As filed with the Securities and Exchange Commission on February 28, 1997
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. __7__ [__X__]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [__X__]
Amendment No. _9_ [__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:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on MARCH 3, 1997 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. 7 includes a signature page for the master fund,
Equity Managers Trust, and appropriate officers and trustees thereof.
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 7 ON FORM N-1A
This Post-Effective Amendment consists of the following papers and
documents:
Cover Sheet
Contents of Post-Effective Amendment No. 7 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. 7 to
the prospectus or statement of additional information for Neuberger & Berman
Focus Assets, Neuberger & Berman Genesis Assets, Neuberger & Berman Guardian
Assets, Neuberger & Berman Manhattan Assets, and Neuberger & Berman
Partners Assets.
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
POST-EFFECTIVE AMENDMENT NO. 7 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
--------------------------------------------
Form N-1A Item No. Caption In Part A Prospectus
------------------ ----------------------------
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
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. 7.
<PAGE>
<PAGE>
PROSPECTUS
- ---------------------------------------------------------------
March 3, 1997
NEUBERGER&BERMAN
EQUITY ASSETS -SM-
Neuberger&Berman
SOCIALLY RESPONSIVE TRUST
No Sales Charges
No Redemption Fees
No 12b - 1 Fees
<PAGE>
Neuberger&Berman
SOCIALLY RESPONSIVE TRUST-SM-
A No-Load Equity Fund
- ----------------------------------------------------------------------
Neuberger&Berman SOCIALLY RESPONSIVE TRUST (the "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 (THE "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 3 AND "SPECIAL INFORMATION REGARDING ORGANIZATION,
CAPITALIZATION, AND OTHER MATTERS" ON PAGE 12.
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 March 3, 1997, is on file with the
Securities and Exchange Commission ("SEC"). The SAI is incorporated herein by
reference (so it is legally considered a part of this Prospectus). You can
obtain a free copy of the SAI by calling N&B Management at 800-877-9700.
PROSPECTUS DATED MARCH 3, 1997
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY 3
The Fund and Portfolio;
Risk Factors 3
Management 4
The Neuberger&Berman Investment
Approach 4
EXPENSE INFORMATION 5
Shareholder Transaction Expenses 5
Annual Fund Operating Expenses 5
Example 6
INVESTMENT PROGRAM 7
Social Policy 8
Short-Term Trading; Portfolio
Turnover 9
Borrowings 9
PERFORMANCE INFORMATION 11
Total Return Information 11
SPECIAL INFORMATION REGARDING
ORGANIZATION, CAPITALIZATION,
AND OTHER MATTERS 12
The Fund 12
The Portfolio 12
SHAREHOLDER SERVICES 15
How to Buy Shares 15
How to Sell Shares 15
Exchanging Shares 16
SHARE PRICES AND
NET ASSET VALUE 17
DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES 18
Distribution Options 18
Taxes 18
MANAGEMENT AND ADMINISTRATION 20
Trustees and Officers 20
Investment Manager, Administrator,
Distributor, and Sub-Adviser 20
Expenses 21
Transfer Agent 22
DESCRIPTION OF INVESTMENTS 23
OTHER INFORMATION 26
Directory 26
Funds Eligible for Exchange 26
</TABLE>
<PAGE>
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.
3
<PAGE>
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
12. 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 7, "Social Policy"
on page 8, and "Description of Investments" on page 23.
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 20. If you want to know how to buy and sell shares of the Fund or exchange
them for shares of other Neuberger&Berman Funds-Registered Trademark- made
available through an Institution, see "Shareholder Services -- How to Buy
Shares" on page 15, "Shareholder Services -- How to Sell Shares" on page 15,
"Shareholder Services -- Exchanging Shares" on page 16, 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.
4
<PAGE>
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.
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases NONE
Sales Charge Imposed on Reinvested Dividends NONE
Deferred Sales Charges NONE
Redemption Fees NONE
Exchange Fees NONE
</TABLE>
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.
<TABLE>
<CAPTION>
OTHER TOTAL
NEUBERGER&BERMAN MANAGEMENT AND 12b-1 EXPENSES OPERATING
EQUITY ASSETS ADMINISTRATION FEES FEES (ESTIMATED) EXPENSES
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOCIALLY RESPONSIVE TRUST 0.95% None 0.48% 1.43%
</TABLE>
"Management and Administration Fees" for the Fund are based upon current
administration fees for the Fund and management fees for the Portfolio. "Other
Expenses" are estimated amounts for the current fiscal year and assume average
daily net assets of $25 million. There can be no assurance that the Fund will
achieve that asset level. 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
5
<PAGE>
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.
A mutual fund that is a series of Neuberger&Berman Equity Funds ("N&B Equity
Funds") and is administered by N&B Management, which has a name similar to the
Fund and the same investment objective, policies, and limitations as the Fund
("Sister Fund"), also invests in the Portfolio. 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 so that the Fund's expense ratio per
annum will not exceed the expense ratio per annum of the Sister Fund by more
than 0.10% of the Fund's average daily net assets. The Fund's per annum "expense
ratio" is the sum of the Fund's Operating Expenses and its pro rata share of the
Portfolio's Operating Expenses, divided by the Fund's average daily net assets
for the year. The expense ratio of the Sister Fund is anticipated to be 1.50%
per annum of the Sister Fund's average daily net assets. This undertaking can be
terminated by N&B Management by giving the Fund at least 60 days' prior written
notice.
For more information about the current expense reimbursement undertaking, see
"Expenses" on page 21.
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:
<TABLE>
<CAPTION>
NEUBERGER&BERMAN
EQUITY ASSETS 1 YEAR 3 YEARS
- -------------------------------------------------------------
<S> <C> <C>
SOCIALLY RESPONSIVE TRUST $15 $45
</TABLE>
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.
6
<PAGE>
INVESTMENT PROGRAM
The investment policies and limitations of the Fund are identical to those of
the Portfolio. The Fund invests only in the Portfolio. Therefore, the following
shows you the kinds of securities in which the Portfolio invests. For an
explanation of some types of investments, see "Description of Investments," on
page 23.
Investment policies and limitations of the Fund and Portfolio are not
fundamental unless otherwise specified in this Prospectus or the SAI.
Fundamental policies may not be changed without shareholder approval. A
non-fundamental policy or limitation may be changed by the trustees of the Trust
or of Managers Trust without shareholder approval.
Additional investment techniques, features, and limitations concerning the
Portfolio's investment program are described in the SAI.
The investment objective of the 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 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.
7
<PAGE>
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
8
<PAGE>
such areas as providing and promoting equal opportunity, investing in the
training and re-training of workers, promoting a safe working environment,
providing family-oriented flexible benefits, and involving workers in job and
workflow engineering.
In making investment decisions, N&B Management takes into account a company's
record as a member of the various communities of which it is a part and its
commitment to product quality and value. Currently, the Social Policy screens
out any company 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. It is anticipated that
the annual turnover rate of the Portfolio normally 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
9
<PAGE>
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.
10
<PAGE>
PERFORMANCE INFORMATION
The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL
RETURN is the change in value of an investment in a fund over a particular
period, assuming that all distributions have been reinvested. Thus, total return
reflects dividends, other distributions, and variations in share prices from the
beginning to the end of a period.
An average annual total return is a hypothetical rate of return that, if
achieved annually, would result in the same cumulative total return as was
actually achieved for the period. This smooths 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.
11
<PAGE>
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 six 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.
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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.
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 3.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. Members of the general public may not purchase a direct
interest in the Portfolio. The Sister Fund, a series of N&B Equity Funds, and a
mutual fund that is a series of Neuberger&Berman Equity Trust ("N&B Equity
Trust") each invests all of its net investable assets in the Portfolio. The
shares of the series of N&B Equity Funds (but not of N&B Equity 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
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investors in the Portfolio with power to, and who did by a vote of all investors
(including the Fund), change the investment objective, policies, or limitations
of the Portfolio in a manner not acceptable to the trustees of the Trust. A
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio to the Fund. That distribution
could result in a less diversified portfolio of investments for the Fund and
could affect adversely the liquidity of the Fund's investment portfolio. If the
Fund decided to convert those securities to cash, it usually would incur
brokerage fees or other transaction costs. If the Fund withdrew its investment
from the Portfolio, the trustees of the Trust would consider what actions might
be taken, including the investment of all of the Fund's net investable assets in
another pooled investment entity having substantially the same investment
objective as the Fund or the retention by the Fund of its own investment manager
to manage its assets in accordance with its investment objective, policies, and
limitations. The inability of the Fund to find a suitable replacement could have
a significant impact on shareholders.
INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings
of investors except as required by the 1940 Act. Each investor in the Portfolio
will be entitled to vote in proportion to its relative beneficial interest in
the Portfolio. On most issues subjected to a vote of investors, the Fund will
solicit proxies from its shareholders and will vote its interest in the
Portfolio in proportion to the votes cast by the Fund's shareholders. If there
are other investors in the Portfolio, there can be no assurance that any issue
that receives a majority of the votes cast by Fund shareholders will receive a
majority of votes cast by all Portfolio investors; indeed, if other investors
hold a majority interest in the Portfolio, they could have voting control of the
Portfolio.
CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund, will
be liable for all obligations of the Portfolio. However, the risk of an investor
in the Portfolio incurring financial loss beyond the amount of its investment on
account of such liability would be limited to circumstances in which the
Portfolio had inadequate insurance and was unable to meet its obligations out of
its assets. Upon liquidation of the Portfolio, investors would be entitled to
share pro rata in the net assets of the Portfolio available for distribution to
investors.
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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.
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.
15
<PAGE>
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.
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DIVIDENDS, OTHER DISTRIBUTIONS,
AND TAXES
The Fund distributes, normally in December, substantially all of its share of
any net investment income (net of the Fund's expenses), 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
distributions are reinvested at the Fund's per share NAV, usually as of the date
the dividend or other distribution is payable.
DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in
cash, with other distributions being reinvested in additional Fund shares, or to
receive all dividends and other distributions in cash.
Taxes
- ----------------------------------------------------------------------
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.
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
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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.
19
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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
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 one other
investment company. The mutual funds managed by N&B Management and
Neuberger&Berman had aggregate net assets of approximately $15.2 billion as of
December 31, 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 $44.7 billion of
assets as of December 31, 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
20
<PAGE>
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
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 such administrative services, the Fund
pays N&B Management a fee at the annual rate of 0.40% of the Fund's average
daily net assets. With the Fund's consent, N&B Management may subcontract to
Institutions some of its responsibilities to the Fund under the administration
agreement and may compensate each Institution that provides such services at an
annual rate of up to 0.25% of the 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
21
<PAGE>
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
so that the Fund's expense ratio per annum will not exceed the expense ratio per
annum of its Sister Fund by more than 0.10% of the Fund's average daily net
assets. The Fund's per annum "expense ratio" is the sum of the Fund's Operating
Expenses and its pro rata share of the Portfolio's Operating Expenses, divided
by the Fund's average daily net assets for the year. N&B Management may
terminate this undertaking to the Fund by giving at least 60 days' prior written
notice to the Fund. The effect of any reimbursement by N&B Management is to
reduce the Fund's expenses and thereby increase its total return.
Transfer Agent
- ----------------------------------------------------------------------
The Fund's transfer agent is State Street Bank and Trust Company ("State
Street"). State Street administers purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
distributions to Institutions. All correspondence should be addressed to
Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New
York, NY 10158-0180.
22
<PAGE>
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,
23
<PAGE>
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.
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 security's 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
24
<PAGE>
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"), Fannie Mae (formerly, Federal National
Mortgage Association), Federal Home Loan Mortgage Corporation ("FHLMC"), Student
Loan 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.
25
<PAGE>
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
ADDRESS CORRESPONDENCE TO:
Neuberger&Berman Funds
Institutional Services
605 Third Avenue
2nd Floor
New York, NY 10158-0180
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
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
Neuberger&Berman, LLC, Neuberger&Berman Management Inc., and the above-named
Funds are registered trademarks or service marks of Neuberger&Berman
Management Inc.
- -C- 1997 Neuberger&Berman Management Inc.
26
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<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Neuberger&Berman Management Inc. -Registered Trademark-
605 THIRD AVENUE 2ND FLOOR
NEW YORK, NY 10158-0180
This wrapper is not part of the prospectus.
Recycle Logo PRINTED ON RECYCLED PAPER
NBLSRP390397
NEUBERGER & BERMAN SOCIALLY RESPONSIVE TRUST AND PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 3, 1997
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 March 3, 1997. 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.
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TABLE OF CONTENTS
INVESTMENT INFORMATION.......................................................1
Investment Policies and Limitations.................................1
Janet W. Prindle, Portfolio Manager of the
Portfolio..................................................5
Background Information on Socially Responsive
Investing..................................................7
The Socially Responsive Database....................................8
Implementation of Social Policy....................................10
Additional Investment Information..................................11
PERFORMANCE INFORMATION.....................................................25
Total Return Computations..........................................25
Comparative Information............................................25
Other Performance Information......................................26
CERTAIN RISK CONSIDERATIONS.................................................27
TRUSTEES AND OFFICERS.......................................................27
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES...........................34
Investment Manager and Administrator...............................34
Sub-Adviser........................................................36
Investment Companies Managed.......................................37
Management and Control of N&B Management...........................39
DISTRIBUTION ARRANGEMENTS...................................................40
ADDITIONAL EXCHANGE INFORMATION.............................................40
ADDITIONAL REDEMPTION INFORMATION...........................................43
Suspension of Redemptions..........................................43
Redemptions in Kind................................................43
DIVIDENDS AND OTHER DISTRIBUTIONS...........................................43
ADDITIONAL TAX INFORMATION..................................................44
Taxation of the Fund...............................................44
Taxation of the Portfolio..........................................45
Taxation of the Fund's Shareholders................................48
PORTFOLIO TRANSACTIONS......................................................48
Portfolio Turnover.................................................52
REPORTS TO SHAREHOLDERS.....................................................53
CUSTODIAN AND TRANSFER AGENT................................................53
INDEPENDENT ACCOUNTANTS.....................................................53
LEGAL COUNSEL...............................................................53
REGISTRATION STATEMENT......................................................53
FINANCIAL STATEMENTS........................................................54
Appendix A..................................................................55
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER....................55
Appendix B..................................................................58
THE ART OF INVESTMENT: A CONVERSATION WITH ROY
NEUBERGER.................................................58
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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 those of the Portfolio. Therefore, although the following discusses
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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
instrumentalities.
5. LENDING. The Portfolio may not lend any security or make
any other loan if, as a result, more than 33-1/3% of its total assets (taken
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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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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.
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12. WARRANTS. The Portfolio does not intend to invest in
warrants (but may hold warrants obtained in units or attached to securities).
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.
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
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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.
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")
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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
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
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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 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.
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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 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.
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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 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.
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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 tradable 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.
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
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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
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
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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 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
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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 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
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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 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, it may increase the risk of loss, because prices can move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing liquidation of unfavorable futures and options positions and
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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.
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
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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 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
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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 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
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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 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 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
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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 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 or writes options thereon or options on foreign
currencies that are traded on an exchange regulated by the CFTC other than for
BONA FIDE hedging purposes (as defined by the CFTC), the aggregate initial
margin and premiums on those positions (excluding the amount by which options
are "in-the-money") may not exceed 5% of the Portfolio's net assets.
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
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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 changes in market value 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 Hedging Instruments and the resulting
inability to close out Hedging Instruments when desired; (3) the fact that the
skills needed to use Hedging 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
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& 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.
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
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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 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.
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PREFERRED STOCK. The Portfolio may invest in preferred stock.
Unlike interest payments on debt securities, dividends on preferred stock are
generally payable at the discretion of the issuer's board of directors.
Preferred shareholders may have certain rights if dividends are not paid but
generally have no legal recourse against the issuer. Shareholders may suffer a
loss of value if dividends are not paid. The market prices of preferred stocks
are generally more sensitive to changes in the issuer's creditworthiness than
are the prices of debt securities.
PERFORMANCE INFORMATION
The Fund's performance figures are based on historical results
and are not intended to indicate future performance. The share price and total
return of the Fund will vary, and an investment in the Fund, when redeemed, may
be worth more or less than an investor's original cost.
TOTAL RETURN COMPUTATIONS
The Fund may advertise certain total return information. An
average annual compounded rate of return ("T") may be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment of $1,000 ("P") over a period of time ("n") according to the
formula:
P(1+T)n[SUPERSCRIPT] = 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
25
<PAGE>
(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, with 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.
26
<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 Attorney at Law, Faith
63 Wall Street Trust Colish, A Professional
24th Floor Corporation.
New York, NY 10005
Donald M. Cox (74) Trustee of each Retired. Formerly Senior
435 East 52nd Trust Vice President and
Street Director of Exxon
New York, NY 10022 Corporation; Director of
Emigrant Savings Bank.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address (1) With The Trusts Principal Occupation(s)(2)
- ----------- --------------- --------------------------
<S> <C> <C>
Stanley Egener* Chairman of the Principal of Neuberger &
(62) Board, Chief Berman; President and
Executive Director of N&B
Officer, and Management; Chairman of
Trustee of each the Board, Chief Executive
Trust 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 Chairman of the Executive
Orion Capital Trust and Investment Committees
Corporation of Orion Capital
600 Fifth Avenue Corporation (property and
24th Floor casualty insurance) since
New York, NY 10020 1997; prior thereto,
Chairman and Chief
Executive Officer of
Orion Capital
Corporation; Director of
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 Trustee of each Vice President and Special
(60) Trust Counsel to WHX Corporation
WHX Corporation (holding company) since
110 East 59th 1992; formerly Vice
Street President and General
30th Floor Counsel of Keene
New York, NY 10022 Corporation (manufacturer
of industrial products);
Director of Kevlin
Corporation (manufacturer
of microwave and other
products).
Edward I. O'Brien* Trustee of each Until 1993, President of
(68) Trust the Securities Industry
12 Woods Lane Association ("SIA")
Scarsdale, NY (securities industry's
10583 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.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address (1) With The Trusts Principal Occupation(s)(2)
- ----------- --------------- --------------------------
<S> <C> <C>
John T. Patterson, Trustee of each Retired. Formerly
Jr. (68) Trust President of SOBRO (South
183 Ledge Drive Bronx Overall Economic
Torrington, CT Development Corporation).
06790
John P. Rosenthal Trustee of each Senior Vice President of
(64) Trust Burnham Securities Inc. (a
Burnham Securities registered broker-dealer)
Inc. since 1991; formerly
Burnham Asset Partner of Silberberg,
Management Corp. Rosenthal & Co. (member of
1325 Avenue of the National Association of
Americas Securities Dealers, Inc.);
17th Floor Director, Cancer Treatment
New York, NY 10019 Holdings, Inc.
Cornelius T. Ryan Trustee of each General Partner of Oxford
(65) Trust Partners and Oxford
Oxford Bioscience Bioscience Partners
Partners (venture capital
315 Post Road West partnerships) and
Westport, CT 06880 President of Oxford
Venture Corporation;
Director of Capital Cash
Management Trust (money
market fund) and Prime
Cash Fund.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address (1) With The Trusts Principal Occupation(s)(2)
- ----------- --------------- --------------------------
<S> <C> <C>
Gustave H. Shubert Trustee of each Senior Fellow/Corporate
(68) Trust Advisor and Advisory
13838 Sunset Trustee of Rand (a non-
Boulevard profit public interest
Pacific Palisades, research institution)
CA 90272 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* President and Principal of Neuberger &
(60) Trustee of each Berman; Director of N&B
Trust
Management; President
and/or Trustee of five
other mutual funds for
which N&B Management acts
as investment manager or
administrator.
Daniel J. Sullivan Vice President Senior Vice President of
(57) of each Trust N&B 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.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address (1) With The Trusts Principal Occupation(s)(2)
- ----------- --------------- --------------------------
<S> <C> <C>
Michael J. Weiner Vice President Senior Vice President of
(50) and Principal N&B Management since 1992;
Financial Treasurer of N&B
Officer of each Management from 1992 to
Trust 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 Secretary of Vice President of N&B
(40) each Trust Management; Secretary of
eight other mutual funds
for which N&B Management
acts as investment
manager or administrator.
Richard Russell Treasurer and Vice President of N&B
(50) Principal Management since 1993;
Accounting prior thereto, Assistant
Officer of each Vice President of N&B
Trust Management; Treasurer and
Principal Accounting
Officer of eight other
mutual funds for which
N&B Management acts as
investment manager or
administrator.
Stacy Cooper- Assistant Assistant Vice President
Shugrue (34) Secretary of of N&B Management since
each Trust 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.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address (1) With The Trusts Principal Occupation(s)(2)
- ----------- --------------- --------------------------
<S> <C> <C>
C. Carl Randolph Assistant Principal of Neuberger &
(59) Secretary of Berman since 1992; prior
each Trust thereto, employee of
Neuberger & Berman;
Assistant Secretary of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Barbara DiGiorgio Assistant Assistant Vice President
(37) Treasurer of of N&B Management since
each Trust 1993; prior thereto,
employee of N&B
Management; Assistant
Treasurer since 1996 of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
Celeste Wischerth Assistant Assistant Vice President
(36) Treasurer of of N&B Management since
each Trust 1994; prior thereto,
employee of N&B
Management; Assistant
Treasurer since 1996 of
eight other mutual funds
for which N&B Management
acts as investment manager
or administrator.
</TABLE>
32
<PAGE>
- --------------------
(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 written opinion of independent counsel) that
such officers or trustees have not engaged in willful misfeasance, bad faith,
gross negligence, or reckless disregard of their duties.
The following table sets forth information concerning the
compensation of the trustees of the Trust. None of the Neuberger & Berman
Funds[REGISTERED TRADEMARK] has any retirement plan for its trustees or
officers.
33
<PAGE>
<TABLE>
<CAPTION>
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
- ---------------------- --------- -----------------
<S> <C> <C>
Faith Colish $0 $38,500
Trustee (5 other investment
companies)
Donald M. Cox $0 $31,000
Trustee (3 other investment
companies)
Stanley Egener $0 $0
Chairman of the Board, (9 other investment
Chief Executive Officer, companies)
and Trustee
Alan R. Gruber $0 $28,000
Trustee (3 other investment
companies)
Howard A. Mileaf $0 $37,000
Trustee (4 other investment
companies)
Edward I. O'Brien $0 $31,500
Trustee (3 other investment
companies)
John T. Patterson, Jr. $0 $40,500
Trustee (4 other investment
companies)
John P. Rosenthal $0 $36,500
Trustee (4 other investment
companies)
Cornelius T. Ryan $0 $30,500
Trustee (3 other investment
companies)
Gustave H. Shubert $0 $30,500
Trustee (3 other investment
companies)
Lawrence Zicklin $0 $0
President and Trustee (5 other investment
companies)
</TABLE>
34
<PAGE>
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
INVESTMENT MANAGER AND ADMINISTRATOR
Because all of the Fund's net investable assets are invested
in the Portfolio, the Fund does not need an investment manager. 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.
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.
35
<PAGE>
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,
as amended August 2, 1996 ("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 in connection with investments in the Fund.
The Management Agreement continues with respect to the
Portfolio until August 2, 1997. 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 until August 2, 1997. The Administration Agreement is renewable from year
to year with respect to the Fund, so long as its continuance is approved at
least annually (1) by the vote of a majority of the Fund Trustees who are not
"interested persons" of 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.
36
<PAGE>
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. Each Agreement terminates automatically if it is assigned.
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.
The Sub-Advisory Agreement continues with respect to the
Portfolio until August 2, 1997, 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.
37
<PAGE>
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 December 31, 1996, these companies, along
with one other investment company advised by Neuberger & Berman, had aggregate
net assets of approximately $15.2 billion, as shown in the following list:
<TABLE>
<CAPTION>
Approximate
Net Assets at
NAME DECEMBER 31, 1996
<S> <C>
Neuberger & Berman Cash Reserves Portfolio...................................................$499,989,187
(investment portfolio for Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Money Portfolio................................................$402,843,399
(investment portfolio for Neuberger & Berman Government Money
Fund)
Neuberger & Berman Limited Maturity Bond Portfolio...........................................$272,342,178
(investment portfolio for Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman Limited Maturity Bond Trust)
Neuberger & Berman Ultra Short Bond Portfolio.................................................$89,819,435
(investment portfolio for Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short Bond Trust)
Neuberger & Berman Municipal Money Portfolio.................................................$135,494,410
(investment portfolio for Neuberger & Berman Municipal Money
Fund)
Neuberger & Berman Municipal Securities Portfolio.............................................$38,634,808
(investment portfolio for Neuberger & Berman Municipal
Securities Trust)
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Approximate
Net Assets at
NAME DECEMBER 31, 1996
<S> <C>
Neuberger & Berman New York Insured Intermediate Portfolio.......................................$9,877,137
(investment portfolio for Neuberger & Berman New York Insured
Intermediate Fund)
Neuberger & Berman Focus Portfolio...........................................................$1,260,252,029
(investment portfolio for Neuberger & Berman Focus Fund,
Neuberger & Berman Focus Trust, and Neuberger & Berman Focus
Assets)
Neuberger & Berman Genesis Portfolio...........................................................$398,343,946
(investment portfolio for Neuberger & Berman Genesis Fund,
Neuberger & Berman Genesis Trust, and Neuberger & Berman
Genesis Assets)
Neuberger & Berman Guardian Portfolio........................................................$7,071,702,448
(investment portfolio for Neuberger & Berman Guardian Fund,
Neuberger & Berman Guardian Trust, and Neuberger & Berman
Guardian Assets)
Neuberger & Berman International Portfolio......................................................$73,377,704
(investment portfolio for Neuberger & Berman International
Fund)
Neuberger & Berman Manhattan Portfolio.........................................................$574,606,109
(investment portfolio for Neuberger & Berman Manhattan Fund,
Neuberger & Berman Manhattan Trust, and Neuberger & Berman
Manhattan Assets)
Neuberger & Berman Partners Portfolio........................................................$2,405,865,742
(investment portfolio for Neuberger & Berman Partners Fund,
Neuberger & Berman Partners Trust, and Neuberger & Berman
Partners Assets)
Neuberger & Berman Socially Responsive Portfolio...............................................$188,366,394
(investment portfolio for Neuberger & Berman Socially
Responsive Fund, Neuberger & Berman NYCDC Socially Responsive
Trust, and Neuberger & Berman Socially Responsive Trust)
Advisers Managers Trust (six series).........................................................$1,695,378,078
</TABLE>
39
<PAGE>
In addition, Neuberger & Berman serves as investment adviser
to one investment company, Plan Investment Fund, with assets of $70,276,858 at
December 31, 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.
40
<PAGE>
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
Villar, Vice President; Mark R. Goldstein, Vice President; Michael Lamberti,
Vice President; Josephine P. Mahaney, Vice President; Ellen Metzger, Vice
President and Secretary; Paul Metzger, Vice President; 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; 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; 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, Sundman,
Goldstein, Kassen, Simons, Gendelman, and Risen 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.
41
<PAGE>
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 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.
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 August 2, 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 out standing 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.
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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 economic
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 portfolio's investments
are normally made in not more than six
sectors.
Neuberger & Berman Seeks capital appreciation through invest-
Genesis Trust ments primarily in common stocks of companies
with small market capitalizations (i.e., up
to $1.5 billion at the time of investment).
The corresponding portfolio uses a value-
oriented approach to the selection of
individual securities.
Neuberger & Berman Seeks capital appreciation through
Guardian Trust investments 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 this past record
does not necessarily predict the fund's
future practices.
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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.
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 principal and liquidity. The corresponding
Trust portfolio invests in money market instru-
ments and investment grade debt securities of
government and non-government issuers.
Maximum average duration of two years.
Neuberger & Berman Seeks the highest current income consistent
Limited Maturity with low risk to principal and liquidity
Bond Trust and, 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.
_______________________
*/ 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.
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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
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.
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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.
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
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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 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
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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
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
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portion of any "excess distribution" received by the Portfolio on the stock or
of any gain on the Portfolio's disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes its share of the
PFIC income as a taxable dividend to the Plan. The balance of the Fund's share
of the PFIC income will be included in its investment company taxable income
and, accordingly, will not be taxable to it to the extent that 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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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 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.
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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 the 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 with 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. When Neuberger & Berman desires to borrow a security that the
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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.
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
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retaining compensation for executing exchange transactions for accounts which
they or their affiliates manage, except where they have the authorization of the
persons authorized to transact business for the account and comply with certain
annual reporting requirements. Managers Trust and N&B Management have expressly
authorized Neuberger & Berman to retain such compensation, and Neuberger &
Berman has agreed to comply with the reporting requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to
Neuberger & Berman in connection with a purchase or sale of securities on a
securities exchange may not exceed the usual and customary broker's commission.
Accordingly, it is the Portfolio's policy that the commissions 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.
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
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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.
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
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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.
The portfolio turnover rates for the Portfolio for the years
ended August 31, 1995 and 1996 were 58% and 53%, respectively. The average
commission rate paid by the Portfolio during the year ended August 31, 1996 was
$0.0587.
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.
CUSTODIAN AND TRANSFER AGENT
The Fund and Portfolio have selected State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as
custodian for their securities and cash. State Street also serves as the Fund's
transfer agent, administering purchases, redemptions, and transfers of Fund
shares with respect to Institutions and the payment of dividends and other
55
<PAGE>
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
An audited statement of assets and liabilities for the Fund
and notes thereto for the fiscal year ended August 31, 1996, and the report of
Coopers & Lybrand L.L.P., independent accountants, with respect to such audited
statement appear on the following pages.
The following financial statements and related documents are
incorporated herein by reference from the Annual Report to Shareholders of
Neuberger & Berman Equity Funds:
The audited financial statements of the Portfolio and notes thereto for
the fiscal year ended August 31, 1996 and the report of Coopers &
Lybrand L.L.P., independent accountants, with respect to such audited
financial statements.
56
<PAGE>
NEUBERGER&BERMAN SOCIALLY RESPONSIVE TRUST
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996
ASSETS:
Cash $100,000
Deferred organization costs (Note 1) 113,724
--------
Total assets 213,724
--------
LIABILITIES:
Accrued organization costs (Note 1) 113,724
--------
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
<PAGE>
shares to Neuberger&Berman Management Incorporated ("Management") on
October 26, 1994.
(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 it from substantially all federal income taxes.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of Neuberger & Berman Equity Assets
and Shareholders of Neuberger & Berman Socially Responsive Trust
We have audited the accompanying statement of assets and liabilities of
Neuberger & Berman Equity Assets: Neuberger & Berman Socially Responsive Trust
as of August 31, 1996. This financial statement is the responsibility of the
Trust's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the financial position of Neuberger & Berman
Equity Assets: Neuberger & Berman Socially Responsive Trust as of August 31,
1996, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 27, 1997
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER
S&P CORPORATE BOND RATINGS:
AAA - Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA - Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from the higher rated issues only in
small degree.
A - Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB - Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in higher rated categories.
PLUS (+) OR MINUS (-) - The ratings above may be modified by
the addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S CORPORATE BOND RATINGS:
Aaa - Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or an exceptionally
stable margin, and principal is secure. Although the various protective elements
are likely to change, the changes that can be visualized are most unlikely to
impair the fundamentally strong position of the issue.
Aa - Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa-rated securities, fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa-rated
securities.
A-1
<PAGE>
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.
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.
A-2
<PAGE>
- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
- Well-established access to a range of financial
markets and assured sources of alternate
liquidity.
Issuers rated PRIME-2 (or related supporting institutions),
also known as P-2, have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
A-3
<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]
B-2
<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
B-3
<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-
B-4
<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.
B-5
<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]
B-6
<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"?
B-7
<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?
B-8
<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.
B-9
<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.
B-10
<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.
B-11
<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.
B-12
<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
B-13
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
POST-EFFECTIVE AMENDMENT NO. 7 ON FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements And Exhibits
- -------- ---------------------------------
(a) Financial Statements:
An audited statement of assets and liabilities of Neuberger & Berman
Socially Responsive Trust (a series of Neuberger & Berman Equity
Assets) for the fiscal year ended August 31, 1996 and the report of
the independent accountants appear in the Statement of Additional
Information. The audited financial statements contained in the
Annual Report to Shareholders of Neuberger & Berman Equity Funds for
the fiscal year ended August 31, 1996, with respect to Neuberger &
Berman Socially Responsive Portfolio (a series of Equity Managers
Trust), and the report of the independent accountants are
incorporated into the Statement of Additional Information by
reference.
(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.
C-1
<PAGE>
(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.
(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.
C-2
<PAGE>
(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.
(iii) Substitution Agreement Among Neuberger & Berman
Management Incorporated, Equity Managers Trust,
Neuberger & Berman, L.P., and Neuberger &
Berman, LLC. Incorporated by Reference to
Amendment No. 7 to Registration Statement of
Equity Managers Trust, File No. 811-7910, EDGAR
Accession No. 0000898432-96-000557.
(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
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.
C-3
<PAGE>
(b) (i) Distribution and Services Agreement between
Neuberger & Berman Equity Assets and Neuberger
& Berman Management Incorporated with Respect
to Other Series. Incorporated by Reference to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement, File Nos. 33-82568 and
811-8106, Edgar Accession No.
0000898432-96-000576.
(ii) Schedule A - Series of Neuberger & Berman
Equity Assets Currently Subject to Distribution
and Services Agreement. Incorporated by
Reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, Edgar Accession No.
0000898432-96-000576.
(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. Incorporated by Reference to
Post-Effective Amendment No. 4 to Registrant's
Registration Statement, File Nos. 33-82568 and
811-8106, Edgar Accession No.
0000898432-96-000558.
C-4
<PAGE>
(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. Incorporated by Reference to
Post-Effective Amendment No. 4 to Registrant's
Registration Statement, File Nos. 33-82568 and
811-8106, Edgar Accession No.
0000898432-96-000558.
(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.
C-5
<PAGE>
(11) Consent of Coopers & Lybrand L.L.P., Independent
Accountants. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
(15) (a) Plan Pursuant to Rule 12b-1. Incorporated by
Reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, Edgar Accession No.
0000898432-96-000576.
(b) Schedule A - Series of Neuberger & Berman
Equity Assets Currently Subject to Plan
Pursuant to Rule 12b-1. Incorporated by
Reference to Post-Effective Amendment No. 5 to
Registrant's Registration Statement, File Nos.
33-82568 and 811-8106, Edgar Accession No.
0000898432-96-000576.
(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-6
<PAGE>
Item 26. Number Of Holders Of Securities.
- -------- --------------------------------
The following information is given as of January 31, 1997:
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 4
Neuberger & Berman Manhattan Assets 3
Neuberger & Berman Partners Assets 2
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.
C-7
<PAGE>
Pursuant to Article IX, Section 3 of the Trust Instrument, if any
present or former shareholder of any series ("Series") of the Registrant shall
be held personally liable solely by reason of his or her being or having been a
shareholder and not because of his or her acts or omissions or for some other
reason, the present or former shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of any entity, its
general successor) shall be entitled out of the assets belonging to the
applicable Series to be held harmless from and indemnified against all loss and
expense arising from such liability. The Registrant, on behalf of the affected
Series, shall, upon request by such shareholder, assume the defense of any claim
made against such shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
Section 9 of the Management 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.
C-8
<PAGE>
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 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.
C-9
<PAGE>
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.
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Claudia A. Brandon Secretary, Neuberger & Berman
Vice President, Advisers Management Trust (Delaware
N&B Management business trust); 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.
C-10
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Stacy Cooper-Shugrue Assistant Secretary, Neuberger &
Assistant Vice President, Berman Advisers Management Trust
N&B Management (Delaware business trust); Assistant
Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); Assistant
Secretary, Neuberger & Berman Income
Funds; Assistant Secretary, Neuberger &
Berman Income Trust; Assistant
Secretary, Neuberger & Berman Equity
Funds; Assistant Secretary, Neuberger &
Berman Equity Trust; Assistant
Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers
Trust; Assistant Secretary, Global
Managers Trust; Assistant Secretary,
Neuberger & Berman Equity Assets.
Barbara DiGiorgio, Assistant Treasurer, Neuberger &
Assistant Vice President, Berman Advisers Management Trust
N&B Management (Delaware business trust); Assistant
Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer,
Neuberger & Berman Income Trust;
Assistant Treasurer, Neuberger & Berman
Equity Funds; Assistant Treasurer,
Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers
Trust; Assistant Treasurer, Equity
Managers Trust; Assistant Treasurer,
Global Managers Trust; Assistant
Treasurer, Neuberger & Berman Equity
Assets.
Stanley Egener Chairman of the Board and Trustee,
President and Director, Neuberger & Berman Advisers
N&B Management; Principal, Management Trust (Delaware business
Neuberger & Berman trust); Chairman of the Board and
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.
C-11
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Theodore P. Giuliano President and Trustee, Neuberger &
Vice President and Director, Berman Income Funds; President and
N&B Management; Principal, Trustee, Neuberger & Berman Income
Neuberger & Berman Trust; President and Trustee, Income
Managers Trust.
C. Carl Randolph Assistant Secretary, Neuberger &
Principal, Berman Advisers Management Trust
Neuberger & Berman (Delaware business trust); Assistant
Secretary, Advisers Managers Trust;
Assistant Secretary, Neuberger & Berman
Advisers Management Trust (Massachusetts
business trust) (1); Assistant
Secretary, Neuberger & Berman Income
Funds; Assistant Secretary, Neuberger &
Berman Income Trust; Assistant
Secretary, Neuberger & Berman Equity
Funds; Assistant Secretary, Neuberger &
Berman Equity Trust; Assistant
Secretary, Income Managers Trust;
Assistant Secretary, Equity Managers
Trust; Assistant Secretary, Global
Managers Trust; Assistant Secretary,
Neuberger & Berman Equity Assets.
Felix Rovelli Senior Vice President-Senior Equity
Vice President, Portfolio Manager, BNP-N&B Global
N&B Management Asset Management L.P. (joint venture
of Neuberger & Berman and Banque
Nationale de Paris) (2).
Richard Russell Treasurer, Neuberger & Berman
Vice President, Advisers Management Trust (Delaware
N&B Management business trust); 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-13
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
- ---- ------------------------------
Daniel J. Sullivan Vice President, Neuberger & Berman
Senior Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Vice President,
Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management
Trust (Massachusetts business trust)
(1); Vice President, Neuberger & Berman
Income Funds; Vice President, Neuberger
& Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice
President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger &
Berman Equity Assets.
Michael J. Weiner Vice President, Neuberger & Berman
Senior Vice President, Advisers Management Trust (Delaware
N&B Management business trust); Vice President,
Advisers Managers Trust; Vice President,
Neuberger & Berman Advisers Management
Trust (Massachusetts business trust)
(1); Vice President, Neuberger & Berman
Income Funds; Vice President, Neuberger
& Berman Income Trust; Vice President,
Neuberger & Berman Equity Funds; Vice
President, Neuberger & Berman Equity
Trust; Vice President, Income Managers
Trust; Vice President, Equity Managers
Trust; Vice President, Global Managers
Trust; Vice President, Neuberger &
Berman Equity Assets.
Celeste Wischerth, Assistant Treasurer, Neuberger &
Assistant Vice President, Berman Advisers Management Trust
N&B Management (Delaware business trust); Assistant
Treasurer, Advisers Managers Trust;
Assistant Treasurer, Neuberger & Berman
Income Funds; Assistant Treasurer,
Neuberger & Berman Income Trust;
Assistant Treasurer, Neuberger & Berman
Equity Funds; Assistant Treasurer,
Neuberger & Berman Equity Trust;
Assistant Treasurer, Income Managers
Trust; Assistant Treasurer, Equity
Managers Trust; Assistant Treasurer,
Global Managers Trust; Assistant
Treasurer, Neuberger & Berman Equity
Assets.
C-14
<PAGE>
Lawrence Zicklin President and Trustee, Neuberger &
Director, N&B Management; Berman Advisers Management Trust
Principal, Neuberger & Berman (Delaware business 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.
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:
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.
C-15
<PAGE>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- --------------------- -------------
Claudia A. Brandon Vice President Secretary
Patrick T. Byrne Vice President None
Richard A. Cantor Chairman of the Board None
and Director
Robert Conti Treasurer None
Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary
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, Chief
Executive Officer,
and Trustee
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 None
Director
Leslie Holliday-Soto Assistant Vice President None
Jody L. Irwin Assistant Vice President None
Michael M. Kassen Vice President and None
Director
C-16
<PAGE>
Irwin Lainoff Director None
Michael Lamberti Vice President None
Josephine Mahaney Vice President None
Carmen G. Martinez Assistant Vice President None
Ellen Metzger Vice President and None
Secretary
Paul Metzger 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 and
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 None
Marketing
Judith M. Vale Vice President None
Susan Walsh Vice President None
Michael J. Weiner Senior Vice President Vice President and
Principal Financial
Officer
C-17
<PAGE>
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-18
<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. 7 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
27th day of February, 1997.
NEUBERGER & BERMAN EQUITY ASSETS
/s/Lawrence Zicklin
By:______________________
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/Faith Colish
_________________ Trustee February 27, 1997
Faith Colish
/s/Donald M. Cox
____________________ Trustee February 27, 1997
Donald M. Cox
/s/Stanley Egener
____________________ Chairman of the Board February 27, 1997
Stanley Egener and Trustee (Chief
Executive Officer)
/s/Howard A. Mileaf
____________________ Trustee February 27, 1997
Howard A. Mileaf
/s/Edward I. O'Brien
____________________ Trustee February 27, 1997
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/John T. Patterson, Jr.
_________________________ Trustee February 27, 1997
John T. Patterson, Jr.
/s/John P. Rosenthal
____________________ Trustee February 27, 1997
John P. Rosenthal
/s/Cornelius T. Ryan
____________________ Trustee February 27, 1997
Cornelius T. Ryan
/s/Gustave H. Shubert
____________________ Trustee February 27, 1997
Gustave H. Shubert
/s/Alan R. Gruber
____________________ Trustee February 27, 1997
Alan R. Gruber
/s/Lawrence Zicklin
____________________ President and Trustee February 27, 1997
Lawrence Zicklin
/s/Michael J. Weiner
____________________ Vice President February 27, 1997
Michael J. Weiner (Principal Financial
Officer)
/s/Richard Russell
____________________ Treasurer (Principal February 27, 1997
Richard Russell Accounting Officer)
<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. 7
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 27th day of February, 1997.
EQUITY MANAGERS TRUST
/s/ Lawrence Zicklin
By:______________________
Lawrence Zicklin
President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/Faith Colish
___________________ Trustee February 27, 1997
Faith Colish
/s/Donald M. Cox
___________________ Trustee February 27, 1997
Donald M. Cox
/s/Stanley Egener
___________________ Chairman of the Board February 27, 1997
Stanley Egener and Trustee (Chief
Executive Officer)
/s/Howard A. Mileaf
___________________ Trustee February 27, 1997
Howard A. Mileaf
/s/Edward I. O'Brien
___________________ Trustee February 27, 1997
Edward I. O'Brien
(signatures continued on next page)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/John T. Patterson, Jr.
_________________________ Trustee February 27, 1997
John T. Patterson, Jr.
/s/John P. Rosenthal
_________________________ Trustee February 27, 1997
John P. Rosenthal
/s/Cornelius T. Ryan
_________________________ Trustee February 27, 1997
Cornelius T. Ryan
/s/Gustave H. Shubert
_________________________ Trustee February 27, 1997
Gustave H. Shubert
/s/Alan R. Gruber
_________________________ Trustee February 27, 1997
Alan R. Gruber
/s/Lawrence Zicklin
_________________________ President and Trustee February 27, 1997
Lawrence Zicklin
/s/Michael J. Weiner
_________________________ Vice President February 27, 1997
Michael J. Weiner (Principal Financial
Officer)
/s/Richard Russell
_________________________ Treasurer (Principal February 27, 1997
Richard Russell Accounting Officer)
<PAGE>
NEUBERGER & BERMAN EQUITY ASSETS
POST-EFFECTIVE AMENDMENT NO. 7 ON FORM N-1A
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
- -------- ---------------------------------------------------- ------------
(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 N.A.
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, N.A.
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>
(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.
(ii) Schedule A - Series of Neuberger & N.A.
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 Managers N.A.
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.
<PAGE>
(iii) Substitution Agreement Among Neuberger N.A.
& Berman Management Incorporated,
Equity Managers Trust, Neuberger &
Berman, L.P., and Neuberger & Berman,
LLC. Incorporated by Reference to
Amendment No. 7 to Registration
Statement of Equity Managers Trust,
File No. 811-7910, EDGAR Accession
No. 0000898432-96-000557.
(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. Incorporated by
Reference to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement, File Nos. 33-82568 and
811-8106, Edgar Accession No.
0000898432-96-000576.
(ii) Schedule A - Series of Neuberger & N.A.
Berman Equity Assets Currently
Subject to Distribution and Services
Agreement. Incorporated by Reference
to Post-Effective Amendment No. 5 to
Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106,
Edgar Accession No. 0000898432-96-000576.
<PAGE>
(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.
(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 N.A.
Custodian Contract. Incorporated by
Reference to Post-Effective Amendment No. 4
to Registrant's Registration Statement, File
Nos. 33-82568 and 811-8106, Edgar Accession
No. 0000898432-96-000558.
(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 N.A.
Transfer Agency Agreement.
Incorporated by Reference to
Post-Effective Amendment No. 4 to
Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106,
Edgar Accession No.
0000898432-96-000558.
(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.
<PAGE>
(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.
(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 N.A.
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) Consent of Coopers & Lybrand L.L.P., Independent ____
Accountants. Filed Herewith.
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) (a) Plan Pursuant to Rule 12b-1. Incorporated N.A.
by Reference to Post-Effective Amendment
No. 5 to Registrant's Registration
Statement, File Nos. 33-82568 and 811-8106,
Edgar Accession No. 0000898432-96-000576.
(b) Schedule A - Series of Neuberger & Berman N.A.
Equity Assets Currently Subject to Plan
Pursuant to Rule 12b-1. Incorporated by
Reference to Post-Effective Amendment No. 5
to Registrant's Registration Statement,
File Nos. 33-82568 and 811-8106, Edgar
Accession No. 0000898432-96-000576.
(16) Schedule of Computation of Performance N.A.
Quotations. None.
(17) Financial Data Schedule. Filed Herewith. _____
(18) Plan Pursuant to Rule 18f-3. None. N.A.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000914228
<NAME> NEUBERGER&BERMAN EQUITY ASSETS
<SERIES>
<NUMBER> 01
<NAME> NEUBERGER&BERMAN SOCIALLY RESPONSIVE TRUST
<MULTIPLIER> 1
<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> 113,724
<OTHER-ITEMS-ASSETS> 100,000
<TOTAL-ASSETS> 213,724
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 113,724
<TOTAL-LIABILITIES> 113,724
<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>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Neuberger&Berman Socially Responsive Portfolio Annual Report and is
qualified in its qualified in its entirety by reference to such document.
</LEGEND>
<RESTATED>
<CIK> 0000910055
<NAME> EQUITY MANAGERS TRUST
<SERIES>
<NUMBER> 06
<NAME> NEUBERGER&BERMAN SOCIALLY RESPONSIVE PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 135,153
<INVESTMENTS-AT-VALUE> 158,396
<RECEIVABLES> 168
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 8
<TOTAL-ASSETS> 158,592
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107
<TOTAL-LIABILITIES> 107
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,157
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,637
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,448
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23,243
<NET-ASSETS> 158,485
<DIVIDEND-INCOME> 1,814
<INTEREST-INCOME> 325
<OTHER-INCOME> 0
<EXPENSES-NET> (832)
<NET-INVESTMENT-INCOME> 1,307
<REALIZED-GAINS-CURRENT> 11,385
<APPREC-INCREASE-CURRENT> 9,035
<NET-CHANGE-FROM-OPS> 21,727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 61,738
<ACCUMULATED-NII-PRIOR> 1,330
<ACCUMULATED-GAINS-PRIOR> 1,063
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 704
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 832
<AVERAGE-NET-ASSETS> 128,052
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
To the Board of Trustees of
Neuberger & Berman Equity Assets:
Neuberger & Berman Socially Responsive Trust
We consent to the inclusion in Part B. Statement of Additional
Information in Post-Effective Amendment No. 7 to the Registration Statement on
Form N-1A of Neuberger & Berman Equity Assets (File #33-82568) (811-8106) of our
report dated February 27, 1997, on our audit of the statement of assets and
liabilities of Neuberger & Berman Equity Assets: Neuberger & Berman Socially
Responsive Trust and to the incorporation by reference in Part B of the
Registration Statement of our report dated October 4, 1996, on our audit of the
financial statements and financial highlights of Neuberger & Berman Socially
Responsive Portfolio, which report is included in the Annual Report to
Shareholders of Neuberger & Berman Equity Funds for the fiscal year ended August
31, 1996.
We also consent to the reference to our Firm with respect to Neuberger
& Berman Socially Responsive Trust and Portfolio under the captions "Independent
Accountants" and "Financial Statements" in Part B of the Registration Statement.
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 27, 1997
