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Neuberger Berman
EQUITY ASSETS-REGISTERED TRADEMARK-
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SEMI-ANNUAL REPORT
FEBRUARY 29, 2000
Focus Assets
Genesis Assets
Guardian Assets
Manhattan Assets
Millennium Assets
Partners Assets
Socially Responsive 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-9
Guardian Assets A-13
Manhattan Assets A-17
Millennium Assets A-20
Partners Assets A-24
Socially Responsive Assets A-28
PERFORMANCE HIGHLIGHTS B-1
FINANCIAL STATEMENTS B-4
FINANCIAL HIGHLIGHTS
PER SHARE DATA
Focus Assets B-15
Genesis Assets B-16
Guardian Assets B-17
Manhattan Assets B-18
Millennium Assets B-19
Partners Assets B-20
Socially Responsive Assets B-21
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
Millennium Portfolio C-13
Partners Portfolio C-16
Socially Responsive Portfolio C-19
FINANCIAL STATEMENTS C-22
FINANCIAL HIGHLIGHTS
Focus Portfolio C-36
Genesis Portfolio C-37
Guardian Portfolio C-38
Manhattan Portfolio C-39
Millennium Portfolio C-40
Partners Portfolio C-41
Socially Responsive Portfolio C-42
OTHER INFORMATION
Directory/Officers and Trustees D-1
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The "Neuberger Berman" name and logo are service marks of Neuberger Berman, LLC.
"Neuberger Berman Management Inc." and the individual fund names in this report
are either service marks or registered trademarks of Neuberger Berman Management
Inc. -C-2000
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CHAIRMAN'S LETTER April 20, 2000
Dear Fellow Shareholder,
This is my first opportunity to address shareholders as Chairman of Neuberger
Berman Equity Funds. Let me begin by thanking you for your loyalty and
appreciation of our firm's investment skills. The Neuberger Berman Funds are
committed to excellence. We understand that in the highly competitive mutual
fund industry, only those companies that serve shareholders well will prosper.
As you review the performance of all our domestic equity funds during this
reporting period, one thing stands out. The growth stock funds (Century,
Millennium and Manhattan) have performed appreciably better than our value funds
(Focus, Genesis, Guardian, Partners, Regency, and Socially Responsive). The
reason is simple. Growth stocks have materially outperformed value stocks across
the market capitalization spectrum during this reporting period. This does not
mean they will continue to do so indefinitely. The relative performance of
growth and value stocks has been cyclical. Throughout stock market history, they
have taken turns in the lead. It is important to realize that over the long
term, the performance of growth stocks and value stocks is almost identical.
That said, you can be sure that we strive to achieve the best possible
performance in our value funds as well as our growth funds, sticking to our
investment disciplines. We believe prudent long-term investors should maintain
portfolios with a sensible balance of funds in both categories.
In reading the fund reports, you will also note that our growth and value fund
managers have very different perspectives on today's market. This is to be
expected from portfolio managers who are passionate advocates of their
respective investment disciplines. Beauty is in the eye of the beholder,
especially in the stock market.
In closing, I look forward to serving you as Chairman of Neuberger Berman
Equity Funds. I welcome comments from shareholders on issues concerning the
funds. So, if you have something on your mind, please feel free to write me.
Sincerely,
/s/ Peter Sundman
Peter Sundman
Chairman of the Board
Neuberger Berman Equity Assets
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PORTFOLIO COMMENTARY
Neuberger Berman
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Focus Assets
For the six months ended February 29, 2000, the Focus Assets rose 21.11% while
the S&P 500 during the same time period increased 4.11%. These results are
gratifying since they occurred during a period that was difficult for the value
style of investing -- as evidenced by the 8.88% decline in the Russell 1000
Value Index for the six months ended February 29th.*
In our opinion, the primary reason for the portfolio's outperforming both the
S&P 500 and the Russell 1000 Value is its focused approach. The Portfolio is
never focused on more than six S&P sectors (it currently is focused on four),
and therefore can concentrate its investments in only those stocks where we feel
the undervaluation is greatest. In other words, we never buy a stock merely to
have representation in some area of the market; the only reason we take a
position is because we think it is attractive.
Recently there were two significant developments which affected the portfolio,
and our reaction to them provides an insight into how our investment discipline
operates. The first occurred early in 1999 when concern over Y2K-related issues
reached levels that bordered on the hysterical. This created enough selling in
technology stocks in general and software stocks in particular that we took a
fairly substantial position in Compuware, Oracle, Rational Software and Sterling
Commerce. Each of these had reached valuations less than the market, a very rare
occurrence in the software industry, and their subsequent return to their more
traditional valuations helped the Fund considerably. We also increased our
exposure to the semiconductor industry at that time, as Y2K-related fears of a
slowdown in the Personal Computer industry led to valuations which we found
attractive. The ensuing recovery in Atmel, Lattice SemiConductor, Microchip
Technology and Texas Instruments increased our performance noticeably.
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Focus Assets (Cont'd)
While technology stocks do not often appear in most value portfolios, the
above example illustrates our discipline: When negative psychology creates
attractive valuations in an industry which we feel has above average
fundamentals, we will be aggressive in establishing sizeable positions.
The second major development has created what we believe to be an opportunity
as good as last year's in technology. This is the Fed's imposition of two
interest rate increases during this reporting period, with the prospect of one
or two more to come. Most financial stocks were beaten down as investors sold
these issues, fearful of the effect the rate increases would have. While
psychology is a powerful factor in stock valuation, over time we believe it is a
company's earning power which determines its stock price, and the fact is that
the rate increases have not slowed the earnings growth of the better financial
companies. Consider this: In the fourth quarter of last year it was leading
technology firms Dell and Lucent announcing earnings shortfalls while, despite
the steadily rising interest rates, Citigroup, Chase Manhattan, Morgan Stanley,
Capital One and Providian (all of which we own) reported substantial earnings
increases. The valuations on finance stocks have now reached levels which
relative to the market, are lower than they have been in decades.
One of the disciplines we have in Focus is to take advantage of broadbased
selling in an out-of-favor industry by buying only the best companies. We have
done, and continue to do this, in the case of financials. While "best" is a
subjective term, we do believe that Citigroup is the best broad-based financial
services company, Chase Manhattan is the best money center bank, Morgan Stanley
the best securities firm, Countrywide Credit the best mortgage banker and
Capital One and Providian the two best credit card companies. We firmly believe
that the earnings of all the above companies will continue to grow, and that
sooner or later (hopefully not too much later) this earning power will be
reflected in their stock prices.
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Focus Assets (Cont'd)
Recently, due to their respective valuations, we have been shifting some funds
out of technology stocks into financials. (That said, technology still
represents 34.9% of the total equity market value portfolio). We also have
established a fairly sizeable position in General Motors and have made a small
increase in our retail holdings.
The future, never easy to predict, is now more difficult than usual. The level
of the overall market, as measured by its price/earnings ratio, seems high. This
statement, while true, is somewhat misleading since today's market is two
distinct markets: the NASDAQ, which seems fairly richly valued, and everything
else, which looks pretty cheap. One of the reasons the Federal Reserve has given
for raising interest rates is to curb excess valuation in the stock market. To
date, unfortunately, the major impact of these rate increases has been on stocks
which were not overvalued to begin with. While this is frustrating to value
managers such as ourselves, we have chosen to forsake whining about it in favor
of acting on the new opportunities we see.
As of February 29th, the P/E ratio in the portfolio was 14.7 times estimated
2000 earnings. This compares with P/E ratios of 26.9 for the S&P 500 and 14.7
for the Russell 1000 Value Index. Interestingly, the consensus earnings growth
rates going forward are 19.3% for Focus, 17.9% for the S&P 500 and 12.3% for the
Russell 1000 Value. This reflects what we are trying to do: get more growth per
dollar invested than the market. While our forward P/E is 45% lower than the S&P
500 our companies' projected earnings growth rate is actually 8% higher.
Similarly, while Focus' forward P/E is the same as the Russell 1000 Value, our
projected growth rate is 57% higher. We feel these numbers are compelling and
over time will produce worthwhile results.
While past results are no guarantee of the future, we would point out that
Focus Fund's performance ranks in the top 10% of all Morningstar-C- large-cap
value funds for the past year, the past three years, the last five years and the
past 10 years.(1) It would seem we
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Focus Assets (Cont'd)
shouldn't alter the process now. In closing, we remain committed to our value
approach since we believe, as in fact the last year shows, that it can produce
superior results.
Sincerely,
/s/ Kent Simons
Kent Simons
PORTFOLIO MANAGER
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. No single holdings of Focus Portfolio make 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.
Past performance is no guarantee of future results. Share prices will vary and
your shares, when redeemed, may be worth more or less than the price you paid
for them.
(1) -C- 2000 by Morningstar, Inc. All rights reserved. The information contained
herein is the proprietary information of Morningstar, Inc. Morningstar Inc.
shall not be responsible for investment decisions, damages or other losses
resulting from use of this information. Past performance is no guarantee of
future performance. Morningstar, Inc. has not granted consent for it to be
considered or deemed an "expert" under the Securities Act of 1933.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Genesis Assets
For the six-month period concluding February 29, 2000, the Genesis Assets
gained 6.65% compared to the Russell 2000's 35.82% return over the same time
period.*
We are pleased the Fund posted respectable gains during a period that was
particularly challenging for small-cap value investors. Performance comparisons
to the Russell 2000 do not take into account the enormous discrepancy between
small-cap growth stock and small-cap value stock performance during this
reporting period. While the Genesis portfolio underperformed its official
Russell 2000 benchmark, it more than doubled the 2.82% return for the Russell
2000 Value Index.
During the last six months, technology was just about the only game in town in
the small-cap stock market. As could be expected, our technology investments did
quite well, more than doubling in value in first half fiscal 2000. However, as a
result of our value parameters, the portfolio was significantly under-weighted
in the technology sector. We like technology and recognize the enormous growth
potential of high quality tech companies. However, unless and until the group
corrects and we can find more reasonably priced technology stock opportunities,
we will likely remain under-weighted versus the Russell 2000. We have been
taking some profits in tech holdings that have moved out of legitimate value
range and using the proceeds to build positions in more reasonably priced
technology stocks. But, true tech stock bargains are becoming more scarce as
stocks in the most promising sub-sectors of the industry continue to soar.
Our energy investments, primarily small oil services companies, also
contributed to returns during this reporting period. As the price of oil
climbed, investors began anticipating increased drilling activity and bid up oil
services companies. We are now seeing signs of a pickup in drilling and believe
that better earnings going forward will continue to buoy our oil services
investments.
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Genesis Assets (Cont'd)
Our biggest performance disappointments fall into two categories: defense and
aerospace, and banking. In the case of defense and aerospace holdings, Alliant
Techsystems and Cordant Technologies, stock price declines were not due to poor
operating results, but rather fallout from the earnings problems experienced by
high profile industry leaders Raytheon, Lockheed Martin, and Boeing. We think
Alliant and Cordant can continue to grow earnings at a decent clip, and that
once the cloud over the industry passes, earn a much better appraisal from
investors.
Small bank stock holdings such as Peoples Heritage Financial and Webster
Financial Corp. were knocked down by a headwind formed by rising interest rates
and the flattening yield curve. We think current stock prices already discount
what is perceived to be a hostile economic environment for banks. In addition,
at currently depressed prices, the odds have increased that these stocks will
attract suitors when consolidation in the banking industry resumes after its Y2K
hiatus.
It has been a rather strange small-cap stock market. In view of what's been
going on in the technology and biotechnology groups, you could argue that the
best way to make money was to buy stocks that had very high price/earnings
ratios or no earnings at all. Obviously, value investors don't subscribe to this
logic. We try to find good little companies trading at valuation discounts.
We are finding a lot of such opportunities in beaten down "old economy"
companies that will be prime beneficiaries of "new economy" technologies. If
this sounds farfetched, we would remind you that during past periods of great
technological innovation -- the railroads, the electric light, the assembly
line, the telephone -- many users of new technologies were rewarded as much or
more than the creators of the new technologies. We expect history to repeat
itself in today's "new economy."
Let us give you an example. Be advised, this should not be viewed as a
recommendation, but rather an example of our investment discipline. AAR Corp. is
a distributor of new and used aerospace parts. It serves all
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Genesis Assets (Cont'd)
the major airlines and should be able to continue to grow its basic business
nicely as airlines outsource more of their replacement parts operations. AAR is
not a technology resistant dinosaur. It already has sophisticated computer
systems that help it procure parts on demand, trace the history of used parts
(required by the FAA), manage inventories, and efficiently fulfill orders.
AAR also has an exciting new business. It is a 50% joint venture partner with
the major airlines in an aerospace parts procurement and distribution
cooperative called SITA. SITA is going on-line. Costs should go down for
everyone involved and profits should rise.
While some of the original equipment manufacturers have teamed up to form
on-line buying groups, none have the used parts expertise or sophisticated
computer tracking ability of AAR. This should not be underestimated, as the size
of the aerospace used parts market dwarfs that of the new parts market.
You can buy this "old economy" company poised to exploit "new economy"
technologies for just 11.5 times projected calendar 2000 earnings. At some time
in the future, AAR's share of SITA could be spun off to shareholders. In view of
the valuations currently being given to business-to-business (B2B) e-commerce
networks, this seems likely to be a very big bonus.
In closing, growth is still in and value is still out. What will change this?
Perhaps the combination of investors realizing that severely depressed "old
economy" stocks can survive and prosper in the "new economy," and recognition
that valuations for many high flying "new economy" stocks defy economic gravity.
We will continue to seek out quality small-cap companies trading at reasonable
valuations relative to
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Genesis Assets (Cont'd)
above average growth prospects. Call us tortoises to the small-cap growth stock
hares. We hope our shareholders will accompany us in the race for long-term
investment profits.
Sincerely,
/s/ Judith Vale /s/ Robert D'Alelio
Judith Vale and Robert D'Alelio
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
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.
Past performance is no guarantee of future results.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Guardian Assets
For the six-month period concluding February 29, 2000, the Guardian Assets
declined 3.00% versus the Russell 1000 Value Index's 8.88% loss over the same
time period. The S&P 500 advanced 4.11% over the corresponding six-month
period.*
Technology was the big story in the market and in the Guardian Portfolio in
the first half of fiscal 2000. Of the 11 sectors in the Russell 1000 Value
Index, technology was the only sector to deliver positive returns. We were
substantially over-weighted in technology versus the benchmark and enjoyed a
return in excess of 50% from our tech investments during this reporting period.
We don't believe owning technology stocks is inconsistent with a value
discipline. The technology sector is relatively volatile and periodically offers
exceptional value oriented opportunities. We tend to buy technology stocks when
they are out-of-favor and trading at low
price/earnings ratios relative to earnings growth rates. Many of our big tech
winners during this reporting period were originally purchased in the summer and
fall of 1998 when the group sold off sharply in response to global economic and
financial market turmoil. Obviously, valuations have risen substantially since
then. We have been consistently trimming and/or eliminating positions in more
fully valued technology stocks. If the group continues to soar, we will probably
do some more paring. However, we are willing to let some of our tech winners run
until valuations get out of line or we see signs of slowing earnings.
With the exception of brokerage/asset management companies (most notably
Morgan Stanley Dean Witter, which made our "Top Ten" contributors' list),
financial services stocks were among our biggest portfolio disappointments. In
general, financial services stocks were hit hard by four factors: higher
interest rates and the prospect of additional Federal Reserve rate hikes; some
high profile earnings shortfalls; disappointing top line revenue growth; and the
fear that the credit quality of loan portfolios would deteriorate if the Fed
tightens too aggressively and sends the economy into recession.
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Guardian Assets (Cont'd)
We are concerned by overcapacity in the financial services industry and the
difficulty many companies are having growing revenues in a very competitive
environment. Also, if interest rates continue to climb, earnings could suffer.
However, we think almost all the potential bad news is already baked into
financial services stock prices. If the Fed once again manages to successfully
pilot the economy to a "soft landing," the cloud currently overhanging financial
services stocks should dissipate.
In general, we believe that the market has unfairly penalized "old economy"
stocks in the so-called new economy. Consider the joint venture taking form
among General Motors, Daimler Chrysler, and Ford. Oracle and i2 Technologies are
building a business-to-business
e-commerce network to allow these auto giants to procure parts over the
Internet. It is estimated that efficiencies realized through this network could
allow the auto makers to shave $2,000-$3,000 off the cost of building a car. Of
course, all this cost saving won't go into their pockets -- it will be competed
away in the marketplace. Under this scenario, as the price of cars comes down,
demand is expected to increase, and the auto makers' revenues and profits would
then grow substantially. Oracle and i2 Technologies would make money building
and operating the network, but, the auto companies would own this incredibly
valuable asset. This appears to be a win/win situation for these "old economy"
car companies. Yet, in today's market, you can buy GM and Ford for less than ten
times earnings, whereas Oracle is going for more than 75 times earnings.
Does it make sense to ignore value and chase growth at any price? In our
opinion, value stocks have three powerful forces currently working in their
favor. The first is good operating results. Earnings are coming through. In
general, value stocks haven't declined because earnings have fallen. It's been
contracting price/earnings ratios (largely a measure of investor perception)
that have resulted in the decline. Secondly, the value sector of the market is
by historical standards quite cheap. One hundred and seventy eight of the 500
stocks in the S&P and 336 stocks out of the 1,000 stocks in the Russell 1000
have P/Es of 10 or less.
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Guardian Assets (Cont'd)
Compare this to the Internet sector where the average price/sales multiple for
226 stocks is 30. Why don't we mention the P/E of this group? Because
collectively these companies are losing $8 billion a year!
Finally, we believe smart money is moving into the value sector. Merger
activity is strong as corporate buyers snap up stock market bargains. Deals are
getting done at very substantial premiums to market prices. Mirage just accepted
a $21 per share offer from MGM Grand. It was trading around $10 before MGM came
calling. Leveraged buyouts (LBO's) are back in vogue. Recently, the management
of Manor Care announced a bid to take the company private. In fourth quarter
1999, $40 billion of planned share repurchases were announced, up from $25
billion in the third quarter. When stocks get too cheap relative to economic
value, they attract the attention of informed industrialists like corporate
acquirers and corporate managements, and eventually, the attention of investors.
In closing, as evidenced by the poor performance of value stock benchmarks, it
has been another challenging period for us. We are never pleased when the Fund
declines. However, the Fund's modest retreat compared to its benchmark index's
substantial loss indicates we effectively executed on our value strategies. More
importantly, we believe the stage is set for a value stock revival, which should
help us improve returns.
Sincerely,
/s/ Kevin Risen /s/ Rick White
Kevin Risen and Rick White
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
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Guardian Assets (Cont'd)
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.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-16
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PORTFOLIO COMMENTARY
Neuberger Berman
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Manhattan Assets
For the six-month period ending February 29, 2000, the Manhattan Assets gained
88.72% compared to the Russell Midcap Growth Index's 67.32% return over the same
time period.*
For the last several years, we have bemoaned the fact that investors were
lavishing attention on large-cap growth stocks and paying lesser tribute to
faster growth mid-cap companies. We couldn't comprehend why mid-caps had lower
price/earnings ratios despite significantly higher earnings growth rates. As
evidenced by the Russell Midcap Growth Index's 67.32% return versus the
large-cap Russell 1000 Growth Index's 22.48% gain over this six-month reporting
period, investors appear to have caught on. Does mid-cap stocks' out-performance
over the last six months signal a reversal in trend? We can't be sure. The
valuation gap between large-cap and mid-cap growth stocks has narrowed. However,
considering mid-cap growth stocks' materially higher earnings growth rates, they
still look to us quite attractive relative to their large-cap counterparts.
Our technology and technology related holdings (approximately 65% of portfolio
total equity market value at the close of this reporting period), fueled
performance in first-half fiscal 2000. Our "Top Ten" contributors' list was
dominated by technology stocks, with companies such as Citrix Systems, JDS
Uniphase, Veritas Software and PMC Sierra delivering 250% or better returns. We
were in the right places -- telecommunications equipment, broadband technology,
and business-to-business (B2B) e-commerce companies -- and avoided some of the
technology potholes like computer hardware and e-commerce retailers.
Of course, the spectacular performance of the technology sector over the last
six months has inspired some concern that tech stocks are now overvalued and
vulnerable to a substantial correction. Based on reported operating results, we
concede that many tech companies are now rather richly priced. However, we
believe investors may actually be underestimating the exceptional growth
potential of many quality mid-cap technology companies. Over the last year or
so, reported revenue and/or earnings growth has not been just running ahead of
consensus
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Manhattan Assets (Cont'd)
estimates. It has been leaving analysts' forecasts in the dust. Wall Street
can't raise estimates fast enough to keep pace with this explosive growth. For
the foreseeable future, we expect this pattern to continue. We are mindful of
the valuations of the tech stocks in our portfolio and consistently trim and/or
eliminate positions in stocks that we feel are getting too far ahead of
themselves or may be less likely to beat fundamental expectations going forward.
However, we think there are still technology companies well positioned in the
most dynamic sectors of the industry.
Returning to portfolio specifics, our healthcare (primarily biotechnology
companies), communications services, and capital goods investments also
contributed to returns during this reporting period. Our holdings in the retail
industry of the consumer cyclical sector disappointed. Retailers such as
Williams Sonoma (kitchen equipment), TJXCompanies (apparel), Best Buy and Tandy
(consumer electronics), and Abercrombie & Fitch (specialty items) all declined
substantially. The consensus appears to be that rising interest rates will
eventually restrain consumer spending and retailers' earnings. While we don't
argue with this economic logic, we note that the American consumer is still
buying. Most, albeit not all, of our retailer holdings met earnings expectations
during their most recent reporting periods. With consensus estimates being
revised downward, we expect some pleasant earnings surprises going forward.
The Manhattan Portfolio clearly displays the fundamental characteristics
inherent in our investment discipline. At the close of this reporting period,
the portfolio has a projected 5-year earnings growth rate of 39%, compared to
the Russell Midcap Growth Index's 33%. Its price/ earnings ratio divided by
5-year projected earnings growth rate is modestly higher than the Index's (1.2
to 0.9), largely the result of some of our Internet investments that have yet to
turn explosive revenue growth into what we believe will be impressive earnings
gains.
This leads us to another issue that requires some discussion. We are in an era
of almost unprecedented technological innovation. Today,
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Manhattan Assets (Cont'd)
promising young technology companies are growing faster than ever before and are
entering the mid-cap arena at an earlier stage of development.
For a variety of reasons ranging from aggressive advertising to gain market
share, to acquisitions of promising smaller companies and/or the depreciation of
infrastructure investments, these companies do not yet have net earnings. Rather
than eliminating these companies from consideration and, in the process, missing
out on some of what we believe are the very best long term opportunities in the
mid-cap growth arena, we have increased our focus on revenue and cash flow
growth in addition to earnings growth. We are carefully evaluating business
models and future profit margin assumptions. If we are convinced that rapidly
growing revenues and cash flows will eventually translate into superior earnings
growth, and can identify stocks with valuations in line with future earnings
prospects, we will add them to the portfolio.
In closing, we are pleased to have delivered attractive absolute and relative
returns during this reporting period and we will be working diligently to build
on our success in the year ahead.
Sincerely,
/s/ Jennifer Silver /s/ Brooke Cobb
Jennifer Silver and Brooke Cobb
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
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.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
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PORTFOLIO COMMENTARY
Neuberger Berman
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Millennium Assets
For the six-month period ended February 29, 2000, the Millennium Assets
returned 126.25% compared to the Russell 2000 Growth and Russell 2000 Index's
66.04% and 35.82% gains over the same time period, respectively.*
We've enjoyed a vibrant small cap growth stock market ever since the Portfolio
commenced operations on October 20, 1998. We have also materially outperformed
our benchmark index since inception. So, we've been both lucky and good. The
market won't always be so cooperative. However, we believe our investment
discipline -- investing in small, fast growing companies capable of consistently
beating consensus earnings expectations and trading at reasonable valuations
relative to growth rates -- will continue to demonstrate its effectiveness.
Our technology stock holdings (58.3% of total equity market value at the close
of this reporting period), performed exceptionally well and were responsible for
about 75% of the Fund's total return. However, technology was not the whole
story. Ten of the 11 sectors represented in the portfolio posted positive
returns, compared to gains in just 6 of these 11 sectors for the Russell 2000.
We also outperformed our benchmark, the Russell 2000 Growth index in 9 of the 11
sectors. We are almost as pleased with the strong gains of portfolio companies
in poor performing groups such as basic materials, financial services, energy,
consumer cyclicals and consumer staples as we are with our many technology stock
winners.
We were often in the right place at the right time in the technology sector
and technology related companies. Our investments in broadband companies such as
Osicom Technologies and Efficient Networks performed exceptionally well as
investors acknowleged the explosive growth potential of companies with
technologies to expand the data carrying capacity of fiber optic and traditional
copper wire communications networks. Internet direct marketing company Mypoints
Communications was also a big winner. Mypoints is an "opt in" e-mail company.
Internet users fill out a demographic profile of themselves for Mypoints.
Mypoints then sends the appropriate advertising to them via e-mail and gives
them points toward gift certificates or discounts as they
A-20
<PAGE>
- ----------------------------------------------------------------------
Millennium Assets (Cont'd)
respond to the ads. It's the "new economy" version of the old S&H Green Stamps,
and we believe a potentially lucrative business. We also scored performance
points with Netegrity, an Internet infrastructure software firm supporting
e-commerce business-to-business (B2B) and retail networks.
Retailers were our primary portfolio disappointments. Children's Place Retail
Stores and Rex Stores fell short of expectations, and in keeping with the Fund's
sell discipline, were quickly eliminated from the portfolio. American Eagle
Outfitters also declined sharply, despite posting better than expected earnings.
We continue to hold this innovative specialty retailer. In general, investors
appear convinced that rising interest rates will put an end to American
consumers' spending spree. We think higher rates will eventually restrain
consumer spending somewhat, but that selected retailers, particularly those with
well conceived e-tail strategies, can continue to grow earnings at an attractive
pace. We are expecting our current holdings in the retail sector to exceed
consensus earnings forecasts in the year ahead.
We are stock pickers, not economists or market forecasters. However, we will
periodically comment on broader investment issues that concern shareholders and
may have an impact on our portfolio. The strong performance of technology, and
particularly, Internet-related stocks, coupled with the poor absolute and
relative performance of most other industry groups has inspired the financial
press to divide the market into "old economy" and "new economy" companies.
Despite our portfolio's bias to technology and its excellent returns from this
sector, we are not of the opinion that all "old economy" companies are worthless
and that all "new economy" companies are priceless. We think some companies in
the former category are legitimate growth stock bargains and some stocks in the
latter category are wildly overvalued. That's why we take profits in "new
economy" stocks, whose valuations become excessive, and look for more reasonably
priced growth opportunities, including stocks in more traditional businesses.
Investors should heed the distinction between companies that are embracing new
technologies and those that are sticking their heads in
A-21
<PAGE>
- ----------------------------------------------------------------------
Millennium Assets (Cont'd)
the sand. The Internet is taking friction out of the economy -- the friction
caused by forms having to be filled out, paper shuffled, checks written, and
currency changing hands. We believe that "old economy" companies that can cut
costs and improve productivity by using new technologies like the Internet will
thrive. Those who don't will eventually be overwhelmed by the competition.
We also believe it is a mistake to underestimate the ultimate investment
potential of "new economy" companies. Some market observers are describing
investors' current infatuation with small-cap technology stocks as a mania. In
some instances they may be right. But, every day, we are finding and investing
in small companies with technologies that could have a major impact on the
American economy. Not all are earning money, and by traditional measures like
price/earnings ratios or multiples to revenues, some appear absurdly priced.
However, some of these are real companies with real businesses that we expect
will eventually produce real earnings. Most importantly, they have the real
potential to provide outstanding long term investment returns.
In closing, we are pleased the Fund delivered such generous returns to
shareholders during first-half fiscal 2000. We trust that shareholders won't
expect this kind of performance every six months. Recent returns were achieved
during very favorable market conditions, which are unlikely to be sustained.
However, we remain confident that our investment discipline can continue to
generate attractive long term returns.
Sincerely,
/s/ Michael Malouf /s/ Jennifer Silver
Michael Malouf and Jennifer Silver
PORTFOLIO CO-MANAGERS
*The start up of Millennium Portfolio roughly coincided with a period of
accelerated growth in the small-cap growth sector of the stock market, and its
investment in IPOs had a significant impact on performance. There can be no
assurance that these factors will continue to have a positive effect on the
fund. And since the fund is relatively small in asset size, it may be easier to
achieve higher returns than in a larger fund. NBMI currently absorbs certain
expenses of the fund. This arrangement is subject to change, and without
A-22
<PAGE>
- ----------------------------------------------------------------------
Millennium Assets (Cont'd)
this arrangement, the fund's returns would have been less. Results are shown
on a "total return" basis and include reinvestment of all dividends and
capital gains 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.
For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Millennium 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.
Past performance is no guarantee of future results.
The risks involved in seeking capital appreciation from investments primarily
in companies with small market capitalization are set forth in the prospectus
A-23
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Partners Assets
For the six-month period concluding February 29, 2000, the Partners Assets
declined 3.47%, versus the Russell 1000 Value Index's 8.88% loss over the same
time period. The S&P 500 advanced 4.11% over the corresponding six-month
period.*
We are always disappointed when the Fund fails to generate a positive return.
On a relative return basis, we had a reasonably good year versus our Russell
1000 Value Index benchmark and a rather poor year compared to the S&P 500.
Market trends will always have some impact on portfolio performance. However,
when the market is clearly biased to one investment style or favors just a few
stocks or industry groups, it will have an even greater impact on portfolio
returns.
Over the last year, we have experienced an increasingly narrow market. In
calendar 1999, the top 25 stocks (predominantly rather richly valued growth
stocks) were responsible for 87% of the S&P 500's 21.04% return. While we do not
yet have the data for this reporting period, we expect to see the same
pattern -- a relative handful of big winners buoy the indices, while the
majority of component stocks languish.
It has also been a one-industry-group stock market. During this six-month
reporting period, 10 of the 11 sectors in the Russell 1000 Value Index declined.
Technology was the only group in the Index that posted a gain. Since technology
stocks generally trade at valuation premiums, this was a particularly
challenging period for value investors.
We participated in the tech sector. In fact, at the close of this reporting
period, technology stocks comprised approximately 21% of the Portfolio's total
equity market value. We were able to buy tech stocks such as Ericsson, GM Hughes
Electronics, and Motorola at opportunistic prices when each of these companies
suffered temporary setbacks in 1999. These stocks were excellent performers for
us over the last six months. We were overweighted in technology compared to the
Russell 1000 Value Index and were under-weighted compared to the S&P 500. This
explains why the Fund outperformed the former and underperformed the latter.
A-24
<PAGE>
- ----------------------------------------------------------------------
Partners Assets (Cont'd)
While by far our best performing group, technology was not the only bright
spot in the portfolio. On average, our consumer cyclical investments generated
attractive returns. Our investments in interest rate sensitive groups like basic
materials, capital goods, and financial services suffered. The consensus seems
to be that an aggressive Federal Reserve may cause the economy to decelerate too
fast and perhaps even slip into recession. We don't agree. We think that the Fed
can once again successfully engineer a "soft landing" that will sustain economic
growth, albeit at a less torrid pace than we have seen over the last year. If we
are right, many of the stocks in beaten down industry groups have "double play"
potential -- the prospect of better than anticipated earnings and rising
price/earnings multiples.
Perhaps even more disturbing than the narrowness of the market, was the
tendency for investors to chase returns. Fundamentals forgotten, investors
abandoned stocks that weren't moving and flocked to those that were going up in
price. This kind of stock price momentum investing has resulted in some absurdly
low and ludicrously high valuations.
For example, on a recent research outing we met with Maytag, a high quality
industrial cyclical with a pristine balance sheet, strong free cash flow, and an
excellent long term record of delivering high financial returns. That same day,
we met with Infospace, a 3 year old company with a promising cellular
telephone/Internet portal business. Over the next few years, we believe Maytag
can grow revenues by 3-5% and earnings by 10-15% annually. Infospace's revenues
have been growing by 100% annually and we believe if everything goes according
to management's plan, the company can go on to become very profitable. But,
Infospace doesn't have any earnings yet, and management is telling analysts that
it may take 3 more years to show a profit.
We think it is fair to characterize Maytag and Infospace as good companies. At
current valuations, we would call only one of them a good investment. Maytag
trades at 6 times earnings and at just 50% of
A-25
<PAGE>
- ----------------------------------------------------------------------
Partners Assets (Cont'd)
revenues. In our opinion, it is an outstanding investment bargain. Infospace
stock has gone from its January, 1999 offering price of $9 7/8 to a high of $264
per share and currently trades at 230 times revenues. This is much too rich for
our blood.
As is our custom, we will briefly describe a portfolio holding that
demonstrates our value discipline. This should not be considered a
recommendation and we may change our opinion and sell the stock if circumstances
warrant it. After acquiring the Fred Meyers chain, Kroger is now the second
largest supermarket company in America. Economies of scale on the purchasing
front and Kroger's ability to increase the percentage sales of higher margin
private label products in the Fred Meyers stores, should improve profit margins
significantly in the years ahead. Over the last year, Kroger stock has gone from
a high of $35 to $14 per share and its P/E has collapsed from 22 to 15. We
believe Kroger can grow revenues by about 7% and earnings by 16-18% in the
coming year. In essence you are getting Kroger for less than one times its
projected annual earnings growth rate. We think that is a very low valuation for
a company in a stable business like groceries.
In closing, it's been another tough period for value investors. We can't
predict when the market will begin valuing businesses more appropriately. We
believe our portfolio is full of high quality, undervalued companies that will
see much better days in the years ahead.
Sincerely,
/s/ S. Basu Mullick /s/ Robert Gendelman
S. Basu Mullick and Robert Gendelman
PORTFOLIO CO-MANAGERS
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
A-26
<PAGE>
- ----------------------------------------------------------------------
Partners Assets (Cont'd)
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.
Past performance is no guarantee of future results.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
A-27
<PAGE>
PORTFOLIO COMMENTARY
Neuberger Berman
- ----------------------------------------------------------------------
Socially Responsive Assets
For the six-month period concluding February 29, 2000, the Socially Responsive
Assets declined 9.95% compared to the Russell 1000 Value Index's 8.88% loss. The
Standard & Poor's 500 Index gained 4.11% over the same time period.*
Technology stocks held center stage during the first half of fiscal 2000. But,
not all technology stocks got rave reviews. Computer hardware companies were
panned, last year's biggest stars (e-commerce retailers) lost their investment
audience, and some of the leading software companies took second billing. The
loudest cheers went to semiconductor manufacturers, telecommunications equipment
companies, and business-to-business (B2B) e-commerce networks. Although we were
overweighted in technology, we owned too few of the rising stars. Portfolio
performance was helped by strong gains from Hewlett Packard and Intel, but hurt
by sharp declines in Xerox and Unisys. Collectively, our investments in the
technology sector posted a modest decline.
Energy and healthcare were the two top contributing sectors in the portfolio.
Our oil services holdings, most notably Cooper Cameron, performed quite well and
helped us achieve positive gains in the poor performing energy sector. Our
biotechnology holdings, highlighted by Biogen's strong performance, also buoyed
returns in a healthcare sector that was hard hit during this reporting period.
Our holdings in interest rate sensitive sectors like basic materials, capital
goods, consumer cyclicals, and financial services disappointed. This was not
generally a result of earnings shortfalls -- profits in these sectors remained
relatively strong. It was more a function of investors' concern that future
earnings are jeopardized by rising interest rates and the prospect of a
considerably less robust economy. These are reasonable concerns. The Federal
Reserve appears committed to slowing the economy and cyclical company earnings
may be peaking. However, cyclical stocks are now priced as if a recession is
just around the corner. We
A-28
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Assets (Cont'd)
don't think that's likely to happen. In fact, we believe earnings will be better
than anticipated and that these stocks should be given materially higher
valuations.
It has been a very narrow market, with a small percentage of stocks (primarily
in the hot technology sectors), posting spectacular gains and the majority of
stocks languishing or retreating. It has also been an unforgiving market. For
example, Unisys, in our opinion a great company doing all the right things to
improve long term profitability, lost nearly 30% of its market value over the
last six months for reporting a Y2K oriented revenue shortfall. Tyco, another
portfolio holding with an exceptional track record, lost 25% of its market value
after a newsletter writer criticized its merger accounting methods. We've
reviewed Tyco's accounting procedures and in our opinion, they conform to
accepted principles. This market has bedeviled investors in some very good
companies. But, long term investors must have patience and we think our patience
with these stocks will be rewarded.
Finally, we are concerned that investors are succumbing to the lure of instant
riches in what is being touted as a new investment era. "New" is fast becoming
the most overused word in everyone's investment vocabulary. The financial press
is trumpeting promising new technologies being developed by "new economy"
companies, and the "new paradigm" has replaced time honored investment
principles. At the risk of sounding old fashioned, we still believe that things
like earnings and valuations matter. We are not sticking our heads in the sand
and ignoring all the dynamic technology driven changes in the American economy.
We will participate, but not by paying what we believe are excessive multiples
for every new idea. We still believe that we will benefit by investing in
undervalued companies in a range of industries that will use new technologies to
invigorate their businesses and technology companies with real earnings or
substantial evidence pointing toward future profitability.
As is our custom, we will briefly detail a portfolio company that we believe
has investment merit and qualifies as a solid corporate citizen.
A-29
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Assets (Cont'd)
Be advised this is an example of our investment discipline, not a
recommendation. Enron is a major natural gas distributor that also owns and
operates natural gas, electric and water utilities. The company recently
announced it will be building a state-of-the-art fiber optic telecommunications
network along its 12,000 mile gas pipeline. Enron isn't cheap on the basis of
current earnings, but we have confidence this financially strong, exceptionally
well managed company can boost earnings significantly with its entry into
telecommunications.
Of course, Enron wouldn't be in our portfolio if it weren't also a socially
responsive company. Natural gas is the most environmentally friendly fuel. Enron
is also an active investor in solar energy and wind power projects. Finally, due
to its progressive work place policies, generous employee benefits, and its
policy of providing stock options to all employees, Enron has been cited by
Fortune Magazine as "one of the hundred best places to work."
In closing, we are disappointed with the Fund's performance in this very
challenging period. However, we have not lost confidence in the principle that
buying high quality, socially responsive companies at opportunistic prices will
generate attractive long term investment returns.
Sincerely,
/s/ Janet Prindle
Janet Prindle
PORTFOLIO MANAGER
*For index definitions, refer to page A-32, titled "Glossary of Indices." The
Portfolio invests in many securities not included in the indices listed.
The composition, industries and holdings of the Portfolio are subject to
change. Socially Responsive 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.
Past performance is no guarantee of future results.
A-30
<PAGE>
- ----------------------------------------------------------------------
Socially Responsive Assets (Cont'd)
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
Neuberger Berman Management Inc.-Registered Trademark- previously absorbed
certain operating expenses of Neuberger Berman Socially Responsive Fund. Absent
such arrangement, the total returns would have been less.
A-31
<PAGE>
GLOSSARY OF INDICES
<TABLE>
<S> <C>
S&P 500 INDEX: An unmanaged index generally
considered to be representative of
stock market activity.
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 92% of
the total market capitalization of
the Russell 3000 Index.
RUSSELL 1000-REGISTERED TRADEMARK-VALUE Measures the performance of those
INDEX: Russell 1000 companies with lower
price-to-book ratios and lower
forecasted growth values.
RUSSELL 2000-REGISTERED TRADEMARK-INDEX: An unmanaged index consisting of
securities of the 2,000 issuers
having the smallest capitalization in
the Russell 3000-Registered
Trademark- Index, representing
approximately 8% of the Russell 3000
total market capitalization. The
smallest company's market
capitalization is roughly $178
million.
RUSSELL 2000-REGISTERED TRADEMARK-GROWTH Measures the performance of those
INDEX: Russell 2000-Registered Trademark-
Index companies with higher
price-to-book ratios and higher
forecasted growth values.
RUSSELL 2000-REGISTERED TRADEMARK-VALUE Measures the performance of those
INDEX: Russell 2000-Registered Trademark-
Index companies with lower
price-to-book ratios and lower
forecasted growth values.
RUSSELL 1000-REGISTERED TRADEMARK-GROWTH Measures the performance of the
INDEX: Russell 1000-Registered Trademark-
companies with higher price-to-book
ratios and higher forecasted growth
values.
EAFE-REGISTERED TRADEMARK- INDEX: Also known as the Morgan Stanley
Capital International Europe,
Australasia, Far East Index. An
unmanaged index of over 1,000 foreign
stock prices. The index is translated
into U.S. dollars and includes
reinvestment of all dividends and
capital gain distributions.
RUSSELL MIDCAP-TM- GROWTH INDEX: An unmanaged index that measures the
performance of those Russell Midcap
Index companies with higher
price-to-book ratios and higher
forecasted growth values.
RUSSELL MIDCAP-TM- VALUE INDEX: An unmanaged index that measures the
performance of those Russell
Midcap-TM- Index companies with lower
price-to-book ratios and lower
forecasted growth values.
</TABLE>
Please note that indices do not take into account any fees and expenses of 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 Portfolio may invest in many
securities not included in the above-described indices.
A-32
<PAGE>
PERFORMANCE HIGHLIGHTS
<TABLE>
<CAPTION>
FOR PERIODS
ENDED 3/31/00
SIX MONTH -----------------------------------
PERIOD AVERAGE ANNUAL TOTAL
NEUBERGER BERMAN ENDED RETURNS(1)
EQUITY ASSETS 2/29/00(1) 1 YR 5 YR 10 YR
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
FOCUS ASSETS(2) +21.11% +36.16% +24.15% +18.83%
GUARDIAN ASSETS -3.00% +8.30% +13.52% +14.15%
PARTNERS ASSETS -3.47% +5.42% +17.90% +14.92%
SOCIALLY RESPONSIVE
ASSETS -9.95% +6.63% +18.27% +15.61%(3)
S&P 500 INDEX(4) +4.11% +17.94% +26.75% +18.82%
RUSSELL 1000 VALUE
INDEX(4) -8.88% +6.34% +20.97% +15.99%
MANHATTAN ASSETS +88.72% +91.79% +29.12% +20.16%
RUSSELL MIDCAP GROWTH
INDEX(4) +67.32% +77.20% +30.32% +21.69%
GENESIS ASSETS +6.65% +26.16% +17.94% +14.11%
RUSSELL 2000 INDEX(4) +35.82% +37.29% +17.24% +14.44%
MILLENNIUM ASSETS* +126.25% +160.89% +170.22%(3) N/A
RUSSELL 2000 GROWTH
INDEX(4) +66.04% +59.05% N/A N/A
</TABLE>
*MILLENNIUM ASSETS STARTED OPERATIONS ON JANUARY 26, 2000. RETURNS PRIOR TO
JANUARY 26, 2000 ARE FOR MILLENNIUM FUND, WHICH INVESTS IN THE SAME PORTFOLIO
OF SECURITIES AND COMMENCED OPERATIONS ON OCTOBER 20, 1998. THE START UP OF
MILLENNIUM FUND ROUGHLY COINCIDED WITH A PERIOD OF ACCELERATED GROWTH IN THE
SMALL-CAP GROWTH SECTOR OF THE STOCK MARKET, AND ITS INVESTMENT IN IPOS HAD A
SIGNIFICANT IMPACT ON PERFORMANCE. THERE CAN BE NO ASSURANCE THAT THESE
FACTORS WILL CONTINUE TO HAVE A POSITIVE EFFECT ON MILLENNIUM ASSETS. AND
SINCE MILLENNIUM ASSETS IS RELATIVELY SMALL IN ASSET SIZE, IT MAY BE EASIER TO
ACHIEVE HIGHER RETURNS IN A SMALL FUND THAN IN A LARGER FUND. BECAUSE OF THE
FUND'S AGGRESSIVE INVESTMENT APPROACH, ITS SHARE PRICE IS SUBJECT TO GREATER
VOLATILITY THAN MAY BE FOUND IN A MORE CONSERVATIVE FUND; CONSEQUENTLY, THE
FUND'S CURRENT PERFORMANCE MAY BE LESS THAN THAT SHOWN.
Neuberger Berman Focus Assets, Neuberger Berman Guardian Assets, and
Neuberger Berman Manhattan Assets each commenced operations in September 1996
and Neuberger Berman Partners Assets, Genesis Assets, Socially Responsive
Assets, and Millennium Assets, commenced operations in August 1996, April 1997,
June 1999, and January 2000, 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. ("NBMI") The performance
information for the Funds prior to their commencement of operations are for the
Sister Funds. NBMI 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 (1.75% for Millennium) of each Fund's average
daily net assets, until December 31, 2009 (Socially Responsive Assets and
Millennium Assets until December 31, 2002). NBMI previously agreed to waive a
portion of the
B-1
<PAGE>
management fee borne directly by Neuberger Berman Genesis Portfolio 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) "Total return" includes reinvestment of dividends and distributions. Results
represent past performance and do not indicate future results. The value of
an investment in the Fund and the return on the investment both will
fluctuate, and redemption proceeds may be higher or lower than an investor's
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; accordingly, performance results prior to that time do not necessarily
reflect the level of performance that may be expected under the Assets'
current investment policies.
3) From inception of Sister Fund.
4) The S&P 500 Index is widely regarded as the standard for measuring large-cap
U.S. stock market performance and includes a representative sample of leading
companies in leading industries. 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 92% of the total market 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-TM- Index companies with higher
price-to-book ratios and higher forecasted growth values. The Russell Midcap
Value Index measures the performance of those Russell Midcap companies with
lower price-to-book ratios and lower forecasted growth values. The Russell
Midcap Index measures the performance of the 800 smallest companies in the
Russell 1000 Index, which represents approximately 26% 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 consisting of the securities of the 2,000
issuers having the smallest capitalization in the Russell 3000 Index,
representing approximately 8% of the Russell 3000 total market
capitalization. The smallest company's market capitalization is roughly $178
million. The Russell 2000 Growth Index measures the performance of those
Russell 2000 Index companies with higher price-to-book ratios and higher
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 NBMI and include
reinvestment of all dividends and distributions. The Portfolios may 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 GUARDIAN
(000'S OMITTED EXCEPT PER SHARE AMOUNTS) ASSETS ASSETS ASSETS
<S> <C> <C> <C>
-------------------------------------------
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 4,293 $ 82,190 $ 23,703
Deferred organization costs (Note A) 18 25 17
Receivable for Trust shares sold 15 98 1
Receivable from administrator -- net
(Note B) 14 -- --
-------------------------------------------
4,340 82,313 23,721
-------------------------------------------
LIABILITIES
Payable for Fund expenses (Note B) -- -- --
Payable for Trust shares redeemed -- 178 49
Payable to administrator -- net (Note B) -- 38 23
Accrued expenses 25 53 25
-------------------------------------------
25 269 97
-------------------------------------------
NET ASSETS at value $ 4,315 $ 82,044 $ 23,624
-------------------------------------------
NET ASSETS consist of:
Par value $ -- $ 6 $ 2
Paid-in capital in excess of par value 3,535 75,785 23,611
Accumulated undistributed net investment
income (loss) (9) (163) (11)
Accumulated net realized gains (losses) on
investment 221 1,842 652
Net unrealized appreciation (depreciation)
in value of investment 568 4,574 (630)
-------------------------------------------
NET ASSETS at value $ 4,315 $ 82,044 $ 23,624
-------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 240 6,090 1,812
-------------------------------------------
NET ASSET VALUE, offering and redemption price per
share $17.99 $13.47 $13.04
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-4
<PAGE>
February 29, 2000 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
SOCIALLY
MANHATTAN MILLENNIUM PARTNERS RESPONSIVE
ASSETS ASSETS ASSETS ASSETS
<S> <C> <C> <C> <C>
----------------------------------------------------------
ASSETS
Investment in corresponding Portfolio, at
value (Note A) $ 4,675 $ 66 $ 54,988 $ 228
Deferred organization costs (Note A) 18 -- 17 --
Receivable for Trust shares sold 25 -- 39 --
Receivable from administrator -- net
(Note B) 23 45 -- 80
----------------------------------------------------------
4,741 111 55,044 308
----------------------------------------------------------
LIABILITIES
Payable for Fund expenses (Note B) -- 38 -- 75
Payable for Trust shares redeemed -- -- 125 5
Payable to administrator -- net (Note B) -- -- 30 --
Accrued expenses 27 7 27 19
----------------------------------------------------------
27 45 182 99
----------------------------------------------------------
NET ASSETS at value $ 4,714 $ 66 $ 54,862 $ 209
----------------------------------------------------------
NET ASSETS consist of:
Par value $ -- $ -- $ 4 $ --
Paid-in capital in excess of par value 2,682 55 53,150 230
Accumulated undistributed net investment
income (loss) (15) -- 26 --
Accumulated net realized gains (losses) on
investment 135 -- 519 (8)
Net unrealized appreciation (depreciation)
in value of investment 1,912 11 1,163 (13)
----------------------------------------------------------
NET ASSETS at value $ 4,714 $ 66 $ 54,862 $ 209
----------------------------------------------------------
SHARES OUTSTANDING
($.001 par value; unlimited shares
authorized) 172 5 3,830 24
----------------------------------------------------------
NET ASSET VALUE, offering and redemption price per
share $27.44 $12.49 $14.33 $8.87
----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-5
<PAGE>
STATEMENTS OF OPERATIONS
Neuberger Berman
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
ASSETS ASSETS ASSETS
For the For the For the
Six Months Six Months Six Months
Ended Ended Ended
February 29, February 29, February 29,
2000 2000 2000
(000'S OMITTED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
-----------------------------------------
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 10 $ 497 $ 191
-----------------------------------------
Expenses:
Administration fee (Note B) 5 163 50
Amortization of deferred organization and
initial offering expenses (Note A) 6 6 6
Auditing fees 2 3 3
Custodian fees 5 5 5
Distribution fees (Note B) 3 102 32
Legal fees 4 4 5
Registration and filing fees 25 41 25
Shareholder reports 14 38 7
Shareholder servicing agent fees 8 9 8
Trustees' fees and expenses -- 1 --
Miscellaneous 1 2 1
Expenses from corresponding Portfolio
(Notes A & B) 7 309 59
-----------------------------------------
Total expenses 80 683 201
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (61) (70) (12)
-----------------------------------------
Total net expenses 19 613 189
-----------------------------------------
Net investment income (loss) (9) (116) 2
-----------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities 220 3,450 1,158
Net realized loss on option contracts -- -- (536)
Net realized loss on financial futures
contracts -- -- (27)
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts 226 2,127 (1,326)
-----------------------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) 446 5,577 (731)
-----------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 437 $ 5,461 $ (729)
-----------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-6
<PAGE>
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
SOCIALLY
MANHATTAN MILLENNIUM PARTNERS RESPONSIVE
ASSETS ASSETS ASSETS ASSETS
For the
Period from
For the January 26, 2000 For the For the
Six Months (Commencement Six Months Six Months
Ended of Operations) to Ended Ended
February 29, February 29, February 29, February 29,
2000 2000 2000 2000
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
--------------------------------------------------------------
INVESTMENT INCOME
Investment income from corresponding Portfolio
(Note A) $ 5 $ -- $ 469 $ 1
--------------------------------------------------------------
Expenses:
Administration fee (Note B) 6 -- 121 --
Amortization of deferred organization and
initial offering expenses (Note A) 5 -- 6 --
Auditing fees 3 1 3 2
Custodian fees 5 1 5 5
Distribution fees (Note B) 3 -- 76 --
Legal fees 4 5 4 8
Registration and filing fees 26 33 34 51
Shareholder reports 9 5 12 12
Shareholder servicing agent fees 8 -- 8 --
Trustees' fees and expenses -- -- -- --
Miscellaneous 1 -- 1 2
Expenses from corresponding Portfolio
(Notes A & B) 8 -- 143 1
--------------------------------------------------------------
Total expenses 78 45 413 81
Expenses reimbursed by administrator and/or
reduced by custodian fee expense offset
arrangement (Note B) (58) (45) -- (80)
--------------------------------------------------------------
Total net expenses 20 -- 413 1
--------------------------------------------------------------
Net investment income (loss) (15) -- 56 --
--------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
FROM CORRESPONDING PORTFOLIO (NOTE A)
Net realized gain (loss) on investment
securities 142 -- 694 (7)
Net realized loss on option contracts -- -- -- --
Net realized loss on financial futures
contracts -- -- -- --
Change in net unrealized appreciation
(depreciation) of investment securities,
financial futures contracts, and option
contracts 1,841 11 (2,738) (12)
--------------------------------------------------------------
Net gain (loss) on investments from
corresponding Portfolio (Note A) 1,983 11 (2,044) (19)
--------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 1,968 $ 11 $ (1,988) $ (19)
--------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Neuberger Berman
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
FOCUS ASSETS GENESIS ASSETS
Six Months Six Months
Ended Year Ended Year
February 29, Ended February 29, Ended
2000 August 31, 2000 August 31,
(000'S OMITTED) (UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
-----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (9) $ (9) $ (116) $ 93
Net realized gain (loss) on investments from
corresponding Portfolio (Note A) 220 216 3,450 (1,746)
Change in net unrealized appreciation
(depreciation) of investments from
corresponding Portfolio (Note A) 226 435 2,127 8,646
-----------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 437 642 5,461 6,993
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (66) (113)
Net realized gain on investments (194) (1) -- --
-----------------------------------------------------
Total distributions to shareholders (194) (1) (66) (113)
-----------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial
capitalization of the Fund (Note A) -- -- -- --
Proceeds from shares sold to the public 2,756 2,252 17,356 69,021
Proceeds from reinvestment of dividends and
distributions 192 1 33 58
Payments for shares redeemed (775) (1,471) (22,545) (18,620)
-----------------------------------------------------
Net increase (decrease) from Trust share
transactions 2,173 782 (5,156) 50,459
-----------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 2,416 1,423 239 57,339
NET ASSETS:
Beginning of period 1,899 476 81,805 24,466
-----------------------------------------------------
End of period $ 4,315 $ 1,899 $ 82,044 $ 81,805
-----------------------------------------------------
Accumulated undistributed net investment
income (loss) at end of period $ (9) $ -- $ (163) $ 19
-----------------------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of the Fund
(Note A) -- -- -- --
Sold to the public 156 176 1,385 5,696
Issued on reinvestment of dividends and
distributions 11 -- 2 5
Redeemed (44) (101) (1,770) (1,521)
-----------------------------------------------------
Net increase (decrease) in shares outstanding 123 75 (383) 4,180
-----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-8
<PAGE>
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
MANHATTAN MILLENNIUM
GUARDIAN ASSETS ASSETS ASSETS
Period from
January 26, 2000
Six Months Six Months (Commencement
Ended Year Ended Year of Operations) to
February 29, Ended February 29, Ended February 29,
2000 August 31, 2000 August 31, 2000
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 2 $ 6 $ (15) $ (5) $ --
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 595 (164) 142 (16) --
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) (1,326) 4,816 1,841 99 11
-------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations (729) 4,658 1,968 78 11
-------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (19) -- -- -- --
Net realized gain on investments (168) -- -- (1) --
-------------------------------------------------------------------------
Total distributions to shareholders (187) -- -- (1) --
-------------------------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial
capitalization of the Fund
(Note A) -- -- -- -- --
Proceeds from shares sold to the
public 1,470 5,961 1,453 1,649 55
Proceeds from reinvestment of
dividends and distributions 182 -- -- 1 --
Payments for shares redeemed (1,941) (3,339) (424) (218) --
-------------------------------------------------------------------------
Net increase (decrease) from Trust
share transactions (289) 2,622 1,029 1,432 55
-------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (1,205) 7,280 2,997 1,509 66
NET ASSETS:
Beginning of period 24,829 17,549 1,717 208 --
-------------------------------------------------------------------------
End of period $ 23,624 $ 24,829 $ 4,714 $ 1,717 $ 66
-------------------------------------------------------------------------
Accumulated undistributed net
investment income (loss) at end of
period $ (11) $ 6 $ (15) $ -- $ --
-------------------------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of
the Fund (Note A) -- -- -- -- --
Sold to the public 108 452 75 114 5
Issued on reinvestment of dividends
and distributions 13 -- -- -- --
Redeemed (143) (241) (21) (15) --
-------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding (22) 211 54 99 5
-------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-9
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
Neuberger Berman
- ----------------------------------------------------------------------
Equity Assets
<TABLE>
<CAPTION>
SOCIALLY RESPONSIVE
ASSETS
PARTNERS ASSETS Period from
Six Months Six Months June 9, 1999
Ended Year Ended (Commencement
February 29, Ended February 29, of Operations) to
2000 August 31, 2000 August 31,
(000'S OMITTED) (UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
-----------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 56 $ 249 $ -- $ --
Net realized gain (loss) on
investments from corresponding
Portfolio (Note A) 694 3,694 (7) (1)
Change in net unrealized
appreciation (depreciation) of
investments from corresponding
Portfolio (Note A) (2,738) 8,416 (12) (1)
-----------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations (1,988) 12,359 (19) (2)
-----------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (39) (257) -- --
Net realized gain on investments (3,463) -- -- --
-----------------------------------------------------------
Total distributions to shareholders (3,502) (257) -- --
-----------------------------------------------------------
FROM TRUST SHARE TRANSACTIONS:
Proceeds from shares sold in initial
capitalization of the Fund
(Note A) -- -- -- 100
Proceeds from shares sold to the
public 5,494 41,194 122 11
Proceeds from reinvestment of
dividends and distributions 3,328 238 -- --
Payments for shares redeemed (10,902) (20,381) (3) --
-----------------------------------------------------------
Net increase (decrease) from Trust
share transactions (2,080) 21,051 119 111
-----------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (7,570) 33,153 100 109
NET ASSETS:
Beginning of period 62,432 29,279 109 --
-----------------------------------------------------------
End of period $ 54,862 $ 62,432 $ 209 $ 109
-----------------------------------------------------------
Accumulated undistributed net
investment income (loss) at end of
period $ 26 $ 9 $ -- $ --
-----------------------------------------------------------
NUMBER OF TRUST SHARES:
Sold in initial capitalization of
the Fund (Note A) -- -- -- 10
Sold to the public 359 2,928 13 1
Issued on reinvestment of dividends
and distributions 223 15 -- --
Redeemed (719) (1,301) -- --
-----------------------------------------------------------
Net increase (decrease) in shares
outstanding (137) 1,642 13 11
-----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
B-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1) GENERAL: Neuberger Berman Focus Assets ("Focus"), Neuberger Berman Genesis
Assets ("Genesis"), Neuberger Berman Guardian Assets ("Guardian"), Neuberger
Berman Manhattan Assets ("Manhattan"), Neuberger Berman Millennium Assets
("Millennium"), Neuberger Berman Partners Assets ("Partners"), and Neuberger
Berman Socially Responsive Assets ("Socially Responsive") (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 "1933 Act"). Millennium and Socially Responsive
had no operations until January 26, 2000 and June 9, 1999, respectively,
other than matters relating to their organization and registration as
diversified, open-end management investment companies under the 1940 Act, and
registration of their shares under the 1933 Act, and for Socially Responsive
the sale and issuance of 10,000 shares to Neuberger Berman Management Inc.
("Management") on December 24, 1998. 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 (0.25%, 5.34%, 0.65%, 0.38%, 0.02%, 1.87%, and 0.18%, for
Focus, Genesis, Guardian, Manhattan, Millennium, Partners, and Socially
Responsive, respectively, at February 29, 2000). On November 16, 1999, 63.72%
of Neuberger Berman Socially Responsive Portfolio was held by another
regulated investment company, which redeemed its interest in the Portfolio
through a redemption in kind on that date. Management carried out this
transaction in a way that minimized the effect on the Portfolio. 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.
B-11
<PAGE>
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 Focus, Genesis, Guardian, Manhattan, Partners,
and Socially Responsive to continue to and the intention of Millennium to
qualify as regulated investment companies 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 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 ($25,405 and $240 expiring in 2007 for Genesis and Socially
Responsive, respectively, determined as of August 31, 1999), 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: Organization expenses incurred by Focus, Genesis,
Guardian, Manhattan, and Partners are being amortized on a straight-line
basis over a five-year period. At February 29, 2000, the unamortized balance
of such expenses amounted to $17,675, $25,392, $17,674, $17,633, and $16,914,
for Focus, Genesis, Guardian, Manhattan, and Partners, respectively.
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
B-12
<PAGE>
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. 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 undertaken to reimburse Focus, Genesis, Guardian, Manhattan,
and Partners through December 31, 2009, and Millennium and Socially Responsive
through December 31, 2002, for their operating expenses plus their pro rata
portion of their corresponding Portfolio's operating expenses (including the
fees payable to Management, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) ("Operating Expenses") which exceed, in
the aggregate, 1.50% (1.75% for Millennium) per annum of their average daily net
assets (each an "Expense Limitation"). For the six months ended February 29,
2000, such excess expenses amounted to $61,448, $69,777, $12,093, $57,854,
$45,215 and $80,045, for Focus, Genesis, Guardian, Manhattan, Millennium, and
Socially Responsive, respectively. For the six months ended February 29, 2000,
there was no reimbursement of expenses by Management to Partners. Socially
Responsive has agreed to repay Management
B-13
<PAGE>
through December 31, 2005, for its excess Operating Expenses previously
reimbursed by Management, so long as its annual Operating Expenses during that
period do not exceed its Expense Limitation, and the repayments are made within
three years after the year in which Management issued the reimbursement. For the
six months ended February 29, 2000, Socially Responsive has not reimbursed
Management.
Since inception of Millennium and Socially Responsive, Management has
voluntarily undertaken to pay certain expenses of each Fund as an advance. These
expenses will be repaid by each Fund to Management in the future, and are
included under the caption Payable for Fund expenses in the Statements of Assets
and Liabilities.
Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New
York Stock Exchange and sub-adviser to each Portfolio, are wholly owned
subsidiaries of Neuberger Berman Inc., a publicly held company. Several
individuals who are officers and/or trustees of the Trust are also employees of
Neuberger and/or 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.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Expenses from corresponding Portfolio, was a
reduction of $6.88, $7.64, $30.59, $3.08, $0.12, $186.82, and $0.43, for Focus,
Genesis, Guardian, Manhattan, Millennium, Partners, and Socially Responsive,
respectively.
NOTE C -- INVESTMENT TRANSACTIONS:
During the six months ended February 29, 2000, additions and reductions in
each Fund's investment in its corresponding Portfolio were as follows:
<TABLE>
<CAPTION>
ADDITIONS REDUCTIONS
- --------------------------------------------------------------------------
<S> <C> <C>
FOCUS $2,613,000 $ 658,000
GENESIS 5,919,000 11,275,000
GUARDIAN 1,358,000 1,912,000
MANHATTAN 1,292,000 314,000
MILLENNIUM 55,000 --
PARTNERS 2,441,000 8,133,000
SOCIALLY RESPONSIVE 141,000 11,000
</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-14
<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 29, September 4, 1996(2)
2000 Year Ended August 31, to August 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
--------------------------------------------------------------
Net Asset Value, Beginning of Period $16.18 $11.31 $14.34 $10.00
--------------------------------------------------------------
Income From Investment Operations
Net Investment Loss (.04) (.08) (.03) (.05)
Net Gains or Losses on Securities
(both realized and unrealized) 3.39 4.96 (2.42) 4.39
--------------------------------------------------------------
Total From Investment Operations 3.35 4.88 (2.45) 4.34
--------------------------------------------------------------
Less Distributions
Distributions (from net capital
gains) (1.54) (.01) (.58) --
--------------------------------------------------------------
Net Asset Value, End of Period $17.99 $16.18 $11.31 $14.34
--------------------------------------------------------------
Total Return(3) +21.11%(4) +43.15% -17.73% +43.40%(4)
--------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 4.3 $ 1.9 $ 0.5 $ 0.1
--------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(5) 1.50%(6) 1.50% 1.50% 1.50%(6)
--------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(7) 1.50%(6) 1.50% 1.50% 1.50%(6)
--------------------------------------------------------------
Ratio of Net Investment Loss to
Average Net Assets (.71%)(6) (.58%) (.36%) (.43%)(6)
--------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-15
<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 29, April 2, 1997(2)
2000 Year Ended August 31, to August 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
----------------------------------------------------------
Net Asset Value, Beginning of Period $12.64 $10.67 $13.21 $10.00
----------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (.02) .01 .02 (.01)
Net Gains or Losses on Securities
(both realized and unrealized) .86 1.99 (2.52) 3.22
----------------------------------------------------------
Total From Investment Operations .84 2.00 (2.50) 3.21
----------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.01) (.03) -- --
Distributions (from net capital
gains) -- -- (.04) --
----------------------------------------------------------
Total Distributions (.01) (.03) (.04) --
----------------------------------------------------------
Net Asset Value, End of Period $13.47 $12.64 $10.67 $13.21
----------------------------------------------------------
Total Return(3) +6.65%(4) +18.75% -18.99% +32.10%(4)
----------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 82.0 $ 81.8 $ 24.5 $ 0.7
----------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(5) 1.50%(6) 1.50% 1.50% 1.50%(6)
----------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(7) 1.50%(6) 1.50% 1.50% 1.50%(6)
----------------------------------------------------------
Ratio of Net Investment Income
(Loss) to Average Net Assets (.28%)(6) .16% .60% (.36%)(6)
----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-16
<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 29, September 4, 1996(2)
2000 Year Ended August 31, to August 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
--------------------------------------------------------------
Net Asset Value, Beginning of Period $13.54 $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) (.40) 2.73 (2.92) 3.88
--------------------------------------------------------------
Total From Investment Operations (.40) 2.73 (2.94) 3.89
--------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.01) -- -- (.01)
Distributions (from net capital
gains) (.09) -- (.13) --
--------------------------------------------------------------
Total Distributions (.10) -- (.13) (.01)
--------------------------------------------------------------
Net Asset Value, End of Period $13.04 $13.54 $10.81 $13.88
--------------------------------------------------------------
Total Return(3) -3.00%(4) +25.25% -21.34% +38.92%(4)
--------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 23.6 $ 24.8 $ 17.5 $ 9.3
--------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(5) 1.50%(6) 1.50% 1.50% 1.50%(6)
--------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(7) 1.50%(6) 1.50% 1.50% 1.50%(6)
--------------------------------------------------------------
Ratio of Net Investment Income
(Loss) to Average Net Assets .01%(6) .03% (.16%) (.12%)(6)
--------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-17
<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 29, September 4, 1996(2)
2000 Year Ended August 31, to August 31,
(UNAUDITED) 1999 1998 1997
<S> <C> <C> <C> <C>
--------------------------------------------------------------
Net Asset Value, Beginning of Period $14.54 $10.76 $13.75 $10.00
--------------------------------------------------------------
Income From Investment Operations
Net Investment Loss (.09) (.04) (.11) (.08)
Net Gains or Losses on Securities
(both realized and unrealized) 12.99 3.92 (1.22) 3.94
--------------------------------------------------------------
Total From Investment Operations 12.90 3.88 (1.33) 3.86
--------------------------------------------------------------
Less Distributions
Distributions (from net capital
gains) -- (.10) (1.66) (.11)
--------------------------------------------------------------
Net Asset Value, End of Period $27.44 $14.54 $10.76 $13.75
--------------------------------------------------------------
Total Return(3) +88.72%(4) +36.09% -11.29% +38.86%(4)
--------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 4.7 $ 1.7 $ 0.2 $ 0.1
--------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(5) 1.50%(6) 1.50% 1.50% 1.50%(6)
--------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets(7) 1.50%(6) 1.50% 1.50% 1.50%(6)
--------------------------------------------------------------
Ratio of Net Investment Loss to
Average Net Assets (1.13%)(6) (1.00%) (.98%) (.70%)(6)
--------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-18
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Millennium Assets(1)
The following table includes selected data for a share outstanding throughout
the 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>
Period from
January 26, 2000(2)
to February 29,
2000
(UNAUDITED)
<S> <C>
-------------------
Net Asset Value, Beginning of Period $ 10.00
-------------------
Income From Investment Operations
Net Investment Loss --
Net Gains or Losses on Securities
(both realized and unrealized) 2.49
-------------------
Total From Investment Operations 2.49
-------------------
Net Asset Value, End of Period $ 12.49
-------------------
Total Return(3)(4) +24.90%
-------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 0.1
-------------------
Ratio of Gross Expenses to Average
Net Assets(5)(6) 1.75%
-------------------
Ratio of Net Expenses to Average Net
Assets(6)(7) 1.75%
-------------------
Ratio of Net Investment Loss to
Average Net Assets(6) (1.33%)
-------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-19
<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 29, August 19, 1996(2)
2000 Year Ended August 31, to August 31,
(UNAUDITED) 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------
Net Asset Value, Beginning of Period $15.74 $12.59 $14.42 $ 9.91 $10.00
----------------------------------------------------------------
Income From Investment Operations
Net Investment Income .01 .06 .01 .01 --
Net Gains or Losses on Securities
(both realized and unrealized) (.52) 3.15 (1.51) 4.56 (.09)
----------------------------------------------------------------
Total From Investment Operations (.51) 3.21 (1.50) 4.57 (.09)
----------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.01) (.06) (.01) (.01) --
Distributions (from net capital
gains) (.89) -- (.32) (.05) --
----------------------------------------------------------------
Total Distributions (.90) (.06) (.33) (.06) --
----------------------------------------------------------------
Net Asset Value, End of Period $14.33 $15.74 $12.59 $14.42 $ 9.91
----------------------------------------------------------------
Total Return(3) -3.47%(4) +25.51% -10.69% +46.26% -0.90%(4)
----------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 54.9 $ 62.4 $ 29.3 $ 5.8 $ 0.1
----------------------------------------------------------------
Ratio of Gross Expenses to Average
Net Assets(5) 1.37%(6) 1.31% 1.50% 1.50% 1.50%(6)
----------------------------------------------------------------
Ratio of Net Expenses to Average Net
Assets 1.37%(6) 1.31% 1.50%(7) 1.50%(7) 1.50%(6)(7)
----------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets .19%(6) .41% .12% .08% 2.38%(6)
----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-20
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive 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 29, June 9, 1999(2)
2000 to August 31,
(UNAUDITED) 1999
<S> <C> <C>
-------------------------------
Net Asset Value, Beginning of Period $9.85 $10.00
-------------------------------
Income From Investment Operations
Net Investment Loss (.01) (.01)
Net Gains or Losses on Securities
(both realized and unrealized) (.97) (.14)
-------------------------------
Total From Investment Operations (.98) (.15)
-------------------------------
Net Asset Value, End of Period $8.87 $ 9.85
-------------------------------
Total Return(3)(4) -9.95% -1.50%
-------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (in
millions) $ 0.2 $ 0.1
-------------------------------
Ratio of Gross Expenses to Average
Net Assets(5)(6) 1.50% 1.50%
-------------------------------
Ratio of Net Expenses to Average Net
Assets(6)(7) 1.50% 1.50%
-------------------------------
Ratio of Net Investment Loss to
Average Net Assets(6) (.26%) (.56%)
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL HIGHLIGHTS
B-21
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
Neuberger Berman February 29, 2000 (Unaudited)
- ----------------------------------------------------------------------
Equity Assets
1) The per share amounts and ratios which are shown reflect income and expenses,
including each Fund's proportionate share of its corresponding Portfolio's
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>
Six Months Period from
Ended Year Ended September 4, 1996 to
February 29, August 31, August 31,
FOCUS 2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses 6.24% 7.08% 28.01% 76.74%
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Period from
Ended Year Ended September 4, 1996 to
February 29, August 31, August 31,
GUARDIAN 2000 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses 1.60% 1.56% 1.63% 5.65%
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Period from
Ended Year Ended September 4, 1996 to
February 29, August 31, August 31,
MANHATTAN 2000 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses 5.67% 19.99% 42.53% 77.83%
---------------------------------------------------------
</TABLE>
B-22
<PAGE>
<TABLE>
<CAPTION>
Period from
January 26, 2000 to
February 29,
MILLENNIUM 2000
- --------------------------------------------------------------------
<S> <C>
Net Expenses 1,131.01%
-------------------
</TABLE>
<TABLE>
<CAPTION>
Period from
Year Ended August 19, 1996 to
August 31, August 31,
PARTNERS 1998 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Expenses 1.56% 8.74% 11,685.89%
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Six Months Period from
Ended June 9, 1999 to
February 29, August 31,
SOCIALLY RESPONSIVE 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Expenses 110.42% 507.01%
-------------------------------
</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 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>
Six Months Period from
Ended Year Ended April 2, 1997 to
February 29, August 31, August 31,
GENESIS 2000 1999 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Expenses 1.67% 1.63% 2.40% 25.91%
--------------------------------------------------
</TABLE>
B-23
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Citigroup Inc. 9.5%
2. Morgan Stanley Dean Witter 6.9%
3. Sterling Commerce 6.8%
4. Rational Software 6.4%
5. Chase Manhattan 6.2%
6. Capital One Financial 5.9%
7. Countrywide Credit Industries 5.0%
8. Providian Financial 4.9%
9. Compuware Corp. 4.8%
10. Wellpoint Health Networks 3.9%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (99.0%)
AUTOMOTIVE (3.8%)
855,000 General Motors $ 65,034
----------
FINANCIAL SERVICES (46.5%)
2,767,500 Capital One Financial 101,879
1,355,000 Chase Manhattan 107,892
3,183,375 Citigroup Inc. 164,541
3,490,800 Countrywide Credit Industries 87,052
1,948,600 FleetBoston Financial 53,099
640,000 Hartford Financial Services
Group 20,000
1,706,000 Morgan Stanley Dean Witter 120,167
950,000 Nationwide Financial Services 21,909
1,310,000 Providian Financial 84,904
1,377,400 Travelers Property Casualty 43,560
----------
805,003
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
HEALTH CARE (5.1%)
2,398,800 Foundation Health Systems $ 19,940
1,008,500 Wellpoint Health Networks 68,074
----------
88,014
----------
RETAIL (6.4%)
2,593,000 Furniture Brands International 41,650(2)
2,219,500 Jones Apparel Group 50,216
90,000 Neiman Marcus Group Class B 1,890
633,000 Staples, Inc. 17,091
----------
110,847
----------
TECHNOLOGY (37.2%)
375,000 American Management Systems 11,930
150,000 ANTEC Corp. 7,941
1,028,000 Atmel Corp. 50,886
675,000 Compaq Computer 16,791
3,715,000 Compuware Corp. 82,194
1,662,000 Gartner Group Class A 23,787
420,000 International Rectifier 17,588
485,000 Lattice Semiconductor 34,071
837,500 Microchip Technology 52,291
718,000 Oracle Corp. 53,312
505,000 Photronics, Inc. 21,494
1,560,000 Rational Software 110,955
2,675,000 Sterling Commerce 117,198
346,700 Sterling Software 12,438
170,000 Synopsys, Inc. 6,789
1,050,000 Tech Data 22,772
----------
642,437
----------
TOTAL COMMON STOCKS (COST
$1,081,905) 1,711,335
----------
</TABLE>
C-1
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Focus Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (0.8%)
$$13,747,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$13,749,180, Collateralized
by $14,090,000 Fannie Mae,
Notes, 6.40%, due 9/27/01
(Collateral Value
$14,161,295) (COST $13,747) $ 13,747(3)
----------
SHORT-TERM INVESTMENTS (0.4%)
6,891,378 N&B Securities Lending Quality
Fund, LLC (COST $6,891) 6,891(3)
----------
TOTAL INVESTMENTS (100.2%)
(COST $1,102,543) 1,731,973(4)
Liabilities, less cash,
receivables and other assets
[(0.2%)] (2,682)
----------
TOTAL NET ASSETS (100.0%) $1,729,291
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-2
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Dallas Semiconductor 3.1%
2. Zebra Technologies 2.7%
3. AptarGroup Inc. 2.6%
4. National-Oilwell 2.2%
5. AAR Corp. 2.1%
6. Fair, Isaac & Co. 2.0%
7. Newport News Shipbuilding 2.0%
8. Methode Electronics Class A 1.9%
9. Alliant Techsystems 1.9%
10. Black Box 1.9%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (94.6%)
AEROSPACE (4.1%)
1,364,950 AAR Corp. $ 32,418(2)
787,200 Aviall Inc. 6,445
504,400 Cordant Technologies 16,330
248,750 Ducommun Inc. 2,317
329,700 Moog, Inc. Class A 5,893
----------
63,403
----------
AUTOMOTIVE (0.9%)
628,500 Donaldson Co. 14,298
----------
BANKING & FINANCIAL (5.6%)
135,200 Bank United 3,541
498,100 Community First Bankshares 6,973
667,600 Cullen/Frost Bankers 14,353
331,400 Highland Bancorp 5,468(2)
169,950 Hudson United Bancorp 3,431
303,000 OceanFirst Financial 4,829
1,118,300 Peoples Heritage Financial
Group 11,882
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
769,675 Sterling Bancshares $ 7,312
300,350 Texas Regional Bancshares 7,340
1,017,300 Webster Financial 21,491
----------
86,620
----------
BUILDING, CONSTRUCTION & FURNISHING (1.1%)
254,800 Lincoln Electric Holdings 4,968
273,600 Simpson Manufacturing 11,594
----------
16,562
----------
BUSINESS SERVICES (0.3%)
789,400 SOS Staffing Services 3,947(2)
----------
CONSUMER CYCLICALS (0.3%)
176,300 Valassis Communications 4,881
----------
CONSUMER PRODUCTS & SERVICES (4.8%)
811,000 Alberto-Culver Class A 16,017
381,638 Block Drug 12,546
1,066,000 Church & Dwight 18,189
390,300 Matthews International 9,440
1,036,800 Ruddick Corp. 13,932
462,000 The First Years 3,754
----------
73,878
----------
DEFENSE (4.9%)
545,200 Alliant Techsystems 29,509(2)
1,102,100 Newport News Shipbuilding 31,203
723,700 Primex Technologies 15,198(2)
----------
75,910
----------
DIAGNOSTIC EQUIPMENT (0.4%)
463,500 ADAC Laboratories 5,765
----------
</TABLE>
C-3
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
ELECTRONICS (4.6%)
467,600 Benchmark Electronics $ 14,788
1,187,400 Dallas Semiconductor 47,941
180,000 SCI Systems 7,245
----------
69,974
----------
ENERGY (1.9%)
677,300 Cabot Oil & Gas 10,710
150,000 Cross Timbers Oil 1,293
808,290 Swift Energy 9,548
894,500 Unit Corp. 7,771
----------
29,322
----------
FINANCIAL TECHNOLOGY (2.8%)
640,100 Fair, Isaac & Co. 31,245
293,100 Investment Technology Group 11,358
----------
42,603
----------
HEALTH CARE (9.5%)
413,000 Acuson Corp. 5,524
132,500 Datascope Corp. 5,284
669,300 DENTSPLY International 17,151
1,126,500 Haemonetics Corp. 26,825
925,600 Mentor Corp. 25,685
421,950 Patterson Dental 15,203
473,700 STAAR Surgical 5,684
835,000 Trigon Healthcare 26,668
458,600 Universal Health Services
Class B 17,828
----------
145,852
----------
INDUSTRIAL & COMMERCIAL PRODUCTS (6.7%)
557,800 Brady Corp. 15,130
325,300 Dionex Corp. 10,267
543,900 Hussmann International 7,853
643,500 IDEX Corp. 15,927
1,065,200 Kaydon Corp. 24,500
268,900 Roper Industries 7,327
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
1,826,400 Wallace Computer Services $ 19,063
203,750 Woodhead Industries 3,311
----------
103,378
----------
INSURANCE (4.6%)
753,200 Annuity and Life Re 17,041
96,500 Brown & Brown 3,185
657,800 FBL Financial Group 10,607
1,446,700 Mutual Risk Management 19,892
891,500 Scottish Annuity & Life
Holdings 7,076(2)
848,700 W. R. Berkley 13,632
----------
71,433
----------
LODGING (0.3%)
499,500 Prime Hospitality 4,246
----------
MACHINERY & EQUIPMENT (0.8%)
643,620 Gardner Denver Machinery 12,229
----------
OFFICE EQUIPMENT (1.8%)
1,019,500 United Stationers 27,399
----------
OIL SERVICES (11.1%)
318,700 Cal Dive International 11,473
681,600 Friede Goldman Halter 3,578
983,800 Global Industries 10,084
992,100 IRI International 4,837
556,500 Nabors Industries 19,964
1,369,412 National-Oilwell 33,208
798,400 Oceaneering International 15,170
781,600 Offshore Logistics 7,767
767,300 Pride International 11,366
460,400 Smith International 28,861
631,000 Tuboscope Inc. 10,530
451,200 UTI Energy 14,467
----------
171,305
----------
PACKING & CONTAINERS (2.6%)
1,646,600 AptarGroup Inc. 39,415
----------
</TABLE>
C-4
<PAGE>
February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
PUBLISHING & BROADCASTING (1.3%)
302,300 Houghton Mifflin $ 12,035
272,900 Meredith Corp. 7,812
----------
19,847
----------
RESTAURANTS (1.1%)
785,050 Brinker International 17,075
----------
RETAILING (3.8%)
679,624 99 Cents Only Stores 17,033
353,300 Ann Taylor Stores 6,735
660,000 Claire's Stores 11,509
125,000 Payless ShoeSource 4,937
451,800 ShopKo Stores 7,511
282,800 Whole Foods Market 10,738
----------
58,463
----------
TECHNOLOGY (15.9%)
798,700 Analysts International 10,583
391,800 Black Box 29,312
488,600 CACI International 13,895
892,700 CIBER, Inc. 20,755
474,200 Davox Corp. 18,138
295,100 Jack Henry & Associates 20,620
173,500 Keane, Inc. 4,164
106,200 Kronos Inc. 6,744
350,000 Mastech Corp. 11,594
141,000 META Group 4,371
513,900 Methode Electronics Class A 29,870
71,000 SBS Technologies 3,865
410,100 Transaction Systems Architects 18,506
185,300 Wind River Systems 10,759
623,300 Zebra Technologies 41,488
----------
244,664
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
TRANSPORTATION (0.5%)
228,400 Circle International Group $ 5,581
213,600 Maritrans Inc. 1,402
----------
6,983
----------
UTILITIES, ELECTRIC & GAS (2.9%)
93,600 Atmos Energy 1,603
125,700 CH Energy Group 3,590
648,600 Montana Power 25,539
78,000 National Fuel Gas 3,193
252,900 NUI Corp. 6,006
140,100 Otter Tail Power 5,184
----------
45,115
----------
TOTAL COMMON STOCKS (COST
$1,269,841) 1,454,567
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ---------------------
<C> <S> <C>
REPURCHASE AGREEMENTS (2.2%)
$34,309,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$34,314,442, Collateralized
by $35,165,000 Fannie Mae,
Notes, 6.40%, due 9/27/01
(Collateral Value
$35,342,935)
(COST $34,309) 34,309(3)
----------
</TABLE>
C-5
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Genesis Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.0%)
$20,000,000 Merrill Lynch & Co., Inc.,
5.73%, due 3/3/00 $ 19,994
25,000,000 Wal-Mart Stores Inc., 5.75%,
due 3/7/00 24,976
47,518,102 N&B Securities Lending Quality
Fund, LLC 47,518
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $92,488) 92,488(3)
----------
TOTAL INVESTMENTS (102.8%)
(COST $1,396,638) 1,581,364(4)
Liabilities, less cash,
receivables and other assets
[(2.8%)] (43,559)
----------
TOTAL NET ASSETS (100.0%) $1,537,805
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-6
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Wellpoint Health Networks 4.1%
2. News Corp. ADR 3.9%
3. American Home Products 2.9%
4. Chase Manhattan 2.8%
5. Bell Atlantic 2.7%
6. Exxon Mobil 2.7%
7. Wells Fargo 2.3%
8. MCI WorldCom 2.3%
9. Seagate Technology 2.3%
10. Cendant Corp. 2.2%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (94.7%)
BANKING & FINANCIAL (5.1%)
1,301,500 Chase Manhattan $ 103,632
2,571,400 Wells Fargo 85,017
----------
188,649
----------
BASIC MATERIALS (7.5%)
2,996,000 Cabot Corp. 66,286
795,500 Champion International 41,167
256,000 Dow Chemical 27,776
1,165,400 duPont 58,853
1,363,200 International Paper 50,183
2,269,500 Millennium Chemicals 31,773
----------
276,038
----------
CAPITAL GOODS (5.9%)
260,000 Deere & Co. 9,295
435,300 Emerson Electric 19,833
595,600 General Dynamics 25,760
409,100 Illinois Tool Works 21,145
4,005,800 Republic Services 43,563
1,738,200 SCI Systems 69,963
145,400 Solectron Corp. 9,524
356,100 United Technologies 18,139
----------
217,222
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMUNICATION SERVICES (8.4%)
1,618,100 AT&T Corp. $ 79,995
2,006,700 Bell Atlantic 98,203
1,903,500 MCI WorldCom 84,944
1,146,000 SBC Communications 43,548
----------
306,690
----------
CONSUMER CYCLICALS (9.5%)
914,300 Carnival Corp. 26,343
4,636,300 Cendant Corp. 82,584
1,643,100 Federated Department Stores 60,281
462,300 General Motors 35,164
2,077,600 Lear Corp. 43,889
1,533,300 Lowe's Cos. 73,024
716,300 Safeway Inc. 27,622
----------
348,907
----------
CONSUMER GOODS & SERVICES (0.8%)
938,200 PepsiCo, Inc. 30,257
----------
CONSUMER STAPLES (6.1%)
891,100 AMFM Inc. 54,691
406,200 Coca-Cola Enterprises 9,495
1,168,900 Kimberly-Clark 60,418
1,084,200 McDonald's Corp. 34,220
1,122,300 Nabisco Holdings 32,827
1,620,000 Philip Morris 32,501
----------
224,152
----------
DIVERSIFIED (0.3%)
252,000 Tyco International 9,560
----------
DRUGS (0.3%)
310,300 Schering-Plough 10,822
----------
ENERGY (13.3%)
1,150,600 Amerada Hess 58,177
873,300 Chevron Corp. 65,225
866,600 Diamond Offshore Drilling 27,514
1,292,246 Exxon Mobil 97,322
1,618,900 Halliburton Co. 61,822
718,000 Royal Dutch Petroleum - NY
Shares 37,695
</TABLE>
C-7
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
533,500 Schlumberger Ltd. $ 39,412
500,000 Texaco Inc. 23,719
1,099,113 Transocean Sedco Forex 43,346
3,822,500 Union Pacific Resources Group 34,164
----------
488,396
----------
FINANCIAL SERVICES (9.9%)
379,500 Aon Corp. 7,946
3,265,800 Associates First Capital 64,908
1,501,000 Capital One Financial 55,255
1,544,300 Citigroup Inc. 79,821
1,089,807 FleetBoston Financial 29,697
955,500 Hartford Financial Services
Group 29,859
525,200 Morgan Stanley Dean Witter 36,994
260,500 Progressive Corp. 15,500
1,325,000 SLM Holding 41,489
----------
361,469
----------
HEALTH CARE (9.3%)
2,449,100 American Home Products 106,536
417,600 Bristol-Myers Squibb 23,725
220,400 Eli Lilly 13,100
555,500 Warner-Lambert 47,530(5)
2,226,996 Wellpoint Health Networks 150,322(5)
----------
341,213
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
MEDIA & ENTERTAINMENT (0.3%)
331,100 Walt Disney $ 11,092
----------
PACKING & CONTAINERS (0.4%)
316,300 Coastal Corp. 13,305
----------
TECHNOLOGY (14.9%)
625,500 Apple Computer 71,698
460,600 BMC Software 21,188
364,500 Compaq Computer 9,067
821,600 Computer Associates 52,839
983,000 Gateway Inc. 67,581
544,900 Hewlett-Packard 73,289
424,100 IBM 43,258
446,100 Micron Technology 43,746
601,600 Novell, Inc. 19,890
862,800 Rational Software 61,367
1,677,800 Seagate Technology 83,680
5,000 VIA NET.WORKS 330
----------
547,933
----------
TRANSPORTATION (2.7%)
681,600 AMR Corp. 36,039
1,617,000 Burlington Northern Santa Fe 31,835
993,200 Continental Airlines Class B 31,410
----------
99,284
----------
TOTAL COMMON STOCKS (COST
$3,409,757) 3,474,989
----------
PREFERRED STOCKS (3.9%)
2,874,200 News Corp. ADR (COST $79,659) 144,608
----------
</TABLE>
C-8
<PAGE>
February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Guardian Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.6%)
$50,000,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$50,007,931, Collateralized
by $51,245,000 Fannie Mae,
Notes, 6.40%, due 9/27/01
(Collateral Value
$51,504,300) $ 50,000
8,708,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$8,709,381, Collateralized by
$8,925,000 Fannie Mae, Notes,
6.40%, due 9/27/01
(Collateral Value $8,970,161) 8,708
----------
TOTAL REPURCHASE AGREEMENTS
(COST $58,708) 58,708(3)
----------
SHORT-TERM INVESTMENTS (2.3%)
25,000,000 Pfizer Inc., 5.82%,
due 3/2/00 24,996
58,319,639 N&B Securities Lending Quality
Fund, LLC 58,320
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $83,316) 83,316(3)
----------
TOTAL INVESTMENTS (102.5%)
(COST $3,631,440) 3,761,621(4)
Liabilities, less cash,
receivables and other assets
[(2.5%)] (90,472)
----------
TOTAL NET ASSETS (100.0%) $3,671,149
----------
</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. Citrix Systems 4.4%
2. JDS Uniphase 3.2%
3. VERITAS Software 3.1%
4. PMC-Sierra 2.9%
5. PE Corp.-PE Biosystems Group 2.2%
6. Peregrine Systems 2.0%
7. Network Appliance 2.0%
8. Efficient Networks 2.0%
9. Metromedia Fiber Network 1.9%
10. Comverse Technology 1.8%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (94.5%)
BUSINESS SERVICES (0.6%)
108,300 Lamar Advertising $ 4,718
40,400 Reckson Service Industries 2,174
----------
6,892
----------
CAPITAL GOODS (1.0%)
130,700 Waters Corp. 12,817
----------
COMMUNICATIONS (12.5%)
143,800 Cabletron Systems 7,046
112,200 Comverse Technology 22,089
30,700 Copper Mountain Networks 2,669
64,100 E-Tek Dynamics 17,515
149,700 Efficient Networks 24,139
150,500 JDS Uniphase 39,676
62,200 Next Level Communications 8,366
27,700 Nextel Partners 887
224,381 NTL Inc. 20,531
37,200 Redback Networks 11,104
----------
154,022
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
CONSUMER CYCLICALS (8.2%)
91,100 EchoStar Communications $ 10,385
281,200 Emmis Communications 10,264
207,900 Entercom Communications 8,745
237,900 Gemstar International Group 18,051
82,700 General Motors Class H 9,965
134,200 Harley-Davidson 9,142
592,400 Park Place Entertainment 6,702
111,700 Univision Communications 11,379
193,600 USA Networks 4,344
171,600 Westwood One 11,465
----------
100,442
----------
ELECTRICAL EQUIPMENT (11.6%)
191,900 Altera Corp. 15,304
123,800 Analog Devices 19,437
68,600 Broadcom Corp. 13,540
166,900 Conexant Systems 16,398
185,100 KLA-Tencor 14,426
173,800 Maxim Integrated Products 11,612
182,000 PMC-Sierra 35,137
212,200 Xilinx Inc. 16,923
----------
142,777
----------
ENERGY (3.1%)
191,500 Calpine Corporation 17,522
213,900 Coastal Corp. 8,997
65,800 Cooper Cameron 3,636
137,100 Rowan Companies 3,445
484,300 Union Pacific Resources Group 4,328
----------
37,928
----------
</TABLE>
C-10
<PAGE>
February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
FINANCE (0.4%)
84,000 eSPEED, Inc. $ 5,203
----------
FINANCIAL SERVICES (2.2%)
181,800 Capital One Financial 6,693
219,700 E*TRADE Group 5,410
96,900 Lehman Brothers Holdings 7,025
116,600 Providian Financial 7,557
----------
26,685
----------
HARDWARE (5.2%)
186,400 Flextronics International 11,347
131,700 Network Appliance 24,858
56,800 QLogic Corp. 8,861
156,300 Sanmina Corp. 18,297
----------
63,363
----------
HEALTH CARE (10.2%)
150,500 Biogen, Inc. 16,245
5,200 Celera Genomics 1,269
79,400 HealthAxis, Inc. 2,313
39,000 Human Genome Sciences 8,512
76,300 Immunex Corp. 15,064
83,800 MedImmune, Inc. 16,634
144,500 MiniMed Inc. 14,432
256,000 PE Corp.-PE Biosystems Group 27,008
144,700 QLT PhotoTherapeutics 10,328
128,200 Sepracor Inc. 12,996
----------
124,801
----------
INTERNET (14.7%)
44,600 Art Technology Group 6,445
61,100 BroadVision, Inc. 15,431
105,700 CheckFree Holdings 9,295
51,000 Clarent Corp. 5,572
14,400 Commerce One 3,008
104,200 Digex, Inc. 16,880
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
92,900 DoubleClick Inc. $ 8,251
19,700 FreeMarkets, Inc. 3,431
111,100 Healtheon Corp. 6,145
337,100 Intuit Inc. 17,698
89,700 Phone.com 12,524
202,400 Portal Software 15,205
324,600 PSINet Inc. 15,053
85,150 PurchasePro.com 10,383
78,400 S1 Corp. 7,889
78,900 Safeguard Scientifics 13,803
25,400 VeriSign, Inc. 6,426
29,000 Vignette Corp. 6,685
----------
180,124
----------
RETAIL (4.0%)
257,500 Best Buy 14,002
146,700 BJ's Wholesale Club 4,548
213,200 Circuit City Stores 8,608
179,200 Limited, Inc. 6,093
253,500 Starbucks Corp. 8,904
105,200 Tiffany & Co. 6,752
----------
48,907
----------
SOFTWARE (15.1%)
70,500 Adobe Systems 7,191
133,600 Bea Systems 16,909
510,800 Citrix Systems 53,857
88,800 Micromuse Inc. 12,593
457,200 Peregrine Systems 24,975
165,600 Rational Software 11,778
145,700 Siebel Systems 20,207
189,450 VERITAS Software 37,487
----------
184,997
----------
TELECOMMUNICATIONS (5.7%)
114,000 Covad Communications Group 10,288
231,700 Intermedia Communications 14,670
326,200 Metromedia Fiber Network 23,451
</TABLE>
C-11
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Manhattan Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
76,100 VoiceStream Wireless $ 10,126
146,900 WinStar Communications 11,366
----------
69,901
----------
TOTAL COMMON STOCKS (COST
$572,842) 1,158,859
----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
- ---------------------
<C> <S> <C>
REPURCHASE AGREEMENTS (2.4%)
$ 29,645,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00,
dated 2/29/00,
Maturity Value $29,649,702,
Collateralized by $30,385,000
Fannie Mae, Notes, 6.40%,
due 9/27/01 (Collateral
Value $30,538,748) (COST
$29,645) 29,645(3)
----------
</TABLE>
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (20.9%)
$ 7,000,000 Ford Motor Credit Co., 5.75%,
due 3/6/00 $ 6,994
10,000,000 American Express Credit Corp.,
5.74%, due 3/8/00 9,989
20,000,000 General Electric Capital
Corp., 5.75%, due 3/8/00 19,978
219,242,815 N&B Securities Lending Quality
Fund, LLC 219,243
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $256,204) 256,204(3)
----------
TOTAL INVESTMENTS (117.8%)
(COST $858,691) 1,444,708(4)
Liabilities, less cash,
receivables and other assets
[(17.8%)] (218,172)
----------
TOTAL NET ASSETS (100.0%) $1,226,536
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-12
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Millennium Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Osicom Technologies 3.4%
2. Efficient Networks 3.1%
3. CAIS Internet 2.5%
4. Pinnacle Holdings 2.4%
5. Active Software 2.3%
6. Lifeminders.com 2.1%
7. Digex, Inc. 2.1%
8. Netopia, Inc. 2.1%
9. IONA Technologies ADR 2.1%
10. Artisan Components 2.0%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (98.7%)
BUSINESS SERVICES (4.2%)
154,700 Circle.com $ 1,460
217,500 Corinthian Colleges 3,888
109,350 Iron Mountain 3,335
104,700 Luminant Worldwide 2,565
91,300 Official Payments 3,276
300 Onvia.com 6
--------
14,530
--------
BUSINESS SERVICES - GENERAL BUSINESS SERVICES (1.4%)
608,500 Strategic Diagnostics 4,830
--------
BUSINESS SERVICES - IT BUSINESS SERVICES (0.7%)
140,500 Hall, Kinion & Associates 2,529
--------
CONSUMER CYCLICAL - CONSUMER MEDIA (2.5%)
92,300 Citadel Communications 3,127
51,400 Emmis Communications 1,876
29,800 Pegasus Communications 3,695
--------
8,698
--------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
CONSUMER CYCLICAL - LEISURE & CONSUMER SERVICE (0.9%)
147,100 Premier Parks $ 2,979
--------
ENERGY (3.5%)
71,500 Hanover Compressor 3,356
66,900 Independent Energy Holdings
ADR 3,349
102,200 Maverick Tube 2,300
127,800 Patterson Energy 2,915
--------
11,920
--------
FINANCIAL SERVICES (5.8%)
82,800 Affiliated Managers Group 3,255
50,952 Digital Insight 3,210
79,650 eSPEED, Inc. 4,933
165,400 Netzee, Inc. 4,238
197,200 SierraCities.com 4,166
--------
19,802
--------
HARDWARE (0.9%)
32,600 DII Group 3,152
--------
HEALTH CARE (9.0%)
14,000 Abgenix, Inc. 4,510
61,200 Allscripts, Inc. 4,223
70,500 Anesta Corp. 1,569
37,100 ArthroCare Corp. 4,582
120,700 ChromaVision Medical Systems 2,482
49,500 Enzon, Inc. 2,871
12,800 Human Genome Sciences 2,793
95,100 INAMED Corp. 3,602
51,900 Pharmacyclics, Inc. 4,142
--------
30,774
--------
INTERNET (9.5%)
94,800 About.com 6,660
301,800 Cybergold, Inc. 6,036
25,000 InterVU Inc. 3,698
138,200 Lifeminders.com 7,342
120,200 Marketing Services Group 3,185
117,100 MyPoints.com 5,489
--------
32,410
--------
</TABLE>
C-13
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Millennium Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
RETAIL (3.6%)
96,400 American Eagle Outfitters $ 2,458
152,300 Factory 2-U Stores 3,693
100,100 Insight Enterprises 3,141
210,400 Steven Madden 2,840
--------
12,132
--------
SEMICONDUCTORS (6.5%)
97,600 Asyst Technologies 4,477
20,400 Cree, Inc. 3,833
95,200 Cypress Semiconductor 4,343
46,000 Elantec Semiconductor 2,895
60,900 Helix Technology 4,332
48,600 Zoran Corp. 2,479
--------
22,359
--------
SOFTWARE (9.0%)
75,100 Active Software 7,885
74,100 Actuate Software 4,622
114,400 BindView Development 3,861
42,600 PC-Tel 2,897
47,000 Project Software & Development 3,639
56,500 Radiant Systems 2,889
77,200 Visual Networks 5,076
--------
30,869
--------
TECHNOLOGY - HARDWARE (16.1%)
71,800 AudioCodes Ltd. 5,547
65,500 Efficient Networks 10,562
20,000 Extended Systems 2,035
53,800 Mercury Computer Systems 2,592
42,000 Natural MicroSystems 2,678
84,300 Netopia, Inc. 7,271
81,100 Osicom Technologies 11,754
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
61,200 SonicWALL, Inc. $ 5,539
34,000 Virata Corp. 5,015
65,500 Westell Technologies 2,243
--------
55,236
--------
TECHNOLOGY - SEMICONDUCTOR (4.4%)
270,800 Artisan Components 6,872
171,100 Integrated Device Technology 6,309
25,000 Kopin Corp. 1,853
--------
15,034
--------
TECHNOLOGY - SOFTWARE (6.1%)
27,100 Allaire Corp. 3,506
83,300 IONA Technologies ADR 7,060
52,500 Netegrity, Inc. 4,489
137,800 SERENA Software 5,813
--------
20,868
--------
TELECOMMUNICATIONS (14.6%)
47,200 AirGate PCS 4,626
83,100 C-COR.net 3,716
225,500 CAIS Internet 8,625
45,300 Digex, Inc. 7,339
41,500 Digital Island 4,819
78,300 Eloquent, Inc. 2,633
109,500 Network Plus 4,223
30,100 Nextel Partners 963
137,700 Pinnacle Holdings 8,055
7,900 Teltrend Inc. 837
53,000 Time Warner Telecom 4,081
--------
49,917
--------
TOTAL COMMON STOCKS (COST
$211,549) 338,039
--------
</TABLE>
C-14
<PAGE>
February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Millennium Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (2.9%)
$ 9,906,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$9,907,571, Collateralized by
$10,155,000 Fannie Mae,
Notes, 6.40%, due 9/27/01
(Collateral Value
$10,206,384) (COST $9,906) $ 9,906(3)
--------
SHORT-TERM INVESTMENTS (12.6%)
43,222,736 N&B Securities Lending Quality
Fund, LLC (COST $43,223) 43,223(3)
--------
TOTAL INVESTMENTS (114.2%)
(COST $264,678) 391,168(4)
Liabilities, less cash,
receivables and other assets
[(14.2%)] (48,492)
--------
TOTAL NET ASSETS (100.0%) $342,676
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-15
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. L.M. Ericsson Telephone, B Shares ADR 3.1%
2. CIGNA Corp. 3.0%
3. News Corp. ADR 3.0%
4. GTE Corp. 2.6%
5. IBM 2.6%
6. The Williams Cos. 2.4%
7. Honeywell International 2.3%
8. Parametric Technology 2.3%
9. Computer Associates 2.3%
10. Bank of New York 2.3%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (95.3%)
AEROSPACE (2.3%)
1,423,000 Honeywell International $ 68,482
----------
AIRLINES (1.5%)
393,000 AMR Corp. 20,780
771,200 Continental Airlines Class B 24,389
----------
45,169
----------
AUTOMOBILE MANUFACTURING (1.7%)
657,000 General Motors 49,973
----------
AUTO/TRUCK REPLACEMENT PARTS (0.8%)
1,090,000 Lear Corp. 23,026
----------
BANKING & FINANCIAL (6.8%)
2,025,000 Bank of New York 67,458
770,000 Chase Manhattan 61,311
284,100 Citigroup Inc. 14,684
1,337,000 Countrywide Credit Industries 33,342
675,000 Wells Fargo 22,317
----------
199,112
----------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
CHEMICALS (2.9%)
614,000 Alcoa Inc. $ 42,059
855,000 duPont 43,177
----------
85,236
----------
COMMUNICATIONS (3.0%)
570,000 Bell Atlantic 27,894
1,360,000 MCI WorldCom 60,690
----------
88,584
----------
ENERGY (1.6%)
175,000 AES Corp. 14,667
660,000 Duke Energy 32,010
----------
46,677
----------
FINANCIAL SERVICES (2.1%)
2,150,000 Ceridian Corp. 42,597
593,000 SLM Holding 18,568
----------
61,165
----------
FOOD & TOBACCO (3.0%)
839,000 Anheuser-Busch 53,801
1,197,900 Nabisco Holdings 35,039
----------
88,840
----------
FOOD PRODUCTS (2.0%)
4,000,000 Kroger Co. 59,500
----------
GAS (1.8%)
1,572,100 Praxair, Inc. 53,058
----------
HEALTH CARE (11.3%)
942,000 American Home Products 40,977
1,020,300 Bristol-Myers Squibb 57,966
1,200,000 CIGNA Corp. 88,575
706,400 Johnson & Johnson 50,684
5,500 MedicaLogic, Inc. 204
955,000 Merck & Co. 58,792
547,900 Wellpoint Health Networks 36,984
----------
334,182
----------
</TABLE>
C-16
<PAGE>
February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
INDUSTRIAL GOODS & SERVICES (2.8%)
1,485,000 General Dynamics $ 64,226
357,200 Phelps Dodge 16,833
----------
81,059
----------
INSURANCE (5.6%)
1,544,000 Ace, Ltd. 27,599
650,000 American International Group 57,485
1,465,700 Aon Corp. 30,688
1,183,359 XL Capital 47,852
----------
163,624
----------
MEDIA & ENTERTAINMENT (1.8%)
1,570,000 Walt Disney 52,595
----------
OIL & GAS (9.2%)
540,000 Chevron Corp. 40,331
735,000 Exxon Mobil 55,355
870,000 Halliburton Co. 33,223
913,200 Texaco Inc. 43,320
800,000 Total Fina ADR 53,700
1,158,000 Transocean Sedco Forex 45,669
----------
271,598
----------
PAPER & FOREST PRODUCTS (2.5%)
478,500 Georgia-Pacific 16,598
1,095,000 Weyerhaeuser Co. 56,187
----------
72,785
----------
RAILROADS (0.2%)
305,300 Burlington Northern Santa Fe 6,011
----------
RETAILING (0.6%)
1,620,000 Consolidated Stores 18,225
----------
TECHNOLOGY (19.5%)
1,980,000 Cadence Design Systems 39,476
1,058,000 Computer Associates 68,043
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
540,000 Computer Sciences $ 42,559
505,000 General Motors Class H 60,853
750,000 IBM 76,500
961,000 L.M. Ericsson Telephone, B
Shares ADR 92,256
225,000 Micron Technology 22,064
175,000 Motorola, Inc. 29,837
39,200 Network Solutions 12,639
1,142,400 Novell, Inc. 37,771
2,245,000 Parametric Technology 68,052
798,600 Unisys Corp. 23,908
5,000 VIA NET.WORKS 330
----------
574,288
----------
TELECOMMUNICATIONS (7.7%)
176,550 Allegiance Telecom 17,456
1,045,000 AT&T Corp.-Liberty Media Group
Class A 54,601
297,800 Global Crossing 13,885
1,323,100 GTE Corp. 78,063
468,000 Nextel Communications 63,999
----------
228,004
----------
UTILITIES (4.6%)
998,400 Edison International 26,270
1,695,000 The Williams Cos. 70,872
1,010,000 Unicom Corp. 38,191
----------
135,333
----------
TOTAL COMMON STOCKS (COST
$2,686,567) 2,806,526
----------
PREFERRED STOCKS (3.0%)
1,752,000 News Corp. ADR (COST $46,209) 88,147
----------
</TABLE>
C-17
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Partners Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ----------------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.0%)
$ 29,395,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$29,399,662, Collateralized
by $30,125,000 Fannie Mae,
Notes, 6.40%, due 9/27/01
(Collateral Value
$30,277,433) (COST $29,395) $ 29,395(3)
----------
SHORT-TERM INVESTMENTS (3.4%)
101,394,544 N&B Securities Lending Quality
Fund, LLC (COST $101,395) 101,395(3)
----------
TOTAL INVESTMENTS (102.7%)
(COST $2,863,566) 3,025,463(4)
Liabilities, less cash,
receivables and other assets
[(2.7%)] (79,167)
----------
TOTAL NET ASSETS (100.0%) $2,946,296
----------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-18
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
TOP TEN EQUITY HOLDINGS
----------------------------------------------------
HOLDING PERCENTAGE
<C> <S> <C>
1. Hewlett-Packard 5.4%
2. Intel Corp. 5.1%
3. Electronic Data Systems 4.1%
4. Citigroup Inc. 4.0%
5. Cooper Cameron 3.6%
6. AT&T Corp. 3.2%
7. Warner-Lambert 2.9%
8. MCI WorldCom 2.9%
9. Biogen, Inc. 2.8%
10. Kimberly-Clark 2.6%
</TABLE>
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
COMMON STOCKS (99.0%)
ADVERTISING (2.0%)
67,900 True North Communications $ 2,512
--------
BASIC MATERIALS (2.0%)
36,600 Alcoa Inc. 2,507
--------
CHEMICALS (4.8%)
75,000 International Flavors &
Fragrances 2,250
36,300 Minerals Technologies 1,473
70,700 Praxair, Inc. 2,386
--------
6,109
--------
CONSUMER GOODS & SERVICES (4.8%)
65,300 Kimberly-Clark 3,375
100,000 Marriott International 2,756
--------
6,131
--------
DIVERSIFIED (4.1%)
48,800 Danaher Corp. 1,992
87,100 Tyco International 3,304
--------
5,296
--------
ENERGY (1.8%)
50,000 BP Amoco ADR 2,350
--------
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
ENTERTAINMENT (2.6%)
127,000 Fox Entertainment Group $ 3,342
--------
FINANCIAL SERVICES (8.3%)
37,600 Chase Manhattan 2,994
98,950 Citigroup Inc. 5,115
46,800 Fannie Mae 2,480
--------
10,589
--------
FOOD & BEVERAGE (0.8%)
66,400 Sara Lee 996
--------
HEALTH CARE (9.2%)
32,600 Biogen, Inc. 3,519
22,800 Johnson & Johnson 1,636
42,800 Warner-Lambert 3,662
42,900 Wellpoint Health Networks 2,895
--------
11,712
--------
INSURANCE (6.3%)
27,000 American International Group 2,388
60,000 HealthAxis, Inc. 1,747
30,200 Progressive Corp. 1,797
76,200 ReliaStar Financial 2,129
--------
8,061
--------
OIL & GAS (9.7%)
90,500 Anadarko Petroleum 2,783
83,500 Cooper Cameron 4,613
47,300 Enron Corp. 3,264
50,600 Nabors Industries 1,815
--------
12,475
--------
PAPER & FOREST PRODUCTS (1.3%)
53,700 Mead Corp. 1,608
--------
PUBLISHING & BROADCASTING (1.8%)
81,700 Valassis Communications 2,262
--------
</TABLE>
C-19
<PAGE>
SCHEDULE OF INVESTMENTS
Neuberger Berman February 29, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Socially Responsive Portfolio (Cont'd)
<TABLE>
<CAPTION>
Market
Number Value(1)
of Shares (000's omitted)
- --------------------- ---------------
<C> <S> <C>
RETAIL (3.7%)
71,700 Safeway Inc. $ 2,765
33,600 Target Corp. 1,982
--------
4,747
--------
RETAIL STORES (1.7%)
60,700 Federated Department Stores 2,227
--------
RETAILING (1.5%)
40,000 Wal-Mart Stores 1,947
--------
TECHNOLOGY (20.4%)
110,700 Compaq Computer 2,754
81,100 Electronic Data Systems 5,251
51,700 Hewlett-Packard 6,954
25,000 IBM 2,550
58,100 Intel Corp. 6,565
60,000 Novell, Inc. 1,984
--------
26,058
--------
TELECOMMUNICATIONS (9.8%)
83,200 AT&T Corp. 4,113
45,500 Bell Atlantic 2,227
81,900 MCI WorldCom 3,655
33,000 Metricom, Inc. 2,570
--------
12,565
--------
TRANSPORTATION (2.4%)
58,100 AMR Corp. 3,072
--------
TOTAL COMMON STOCKS (COST
$106,437) 126,566
--------
</TABLE>
<TABLE>
<CAPTION>
Market
Principal Value(1)
Amount (000's omitted)
- --------------------- ---------------
<C> <S> <C>
REPURCHASE AGREEMENTS (0.8%)
$1,023,000 State Street Bank and Trust
Co. Repurchase Agreement,
5.71%, due 3/1/00, dated
2/29/00, Maturity Value
$1,046,166, Collateralized by
$1,075,000 Fannie Mae, Notes,
6.40%, due 9/27/01
(Collateral Value $1,080,440)
(COST $1,023) $ 1,023(3)
--------
SHORT-TERM INVESTMENTS (1.9%)
100,000 Community Capital Bank, 4.20%,
due 3/31/00 100
100,000 Self Help Credit Union, 5.46%,
due 5/22/00 100
2,214,967 N&B Securities Lending Quality
Fund, LLC 2,215
--------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,415) 2,415(3)
--------
TOTAL INVESTMENTS (101.7%)
(COST $109,875) 130,004(4)
Liabilities, less cash,
receivables and other assets
[(1.7%)] (2,135)
--------
TOTAL NET ASSETS (100.0%) $127,869
--------
</TABLE>
SEE NOTES TO SCHEDULE OF INVESTMENTS
C-20
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS
February 29, 2000 (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 29, 2000, selected Portfolio information on a U.S. Federal income
tax basis was as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
NEUBERGER BERMAN COST APPRECIATION DEPRECIATION APPRECIATION
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
FOCUS PORTFOLIO $1,104,958,000 $732,439,000 $105,424,000 $627,015,000
GENESIS PORTFOLIO 1,396,697,000 329,645,000 144,978,000 184,667,000
GUARDIAN PORTFOLIO 3,631,665,000 600,113,000 470,157,000 129,956,000
MANHATTAN PORTFOLIO 858,802,000 604,639,000 18,733,000 585,906,000
MILLENNIUM PORTFOLIO 264,713,000 131,509,000 5,054,000 126,455,000
PARTNERS PORTFOLIO 2,867,056,000 417,728,000 259,321,000 158,407,000
SOCIALLY RESPONSIVE PORTFOLIO 109,875,000 28,627,000 8,498,000 20,129,000
</TABLE>
5) The following securities were held in escrow at February 29, 2000, to cover
outstanding call options written:
<TABLE>
<CAPTION>
PREMIUM
SECURITIES AND MARKET VALUE ON MARKET VALUE
NEUBERGER BERMAN SHARES OPTIONS OF SECURITIES OPTIONS OF OPTIONS
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
GUARDIAN PORTFOLIO 311,500 Warner-Lambert $26,653,000 $1,889,000 $ 642,000
July 2000 @ 105
100,000 Wellpoint Health 6,750,000 893,000 1,838,000
Networks
April 2000 @ 50
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-21
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
-------------------------------------------
ASSETS
Investments in securities, at market value* (Notes A &
E) -- see Schedule of Investments:
Unaffiliated issuers $ 1,690,323 $ 1,487,748 $ 3,761,621
Non-controlled affiliated issuers 41,650 93,616 --
-------------------------------------------
1,731,973 1,581,364 3,761,621
Cash -- 1 --
Dividends and interest receivable 679 1,610 5,701
Prepaid expenses and other assets 24 46 127
Receivable for option contracts written 8 -- --
Receivable for securities sold 10,010 22,492 33,983
-------------------------------------------
1,742,694 1,605,513 3,801,432
-------------------------------------------
LIABILITIES
Option contracts written, at market value (Note A) -- -- 2,480
Payable for collateral on securities loaned (Note A) 6,891 47,518 58,320
Payable for securities purchased 5,713 18,981 67,716
Payable to investment manager (Note B) 636 878 1,369
Accrued expenses and other payables 163 331 398
-------------------------------------------
13,403 67,708 130,283
-------------------------------------------
NET ASSETS Applicable to Investors' Beneficial Interests $ 1,729,291 $ 1,537,805 $ 3,671,149
-------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 1,099,861 $ 1,353,079 $ 3,540,666
Net unrealized appreciation in value of investment
securities and option contracts 629,430 184,726 130,483
-------------------------------------------
NET ASSETS $ 1,729,291 $ 1,537,805 $ 3,671,149
-------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 1,066,195 $ 1,295,175 $ 3,631,440
Non-controlled affiliated issuers 36,348 101,463 --
-------------------------------------------
Total cost of investments $ 1,102,543 $ 1,396,638 $ 3,631,440
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-22
<PAGE>
February 29, 2000 (Unaudited)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
MANHATTAN MILLENNIUM PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
----------------------------------------------------------
ASSETS
Investments in securities, at market value* (Notes A &
E) -- see Schedule of Investments:
Unaffiliated issuers $ 1,444,708 $ 391,168 $ 3,025,463 $ 130,004
Non-controlled affiliated issuers -- -- -- --
----------------------------------------------------------
1,444,708 391,168 3,025,463 130,004
Cash 6 12 -- 2
Dividends and interest receivable 961 172 5,152 99
Prepaid expenses and other assets 52 3 83 8
Receivable for option contracts written -- -- -- --
Receivable for securities sold 7,935 6,029 18,768 2,454
----------------------------------------------------------
1,453,662 397,384 3,049,466 132,567
----------------------------------------------------------
LIABILITIES
Option contracts written, at market value (Note A) -- -- -- --
Payable for collateral on securities loaned (Note A) 219,243 43,223 101,395 2,215
Payable for securities purchased 6,476 11,088 272 2,375
Payable to investment manager (Note B) 442 193 1,117 60
Accrued expenses and other payables 965 204 386 48
----------------------------------------------------------
227,126 54,708 103,170 4,698
----------------------------------------------------------
NET ASSETS Applicable to Investors' Beneficial Interests $ 1,226,536 $ 342,676 $ 2,946,296 $ 127,869
----------------------------------------------------------
NET ASSETS consist of:
Paid-in capital $ 640,519 $ 216,186 $ 2,784,399 $ 107,740
Net unrealized appreciation in value of investment
securities and option contracts 586,017 126,490 161,897 20,129
----------------------------------------------------------
NET ASSETS $ 1,226,536 $ 342,676 $ 2,946,296 $ 127,869
----------------------------------------------------------
*Cost of investments:
Unaffiliated issuers $ 858,691 $ 264,678 $ 2,863,566 $ 109,875
Non-controlled affiliated issuers -- -- -- --
----------------------------------------------------------
Total cost of investments $ 858,691 $ 264,678 $ 2,863,566 $ 109,875
----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-23
<PAGE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
FOCUS GENESIS GUARDIAN
(000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
---------------------------------------
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 5,920 $ 6,991 $ 25,244
Dividend income -- non-controlled affiliated issuers -- 524 --
Interest income 292 2,139 8,022
Foreign taxes withheld (Note A) -- -- (122)
---------------------------------------
Total income 6,212 9,654 33,144
---------------------------------------
Expenses:
Investment management fee (Note B) 3,945 5,806 9,727
Accounting fees 5 5 5
Auditing fees 21 20 24
Custodian fees (Note B) 146 163 328
Insurance expense 10 11 31
Legal fees 12 6 10
Trustees' fees and expenses 12 12 27
Miscellaneous -- 17 --
---------------------------------------
Total expenses 4,151 6,040 10,152
Expenses reduced by custodian fee expense offset
arrangement (Note B) (4) -- (5)
---------------------------------------
Total net expenses 4,147 6,040 10,147
---------------------------------------
Net investment income (loss) 2,065 3,614 22,997
---------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities sold in
unaffiliated issuers 192,180 61,250 447,704
Net realized loss on investment securities sold in
non-controlled affiliated issuers -- (5,188) --
Net realized loss on option contracts (Note A) (12) -- (88,477)
Net realized loss on financial futures contracts (Note A) -- -- (5,940)
Change in net unrealized appreciation of investment
securities, financial futures contracts, and option
contracts (Note A) 122,083 43,805 (450,438)
---------------------------------------
Net gain (loss) on investments 314,251 99,867 (97,151)
---------------------------------------
Net increase (decrease) in net assets resulting from
operations $ 316,316 $ 103,481 $ (74,154)
---------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-24
<PAGE>
For the Six Months Ended February 29, 2000 (Unaudited)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
MANHATTAN MILLENNIUM PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
----------------------------------------------------
INVESTMENT INCOME
Income:
Dividend income -- unaffiliated issuers $ 349 $ 4 $ 24,402 $ 966
Dividend income -- non-controlled affiliated issuers -- -- -- --
Interest income 1,145 370 2,516 382
Foreign taxes withheld (Note A) -- -- (161) --
----------------------------------------------------
Total income 1,494 374 26,757 1,348
----------------------------------------------------
Expenses:
Investment management fee (Note B) 2,069 655 7,806 671
Accounting fees 5 5 5 5
Auditing fees 18 8 23 15
Custodian fees (Note B) 93 47 272 47
Insurance expense 4 -- 24 2
Legal fees 8 11 9 24
Trustees' fees and expenses 7 3 22 4
Miscellaneous 11 3 -- --
----------------------------------------------------
Total expenses 2,215 732 8,161 768
Expenses reduced by custodian fee expense offset
arrangement (Note B) (1) (2) (11) (1)
----------------------------------------------------
Total net expenses 2,214 730 8,150 767
----------------------------------------------------
Net investment income (loss) (720) (356) 18,607 581
----------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment securities sold in
unaffiliated issuers 92,655 24,399 85,756 63,234
Net realized loss on investment securities sold in
non-controlled affiliated issuers -- -- -- --
Net realized loss on option contracts (Note A) -- -- -- --
Net realized loss on financial futures contracts (Note A) -- -- -- --
Change in net unrealized appreciation of investment
securities, financial futures contracts, and option
contracts (Note A) 463,683 120,373 (197,994) (77,830)
----------------------------------------------------
Net gain (loss) on investments 556,338 144,772 (112,238) (14,596)
----------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $ 555,618 $ 144,416 $ (93,631) $ (14,015)
----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-25
<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 29, Ended February 29, Ended
2000 August 31, 2000 August 31,
(000'S OMITTED) (UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 2,065 $ 5,971 $ 3,614 $ 18,739
Net realized gain (loss) on investments 192,168 203,107 56,062 (110,390)
Change in net unrealized appreciation (depreciation) of
investments 122,083 283,206 43,805 413,682
----------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 316,316 492,284 103,481 322,031
----------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 45,385 50,568 50,683 528,302
Reductions (178,808) (313,932) (367,463) (911,584)
----------------------------------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests (133,423) (263,364) (316,780) (383,282)
----------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 182,893 228,920 (213,299) (61,251)
NET ASSETS:
Beginning of period 1,546,398 1,317,478 1,751,104 1,812,355
----------------------------------------------------
End of period $ 1,729,291 $ 1,546,398 $ 1,537,805 $ 1,751,104
----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-26
<PAGE>
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
GUARDIAN MANHATTAN
PORTFOLIO PORTFOLIO
Six Months Six Months
Ended Year Ended Year
February 29, Ended February 29, Ended
2000 August 31, 2000 August 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
-----------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 22,997 $ 60,087 $ (720) $ (502)
Net realized gain (loss) on investments 353,287 991,845 92,655 57,698
Change in net unrealized appreciation (depreciation) of
investments (450,438) 406,548 463,683 135,208
-----------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (74,154) 1,458,480 555,618 192,404
-----------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 29,766 164,857 122,051 47,432
Reductions (1,008,183) (2,687,422) (63,992) (150,336)
-----------------------------------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests (978,417) (2,522,565) 58,059 (102,904)
-----------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (1,052,571) (1,064,085) 613,677 89,500
NET ASSETS:
Beginning of period 4,723,720 5,787,805 612,859 523,359
-----------------------------------------------------
End of period $ 3,671,149 $ 4,723,720 $ 1,226,536 $ 612,859
-----------------------------------------------------
<CAPTION>
MILLENNIUM
PORTFOLIO
Period from
Six Months October 20, 1998
Ended (Commencement
February 29, of Operations) to
2000 August 31,
(UNAUDITED) 1999
<S> <C> <C>
-------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ (356) $ (186)
Net realized gain (loss) on investments 24,399 8,249
Change in net unrealized appreciation (depreciation) of
investments 120,373 6,117
-------------------------------
Net increase (decrease) in net assets resulting from
operations 144,416 14,180
-------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 148,347 57,892
Reductions (18,324) (3,835)
-------------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests 130,023 54,057
-------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 274,439 68,237
NET ASSETS:
Beginning of period 68,237 --
-------------------------------
End of period $ 342,676 $ 68,237
-------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS(Cont'd)
- ----------------------------------------------------------------------
Equity Managers Trust
<TABLE>
<CAPTION>
SOCIALLY
PARTNERS RESPONSIVE
PORTFOLIO PORTFOLIO
Six Months Six Months
Ended Year Ended Year
February 29, Ended February 29, Ended
2000 August 31, 2000 August 31,
(000'S OMITTED) (UNAUDITED) 1999 (UNAUDITED) 1999
<S> <C> <C> <C> <C>
------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) $ 18,607 $ 51,968 $ 581 $ 2,271
Net realized gain (loss) on investments 85,756 353,820 63,234 22,484
Change in net unrealized appreciation (depreciation) of
investments (197,994) 531,136 (77,830) 81,446
------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (93,631) 936,924 (14,015) 106,201
------------------------------------------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Additions 40,035 230,354 21,529 53,231
Reductions (768,848) (979,875) (276,758) (45,169)
------------------------------------------------------
Net increase (decrease) in net assets resulting from
transactions in investors' beneficial interests (728,813) (749,521) (255,229) 8,062
------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (822,444) 187,403 (269,244) 114,263
NET ASSETS:
Beginning of period 3,768,740 3,581,337 397,113 282,850
------------------------------------------------------
End of period $ 2,946,296 $ 3,768,740 $ 127,869 $ 397,113
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
C-28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
February 29, 2000 (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"), Neuberger Berman
Millennium Portfolio ("Millennium"), Neuberger Berman Partners Portfolio
("Partners"), and Neuberger Berman Socially Responsive Portfolio ("Socially
Responsive") (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"). Millennium had no
operations until October 20, 1998, other than matters relating to its
organization and registration as a series of Managers Trust. 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
C-29
<PAGE>
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.
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 29, 2000:
<TABLE>
<CAPTION>
VALUE
WHEN
FOCUS NUMBER WRITTEN
<S> <C> <C>
- ------------------------------------------------------------
CONTRACTS OUTSTANDING 8/31/99 3,000 $ 441,000
CONTRACTS WRITTEN 1,000 434,000
CONTRACTS EXPIRED (1,000) (145,000)
CONTRACTS EXERCISED 0 0
CONTRACTS CLOSED (3,000) (730,000)
-----------------------
CONTRACTS OUTSTANDING 2/29/00 0 $ 0
-----------------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
WHEN
GUARDIAN NUMBER WRITTEN
<S> <C> <C>
- -----------------------------------------------------------------
CONTRACTS OUTSTANDING 8/31/99 23,750 $ 15,446,000
CONTRACTS WRITTEN 67,676 66,353,000
CONTRACTS EXPIRED (500) (2,985,000)
CONTRACTS EXERCISED (3,769) (1,754,000)
CONTRACTS CLOSED (83,042) (74,278,000)
----------------------------
CONTRACTS OUTSTANDING 2/29/00 4,115 $ 2,782,000
----------------------------
</TABLE>
C-30
<PAGE>
9) FINANCIAL FUTURES CONTRACTS: Each Portfolio may buy and sell stock index
futures contracts for purposes of managing cash flow. Millennium and
Socially Responsive may each buy and sell financial futures contracts to
hedge against a possible decline in the value of their portfolio securities.
At the time a Portfolio 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 six months ended February 29, 2000, Focus, Genesis, Manhattan,
Millennium, Partners, and Socially Responsive did not enter into any
financial futures contracts.
During the six months ended February 29, 2000, Guardian had entered into
various financial futures contracts. At February 29, 2000, there were no
open positions.
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 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
C-31
<PAGE>
terms which would prevent each of their investors from qualifying as a
regulated investment company. 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 ("State
Street") 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 29, 2000, 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 $ 6,756,000 $ 6,891,000
GENESIS 46,586,000 47,518,000
GUARDIAN 57,176,000 58,320,000
MANHATTAN 214,944,000 219,243,000
MILLENNIUM 42,375,000 43,223,000
PARTNERS 99,406,000 101,395,000
SOCIALLY RESPONSIVE 2,172,000 2,215,000
</TABLE>
11) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements
with institutions that the 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 and Millennium) 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 and Millennium pay Management a
fee for investment management services at the annual rate of 0.85% of the first
$250 million of that Portfolio's average
C-32
<PAGE>
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.
Management and Neuberger Berman, LLC ("Neuberger"), a member firm of The New
York Stock Exchange and sub-adviser to each Portfolio, are wholly owned
subsidiaries of Neuberger Berman Inc., a publicly held company. 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 employees of
Neuberger and/or Management.
Each Portfolio has an expense offset arrangement in connection with its
custodian contract. The impact of this arrangement, reflected in the Statements
of Operations under the caption Custodian fees, was a reduction of $4,333, $149,
$5,260, $885, $2,294, $10,625, and $613, for Focus, Genesis, Guardian,
Manhattan, Millennium, Partners, and Socially Responsive, respectively.
NOTE C -- SECURITIES TRANSACTIONS:
During the six months ended February 29, 2000, there were purchase and sale
transactions (excluding short-term securities and option contracts) as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
- -------------------------------------------------------------------
FOCUS $ 381,851,000 $ 479,210,000
GENESIS 211,484,000 546,464,000
GUARDIAN 1,725,279,000 2,231,751,000
MANHATTAN 426,433,000 395,770,000
MILLENNIUM 242,490,000 111,566,000
PARTNERS 1,678,989,000 2,225,081,000
SOCIALLY RESPONSIVE 94,888,000 326,423,000
</TABLE>
During the six months ended February 29, 2000, 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 $ 414,000 $ 371,000 $ 785,000
GENESIS 410,000 551,000 961,000
GUARDIAN 2,671,000 1,977,000 4,648,000
MANHATTAN 132,000 301,000 433,000
MILLENNIUM 28,000 25,000 53,000
PARTNERS 280,000 81,000 361,000
SOCIALLY RESPONSIVE 180,000 82,000 262,000
</TABLE>
C-33
<PAGE>
NOTE D -- LINE OF CREDIT:
At February 29, 2000, Genesis, Manhattan, and Millennium were three of the
holders of a single committed, unsecured $100,000,000 line of credit with State
Street, 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 0.09% (0.07% prior to October 1, 1999) per
annum of the available line of credit is charged, of which Genesis, Manhattan,
and Millennium 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 this 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, Manhattan, and Millennium had no loans outstanding
pursuant to this line of credit at February 29, 2000. During the six months
ended February 29, 2000, Genesis, Manhattan, and Millennium 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 29, FEBRUARY 29,
NAME OF ISSUER: 1999 ADDITIONS REDUCTIONS 2000 2000
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Furniture Brands International 1,800,000 793,000 0 2,593,000 $41,650,000
Photronics Inc.** 1,302,500 0 797,500 505,000 21,494,000
</TABLE>
<TABLE>
<CAPTION>
GENESIS
BALANCE OF GROSS GROSS BALANCE OF
SHARES HELD PURCHASES SALES SHARES HELD VALUE
AUGUST 31, AND AND FEBRUARY 29, FEBRUARY 29,
NAME OF ISSUER: 1999 ADDITIONS REDUCTIONS 2000 2000
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AAR Corp. 1,771,350 0 406,400 1,364,950 $32,418,000
Alliant Techsystems 663,200 0 118,000 545,200 29,509,000
Aviall Inc.** 1,219,500 0 432,300 787,200 6,445,000
Davox Corp.** 1,075,600 0 601,400 474,200 18,138,000
DONCASTERS PLC ADR** 478,300 0 478,300 0 0
Highland Bancorp 331,400 0 0 331,400 5,468,000
Primex Technologies 800,400 0 76,700 723,700 15,198,000
SOS Staffing Services 814,400 0 25,000 789,400 3,947,000
Scottish Annuity & Life Holdings 857,900 33,600 0 891,500 7,076,000
</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 29, 2000, THE ISSUERS OF THESE SECURITIES WERE NO LONGER
AFFILIATED WITH THE PORTFOLIO.
C-34
<PAGE>
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-35
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Focus Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
2000 Year Ended August 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .51%(2) .51% .51% .53% .54% --
-----------------------------------------------------------------------------
Net Expenses .51%(2) .51% .51% .53% .54% .57%
-----------------------------------------------------------------------------
Net Investment Income .25%(2) .37% .59% .54% 1.04% 1.05%
-----------------------------------------------------------------------------
Portfolio Turnover Rate 23% 57% 64% 63% 39% 36%
-----------------------------------------------------------------------------
Net Assets, End of Period (in millions) $1,729.3 $1,546.4 $1,317.5 $1,573.4 $1,122.4 $969.2
-----------------------------------------------------------------------------
</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>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Genesis Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
2000 Year Ended August 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .76%(2) .75% .72% .77% .85% --
----------------------------------------------------------------------------------
Net Expenses .76%(2) .75% .72%(3) .77%(3) .85%(3) .94%(3)
----------------------------------------------------------------------------------
Net Investment Income .45%(2) 1.02% 1.13% .32% .27% .25%
----------------------------------------------------------------------------------
Portfolio Turnover Rate 14% 33% 18% 18% 21% 37%
----------------------------------------------------------------------------------
Net Assets, End of Period (in millions) $1,537.8 $1,751.1 $1,812.4 $1,083.7 $259.9 $142.2
----------------------------------------------------------------------------------
</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-37
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Guardian Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
2000 Year Ended August 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .47%(2) .46% .46% .46% .46% --
-----------------------------------------------------------------------------
Net Expenses .47%(2) .46% .46% .46% .46% .48%
-----------------------------------------------------------------------------
Net Investment Income 1.06%(2) 1.06% .92% .89% 1.72% 1.72%
-----------------------------------------------------------------------------
Portfolio Turnover Rate 42% 73% 60% 50% 37% 26%
-----------------------------------------------------------------------------
Net Assets, End of Period (in millions) $3,671.1 $4,723.7 $5,787.8 $8,758.2 $6,232.5 $4,613.2
-----------------------------------------------------------------------------
</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-38
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Manhattan Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
2000 Year Ended August 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .56%(2) .58% .57% .59% .58% --
-------------------------------------------------------------------
Net Expenses .56%(2) .58% .57% .59% .58% .59%
-------------------------------------------------------------------
Net Investment Income (Loss) (.18%)(2) (.08%) (.05%) .20% .13% .42%
-------------------------------------------------------------------
Portfolio Turnover Rate 51% 115% 90% 89% 53% 44%
-------------------------------------------------------------------
Net Assets, End of Period (in millions) $1,226.5 $612.9 $523.4 $621.7 $567.4 $645.4
-------------------------------------------------------------------
</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-39
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Millennium Portfolio
<TABLE>
<CAPTION>
Six Months
Ended Period from
February 29, October 20, 1998(1)
2000 to August 31,
(UNAUDITED) 1999
<S> <C> <C>
-----------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(2)(3) .95% 1.20%
-----------------------------------
Net Expenses(3) .95% 1.19%
-----------------------------------
Net Investment Loss(3) (.46%) (.67%)
-----------------------------------
Portfolio Turnover Rate 71% 208%
-----------------------------------
Net Assets, End of Period (in millions) $342.7 $68.2
-----------------------------------
</TABLE>
1) The date investment operations commenced.
2) The Portfolio is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset arrangements.
3) Annualized.
C-40
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Partners Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
2000 Year Ended August 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .47%(2) .47% .47% .48% .51% --
-----------------------------------------------------------------------------
Net Expenses .47%(2) .47% .47% .48% .51% .53%
-----------------------------------------------------------------------------
Net Investment Income 1.08%(2) 1.29% 1.11% 1.05% 1.26% 1.13%
-----------------------------------------------------------------------------
Portfolio Turnover Rate 50% 132% 109% 77% 96% 98%
-----------------------------------------------------------------------------
Net Assets, End of Period (in millions) $2,946.3 $3,768.7 $3,581.3 $3,575.6 $1,999.6 $1,623.5
-----------------------------------------------------------------------------
</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-41
<PAGE>
FINANCIAL HIGHLIGHTS
Neuberger Berman
- --------------------------------------------------------------------------------
Socially Responsive Portfolio
<TABLE>
<CAPTION>
Six Months
Ended
February 29,
2000 Year Ended August 31,
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Gross Expenses(1) .63%(2) .59% .60% .63% .65% --
-------------------------------------------------------------------
Net Expenses .63%(2) .59% .60% .63% .65% .68%
-------------------------------------------------------------------
Net Investment Income .48%(2) .63% .92% 1.08% 1.02% 1.18%
-------------------------------------------------------------------
Portfolio Turnover Rate 41% 53% 47% 51% 53% 58%
-------------------------------------------------------------------
Net Assets, End of Period (in millions) $127.9 $397.1 $282.9 $256.3 $158.5 $96.7
-------------------------------------------------------------------
</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-42
<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
Peter E. Sundman
CHAIRMAN OF THE BOARD AND TRUSTEE
Michael M. Kassen
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- 2000 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
proceed or accompany this report.
[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] A0059 04/00
