SHARES-COMMON-STOCK> 10,000
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100,000
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 100,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 100,000
<PER-SHARE-NAV-BEGIN> 10.00
<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> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
NEUBERGER AND BERMAN FUND COMPLEX
Equity Managers Trust:
- ---------------------
. Neuberger and Berman Focus Portfolio
. Neuberger and Berman Genesis Portfolio
. Neuberger and Berman Guardian Portfolio
. Neuberger and Berman Manhattan Portfolio
. Neuberger and Berman Partners Portfolio
. Neuberger and Berman Socially Responsive Portfolio
Income Managers Trust:
- ---------------------
. Neuberger and Berman Cash Reserves Portfolio
. Neuberger and Berman Government Money Portfolio
. Neuberger and Berman Limited Maturity Bond Portfolio
. Neuberger and Berman Municipal Money Portfolio
. Neuberger and Berman Municipal Securities Portfolio
. Neuberger and Berman New York Insured Intermediate Portfolio
Neuberger and Berman Ultra Short Bond
Advisers Managers Trust:
- -----------------------
. AMT Balanced Investments
. AMT Government Income Investments
. AMT Growth Investments
. AMT International Investments
. AMT Limited Maturity Bond Investments
. AMT Liquid Asset Investments
. AMT Partners Investments
I. ADMINISTRATION
Custody, Portfolio and Fund Accounting Service: Maintain custody of fund
assets. Settle portfolio purchase and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash disbursements and report
cash transactions. Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general ledger and
capital stock accounts. Prepare daily trial balance. Calculate net asset
value daily. Provide selected general ledger reports. Securities yield or
market value quotations will be provided to State Street by sources
authorized by the funds.
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 2
The administration fee shown below is an annual charge, billed and payable
monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
-------------------------
Custody, Portfolio
Fund Net Assets and Fund Accounting
--------------- -------------------
$ 0 - $ 20 million .075%
$ 20 - $100 million .037%
$100 - $200 million .028%
$200 - $500 million .014%
Over $500 million .013%
II. GLOBAL CUSTODY
These fees are divided into two categories: Transaction Charges and
Holdings Charges which are calculated based on the following country
groups:
A. Country Grouping
----------------
<TABLE>
<CAPTION>
========================================================================================================
Group A Group B Group C Group D Group E Group F
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
USA Austria Australia Denmark Indonesia Argentina
- --------------------------------------------------------------------------------------------------------
Canada Belgium Finland Malaysia Bangladesh
- --------------------------------------------------------------------------------------------------------
Euroclear Hong Kong France Philippines Brazil
- --------------------------------------------------------------------------------------------------------
Germany Netherlands Ireland Portugal Chile
- --------------------------------------------------------------------------------------------------------
Japan New Zealand Italy So. Korea China
- --------------------------------------------------------------------------------------------------------
Singapore Luxembourg Spain Columbia
- --------------------------------------------------------------------------------------------------------
Switzerland Mexico Sri Lanka Czech Republic
- --------------------------------------------------------------------------------------------------------
Norway Sweden Cyprus
- --------------------------------------------------------------------------------------------------------
Thailand Taiwan Greece
- --------------------------------------------------------------------------------------------------------
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 3
========================================================================================================
Group A Group B Group C Group D Group E Group F
- --------------------------------------------------------------------------------------------------------
U.K. Hungary
- --------------------------------------------------------------------------------------------------------
India
- --------------------------------------------------------------------------------------------------------
Israel
- --------------------------------------------------------------------------------------------------------
Morocco
- --------------------------------------------------------------------------------------------------------
Pakistan
- --------------------------------------------------------------------------------------------------------
Peru
- --------------------------------------------------------------------------------------------------------
Poland
- --------------------------------------------------------------------------------------------------------
So. Africa
- --------------------------------------------------------------------------------------------------------
Turkey
- --------------------------------------------------------------------------------------------------------
Uruguay
- --------------------------------------------------------------------------------------------------------
Venezuela
- --------------------------------------------------------------------------------------------------------
</TABLE>
B. Transactions Charges
--------------------
<TABLE>
<CAPTION>
========================================================================================================
Group A Group B Group C Group D Group E Group F
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
State Street Bank $25 $50 $60 $70 $150
Repos or Euros - $7.00
- --------------------------------------------------------------------------------------------------------
DTC or Fed Book
Entry - $12.00
- --------------------------------------------------------------------------------------------------------
All Other - $25.00
========================================================================================================
</TABLE>
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 4
C. Holdings Charges
----------------
<TABLE>
<CAPTION>
========================================================================================================
Group A Group B Group C Group D Group E Group F
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
1.5 5.0 6.0 10.0 25.0 40.0
- --------------------------------------------------------------------------------------------------------
</TABLE>
III. Portfolio Trades - For Each Line Item Processed
State Street Bank Repos $ 7.00
DTC of Fed Book Entry $ 12.00
New York Physical Settlements $ 25.00
Maturity Collection (NY Physical Items Only) $ 8.00
All Other Trades $ 16.00
IV. Option
Option charge for each option written or closing contract, per issue, per
broker $25.00 Option expiration charge, per issue, per broker$15.00 Option
exercised charge, per issue, per broker$15.00
V. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of loaned
securities $25.00
Loan administration - mark-to-market per day, per loan $ 3.00
VI. Interest Rate Futures
Transactions - no security movement $ 8.00
VII. Pricing Service
Monthly Quote Charge (based on average number of
positions in portfolio) $ 6.00
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 5
VIII. Holding Charge
For each issue maintained - monthly charge $ 5.00
IX. Principal Reduction Payments
Per Paydown $10.00
X. Dividend/Interest Collection Charges
For items held at the request of traders over record
date in street form $50.00
XI. Spoke Configuration
Annual fee of $10,000 per each series in each Spoke Entity
Spoke Entities:
--------------
Neuberger and Berman Equity Funds (except N & B International Fund)
Neuberger and Berman Equity Trust Neuberger and Berman Income Funds
Neuberger and Berman Income Trust Neuberger and Berman Advisers Management
Trust Neuberger and Berman Equity Assets
XII. Special Services
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation
of special reports will be subject to negotiation. Yield calculation and
other special items will be negotiated separately.
XIII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but are
not limited to the following:
. Wire charges relative to custodian functions ($5.25 per wire in
and $5.00 out)
. Postage and Insurance
. Courier Service
. Duplicating
. Legal fees in jointly agreed upon situations
. Supplies related to fund records
. Rush transfer -- $8.00 each
. Transfer fees
<PAGE>
Neuberger & Berman Fund Complex
Custodian Fee Schedule
Page 6
. Sub-custodian charges
. Price Waterhouse audit letter
. Federal Reserve fee for return check items over $2,500 - $4.25
. GNMA Transfer - $15 each
XIV. Payment and Earnings Credit
The above fees will be charged against the fund's custodian checking
account five (5) days after the invoice is mailed to the fund's offices,
contingent on fund approval.
An earnings credit of 75% of the 90 Day T-Bill rate will be applied for
fund balances.
NEUBERGER & BERMAN FUND COMPLEX STATE STREET BANK AND TRUST CO.
By: /s/ Michael J. Weiner By: /s/ K. Griffin
----------------------------------- --------------------------
Title: Vice President N&B Equity Assets By: Vice President
----------------------------------- --------------------------
Date: 7-31-96 Date: 7-31-96
----------------------------------- --------------------------
FEE SCHEDULE
FOR
TRANSFER AGENCY AGREEMENT
BETWEEN
STATE STREET BANK AND TRUST COMPANY
AND
NEUBERGER & BERMAN EQUITY ASSETS
The Portfolios within the Neuberger & Berman Equity Assets will be charged an
annual Fund minimum of $16,500 for the first three years, and following that
period an annual fee of $7.30 per account:
Focus Assets
Guardian Assets
Manhattan Assets
Partners Assets
Socially Responsive Trust
There will be an Account Charge of $1.00 per closed account or zero balance, and
out of pocket expenses which will be billed on a monthly basis as incurred, and
determined by product and related expense. The Fund minimum will be waived for
the first nine months after seed money has been received by the Bank. This
minimum will be guaranteed for three years.
NEUBERGER & BERMAN STATE STREET BANK AND
EQUITY ASSETS TRUST COMPANY
Name: /s/ Michael J. Weiner Name: /s/ Ronald E. Logue
------------------------- --------------------------
Title: Vice President Title: Executive Vice President
------------------------- --------------------------
Date: 9-10-96 Date: 9-16-96
------------------------- --------------------------
