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[NEUBERGER BERMAN LOGO]
Neuberger Berman
EQUITY ASSETS-Registered Trademark-
SEMI-ANNUAL REPORT
FEBRUARY 28, 1999
Focus Assets
Genesis Assets
Guardian Assets
Manhattan Assets
Partners Assets
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TABLE OF CONTENTS
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THE FUNDS
CHAIRMAN'S LETTER A-4
PORTFOLIO COMMENTARY
Focus Assets A-5
Genesis Assets A-8
Guardian Assets A-11
Manhattan Assets A-14
Partners Assets A-17
PERFORMANCE HIGHLIGHTS B-1
FINANCIAL STATEMENTS B-4
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Focus Assets B-14
Genesis Assets B-15
Guardian Assets B-16
Manhattan Assets B-17
Partners Assets B-18
THE PORTFOLIOS
SCHEDULE OF INVESTMENTS
TOP TEN EQUITY HOLDINGS
Focus Portfolio C-1
Genesis Portfolio C-3
Guardian Portfolio C-7
Manhattan Portfolio C-10
Partners Portfolio C-13
FINANCIAL STATEMENTS C-18
FINANCIAL HIGHLIGHTS
Focus Portfolio C-32
Genesis Portfolio C-33
Guardian Portfolio C-34
Manhattan Portfolio C-35
Partners Portfolio C-36
OTHER INFORMATION
Directory/Officers and Trustees D-1
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CHAIRMAN'S LETTER April 16, 1999
Dear Fellow Shareholder,
The first half of fiscal 1999 was the best of times and worst of times for
equities investors. In September 1998, the first month of this reporting period,
global economic and financial market turmoil sent stocks plummeting. Then, with
three waves of interest rate cuts, Federal Reserve Chairman Alan Greenspan
seemed to make the market's problems disappear and stocks surged back to record
highs. However, not all stocks participated equally in the market recovery.
Growth stocks performed significantly better than value stocks across the market
capitalization spectrum, and large-cap stocks, in general, outperformed mid- and
small-cap stocks. These short-term performance trends are reflected in the
varying returns achieved by our different funds this time period.
No one knows what the market has in store for us in the future or which
investment style or capitalization sector will be most productive. That's why we
believe prudent investors should diversify, rather than put all or most of their
eggs in whatever style/capitalization portfolio has produced the most generous
recent returns. That means making and maintaining positions in current laggards
as well as current leaders.
In closing, at Neuberger Berman, we are dedicated to offering quality funds
managed by talented and experienced investors, not rushing to market with the
latest "hot" product. We are proud of the long-term, solid performance of our
family of investment products and are confident that our disciplined approach
will keep us focused on the long-term potential of our funds. To that end, we
try to look beyond day-to-day market volatility and not overreact to short-term
events, which could negatively impact our funds. We believe this strategy has
benefited our shareholders in the past and will continue to do so in the years
to come.
Sincerely,
/s/ Stanley Egener
Stanley Egener
Chairman of the Board
Neuberger Berman Equity Assets
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PORTFOLIO COMMENTARY
Neuberger Berman
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Focus Assets
PORTFOLIO MANAGER KENT SIMONS EMPLOYS A BOTTOM-UP STOCK SELECTION PROCESS
SEEKING HIGH-QUALITY COMPANIES TRADING AT DISCOUNTED VALUATIONS. IDEALLY,
PORTFOLIO HOLDINGS HAVE ABOVE MARKET AVERAGE EARNINGS GROWTH AND TRADE AT
BELOW MARKET AVERAGE PRICE/EARNINGS MULTIPLES. AS THE NAME IMPLIES, THE
FOCUS PORTFOLIO IS MORE CONCENTRATED THAN OUR OTHER EQUITY FUNDS,
GENERALLY HOLDING 60 STOCKS OR LESS, WITH THE TEN LARGEST POSITIONS
REPRESENTING A SIGNIFICANT PORTION OF PORTFOLIO ASSETS.
For the six-month period ended February 28, 1999, Focus Assets gained 41.73%
versus the Standard & Poor's 500 Index's 30.32% return (see page B-1 for average
annual total returns through March 31, 1999).*
The same industry groups and many of the same stocks that restrained
performance in the early part of last year rebounded during the six-month
reporting period and posted strong gains -- rewarding our patience and, once
again, validating our thesis that owning high-quality companies at discounted
valuations is a productive long-term investment strategy. Our two largest
industry group commitments, financial services and technology, which represent a
total of approximately 36% of the portfolio assets, performed well during the
past six months. In fact, all five of the portfolio's largest holdings are
within these two groups, and, on average, they appreciated more than 40%.
Within financial services, the portfolio's holdings rebounded after
experiencing severe pressure following the Russian default in August, an event
that Wall Street quickly characterized as a crisis. Aided considerably by three
interest rate cuts by the Federal Reserve last fall, this "crisis" did not, in
fact, materialize, and the stocks returned to their prior, and in our opinion,
more normal valuations. It is worth noting that during the turmoil in the
financial markets last summer, the actual businesses of our financial holdings
held up quite well. One of our basic assumptions when we established our core
positions in Citigroup, Chase Manhattan and Morgan Stanley Dean Witter was that
over time, we believed these firms would increase their market share because of
their product breadth, financial strength and superior management. This, in
fact, proved to be the case during last summer's turmoil.
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Focus Assets (Cont'd)
Moreover, the long-term case for our positions in financial services remains
very much intact. Demographics in the United States point to increased savings
and investment as baby boomers prepare for retirement. In addition, we expect to
see accelerated investment banking activity overseas as the rest of the world
follows the U.S. model and more corporate assets come under public ownership. To
make the most of an opportunity, we believe a firm needs to have an
institutional and retail presence, a global reach, and a strong balance sheet.
Our core holdings -- Citigroup, Chase and Morgan Stanley -- meet these criteria.
Our technology holdings posted good gains during this reporting period -- in
aggregate, up more than 70%. These attractive returns did not come from high
multiple market favorites like Intel, Microsoft, Dell Computer or Lucent
Technologies -- all great companies, but well out of the value range. Our gains
came from high-quality, but previously out-of-favor companies like Applied
Materials and KLA-Tencor, both of which are semi-conductor equipment
manufacturers, as well as Texas Instruments, a leading maker of digital service
providers (DSP), and software companies Oracle and Rational Software.
Of course, we did have some disappointments during this reporting period, both
on a negative return and opportunity-lost basis. The stock price of Sierra
Health Services, one of our health care positions, declined during this period.
In hindsight, it appears our sale of Merrill Lynch during this period was
premature. In our opinion, Morgan Stanley Dean Witter emerged from the third
quarter 1998 global financial debacle looking healthier than Merrill, which had
suffered substantial trading losses. While Merrill was laying off workers,
Morgan Stanley Dean Witter was using its excess capital to repurchase shares.
Since our earnings projections for both companies were virtually identical and
Merrill was trading up to 20% higher than Morgan Stanley Dean Witter, we decided
to sell Merrill and add to our Morgan Stanley Dean Witter position.
In closing, I want to stress a few things about our approach and focused
portfolios in general. First, we take substantial positions in
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Focus Assets (Cont'd)
industry groups, not because we are making top-down macro-economic judgments,
but rather because that is where we find the most compelling investment values.
Secondly, although over the short term, our more concentrated portfolio will
most likely be more volatile than a more widely diversified fund, this does not
necessarily reflect volatile operating results for our portfolio companies. In
the recently released Morgan Stanley Dean Witter 1998 Annual Report, the
Chairman expresses his puzzlement over the wide swings in the company's stock
price during a period in which revenues and profits held steady. Unfortunately,
short-term stock price volatility is something we may all have to endure. Longer
term, we believe quality companies that can consistently grow revenues and
earnings will provide good returns. Finally, contrary to today's conventional
wisdom, you don't always have to pay up for great companies. The fact that our
portfolio has a price/earnings ratio lower than the S&P 500 with above market
average projected earnings growth (by Institutional Brokers Estimate System),
demonstrates that you can buy some very good companies at reasonable valuations.
Sincerely,
/s/ Kent Simons
Kent Simons
PORTFOLIO MANAGER
*The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. Please note that indices do not take
into account any fees and expenses of investing in the individual securities
that they track, and that individuals cannot invest directly in any index. Data
about the performance of this index are prepared or obtained by Neuberger
Berman Management Inc. ("NBMI") and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described index.
The composition, industries and holdings of the Portfolio are subject to
change. No single holding of Focus Portfolio makes up more than a small
fraction of the Portfolio's total assets.
While the value-oriented approach is intended to limit risks, the
Portfolio -- with its concentration in sectors -- may be more greatly affected
by any single economic, political or regulatory development than a more
diversified mutual fund.
Please remember that past performance is not indicative of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Genesis Assets
PORTFOLIO CO-MANAGERS JUDITH VALE AND ROBERT D'ALELIO FOCUS ON
"EASY-TO-UNDERSTAND" COMPANIES IN THE LESS GLAMOROUS SECTORS OF THE
SMALL-CAPITALIZATION STOCK UNIVERSE. BY AVOIDING THE CUTTING-EDGE
TECHNOLOGY COMPANIES THAT ATTRACT SO MUCH SPECULATIVE ATTENTION IN THE
SMALL-CAP MARKET, THEY ARE BETTER ABLE TO IDENTIFY FUNDAMENTALLY
UNDERVALUED STOCKS WITH EXCEPTIONAL GROWTH POTENTIAL. THIS VALUE-ORIENTED
APPROACH TO SMALL-CAP INVESTING TRANSLATES INTO A PORTFOLIO WITH FAVORABLE
RISK/REWARD CHARACTERISTICS.
For the six-month period ended February 28, 1999, Genesis Assets gained 7.19%
versus the Russell 2000 Index's 16.79% return (see page B-1 for average annual
total returns through March 31, 1999).*
The Genesis portfolio's lagging performance, relative to its benchmark, is
largely explained by the small-cap market's strong bias to growth during this
reporting period. To further illustrate this point, we'd like to point out that
the Russell 2000 Growth Index gained 29.28% over the last six months, compared
to the Russell 2000 Value Index's considerably more modest 4.93% return.*
Three Federal Reserve interest rate cuts last fall seemed to inspire small-cap
investors to throw caution to the wind and bid up the most attractive stocks in
the small-cap growth arena, most notably the already richly-valued Internet
group. The more mundane, but in our view, much more attractively priced
small-cap stocks, languished. In general, our holdings posted relatively good
earnings gains -- meeting or exceeding our expectations. However, investors just
didn't seem to notice or care. Only time will tell whether paying sky-high
multiples to earnings -- in those instances where earnings even exist -- will
continue to be productive. Our feeling is that many of the most sensational
small-cap performers during this reporting period will have a very hard time
meeting investors' increasingly grandiose expectations. If earnings realities
fail to live up to current fantasies, small-cap speculators will likely get
burned.
On an absolute and relative basis, our best returns during this reporting
period came from the consumer staples sector, highlighted by strong gains for
Brinker International, Church & Dwight, and First Brands, which was acquired by
Clorox. The First Brands/Clorox deal illustrates a trend in the market that we
believe will ultimately breathe more life into undervalued small-cap stocks.
These two companies are
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Genesis Assets (Cont'd)
in similar businesses and have comparable earnings growth rates. Clorox, which
at the time of the acquisition was trading at around 33 times earnings, was able
to use its richly-valued stock to pay a 100% premium for First Brands, which
prior to the announcement of the deal, was trading at just 13 times earnings. If
you combine the earnings of both companies, the deal was particularly attractive
for Clorox, even before factoring in very large potential cost savings. We've
since sold our position in Clorox and taken profits; however, we believe going
forward, more and more richly-valued, large-cap companies will use their stock
as currency to buy smaller undervalued companies within their own industries.
This should eventually lead to increased investor recognition for small-cap
stocks.
As a group, our consumer cyclical investments also performed well, with stocks
like 99 Cents Only Stores, Black Box Corp, and St. John Knits all posting strong
gains. In addition, our financial holdings, in particular, small regional banks,
consumer credit companies, and insurers, contributed positive returns for the
portfolio.
On the negative side, our energy investments continued to disappoint during
the six-month period. However, we are still overweighted in energy, primarily in
small oil services companies, because we believe we see light at the end of what
has been a dark tunnel for these stocks. In our view, oil prices are creeping
higher and non-OPEC supply is being depleted. In addition, we believe global
demand should pick up as Asian economies recover. When combined, these factors
seem to us to point to renewed drilling activity and a potential profit recovery
for small oil services companies. As a result, we see a lot of upside potential
for these severely depressed stocks.
While our over-weighting in small utilities companies helped us during the
sharp market decline in September, since then, our utilities holdings have been
ho-hum performers. That's because small-cap investors have tended to focus on
faster-growth industries. We continue to believe the utilities sector presents a
great store of value, and are optimistic that the opportunities in this area
will surface via accelerating cost driven consolidation in this newly
deregulated industry. Our "low voltage" technology investments have also
languished. In general, these portfolio companies have legitimate high teens/low
twenties earnings
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Genesis Assets (Cont'd)
growth rates. But, that hasn't been exciting enough for tech investors, who have
been willing to pay up for companies with faster earnings growth potential.
Like most small-cap investors, we are somewhat dismayed that much more
richly-valued, large-cap stocks continue to outperform what we view as much
better fundamental bargains in the small-cap sector. It is not unusual for
small-cap stocks to underperform large-caps for extended periods of time. These
periods have been followed by briefer periods in which small caps
outperformed -- often by a wide margin. While it is impossible to predict
precisely when this performance tide will turn, we believe it tends to happen
when everyone least expects it to. Who would have known that at the end of
1990 -- a terrible year for small-cap stocks -- they would come roaring back and
outperform large caps by nearly 50% over the next three years? We will remain
patient and dedicated to uncovering quality small-cap companies that are trading
at reasonable valuations. When small-cap stocks reassert themselves, we believe
the Genesis portfolio is well positioned to benefit.
Sincerely,
/s/ Judity Vale /s/ Robert D'Alelio
Judith Vale and Robert D'Alelio
PORTFOLIO CO-MANAGERS
*The Russell 2000-Registered Trademark- Index is an unmanaged index consisting
of securities of the 2,000 issuers having the smallest capitalization in the
Russell 3000-Registered Trademark- Index, representing approximately 11% of the
Russell 3000 total market capitalization. The smallest company's market
capitalization is roughly $222 million. The Russell 2000-Registered Trademark-
Growth Index measures the performance of those Russell
2000-Registered Trademark- Index companies with higher price-to-book ratios and
higher forecasted growth values. The Russell 2000-Registered Trademark- Value
Index measures the performance of those Russell 2000-Registered Trademark-
Index companies with lower price-to-book ratios and lower forecasted growth
values. Please note that indices do not take into account any fees and expenses
of investing in the individual securities that they track, and that individuals
cannot invest directly in any index. Data about the performance of these
indices are prepared or obtained by Neuberger Berman Management Inc. ("NBMI")
and include reinvestment of all dividends and capital gain distributions. The
Portfolio invests in many securities not included in the above-described
indices.
The composition, industries and holdings of the Portfolio are subject to
change. Genesis Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY
IN COMPANIES WITH SMALL MARKET CAPITALIZATIONS ARE SET FORTH IN THE PROSPECTUS.
Please remember that past performance is not indicative of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Guardian Assets
PORTFOLIO CO-MANAGERS KEVIN RISEN AND RICK WHITE FOCUS ON "FIRST-RATE"
COMPANIES IN INDUSTRIES THAT ARE CURRENTLY OUT OF FAVOR. RECOGNIZING THAT
"CHEAP" STOCKS ARE NOT NECESSARILY UNDERVALUED, THEY SEEK WELL-MANAGED,
FINANCIALLY SOUND COMPANIES TRADING AT FUNDAMENTALLY ATTRACTIVE PRICES
RELATIVE TO THEIR LONG-TERM EARNINGS GROWTH POTENTIAL. BY CONCENTRATING
THE PORTFOLIO IN HIGH-QUALITY WALL STREET "ORPHANS," THE PORTFOLIO
MANAGEMENT TEAM ATTEMPTS TO CONSISTENTLY TAKE ADVANTAGE OF OPPORTUNITIES
CREATED BY INVESTORS' OVERREACTION TO REAL OR PERCEIVED PROBLEMS.
For the six-month period ended February 28, 1999, Guardian Assets gained
24.14% versus the Russell 1000 Value Index's 22.53% advance and the Standard &
Poor's 500 Index's 30.32% return (see page B-1 for average annual total returns
through March 31, 1999).*
We are pleased to report that the Guardian portfolio materially outperformed
the Russell 1000 Value Index in first half fiscal 1999. We achieved such
competitive results versus the S&P 500 during a period in which growth continued
to outperform value. In fact, for the five-month period beginning at the end of
September (a particularly difficult month for value stocks and our portfolio),
we actually outperformed the S&P 500.
A lot of the good things, and some of the not so good things, that happened to
the portfolio in first half fiscal 1999 can be traced back to the events of late
summer/early fall 1998. Ongoing economic turmoil in Southeast Asia, the Russian
debt default, and the well-publicized problems of highly leveraged hedge funds
culminated in a swift and merciless market decline in September. The basic
materials, capital goods, energy, financial services, and technology sectors all
fell sharply in response to global economic and financial market turmoil. During
this chaos, we were in the process of restructuring the portfolio -- both in
terms of choosing the stocks we wanted to keep and those we wanted to discard,
as well as taking steps to further diversify the portfolio. We didn't escape the
September market massacre unscathed, but, in our opinion, the decisions we made
during those trying times have generally worked in our favor.
In the technology sector, we elected to own shares in out-of-favor
semi-conductor equipment manufacturers like Applied Materials,
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Guardian Assets (Cont'd)
KLA-Tencor, and Teradyne, all of which posted 100% plus gains during this
six-month reporting period. We also stayed with Micron Technology, Sun
Microsystems and Texas Instruments, companies that rewarded our patience with
large gains. In addition, we've gradually reduced positions in some of the big
winners in the portfolio and have recently been moving into larger, more
diversified technology companies like IBM and Xerox. These companies are less
cyclical because they serve many different industries, and in our opinion, they
have better valuation support at current prices.
In the financial services sector, our best returns in this reporting period
came from two money center banks, Citigroup and Chase Manhattan, as well as
Morgan Stanley Dean Witter, a blue chip broker/ asset manager. While the bulk of
Citigroup's positive performance surfaced after the merger with Travelers Group,
in our view, all of these companies were substantially undervalued after sharp
declines in late summer/early fall 1998. Because these stocks are no longer
quite as inexpensive, we have been reducing our positions there. Instead, we
have been gravitating to domestic financial services franchises that we find
more fundamentally appealing, primarily because their fortunes are not directly
linked to the relative health of the global capital and credit markets. Such
examples include banks, like Banc One and Wells Fargo, whose operations are
concentrated in the U.S., and consumer finance companies such as Associates
First Capital Corp., which we expect to benefit from ongoing strength in
consumer spending in the U.S.
Although the portfolio has been underweighted in communications services and
energy, both groups contributed to six-month positive returns. In addition to
reaping positive returns from our holdings in MCI Worldcom, the portfolio got a
big lift when AirTouch agreed to be acquired by Vodaphone. Recently, we have
established a small position in AT&T. We would like to own more
telecommunications stocks, but we won't stretch our value parameters to do so.
Our decision back in September to trade out of oil services companies and into
larger, more financially robust international oils helped us generate attractive
returns in a sector that posted only modest gains.
On the other hand, several stocks we chose to hold have not recovered much of
the ground lost in September. For example, our basic
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Guardian Assets (Cont'd)
materials and capital goods investments have languished. With global economic
weakness continuing to restrain commodities prices and capital goods spending,
we are taking another hard look at stocks in these sectors. We think these
stocks have valuation support at current prices, but we would like to see more
evidence of a potential turnaround in the form of firming commodities prices and
increased capital goods spending. In addition, we were disappointed in our
airline holdings and believe we may have already seen peak earnings for this
cycle. However, we think the industry is now somewhat less cyclical than it was
in the past and with current airline valuations very depressed, we are inclined
to remain patient with our current positions.
In closing, we are pleased with the portfolio's impressive performance
compared to the Russell 1000 Value Index and competitive performance relative to
the S&P 500. We believe most of the decisions we made in September 1998,
following a very difficult period for the portfolio, have worked in
shareholders' favor. Looking ahead, we believe Guardian has the potential to
generate more consistent returns with less risk and lower volatility.
Sincerely,
/s/ Kevin Risen /s/ Rick White
Kevin Risen and Rick White
PORTFOLIO CO-MANAGERS
*The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. The Russell 1000-Registered Trademark-
Index measures the performance of the 1,000 largest companies in the Russell
3000-Registered Trademark- Index (which measures the performance of the 3,000
largest U.S. companies based on total market capitalization). The Russell 1000
Index represents approximately 89% of the total market capitalization of the
Russell 3000 Index. The Russell 1000-Registered Trademark- Value Index measures
the performance of those Russell 1000 companies with lower price-to-book ratios
and lower forecasted growth values. Please note that indices do not take into
account any fees and expenses of investing in the individual securities that
they track, and that individuals cannot invest directly in any index. Data
about the performance of these indices are prepared or obtained by Neuberger
Berman Management Inc. ("NBMI") and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described indices.
The composition, industries and holdings of the Portfolio are subject to
change. Guardian Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Please remember that past performance is not indicative of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Manhattan Assets
PORTFOLIO CO-MANAGERS JENNIFER SILVER AND BROOKE COBB LOVE
SURPRISES -- POSITIVE EARNINGS SURPRISES THAT IS. THEIR RESEARCH REVEALS
THAT THE STOCKS OF COMPANIES CONSISTENTLY EXCEEDING CONSENSUS EARNINGS
ESTIMATES HAVE TENDED TO BE TERRIFIC PERFORMERS. THEY USE A COMPUTER TO
SCREEN THE MID-CAP GROWTH STOCK UNIVERSE TO ISOLATE STOCKS WHOSE MOST
RECENT EARNINGS HAVE BEAT THE STREET'S EXPECTATIONS. THEY THEN ROLL UP
THEIR SLEEVES AND, THROUGH DILIGENT FUNDAMENTAL RESEARCH, STRIVE TO
IDENTIFY THOSE COMPANIES MOST LIKELY TO RECORD A STRING OF POSITIVE
EARNINGS SURPRISES. THEIR GOAL IS TO INVEST TODAY IN THE FAST GROWING
MID-SIZED COMPANIES THAT WILL COMPRISE TOMORROW'S FORTUNE 500.
For the six-month period ending February 28, 1999, Manhattan Assets gained
26.73% versus the Russell Midcap Growth Index's 33.27% return (see page B-1 for
average annual total returns through March 31, 1999).*
We are pleased with the portfolio's progress in what has been an uneven and
volatile mid-cap stock market. During this six-month reporting period, our
consumer cyclical investments performed quite well, with specialty retailers
Abercrombie & Fitch and Linens 'n Things posting strong gains. Value retailers
also reported strong gains, with companies like Costco, Staples, and TJX leading
the pack. However, the real star of this industry group category was Amazon.com,
which continued to surpass analysts' projections for revenue and earnings
growth.
Our healthcare investments also buoyed returns. Biogen was the biggest winner
as Avonex, its new drug for the treatment of multiple sclerosis, quickly reached
blockbuster status. As a group, our financial holdings performed well with
broker/dealer Donaldson Lufkin & Jenrette, asset manager Northern Trust, and
State Street, one of the leading custodian/transfer agents for the mutual fund
industry, each gaining more than 40%.
On the other hand, while returns from our technology holdings were generous on
an absolute basis (in aggregate up 26.8%), they were less impressive than more
aggressive funds that really cashed in on the Internet stock frenzy. Our
approach to the Internet group has been conservative -- we focused on companies
we believed had legitimate earnings growth prospects and staying power. As a
result, we have been modestly overweighted in the group and our selections have
been great
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Manhattan Assets (Cont'd)
performers, with Infoseek, Yahoo!, and lesser known companies like VERITAS
SOFTWARE and Network Appliance, all gaining more than 100% in this six-month
reporting period. We did miss out on some spectacular short-term gains in some
other ".com" companies which, in our opinion, had more sizzle than substance.
However, we can envision these gains evaporating quickly if reality fails to
live up to the hype surrounding these companies. And, true to our sell
discipline, technology holdings like CBT Group, J.D. Edwards and SmarTalk were
sold during the period because they failed to meet our earnings expectations.
In addition, some of our investments in capital goods companies were
disappointing. Although our capital goods holdings, as a group, posted modest
gains, earnings continued to be restrained by weak global demand and a lack of
pricing flexibility.
In terms of indices, the Russell Midcap Growth Index outperformed the S&P 500
Index during the six-month reporting period. However, most of the mid-cap
sector's outperformance occurred during a spirited, but relatively short-lived
rally in November/December 1998. During the first two months of 1999, the S&P
outperformed once again, leaving mid-cap investors wondering just what it takes
to keep up with the large-cap competition.
We recently conducted a survey of earnings growth and valuations in these two
capitalization sectors. In 1998, S&P 500 earnings advanced 2%. By comparison,
Russell Midcap Index and Russell Midcap Growth Index earnings grew by 8% and
25%, respectively. If you look at earnings growth for these three indices on an
unweighted basis (earnings from all component stocks given equal weighting in
calculating the indices' earnings growth rate), the discrepancy was even
greater. Within that context, S&P 500 earnings were flat, and Russell Midcap and
Russell Midcap Growth earnings grew by 13% and 36%, respectively.
The results of this survey may seem confusing. In view of these earnings
dynamics, it would appear that the two mid-cap indices should have outperformed
the large-cap benchmark in 1998. In fact, just the opposite occurred -- they
materially lagged the S&P 500. The reason may be that large-cap valuations have
been growing much faster than earnings, which has resulted in even better
relative value in the mid-cap sector. Presently, on a price/sales,
price/earnings, and P/E relative to
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Manhattan Assets (Cont'd)
earnings growth rate basis, mid-cap stocks are at or near historical lows versus
large-cap stocks. The question then becomes if, and when, this will change.
One indication of value in the mid-cap sector is increasing merger and
acquisition activities. Over the last six months, four of our portfolio
holdings, Ascend Communications, Sofamor Danek Group, SunAmerica, Inc., and HBO
& Company, have been acquired. A fifth, Level One Communications, is in the
midst of negotiating an acquisition by Intel. It seems that while the investment
public has yet to fully acknowledge value in the mid-cap sector, business buyers
are steadily taking advantage of bargains.
In closing, the Manhattan portfolio continued to reward shareholders in the
first few months of 1999. We can't predict what will happen over the next six
months, but the portfolio has the critical fundamental
characteristics -- superior earnings growth potential and reasonable valuations
relative to projected earnings growth rates -- that we believe has the potential
to translate into excellent long-term performance.
Sincerely,
/s/ Jennifer Silver /s/ Brooke Cobb
Jennifer Silver and Brooke Cobb
PORTFOLIO CO-MANAGERS
*The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. The Russell Midcap-Trademark- Growth
Index is an unmanaged index which measures the performance of those Russell
Midcap Index companies with higher price-to-book ratios and higher forecasted
growth values. The Russell Midcap-Trademark- Index measures the performance of
the 800 smallest companies in the Russell 1000-Registered Trademark- Index,
which represents approximately 35% of the total market capitalization of the
Russell 1000 Index (which in turn, consists of the 1,000 largest US companies,
based on market capitalization). Please note that indices do not take into
account any fees and expenses of investing in the individual securities that
they track, and that individuals cannot invest directly in any index. Data
about the performance of these indices are prepared or obtained by Neuberger
Berman Management Inc. ("NBMI") and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described indices.
The composition, industries and holdings of the Portfolio are subject to
change. Manhattan Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Please remember that past performance is not indicative of future results.
A-16
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Partners Assets
PORTFOLIO CO-MANAGERS MICHAEL KASSEN, ROBERT GENDELMAN AND S. BASU MULLICK
FOCUS ON OUT-OF-FAVOR LARGE-CAP STOCKS AND MID-SIZED COMPANIES LESS WIDELY
FOLLOWED BY WALL STREET ANALYSTS. THEY ARE PARTICULARLY PARTIAL TO GROWTH
STOCKS THAT HAVE EXPERIENCED TEMPORARY SETBACKS, BUT WHOSE LONGER-TERM
FUNDAMENTAL OUTLOOK REMAINS STRONG. THE PORTFOLIO MANAGEMENT TEAM VIEWS
STOCKS AS PIECES OF BUSINESSES THEY WOULD LIKE TO OWN RATHER THAN PIECES
OF PAPER TO TRADE BASED ON SHORT-TERM PRICE FLUCTUATIONS. THE GOAL IS TO
FIND QUALITY COMPANIES TRADING AT A DISCOUNT TO THEIR INTRINSIC ECONOMIC
VALUE.
For the six-month period ended February 28, 1999, Partners Assets returned
20.01% versus the Russell 1000 Value Index's 22.53% advance and the S&P 500
Index's 30.32% gain (see page B-1 for average annual total returns through March
31, 1999).*
During the first half of fiscal 1999, our technology investments performed
particularly well -- in aggregate, up more than 60%. We achieved these strong
returns without owning high price/earnings multiple market darlings like Intel,
Microsoft, Dell Computer, Lucent, or any of the sizzling Internet stocks. Our
focus on high-quality companies like Texas Instruments, Hewlett-Packard and
Northern Telecom, whose multiples are below the market average, validated our
belief that buying quality technology companies at opportunistic prices can
generate attractive risk-adjusted returns.
Our healthcare positions also performed quite well. Once again, we did not own
the glamour stocks like Merck and Pfizer. Instead, we held smaller, and in our
opinion, much more reasonably valued drug companies like ALZA, Biogen, and
Baxter International. Each of these companies has new drug introductions we
believe will have a very favorable impact on future results.
In the consumer staples sector, we did well with our holdings in
Anheuser-Busch (beer), McDonald's (fast foods), Tricon Global Restaurants
(pizza, fried chicken and tacos), and Nabisco Holdings (cookies). Kimberly Clark
(diapers) and MediaOne Group (cellular telephone and cable television) also
rewarded us.
A-17
<PAGE>
- ----------------------------------------------------------------------
Partners Assets (Cont'd)
Our financial holdings were mixed. In the banking group, Bank One, Chase
Manhattan and Citigroup performed well, while our holdings in BankBoston
disappointed. And even as our holdings in Morgan Stanley Dean Witter, a
broker/asset manager, soared, we had flat returns in Countrywide Credit, a
mortgage finance company. In general, our larger-capitalization financial
holdings performed materially better than our mid-cap positions.
In aggregate, the portfolio's capital goods, transportation, and energy
holdings declined over this reporting period. Capital goods companies continue
to suffer the aftereffects of the Asian economic flu -- slack demand and no
pricing flexibility. We believe our current capital goods investments represent
high quality and great value. However, over the short-to-intermediate term, we
believe our patience will likely continue to be tested. The same can be said for
our energy holdings, which have suffered as oil prices have remained depressed.
We are not anticipating a sharp rise in oil prices in the immediate future.
However, we are sufficiently contrarian to challenge the current consensus that
oil prices will stay at current levels indefinitely.
Our airline holdings, primarily Continental Airlines, declined during this
six-month reporting period. Wall Street seems to believe we have seen peak
earnings in this cycle and consequently, price/earnings multiples have
contracted. We believe airline earnings will level off, but not plunge the way
they have during previous down cycles.
Within utilities, The Williams Companies, the only big winner among our
otherwise disappointing holdings there, is really two companies -- a large gas
pipeline and a telecommunications network. Several years ago, Williams used its
steady cash flow from the pipeline business to build a telecommunications
network (WilTel), which it eventually sold at a handsome profit to Worldcom (now
MCI Worldcom). It is doing it all over again, laying an advanced fiber optic
network along its 32,000 miles of gas pipeline. Recently, SBC Communications,
(formerly Southwestern Bell), has contracted for the use of this new fiber optic
network and taken a 10% stake in the business. We
A-18
<PAGE>
- ----------------------------------------------------------------------
Partners Assets (Cont'd)
believe the combined value of the gas pipeline and telecommunications network is
a bit higher than $40 per share -- above Williams' $37 per share price at the
end of this reporting period. Williams has announced it will be spinning off a
portion of this new communications network business to the public. We believe
this should help surface value and perhaps foreshadow a more complete
restructuring. We reserve the right to change our opinion on Williams Companies
should circumstances warrant it. But, right now, we think it has excellent
upside potential.
In the first two months of 1999, growth stocks continued to outperform value
stocks and large-cap stocks continued to outperform smaller companies. However,
our stock picking discipline produced generous absolute returns in this uneven
market. We believe our portfolio represents quality and value -- the
cornerstones of a prudent and productive investment program.
Sincerely,
/s/ Robert Gendelman /s/ Michael Kassen /s/ S. Basu Mullick
Robert Gendelman, Michael Kassen, and S. Basu Mullick,
PORTFOLIO CO-MANAGERS
*The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. The Russell 1000-Registered Trademark-
Index measures the performance of the 1,000 largest companies in the Russell
3000-Registered Trademark- Index (which measures the performance of the 3,000
largest U.S. companies based on total market capitalization). The Russell 1000
Index represents approximately 89% of the total market capitalization of the
Russell 3000 Index. The Russell 1000-Registered Trademark- Value Index measures
the performance of those Russell 1000 companies with lower price-to-book ratios
and lower forecasted growth values. Please note that indices do not take into
account any fees and expenses of investing in the individual securities that
they track, and that individuals cannot invest directly in any index. Data
about the performance of these indices are prepared or obtained by Neuberger
Berman Management Inc. ("NBMI") and include reinvestment of all dividends and
capital gain distributions. The Portfolio invests in many securities not
included in the above-described indices.
The composition, industries and holdings of the Portfolio are subject to
change. Partners Portfolio is invested in a wide array of stocks and no single
holding makes up more than a small fraction of the Portfolio's total assets.
Please remember that past performance is not indicative of future results.
A-19
<PAGE>
(This page has been left blank intentionally.)
A-20
<PAGE>
PERFORMANCE HIGHLIGHTS
<TABLE>
<CAPTION>
FOR PERIODS
ENDED 3/31/99
---------------------------------
SIX MONTH
PERIOD AVERAGE ANNUAL TOTAL
NEUBERGER BERMAN ENDED RETURNS(1)
EQUITY ASSETS 2/28/99(1) 1 YR 5 YR 10 YR
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS ASSETS(2) +41.73% +5.18% +19.90% +16.86%
GUARDIAN ASSETS +24.14% -7.43% +14.59% +14.25%
PARTNERS ASSETS +20.01% -3.21% +19.38% +15.68%
S&P 500 INDEX(3) +30.32% +18.43% +26.19% +18.92%
RUSSELL
1000-REGISTERED TRADEMARK-
VALUE INDEX(3) +22.53% +5.04% +22.07% +16.71%
MANHATTAN ASSETS +26.73% +0.49% +15.46% +13.96%
RUSSELL MIDCAP-TM- GROWTH
INDEX(3) +33.27% +8.89% +18.87% +16.97%
GENESIS ASSETS +7.19% -19.71% +13.83% +12.07%
RUSSELL
2000-REGISTERED TRADEMARK-
INDEX(3) +16.79% -16.26% +11.22% +11.46%
</TABLE>
Each Fund commenced operations in September 1996 (except Neuberger Berman
Partners Assets-Registered Trademark- and Neuberger Berman Genesis Assets-SM-,
which commenced operations in August 1996 and April 1997, respectively).
The Funds have identical investment objectives and policies and invest in the
same Portfolio as other funds ("Sister Funds") of similar names, which are also
managed by Neuberger Berman Management Inc.-Registered Trademark- The
performance information for the Funds prior to their commencement of operations
is for the Sister Funds. Neuberger Berman Management Inc. currently absorbs
certain operating expenses of each Fund and their pro rata share of their
Portfolio's operating expenses which, in the aggregate, exceed 1.50% per annum
of each Fund's average daily net assets, until December 31, 2008. Neuberger
Berman Management Inc. previously agreed to waive a portion of the management
fee borne directly by Neuberger Berman Genesis Portfolio-SM- and indirectly by
Neuberger Berman Genesis Assets. Absent such arrangements, the average annual
total returns of the Funds would have been less. The total returns for periods
prior to the Funds' commencement of operations would have been lower had they
reflected the higher expense ratios of the Funds as compared to those of the
Sister Funds.
1) Results are shown on a "total return" basis and include reinvestment of all
dividends and capital gain distributions. Performance data quoted represents
past performance, which is no guarantee of future results. The investment
return and principal value of an investment will fluctuate so that the
shares, when redeemed, may be worth more or less than their original cost.
2) Prior to November 1, 1991, the investment policies of its Sister Fund
required that it invest a substantial portion of its assets in the energy
field.
3) The S&P 500 Index is an unmanaged index generally considered to be
representative of stock market activity. The Russell 1000-Registered
Trademark- Index measures the performance of the 1,000 largest companies in
the Russell 3000-Registered Trademark- Index (which measures the performance
of the 3,000 largest U.S. companies based on total market capitalization).
The Russell 1000 Index represents approximately 89% of the total market
B-1
<PAGE>
capitalization of the Russell 3000 Index. The Russell 1000 Value Index
measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. The Russell Midcap
Growth Index measures the performance of those Russell Midcap-Trademark-
Index companies with higher price-to-book ratios and higher forecasted growth
values. The Russell Midcap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represents approximately 35% of
the total market capitalization of the Russell 1000 Index (which, in turn,
consists of the 1,000 largest U.S. companies, based on market
capitalization). The Russell 2000 Index is an unmanaged index that measures
the performance of the 2,000 issuers having the smallest capitalization in
the Russell 3000 Index, representing approximately 11% of the Russell 3000
total market capitalization. The smallest company's market capitalization is
roughly $222 million. Please note that indices do not take into account any
fees and expenses of investing in the individual securities that they track,
and that individuals cannot invest directly in any index. Data about the
performance of these indices are prepared or obtained by Neuberger Berman
Management Inc. and include reinvestment of all dividends and capital gain
distributions. The Portfolios invest in many securities not included in any
of the above-described indices.
THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY
IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE
PROSPECTUS.
B-2
<PAGE>
(This page has been left blank intentionally.)
B-3
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
Neuberger Berman
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) ASSETS ASSETS
-------------------------------
<S> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 1,546 $ 56,806
Deferred organization costs (Note A) 29 38
Receivable for Trust shares sold 1 761
Receivable from administrator -- net (Note
B) 226 --
-------------------------------
1,802 57,605
-------------------------------
LIABILITIES
Payable for Fund expenses (Note B) 164 --
Payable for Trust shares redeemed -- 13
Payable to administrator -- net (Note B) -- 10
Accrued organization costs (Note A) 58 --
Accrued expenses 36 36
-------------------------------
258 59
-------------------------------
NET ASSETS at value $ 1,544 $ 57,546
-------------------------------
NET ASSETS consist of:
Par value $ -- $ 5
Paid-in capital in excess of par value 1,007 63,742
Accumulated undistributed net investment
income (loss) (3) 58
Accumulated net realized gains (losses) on
investment 66 (1,410)
Net unrealized appreciation (depreciation)
in value of investment 474 (4,849)
-------------------------------
NET ASSETS at value $ 1,544 $ 57,546
-------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 96 5,045
-------------------------------
NET ASSET VALUE, offering and redemption price per
share $16.01 $11.41
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
ASSETS ASSETS ASSETS
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 23,619 $ 199 $ 60,211
Deferred organization costs (Note A) 29 29 28
Receivable for Trust shares sold 1 20 56
Receivable from administrator -- net (Note
B) -- 236 --
------------------------------------------------
23,649 484 60,295
------------------------------------------------
LIABILITIES
Payable for Fund expenses (Note B) -- 166 --
Payable for Trust shares redeemed -- -- 113
Payable to administrator -- net (Note B) 16 -- 31
Accrued organization costs (Note A) -- 58 --
Accrued expenses 27 39 29
------------------------------------------------
43 263 173
------------------------------------------------
NET ASSETS at value $ 23,606 $ 221 $ 60,122
------------------------------------------------
NET ASSETS consist of:
Par value $ 2 $ -- $ 4
Paid-in capital in excess of par value 23,443 196 56,112
Accumulated undistributed net investment
income (loss) 5 (1) (46)
Accumulated net realized gains (losses) on
investment (983) (2) (62)
Net unrealized appreciation (depreciation)
in value of investment 1,139 28 4,114
------------------------------------------------
NET ASSETS at value $ 23,606 $ 221 $ 60,122
------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 1,758 16 3,995
------------------------------------------------
NET ASSET VALUE, offering and redemption price per
share $13.42 $13.54 $15.05
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-5
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) ASSETS ASSETS
---------------------------
<S> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 6 $ 428
---------------------------
Expenses:
Administration fee (Note B) 3 81
Amortization of deferred organization and
initial offering expenses (Note A) 6 6
Auditing fees 3 3
Custodian fees 5 5
Distribution fees (Note B) 1 51
Legal fees 6 8
Registration and filing fees 22 34
Shareholder reports 8 20
Shareholder servicing agent fees 8 9
Miscellaneous 1 1
Expenses from corresponding Portfolio (Notes
A & B) 3 151
---------------------------
Total expenses 66 369
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (57) (64)
---------------------------
Total net expenses 9 305
---------------------------
Net investment income (loss) (3) 123
---------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities 79 (1,295)
Net realized gain on option contracts -- --
Net realized gain on financial futures
contracts -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts 568 1,350
---------------------------
Net gain on investments from corresponding
Portfolio (Note A) 647 55
---------------------------
Net increase in net assets resulting from
operations $ 644 $ 178
---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-6
<PAGE>
For the Six Months Ended February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
ASSETS ASSETS ASSETS
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 166 $ 1 $ 578
------------------------------------------------
Expenses:
Administration fee (Note B) 43 1 110
Amortization of deferred organization and
initial offering expenses (Note A) 6 6 6
Auditing fees 2 4 3
Custodian fees 5 5 5
Distribution fees (Note B) 27 -- 69
Legal fees 10 7 8
Registration and filing fees 26 22 34
Shareholder reports 9 8 10
Shareholder servicing agent fees 8 8 8
Miscellaneous 1 1 1
Expenses from corresponding Portfolio (Notes
A & B) 49 1 130
------------------------------------------------
Total expenses 186 63 384
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (25) (61) --
------------------------------------------------
Total net expenses 161 2 384
------------------------------------------------
Net investment income (loss) 5 (1) 194
------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities (1,011) (2) 662
Net realized gain on option contracts 9 -- --
Net realized gain on financial futures
contracts 287 -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts 5,259 56 8,629
------------------------------------------------
Net gain on investments from corresponding
Portfolio (Note A) 4,544 54 9,291
------------------------------------------------
Net increase in net assets resulting from
operations $ 4,549 $ 53 $ 9,485
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
FOCUS GENESIS
ASSETS ASSETS
Six Months Six Months
Ended Year Ended Year
February 28, Ended February 28, Ended
1999 August 31, 1999 August 31,
(000'S OMITTED) (UNAUDITED) 1998 (UNAUDITED) 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (3) $ (1) $ 123 $ 49
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 79 (13) (1,295) (133)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 568 (132) 1,350 (6,253)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 644 (146) 178 (6,337)
-------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (113) --
Net realized gain on investments (1) (6) -- (3)
-------------------------------------------------------------
Total distributions to shareholders (1) (6) (113) (3)
-------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 1,733 551 39,175 33,602
Proceeds from reinvestment of
dividends and distributions 1 6 58 3
Payments for shares redeemed (1,309) (72) (6,218) (3,529)
-------------------------------------------------------------
Net increase (decrease) from Trust
share transactions 425 485 33,015 30,076
-------------------------------------------------------------
NET INCREASE IN NET ASSETS 1,068 333 33,080 23,736
NET ASSETS:
Beginning of period 476 143 24,466 730
-------------------------------------------------------------
End of period $ 1,544 $ 476 $ 57,546 $ 24,466
-------------------------------------------------------------
Accumulated undistributed net
investment income (loss) at end of
period $ (3) $ -- $ 58 $ 48
-------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 145 37 3,270 2,503
Issued on reinvestment of dividends
and distributions -- -- 5 --
Redeemed (91) (5) (523) (265)
-------------------------------------------------------------
Net increase (decrease) in shares
outstanding 54 32 2,752 2,238
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-8
<PAGE>
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
ASSETS ASSETS ASSETS
Six Months Six Months Six Months
Ended Year Ended Year Ended Year
February 28, Ended February 28, Ended February 28, Ended
1999 August 31, 1999 August 31, 1999 August 31,
(UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 5 $ (27) $ (1) $ (2) $ 194 $ 24
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) (715) (322) (2) 2 662 (705)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) 5,259 (4,845) 56 (46) 8,629 (4,836)
------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 4,549 (5,194) 53 (46) 9,485 (5,517)
------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- -- (257) (8)
Net realized gain on investments -- (133) (1) (23) -- (250)
------------------------------------------------------------------------------------
Total distributions to shareholders -- (133) (1) (23) (257) (258)
------------------------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold 3,089 14,285 43 143 32,897 31,554
Proceeds from reinvestment of
dividends and distributions -- 134 1 23 238 258
Payments for shares redeemed (1,581) (850) (83) (28) (11,520) (2,577)
------------------------------------------------------------------------------------
Net increase (decrease) from Trust
share transactions 1,508 13,569 (39) 138 21,615 29,235
------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 6,057 8,242 13 69 30,843 23,460
NET ASSETS:
Beginning of period 17,549 9,307 208 139 29,279 5,819
------------------------------------------------------------------------------------
End of period $ 23,606 $ 17,549 $ 221 $ 208 $ 60,122 $ 29,279
------------------------------------------------------------------------------------
Accumulated undistributed net
investment income (loss) at end of
period $ 5 $ -- $ (1) $ -- $ (46) $ 17
------------------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold 254 1,004 3 9 2,417 2,072
Issued on reinvestment of dividends
and distributions -- 10 -- 2 16 18
Redeemed (119) (61) (6) (2) (763) (169)
------------------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding 135 953 (3) 9 1,670 1,921
------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Assets-Registered Trademark- ("Focus"),
Neuberger Berman Genesis Assets ("Genesis"), Neuberger Berman Guardian
Assets-SM-("Guardian"), Neuberger Berman Manhattan
Assets-Registered Trademark- ("Manhattan"), and Neuberger Berman Partners
Assets ("Partners") (collectively, the "Funds") are separate operating series
of Neuberger Berman Equity Assets (the "Trust"), a Delaware business trust
organized pursuant to a Trust Instrument dated October 18, 1993. The Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and its shares
are registered under the Securities Act of 1933, as amended. The trustees of
the Trust may establish additional series or classes of shares without the
approval of shareholders.
The assets of each Fund belong only to that Fund, and the liabilities of
each Fund are borne solely by that Fund and no other.
Each Fund seeks to achieve its investment objective by investing all of
its net investable assets in its corresponding portfolio of Equity Managers
Trust (each a "Portfolio") having the same investment objective and policies
as the Fund. The value of each Fund's investment in its corresponding
Portfolio reflects that Fund's proportionate interest in the net assets of
that Portfolio (0.09%, 3.37%, 0.43%, 0.03%, and 1.52%, for Focus, Genesis,
Guardian, Manhattan, and Partners, respectively, at February 28, 1999). The
performance of each Fund is directly affected by the performance of its
corresponding Portfolio. The financial statements of each Portfolio,
including the Schedule of Investments, are included elsewhere in this report
and should be read in conjunction with the corresponding Fund's financial
statements.
2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding
Portfolio at value. Investment securities held by each Portfolio are valued
as indicated in the notes following the Portfolios' Schedule of Investments.
3) TAXES: The Funds are treated as separate entities for U.S. Federal income tax
purposes. It is the policy of each Fund to continue to qualify as a regulated
investment company by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of investment company taxable income
and net capital gains (after reduction for any amounts available for U.S.
Federal income tax
B-10
<PAGE>
purposes as capital loss carryforwards) sufficient to relieve it from all, or
substantially all, U.S. Federal income taxes. Accordingly, each Fund paid no
U.S. Federal income taxes and no provision for U.S. Federal income taxes was
required.
4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net of
Portfolio expenses, daily on its investment in its corresponding Portfolio.
Income dividends and distributions from net realized capital gains, if any,
are normally distributed in December. Guardian generally distributes
substantially all of its net investment income, if any, at the end of each
calendar quarter. Income dividends and capital gain distributions to
shareholders are recorded on the ex-dividend date. To the extent each Fund's
net realized capital gains, if any, can be offset by capital loss
carryforwards ($19,527 expiring in 2006 for Guardian, determined as of August
31, 1998), it is the policy of each Fund not to distribute such gains.
Each Fund distinguishes between dividends on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
5) ORGANIZATION EXPENSES: Expenses incurred by each Fund in connection with its
organization are being amortized by each Fund on a straight-line basis over a
five-year period. At February 28, 1999, the unamortized balance of such
expenses amounted to $29,394, $37,589, $29,393, $29,323, and $28,465, for
Focus, Genesis, Guardian, Manhattan, and Partners, respectively. The accrued
organization costs for Focus and Manhattan are payable to Neuberger Berman
Management Inc. ("Management"), the administrator of each Fund.
6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses
incurred by the Trust with respect to any two or more funds are allocated in
proportion to the net assets of such funds, except where a more appropriate
allocation of expenses to each fund can otherwise be made fairly. Expenses
directly attributable to a fund are charged to that fund.
7) OTHER: All net investment income and realized and unrealized capital gains
and losses of each Portfolio are allocated pro rata among its respective
Funds and any other investors in the Portfolio.
NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS
WITH AFFILIATES:
Each Fund retains Management as its administrator under an Administration
Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an
administration fee at the annual rate of 0.40% of that Fund's average daily net
assets.
B-11
<PAGE>
Each Fund indirectly pays for investment management services through its
investment in its corresponding Portfolio (see Note B of Notes to Financial
Statements of the Portfolios).
Management acts as agent in arranging for the sale of Fund shares without
commission and bears advertising and promotion expenses. The trustees of the
Trust have adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"). The Plan provides that, as compensation for administrative and other
services provided to the Funds, Management's activities and expenses related to
the sale and distribution of Fund shares, and ongoing services provided to
investors in the Funds, Management receives from each Fund a fee at the annual
rate of 0.25% of that Fund's average daily net assets. Management pays this
amount to institutions that distribute Fund shares and provide services to the
Funds and their shareholders. Those institutions may use the payments for, among
other purposes, compensating employees engaged in sales and/or shareholder
servicing. The amount of fees paid by each Fund during any year may be more or
less than the cost of distribution and other services provided to that Fund.
NASD rules limit the amount of annual distribution fees that may be paid by a
mutual fund and impose a ceiling on the cumulative distribution fees paid. The
Trust's Plan complies with those rules.
Management has voluntarily undertaken until December 31, 2008, to reimburse
each Fund for its operating expenses plus its pro rata portion of its
corresponding Portfolio's operating expenses (including the fees payable to
Management but excluding interest, taxes, brokerage commissions, and
extraordinary expenses) which exceed, in the aggregate, 1.50% per annum of the
Fund's average daily net assets. For the six months ended February 28, 1999,
such excess expenses amounted to $56,994, $63,777, $24,982, and $61,334, for
Focus, Genesis, Guardian, and Manhattan, respectively. For the six months ended
February 28, 1999, there was no reimbursement by Management to Partners.
Since inception of Focus and Manhattan, Management has voluntarily undertaken
to pay certain expenses of each Fund as an advance. These expenses will be
repaid by the Funds to Management in the future, and are included under the
caption Payable for Fund expenses in the Statements of Assets and Liabilities.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Several individuals who are
officers and/or trustees of the Trust are also principals of Neuberger and/or
officers and/or directors of Management.
Each Fund also has a distribution agreement with Management. Management
receives no commissions for sales or redemptions of shares of beneficial
interest of each Fund, but receives fees under the Plan, as described above.
B-12
<PAGE>
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between each Portfolio and Morgan Stanley & Co. Incorporated
("Morgan"), Morgan has agreed to reimburse each Portfolio for transaction costs
incurred on security lending transactions charged by the custodian. The impact
of these arrangements, respectively, reflected in the Statements of Operations
under the caption Expenses from corresponding Portfolio, was a reduction of
$0.14 and $1.36, $3.47 and $73.76, $1.16 and $5.95, $0.04 and $1.02, and $2.34
and $25.90, for Focus, Genesis, Guardian, Manhattan, and Partners, respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the six months ended February 28, 1999, additions and reductions in
each Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- -----------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 1,722,947 $1,314,021
GENESIS 32,584,703 478,510
GUARDIAN 2,881,035 1,470,896
MANHATTAN 23,092 101,706
PARTNERS 29,896,876 8,521,815
</TABLE>
NOTE D -- UNAUDITED FINANCIAL INFORMATION:
The financial information included in this interim report is taken from the
records of each Fund without audit by independent accountants/auditors. Annual
reports contain audited financial statements.
B-13
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Assets(1)
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Six Months
Ended Period from
February 28, Year Ended September 4, 1996(2)
1999 August 31, to August 31,
(UNAUDITED) 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.31 $14.34 $ 10.00
-----------------------------------------------------------
Income From Investment Operations
Net Investment Loss (.03) (.03) (.05)
Net Gains or Losses on Securities (both
realized and unrealized) 4.74 (2.42) 4.39
-----------------------------------------------------------
Total From Investment Operations 4.71 (2.45) 4.34
-----------------------------------------------------------
Less Distributions
Distributions (from net capital gains) (.01) (.58) --
-----------------------------------------------------------
Net Asset Value, End of Period $ 16.01 $11.31 $ 14.34
-----------------------------------------------------------
Total Return(3) +41.73%(4) -17.73% +43.40%(4)
-----------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 1.5 $ 0.5 $ 0.1
-----------------------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) 1.50%(6) 1.50% 1.50%(6)
-----------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(7) 1.50%(6) 1.50% 1.50%(6)
-----------------------------------------------------------
Ratio of Net Investment Loss to Average
Net Assets (.47%)(6) (.36%) (.43%)(6)
-----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-14
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Assets(1)
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Six Months
Ended Period from
February 28, Year Ended April 2, 1997(2)
1999 August 31, to August 31,
(UNAUDITED) 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.67 $13.21 $10.00
--------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) .02 .02 (.01)
Net Gains or Losses on Securities (both
realized and unrealized) .75 (2.52) 3.22
--------------------------------------------
Total From Investment Operations .77 (2.50) 3.21
--------------------------------------------
Less Distributions
Dividends (from net investment income) (.03) -- --
Distributions (from net capital gains) -- (.04) --
--------------------------------------------
Total Distributions (.03) (.04) --
--------------------------------------------
Net Asset Value, End of Period $11.41 $10.67 $13.21
--------------------------------------------
Total Return(3) +7.19%(4) -18.99% +32.10%(4)
--------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 57.5 $ 24.5 $ 0.7
--------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) 1.50%(6) 1.50% 1.50%(6)
--------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.50%(6) 1.50% 1.50%(6)
--------------------------------------------
Ratio of Net Investment Income (Loss) to
Average Net Assets .60%(6) .60% (.36%)(6)
--------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-15
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Assets(1)
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Six Months
Ended Period from
February 28, Year Ended September 4, 1996(2)
1999 August 31, to August 31,
(UNAUDITED) 1998 1997
------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.81 $13.88 $10.00
------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) -- (.02) .01
Net Gains or Losses on Securities (both
realized and unrealized) 2.61 (2.92) 3.88
------------------------------------------------
Total From Investment Operations 2.61 (2.94) 3.89
------------------------------------------------
Less Distributions
Dividends (from net investment income) -- -- (.01)
Distributions (from net capital gains) -- (.13) --
------------------------------------------------
Total Distributions -- (.13) (.01)
------------------------------------------------
Net Asset Value, End of Period $13.42 $10.81 $13.88
------------------------------------------------
Total Return(3) +24.14%(4) -21.34% +38.92%(4)
------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 23.6 $ 17.5 $ 9.3
------------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) 1.51%(6) 1.50% 1.50%(6)
------------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.51%(6) 1.50% 1.50%(6)
------------------------------------------------
Ratio of Net Investment Income (Loss) to
Average Net Assets .05%(6) (.16%) (.12%)(6)
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-16
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Assets(1)
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Six Months
Ended Period from
February 28, Year Ended September 4, 1996(2)
1999 August 31, to August 31,
(UNAUDITED) 1998 1997
------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.76 $13.75 $10.00
------------------------------------------------
Income From Investment Operations
Net Investment Loss (.06) (.11) (.08)
Net Gains or Losses on Securities (both
realized and unrealized) 2.94 (1.22) 3.94
------------------------------------------------
Total From Investment Operations 2.88 (1.33) 3.86
------------------------------------------------
Less Distributions
Distributions (from net capital gains) (.10) (1.66) (.11)
------------------------------------------------
Net Asset Value, End of Period $13.54 $10.76 $13.75
------------------------------------------------
Total Return(3) +26.73%(4) -11.29% +38.86%(4)
------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 0.2 $ 0.2 $ 0.1
------------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) 1.50%(6) 1.50% 1.50%(6)
------------------------------------------------
Ratio of Net Expenses to Average Net Assets(7) 1.50%(6) 1.50% 1.50%(6)
------------------------------------------------
Ratio of Net Investment Loss to Average Net
Assets (.98%)(6) (.98%) (.70%)(6)
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-17
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Assets(1)
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. It should be read in conjunction with its corresponding Portfolio's
Financial Statements and notes thereto.
<TABLE>
<CAPTION>
Six Months
Ended Period from
February 28, Year Ended August August 19, 1996(2)
1999 31, to August 31,
(UNAUDITED) 1998 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.59 $ 14.42 $ 9.91 $10.00
-----------------------------------------------------------
Income From Investment Operations
Net Investment Income .04 .01 .01 --
Net Gains or Losses on Securities (both
realized and unrealized) 2.48 (1.51) 4.56 (.09)
-----------------------------------------------------------
Total From Investment Operations 2.52 (1.50) 4.57 (.09)
-----------------------------------------------------------
Less Distributions
Dividends (from net investment income) (.06) (.01) (.01) --
Distributions (from net capital gains) -- (.32) (.05) --
-----------------------------------------------------------
Total Distributions (.06) (.33) (.06) --
-----------------------------------------------------------
Net Asset Value, End of Period $15.05 $ 12.59 $ 14.42 $ 9.91
-----------------------------------------------------------
Total Return(3) +20.01%(4) -10.69% +46.26% -0.90%(4)
-----------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in millions) $ 60.1 $ 29.3 $ 5.8 $ 0.1
-----------------------------------------------------------
Ratio of Gross Expenses to Average Net
Assets(5) 1.39%(6) 1.50% 1.50% 1.50%(6)
-----------------------------------------------------------
Ratio of Net Expenses to Average Net Assets 1.39%(6) 1.50%(7) 1.50%(7) 1.50%(6)(7)
-----------------------------------------------------------
Ratio of Net Investment Income to Average Net
Assets .71%(6) .12% .08% 2.38%(6)
-----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-18
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
1) The per share amounts and ratios which are shown reflect income and expenses,
including the Fund's proportionate share of its corresponding Portfolios
income and expenses.
2) The date investment operations commenced.
3) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of each Fund during each fiscal
period and assumes dividends and other distributions, if any, were
reinvested. Results represent past performance and do not guarantee future
results. Investment returns and principal may fluctuate and shares when
redeemed may be worth more or less than original cost. Total return would
have been lower if Management had not reimbursed certain expenses. In
addition, for Genesis, total return would have been lower if the investment
manager had not waived a portion of the management fee.
4) Not annualized.
5) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
6) Annualized.
7) After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements. Had Management not undertaken such action the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
Period from
Six Months Ended Year Ended September 4, 1996
February 28, August 31, to August 31,
FOCUS 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 10.59% 28.01% 76.74%
-------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
Six Months Ended Year Ended September 4, 1996
February 28, August 31, to August 31,
GUARDIAN 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.74% 1.63% 5.65%
-------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
Six Months Ended Year Ended September 4, 1996
February 28, August 31, to August 31,
MANHATTAN 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 59.57% 42.53% 77.83%
-------------------------------------------------
</TABLE>
B-19
<PAGE>
<TABLE>
<CAPTION>
Period from
Year Ended August 19, 1996
August 31, to August 31,
PARTNERS 1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.56% 8.74% 11,685.89%
-----------------------------------------------
</TABLE>
After reimbursement of expenses by Management as described in Note B of Notes
to Financial Statements and/or the waiver of a portion of the management fee
by the investment manager as described in Note B of Notes to Financial
Statements of Neuberger Berman Genesis Portfolio. Had Management not
undertaken such action the annualized ratios of net expenses to average daily
net assets would have been:
<TABLE>
<CAPTION>
Period from
Six Months Ended Year Ended April 2, 1997
February 28, August 31, to August 31,
GENESIS 1999 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.82% 2.40% 25.91%
---------------------------------------------
</TABLE>
B-20
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Citigroup Inc. 8.7%
2. Chase Manhattan 7.3%
3. Capital One Financial 7.2%
4. Morgan Stanley Dean Witter 7.0%
5. Compaq Computer 5.4%
6. Wellpoint Health Networks 5.4%
7. Countrywide Credit Industries 4.7%
8. General Motors 3.1%
9. BankBoston Corp. 3.1%
10. MCI WorldCom 3.0%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (98.3%)
AUTOMOTIVE (3.8%)
467,900 Cabot Corp. $ 11,785
620,000 General Motors 51,189
------------
62,974
------------
FINANCIAL SERVICES (50.6%)
798,500 ADVANTA Corp. Class A 9,332 (2)
802,500 ADVANTA Corp. Class B 7,273 (2)
670,000 Bank One 36,012
1,236,000 BankBoston Corp. 49,981
922,500 Capital One Financial 117,734
1,505,000 Chase Manhattan 119,836
2,421,250 Citigroup Inc. 142,248
2,015,000 Countrywide Credit Industries 76,318
601,000 Hartford Financial Services
Group 32,492
1,265,000 Morgan Stanley Dean Witter 114,482
655,000 Nationwide Financial Services 29,762
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
522,000 PartnerRe Ltd. $ 22,577
1,198,000 Travelers Property Casualty 45,449
659,000 Washington Mutual 26,360
------------
829,856
------------
HEALTH CARE (6.4%)
1,977,900 Foundation Health Systems 15,823
1,122,000 Wellpoint Health Networks 88,498
------------
104,321
------------
RETAIL (6.8%)
555,000 Barnes & Noble 16,407
1,982,800 Furniture Brands International 42,382
225,000 Jones Apparel Group 6,286
520,000 Payless ShoeSource 28,535
520,000 Promus Hotel 18,298
------------
111,908
------------
TECHNOLOGY (30.7%)
931,000 3Com Corp. 29,268
245,000 Applied Materials 13,628
1,090,000 Atmel Corp. 18,734
375,000 Autodesk Inc. 15,047
2,512,500 Compaq Computer 88,566
295,000 Compuware Corp. 16,502
265,000 Etec Systems 11,743
560,000 KLA-Tencor 29,015
1,640,000 Maxtor Corp. 13,530
591,500 MCI WorldCom 48,799
530,000 Microchip Technology 14,442
140,000 Micron Technology 8,067
331,000 Novellus Systems 19,550
330,000 Oracle Corp. 18,439
145,000 PeopleSoft, Inc. 2,737
1,010,000 Photronics, Inc. 20,768
1,820,000 PLATINUM Technology 24,115
1,495,000 Rational Software 44,383
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Focus Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
1,060,000 Saville Systems ADR $ 21,134
492,000 Texas Instruments 43,880
------------
502,347
------------
TOTAL COMMON STOCKS (COST
$991,719) 1,611,406
------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C>
SHORT-TERM INVESTMENTS (4.0%)
$17,170,000 General Electric Capital
Corp., 4.72%, due 3/1/99 17,170
48,892,335 N&B Securities Lending Quality
Fund, LLC 48,892
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $66,062) 66,062(3)
------------
TOTAL INVESTMENTS (102.3%)
(COST $1,057,781) 1,677,468(4)
Liabilities, less cash,
receivables and other assets
[(2.3%)] (38,930)
------------
TOTAL NET ASSETS (100.0%) $1,638,538
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-2
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Alliant Techsystems 3.4%
2. AptarGroup Inc. 2.6%
3. Dallas Semiconductor 2.4%
4. Webster Financial 2.3%
5. Trigon Healthcare 2.2%
6. Newport News Shipbuilding 2.2%
7. Bank United 2.0%
8. Montana Power 1.9%
9. Universal Health Services Class B 1.9%
10. Cordant Technologies 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (93.4%)
AEROSPACE (6.5%)
1,781,350 AAR Corp. $ 26,943 (2)
1,244,500 Aviall Inc. 17,190 (2)
755,800 Cordant Technologies 29,429
468,300 DONCASTERS PLC ADR 8,283 (2)
299,850 Ducommun Inc. 3,748
121,600 Howmet International 1,961
425,000 Ladish Co. 3,001
343,000 Moog, Inc. Class A 10,933
257,300 Orbital Sciences 7,108
------------
108,596
------------
AUTOMOTIVE (0.6%)
597,200 Donaldson Co. 10,787
------------
BANKING & FINANCIAL (9.1%)
866,400 Bank United 34,223
604,300 Community First Bankshares 11,784
333,800 Cullen/Frost Bankers 15,793
552,500 FirstFed Financial 9,358
285,400 Ocean Financial 4,245
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
678,300 Peoples Heritage Financial
Group $ 11,531
116,212 Queens County Bancorp 3,377
227,600 Reliance Bancorp 6,970
726,675 Sterling Bancshares 8,720
357,850 Texas Regional Bancshares 9,125
1,243,400 Webster Financial 38,002
------------
153,128
------------
BASIC MATERIALS (1.0%)
299,200 Lone Star Industries 9,874
165,160 Southdown, Inc. 7,793
------------
17,667
------------
BUILDING, CONSTRUCTION & FURNISHINGS (0.7%)
157,200 Lincoln Electric Holdings 3,222
220,100 Simpson Manufacturing 7,800
------------
11,022
------------
BUSINESS SERVICES (1.1%)
300,000 Metzler Group 12,750
109,000 Valassis Communications 5,232
------------
17,982
------------
CHEMICALS (0.4%)
399,900 Lawter International 2,849
201,000 Lilly Industries 3,430
------------
6,279
------------
CONSUMER CYCLICALS (0.6%)
466,600 Coachmen Industries 9,449
------------
CONSUMER PRODUCTS & SERVICES (6.5%)
658,800 Alberto-Culver Class A 14,329
530,638 Block Drug 20,695
141,800 Bush Boake Allen 4,529
521,300 Church & Dwight 21,764
131,200 Matthews International 3,756
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
372,400 Omega Protein $ 2,281
888,900 Richfood Holdings 21,111
800,700 Ruddick Corp. 14,763
457,000 The First Years 6,969
------------
110,197
------------
DEFENSE (6.4%)
715,400 Alliant Techsystems 56,651 (2)
1,272,900 Newport News Shipbuilding 36,834
337,000 Primex Technologies 14,007 (2)
------------
107,492
------------
DIAGNOSTIC EQUIPMENT (1.1%)
1,043,300 ADAC Laboratories 18,649 (2)
------------
ELECTRONICS (2.9%)
1,158,600 Dallas Semiconductor 40,985
237,700 SCI Systems 7,354
------------
48,339
------------
ENERGY (0.7%)
425,000 Cabot Oil & Gas 4,648
661,990 Swift Energy 3,972
855,800 Unit Corp. 3,530
------------
12,150
------------
HEALTH CARE (10.1%)
977,800 Acuson Corp. 14,667
214,600 Arrow International 5,271
445,400 CONMED Corp. 13,752
709,000 DENTSPLY International 18,079
1,176,000 Haemonetics Corp. 19,625
542,000 Mentor Corp. 8,333
429,950 Patterson Dental 17,413
503,700 STAAR Surgical 4,754
1,055,200 Trigon Healthcare 36,998
767,900 Universal Health Services
Class B 31,196
------------
170,088
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (6.8%)
789,700 BMC Industries $ 3,850
449,900 Brady Corp. 10,741
282,000 Dionex Corp. 10,399
1,496,800 Hussmann International 21,142
284,700 IDEX Corp. 6,761
676,300 Kaydon Corp. 20,627
235,000 NN Ball & Roller 1,322
187,000 Pentair, Inc. 7,083
183,100 Roper Industries 4,051
814,400 SOS Staffing Services 7,228 (2)
809,800 Wallace Computer Services 18,322
203,750 Woodhead Industries 2,318
------------
113,844
------------
INSURANCE (3.8%)
836,200 Annuity and Life Re 18,553
600,800 FBL Financial Group 12,054
392,300 Orion Capital 12,970
229,000 Penn-America Group 2,548
61,700 Trenwick Group 1,789
570,500 W. R. Berkley 16,331
------------
64,245
------------
LODGING (0.5%)
846,000 Prime Hospitality 8,671
------------
MACHINERY & EQUIPMENT (0.2%)
178,800 Allied Products 883
226,500 Gardner Denver Machinery 2,888
------------
3,771
------------
OFFICE EQUIPMENT (1.2%)
1,091,900 United Stationers 19,995
------------
OIL SERVICES (4.0%)
350,700 Cal Dive International 5,041
468,500 Friede Goldman International 5,007
</TABLE>
C-4
<PAGE>
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
700,800 Global Industries $ 3,548
520,000 IRI International 1,625
569,500 Nabors Industries 6,549
1,446,712 National-Oilwell 12,840
588,400 Oceaneering International 5,884
781,600 Offshore Logistics 6,815
777,300 Pride International 3,886
463,400 Smith International 11,266
267,500 Tuboscope Inc. 1,438
398,200 UTI Energy 2,315
247,400 Willbros Group 1,206
------------
67,420
------------
PACKING & CONTAINERS (2.6%)
1,612,900 AptarGroup Inc. 44,153
------------
PUBLISHING & BROADCASTING (0.6%)
133,866 Pulitzer Publishing 10,692
------------
REAL ESTATE/REITS (2.5%)
277,700 Crescent Real Estate Equities 5,797
495,000 Health Care Property Investors 14,540
415,000 Nationwide Health Properties 7,470
778,100 Prime Retail 6,225
421,800 SL Green Realty 8,146
------------
42,178
------------
RESTAURANTS (1.4%)
830,650 Brinker International 24,037
------------
RETAILING (2.3%)
472,968 99 Cents Only Stores 22,378
529,500 Claire's Stores 11,682
222,000 Schultz Sav-O Stores 3,857
------------
37,917
------------
TECHNOLOGY (5.2%)
679,700 Analysts International 9,686
194,900 Black Box 6,286
527,600 CACI International 8,705
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
2,500 Dialogic Corp. $ 69
2,606,300 Inprise Corp. 13,032(2)
1,350,400 Methode Electronics Class A 14,179
800,900 Reynolds & Reynolds 15,117
795,600 Zebra Technologies 20,536
------------
87,610
------------
TEXTILES & APPAREL (0.2%)
100,000 St. John Knits 2,669
------------
TRANSPORTATION, SHIPPING & FREIGHT (0.2%)
112,000 Air Express International 1,967
213,600 Maritrans Inc. 1,242
------------
3,209
------------
UTILITIES, ELECTRIC & GAS (14.2%)
1,257,500 AGL Resources 23,971
183,200 Aquila Gas Pipeline 1,603
344,800 Atmos Energy 8,275
63,800 Avista Corp. 1,045
282,500 Central Hudson Gas & Electric 10,241
430,100 Connecticut Energy 11,209
129,300 Eastern Enterprises 4,970
149,000 Interstate Energy 4,107
535,100 Montana Power 32,574
341,200 National Fuel Gas 13,755
384,700 Nevada Power 9,209
298,800 NICOR Inc. 11,410
290,000 Northwest Natural Gas 7,096
450,900 NUI Corp. 10,342
374,300 ONEOK, Inc. 10,083
115,100 Orange & Rockland Utilities 6,460
266,500 Otter Tail Power 9,877
360,500 Public Service Co. of New
Mexico 5,543
490,100 Rochester Gas & Electric 12,804
401,100 Sierra Pacific Resources 13,763
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
271,500 UtiliCorp United $ 9,333
457,400 Washington Gas Light 10,949
319,600 WICOR, Inc. 6,751
120,000 WPS Resources 3,570
------------
238,940
------------
TOTAL COMMON STOCKS (COST
$1,625,933) 1,571,176
------------
WARRANTS (0.1%)
355,000 Golden State Bancorp (COST
$2,161) 1,797
------------
<CAPTION>
Principal
Amount
- ----------
<C> <S> <C>
REPURCHASE AGREEMENTS (3.0%)
$50,440,000 State Street Bank and Trust
Co. Repurchase Agreement,
4.70%, due 3/1/99, dated
2/26/99, Maturity Value
$50,459,756, Collateralized
by $44,340,000 U.S. Treasury
Bonds, 7.25%, due 5/15/16
(Collateral Value
$51,961,071) (COST $50,440) 50,440(3)
------------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (5.0%)
$3,000,000 General Electric Capital
Corp., 4.79%, due 3/2/99 $ 29,996
2,000,000 Ford Motor Credit Co., 4.83%,
due 3/3/99 19,995
34,356,306 N&B Securities Lending Quality
Fund, LLC 34,356
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $84,347) 84,347(3)
------------
TOTAL INVESTMENTS (101.5%)
(COST $1,762,881) 1,707,760(4)
Liabilities, less cash,
receivables and other assets
[(1.5%)] (25,498)
------------
TOTAL NET ASSETS (100.0%) $1,682,262
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-6
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Capital One Financial 4.8%
2. Wellpoint Health Networks 4.7%
3. General Motors 4.3%
4. Countrywide Credit Industries 3.5%
5. Conseco, Inc. 3.4%
6. Aetna Inc. 3.4%
7. MCI WorldCom 3.3%
8. Philip Morris 2.8%
9. Chase Manhattan 2.7%
10. PacifiCare Health Systems Class B 2.6%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (89.0%)
BANKING & FINANCIAL (9.1%)
608,000 Allstate Corp. $ 22,800
2,184,600 Bank One 117,422
1,121,000 BankAmerica Corp. 73,215
2,313,000 BankBoston Corp. 93,532 (5)
1,853,800 Chase Manhattan 147,609
1,126,000 SLM Holding 48,277
------------
502,855
------------
BASIC MATERIALS (3.0%)
3,841,000 Cabot Corp. 96,745 (2)
2,472,000 Millennium Chemicals 44,650
455,560 Potash Corp. of Saskatchewan 25,825
------------
167,220
------------
CAPITAL GOODS (4.5%)
5,337,000 Republic Services 93,064 (2)
792,900 SCI Systems 24,530
863,800 Solectron Corp. 38,601
1,800,000 Waste Management 87,975
------------
244,170
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
COMMUNICATION SERVICES (5.8%)
978,000 AT&T Corp. $ 80,318
1,019,700 Bell Atlantic 58,569
2,178,900 MCI WorldCom 179,759
------------
318,646
------------
CONSUMER CYCLICALS (7.6%)
5,800,100 Cendant Corp. 96,064
2,840,000 General Motors 234,478
1,651,600 Lear Corp. 58,322
519,100 Tandy Corp. 28,875
------------
417,739
------------
CONSUMER STAPLES (7.3%)
1,133,800 Keebler Foods 44,218
1,795,000 Kimberly-Clark 84,814
900,000 McDonald's Corp. 76,500
3,900,000 Philip Morris 152,588
1,545,100 Sara Lee 42,007
------------
400,127
------------
ENERGY (4.1%)
640,100 Amerada Hess 29,045
356,400 Chevron Corp. 27,398
1,443,000 Conoco Inc. 29,311
906,800 Halliburton Co. 25,617
799,500 Mobil Corp. 66,508
985,000 Texaco, Inc. 45,864
------------
223,743
------------
FINANCIAL SERVICES (21.6%)
2,038,000 Associates First Capital 82,794
2,086,000 Capital One Financial 266,226
1,563,200 Citigroup Inc. 91,838
6,168,000 Conseco, Inc. 184,655
5,010,800 Countrywide Credit Industries 189,784
2,350,000 Hartford Financial Services
Group 127,047
3,067,100 IndyMac Mortgage Holdings 32,588
320,000 Loews Corp. 25,020
</TABLE>
C-7
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- ------------
<C> <S> <C>
1,104,500 Morgan Stanley Dean Witter $ 99,957
2,448,700 Wells Fargo 89,990
------------
1,189,899
------------
HEALTH CARE (12.3%)
2,487,100 Aetna Inc. 184,201
1,469,900 American Home Products 87,459
1,995,564 PacifiCare Health Systems
Class B 144,179 (2)
3,295,996 Wellpoint Health Networks 259,972
------------
675,811
------------
TECHNOLOGY (12.0%)
1,389,900 3Com Corp. 43,695
1,917,800 Compaq Computer 67,602
1,168,900 Hewlett-Packard 77,659
569,650 IBM 96,841
500,000 KLA-Tencor 25,906 (5)
378,800 Micron Technology 21,828
824,300 Motorola, Inc. 57,907
2,045,000 Rational Software 60,711
530,400 Sun Microsystems 51,615
469,500 Teradyne, Inc. 22,360
602,700 Texas Instruments 53,753 (5)
1,428,600 Xerox Corp. 78,841
------------
658,718
------------
TRANSPORTATION (1.7%)
502,900 AMR Corp. 27,880
1,005,000 Continental Airlines Class B 34,798
1,301,400 Northwest Airlines 32,535
------------
95,213
------------
TOTAL COMMON STOCKS (COST
$3,977,212) 4,894,141
------------
PREFERRED STOCKS (1.1%)
2,258,200 News Corp. ADR (COST $56,624) 59,278
------------
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ------------
<C> <S> <C>
U.S. TREASURY SECURITIES (2.4%)
$132,840,000 U.S. Treasury Bills, 4.345% &
4.425%, due 4/1/99 & 4/22/99
(COST $132,260) $ 132,238
------------
REPURCHASE AGREEMENTS (2.4%)
131,215,000 State Street Bank and Trust
Co. Repurchase Agreement,
4.70%, due 3/1/99, dated
2/26/99, Maturity Value
$131,266,393, Collateralized
by $115,340,000 U.S. Treasury
Bonds, 7.25%, due 5/15/16
(Collateral Value
$135,164,409) (COST $131,215) 131,215 (3)
------------
SHORT-TERM INVESTMENTS (6.0%)
50,000,000 Koch Industries, Inc., 4.76%,
due 3/1/99 50,000
50,000,000 Pitney Bowes Inc., 4.85%, due
3/1/99 50,000
25,000,000 Vulcan Materials Co., 4.81%,
due 3/1/99 25,000
40,550,000 National Australia Funding,
4.80%, due 3/2/99 40,544
50,000,000 Export Development Corp.,
4.80%, due 3/3/99 49,987
50,000,000 Ford Motor Credit Co., 4.84%,
due 3/4/99 49,980
</TABLE>
C-8
<PAGE>
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- ------------
<C> <S> <C>
$30,000,000 Enterprise Funding Corp.,
4.87%, due 3/5/99 $ 29,984
26,202,000 USAA Capital Corp., 4.81%, due
3/5/99 26,188
7,002,158 N&B Securities Lending Quality
Fund, LLC 7,002
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $328,685) 328,685(3)
------------
TOTAL INVESTMENTS (100.9%)
(COST $4,625,996) 5,545,557(4)
Liabilities, less cash,
receivables and other assets
[(0.9%)] (48,020)
------------
TOTAL NET ASSETS (100.0%) $5,497,537
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-9
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Donaldson, Lufkin & Jenrette 2.2%
2. Citrix Systems 2.1%
3. Staples, Inc. 2.0%
4. Elan Corp. ADR 2.0%
5. Kansas City Southern Industries 1.9%
6. TJX Cos. 1.8%
7. Capital One Financial 1.8%
8. Dollar Tree Stores 1.8%
9. Intuit Inc. 1.7%
10. Republic Services 1.7%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -------------
<C> <S> <C>
COMMON STOCKS (96.3%)
BUSINESS SERVICES (6.6%)
364,900 Avis Rent A Car $ 8,370
282,600 Cambridge Technology Partners 7,100
106,500 International Network Services 5,445
97,800 NCR Corp. 4,004
397,500 Saville Systems ADR 7,925
179,800 Valassis Communications 8,630
-------------
41,474
-------------
CAPITAL GOODS (1.7%)
621,700 Republic Services 10,841
-------------
COMMUNICATIONS (5.8%)
223,300 American Tower 5,987
278,900 ICG Communications 5,247
225,100 Intermedia Communications 4,080
94,100 Jones Intercable Class A 3,811
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -------------
<C> <S> <C>
102,100 NTL Inc. $ 7,932
336,300 RSL Communications 9,606
-------------
36,663
-------------
CONSUMER CYCLICALS (19.9%)
132,600 Abercrombie & Fitch 10,078
65,300 Amazon.com 8,367
83,300 Costco Cos. 6,690
277,900 Dollar Tree Stores 11,116
346,500 Furniture Brands International 7,406
180,500 Hayes Lemmerz International 4,693
267,800 Lennar Corp. 6,210
273,900 Linens 'n Things 9,860
229,100 Office Depot 8,176
329,775 Outdoor Systems 9,213
434,400 Staples, Inc. 12,774
320,600 Sylvan Learning Systems 10,660
395,200 TJX Cos. 11,288
320,500 Tower Automotive 5,969
140,400 Travel Services International 2,141
-------------
124,641
-------------
CONSUMER STAPLES (10.3%)
81,500 American Italian Pasta 2,078
178,500 Brinker International 5,165
335,500 Capstar Broadcasting 6,773
112,150 Cardinal Health 8,096
245,000 Chancellor Media 10,719
350,900 CKE Restaurants 9,321
80,600 Estee Lauder 6,997
70,900 Jones Apparel Group 1,981
86,600 SFX Entertainment 5,293
217,300 Suiza Foods 8,040
-------------
64,463
-------------
</TABLE>
C-10
<PAGE>
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -------------
<C> <S> <C>
ELECTRICAL EQUIPMENT (5.5%)
149,100 Altera Corp. $ 7,250
122,800 KLA-Tencor 6,363
170,100 Level One Communications 5,698
75,800 Micron Technology 4,368
98,700 PMC-Sierra 6,995
45,700 RF Micro Devices 3,519
-------------
34,193
-------------
FINANCIAL SERVICES (9.8%)
87,700 Capital One Financial 11,193
241,100 Donaldson, Lufkin & Jenrette 13,743
187,100 FINOVA Group 9,507
152,000 Nationwide Financial Services 6,906
231,300 North Fork Bancorp. 5,088
82,700 Providian Financial 8,446
87,500 State Street 6,710
-------------
61,593
-------------
HARDWARE (7.0%)
343,000 Adaptec, Inc. 6,838
136,200 Ascend Communications 10,479
194,300 Network Appliance 8,161
201,700 Sanmina Corp. 10,539
90,700 Uniphase Corp. 7,993
-------------
44,010
-------------
HEALTH CARE (15.3%)
345,000 Alternative Living Services 7,072
100,900 ALZA Corp. 5,291
110,600 Biogen, Inc. 10,631
167,500 C. R. Bard 9,443
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ----------- -------------
<C> <S> <C>
159,600 Elan Corp. ADR $ 12,239
53,500 Immunex Corp. 7,570
226,400 Mylan Laboratories 6,184
349,100 Omnicare, Inc. 8,357
385,600 Safeskin Corp. 8,965
7,900 Sepracor Inc. 986
263,500 STERIS Corp. 8,663
69,900 Sunrise Assisted Living 2,700
158,600 Watson Pharmaceuticals 7,662
-------------
95,763
-------------
INTERNET (4.4%)
123,100 Infoseek Corp. 8,809
109,600 Intuit Inc. 10,844
78,400 Safeguard Scientifics 2,930
33,600 Yahoo! Inc. 5,158
-------------
27,741
-------------
SOFTWARE (8.1%)
182,300 BMC Software 7,451
173,750 Citrix Systems 13,400
144,800 Compuware Corp. 8,100
178,800 Network Associates 8,404
227,500 Novell, Inc. 4,408
122,900 VERITAS Software 8,726
-------------
50,489
-------------
TRANSPORTATION (1.9%)
254,400 Kansas City Southern
Industries 11,893
-------------
TOTAL COMMON STOCKS (COST
$489,643) 603,764
-------------
</TABLE>
C-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ----------- -------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (21.3%)
$21,800,000 General Electric Capital
Corp., 4.72%, due 3/1/99 $ 21,800
111,711,022 N&B Securities Lending Quality
Fund, LLC 111,711
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $133,511) 133,511(3)
-------------
TOTAL INVESTMENTS (117.6%)
(COST $623,154) 737,275(4)
Liabilities, less cash,
receivables and other
assets[(17.6%)] (110,263)
-------------
TOTAL NET ASSETS (100.0%) $ 627,012
-------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-12
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
---------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Bank One 3.1%
2. CIGNA Corp. 3.1%
3. Northern Telecom 3.0%
4. MCI WorldCom 2.9%
5. MediaOne Group 2.8%
6. SLM Holding 2.5%
7. American Home Products 2.5%
8. Xerox Corp. 2.5%
9. Chase Manhattan 2.4%
10. Baxter International 2.4%
</TABLE>
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (97.4%)
AIRLINES (1.3%)
1,532,100 Continental Airlines Class B $ 53,049
------------
AUTOMOBILE MANUFACTURING (1.5%)
710,000 General Motors 58,619
------------
AUTO/TRUCK REPLACEMENT PARTS (2.5%)
1,215,000 AutoZone, Inc. 42,525
1,070,000 Delphi Automotive Systems 19,728
1,036,000 Lear Corp. 36,584
------------
98,837
------------
BANKING & FINANCIAL (10.4%)
2,297,000 Bank One 123,464
988,000 BankAmerica Corp. 64,529
1,185,000 Chase Manhattan 94,356
2,063,300 Countrywide Credit Industries 78,147
1,309,400 Household International 53,194
------------
413,690
------------
CHEMICALS (0.5%)
415,000 duPont 21,295
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
COMMUNICATIONS (4.9%)
319,500 AT&T Corp. $ 26,239
945,400 Bell Atlantic 54,301
1,391,600 MCI WorldCom 114,807
------------
195,347
------------
ELECTRICAL & ELECTRONICS (3.6%)
1,720,000 General Motors Class H 81,162
1,165,000 Raytheon Co. Class A 61,599
------------
142,761
------------
ELECTRONICS (1.7%)
2,191,200 Loral Space & Communications 39,442
615,000 Teradyne, Inc. 29,289
------------
68,731
------------
ENERGY (3.0%)
1,899,200 McDermott International 37,865
1,917,500 Texas Utilities 81,374
------------
119,239
------------
ENTERTAINMENT (1.1%)
2,240,000 Mirage Resorts 43,680
------------
FINANCIAL SERVICES (3.4%)
390,000 Morgan Stanley Dean Witter 35,295
2,338,800 SLM Holding 100,276
------------
135,571
------------
FOOD & TOBACCO (6.7%)
940,000 Anheuser-Busch 72,086
2,293,900 ConAgra, Inc. 69,104
2,112,000 Nabisco Holdings 93,720
745,000 Philip Morris 29,148
------------
264,058
------------
FOOD PRODUCTS (1.5%)
115,200 Diageo PLC ADR 5,213
1,940,000 Sara Lee 52,744
------------
57,957
------------
</TABLE>
C-13
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
GAS (1.6%)
1,751,600 Praxair, Inc. $ 61,197
------------
HEALTH CARE (15.9%)
1,670,000 ALZA Corp. 87,571
1,665,000 American Home Products 99,067
1,340,000 Baxter International 94,302
1,490,000 Becton, Dickinson & Co. 49,915
1,361,900 Boston Scientific 36,090
1,082,000 Centocor, Inc. 44,971
1,550,000 CIGNA Corp. 121,675
630,000 McKesson HBOC 42,840
2,711,000 Tenet Healthcare 53,373
------------
629,804
------------
INDUSTRIAL GOODS & SERVICES (1.0%)
1,585,700 Owens-Illinois 37,958
------------
INSURANCE (4.1%)
1,835,000 Ace, Ltd. 50,004
650,000 Aetna Inc. 48,141
501,000 Allstate Corp. 18,787
230,000 NAC Re 12,434
560,600 XL Capital 34,337
------------
163,703
------------
OIL & GAS (4.4%)
490,000 Chevron Corp. 37,669
410,000 Schlumberger Ltd. 19,910
1,575,000 Texaco Inc. 73,336
2,100,000 Tosco Corp. 43,444
------------
174,359
------------
REAL ESTATE (0.8%)
2,825,300 Host Marriott 30,549
------------
RETAILING (3.8%)
1,208,000 Consolidated Stores 30,426
1,180,000 Harcourt General 54,059
1,205,000 Tandy Corp. 67,028
------------
151,513
------------
<CAPTION>
Market
Value(1)
Number (000's
of Shares omitted)
- ---------- ------------
<C> <S> <C>
STEEL (0.8%)
1,435,000 AK Steel Holding $ 31,301
------------
TECHNOLOGY (11.3%)
1,857,100 Computer Associates 77,998
1,073,000 Hewlett-Packard 71,287
470,000 IBM 79,900
2,475,000 Parametric Technology 38,053
1,728,300 Quantum Corp. 28,409
575,000 Texas Instruments 51,283
1,790,000 Xerox Corp. 98,786
------------
445,716
------------
TELECOMMUNICATIONS (7.5%)
1,050,800 GTE Corp. 68,171
2,045,000 MediaOne Group 111,452
2,036,600 Northern Telecom 118,250
------------
297,873
------------
UTILITIES (4.1%)
657,000 PG&E Corp. 20,696
2,120,000 The Williams Cos. 78,440
1,760,000 Unicom Corp. 62,590
------------
161,726
------------
TOTAL COMMON STOCKS (COST
$3,492,631) 3,858,533
------------
PREFERRED STOCKS (1.1%)
1,660,000 News Corp. ADR (COST $43,439) 43,575
------------
</TABLE>
C-14
<PAGE>
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Value(1)
Principal (000's
Amount omitted)
- ---------- ------------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.3%)
$51,050,000 State Street Bank and Trust
Co. Repurchase Agreement,
4.70%, due 3/1/99, dated
2/26/99, Maturity Value
$51,066,995, Collateralized
by $44,875,000 U.S. Treasury
Bonds, 7.25%, due 5/15/16
(Collateral Value
$52,588,025) (COST $51,050) $ 51,050(3)
------------
SHORT-TERM INVESTMENTS (3.1%)
6,000,000 USAA Capital Corp., 4.80%, due
3/2/99 5,999
25,000,000 Vulcan Materials Co., 4.85%,
due 3/2/99 24,997
92,088,729 N&B Securities Lending Quality
Fund, LLC 92,089
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $123,085) 123,085 (3)
------------
TOTAL INVESTMENTS (102.9%)
(COST $3,710,205) 4,076,243 (4)
Liabilities, less cash,
receivables and other assets
[(2.9%)] (116,483 )
------------
TOTAL NET ASSETS (100.0%) $ 3,959,760
------------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-15
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Managers Trust
1) Investment securities of each Portfolio are valued at the latest sales price;
securities for which no sales were reported, unless otherwise noted, are
valued at the mean between the closing bid and asked prices. The Portfolios
value all other securities by a method the trustees of Equity Managers Trust
believe accurately reflects fair value. Foreign security prices are furnished
by independent quotation services expressed in local currency values. Foreign
security prices are translated from the local currency into U.S. dollars
using current exchange rates. Short-term debt securities with less than 60
days until maturity may be valued at cost which, when combined with interest
earned, approximates market value.
2) Affiliated issuer (see Note E of Notes to Financial Statements).
3) At cost, which approximates market value.
4) At February 28, 1999, selected Portfolio information on a U.S. Federal income
tax basis was as follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
NEUBERGER BERMAN COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOCUS PORTFOLIO $ 1,059,364,728 $ 679,640,706 $ 61,537,630 $618,103,076
GENESIS PORTFOLIO 1,762,881,325 182,036,789 237,157,652 (55,120,863)
GUARDIAN PORTFOLIO 4,631,212,166 1,236,374,590 322,029,482 914,345,108
MANHATTAN PORTFOLIO 623,154,006 151,141,461 37,020,222 114,121,239
PARTNERS PORTFOLIO 3,713,681,052 512,732,171 150,170,224 362,561,947
</TABLE>
5) The following securities were held in escrow at February 28, 1999, to cover
outstanding call options written:
<TABLE>
<CAPTION>
PREMIUM MARKET
SECURITIES AND MARKET VALUE ON VALUE
NEUBERGER BERMAN SHARES OPTIONS OF SECURITIES OPTIONS OF OPTIONS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARDIAN PORTFOLIO 200,000 BankBoston Corp. $ 8,087,500 $ 543,982 $ 700,000
May 1999 @ 40
500,000 KLA-Tencor 25,906,250 1,947,435 2,187,500
March 1999 @ 50
100,000 Texas Instruments 8,918,750 671,978 125,000
March 1999 @ 100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-16
<PAGE>
(This page has been left blank intentionally.)
C-17
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) PORTFOLIO PORTFOLIO
-------------------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 1,660,863 $ 1,545,777
Non-controlled affiliated issuers 16,605 161,983
-------------------------------
1,677,468 1,707,760
Cash 6 4
Dividends and interest receivable 1,404 3,276
Prepaid expenses and other assets 23 47
Receivable for securities sold 42,727 20,410
-------------------------------
1,721,628 1,731,497
-------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) -- --
Payable for collateral on securities loaned
(Note A) 48,892 34,356
Payable for securities purchased 32,914 12,641
Payable for variation margin (Note A) -- --
Payable to investment manager (Note B) 627 988
Accrued expenses and other payables 657 1,250
-------------------------------
83,090 49,235
-------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 1,638,538 $ 1,682,262
-------------------------------
NET ASSETS consist of:
Paid-in capital $ 1,018,851 $ 1,737,383
Net unrealized appreciation (depreciation)
in value of investment securities,
financial futures contracts, and option
contracts 619,687 (55,121)
-------------------------------
NET ASSETS $ 1,638,538 $ 1,682,262
-------------------------------
*Cost of investments:
Unaffiliated issuers $ 1,024,810 $ 1,584,548
Non-controlled affiliated issuers 32,971 178,333
-------------------------------
Total cost of investments $ 1,057,781 $ 1,762,881
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-18
<PAGE>
February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at market value*
(Notes A & E) -- see Schedule of
Investments:
Unaffiliated issuers $ 5,211,569 $ 737,275 $ 4,076,243
Non-controlled affiliated issuers 333,988 -- --
------------------------------------------------
5,545,557 737,275 4,076,243
Cash 10 4 8
Dividends and interest receivable 8,768 2,253 7,237
Prepaid expenses and other assets 115 59 70
Receivable for securities sold 106,079 5,468 1,438
------------------------------------------------
5,660,529 745,059 4,084,996
------------------------------------------------
LIABILITIES
Option contracts written, at market value
(Note A) 3,012 -- --
Payable for collateral on securities loaned
(Note A) 7,002 111,711 92,089
Payable for securities purchased 146,184 3,851 28,145
Payable for variation margin (Note A) 2,261 -- --
Payable to investment manager (Note B) 1,928 263 1,396
Accrued expenses and other payables 2,605 2,222 3,606
------------------------------------------------
162,992 118,047 125,236
------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial
Interests $ 5,497,537 $ 627,012 $ 3,959,760
------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 4,555,306 $ 512,891 $ 3,593,722
Net unrealized appreciation (depreciation)
in value of investment securities,
financial futures contracts, and option
contracts 942,231 114,121 366,038
------------------------------------------------
NET ASSETS $ 5,497,537 $ 627,012 $ 3,959,760
------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 4,264,323 $ 623,154 $ 3,710,205
Non-controlled affiliated issuers 361,673 -- --
------------------------------------------------
Total cost of investments $ 4,625,996 $ 623,154 $ 3,710,205
------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-19
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
(000'S OMITTED) PORTFOLIO PORTFOLIO
---------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 6,393 $ 16,601
Dividend income -- non-controlled affiliated
issuers 243 391
Interest income 497 3,155
Foreign taxes withheld (Note A) (37) --
---------------------------
Total income 7,096 20,147
---------------------------
Expenses:
Investment management fee (Note B) 3,723 6,961
Accounting fees 5 5
Auditing fees 21 23
Custodian fees (Note B) 122 181
Insurance expense 10 13
Legal fees 13 16
Trustees' fees and expenses 11 15
Miscellaneous -- 22
---------------------------
Total expenses 3,905 7,236
Expenses reduced by custodian fee expense
offset arrangement (Note B) (2) (4)
---------------------------
Total net expenses 3,903 7,232
---------------------------
Net investment income (loss) 3,193 12,915
---------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold in unaffiliated issuers 67,598 (81,908)
Net realized loss on investment securities
sold in non-controlled affiliated issuers (5,311) (1,491)
Net realized gain on option contracts (Note A) 54 --
Net realized gain on financial futures
contracts (Note A) -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts (Note A) 395,546 217,640
---------------------------
Net gain on investments 457,887 134,241
---------------------------
Net increase in net assets resulting from
operations $ 461,080 $ 147,156
---------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-20
<PAGE>
For the Six Months Ended February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 28,153 $ 578 $ 38,731
Dividend income -- non-controlled affiliated
issuers 845 -- --
Interest income 16,496 976 3,279
Foreign taxes withheld (Note A) (554) -- (107)
----------------------------------------------
Total income 44,940 1,554 41,903
----------------------------------------------
Expenses:
Investment management fee (Note B) 12,941 1,595 8,923
Accounting fees 5 5 5
Auditing fees 24 31 23
Custodian fees (Note B) 426 92 303
Insurance expense 44 4 24
Legal fees 14 13 9
Trustees' fees and expenses 36 6 25
Miscellaneous -- 7 --
----------------------------------------------
Total expenses 13,490 1,753 9,312
Expenses reduced by custodian fee expense
offset arrangement (Note B) (2) (3) (2)
----------------------------------------------
Total net expenses 13,488 1,750 9,310
----------------------------------------------
Net investment income (loss) 31,452 (196) 32,593
----------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investment
securities sold in unaffiliated issuers 443,851 16,611 157,610
Net realized loss on investment securities
sold in non-controlled affiliated issuers -- -- --
Net realized gain on option contracts (Note A) 3,042 -- --
Net realized gain on financial futures
contracts (Note A) 81,082 -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts (Note A) 767,858 126,995 537,283
----------------------------------------------
Net gain on investments 1,295,833 143,606 694,893
----------------------------------------------
Net increase in net assets resulting from
operations $ 1,327,285 $ 143,410 $ 727,486
----------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS
PORTFOLIO PORTFOLIO
Six Months Six Months
Ended Year Ended Year
February 28, Ended February 28, Ended
1999 August 31, 1999 August 31,
(000'S OMITTED) (UNAUDITED) 1998 (UNAUDITED) 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 3,193 $ 10,123 $ 12,915 $ 23,438
Net realized gain (loss) on
investments 62,341 74,686 (83,399) 35,406
Change in net unrealized
appreciation (depreciation) of
investments 395,546 (360,086) 217,640 (545,041)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 461,080 (275,277) 147,156 (486,197)
-------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 25,197 178,065 115,426 1,557,053
Reductions (165,217) (158,751) (392,675) (342,152)
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (140,020) 19,314 (277,249) 1,214,901
-------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 321,060 (255,963) (130,093) 728,704
NET ASSETS:
Beginning of period 1,317,478 1,573,441 1,812,355 1,083,651
-------------------------------------------------------------
End of period $ 1,638,538 $ 1,317,478 $ 1,682,262 $ 1,812,355
-------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-22
<PAGE>
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN PARTNERS
PORTFOLIO PORTFOLIO PORTFOLIO
Six Months Six Months Six Months
Ended Year Ended Year Ended Year
February 28, Ended February 28, Ended February 28, Ended
1999 August 31, 1999 August 31, 1999 August 31,
(UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 31,452 $ 78,026 $ (196) $ (343) $ 32,593 $ 46,344
Net realized gain (loss) on
investments 527,975 893,833 16,611 45,585 157,610 408,784
Change in net unrealized
appreciation (depreciation) of
investments 767,858 (2,420,985) 126,995 (106,156) 537,283 (872,798)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 1,327,285 (1,449,126) 143,410 (60,914) 727,486 (417,670)
---------------------------------------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Additions 46,875 391,142 18,985 53,069 135,861 743,583
Reductions (1,664,428) (1,912,418) (58,742) (90,539) (484,924) (320,149)
---------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from transactions
in investors' beneficial interests (1,617,553) (1,521,276) (39,757) (37,470) (349,063) 423,434
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (290,268) (2,970,402) 103,653 (98,384) 378,423 5,764
NET ASSETS:
Beginning of period 5,787,805 8,758,207 523,359 621,743 3,581,337 3,575,573
---------------------------------------------------------------------------------------
End of period $ 5,497,537 $ 5,787,805 $ 627,012 $ 523,359 $ 3,959,760 $ 3,581,337
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 28, 1999 (Unaudited)
- ----------------------------------------------------------------------
Equity Managers Trust
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Portfolio ("Focus"), Neuberger Berman Genesis
Portfolio ("Genesis"), Neuberger Berman Guardian Portfolio ("Guardian"),
Neuberger Berman Manhattan Portfolio ("Manhattan"), and Neuberger Berman
Partners Portfolio ("Partners") (collectively, the "Portfolios") are separate
operating series of Equity Managers Trust ("Managers Trust"), a New York
common law trust organized as of December 1, 1992. Managers Trust is
registered as a diversified, open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). Other regulated
investment companies sponsored by Neuberger Berman Management Inc.
("Management"), whose financial statements are not presented herein, also
invest in Managers Trust.
The assets of each Portfolio belong only to that Portfolio, and the
liabilities of each Portfolio are borne solely by that Portfolio and no
other.
2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the
notes following the Portfolios' Schedule of Investments.
3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange of such currency against the U.S.
dollar to determine the value of investments, other assets and liabilities.
Purchase and sale prices of securities, and income and expenses are
translated into U.S. dollars at the prevailing rate of exchange on the
respective dates of such transactions.
4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date or, for certain foreign dividends, as soon as the Portfolio
becomes aware of the dividends. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, including accretion of original issue discount,
where applicable, and accretion of discount on short-term investments, is
recorded on the accrual basis. Realized gains and losses from securities
transactions and foreign currency transactions are recorded on the basis of
identified cost.
5) TAXES: Managers Trust intends to comply with the requirements of the Internal
Revenue Code. Each Portfolio of Managers Trust also intends to conduct its
operations so that each of its investors will be able to qualify as a
regulated investment company. Each Portfolio will be treated as a partnership
for U.S. Federal income tax purposes and is therefore not subject to U.S.
Federal income tax.
C-24
<PAGE>
6) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign
tax authorities, net of refunds recoverable.
7) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations.
Expenses incurred by Managers Trust with respect to any two or more
portfolios are allocated in proportion to the net assets of such portfolios,
except where a more appropriate allocation of expenses to each portfolio can
otherwise be made fairly. Expenses directly attributable to a portfolio are
charged to that portfolio.
8) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered call
option are recorded in the liability section of each Portfolio's Statement of
Assets and Liabilities and are subsequently adjusted to the current market
value. When an option is exercised, closed, or expired, the Portfolio
realizes a gain or loss and the liability is eliminated. A Portfolio bears
the risk of a decline in the price of the security during the period,
although any potential loss during the period would be reduced by the amount
of the option premium received. In general, written covered call options may
serve as a partial hedge against decreases in value in the underlying
securities to the extent of the premium received. All securities covering
outstanding options are held in escrow by the custodian bank.
Summary of option transactions for the six months ended February 28, 1999:
<TABLE>
<CAPTION>
VALUE
WHEN
FOCUS NUMBER WRITTEN
- -------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/98 0 $ 0
CONTRACTS WRITTEN 10,180 3,425,092
CONTRACTS EXPIRED (1,880) (920,082)
CONTRACTS EXERCISED (3,525) (870,436)
CONTRACTS CLOSED (4,775) (1,634,574)
------------------------
CONTRACTS OUTSTANDING 2/28/99 0 $ 0
------------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
WHEN
GUARDIAN NUMBER WRITTEN
- --------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS OUTSTANDING 8/31/98 7,018 $ 3,498,330
CONTRACTS WRITTEN 42,000 17,810,913
CONTRACTS EXPIRED (12,518) (5,081,776)
CONTRACTS EXERCISED (15,000) (8,098,489)
CONTRACTS CLOSED (13,500) (4,965,583)
-------------------------
CONTRACTS OUTSTANDING 2/28/99 8,000 $ 3,163,395
-------------------------
</TABLE>
9) FINANCIAL FUTURES CONTRACTS: Focus and Guardian may each buy and sell
financial futures contracts to hedge against a possible decline in the value
of their portfolio securities. Also, Focus and Guardian may each buy and sell
stock index futures contracts for purposes of managing cash flow. At the time
a Portfolio
C-25
<PAGE>
enters into a financial futures contract, it is required to deposit with its
custodian a specified amount of cash or liquid securities, known as "initial
margin," ranging upward from 1.1% of the value of the financial futures
contract being traded. Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodity exchange on
which such futures contract is traded. Subsequent payments, known as
"variation margin," to and from the broker are made on a daily basis as the
market price of the financial futures contract fluctuates. Daily variation
margin adjustments, arising from this "mark to market," are recorded by the
Portfolios as unrealized gains or losses.
Although some financial futures contracts by their terms call for actual
delivery or acceptance of financial instruments, in most cases the contracts
are closed out prior to delivery by offsetting purchases or sales of matching
financial futures contracts. When the contracts are closed, a Portfolio
recognizes a gain or loss. Risks of entering into futures contracts include
the possibility there may be an illiquid market and/or a change in the value
of the contract may not correlate with changes in the value of the underlying
securities.
For U.S. Federal income tax purposes, the futures transactions undertaken
by a Portfolio may cause that Portfolio to recognize gains or losses from
marking to market even though its positions have not been sold or terminated,
may affect the character of the gains or losses recognized as long-term or
short-term, and may affect the timing of some capital gains and losses
realized by the Portfolios. Also, a Portfolio's losses on transactions
involving futures contracts may be deferred rather than being taken into
account currently in calculating such Portfolio's taxable income.
During the period ended February 28, 1999, Focus did not enter into any
financial futures contracts.
At February 28, 1999, open positions in financial futures contracts for
Guardian were as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION OPEN CONTRACTS POSITION APPRECIATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 1999 1,507 S&P 500 Futures Long $22,519,480
</TABLE>
At February 28, 1999, Guardian had the following securities deposited in a
segregated account to cover margin requirements on open financial futures
contracts:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SECURITY
-----------------------------------------------------------
<S> <C>
$ 10,205,000 U.S. Treasury Bills, 4.345%, due 4/1/1999
21,500,000 U.S. Treasury Bills, 4.425%, due 4/22/1999
</TABLE>
10) SECURITY LENDING: Securities loans involve certain risks in the event a
borrower should fail financially, including delays or inability to recover
the lent securities or
C-26
<PAGE>
foreclose against the collateral. The investment manager, under the general
supervision of Managers Trust's Board of Trustees, monitors the
creditworthiness of the parties to whom the Portfolios make security loans.
The Portfolios will not lend securities on which covered call options have
been written, or lend securities on terms which would prevent each of their
investors from qualifying as a regulated investment company. Effective June
1, 1998, the Portfolios entered into a Securities Lending Agreement with
Morgan Stanley & Co. Incorporated ("Morgan"). The Portfolios receive cash
collateral equal to at least 100% of the current market value of the loaned
securities. The Portfolios invest the cash collateral in the N&B Securities
Lending Quality Fund, LLC ("investment vehicle"), which is managed by State
Street Bank and Trust Company pursuant to guidelines approved by Managers
Trust's investment manager. Income earned on the investment vehicle is paid
to Morgan monthly. The Portfolios receive a fee, payable monthly, negotiated
by the Portfolios and Morgan, based on the number and duration of the
lending transactions. At February 28, 1999, the value of the securities
loaned and the value of the collateral were as follows:
<TABLE>
<CAPTION>
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
- --------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 47,933,652 $ 48,892,335
GENESIS 33,682,579 34,356,306
GUARDIAN 6,864,855 7,002,158
MANHATTAN 109,520,578 111,711,022
PARTNERS 90,283,072 92,088,729
</TABLE>
11) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
with institutions that each Portfolio's investment manager has determined
are creditworthy. Each repurchase agreement is recorded at cost. A Portfolio
requires that the securities purchased in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable a Portfolio to
obtain those securities in the event of a default under the repurchase
agreement. A Portfolio monitors, on a daily basis, the value of the
securities transferred to ensure that their value, including accrued
interest, is greater than amounts owed to a Portfolio under each such
repurchase agreement.
NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
Each Portfolio retains Management as its investment manager under a
Management Agreement. For such investment management services, each Portfolio
(except Genesis) pays Management a fee at the annual rate of 0.55% of the first
$250 million of that Portfolio's average daily net assets, 0.525% of the next
$250 million, 0.50% of the next $250 million, 0.475% of the next $250 million,
0.45% of the next $500 million, and 0.425% of average daily net assets in excess
of $1.5 billion. Genesis pays Management a fee for investment management
services at the annual rate of 0.85% of the first
C-27
<PAGE>
$250 million of that Portfolio's average daily net assets, 0.80% of the next
$250 million, 0.75% of the next $250 million, 0.70% of the next $250 million,
and 0.65% of average daily net assets in excess of $1 billion. Prior to December
15, 1997, Management had voluntarily agreed to waive a portion of the management
fee borne directly by Genesis and indirectly by any entity that invested in
Genesis to reduce the annual fee by 0.10% per annum of average daily net assets
of Genesis. Effective December 15, 1997, the above waiver was terminated.
All of the capital stock of Management is owned by individuals who are also
principals of Neuberger Berman, LLC ("Neuberger"), a member firm of The New York
Stock Exchange and sub-adviser to each Portfolio. Neuberger is retained by
Management to furnish it with investment recommendations and research
information without added cost to each Portfolio. Several individuals who are
officers and/or trustees of Managers Trust are also principals of Neuberger
and/or officers and/or directors of Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. In addition, in connection with the Securities Lending
Agreement between each Portfolio and Morgan, Morgan has agreed to reimburse each
Portfolio for transaction costs incurred on security lending transactions
charged by the custodian. The impact of these arrangements, respectively,
reflected in the Statements of Operations under the caption Custodian fees, was
a reduction of $162 and $1,632, $166 and $3,536, $315 and $1,624, $116 and
$2,944, and $168 and $1,856, for Focus, Genesis, Guardian, Manhattan, and
Partners, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the six months ended February 28, 1999, there were purchase and sale
transactions (excluding short-term securities, financial futures contracts, and
option contracts) as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ------------------------------------------------------------------------------------
<S> <C> <C>
FOCUS $ 397,301,619 $ 525,042,028
GENESIS 232,202,486 474,841,102
GUARDIAN 2,144,893,710 4,020,900,683
MANHATTAN 283,532,028 321,578,824
PARTNERS 3,272,942,139 3,435,597,084
</TABLE>
C-28
<PAGE>
During the six months ended February 28, 1999, there were brokerage
commissions on securities paid to Neuberger and other brokers as follows:
<TABLE>
<CAPTION>
OTHER
NEUBERGER BROKERS TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOCUS $ 518,826 $ 561,853 $ 1,080,679
GENESIS 528,353 536,852 1,065,205
GUARDIAN 2,043,446 4,106,527 6,149,973
MANHATTAN 195,212 288,686 483,898
PARTNERS 4,586,919 3,987,457 8,574,376
</TABLE>
NOTE D -- COMBINED LINE OF CREDIT:
At February 28, 1999, Genesis and Manhattan, were two of the holders of a
committed, unsecured $100,000,000 combined line of credit with State Street Bank
and Trust Company, to be used only for temporary or emergency purposes. Interest
is charged on borrowings under this agreement at the overnight Federal Funds
Rate plus 0.75% per annum. A facility fee of 0.07% per annum of the available
line of credit is charged, of which Genesis and Manhattan each has agreed to pay
its pro rata share, based on the ratio of its individual net assets to the net
assets of all the participants at the time the fee is due and payable. The fee
is paid quarterly in arrears. No compensating balance is required. Other
investment companies managed by Management also participate in the line of
credit on the same terms. Because several investment companies participate,
there is no assurance that an individual Portfolio will have access to the
entire $100,000,000 at any particular time. Genesis and Manhattan had no loans
outstanding pursuant to this line of credit at February 28, 1999. During the six
months ended February 28, 1999, Genesis and Manhattan did not utilize this line
of credit.
NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
<TABLE>
<CAPTION>
FOCUS
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND FEBRUARY 28, FEBRUARY 28,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADVANTA Corp. Class A 948,694 0 150,194 798,500 $ 9,332,469
ADVANTA Corp. Class B 910,000 0 107,500 802,500 7,272,656
Sierra Health Services** 1,360,000 0 1,360,000 0 0
</TABLE>
C-29
<PAGE>
<TABLE>
<CAPTION>
GENESIS
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND FEBRUARY 28, FEBRUARY 28,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAR Corp. 1,748,650 60,900 28,200 1,781,350 $ 26,942,919
ADAC Laboratories 1,003,100 42,200 2,000 1,043,300 18,648,988
Alliant Techsystems 648,500 90,600 23,700 715,400 56,650,738
Aviall Inc. 1,194,100 50,400 0 1,244,500 17,189,656
DONCASTERS PLC ADR 468,300 0 0 468,300 8,283,056
Eltron International** 420,000 0 420,000 0 0
Inprise Corp. 2,606,300 0 0 2,606,300 13,031,500
Pameco Corp.** 281,800 0 281,800 0 0
Primex Technologies 235,000 102,000 0 337,000 14,006,563
SOS Staffing Services 641,900 172,500 0 814,400 7,227,800
</TABLE>
C-30
<PAGE>
<TABLE>
<CAPTION>
GUARDIAN
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND FEBRUARY 28, FEBRUARY 28,
NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cabot Corp. 3,841,000 0 0 3,841,000 $ 96,745,188
Capital One Financial** 3,087,900 0 1,001,900 2,086,000 266,225,750
Coltec Industries** 4,863,900 0 4,863,900 0 0
Countrywide Credit Industries** 6,590,000 0 1,579,200 5,010,800 189,784,050
Foundation Health Systems** 9,939,900 0 9,939,900 0 0
Mark IV Industries** 2,942,081 0 2,942,081 0 0
PacifiCare Health Systems Class B 1,988,564 7,000 0 1,995,564 144,179,499
Republic Services 3,835,000 1,502,000 0 5,337,000 93,063,938
UCAR International** 2,176,200 0 2,176,200 0 0
Wellpoint Health Networks** 3,674,996 25,000 404,000 3,295,996 259,971,685
</TABLE>
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE
PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES.
**AT FEBRUARY 28, 1999, THE ISSUERS OF THESE SECURITIES WERE NO LONGER
AFFILIATED WITH THE PORTFOLIO.
NOTE F -- UNAUDITED FINANCIAL INFORMATION:
The financial information included in this interim report is taken from the
records of each Portfolio without audit by independent accountants/auditors.
Annual reports contain audited financial statements.
C-31
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 28,
1999 Year Ended August 31,
(UNAUDITED) 1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .51%(2) .51% .53% .54% -- --
------------------------------------------------------------------------------
Net Expenses .51%(2) .51% .53% .54% .57% .58%
------------------------------------------------------------------------------
Net Investment Income .42%(2) .59% .54% 1.04% 1.05% 1.16%
------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 64% 63% 39% 36% 52%
------------------------------------------------------------------------------
Net Assets, End of Period (in millions) $1,638.5 $1,317.5 $1,573.4 $1,122.4 $969.2 $645.0
------------------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Annualized.
C-32
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 28,
1999 Year Ended August 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .74%(2) .72% .77% .85% -- --
----------------------------------------------------------------------------
Net Expenses .74%(2) .72%(3) .77%(3) .85%(3) .94%(3) .98%
----------------------------------------------------------------------------
Net Investment Income 1.32%(2) 1.13% .32% .27% .25% .18%
----------------------------------------------------------------------------
Portfolio Turnover Rate 13% 18% 18% 21% 37% 63%
----------------------------------------------------------------------------
Net Assets, End of Period (in millions) $1,682.3 $1,812.4 $1,083.7 $259.9 $142.2 $138.6
----------------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Annualized.
3) Had the investment manager not waived a portion of the management fee, the
annualized ratios of net expenses to average daily net assets would have
been:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------
Net Expenses .74% .87% .95% .97%
------------------------------------------
</TABLE>
C-33
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 28,
1999 Year Ended August 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .46%(2) .46% .46% .46% -- --
----------------------------------------------------------------------------------
Net Expenses .46%(2) .46% .46% .46% .48% .50%
----------------------------------------------------------------------------------
Net Investment Income 1.07%(2) .92% .89% 1.72% 1.72% 1.66%
----------------------------------------------------------------------------------
Portfolio Turnover Rate 41% 60% 50% 37% 26% 24%
----------------------------------------------------------------------------------
Net Assets, End of Period (in millions) $5,497.5 $5,787.8 $8,758.2 $6,232.5 $4,613.2 $2,480.3
----------------------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Annualized.
C-34
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 28,
1999 Year Ended August 31,
(UNAUDITED) 1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .58%(2) .57% .59% .58% -- --
------------------------------------------------------------------------
Net Expenses .58%(2) .57% .59% .58% .59% .59%
------------------------------------------------------------------------
Net Investment Income (Loss) (.07%)(2) (.05%) .20% .13% .42% .53%
------------------------------------------------------------------------
Portfolio Turnover Rate 49% 90% 89% 53% 44% 50%
------------------------------------------------------------------------
Net Assets, End of Period (in millions) $627.0 $523.4 $621.7 $567.4 $645.4 $521.7
------------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Annualized.
C-35
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 28,
1999 Year Ended August 31,
(UNAUDITED) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .47%(2) .47% .48% .51% -- --
----------------------------------------------------------------------------------
Net Expenses .47%(2) .47% .48% .51% .53% .54%
----------------------------------------------------------------------------------
Net Investment Income 1.64%(2) 1.11% 1.05% 1.26% 1.13% .75%
----------------------------------------------------------------------------------
Portfolio Turnover Rate 85% 109% 77% 96% 98% 75%
----------------------------------------------------------------------------------
Net Assets, End of Period (in millions) $3,959.8 $3,581.3 $3,575.6 $1,999.6 $1,623.5 $1,340.3
----------------------------------------------------------------------------------
</TABLE>
1) For fiscal periods ending after September 1, 1995, the Portfolio is required
to calculate an expense ratio without taking into consideration any expense
reductions related to expense offset arrangements.
2) Annualized.
C-36
<PAGE>
OTHER INFORMATION
DIRECTORY
INVESTMENT MANAGER, ADMINISTRATOR
AND DISTRIBUTOR
Neuberger Berman Management Inc.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
800.877.9700 or 212.476.8800
Institutional Services 800.366.6264
SUB-ADVISER
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
CUSTODIAN AND SHAREHOLDER
SERVICING 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
OFFICERS AND TRUSTEES
Stanley Egener
CHAIRMAN OF THE BOARD AND TRUSTEE
Lawrence Zicklin
PRESIDENT AND TRUSTEE
Faith Colish
TRUSTEE
Howard A. Mileaf
TRUSTEE
Edward I. O'Brien
TRUSTEE
John T. Patterson, Jr.
TRUSTEE
John P. Rosenthal
TRUSTEE
Cornelius T. Ryan
TRUSTEE
Gustave H. Shubert
TRUSTEE
Daniel J. Sullivan
VICE PRESIDENT
Michael J. Weiner
VICE PRESIDENT
Richard Russell
TREASURER
Claudia A. Brandon
SECRETARY
Barbara DiGiorgio
ASSISTANT TREASURER
Celeste Wischerth
ASSISTANT TREASURER
Stacy Cooper-Shugrue
ASSISTANT SECRETARY
C. Carl Randolph
ASSISTANT SECRETARY
- -C- 1999 Neuberger Berman Management Inc.
D-1
<PAGE>
Statistics and projections in this report are derived from
sources deemed to be reliable but cannot be regarded as a
representation of future results of the Funds. This report
is prepared for the general information of shareholders and
is not an offer of shares of the Funds. Shares are sold
only through the currently effective prospectus, which must
precede or accompany this report.
[NEUBERGER BERMAN LOGO]
NEUBERGER BERMAN MANAGEMENT INC.
605 Third Avenue 2nd Floor
New York, NY 10158-0180
SHAREHOLDER SERVICES
800.877.9700
INSTITUTIONAL SERVICES
800.366.6264
WWW.NBFUNDS.COM
[RECYCLED LOGO] NMATR5620499
