NEUBERGER&BERMAN
EQUITY ASSETS
SUPPLEMENT TO THE PROSPECTUS DATED DECEMBER 15, 1997
I. THE SECTION "INVESTMENT PROGRAMS - NEUBERGER&BERMAN GUARDIAN PORTFOLIO" ON
PAGE 19 OF THE PROSPECTUS IS REVISED BY ADDING THE FOLLOWING PARAGRAPH:
INVESTMENT PROGRAM-NEUBERGER&BERMAN GUARDIAN PORTFOLIO
For purposes of managing cash flow, the Portfolio at times may invest in
financial instruments, the return on which is intended to approximate the
performance of a recognized securities index, such as the S&P "500" Index. These
may include options and futures on securities indices, options on such futures,
and instruments structured as investment companies.
II. THE FOLLOWING PARAGRAPHS ARE ADDED TO THE SECTION "DESCRIPTION OF
INVESTMENTS" ON PAGE 38 OF THE PROSPECTUS:
DESCRIPTION OF INVESTMENTS
OTHER INVESTMENT COMPANIES. Neuberger&Berman GUARDIAN Portfolio at times
may invest in instruments structured as investment companies to gain exposure to
the performance of a recognized securities index, such as the S&P "500" Index.
As a shareholder in an investment company, the Portfolio would bear its pro rata
share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. Neuberger&Berman GUARDIAN Portfolio does not intend to
invest in such funds unless, in the judgment of N&B Management, the potential
benefits of such investment justify the payment of any applicable premium or
sales charge.
The Portfolio's investment in such securities is limited to (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Portfolio's
total assets with respect to any one investment company and (iii) 10% of the
Portfolio's total assets in the aggregate.
GENERAL RISKS OF OPTIONS, FUTURES AND FORWARD CONTRACTS. Neuberger &
Berman GUARDIAN Portfolio may use options and futures on securities indices, and
options on such futures, to increase its exposure to the broad equity markets.
Such contracts are often closed out prior to the delivery date. The primary
risks in using put and call options, futures contracts, and options on futures
contracts ("Financial Instruments") are (1) imperfect correlation or no
correlation between changes in market value of the securities index and the
prices of the Financial Instruments; (2) possible lack of a liquid secondary
market for Financial Instruments and the resulting inability to close them out
when desired; and (3) the fact that the use of Financial Instruments 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 portfolio securities. When the Portfolio uses Financial
Instruments, it will place cash or appropriate liquid securities in a segregated
<PAGE>
account or will "cover" its position, to the extent required by SEC staff
policy. Another risk of Financial Instruments is the possible inability of a
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 a Portfolio to sell a
security at a disadvantageous time, due to its need to maintain cover or to
segregate securities in connection with its use of Financial Instruments. Losses
that may arise from certain futures transactions are potentially unlimited.
III. THE PARAGRAPH REGARDING THE PORTFOLIO MANAGEMENT OF NEUBERGER&BERMAN
PARTNERS PORTFOLIO IN THE SECTION "MANAGEMENT AND ADMINISTRATION - INVESTMENT
MANAGER, ADMINISTRATOR, DISTRIBUTOR, ANd SUB-ADVISER" (PAGE 31) IS REVISED TO
READ AS fOLLOWS:
MANAGEMENT AND ADMINISTRATION
INVESTMENT MANAGER, ADMINISTRATOR, DISTRIBUTOR AND SUB-ADVISER
Neuberger&Berman PARTNERS Portfolio -- Michael M. Kassen, Robert I.
Gendelman, and S. Basu Mullick are co-managers of the Portfolio. Mr. Kassen, Mr.
Gendelman, and Mr. Mullick are Vice Presidents of N&B Management. Mr. Kassen and
Mr. Gendelman are principals of Neuberger&Berman. Mr. Kassen, Mr. Gendelman and
Mr. Mullick have had responsibility for Neuberger&Berman PARTNERS Portfolio
since June 1990, October 1994, and October 1998, respectively. Mr. Kassen has
been an employee of N&B Management since 1990. Mr. Gendelman was a portfolio
manager for another mutual fund manager from 1992 to 1993. Mr. Mullick was a
portfolio manager for a prominent investment adviser from 1993 to 1998.
The date of this Supplement is October 1, 1998.
<PAGE>
NEUBERGER&BERMAN
EQUITY ASSETS
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 15, 1997
I. THE FINAL PARAGRAPH IN THE SECTION "INVESTMENT INFORMATION - INVESTMENT
POLICIES AND LIMITATIONS" (PAGE 4) IS REVISED TO READ AS FOLLOWS:
Each Portfolio (except Neuberger&Berman GUARDIAN Portfolio) as an
operating policy, does not intend to invest in futures contracts and options
thereon during the coming year. In addition, although the Portfolios do not have
policies limiting their investment in warrants, no Portfolio currently intends
to invest in warrants unless acquired in units or attached to securities.
II. THE SECTION HEADING "OPTIONS ON SECURITIES, FORWARD CONTRACTS, AND OPTIONS
ON FOREIGN CURRENCIES (COLLECTIVELY, 'HEDGING INSTRUMENTS')" (PAGE 15) IS
REVISED TO READ "FUTURES, OPTIONS ON FUTURES, OPTIONS ON SECURITIES AND INDICES,
FORWARD CONTRACTS, AND OPTIONS ON FOREIGN CURRENCIES (COLLECTIVELY, 'FINANCIAL
INSTRUMENTS') AND IS REVISED BY ADDING THE FOLLOWING:
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER&BERMAN GUARDIAN PORTFOLIO).
Neuberger&Berman GUARDIAN Portfolio may purchase and sell stock index
futures contracts, and may purchase and sell options thereon. For purposes of
managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P "500" Index.
A "sale" of a futures contract (or a "short" futures position) entails the
assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual delivery
or acquisition of the underlying securities or currency, in most cases the
contractual obligation is extinguished by being offset before the expiration of
the contract. A futures position is offset by buying (to offset an earlier sale)
<PAGE>
or selling (to offset an earlier purchase) an identical futures contract calling
for delivery in the same month. This may result in a profit or loss. While
futures contracts entered into by the Portfolio will usually be liquidated in
this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
"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 NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in the contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume a short futures position (if the
option is a call) or a long futures position (if the option is a put). Upon
exercise of the option, the accumulated cash balance in the writer's futures
margin account is delivered to the holder of the option. That balance represents
the amount by which the market price of the futures contract at exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option. Options on futures have characteristics and risks
similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying a Portfolio's futures position and the securities held by
or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
<PAGE>
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
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 ON SECURITIES INDICES (NEUBERGER&BERMAN GUARDIAN
PORTFOLIO).
For purposes of managing cash flow, Neuberger & Berman GUARDIAN Portfolio may
purchase put and call options on securities indices to increase the Portfolio's
exposure to the performance of a recognize securities index, such as the S&P
"500" Index . All securities index options purchased by Neuberger & Berman
GUARDIAN Portfolio will be listed and traded on an exchange.
The Portfolio may write securities index options to close out positions in
such options that it has purchased. The Portfolio currently does not expect to
invest a substantial portion of its assets in securities index options.
Unlike a securities option, which gives the holder the right to purchase
or sell a specified security at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (1) the difference between the exercise price of the option and the
value of the underlying securities index on the exercise date (2) multiplied by
a fixed "index multiplier." A securities index fluctuates with changes in the
market values of the securities included in the index. Options on stock indices
are currently traded on the Chicago Board Options Exchange, the New York Stock
Exchange ("NYSE"), the American Stock Exchange, and other U.S. and foreign
exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks similar to those
of securities options, as discussed herein.
The date of this Supplement is October 1, 1998.
<PAGE>
NEUBERGER&BERMAN
EQUITY ASSETS
SUPPLEMENT TO THE PROSPECTUS DATED DECEMBER 15, 1997
I. THE SECTION WHICH PROVIDES A SUMMARY OF THE FEATURES OF NEUBERGER&BERMAN
FOCUS ASSETS (PAGE 4) IS ReVISED TO READ AS FOLLOWS:
- --------------------------------------------------------------------------------
FOCUS ASSETS Value fund, more Invests principally in
concentrated portfolio common stocks selected
than Guardian. May from 13 multi-industry
invest without regard to sectors of the economy.
market capitalization. To maximize potential
return, the Portfolio
normally makes at least
90% of its investments in
not more than six sectors
of the economy believed by
the portfolio manager to
be undervalued.
- --------------------------------------------------------------------------------
II. THE FOLLOWING DISCLOSURE REGARDING NEUBERGER&BERMAN FOCUS PORTFOLIO IS ADDED
TO PAGE 17 OF THE PROSPECTUS:
INVESTMENT PROGRAMS - NEUBERGER&BERMAN FOCUS PORTFOLIO
The Portfolio may invest in stocks of companies of any market
capitalization. For more information, see "Special Considerations of Small- and
Mid-Cap Company Stocks" on page 20.
III. THE FOLLOWING DISCLOSURE REGARDING NEUBERGER&BERMAN GUARDIAN PORTFOLIO IS
ADDED TO PAGE 19 OF THE PROSPECTUS:
INVESTMENT PROGRAMS - NEUBERGER&BERMAN GUARDIAN PORTFOLIO
For purposes of managing cash flow, Neuberger&Berman GUARDIAN Portfolio at
times may invest in financial instruments, the return on which is intended to
approximate the performance of a recognized securities index, such as the S&P
"500" Index. These may include options and futures on securities indices,
options on such futures, and instruments structured as investment companies.
<PAGE>
IV. THE PARAGRAPHS REGARDING THE PORTFOLIO MANAGEMENT OF NEUBERGER&BERMAN FOCUS
PORTFOLIO, NEUBERGER&BERMAN GUArDIAN PORTFOLIO, AND NEUBERGER&BERMAN PARTNERS
PORTFOLIO IN THE SECTION "MANAgEMENT AND ADMINISTRATION - INVESTMENT MANAGER,
ADMINISTRATOR, DISTRIBUTOR, AND SUB-ADVISER" (PAGES 30-31) ARE
REVISED TO READ AS FOLLOWS:
MANAGEMENT AND ADMINISTRATION
INVESTMENT MANAGER, ADMINISTRAToR, DISTRIBUTOR AND SUB-ADVISER
Neuberger&Berman FOCUS Portfolio -- Kent C. Simons is manager of the
Portfolio. Mr. Simons is Vice President of N&B Management and a principal of
Neuberger&Berman. Mr. Simons has had responsibility for Neuberger&Berman FOCUS
Portfolio since 1988.
Neuberger&Berman GUARDIAN Portfolio -- Kevin L. Risen and Rick White are
co-managers of the Portfolio. Mr. Risen is a Vice President of N&B Management
and a principal of Neuberger&Berman. Mr. Risen has had responsibility for
Neuberger&Berman GUARDIAN Portfolio since 1996, and during the prior year, he
was a portfolio manager for Neuberger&Berman. He was a research analyst at
Neuberger&Berman from 1992 to 1995. Mr. White is a Vice President of N&B
Management. He has had responsibility for Neuberger&Berman GUARDIAN Portfolio
since September 1998. From 1989 to September 1998, he was a portfolio manager
for a mutual fund managed by a prominent investment adviser.
Neuberger&Berman PARTNERS Portfolio -- Michael M. Kassen, Robert I.
Gendelman, and S. Basu Mullick are co-managers of the Portfolio. Mr. Kassen, Mr.
Gendelman, and Mr. Mullick are Vice Presidents of N&B Management. Mr. Kassen and
Mr. Gendelman are principals of Neuberger&Berman. Mr. Kassen, Mr. Gendelman and
Mr. Mullick have had responsibility for Neuberger&Berman PARTNERS Portfolio
since June 1990, October 1994, and October 1998, respectively. Mr. Kassen has
been an employee of N&B Management since 1990. Mr. Gendelman was a portfolio
manager for another mutual fund manager from 1992 to 1993. Mr. Mullick was a
portfolio manager for a prominent investment adviser from 1993 to 1998.
V. THE FOLLOWING PARAGRAPHS ARE ADDED TO THE SECTION "DESCRIPTION OF
INVESTMENTS" ON PAGE 38 OF THE PROSPECTUS:
DESCRIPTION OF INVESTMENTS
OTHER INVESTMENT COMPANIES. Neuberger&Berman GUARDIAN Portfolio at times
may invest in instruments structured as investment companies to gain exposure to
the performance of a recognized securities index, such as the S&P "500" Index.
As a shareholder in an investment company, the Portfolio would bear its pro rata
share of that investment company's expenses. Investment in other funds may
involve the payment of substantial premiums above the value of such issuer's
portfolio securities. Neuberger&Berman GUARDIAN Portfolio does not intend to
invest in such funds unless, in the judgment of N&B Management, the potential
benefits of such investment justify the payment of any applicable premium or
sales charge.
<PAGE>
The Portfolio's investment in such securities is limited to (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Portfolio's
total assets with respect to any one investment company and (iii) 10% of the
Portfolio's total assets in the aggregate.
GENERAL RISKS OF OPTIONS, FUTURES AND FORWARD CONTRACTS. Neuberger &
Berman GUARDIAN Portfolio may use options and futures on securities indices, and
options on such futures, to increase its exposure to the broad equity markets.
Such contracts are often closed out prior to the delivery date. The primary
risks in using put and call options, futures contracts, and options on futures
contracts ("Financial Instruments") are (1) imperfect correlation or no
correlation between changes in market value of the securities index and the
prices of the Financial Instruments; (2) possible lack of a liquid secondary
market for Financial Instruments and the resulting inability to close them out
when desired; and (3) the fact that the use of Financial Instruments 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 portfolio securities. When the Portfolio uses Financial
Instruments, it will place cash or appropriate liquid securities in a segregated
account or will "cover" its position, to the extent required by SEC staff
policy. Another risk of Financial Instruments is the possible inability of a
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 a Portfolio to sell a
security at a disadvantageous time, due to its need to maintain cover or to
segregate securities in connection with its use of Financial Instruments. Losses
that may arise from certain futures transactions are potentially unlimited.
The date of this Supplement is October 1, 1998.
<PAGE>
NEUBERGER&BERMAN
EQUITY ASSETS
SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 15, 1997
I. THE FINAL PARAGRAPH IN THE SECTION "INVESTMENT INFORMATION - INVESTMENT
POLICIES AND LIMITATIONS" (PAGE 4) IS REVISED TO READ AS FOLLOWS:
Each Portfolio (except Neuberger&Berman GUARDIAN Portfolio) as an
operating policy, does not intend to invest in futures contracts and options
thereon during the coming year. In addition, although the Portfolios do not have
policies limiting their investment in warrants, no Portfolio currently intends
to invest in warrants unless acquired in units or attached to securities.
II. THE SECTION HEADING "OPTIONS ON SECURITIES, FORWARD CONTRACTS, AND OPTIONS
ON FOREIGN CURRENCIES (COLLECTiVELY, `HEDGING INSTRUMENTS')" (PAGE 15) IS
REVISED TO READ "FUTURES, OPTIoNS ON FUTURES, OPTIONS ON SECURITIES AND INDICES,
FORWARD CONTRACTS, aND OPTIONS ON FOREIGN CURRENCIES (COLLECTIVELY, `FINANCIAL
INSTRUMENTS') AND IS REVISED BY ADDING THE following:
FUTURES CONTRACTS AND OPTIONS THEREON (NEUBERGER&BERMAN GUARDIAN PORTFOLIO).
Neuberger&Berman GUARDIAN Portfolio may purchase and sell stock index
futures contracts, and may purchase and sell options thereon. For purposes of
managing cash flow, the managers may use such futures and options to increase
the Portfolio's exposure to the performance of a recognized securities index,
such as the S&P "500" Index.
A "sale" of a futures contract (or a "short" futures position) entails the
assumption of a contractual obligation to deliver the securities or currency
underlying the contract at a specified price at a specified future time. A
"purchase" of a futures contract (or a "long" futures position) entails the
assumption of a contractual obligation to acquire the securities or currency
underlying the contract at a specified price at a specified future time. Certain
futures, including stock and bond index futures, are settled on a net cash
payment basis rather than by the sale and delivery of the securities underlying
the futures.
U.S. futures contracts (except certain currency futures) are traded on
exchanges that have been designated as "contract markets" by the CFTC; futures
transactions must be executed through a futures commission merchant that is a
member of the relevant contract market. In both U.S. and foreign markets, an
exchange's affiliated clearing organization guarantees performance of the
contracts between the clearing members of the exchange.
Although futures contracts by their terms may require the actual delivery
or acquisition of the underlying securities or currency, in most cases the
contractual obligation is extinguished by being offset before the expiration of
the contract. A futures position is offset by buying (to offset an earlier sale)
<PAGE>
or selling (to offset an earlier purchase) an identical futures contract calling
for delivery in the same month. This may result in a profit or loss. While
futures contracts entered into by the Portfolio will usually be liquidated in
this manner, the Portfolio may instead make or take delivery of underlying
securities whenever it appears economically advantageous for it to do so.
"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 NAV,
the Portfolio marks to market the value of its open futures positions. The
Portfolio also must make margin deposits with respect to options on futures that
it has written (but not with respect to options on futures that it has
purchased). If the futures commission merchant holding the margin deposit goes
bankrupt, the Portfolio could suffer a delay in recovering its funds and could
ultimately suffer a loss.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in the contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume a short futures position (if the
option is a call) or a long futures position (if the option is a put). Upon
exercise of the option, the accumulated cash balance in the writer's futures
margin account is delivered to the holder of the option. That balance represents
the amount by which the market price of the futures contract at exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option. Options on futures have characteristics and risks
similar to those of securities options, as discussed herein.
Although the Portfolio believes that the use of futures contracts will
benefit it, if N&B Management's judgment about the general direction of the
markets or about interest rate or currency exchange rate trends is incorrect,
the Portfolio's overall return would be lower than if it had not entered into
any such contracts. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in interest or
currency exchange rates, which in turn are affected by fiscal and monetary
policies and by national and international political and economic events. At
best, the correlation between changes in prices of futures contracts and of
securities being hedged can be only approximate due to differences between the
futures and securities markets or differences between the securities or
currencies underlying a Portfolio's futures position and the securities held by
or to be purchased for the Portfolio. The currency futures market may be
dominated by short-term traders seeking to profit from changes in exchange
rates. This would reduce the value of such contracts used for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approaches maturity.
<PAGE>
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
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 ON SECURITIES INDICES (NEUBERGER&BERMAN GUARDIAN
PORTFOLIO).
For purposes of managing cash flow, Neuberger & Berman GUARDIAN Portfolio may
purchase put and call options on securities indices to increase the Portfolio's
exposure to the performance of a recognize securities index, such as the S&P
"500" Index . All securities index options purchased by Neuberger & Berman
GUARDIAN Portfolio will be listed and traded on an exchange.
The Portfolio may write securities index options to close out positions in
such options that it has purchased. The Portfolio currently does not expect to
invest a substantial portion of its assets in securities index options.
Unlike a securities option, which gives the holder the right to purchase
or sell a specified security at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement amount"
equal to (1) the difference between the exercise price of the option and the
value of the underlying securities index on the exercise date (2) multiplied by
a fixed "index multiplier." A securities index fluctuates with changes in the
market values of the securities included in the index. Options on stock indices
are currently traded on the Chicago Board Options Exchange, the New York Stock
Exchange ("NYSE"), the American Stock Exchange, and other U.S. and foreign
exchanges.
The effectiveness of hedging through the purchase of securities index
options will depend upon the extent to which price movements in the securities
being hedged correlate with price movements in the selected securities index.
Perfect correlation is not possible because the securities held or to be
acquired by the Portfolio will not exactly match the composition of the
securities indices on which options are available.
Securities index options have characteristics and risks similar to those of
securities options, as discussed herein.
The date of this Supplement is October 1, 1998.
