<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1995
File No. 811-8422
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2
GLOBAL MANAGERS TRUST
(Exact Name of the Registrant as Specified in Charter)
Elizabethan Square
P.O. Box 1984
George Town, Grand Cayman
Cayman Islands, BWI
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code: (809) 949-6644
Lawrence Zicklin, President
Global Managers Trust
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur C. Delibert, Esq.
Kirkpatrick & Lockhart LLP
South Lobby - 9th Floor
1800 M Street, N.W.
Washington, DC 20036-5891
(Names and Addresses of agents for service)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Page 1 of _____
Exhibit Index begins on page _____
<PAGE>
EXPLANATORY NOTE
This Registration Statement is being filed by the Registrant
pursuant to Section 8(b) of the Investment Company Act of 1940, as
amended. However, beneficial interests in the series of the Registrant
are not being registered under the Securities Act of 1933, as amended,
("1933 Act") because such interests are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. Investments in the Registrant's series
may be made only by regulated investment companies, segregated asset
accounts, foreign investment companies, common trust funds, group trusts,
or other investment arrangements, whether organized within or without the
United States (excluding individuals, S corporations, partnerships, and
grantor trusts beneficially owned by any individuals, S corporations, or
partnerships). This Registration Statement does not constitute an offer
to sell, or the solicitation of an offer to buy, any beneficial interests
in any series of the Registrant.
<PAGE>
PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. GENERAL DESCRIPTION OF REGISTRANT.
Global Managers Trust ("Trust") is a diversified, no-load, open-
end management investment company that was organized as a trust under the
laws of the State of New York pursuant to a Declaration of Trust dated as
of March 18, 1994.
Beneficial interests in the Trust are divided into separate
subtrusts or "series," each having a distinct investment objective and
distinct investment policies. The only current series of the Trust,
Neuberger & Berman International Portfolio ("Portfolio"), is described
herein. The assets of the Portfolio belong only to the Portfolio, and the
liabilities of the Portfolio are borne solely by the Portfolio and no
other.
Beneficial interests in the Portfolio are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. Investments in the
Portfolio may be made only by regulated investment companies, segregated
asset accounts, foreign investment companies, common trust funds, group
trusts, or other investment arrangements, whether organized within or
without the United States (excluding individuals, S corporations,
partnerships, and grantor trusts beneficially owned by any individuals,
S corporations, or partnerships). This Registration Statement does not
constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
Neuberger & Berman Management Incorporated ("N&B Management")
serves as the investment manager and Neuberger & Berman, L.P. ("Neuberger
& Berman") serves as the sub-adviser of the Portfolio.
INVESTMENT OBJECTIVE
The investment objective of the Portfolio is not fundamental.
Although the investment objective may be changed by the trustees of the
Trust ("Trustees") without investor approval, the Portfolio intends to
notify its investors 30 days before implementing any material change in
its investment objective.
The Portfolio seeks long-term capital appreciation by investing
primarily in a diversified portfolio of equity securities of foreign
issuers. Foreign issuers are issuers organized and doing business
principally outside of the U.S. and include non-U.S. governments, their
agencies, and instrumentalities. There can be no assurance that the
Portfolio will achieve its investment objective.
A-1
<PAGE>
INVESTMENT PROGRAM
Investment policies and limitations of the Portfolio are not
fundamental unless otherwise specified in this Registration Statement.
While non-fundamental policies or limitations may be changed by the
Trustees without investor approval, the Portfolio intends to notify its
investors before making any material change to such policies or
limitations. Fundamental policies and limitations may not be changed
without approval of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940, as amended ("1940 Act")) of
the Portfolio.
For an explanation of some types of investments, see "Description
of Investments." Additional investment techniques, features and
restrictions concerning the Portfolio's investment program are described
in Part B.
The Portfolio invests primarily in equity securities of medium-
to large-capitalization companies, determined in relation to each national
market, traded on foreign exchanges. The Portfolio normally invests in
issuers in at least three foreign countries. The strategy of N&B
Management is to select attractive investment opportunities outside of the
U.S., allocating the Portfolio's assets among investments in economically
mature countries and emerging industrialized countries. At least 65% of
the Portfolio's total assets normally are invested in equity securities of
foreign issuers. The Portfolio may invest more heavily in certain
countries than in others. From time to time, the Portfolio may invest a
significant portion of its assets in Japan.
The Portfolio may also invest in foreign securities in the form
of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs"), International Depositary
Receipts ("IDRs") or other similar securities representing an interest in
securities of foreign issuers.
Because the Portfolio invests primarily in foreign securities, it
may be subject to greater risks and higher expenses than equity funds that
invest primarily in securities of U.S. issuers. Such risks may be even
greater in emerging industrialized and less developed countries.
The risks of investing in foreign securities include, but are not
limited to, possible adverse political and economic developments in a
particular country, differences between foreign and U.S. regulatory
systems, and foreign securities markets that are smaller and less well-
regulated than those in the U.S. There is often less information publicly
available about foreign issuers, and many foreign countries do not follow
the financial accounting standards used in the U.S. Most of the
securities held by the Portfolio are denominated in foreign currencies,
and the value of these investments can be adversely affected by
fluctuations in foreign currency values. Some foreign currencies can be
volatile and may be subject to governmental controls or intervention. The
Portfolio may use techniques such as options, futures, forward foreign
A-2
<PAGE>
currency exchange contracts ("forward contracts"), and short selling, for
hedging purposes and in an attempt to realize income. The Portfolio may
also use leverage to facilitate transactions entered into by it for
hedging purposes. The use of these strategies may entail special risks.
For temporary defensive purposes, the Portfolio may invest up to
100% of its total assets in short-term foreign and U.S. investments, such
as cash or cash equivalents, commercial paper, short-term bank
obligations, government and agency securities and repurchase agreements.
The Portfolio may also invest in such instruments to increase liquidity or
to provide collateral to be held in segregated accounts.
Short-Term Trading; Portfolio Turnover
Although the Portfolio does not purchase securities with the
intention of profiting from short-term trading, it may sell portfolio
securities when N&B Management believes that such action is advisable.
The portfolio turnover rate for the Portfolio for the year ended August
31, 1995 was 41%.
Borrowings
The Portfolio has a fundamental policy that it may not borrow
money, except that it may (1) borrow money from banks for temporary or
emergency purposes and for leveraging or investment and (2) enter into
reverse repurchase agreements for any purpose, so long as the aggregate
amount of borrowings and reverse repurchase agreements does not exceed
one-third of the Portfolio's total assets (including the amount borrowed)
less liabilities (other than borrowings).
The Portfolio may borrow money from banks to facilitate
transactions that it enters into for hedging purposes, which is a form of
leverage. This leverage may exaggerate the gains and losses on the
Portfolio's investments and changes in the net asset value of the
Portfolio's shares. Leverage also creates interest expenses; if those
expenses exceed the return on the transactions that the borrowings
facilitate, the Portfolio will be in a worse position than if it had not
borrowed. The use of derivatives in connection with leverage may create
the potential for significant losses. The Portfolio may pledge assets in
connection with permitted borrowings.
DESCRIPTION OF INVESTMENTS
In addition to common stocks and other securities referred to in
"Investment Program" herein, the Portfolio may make the following
investments, among others, individually or in combination, although it may
not necessarily buy all of the types of securities or use all of the
investment techniques that are described. For additional information on
the following investments and on other types of investments the Portfolio
may make, see Part B.
A-3
<PAGE>
Foreign Securities. The Portfolio invests primarily in foreign
securities. Foreign securities are those of issuers organized and doing
business principally outside of the U.S., including non-U.S. governments,
their agencies and instrumentalities. The Portfolio may also invest in
ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or unsponsored) are receipts
typically issued by a U.S. bank or trust company evidencing its ownership
of the underlying foreign securities. Most ADRs are denominated in U.S.
dollars and are traded on a U.S. stock exchange. Issuers of the
securities underlying unsponsored ADRs are not contractually obligated to
disclose material information in the U.S. and, therefore, the market value
of the unsponsored ADR may not reflect the effect of such information.
EDRs and IDRs are receipts typically issued by a European bank or trust
company evidencing its ownership of the underlying foreign securities.
GDRs are receipts issued by either a U.S. or non-U.S. banking institution
evidencing its ownership of the underlying foreign securities and are
often denominated in U.S. dollars.
Factors affecting investments in foreign securities include, but
are not limited to, varying custody, brokerage and settlement practices;
difficulty in pricing some foreign securities; less public information
about issuers of securities; less governmental regulation and supervision
of issuance and trading of securities; the unavailability of financial
information or the difficulty of interpreting financial information
prepared under foreign accounting standards; less liquidity and more
volatility in foreign securities markets; the possibility of
expropriation; the imposition of foreign withholding and other taxes;
political, social, or diplomatic developments; limitations on the movement
of funds or other assets of the Portfolio between different countries;
difficulties in invoking legal process abroad and enforcing contractual
obligations; and the difficulty of assessing economic trends in foreign
countries. Investment in foreign securities also involves higher
brokerage and custodial expenses than does investment in domestic
securities.
In addition, investing in securities of foreign companies and
governments may involve other risks which are not ordinarily associated
with investing in domestic securities. These risks include changes in
currency exchange rates and currency exchange control regulations or other
foreign or U.S. laws or restrictions applicable to such investments, or
devaluations of foreign currencies. A decline in the exchange rate
between the U.S. dollar and another currency would reduce the value of
portfolio securities denominated in that currency irrespective of the
performance of the underlying investments. In addition, the Portfolio may
incur costs in connection with conversion between various currencies.
Investments in depositary receipts (whether or not denominated in U.S.
dollars) may be subject to exchange controls and changes in rates of
exchange with the U.S. dollar because the underlying security is usually
denominated in foreign currency.
All of the foregoing risks may be intensified in emerging
industrialized and less developed countries.
A-4
<PAGE>
Japanese Investments. From time to time, the Portfolio may
invest a significant portion of its assets in securities of Japanese
issuers. The performance of the Portfolio may therefore be significantly
affected by events affecting the Japanese economy and the exchange rate
between the Japanese yen and the U.S. dollar. Japan has experienced a
severe recession, including a decline in real estate values and other
events that adversely affected the balance sheets of many financial
institutions and indicated that there may be structural weaknesses in the
Japanese financial system. The effects of this economic downturn may be
felt for a considerable period and are being exacerbated by the currency
exchange rate. Japan is heavily dependent on foreign oil. Japan is
located in a seismically active area, and severe earthquakes may damage
important elements of the country's infrastructure. Japan's economic
prospects may be affected by the political and military situations of its
near neighbors, notably North and South Korea, China and Russia.
Other Investment Companies. The Portfolio may invest up to 10%
of its total assets in the shares of other investment companies. Such
investment may be the most practical or only manner in which the Portfolio
can participate in certain foreign markets because of the expenses
involved or because other vehicles for investing in certain countries may
not be available at the time the Portfolio is ready to make an investment.
As a shareholder in an investment company, the Portfolio would bear its
pro rata share of that investment company's expenses. Investment in other
funds may involve the payment of substantial premiums above the value of
such issuers' portfolio securities. The Portfolio does not intend to
invest in such funds unless, in the judgment of N&B Management, the
potential benefits of such investment justify the payment of any
applicable premium or sales charge.
Foreign Currency Transactions. The Portfolio may enter into
forward contracts in order to protect against adverse changes in future
foreign currency exchange rates. The Portfolio may enter into contracts
to purchase foreign currencies to protect against an anticipated rise in
the U.S. dollar price of securities it intends to purchase. The Portfolio
may also enter into contracts to sell foreign currencies to protect
against a decline in value of its foreign currency denominated portfolio
securities due to a decline in the value of foreign currencies against the
U.S. dollar. Contracts to sell foreign currency could limit any potential
gain which might be realized by the Portfolio if the value of the hedged
currency increased.
The Portfolio may also enter into forward contracts for non-
hedging purposes when N&B Management anticipates that the foreign currency
will appreciate or depreciate in value, but securities denominated in that
currency do not present attractive investment opportunities and are not
held in the Portfolio. The Portfolio may also engage in cross-hedging by
using forward contracts in one currency to hedge against fluctuations in
the value of securities denominated in a different currency if N&B
Management believes that there is a pattern of correlation between the two
currencies.
A-5
<PAGE>
Put and Call Options on Foreign Currencies, Securities, and
Securities Indices. The Portfolio may purchase and write put and call
options on foreign currencies for the purpose of protecting against
declines in the dollar value of foreign portfolio securities and against
increases in the U.S. dollar cost of foreign securities to be acquired.
The Portfolio may also use options on foreign currencies to cross-hedge.
In addition, the Portfolio may purchase put or call options on currencies
for non-hedging purposes when N&B Management expects that the currency
will appreciate or depreciate in value, but securities denominated in that
currency do not present attractive investment opportunities and are not
held in the Portfolio. Options on foreign currencies to be written or
purchased by the Portfolio may be traded on U.S. or foreign exchanges or
over-the-counter. Options on foreign currencies which are traded in the
over-the-counter market may be considered to be illiquid securities and
subject to the restriction on illiquid securities.
To realize greater income than would be realized on portfolio
securities transactions alone, the Portfolio may write put and call
options on any securities in which it may invest or options on any
securities index based on securities in which the Portfolio may invest.
The Portfolio will not write a call option on a security or currency
unless it owns the underlying security or currency or has the right to
obtain it at no additional cost.
The writing and purchasing of options is a highly specialized
activity that involves investment techniques and risks different from
those associated with ordinary portfolio securities transactions,
including price volatility and a high degree of leverage. The Portfolio
pays brokerage commissions or spreads in connection with its options
transactions, as well as for purchases and sales of underlying securities
or currencies. The writing of options could result in significant
increases in the Portfolio's turnover rate.
Futures Contracts and Options on Futures Contracts. The
Portfolio may enter into futures contracts on debt securities, interest
rates, securities indices and currencies and may purchase and sell options
on such contracts on both U.S. and foreign exchanges. The Portfolio may
engage in such transactions for hedging and non-hedging purposes.
General Risks of Options, Futures and Forward Contracts. The
primary risks in using put and call options, futures contracts, options on
futures contracts, and forward contracts ("Financial Instruments") are (1)
imperfect correlation or no correlation between changes in market value of
the securities held by the Portfolio and the prices of Financial
Instruments; (2) possible lack of a liquid secondary market for Financial
Instruments and the resulting inability to close out Financial Instruments
when desired; (3) the fact that the skills needed to use Financial
Instruments are different from those needed to select the Portfolio's
securities; and (4) the fact that, although use of Financial Instruments
for hedging purposes can reduce the risk of loss, they also can reduce the
opportunity for gain, or even result in losses, by offsetting favorable
price movements in hedged investments. When the Portfolio uses Financial
A-6
<PAGE>
Instruments, the Portfolio will place cash or high-grade, liquid debt
securities in a segregated account to the extent required by SEC staff
policy. Another risk of Financial Instruments is the possible inability
of the Portfolio to purchase or sell a security at a time that would
otherwise be favorable for it to do so, or the possible need for the
Portfolio to sell a security at a disadvantageous time, due to its need to
maintain "cover" or to segregate securities in connection with its use of
Financial Instruments. Futures, options and forward contracts are
considered "derivatives." Losses that may arise from certain futures
transactions are potentially unlimited.
Short Sales. The Portfolio may attempt to limit exposure to a
possible decline in the market value of portfolio securities through short
sales of securities that N&B Management believes possess volatility
characteristics similar to those being hedged. The Portfolio also may use
short sales in an attempt to realize gain. To effect a short sale, the
Portfolio borrows a security from a brokerage firm to make delivery to the
buyer. The Portfolio then is obligated to replace the borrowed security
by purchasing it at the market price at the time of replacement. Until
the security is replaced, the Portfolio is required to pay to the lender
any accrued interest or dividends and may be required to pay a premium.
The Portfolio will realize a gain if the security declines in
price between the date of the short sale and the date on which the
Portfolio replaces the borrowed security. The Portfolio will incur a loss
if the price of the security increases between those dates. The amount of
any gain will be decreased, and the amount of any loss increased, by the
amount of any premium or interest the Portfolio may be required to pay in
connection with a short sale. A short position may be adversely affected
by imperfect correlation between movements in the price of the security
sold short and the securities being hedged.
The Portfolio may also make short sales against-the-box, in which
it sells securities short only if it owns or has the right to obtain
without payment of additional consideration an equal amount of the same
type of securities sold. Short selling against-the-box may defer
recognition of gains or losses into a later tax period.
Forward Commitments and When-Issued Securities. In a when-issued
or forward commitment transaction, the Portfolio commits to purchase
securities at a future date (generally within two months) and pays for
them when they are delivered. If the seller fails to complete the sale,
the Portfolio may lose the opportunity to obtain a favorable price and
yield. When-issued securities or securities subject to a forward
commitment may decline or increase in value during the period from the
Portfolio's investment commitment to the settlement of the purchase.
Indexed Securities. The Portfolio may invest in indexed
securities whose value is linked to currencies, interest rates,
commodities, indices, or other financial indicators. Most indexed
securities are short- to intermediate-term fixed income securities whose
values at maturity or interest rates rise or fall according to the change
A-7
<PAGE>
in one or more specified underlying instruments. Indexed securities may
be positively or negatively indexed (i.e., their value may increase or
decrease if the underlying instrument appreciates) and may have return
characteristics similar to direct investments in the underlying instrument
or to one or more options on the underlying instrument. Indexed
securities may be more volatile than the underlying instrument itself.
Illiquid Securities. The Portfolio may invest up to 10% of its
net assets in illiquid securities, which are securities that cannot be
expected to be sold within seven days at approximately the price at which
they are valued. Due to the absence of an active trading market, the
Portfolio may experience difficulty in valuing or disposing of illiquid
securities. N&B Management determines the liquidity of the Portfolio's
securities, under supervision of the Trustees. Securities which are
freely tradable in their country of origin or in their principal market
are not considered illiquid securities even if they are not registered for
sale in the U.S.
Restricted and Rule 144A Securities. The Portfolio may invest in
restricted securities and Rule 144A securities. Restricted securities
cannot be sold to the public without registration under the 1933 Act.
Unless registered for sale, these securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid. Rule 144A
securities, although not registered, may be resold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act.
Unregistered securities may also be sold abroad pursuant to Regulation S
under the 1933 Act. N&B Management, acting pursuant to guidelines
established by the Trustees, may determine that some restricted securities
are liquid.
Foreign Corporate and Foreign Government Debt Securities. The
Portfolio may invest up to 5% of its net assets in U.S. dollar-denominated
and non-U.S. dollar-denominated corporate and government debt securities
of foreign issuers.
The Portfolio may invest in debt securities of any rating,
including those rated below investment grade and comparable unrated
securities. Securities rated below investment grade are deemed by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's ("S&P") (or
foreign statistical rating organizations) to be predominantly speculative,
although as debt securities, they generally have priority over equity
securities of the same issuer and are generally better secured. Debt
securities in the lowest rating categories may involve a substantial risk
of default or may be in default. Changes in economic conditions or
developments regarding the individual issuer are more likely to cause
price volatility and weaken the capacity of the issuer of such securities
to make principal and interest payments than is the case for higher grade
debt securities. An economic downturn affecting the issuer may result in
an increased incidence of default. The market for lower-rated securities
may be thinner and less active than for higher-rated securities. The
Portfolio will invest in such securities only when N&B Management
A-8
<PAGE>
concludes that the anticipated return to the Portfolio on such an
investment warrants exposure to the additional level of risk. A further
description of Moody's and S&P's ratings is included in Part B.
The value of the fixed income securities in which the Portfolio
may invest, measured in the currency in which they are denominated, is
likely to decline in times of rising interest rates. Conversely, when
rates fall, the value of the Portfolio's fixed income investments is
likely to rise.
Convertible Securities. The Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred
stock, or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within
a particular period at a specified price or formula. Many convertible
securities are rated below investment grade or are unrated.
Repurchase Agreements and Securities Loans. The Portfolio may
enter into repurchase agreements and lend securities from its portfolio.
In a repurchase agreement, the Portfolio buys a security from a Federal
Reserve member bank, a foreign bank, a U.S. branch or agency of a foreign
bank, or a securities dealer and simultaneously agrees to sell it back at
a higher price, at a specified date, usually less than a week later. The
underlying securities must fall within the Portfolio's investment policies
and limitations. The Portfolio also may lend portfolio securities to
banks, brokerage firms, or institutional investors to earn income. Costs,
delays, or losses could result if the selling party to a repurchase
agreement or the borrower of portfolio securities becomes bankrupt or
otherwise defaults. N&B Management monitors the creditworthiness of
sellers and borrowers.
Reverse Repurchase Agreements. The Portfolio may enter into
reverse repurchase agreements. In such a transaction, the Portfolio sells
a security to a bank or securities dealer and simultaneously agrees to
repurchase it at an agreed upon price on a specific date. The Portfolio
will maintain a segregated account consisting of cash or high-grade,
liquid debt obligations to cover its obligations under reverse repurchase
agreements.
U.S. Government and Agency Securities. The Portfolio may
purchase U.S. Government and Agency Securities. U.S. Government
securities are obligations of the U.S. Treasury backed by the full faith
and credit of the United States. U.S. Government Agency Securities are
securities issued or guaranteed by U.S. Government agencies or
instrumentalities; by other U.S. Government-sponsored enterprises, such as
the Government National Mortgage Association ("GNMA"), Federal National
Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation
("FHLMC"), Student Loan Mortgage Association, and Tennessee Valley
Authority; and by various federally chartered or sponsored banks. Some
U.S. Government Agency Securities are backed by the full faith and credit
of the United States, while others may be supported by the issuer's
ability to borrow from the U.S. Treasury, subject to the Treasury's
A-9
<PAGE>
discretion in certain cases, or only by the credit of the issuer. U.S.
Government Agency Securities include U.S. Government mortgage-backed
securities. The market prices of U.S. Government securities are not
guaranteed by the Government and generally fluctuate with changing
interest rates.
Item 5. MANAGEMENT OF THE PORTFOLIO.
Trustees and Officers
The Trustees have oversight responsibility for the operations of
the Portfolio. Part B contains general background information about each
Trustee and officer of the Trust. The Trustees and officers of the Trust
who are officers and/or directors of N&B Management and/or partners of
Neuberger & Berman serve without compensation from the Portfolio. The
Trustees, including a majority of those Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust, have adopted written
procedures reasonably appropriate to deal with potential conflicts of
interest.
Investment Manager and Sub-Adviser
N&B Management, 605 Third Avenue, 2nd Floor, New York, New York
10158-0180, serves as the investment manager of the Portfolio. N&B
Management and its predecessor firms have specialized in the management of
no-load mutual funds since 1950. In addition to serving the Portfolio,
N&B Management currently serves as investment manager of other mutual
funds. Neuberger & Berman, 605 Third Avenue, New York, New York 10158-
3698, which acts as sub-adviser for the Portfolio and other mutual funds
managed by N&B Management, also serves as investment adviser of three
investment companies. The mutual funds managed by N&B Management and
Neuberger & Berman had aggregate net assets of approximately $11.4 billion
as of September 30, 1995.
As sub-adviser, Neuberger & Berman furnishes N&B Management with
investment recommendations and research without added cost to the
Portfolio. Neuberger & Berman is a member firm of the New York Stock
Exchange ("NYSE") and other principal exchanges. Neuberger & Berman and
its affiliates, including N&B Management, manage securities accounts that
had approximately $37.6 billion of assets as of September 30, 1995. All
of the voting stock of N&B Management is owned by individuals who are
general partners of Neuberger & Berman.
State Street Cayman Trust Company, Ltd. ("State Street Cayman"),
located in George Town, Grand Cayman, Cayman Islands, British West Indies,
provides certain administrative, fund accounting and transfer agency
services for the Portfolio, which has its principal offices in the Cayman
Islands.
Felix Rovelli has been primarily responsible for the day-to-day
management of the Portfolio since its inception in June 1994. Mr. Rovelli
is a Vice President of N&B Management and was a Senior Vice President-
A-10
<PAGE>
Senior Equity Portfolio Manager of BNP-N&B Global Asset Management L.P.
("BNP-N&B Global") from May 1994 until October 1995. He previously served
as first vice president and portfolio manager of another mutual fund that
invested in international equity securities, from April 1990 to April
1994. Robert Cresci is an Assistant Vice President of N&B Management and
was an Assistant Portfolio Manager of BNP-N&B Global from May 1994 until
October 1995. He previously served as an assistant portfolio manager of
another mutual fund that invested in international equity securities, from
November 1992 until May 1994, and as an associate with a money manager
from September 1989 until October 1992.
Neuberger & Berman may act as broker for the Portfolio in the
purchase and sale of portfolio securities and in the purchase and sale of
options, and for those services receives brokerage commissions. In
effecting securities transactions, the Portfolio seeks to obtain the best
price and execution of orders. For more information, see Part B.
The partners and employees of Neuberger & Berman and officers and
employees of N&B Management, together with their families, have invested
over $100 million of their own money in Neuberger & Berman
Funds.(SERVICEMARK)
To mitigate the possibility that the Portfolio will be adversely
affected by employees' personal trading, the Trust, N&B Management and
Neuberger & Berman have adopted policies that restrict securities trading
in the personal accounts of portfolio managers and others who normally
come into possession of information on portfolio transactions.
Expenses
N&B Management provides investment management services to the
Portfolio that include, among other things, making and implementing
investment decisions and providing facilities and personnel necessary to
operate the Portfolio. For investment management services, the Portfolio
pays N&B Management a fee at the annual rate of 0.85% of the first $250
million of the Portfolio's average daily net assets; 0.825% of the next
$250 million; 0.80% of the next $250 million; 0.775% of the next $250
million; 0.75% of the next $500 million; and 0.725% of average daily net
assets in excess of $1.5 billion. This management fee is higher than that
paid by most domestic equity funds, but is consistent with the average fee
levels of other international equity funds.
The Portfolio bears all expenses of its operations other than
those borne by N&B Management as investment manager of the Portfolio.
These expenses include, but are not limited to, legal and accounting fees,
compensation for Trustees who are not affiliated with N&B Management, and
custodial fees for securities.
Item 6. CAPITAL STOCK AND OTHER SECURITIES.
The Trust was organized as a common law trust under the laws of
the State of New York. Under the Declaration of Trust, the Trustees are
A-11
<PAGE>
authorized to issue beneficial interests in separate subtrusts or "series"
of the Trust. The Trust currently has one series (the Portfolio); the
Trust reserves the right to create and issue additional series.
Each investor in the Portfolio is entitled to participate equally
in the Portfolio's earnings and assets and to vote in proportion to the
amount of its investment in the Portfolio. Investments in the Portfolio
may not be transferred, but an investor may withdraw all or any portion of
its investment at any time at the net asset value ("NAV") of such
investment. Each investor in the Portfolio is liable for all obligations
of the Portfolio. However, the risk of an investor in the Portfolio
incurring financial loss on account of such liability would be limited to
circumstances in which the Portfolio had inadequate insurance and was
unable to meet its obligations out of its assets. Upon liquidation of the
Portfolio, investors would be entitled to share pro rata in the net assets
of the Portfolio available for distribution to investors.
Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and non-assessable. The Trust is not required
and has no current intention to hold annual meetings of investors, but the
Trust will hold special meetings of investors when, in the Trustees'
judgment, it is necessary or desirable to submit matters to an investor
vote. Changes in fundamental policies or limitations will be submitted to
investors for approval. Investors have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified
number of investors.
The Portfolio's NAV is determined each day the NYSE is open for
trading ("Business Day"). This determination is made as of the close of
regular trading on the NYSE, usually 4 p.m. Eastern time ("Valuation
Time").
Each investor in the Portfolio may add to or reduce its invest-
ment in the Portfolio. At the Valuation Time on each Business Day, the
value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the Portfolio's NAV by the percentage, effective
for that day, that represents that investor's share of the aggregate
beneficial interests in the Portfolio. Any additions to or withdrawals of
those interests which are to be effected on that day will then be
effected. Each investor's share of the aggregate beneficial interests in
the Portfolio then will be recomputed using the percentage equal to the
fraction (1) the numerator of which is the value of the investor's
investment in the Portfolio as of the Valuation Time on that day plus or
minus, as the case may be, the amount of any additions to or withdrawals
from such investment effected on that day and (2) the denominator of which
is the Portfolio's aggregate NAV as of the Valuation Time on that day plus
or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investments in the Portfolio by all
investors. The percentages so determined then will be applied to
determine the value of each investor's respective interest in the
Portfolio as of the Valuation Time on the following Business Day.
A-12
<PAGE>
The Portfolio's net income consists of (1) all dividends, accrued
interest (including earned discount, both original issue and market dis-
count), and other income, including any net realized gains or losses on
the Portfolio's assets, less (2) all actual and accrued expenses of the
Portfolio, and amortization of any premium, all as determined in
accordance with generally accepted accounting principles. All of the
Portfolio's net income is allocated pro rata among the investors in the
Portfolio. The Portfolio's net income generally is not distributed to the
investors in the Portfolio, except as determined by the Trustees from time
to time, but instead is included in the value of the investors' respective
beneficial interests in the Portfolio.
Under the current method of the Portfolio's operations, it is not
subject to any income tax. However, each domestic investor in the
Portfolio is taxable on its share (as determined in accordance with the
Trust's governing instruments and the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations promulgated thereunder) of the
Portfolio's ordinary income and capital gain. It is intended that the
Portfolio's assets, income, and distributions will continue to be managed
in such a way that an investor in the Portfolio will be able to satisfy
the requirements of Subchapter M of the Code, assuming that the investor
invests all of its assets in the Portfolio. See Part B for a discussion
concerning the foregoing tax matters and certain other matters.
As of December 15, 1995, Neuberger & Berman International Fund, a
series of Neuberger & Berman Equity Funds, may be deemed to control the
Portfolio. Part B contains additional information concerning this
controlling person. Inquiries by a holder of an interest in the Portfolio
should be directed to the Portfolio at the following address: Elizabethan
Square, P.O. Box 1984, George Town, Grand Cayman, Cayman Islands, BWI.
Item 7. PURCHASE OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. See "General
Description of Registrant" above. All investments in the Portfolio are
made without a sales load, at the NAV next determined after an order is
received by the Portfolio. The NAV of the Portfolio is determined on each
Business Day as of the Valuation Time.
Equity securities are valued at the last sale price on the
principal exchange or in the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, if there are no sales, at the last
available bid price. Debt obligations are valued at the last available
bid price for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality, and type. Foreign
securities are translated from the local currency into U.S. dollars using
current exchange rates. The Portfolio values all other types of
securities and assets, including restricted securities and securities for
which market quotations are not readily available, by a method that the
A-13
<PAGE>
Trustees believe accurately reflects fair value. The Portfolio's
portfolio securities are traded primarily on foreign markets, which may be
open on days when the NYSE is closed. As a result, the NAV of the
Portfolio may be significantly affected on days when investors therein
have no access to the Portfolio.
There is no minimum initial or subsequent investment in the
Portfolio. However, because the Portfolio intends to be as fully invested
at all times as is reasonably practicable, investments in the Portfolio
must be made in federal funds (i.e., monies credited to the account of the
Trust's custodian bank by a Federal Reserve Bank). The Trust reserves the
right to cease accepting investments in the Portfolio at any time or to
reject any investment order.
The Trust's placement agent is N&B Management. Its principal
business address is 605 Third Avenue, New York, NY 10158-0180. N&B
Management receives no compensation for serving as the Trust's placement
agent.
Item 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may withdraw all or any portion of
its investment at the NAV next determined after a withdrawal request in
proper form is furnished by the investor to the Trust. The proceeds of a
withdrawal will be paid by the Portfolio in federal funds normally on the
Business Day the withdrawal is effected, but in any event within three
days.
The Portfolio reserves the right to pay withdrawals in kind.
Unless requested by an investor, the Portfolio will not pay a withdrawal
in kind to an investor, except in situations where that investor may pay
redemptions in kind.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended, or the payment of the withdrawal proceeds
postponed, during any period in which the NYSE is closed (other than
weekends or holidays) or trading on the NYSE is restricted or to the
extent otherwise permitted by the 1940 Act.
Item 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
A-14
<PAGE>
PART B
Item 10. Cover Page.
--------------------
Not applicable.
Item 11. Table of Contents. Page
--------------------------- ----
General Information and History . . . . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . . . . B-1
Management of the Trust . . . . . . . . . . . . . . . . . . B-34
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . B-41
Investment Management and Other Services . . . . . . . . . . B-41
Brokerage Allocation and Other Practices . . . . . . . . . . B-47
Capital Stock and Other Securities . . . . . . . . . . . . . B-51
Purchase, Redemption and Pricing of
Securities . . . . . . . . . . . . . . . . . . . . . . B-52
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . B-52
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . B-55
Calculation of Performance Data . . . . . . . . . . . . . . B-55
Financial Statements . . . . . . . . . . . . . . . . . . . . B-55
Item 12. General Information and History.
-----------------------------------------
Registrant added the words "Neuberger & Berman" to the
name of the International Portfolio on November 17, 1995.
Item 13. Investment Objective and Policies.
-------------------------------------------
Part A contains information about the investment
objective, policies and limitations of Neuberger & Berman International
Portfolio, ("Portfolio"), a series of Global Managers Trust ("Trust").
This Part B should be read only in conjunction with Part A. This section
contains supplemental information concerning the Portfolio's investment
policies and limitations, the portfolio strategies that the Portfolio may
utilize, the types of securities and other instruments in which the
Portfolio may invest, and certain risks attendant to those investments,
policies and strategies.
Investment Policies and Limitations
-----------------------------------
Except for the limitation on borrowing and the limitation
on ownership of portfolio securities by officers and trustees, any
investment policy or limitation that involves a maximum percentage of
securities or assets will not be considered to be violated unless the
percentage limitation is exceeded immediately after, and because of, a
<PAGE>
transaction by the Portfolio. The Portfolio's investment policies and
limitations, as described in this Part B, are nonfundamental unless
otherwise stated.
The Portfolio's fundamental investment policies and
limitations are as follows:
1. Borrowing. The Portfolio may not borrow money,
except that the Portfolio may (i) borrow money from banks for temporary or
emergency purposes and for leveraging or investment and (ii) enter into
reverse repurchase agreements for any purpose; provided that (i) and (ii)
in combination do not exceed 331/3% of the value of the Portfolio's total
assets (including the amount borrowed) less liabilities (other than
borrowings). If at any time borrowings exceed 33-1/3% of the value of the
Portfolio's total assets, the Portfolio will reduce its borrowings within
three days (excluding Sundays and holidays) to the extent necessary to
comply with the 331/3% limitation.
2. Commodities. The Portfolio may not purchase
physical commodities or contracts thereon, unless acquired as a result of
the ownership of securities or instruments, but this restriction shall not
prohibit the Portfolio from purchasing futures contracts, options
(including options on futures contracts, but excluding options or futures
contracts on physical commodities), foreign currencies or forward
contracts, or from investing in securities of any kind.
3. Diversification. The Portfolio may not, with
respect to 75% of the value of its total assets, purchase the securities
of any issuer if, as a result, (i) more than 5% of the value of the
Portfolio's total assets would be invested in the securities of that
issuer or (ii) the Portfolio would hold more than 10% of the outstanding
voting securities of that issuer. This limitation does not apply to
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
4. Industry Concentration. The Portfolio may not
purchase any security if, as a result, 25% or more of its total assets
(taken at current value) would be invested in the securities of issuers
having their principal business activities in the same industry. This
limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
5. Lending. The Portfolio may not lend any security
or make any other loan if, as a result, more than 331/3% of its total
assets (taken at current value) would be lent to other parties, except, in
accordance with its investment objective, policies, and limitations, (i)
through the purchase of a portion of an issue of debt securities or (ii)
by engaging in repurchase agreements.
6. Real Estate. The Portfolio may not invest any
part of its total assets in real estate or interests in real estate unless
acquired as a result of the ownership of securities or instruments, but
B-2
<PAGE>
this restriction shall not prohibit the Portfolio from purchasing readily
marketable securities issued by entities or investment vehicles that own
or deal in real estate or interests therein or instruments secured by real
estate or interests therein.
7. Senior Securities. The Portfolio may not issue
senior securities, except as permitted under the Investment Company Act of
1940, as amended ("1940 Act").
8. Underwriting. The Portfolio may not underwrite
securities of other issuers, except to the extent that the Portfolio, in
disposing of portfolio securities, may be deemed to be an underwriter
within the meaning of the Securities Act of 1933, as amended ("1933 Act").
The following nonfundamental investment policies and
limitations apply to the Portfolio:
1. Investments in Any One Issuer. At the close of
each quarter of the Portfolio's tax year, (i) no more than 25% of its
total assets may be invested in the securities of a single issuer, and
(ii) with regard to 50% of its total assets, no more than 5% of total
assets may be invested in the securities of a single issuer. These
limitations do not apply to U.S. Government securities, as defined for tax
purposes.
2. Lending. Except for the purchase of debt
securities and engaging in repurchase agreements, the Portfolio may not
make any loans other than securities loans.
3. Investments in Other Investment Companies. The
Portfolio may not purchase securities of other investment companies,
except to the extent permitted by the 1940 Act and in the open market at
no more than customary brokerage commission rates. This limitation does
not apply to securities received or acquired as dividends, through offers
of exchange, or as a result of a reorganization, consolidation, or merger.
4. Margin Transactions. The Portfolio may not
purchase securities on margin from brokers or other lenders, except that
the Portfolio may obtain such short-term credits as are necessary for the
clearance of securities transactions. Margin payments in connection with
transactions in futures contracts and options on futures contracts shall
not constitute the purchase of securities on margin and shall not be
deemed to violate the foregoing limitation.
5. Short Sales. The Portfolio may not engage in a
short sale (except a short sale against-the-box), if, as a result, the
dollar amount of all short sales would exceed 25% of its net assets or if,
as a result, the value of securities of any one issuer in which the
Portfolio would be short would exceed 2% of the value of the Portfolio's
net assets or 2% of the securities of any class of any issuer.
Transactions in forward contracts, futures contracts and options are not
considered short sales.
B-3
<PAGE>
6. Ownership of Portfolio Securities by Officers and
Trustees. The Portfolio may not purchase or retain the securities of any
issuer if, to the knowledge of the Portfolio's investment manager,
Neuberger & Berman Management Incorporated ("N&B Management"), those
officers and trustees of the Trust and officers and directors of N&B
Management who each owns individually more than 1/2 of 1% of the outstand-
ing securities of such issuer, together own more than 5% of such
securities.
7. Unseasoned Issuers. The Portfolio may not
purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of the Portfolio's total assets
would be invested in the securities of business enterprises that,
including predecessors, have a record of less than three years of
continuous operation.
8. Illiquid Securities. The Portfolio may not
purchase any security if, as a result, more than 10% of its net assets
would be invested in illiquid securities. Illiquid securities include
securities that cannot be sold within seven days in the ordinary course of
business for approximately the amount at which the Portfolio has valued
the securities, such as repurchase agreements maturing in more than seven
days.
9. Restricted Securities. The Portfolio may not
purchase a security restricted as to resale if, as a result thereof, more
than 10% of the Portfolio's total assets would be invested in restricted
securities. Securities that can be sold freely in the principal market in
which they are traded are not considered restricted, even if they cannot
be sold in the U.S.
10. Warrants. The Portfolio may not invest more than 5%
of its net assets in warrants, whether or not such warrants are listed on
the New York Stock Exchange ("NYSE") or the American Stock Exchange
("AmEx"), or more than 2% of its net assets in unlisted warrants. For
purposes of this limitation, warrants are valued at the lower of cost or
market value, and warrants acquired by the Portfolio in units or attached
to securities are deemed to be without value, even if the warrants are
later separated from the unit.
11. Oil and Gas Programs. The Portfolio may not
invest in participations or other direct interests in oil, gas, or other
mineral leases or exploration or development programs, but the Portfolio
may purchase securities of companies that own interests in any of the
foregoing.
12. Real Estate. The Portfolio may not invest in
real estate limited partnerships.
B-4
<PAGE>
International Investing
-----------------------
Equity portfolios consisting solely of domestic invest-
ments generally have not enjoyed the higher returns foreign opportunities
can offer. For more than thirty years, for example, the growth rate of
many foreign economies has outpaced that of the U.S. While the U.S.
accounted for almost 66% of the world's total securities market
capitalization in 1970, it accounted for less than 37% of that total at
the end of 1994 or less than half of the dollar value of the world's
available stocks and bonds today.1
Over time, a number of international equity markets have
outperformed their U.S. counterparts. Although there are no guarantees,
foreign markets could continue to provide attractive investment
opportunities.
In addition, according to Morgan Stanley Capital
International, the leading companies in any given sector are not always
U.S.based. For example, 22 of the largest 25 automobile companies are
based outside the U.S., as are 20 of the top 25
banks.
A principal advantage of investing overseas is diversi-
fication. A diversified portfolio gives investors the opportunity to
pursue increased overall return while reducing risk. It is prudent to
diversify by taking advantage of investment opportunities in more than one
country's stock or bond market. By investing in several countries through
a worldwide portfolio, investors can lower their exposure and
vulnerability to weakness in any one market. Investors should be aware,
however, that international investing is not a guarantee against market
risk and may be affected by economic factors described in Part A of this
Registration Statement ("Prospectus"), such as the prospects of individual
companies and other risks such as currency fluctuations or controls,
expropriation, nationalization and confiscatory taxation.
Furthermore, for the individual investor, buying foreign
stocks and bonds can be difficult, involving many decisions. Accessing
international markets is complicated; few individuals have the time or
resources to evaluate thoroughly foreign companies and markets, or the
ability to incur the high transaction costs of direct investment in such
markets. A mutual fund investing in foreign securities offers an investor
broad diversification at a relatively low cost.
The Portfolio invests primarily in equity securities of
companies located in developed foreign economies, as well as in "emerging
markets." In all cases, N&B Management's investment process includes a
1 Source: Morgan Stanley Capital International.
B-5
<PAGE>
combination of "topdown country allocation" and "bottomup security
selection."
Top-down approach to regional and country diversification
N&B Management uses extensive economic research to
identify countries that offer attractive investment opportunities, by
analyzing factors such as gross domestic product growth rates, interest
rate trends, and currency exchange rates. Market valuations, combined
with correlation and volatility comparisons, provide N&B Management with a
target allocation across twenty or more countries.
Bottom-up approach to security selection
N&B Management's value-driven style seeks out attractive-
ly priced issues, by concentrating on criteria such as a low price-to-
earnings ratio relative to earnings growth rate, balance sheet strength,
low price to cash flow, and management quality. Typically, over 100
individual issues will comprise the portfolio. The portfolio will be
comprised of securities of medium to large-capitalization companies,
determined in relation to each individual national market.
Currency risk management
Exchange rate movements and volatility are important
factors in international investing. The portfolio manager believes in
actively managing the Portfolio's currency exposure, in an effort to
capitalize on foreign currency trends and to reduce overall portfolio
volatility. Currency risk management is performed separately from equity
analysis. The portfolio manager uses a combination of economic analysis
to guide the Portfolio's longer-term posture and quantitative trend
analysis to assist in timing decisions with respect to whether (or when)
to invest in instruments denominated in a particular foreign currency, or
whether (or when) to hedge particular foreign currencies in which liquid
foreign exchange markets exist.
An Interview with Felix Rovelli, Portfolio Manager of the Portfolio
Q: Why should investors allocate a portion of their assets
to international markets?
A: First, an investor who does not invest internationally
misses out on more than two-thirds of the world's potential investment
opportunities. The U.S. stock market today represents less than one-half
of the world's stock market capitalization, and the U.S. portion continues
to shrink as other countries around the world introduce or expand the size
of their equity markets. Privatizations of government-owned corporations,
initial public offerings, and the occasional creation of official stock
exchanges in emerging economies continuously present new opportunities for
capital in an expanding global market.
B-6
<PAGE>
Second, many foreign economies are in earlier stages of
development than ours and are growing fast. Economic growth can often
mean potential for investment growth.
Finally, international investing helps an investor
increase diversification and can reduce risk. Domestic and foreign
markets generally do not all move in the same direction, so gains in one
market may offset losses in another.
Q: Does international investing involve special risks?
A: Currency risk is one important risk presented by
international investing. Fluctuations in exchange rates can either add to
or reduce an investor's returns, a fact that anyone who invests in foreign
markets should keep in mind.
Other risks include, but are not limited to, greater
market volatility, less government supervision and availability of public
information and the possibility of adverse economic or political
developments. The special risks of foreign investing are discussed in
greater detail in the Prospectus.
Q: What are some of the advantages of investing in an
international fund?
A: An international mutual fund can be a convenient way to
invest internationally and diversify assets among several markets to
reduce risk.
Additionally, the considerable burden of obtaining
timely, accurate, and comprehensive information about foreign economies
and securities is left to seasoned professional managers.
Over the past decade, one of the major indices of international
stocks outperformed the "S&P 500", which represents an average of the
prices of certain major U.S. stocks.
If you had invested $10,000 in the international and U.S. stocks
comprising both indices ten years ago, here's what your investments would
have been worth as of June 30, 1995:2
2 Source: Ibbotson Associates. For the period ended June 30,
1995. International stocks are represented by the Morgan Stanley Capital
International European, Australia, Far East (EAFE) Index, an unmanaged
index of non-U.S. equity performance. Domestic stocks are represented by
the Standard & Poor's 500 Index, an unmanaged index of U.S. equity
performance. Indices do not take into account any fees and expenses of
investing in the individual securities that they track; individuals cannot
invest directly in any index. Average annualized total returns are
measured in U.S. dollars and include changes in share price, dividends
paid and the gross effect of reinvesting dividends.
B-7
<PAGE>
Value of Avg. annualized
investment total return
International stocks $45,587 16.38%
(EAFE)
Domestic stocks $39,131 14.62%
(S&P 500)
Of course, these historical results may not continue in the
future and cannot predict or reflect the performance of the Portfolio. In
addition, investors should keep in mind the added risks inherent in
foreign markets, such as currency exchange fluctuations, interest rates,
and economic and political conditions, all of which can lead to a greater
degree of volatility than funds that invest primarily in U.S. stocks.
Q: What is your investment approach?
A: We seek to capitalize on investments in countries where we
believe that positive economic and political factors are likely to produce
above-average returns. Studies have shown that the allocation of assets
among countries is typically the most important factor contributing to
portfolio performance. We believe that, in the long term, a nation's
economic growth and the performance of its equity market are highly
correlated. Therefore, we continuously evaluate the global economic
outlook as well as individual country data to guide country allocation.
Our process also leads to diversification across many countries, typically
twenty or more, in an effort to limit total portfolio risk.
We strive to invest in companies within the selected
countries that are in the best position to capitalize on such positive
developments or companies that are most attractively valued. We usually
include in the Portfolio's investments the securities of large-
capitalization companies, determined in relation to each individual
national market, as well as securities of faster-growing, medium-sized
companies that offer potentially higher returns but are often associated
with higher risk.
The criteria for security selection focus on companies
with leadership in specific markets or niches within specific industries,
which appear to exhibit positive fundamentals and seem undervalued
relative to their earnings potential or the worth of their assets.
Typically, in emerging markets, we invest in relatively large, established
companies that we believe possess the managerial, financial, and marketing
strength to exploit successfully the growth of a dynamic economy. In more
developed markets, such as Europe and Japan, the Portfolio may invest to a
higher degree in medium-sized companies. Medium-sized companies can often
provide above-average growth and are less followed by market analysts, a
fact that sometimes leads to inefficient valuation.
B-8
<PAGE>
Finally, we strive to limit total portfolio volatility and
protect the value of portfolio securities by selectively hedging the
Portfolio's foreign currency exposure in times when we expect the U.S.
dollar to strengthen.
Q: How do you perceive the current outlook?
A: There is still an abundance of exciting investment
opportunities around the world. Many equity markets still have not
reached the maturity stage of the U.S. market and have much more room to
grow. There are new markets opening up to foreign investment and many
changes are occurring in markets where equity investments have
traditionally commanded less attention than fixed income securities.
In addition, it appears to us that both Europe and Japan
recently passed the bottom of their economic cycles. In many economies,
the current recession has been the most severe of all recessions in the
last five decades. With global inflation still in check, many economies
should continue to have lower interest rates, which, coupled with a
forecast of recovery in profits, could positively impact stock market
returns.
Timely Opportunity for Investors Looking for International Bargains
-------------------------------------------------------------------
"If you have most of your money in U.S. stocks, now may be a good
time to shift part of your portfolio abroad." The Wall Street Journal,
July 25, 1995.
While the U.S. stock market has been reaching new highs in recent
months, you may be able to find more bargains in international stocks than
you may locate on Wall Street. "Today, we are finding a large supply of
what we believe to be excellent companies whose stocks are priced at very
low levels," explains Felix Rovelli, portfolio manager for Neuberger &
Berman International Portfolio, a fund that invests in the stocks of
companies outside the United States.
"For the past year," Rovelli continues, "the economies of many
countries have been growing, and the fundamentals of many selected
individual company stocks have looked strong. Yet because of concerns
over Mexico and the falling U.S. dollar, among other things international
stock prices have lagged. That is, until recently."
After facing setbacks in 1994 and earlier this year, plenty of
regions outside the United States have begun to bounce back.
In its June 1995 quarterly report on mutual funds, The Wall
Street Journal reported that stock markets in both emerging areas and
B-9
<PAGE>
developed European countries rebounded strongly from April 1st to June
30th.3
What is causing this apparent turnaround? France, Italy, and
other European countries have been recovering from recessions. In
developing countries like Thailand and Malaysia, the economies have been
moving ahead at impressive growth rates of 6% to 10% annually over twice
the U.S. rate.
The Portfolio searches far and wide for the best bargains outside
the United States.
Without restrictions as to regions, portfolio manager Felix
Rovelli can exploit investment opportunities wherever and whenever they
arise in both developed and emerging economies. He invests in the stocks
of companies with solid fundamentals that he believes to be undervalued
and to have above-average potential for capital appreciation.
Additional Investment Information
---------------------------------
The Portfolio may make the following investments, among
others. It may not buy all of the types of securities or use all of the
investment techniques that are described.
Repurchase Agreements. Repurchase agreements are
agreements under which the Portfolio purchases securities from a bank that
is a member of the Federal Reserve System, a foreign bank, a U.S. branch
or agency of a foreign bank, or a securities dealer that agrees to
repurchase the securities from the Portfolio at a higher price on a
designated future date. Repurchase agreements generally are for a short
period of time, usually less than a week. The Portfolio may not enter
into a repurchase agreement with a maturity of more than seven days if, as
a result, more than 10% of the value of its net assets would then be
invested in such repurchase agreements and other illiquid securities. The
Portfolio may enter into a repurchase agreement only if (1) the underlying
securities are of the type that the Portfolio's investment policies and
limitations would allow it to purchase directly, (2) the market value of
the underlying securities, including accrued interest, at all times equals
or exceeds the value of the repurchase agreement, and (3) payment for the
underlying securities is made only upon satisfactory evidence that the
securities are being held for the Portfolio's account by its custodian or
a bank acting as the Portfolio's agent. If the Portfolio enters into a
repurchase agreement subject to foreign law and the counterparty defaults,
the Portfolio may not enjoy protections comparable to those provided to
certain repurchase agreements under U.S. bankruptcy law, and may suffer
delays and losses in disposing of the collateral as a result.
3 July 7, 1995. Drawn from data supplied by Lipper Analytical
Services.
B-10
<PAGE>
Securities Loans. In order to realize income, the
Portfolio may lend portfolio securities with a value not exceeding 331/3%
of its total assets to banks, brokerage firms, or institutional investors
judged creditworthy by N&B Management. Borrowers are required
continuously to secure their obligations to return securities on loan from
the Portfolio by depositing collateral in a form determined to be satis-
factory by the trustees of the Trust ("Trustees"). The collateral, which
must be marked to market daily, must be equal to at least 100% of the
market value of the loaned securities, which will also be marked to market
daily. N&B Management believes the risk of loss on these transactions is
slight because, if a borrower were to default for any reason, the
collateral should satisfy the obligation. However, as with other
extensions of secured credit, loans of portfolio securities involve some
risk of loss of rights in the collateral should the borrower fail finan-
cially.
Restricted Securities and Rule 144A Securities. The
Portfolio may invest in restricted securities, which are securities that
may not be sold to the public without an effective registration statement
under the 1933 Act or, if they are unregistered, may be sold only in a
privately negotiated transaction or pursuant to an exemption from
registration. In recognition of the increased size and liquidity of the
institutional market for unregistered securities and the importance of
institutional investors in the formation of capital, the Securities and
Exchange Commission ("SEC") has adopted Rule 144A under the 1933 Act.
Rule 144A is designed further to facilitate efficient trading among
institutional investors by permitting the sale of certain unregistered
securities to qualified institutional buyers. To the extent privately
placed securities held by the Portfolio qualify under Rule 144A, and an
institutional market develops for those securities, the Portfolio likely
will be able to dispose of the securities without registering them under
the 1933 Act. To the extent that institutional buyers become, for a time,
uninterested in purchasing these securities, investing in Rule 144A
securities could increase the level of the Portfolio's illiquidity. N&B
Management, acting under guidelines established by the Trustees, may
determine that certain securities qualified for trading under Rule 144A
are liquid. Foreign securities that can be freely sold in the markets in
which they are principally traded are not considered to be restricted.
Regulation S under the 1933 Act permits the sale abroad of securities that
are not registered for sale in the United States.
Where registration is required, the Portfolio may be
obligated to pay all or part of the registration expenses, and a
considerable period may elapse between the decision to sell and the time
the Portfolio may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market
conditions were to develop, the Portfolio might obtain a less favorable
price than prevailed when it decided to sell. To the extent privately
placed securities, including Rule 144A securities, are illiquid, purchases
thereof will be subject to the Portfolio's 10% limit on investments in
illiquid securities. Restricted securities for which no market exists are
B-11
<PAGE>
priced at fair value as determined in accordance with procedures approved
and periodically reviewed by the Trustees.
Reverse Repurchase Agreements. In a reverse repurchase
agreement, the Portfolio sells portfolio securities subject to its
agreement to repurchase the securities at a later date for a fixed price
reflecting a market rate of interest; these agreements are considered
borrowings for purposes of the Portfolio's investment policies and
limitations concerning borrowings. While a reverse repurchase agreement
is outstanding, the Portfolio will maintain with its custodian in a
segregated account cash or liquid, high-grade debt securities, marked to
market daily, in an amount at least equal to the Portfolio's obligations
under the agreement. There is a risk that the contra-party to a reverse
repurchase agreement will be unable or unwilling to complete the
transaction as scheduled, which may result in losses to the Portfolio.
Leverage. The Portfolio may make investments when
borrowings are outstanding. Leveraging the Portfolio creates an
opportunity for increased net income but, at the same time, creates
special risk considerations. For example, leverage may exaggerate changes
in the Portfolio's net asset value ("NAV") and in its yield. Although the
principal of such borrowings will be fixed, the Portfolio's assets may
change in value during the time the borrowing is outstanding. Leverage
creates interest expenses for the Portfolio. To the extent the income
derived from securities purchased with borrowed funds exceeds the interest
the Portfolio will have to pay, the Portfolio's net income will be greater
than it would be if leverage were not used. Conversely, if the income
from the assets obtained with borrowed funds is not sufficient to cover
the cost of leveraging, the net income of the Portfolio will be less than
it would be if leverage were not used, and therefore the amount available
for distribution to investors as dividends will be reduced. Reverse
repurchase agreements create leverage, a speculative factor, and are
considered borrowings for purposes of the Portfolio's investment
limitations.
Generally, the Portfolio does not intend to use leverage
for investment purposes. It may, however, use leverage to purchase
securities needed to close out short sales entered into for hedging
purposes and to facilitate other hedging transactions.
Foreign Securities. The Portfolio may invest in U.S.
dollar-denominated securities issued by foreign issuers (including banks,
governments, and quasi-governmental organizations) and foreign branches of
U.S. banks, including negotiable certificates of deposit ("CDs"), bankers'
acceptances and commercial paper. These investments are subject to the
Portfolio's quality standards. While investments in foreign securities
are intended to reduce risk by providing further diversification, such
investments involve sovereign and other risks, in addition to the credit
and market risks normally associated with domestic securities. These
additional risks include the possibility of adverse political and economic
developments (including political instability) and the potentially adverse
effects of unavailability of public information regarding issuers, less
B-12
<PAGE>
governmental supervision and regulation of financial markets, reduced
liquidity of certain financial markets, and the lack of uniform
accounting, auditing, and financial standards or the application of
standards that are different or less stringent than those applied in the
United States.
The Portfolio may invest in equity, debt, or other income-
producing securities that are denominated in or indexed to foreign curren-
cies, including (1) common and preferred stocks, (2) CDs, commercial
paper, fixed time deposits, and bankers' acceptances issued by foreign
banks, (3) obligations of other corporations, and (4) obligations of
foreign governments or their subdivisions, agencies, and instrumentali-
ties, international agencies, and supranational entities. Investing in
foreign currency denominated securities includes the special risks asso-
ciated with investing in non-U.S. issuers described in the preceding
paragraph and the additional risks of (1) adverse changes in foreign
exchange rates, (2) nationalization, expropriation, or confiscatory taxa-
tion, (3) adverse changes in investment or exchange control regulations
(which could prevent cash from being brought back to the United States),
and (4) expropriation or nationalization of foreign portfolio companies.
Additionally, dividends and interest payable on foreign securities may be
subject to foreign taxes, including taxes withheld from those payments.
Commissions on foreign securities exchanges are often at fixed rates and
are generally higher than negotiated commissions on U.S. exchanges,
although the Portfolio endeavors to achieve the most favorable net results
on portfolio transactions.
Foreign securities often trade with less frequency and in
less volume than domestic securities and therefore may exhibit greater
price volatility. Additional costs associated with an investment in
foreign securities may include higher custodial fees than apply to
domestic custody arrangements, and transaction costs of foreign currency
conversions.
Prices of foreign securities and exchange rates for
foreign currencies may be affected by the interest rates prevailing in
other countries. Interest rates in other countries are often affected by
local factors, including the strength of the local economy, the demand for
borrowing, the government's fiscal and monetary policies, and the
international balance of payments. Individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position.
Foreign markets also have different clearance and
settlement procedures, and, in certain markets, there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Such
delays in settlement could result in temporary periods when a portion of
the assets of the Portfolio are uninvested and no return is earned
thereon. The inability of the Portfolio to make intended security
purchases due to settlement problems could cause the Portfolio to miss
B-13
<PAGE>
attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result in losses to the
Portfolio due to subsequent declines in value of the portfolio securities,
or, if the Portfolio has entered into a contract to sell the securities,
could result in possible liability to the purchaser.
Forward Commitments and When-Issued Securities. The
Portfolio may purchase securities on a when-issued basis and may purchase
or sell securities on a forward commitment basis. These transactions
involve a commitment by the Portfolio to purchase or sell securities at a
future date (ordinarily one or two months later). The price of the
underlying securities (usually expressed in terms of yield) and the date
when the securities will be delivered and paid for (the settlement date)
are fixed at the time the transaction is negotiated. When-issued
purchases and forward commitment transactions are negotiated directly with
the other party, and such commitments are not traded on exchanges.
When-issued purchases and forward commitment transactions
enable the Portfolio to "lock in" what N&B Management believes to be an
attractive price or yield on a particular security for a period of time,
regardless of future changes in interest rates. For instance, in periods
of rising interest rates and falling prices, the Portfolio might sell
securities it owns on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising prices,
the Portfolio might purchase a security on a when-issued or forward
commitment basis and sell a similar security to settle such purchase,
thereby obtaining the benefit of currently higher yields.
The value of securities purchased on a when-issued or
forward commitment basis and any subsequent fluctuations in their value
are reflected in the computation of the Portfolio's NAV starting on the
date of the agreement to purchase the securities. The Portfolio does not
earn interest on securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Portfolio makes a
forward commitment to sell securities it owns, the proceeds to be received
upon settlement are included in the Portfolio's assets. Fluctuations in
the market value of the underlying securities are not reflected in the
Portfolio's daily net asset value as long as the commitment to sell
remains in effect. Settlement of when-issued purchases and forward
commitment transactions generally takes place within two months after the
date of the transaction, but the Portfolio may agree to a longer
settlement period.
The Portfolio will purchase securities on a when-issued
basis or purchase or sell securities on a forward commitment basis only
with the intention of completing the transaction and actually purchasing
or selling the securities. If deemed advisable as a matter of investment
strategy, however, the Portfolio may dispose of or renegotiate a
commitment after it has been entered into. The Portfolio also may sell
securities it has committed to purchase before those securities are
delivered to the Portfolio on the settlement date. The Portfolio may
realize a capital gain or loss in connection with these transactions.
B-14
<PAGE>
When the Portfolio purchases securities on a when-issued
or forward commitment basis, the Portfolio's custodian will maintain in a
segregated account securities having a value (determined daily) at least
equal to the amount of the Portfolio's purchase commitments. In the case
of a forward commitment to sell portfolio securities, the custodian will
hold the portfolio securities themselves in a segregated account while the
commitment is outstanding. These procedures are designed to ensure that
the Portfolio maintains sufficient assets at all times to cover its
obligations under when-issued purchases and forward commitment
transactions.
Put and Call Options on Individual Securities. The
Portfolio may write call options and purchase put options on securities in
order to hedge (i.e., write or purchase options to reduce the effect of
price fluctuations of securities held by the Portfolio on the Portfolio's
NAV). The Portfolio may also purchase or write put options, purchase call
options and write covered call options in an attempt to enhance income.
The obligation under any option terminates upon expiration
of the option or, at an earlier time, when the writer offsets the option
by entering into a "closing purchase transaction" to purchase an option of
the same series. If an option is purchased by the Portfolio and is never
exercised, the Portfolio will lose the entire amount of the premium paid.
The Portfolio will receive a premium for writing a put
option, which obligates the Portfolio to acquire a certain security at a
certain price at any time until a certain date if the purchaser of the
option decides to sell such security. The Portfolio may be obligated to
purchase the underlying security at more than its current value.
When the Portfolio purchases a put option, it pays a
premium to the writer for the right to sell a security to the writer for a
specified amount at any time until a certain date. The Portfolio would
purchase a put option in order to protect itself against a decline in the
market value of a security it owns.
When the Portfolio writes a call option, it is obligated
to sell a security to a purchaser at a specified price at any time the
purchaser requests until a certain date, and receives a premium for
writing the call option. So long as the obligation of the call option
continues, the Portfolio may be assigned an exercise notice, requiring it
to deliver the underlying security against payment of the exercise price.
The Portfolio may be obligated to deliver securities underlying an option
at less than the market price, thereby giving up any additional gain on
the security. The Portfolio intends to write only "covered" call options
on securities it owns.
When the Portfolio purchases a call option, it pays a
premium for the right to purchase a security from the writer at a
specified price until a specified date. The Portfolio would purchase a
call option in order to protect against an increase in the price of
B-15
<PAGE>
securities it intends to purchase or to offset a previously written call
option.
Portfolio securities on which call and put options may be
written and purchased by the Portfolio are purchased solely on the basis
of investment considerations consistent with the Portfolio's investment
objective. The writing of covered call options is a conservative
investment technique that is believed to involve relatively little risk
(in contrast to the writing of "naked" or uncovered call options, which
the Portfolio will not do) but is capable of enhancing the Portfolio's
total return. When writing a covered call option, the Portfolio, in
return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but
conversely retains the risk of loss should the price of the security
decline. When writing a put option, the Portfolio, in return for the
premium, takes the risk that it must purchase the underlying security at
the exercise price, which may be higher than the current market price of
the security. If a call or put option that the Portfolio has written
expires unexercised, the Portfolio will realize a gain in the amount of
the premium; however, in the case of a call option, that gain may be
offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security.
Options are traded both on exchanges and in the over-the-
counter ("OTC") market. Exchange-traded options are issued by a clearing
organization affiliated with the exchange on which the option is listed;
the clearing organization in effect guarantees completion of every
exchange-traded option. In contrast, OTC options are contracts between
the Portfolio and its counterparty with no clearing organization
guarantee. Thus, when the Portfolio sells (or purchases) an OTC option,
it generally will be able to "close out" the option prior to its
expiration only by entering into a closing transaction with the dealer to
whom (or from whom) the Portfolio originally sold (or purchased) the
option. There can be no assurance that the Portfolio would be able to
liquidate an OTC option at any time prior to expiration. Unless the
Portfolio is able to effect a closing purchase transaction in a covered
OTC call option it has written, it will not be able to liquidate
securities used as cover until the option expires or is exercised or until
different cover is substituted. In the event of the counterparty's
insolvency, the Portfolio may be unable to liquidate its options position
and the associated cover. N&B Management monitors the creditworthiness of
dealers with which the Portfolio may engage in OTC options transactions,
and limits the Portfolio's counterparties in such transactions to dealers
with a net worth of at least $20 million as reported in their latest
financial statements.
The assets used as cover (or held in a segregated account)
for OTC options written by the Portfolio will be considered illiquid
unless the OTC options are sold to qualified dealers who agree that the
Portfolio may repurchase any OTC option it writes at a maximum price to be
calculated by a formula set forth in the option agreement. The cover for
B-16
<PAGE>
an OTC call option written subject to this procedure will be considered
illiquid only to the extent that the maximum repurchase price under the
formula exceeds the intrinsic value of the option.
The premium received (or paid) by the Portfolio when it
writes (or purchases) a call or put option is the amount at which the
option is currently traded on the applicable exchange, less (or plus) a
commission. The premium may reflect, among other things, the current
market price of the underlying security, the relationship of the exercise
price to the market price, the historical price volatility of the
underlying security, the length of the option period, the general supply
of and demand for credit, and the general interest rate environment. The
premium received by the Portfolio for writing a covered call or put option
is recorded as a liability on the Portfolio's statement of assets and
liabilities. This liability is adjusted daily to the option's current
market value, which is the sales price on the option's last reported trade
on that day before the time the Portfolio's NAV is computed or, in the
absence of any trades thereof on that day, the mean between the closing
bid and ask prices.
Closing transactions are effected in order to realize a
profit on an outstanding option, to prevent an underlying security from
being called, or to permit the sale or the put of the underlying security.
Furthermore, effecting a closing transaction permits the Portfolio to
write another call option on the underlying security with a different
exercise price or expiration date or both. If the Portfolio desires to
sell a particular security on which it has written a call option, it will
seek to effect a closing transaction prior to, or concurrently with, the
sale of the security. There is, of course, no assurance that the
Portfolio will be able to effect closing transactions at favorable prices.
If the Portfolio cannot enter into such a transaction, it may be required
to hold a security that it might otherwise have sold (or purchase a
security that it would not have otherwise bought), in which case it would
continue to be subject to market risk on the security.
The Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than
the premium received from writing the call or put option. However,
because increases in the market price of a call option generally reflect
increases in the market price of the underlying security, any loss
resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the
Portfolio.
Options normally have expiration dates between three and
nine months from the date written. The Portfolio may purchase both
European-style options and American-style options. European-style options
are only exercisable immediately prior to their expiration date.
American-style options, in contrast, are exercisable at any time prior to
their expiration date. The exercise price of an option may be below,
equal to, or above the market value of the underlying security at the time
the option is written. From time to time, the Portfolio may purchase an
B-17
<PAGE>
underlying security for delivery in accordance with an exercise notice of
a call option assigned to it, rather than delivering the security from its
portfolio. In those cases, additional brokerage commissions are incurred.
Put and Call Options on Securities Indices. The Portfolio
may write or purchase put and call options on securities indices for the
purpose of hedging against the risk of unfavorable price movements that
would adversely affect the value of the Portfolio's securities or
securities the Portfolio intends to buy. However, the Portfolio currently
does not expect to invest a substantial portion of its assets in
securities index options. Unlike a securities option, which gives the
holder the right to purchase or sell a specified security at a specified
price, an option on a securities index gives the holder the right to
receive a cash "exercise settlement amount" equal to (1) the difference
between the exercise price of the option and the value of the underlying
securities index on the exercise date multiplied by (2) a fixed "index
multiplier."
A securities index fluctuates with changes in the market
values of the securities included in the index. Options on stock indices
are currently traded on the Chicago Board Options Exchange, the NYSE, the
AmEx, and other U.S. and foreign exchanges.
The Portfolio may purchase put options in order to hedge
against an anticipated decline in securities market prices that might
adversely affect the value of the Portfolio's portfolio securities. If
the Portfolio purchases a put option on a securities index, the amount of
the payment it would receive upon exercising the option would depend on
the extent of any decline in the level of the securities index below the
exercise price. Such payments would tend to offset a decline in the value
of the Portfolio's portfolio securities. However, if the level of the
securities index increases and remains above the exercise price while the
put option is outstanding, the Portfolio will not be able to exercise the
option profitably and will lose the amount of the premium and any
transaction costs. Such loss may be partially offset by an increase in
the value of the Portfolio's portfolio securities.
The Portfolio may purchase call options on securities
indices in order to participate in an anticipated increase in securities
market prices. If the Portfolio purchases a call option on a securities
index, the amount of the payment it would receive upon exercising the
option would depend on the extent of any increase in the level of the
securities index above the exercise price. Such payments would, in
effect, allow the Portfolio to benefit from securities market appreciation
even though it may not have had sufficient cash to purchase the underlying
securities. Such payments may also offset increases in the price of
securities that the Portfolio intends to purchase. If, however, the level
of the securities index declines and remains below the exercise price
while the call option is outstanding, the Portfolio will not be able to
exercise the option profitably and will lose the amount of the premium and
any transaction costs. Such loss may be partially offset by a reduction
B-18
<PAGE>
in the price the Portfolio pays to buy additional securities for its
portfolio.
The Portfolio may write securities index options in order
to close out positions in securities index options which it has purchased.
These closing sale transactions enable the Portfolio immediately to
realize gains or minimize losses on its options positions. If the
Portfolio is unable to effect a closing sale transaction with respect to
options that it has purchased, it would have to exercise the options in
order to realize any profit and may incur transaction costs.
The hours of trading for options may not conform to the
hours during which the underlying securities are traded. To the extent
that the options markets close before the markets for the underlying
securities, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the options markets.
The effectiveness of hedging through the purchase of
securities index options will depend upon the extent to which price
movements in the portfolio securities being hedged correlate with price
movements in the selected securities index. Perfect correlation is not
possible because the securities held or to be acquired by the Portfolio
will not exactly match the composition of the securities indices on which
options are available. In addition, the purchase of securities index
options involves the risk that the premium and transaction costs paid by
the Portfolio in purchasing an option will be lost as a result of
unanticipated movements in prices of the securities comprising the
securities index on which the option is based.
All securities index options purchased by the Portfolio
will be listed and traded on an exchange.
Other Risks of Options Transactions. The Portfolio may
purchase and sell options that are traded on both U.S. and foreign
exchanges. There is no assurance that a liquid secondary market on a
domestic or foreign options exchange will exist for any particular
exchange-traded option or at any particular time, and for some options no
secondary market on an exchange may exist. If the Portfolio is unable to
effect a closing purchase transaction with respect to covered call options
it has written, it will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or
are exercised.
Reasons for the absence of a liquid secondary market on an
exchange include the following: (1) there may be insufficient interest in
trading certain options; (2) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (3) trading halts,
suspensions or other restrictions may be imposed with respect to
particular classes, series of options or underlying securities;
(4) unusual or unforeseen circumstances may interrupt normal operations on
an exchange; (5) the facilities of an exchange or its clearing
organization may not at all times be adequate to handle current trading
B-19
<PAGE>
volume; or (6) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that
had been issued by the clearing organization as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The writing and purchase of options is a highly special-
ized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions.
The writing of options on securities involves a risk that the Portfolio
will be required to sell or purchase such securities at a price less
favorable than the current market price and will lose the benefit of
appreciation or depreciation in the market price of such securities.
The Portfolio would incur brokerage commissions or spreads
in connection with its options transactions, as well as for purchases and
sales of underlying securities. Brokerage commissions for options
transactions may be higher or lower than for portfolio securities
transactions. The writing of options could result in a significant
increase in the Portfolio's turnover rate.
Futures Contracts. The Portfolio may enter into futures
contracts for the purchase or sale of individual securities and futures
contracts on securities indices which are traded on exchanges licensed and
regulated by the Commodity Futures Trading Commission ("CFTC") or on
foreign exchanges. Trading on foreign exchanges is subject to the legal
requirements of the jurisdiction in which the exchange is located and to
the rules of such foreign exchange. The Portfolio may purchase and sell
futures for bona fide hedging and non-hedging purposes (i.e., in an effort
to enhance income) as defined in regulations of the CFTC.
A futures contract on a security is a binding contractual
commitment which, if held to maturity, will result in an obligation to
make or accept delivery during a particular month of securities having a
standardized face value and rate of return. By purchasing futures on
securities, the Portfolio will legally obligate itself to accept delivery
of the underlying security and to pay the agreed price. By selling
futures on securities, the Portfolio will legally obligate itself to make
delivery of the security and receive payment of the agreed price.
Open futures positions on securities are valued at the
most recent settlement price, unless such price does not reflect the fair
value of the contract, in which case the position will be valued by or
under the direction of the Trustees.
Futures contracts on securities normally are not held to
maturity but are instead liquidated through offsetting transactions which
may result in a profit or loss. While futures contracts on securities
entered into by the Portfolio will usually be liquidated in this manner,
the Portfolio may instead make or take delivery of the underlying
B-20
<PAGE>
securities whenever it appears economically advantageous for it to do so.
A clearing corporation associated with the exchange on which futures on
securities are traded assumes responsibility for closing out open futures
positions and guarantees that, if still open, the sale or purchase of
securities will be performed on the settlement date.
A securities index futures contract does not require the
physical delivery of securities, but merely provides for profits and
losses resulting from changes in the market value of the contract to be
credited or debited at the close of each trading day to the respective
accounts of the parties to the contract. On the contract's expiration
date, a final cash settlement occurs, and the futures positions are simply
closed out. Changes in the market value of a particular securities index
futures contract reflect changes in the specified index of the securities
on which the futures contract is based.
The Portfolio sells futures contracts in order to offset a
possible decline in the value of its portfolio securities. When a futures
contract is sold by the Portfolio, the value of the contract will tend to
rise when the value of the Portfolio's securities declines and will tend
to fall when the value of such securities increases. The Portfolio
purchases futures contracts in order to fix what N&B Management believes
to be a favorable price for securities the Portfolio intends to purchase.
If a futures contract is purchased by the Portfolio, the value of the
contract will tend to change together with changes in the value of such
securities.
The Portfolio may also purchase put and call options on
futures contracts for bona fide hedging and nonhedging purposes. A put
option purchased by the Portfolio would give it the right to assume a
position as the seller of a futures contract (assume a short position). A
call option purchased by the Portfolio would give it the right to assume a
position as the purchaser of a futures contract (assume a long position).
The Portfolio pays a premium when it purchases an option on a futures
contract. In exchange for the premium, the Portfolio becomes entitled to
exercise the option, but is not required to do so. If the option cannot
be profitably exercised before it expires, the Portfolio's loss will be
limited to the amount of the premium and any transaction costs.
In addition, the Portfolio may write (sell) put and call
options on futures contracts for bona fide hedging and nonhedging
purposes. Writing a put option on a futures contract generates a premium,
which may partially offset an increase in the price of securities that the
Portfolio intends to purchase. However, the Portfolio becomes obligated
to purchase a futures contract, which may have a value lower than the
exercise price. Conversely, writing a call option on a futures contract
generates a premium which may partially offset a decline in the value of
the Portfolio's assets. By writing a call option, the Portfolio becomes
obligated, in exchange for the premium, to sell a futures contract, which
may have a value higher than the exercise price.
B-21
<PAGE>
The Portfolio may enter into closing purchase or sale
transactions in order to terminate a futures contract. The Portfolio may
close out an option which it has purchased or written by selling or
purchasing an offsetting option of the same series. There is no guarantee
that such closing transactions can be effected. The Portfolio's ability
to enter into closing transactions depends on the development and
maintenance of a liquid market, which may not exist at all times.
Although futures and options transactions are intended to
enable the Portfolio to manage interest rate or stock market risks,
unanticipated changes in interest rates or market prices could result in
poorer performance than if the Portfolio had not entered into such
transactions. Even if N&B Management correctly predicts interest rate or
market price movements, a hedge could be unsuccessful if changes in the
value of the Portfolio's futures position do not correspond to changes in
the value of its investments. This lack of correlation between the
Portfolio's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Portfolio's futures position and the securities
held by or to be purchased for the Portfolio. N&B Management attempts to
minimize these risks through careful selection and monitoring of the
Portfolio's futures and options positions. The ability to predict the
direction of the securities markets and interest rates involves skills
different from those used in selecting securities.
The prices of futures contracts depend primarily on the
value or level of the securities or indices on which they are based.
Because there are a limited number of types of futures contracts, it is
likely that the standardized futures contracts available to the Portfolio
will not exactly match the securities the Portfolio wishes to hedge or
intends to purchase, and consequently will not provide a perfect hedge
against all price fluctuations. To compensate for differences in
historical volatility between positions the Portfolio wishes to hedge and
the standardized futures contracts available to it, the Portfolio may
purchase or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase.
Foreign Currency Transactions. The Portfolio may engage
in foreign currency exchange transactions. Such transactions are
conducted either on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or through entering into forward
contracts to purchase or sell foreign currencies. The Portfolio may enter
into forward contracts in order to protect against uncertainty in the
level of future foreign currency exchange rates and may also enter into
forward contracts for nonhedging purposes. A forward contract involves an
obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days (usually less than one year) from the date
of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded in the interbank market directly
between traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions
are charged at any stage for trades. Although foreign exchange dealers do
B-22
<PAGE>
not charge a fee for conversion, they do realize a profit based on the
difference (the spread) between the prices at which they are buying and
selling various currencies.
When the Portfolio enters into a contract for the purchase
or sale of a security denominated in a foreign currency, it may wish to
"lock in" the U.S. dollar price of the security. By entering into a
forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying
security transactions, the Portfolio will be able to protect itself
against a possible loss. Such loss would result from an adverse change in
the relationship between the U.S. dollar and the foreign currency during
the period between the date on which the security is purchased or sold and
the date on which payment is made or received.
When N&B Management believes that the currency of a
particular foreign country may suffer a substantial decline against the
U.S. dollar, the Portfolio may also enter into a forward contract to sell,
for a fixed amount of dollars, an amount of foreign currency which
approximates the value of some or all of the portfolio securities
denominated in such foreign currency. The precise matching of the forward
contract amounts and the value of the Portfolio's foreign currency
denominated securities will not generally be possible, since the future
value of such securities will change as a consequence of market movements
between the date the forward contract is entered into and the date it
matures.
The Portfolio may also engage in cross-hedging by using
forward contracts in one currency to hedge against fluctuations in the
value of securities denominated in a different currency, when N&B
Management believes that there is a pattern of correlation between the two
currencies. The Portfolio may also purchase and sell forward contracts
for nonhedging purposes when N&B Management anticipates that a foreign
currency will appreciate or depreciate in value, but securities in that
currency do not present attractive investment opportunities and are not
held in the Portfolio's investment portfolio.
When the Portfolio engages in foreign currency
transactions for hedging purposes, it will not enter into forward
contracts to sell currency or maintain a net exposure to such contracts if
their consummation would obligate the Portfolio to deliver an amount of
foreign currency in excess of the value of the Portfolio's portfolio
securities or other assets denominated in that currency. At the
consummation of the forward contract, the Portfolio may either make
delivery of the foreign currency or terminate its contractual obligation
to deliver by purchasing an offsetting contract obligating it to purchase
the same amount of such foreign currency at the same maturity date. If
the Portfolio chooses to make delivery of the foreign currency, it may be
required to obtain such currency through the sale of portfolio securities
denominated in such currency or through conversion of other assets of the
Portfolio into such currency. If the Portfolio engages in an offsetting
transaction, it will incur a gain or a loss to the extent that there has
B-23
<PAGE>
been a change in forward contract prices. Closing purchase transactions
with respect to forward contracts are usually made with the currency
trader who is a party to the original forward contract.
The Portfolio is not required to enter into such
transactions and will not do so unless deemed appropriate by N&B
Management.
Using forward contracts to protect the value of the
Portfolio's securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. It
simply establishes a rate of exchange which can be achieved at some future
point in time. The precise projection of short-term currency market
movements is not possible, and short-term hedging provides a means of
fixing the dollar value of only a portion of the Portfolio's foreign
assets.
While the Portfolio may enter into forward contracts to
reduce currency exchange rate risks, transactions in such contracts
involve certain other risks. Thus, while the Portfolio may benefit from
such transactions, unanticipated changes in currency exchange rates may
result in a poorer overall performance for the Portfolio than if it had
not engaged in any such transactions. Moreover, there may be imperfect
correlation between the Portfolio's holdings of securities denominated in
a particular currency and forward contracts entered into by the Portfolio.
Such imperfect correlation may cause the Portfolio to sustain losses or
may prevent the Portfolio from achieving a complete hedge. The Portfolio
may experience delays in the settlement of its foreign currency
transactions.
An issuer of fixed income securities purchased by the
Portfolio may be domiciled in a country other than the country in whose
currency the instrument is denominated. The Portfolio may also invest in
debt securities denominated in the European Currency Unit ("ECU"), which
is a "basket" consisting of a specified amount of the currencies of
certain of the member states of the European Union. The specific amounts
of currencies comprising the ECU may be adjusted by the Council of
Ministers of the European Union from time to time to reflect changes in
relative values of the underlying currencies. In addition, the Portfolio
may invest in securities denominated in other currency baskets. The
market for ECUs may become illiquid at times of uncertainty or rapid
change in the European currency markets, limiting the Portfolio's ability
to prevent potential losses.
Currency Futures and Options Thereon. The Portfolio may
enter into currency futures contracts and options on such futures
contracts in domestic and foreign markets and may do so for hedging or
nonhedging purposes (i.e., in an effort to enhance income) as defined in
CFTC regulations. The Portfolio may sell a currency futures contract or a
call option, or it may purchase a put option on such futures contract, if
N&B Management anticipates that exchange rates for a particular currency
will fall. Such a transaction will be used as a hedge (or, in the case of
B-24
<PAGE>
a sale of a call option, a partial hedge) against a decrease in the value
of the Portfolio's securities denominated in such currency. If N&B
Management anticipates that a particular currency will rise, the Portfolio
may purchase a currency futures contract or a call option to protect
against an increase in the price of securities which are denominated in a
particular currency and which the Portfolio intends to purchase. The
Portfolio may also purchase a currency futures contract, or a call option
thereon, for nonhedging purposes when N&B Management anticipates that a
particular currency will appreciate in value, but securities denominated
in that currency do not present an attractive investment and are not
included in the Portfolio's portfolio.
The sale of a currency futures contract creates an
obligation by the Portfolio, as seller, to deliver the amount of currency
called for in the contract at a specified future time for a specified
price. The purchase of a currency futures contract creates an obligation
by the Portfolio, as purchaser, to take delivery of an amount of currency
at a specified future time at a specified price. Although the terms of
currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without
the parties making or taking of delivery of the currency. A currency
futures contract is closed out by entering into an offsetting purchase or
sale transaction. To close out a currency futures contract sold by the
Portfolio, the Portfolio purchases a currency futures contract for the
same aggregate amount of currency and same delivery date. If the price in
the sale exceeds the price in the offsetting purchase, the Portfolio is
immediately paid the difference. Similarly, to close out a currency
futures contract purchased by the Portfolio, the Portfolio sells a
currency futures contract. If the offsetting sale price exceeds the
purchase price, the Portfolio realizes a gain. Likewise, if the
offsetting sale price is less than the purchase price, the Portfolio
realizes a loss.
Unlike a currency futures contract, which requires the
parties to buy and sell currency on a set date, an option on a futures
contract entitles its holder to decide on or before a future date whether
to enter into such a contract. If the holder decides not to enter into
the contract, the premium paid for the option is lost. For the holder of
an option, there are no daily payments of cash for variation margin to
reflect changes in the value of the underlying contract, as there are by a
purchaser or seller of a currency futures contract.
A risk in employing currency futures contracts to protect
against price volatility of portfolio securities which are denominated in
a particular currency is that the prices of such currency futures
contracts may not completely correlate with the cash prices of the
Portfolio's securities. The correlation may be distorted by the fact that
the currency futures market may be dominated by short-term traders seeking
to profit from changes in exchange rates. This would reduce the value of
such contracts used for hedging purposes over a short-term period. Such
distortions are generally minor and would diminish as the contract
approaches maturity. Another risk is that N&B Management could be
B-25
<PAGE>
incorrect in its expectation as to the direction or extent of various
exchange rate movements or the time span within which such movements will
take place. When the Portfolio purchases currency futures contracts, an
amount of securities, cash, or cash equivalents equal to the market value
of the currency futures contract (minus any required margin) will be
deposited in a segregated account to collateralize the position and
thereby limit the use of such futures contracts.
Put and call options on currency futures have character-
istics similar to those of other options. In particular, the ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market for such options.
Options on Foreign Currencies. The Portfolio may purchase
options on foreign currencies for hedging purposes in a manner similar to
currency futures contracts or forward contracts. For example, a decline
in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if
their value in the foreign currency remains constant. In order to protect
against such decreases in the value of portfolio securities, the Portfolio
may purchase put options on the foreign currency. If the value of the
currency declines, the Portfolio will have the right to sell such currency
for a fixed amount of dollars which exceeds the market value of such
currency. This would result in a gain that may offset, in whole or in
part, the negative effect of currency depreciation on the value of the
Portfolio's securities denominated in that currency.
Conversely, if a rise in the dollar value of a currency is
projected for securities to be acquired by the Portfolio, thereby increas-
ing the cost of such securities, the Portfolio may purchase call options
on such currency. If the value of currency increases sufficiently, the
Portfolio will have the right to purchase such currency for a fixed amount
of dollars which is less than the market value of such currency. Such a
purchase would result in a gain that may offset, at least partially, the
effect of any currency-related increase in the price of securities the
Portfolio intends to acquire.
As in the case of other types of options transactions,
however, the benefit the Portfolio derives from purchasing foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, if currency exchange rates do not move in
the direction or to the extent anticipated, the Portfolio could sustain
losses on transactions in foreign currency options which would deprive it
of all or a portion of the benefits of advantageous changes in such rates.
The Portfolio may also write options on foreign currencies
for hedging purposes. For example, if N&B Management anticipates a
decline in the dollar value of foreign currency denominated securities
because of declining exchange rates, the Portfolio could, instead of
purchasing a put option, write a call option on the relevant currency. If
the expected decline occurs, the option most likely will not be exercised,
B-26
<PAGE>
and the decrease in value of portfolio securities will be offset, at least
partially, by the amount of the premium received by the Portfolio.
Similarly, the Portfolio could write a put option on the
relevant currency, instead of purchasing a call option, to hedge against
an anticipated increase in the dollar cost of securities to be acquired.
If exchange rates move in the manner projected, the put option most likely
will expire unexercised and allow the Portfolio to offset such increased
cost up to the amount of the premium.
However, as in the case of other types of options
transactions, the writing of a foreign currency option will constitute
only a partial hedge up to the amount of the premium and only if rates
move in the expected direction. If unanticipated exchange rate fluctua-
tions occur, the option may be exercised, and the Portfolio would be
required to purchase or sell the underlying currency at a loss which may
not be fully offset by the amount of the premium. As a result of writing
options on foreign currencies, the Portfolio also may be required to
forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in currency exchange rates.
The Portfolio may purchase call options on foreign
currencies for nonhedging purposes when N&B Management anticipates that a
currency will appreciate in value, but securities denominated in that
currency do not present attractive investment opportunities and are not
included in the Portfolio's portfolio. The Portfolio may write (sell) put
and covered call options on any currency in order to realize greater
income than would be realized on portfolio securities alone. However, in
writing covered call options for income, the Portfolio may forego the
opportunity to profit from an increase in the market value of the
underlying currency. Also, when writing put options, the Portfolio
accepts, in return for the option premium, the risk that it may be
required to purchase the underlying currency at a price in excess of the
currency's market value at the time of purchase.
The Portfolio would normally purchase call options for
nonhedging purposes in anticipation of an increase in the market value of
a currency. The Portfolio would ordinarily realize a gain if, during the
option period, the value of such currency exceeded the sum of the exercise
price, the premium paid and transaction costs. Otherwise the Portfolio
would realize either no gain or a loss on the purchase of the call option.
Put options may be purchased by the Portfolio for the purpose of
benefiting from a decline in the value of currencies which it does not
own. The Portfolio would ordinarily realize a gain if, during the option
period, the value of the underlying currency decreased below the exercise
price sufficiently to more than cover the premium and transaction costs.
Otherwise the Portfolio would realize either no gain or a loss on the
purchase of the put option.
A call option on foreign currency written by the Portfolio
is "covered" if the Portfolio owns the underlying foreign currency, or if
it has an absolute and immediate right to acquire that foreign currency
B-27
<PAGE>
without additional cash consideration. A call option is also covered if
the Portfolio holds a call on the same foreign currency for the same
principal amount as the call written where the exercise price of the call
held is (1) equal to or less than the exercise price of the call written
or (2) greater than the exercise price of the call written if the amount
of the difference is maintained by the Portfolio in cash or liquid, high-
grade debt securities in a segregated account with its custodian.
Limitations on Options, Futures Contracts and Foreign Currency
Transactions. The Portfolio is required to maintain margin deposits with,
or for the benefit of, futures commission merchants through which it
effects futures transactions. The Portfolio must deposit initial margin
each time it enters into a futures contract. Such initial margin is
usually equal to a percentage of the contract's value. In addition, daily
variation margin payments in cash are required to reflect gains and losses
on open futures positions. As a result, the Portfolio may be required to
make additional margin payments during the term of a futures contract.
The Portfolio may not purchase or sell futures contracts (including
currency futures contracts) or related options (including certain options
on foreign currencies) on foreign or U.S. exchanges if immediately
thereafter the aggregate amount of initial margin deposits and premiums
paid on the Portfolio's existing positions (excluding futures contracts
and options entered into for bona fide hedging purposes and net of the
amount the options are "in the money") would exceed 5% of the market value
of the Portfolio's net assets. When the Portfolio purchases futures
contracts or writes put options thereon, the Portfolio will deposit an
amount of cash, cash equivalents or securities denominated in the
appropriate currency equal to the market value of the futures contracts
and options (less any related margin deposits) in a segregated account
with its custodian to collateralize the position, thereby limiting the use
of such futures contracts. Pursuant to an undertaking made to a state
securities administrator, the Portfolio will not invest more than 5% of
its total assets in instruments commonly known as options, financial
futures, or stock index futures, other than hedging positions or positions
that are covered by cash or securities. Also, the Portfolio has
undertaken that it will not invest more than 5% of its total assets in
puts, calls, straddles, spreads, or any combination thereof.
When the Portfolio enters into forward contracts for the
sale or purchase of currencies, the Portfolio will either cover its
position or establish a segregated account. The Portfolio will consider
its position covered if it has securities in the currency subject to the
forward contract, or otherwise has the right to obtain that currency at no
additional cost. In the alternative, the Portfolio will place cash which
is not available for investment, liquid, high-grade debt securities or
other securities (denominated in the foreign currency subject to the
forward contract) in a separate account. The amounts in such separate
account will equal the value of the Portfolio's assets which are committed
to the consummation of foreign currency exchange contracts. If the value
of the securities placed in the separate account declines, the Portfolio
will place additional cash or securities in the account on a daily basis
B-28
<PAGE>
so that the value of the account will equal the amount of the Portfolio's
commitments with respect to such contracts.
The extent to which the Portfolio may enter into futures
and options transactions may be limited by the requirements of federal
income tax law applicable to its investor(s) for qualification as a
regulated investment company ("RIC").
Short Sales. The Portfolio may enter into short sales of
securities to the extent permitted by its nonfundamental investment
policies and limitations. Under applicable guidelines of the SEC staff,
if the Portfolio engages in a short sale (other than a short sale against-
the-box), it must put in a segregated account (not with the broker) an
amount of cash or U.S. Government securities equal to the difference
between (1) the market value of the securities sold short at the time they
were sold short and (2) any cash or U.S. Government securities required to
be deposited as collateral with the broker in connection with the short
sale (not including the proceeds from the short sale). In addition, until
the Portfolio replaces the borrowed security, it must daily maintain the
segregated account at such a level that (1) the amount deposited in it
plus the amount deposited with the broker as collateral equals the current
market value of the securities sold short, and (2) the amount deposited in
it plus the amount deposited with the broker as collateral is not less
than the market value of the securities at the time they were sold short.
The effect of short selling on the Portfolio is similar to
the effect of leverage. Short selling may exaggerate changes in the
Portfolio's NAV and yield. Short selling may also produce higher than
normal portfolio turnover, which may result in increased transaction costs
to the Portfolio and may result in gains from the sale of securities
deemed to have been held for less than three months. Such gains must be
limited in order for an investor in the Portfolio to qualify as a RIC for
federal income tax purposes. See Item 20 ("Tax Status").
Fixed Income Securities. While the emphasis of the
Portfolio's investment program is on common stocks and other equity
securities (including preferred stocks and securities convertible into or
exchangeable for common stocks), the Portfolio may also invest in money
market instruments, U.S. Government or Agency Securities, and other fixed
income securities. The Portfolio may invest in foreign corporate bonds
and debentures and sovereign debt instruments issued or guaranteed by
foreign governments, their agencies or instrumentalities. The Portfolio
may invest in debt securities of any rating, including those rated below
investment grade and Comparable Unrated Securities. The ratings of a
nationally recognized statistical rating organization represent its
opinion as to the quality of securities it undertakes to rate. Ratings
are not absolute standards of quality; consequently, securities with the
same maturity, coupon, and rating may have different yields. The
Portfolios rely primarily on ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's ("S&P"), which are
described in the Appendix to this Part B.
B-29
<PAGE>
Foreign debt securities are subject to risks similar to
those of other foreign securities. Fixed income securities are subject to
the risk of an issuer's inability to meet principal and interest payments
on its obligations ("credit risk") and are subject to price volatility due
to such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer, and general market liquidity ("market
risk"). Lower-rated securities are more likely to react to developments
affecting market and credit risk than are more highly rated securities,
which react primarily to movements in the general level of interest rates.
Debt securities in the lowest rating categories may involve a substantial
risk of default or may be in default. Changes in economic conditions or
developments regarding the individual issuer are more likely to cause
price volatility and weaken the capacity of the issuer of such securities
to make principal and interest payments than is the case for higher-grade
debt securities. An economic downturn affecting the issuer may result in
an increased incidence of default. The market for lower-rated securities
may be thinner and less active than for higher-rated securities. Pricing
of thinly traded securities requires greater judgment than pricing of
securities for which market transactions are regularly reported. N&B
Management will invest in such securities only when it concludes that the
anticipated return to the Portfolio on such an investment warrants
exposure to the additional level of risk.
Subsequent to its purchase by the Portfolio, an issue of
securities may cease to be rated or its rating may be reduced so that the
securities would not be eligible for purchase by the Portfolio. In such a
case, N&B Management will make a determination as to whether the Portfolio
should dispose of the downgraded securities.
Commercial Paper. Commercial paper is a short-term debt
security issued by a corporation or bank for purposes such as financing
current operations. The Portfolio may invest only in commercial paper
receiving the highest rating from S&P (A1) or Moody's (P1), or deemed by
N&B Management to be of equivalent quality. The Portfolio may invest in
such commercial paper as a defensive measure, to increase liquidity or as
needed for segregated accounts.
The Portfolio may invest in commercial paper that cannot
be resold to the public without an effective registration statement under
the 1933 Act. While restricted commercial paper normally is deemed
illiquid, N&B Management may in certain cases determine that such paper is
liquid, pursuant to guidelines established by the Trustees.
Convertible Securities. A convertible security entitles
the holder to receive interest paid or accrued on debt or the dividend
paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, such securities
ordinarily provide a stream of income with generally higher yields than
common stocks of the same or similar issuers, but lower than the yield on
nonconvertible debt. Convertible securities are usually subordinated to
comparable-tier nonconvertible securities but rank senior to common stock
in a corporation's capital structure. The value of a convertible security
B-30
<PAGE>
is a function of (1) its yield in comparison to the yields of other
securities of comparable maturity and quality that do not have a
conversion privilege and (2) its worth if converted into the underlying
common stock.
Convertible securities are typically issued by smaller
capitalization companies whose stock prices may be volatile. The price of
a convertible security often reflects variations in the price of the
underlying common stock in a way that nonconvertible debt does not. A
convertible security may be subject to redemption at the option of the
issuer at a price established in the security's governing instrument. If
a convertible security held by the Portfolio is called for redemption, the
Portfolio will be required to convert it into the underlying common stock,
sell it to a third party or permit the issuer to redeem the security. Any
of these actions could have an adverse effect on the Portfolio's ability
to achieve its investment objective.
Preferred Stock. The Portfolio may invest in preferred
stock. Unlike interest payments on debt securities, dividends on
preferred stock are generally payable at the discretion of the issuer's
board of directors, although preferred shareholders may have certain
rights if dividends are not paid. Shareholders may suffer a loss of value
if dividends are not paid and generally have no legal recourse against the
issuer. The market prices of preferred stocks are generally more
sensitive to changes in the issuer's creditworthiness than are the prices
of debt securities.
Item 14. Management of the Trust.
---------------------------------
Trustees and Officers
The following table sets forth information concerning the
Trustees and officers of the Trust, including their addresses and
principal business experience during the past five years. Some persons
named as trustees and officers also serve in similar capacities for other
funds, and (where applicable) their corresponding portfolios, managed by
N&B Management and Neuberger & Berman, L.P. ("Neuberger & Berman").
<TABLE>
<CAPTION>
Name, Age and Positions Held
Address(1) With the Trust Principal Occupation(s)(2)
------------- -------------- -----------------------
<S> <C> <C>
B-31
<PAGE>
Name, Age and Positions Held
Address(1) With the Trust Principal Occupation(s)(2)
------------- -------------- -----------------------
Stanley Egener*(61) Chairman of the Partner of Neuberger & Berman; President and
Board, Chief Director of N&B Management; Chairman of the
Executive Officer, Board, Chief Executive Officer, and Trustee
and Trustee of eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Howard A. Mileaf (57) Trustee Vice President and Special Counsel to Wheel-
Wheeling Pittsburgh ing Pittsburgh Corporation (holding company)
Corporation since 1992; formerly Vice President and
110 East 59th Street General Counsel of Keene Corporation
New York, NY 10022 (manufacturer of industrial products);
Director of Kevlin Corporation (manufacturer
of microwave and other products).
John T. Patterson, Jr. (67) Trustee President of SOBRO (South Bronx Overall
90 Riverside Drive Economic Development Corporation).
Apartment 1B
New York, NY 10024
John P. Rosenthal (63) Trustee Senior Vice President of Burnham Securities
Burnham Securities Inc. Inc. (a registered broker-dealer) since 1991;
Burnham Asset formerly Partner of Silberberg, Rosenthal &
Management Corp. Co. (member of National Association of
1325 Avenue of the Securities Dealers, Inc.); Director, Cancer
Americas, 17th Floor Treatment Holdings, Inc.
New York, NY 10019
Lawrence Zicklin* (59) President Partner of Neuberger & Berman; Director of
N&B Management; President and Trustee of five
other mutual funds for which N&B Management
acts as investment manager or administrator.
Daniel J. Sullivan (55) Vice President Senior Vice President of N&B Management since
1992; prior thereto, Vice President of N&B
Management; Vice President of eight other
mutual funds for which N&B Management acts as
investment manager or administrator.
B-32
<PAGE>
Name, Age and Positions Held
Address(1) With the Trust Principal Occupation(s)(2)
------------- -------------- -----------------------
Michael J. Weiner (48) Vice President Senior Vice President and Treasurer of N&B
and Principal Management since 1992; prior thereto, Vice
Financial Officer President and Treasurer of N&B Management and
Treasurer of certain mutual funds for which
N&B Management acted as investment adviser;
Vice President and Principal Financial
Officer of eight other mutual funds for which
N&B Management acts as investment manager or
administrator.
Richard Russell (48) Treasurer and Vice President of N&B Management since
Principal January 1993; prior thereto, Assistant Vice
Accounting Officer President of N&B Management; Treasurer and
Principal Accounting Officer of eight other
mutual funds for which N&B Management acts as
investment manager or administrator.
Claudia A. Brandon (38) Secretary Vice President of N&B Management; Secretary
of eight other mutual funds for which N&B
Management acts as investment manager or
administrator.
Stacy Cooper-Shugrue (32) Assistant Secretary Assistant Vice President of N&B Management
since 1993; employee of N&B Management since
1989; Assistant Secretary of eight other
mutual funds for which N&B Management acts as
investment manager or administrator.
C. Carl Randolph (57) Assistant Secretary Partner of Neuberger & Berman since 1992;
employee thereof since 1971; Assistant
Secretary of eight other mutual funds for
which N&B Management acts as investment
manager or administrator.
Jacqueline Henning (53) Assistant Treasurer Managing Director, State Street Cayman Trust
Co., Ltd. since 1994; Assistant Director,
Morgan Grenfell, 199394; Bank of Nova Scotia
Trust Co. (Cayman) Ltd., Managing Director,
198893.
Lenore Joan McCabe (34) Assistant Secretary Operations Supervisor, State Street Cayman
Trust Co., Ltd.; Project Manager, State
Street Canada, Inc., 199294; employee, Boston
Financial Data Services, 198492.
</TABLE>
____________________
B-33
<PAGE>
(1) Unless otherwise indicated, the business address of each listed
person is 605 Third Avenue, New York, New York 10158.
(2) Except as otherwise indicated, each individual has held the positions
shown for at least the last five years.
* Indicates an "interested person" of the Trust within the meaning of
the 1940 Act. Messrs. Egener and Zicklin are interested persons by virtue
of the fact that they are officers and/or directors of N&B Management and
partners of Neuberger & Berman.
The Trust's Declaration of Trust provides that it will indemnify
its Trustees and officers against liabilities and expenses reasonably
incurred in connection with litigation in which they may be involved
because of their offices with the Trust, unless it is adjudicated that
they engaged in bad faith, willful misfeasance, gross negligence, or
reckless disregard of the duties involved in the conduct of their offices.
In the case of settlement, such indemnification will not be provided
unless it has been determined (by a court or other body approving the
settlement or other disposition, by a majority of disinterested Trustees
based upon a review of readily available facts, or in a written opinion of
independent counsel) that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence, or reckless disregard of
their duties.
The following table sets forth information concerning the
compensation of the trustees and officers of the Trust. None of the
Neuberger & Berman Funds has any retirement plan for its trustees or
officers.
TABLE OF COMPENSATION
FOR FISCAL YEAR ENDED 8/31/95
-----------------------------
<TABLE>
<CAPTION>
Total Compensation from the
Name and Position Aggregate Compensation Neuberger & Berman Fund Complex
with the Trust from the Trust Paid to Trustees
----------------- ---------------------- -------------------------------
<S> <C> <C>
Stanley Egener, $0 $0
Chairman of the Board, Chief (9 other investment companies)
Executive Officer, and Trustee
Howard A. Mileaf, Trustee $2,500 $36,500
(4 other investment companies)
John T. Patterson, Jr., Trustee $3,000 $34,500
(4 other investment companies)
B-34
<PAGE>
John P. Rosenthal, Trustee $3,000 $33,000
(4 other investment companies)
</TABLE>
B-35
<PAGE>
Item 15. Control Persons and Principal Holders of Securities.
-------------------------------------------------------------
As of December 15, 1995, the Portfolio could be deemed to
be under the control of Neuberger & Berman International Fund ("Fund"), a
series of Neuberger & Berman Equity Funds, which owned nearly 100% of the
value of the outstanding interests of the Portfolio. The address of the
Fund is 605 Third Avenue, New York, New York, 10158-0180. On most issues
requiring a vote of the Portfolio's interestholders, the Fund is required
to seek voting instructions from its shareholders.
Item 16. Investment Management and Other Services.
--------------------------------------------------
Investment Manager
------------------
N&B Management serves as the Portfolio's investment
manager pursuant to a management agreement with the Trust, on behalf of
the Portfolio, dated as of November 1, 1995 ("Management Agreement"). The
Management Agreement was approved by the holders of the interests in the
Portfolio on October 26, 1995. The Portfolio was authorized to become
subject to the Management Agreement by vote of the Trustees on August 8,
1995, and became subject to it on November 1, 1995.
The Management Agreement provides, in substance, that N&B
Management will make and implement investment decisions for the Portfolio
in its discretion and will continuously develop an investment program for
the Portfolio's assets. The Management Agreement permits N&B Management
to effect securities transactions on behalf of the Portfolio through
associated persons of N&B Management. The Management Agreement also
specifically permits N&B Management to compensate, through higher
commissions, brokers and dealers who provide investment research and
analysis to the Portfolio, although N&B Management has no current plans to
do so.
N&B Management provides to the Portfolio, without separate
cost, office space, equipment, and facilities and the personnel necessary
to perform executive, administrative, and clerical functions. N&B
Management pays all salaries, expenses, and fees of the officers,
trustees, and employees of the Trust who are officers, directors, or
employees of N&B Management. Two directors of N&B Management (who also
are partners of Neuberger & Berman), one of whom also serves as an officer
of N&B Management, presently serve as trustees and/or officers of the
Trust. The Portfolio pays N&B Management a management fee based on the
Portfolio's average daily net assets, as described in Part A.
Because the Portfolio has its principal offices in the
Cayman Islands, the Trust has entered into an Administrative Services
Agreement with State Street Cayman Trust Company Ltd. ("State Street
Cayman"), Elizabethan Square, P.O. Box 1984, George Town, Grand Cayman,
Cayman Islands, effective August 31, 1994. Under the Administrative
B-36
<PAGE>
Services Agreement, State Street Cayman provides sufficient personnel and
suitable facilities for the principal offices of the Portfolio, and
provides certain administrative, fund accounting and transfer agency
services with respect to the Portfolio. The Administrative Services
Agreement terminates if assigned by State Street Cayman; however, State
Street Cayman is permitted to, and does, employ an affiliate, State Street
Canada, Inc., to perform certain accounting functions.
Prior to November 1, 1995, the Portfolio was advised by
BNPN&B Global Asset Management L.P. ("BNPN&B Global"), a joint venture of
Banque Nationale de Paris ("BNP") and Neuberger & Berman, pursuant to an
investment advisory agreement dated June 15, 1994 ("Investment Advisory
Agreement"). During that period, BNPN&B Global voluntarily reimbursed the
Portfolio to the extent that its operating expenses (excluding interest,
taxes, brokerage commissions, and extraordinary expenses) exceeded 0.70%
per annum of the Portfolio's average daily net assets. Prior to November
1, 1995, N&B Management provided the Portfolio with administrative
services pursuant to a separate administration agreement dated June 15,
1994 ("Portfolio Administration Agreement").
For the fiscal year ended August 31, 1995, and for the
period from June 15, 1994 (commencement of operations) through August 31,
1994, the Portfolio paid to BNPN&B Global a fee of $94,422 and $4,167,
respectively, under the Investment Advisory Agreement. During those same
periods, BNPN&B Global reimbursed the Portfolio for $290,362 and $70,114,
respectively, in expenses.
For the fiscal year ended August 31, 1995, and for the
period from June 15, 1994 (commencement of operations) through August 31,
1994, the Portfolio accrued and paid to N&B Management a fee of $100,000
and $21,370, respectively, under the Portfolio Administration Agreement.
The Management Agreement continues with respect to the
Portfolio for a period of two years after the date the Portfolio became
subject thereto. The Management Agreement is renewable thereafter from
year to year with respect to the Portfolio, so long as its continuance is
approved at least annually (1) by the vote of a majority of the Trustees
who are not "interested persons" of N&B Management or the Trust
("Independent Trustees"), cast in person at a meeting called for the
purpose of voting on such approval, and (2) by the vote of a majority of
the Trustees or by a 1940 Act majority vote of the outstanding interests
in the Portfolio.
The Management Agreement is terminable, without penalty,
with respect to the Portfolio on 60 days' written notice either by the Tr-
ust or by N&B Management. The Management Agreement terminates
automatically if it is assigned.
B-37
<PAGE>
Sub-Adviser
-----------
N&B Management retains Neuberger & Berman, 605 Third Avenue, New
York, NY 101583698, as sub-adviser with respect to the Portfolio pursuant
to a sub-advisory agreement dated November 1, 1995 ("Sub-Advisory
Agreement"). The Sub-Advisory Agreement was approved by the holders of
the interests in the Portfolio on October 26, 1995. The Portfolio was
authorized to become subject to the Sub-Advisory Agreement by vote of the
Trustees on August 8, 1995, and became subject to it on November 1, 1995.
The Sub-Advisory Agreement provides in substance that Neuberger &
Berman will furnish to N&B Management, upon reasonable request, the same
type of investment recommendations and research that Neuberger & Berman,
from time to time, provides to its partners and employees for use in
managing client accounts. In this manner, N&B Management expects to have
available to it, in addition to research from other professional sources,
the capability of the research staff of Neuberger & Berman. This staff
consists of approximately fourteen investment analysts, each of whom
specializes in studying one or more industries, under the supervision of
the Director of Research, who is also available for consultation with N&B
Management. The Sub-Advisory Agreement provides that N&B Management will
pay for the services rendered by Neuberger & Berman based on the direct
and indirect costs to Neuberger & Berman in connection with those
services. Neuberger & Berman also serves as a sub-adviser for all of the
other mutual funds managed by N&B Management.
The Sub-Advisory Agreement continues for a period of two years
after the date the Portfolio became subject thereto, and is renewable from
year to year, subject to approval of its continuance in the same manner as
the Management Agreement. The Sub-Advisory Agreement is subject to
termination, without penalty, with respect to the Portfolio by the
Trustees, by a 1940 Act majority vote of the outstanding Portfolio
interests, by N&B Management, or by Neuberger & Berman on not less than 30
nor more than 60 days' written notice. The Sub-Advisory Agreement also
terminates automatically with respect to the Portfolio if it is assigned
or if the Management Agreement terminates with respect to the Portfolio.
Most money managers that come to the Neuberger & Berman
organization have at least fifteen years' experience. Neuberger & Berman
and N&B Management employ experienced professionals that work in a
competitive environment.
Investment Companies Advised
----------------------------
N&B Management currently serves as investment manager of
the following investment companies. As of September 30, 1995, these
companies, along with three investment companies advised by Neuberger &
Berman, had aggregate net assets of approximately $11.4 billion, as shown
in the following list:
B-38
<PAGE>
<TABLE>
<CAPTION>
Approximate
Net Assets at
Name September 30, 1995
---- ------------------
<S> <C>
Neuberger & Berman Cash Reserves Portfolio . . . . . . . $ 377,608,619
(investment portfolio for
Neuberger & Berman Cash Reserves)
Neuberger & Berman Government Income
Portfolio . . . . . . . . . . . . . . . . . . . . . . . $ 12,053,656
(investment portfolio for
Neuberger & Berman Government Income
Fund and Neuberger & Berman Government
Income Trust)
Neuberger & Berman Government Money Portfolio . . . . . $ 346,898,132
(investment portfolio for
Neuberger & Berman Government Money Fund)
Neuberger & Berman Limited Maturity Bond
Portfolio . . . . . . . . . . . . . . . . . . . . . . . $ 309,540,451
(investment portfolio for
Neuberger & Berman Limited Maturity
Bond Fund and Neuberger & Berman
Limited Maturity Bond Trust)
Neuberger & Berman Municipal Money Portfolio . . . . . . $ 149,657,613
(investment portfolio for
Neuberger & Berman Municipal Money Fund)
Neuberger & Berman Municipal Securities
Portfolio . . . . . . . . . . . . . . . . . . . . . . . $ 44,568,635
(investment portfolio for
Neuberger & Berman Municipal Securities
Trust)
Neuberger & Berman New York Insured . . . . . . . . . . $ 10,679,324
Intermediate Portfolio (investment
portfolio for Neuberger & Berman New York
Insured Intermediate Fund)
Neuberger & Berman Ultra Short Bond Portfolio . . . . . $ 102,903,312
(investment portfolio for
Neuberger & Berman Ultra Short Bond
Fund and Neuberger & Berman Ultra Short
Bond Trust)
B-39
<PAGE>
Neuberger & Berman Focus Portfolio . . . . . . . . . . . $1,031,915,664
(investment portfolio for
Neuberger & Berman Focus Fund
and Neuberger & Berman Focus
Trust)
</TABLE>
B-40
<PAGE>
<TABLE>
<CAPTION>
Approximate
Net Assets at
Name September 30, 1995
---- ------------------
<S> <C>
Neuberger & Berman Genesis Portfolio . . . . . . . . . . $ 145,188,783
(investment portfolio for Neuberger
& Berman Genesis Fund and Neuberger
& Berman Genesis Trust)
Neuberger & Berman Guardian Portfolio . . . . . . . . . $4,943,764,830
(investment portfolio for Neuberger
& Berman Guardian Fund and Neuberger
& Berman Guardian Trust)
Neuberger & Berman International Portfolio . . . . . . . $ 29,990,616
(investment portfolio for Neuberger &
Berman International Fund)
Neuberger & Berman Manhattan Portfolio . . . . . . . . . $ 670,916,038
(investment portfolio for Neuberger
& Berman Manhattan Fund and Neuberger
& Berman Manhattan Trust)
Neuberger & Berman Partners Portfolio . . . . . . . . . . $1,664,460,688
(investment portfolio for Neuberger
& Berman Partners Fund and Neuberger
& Berman Partners Trust)
Neuberger & Berman Socially Responsive Portfolio . . . $ 102,675,093
(investment portfolio for
Neuberger & Berman Socially Responsive
Fund, Neuberger & Berman Socially
Responsive Trust, and Neuberger &
Berman NYCDC Socially Responsive Trust)
Neuberger & Berman Advisers Managers
Trust (six series) . . . . . . . . . . . . . . . $ 1,257,506,124
</TABLE>
In addition, Neuberger & Berman serves as investment adviser
to three investment companies, Plan Investment Fund, Inc., AHA Investment
Fund, Inc., and AHA Full Maturity, with assets of $85,110,472,
$110,683,193 and $23,891,472, respectively, at September 30, 1995.
B-41
<PAGE>
The investment decisions concerning the Portfolio and the other funds
and portfolios managed by N&B Management (collectively, "Other N&B Funds")
have been and will continue to be made independently of one another. In
terms of their investment objectives, all of the Other N&B Funds differ
from the Portfolio. Even where the investment objectives are similar,
however, the methods used by the Other N&B Funds to achieve their
investment objectives may differ.
There may be occasions when the Portfolio and one or more of
the Other N&B Funds or other accounts managed by Neuberger & Berman are
contemporaneously engaged in purchasing or selling the same securities
from or to third parties. When this occurs, the transactions are averaged
as to price and allocated as to amounts in accordance with a formula
considered to be equitable to the funds involved. Although in some cases
this arrangement may have a detrimental effect on the price or volume of
the securities as to the Portfolio, in other cases it is believed that the
Portfolio's ability to participate in volume transactions may produce
better executions for it. In any case, it is the judgment of the Trustees
that the desirability of the Portfolio's having its advisory arrangements
with N&B Management outweighs any disadvantages that may result from
contemporaneous transactions. The investment results achieved by all of
the funds managed by N&B Management have varied from one another in the
past and are likely to vary in the future.
Management and Control of N&B Management
----------------------------------------
The directors and officers of N&B Management, all of whom have
offices at the same address as N&B Management, are Richard A. Cantor,
Chairman of the Board and director; Stanley Egener, President and
director; Theresa A. Havell, Vice President and director; Irwin Lainoff,
director; Marvin C. Schwartz, director; Lawrence Zicklin, director; Daniel
J. Sullivan, Senior Vice President; Michael J. Weiner, Senior Vice
President and Treasurer; Claudia A. Brandon, Vice President; William
Cunningham, Vice President; Clara Del Villar, Vice President; Mark R.
Goldstein, Vice President; FarhaJoyce Haboucha, Vice President; Michael M.
Kassen, Vice President; Michael Lamberti, Vice President; Josephine P.
Mahaney, Vice President; Lawrence Marx III, Vice President; Ellen Metzger,
Vice President and Secretary; Janet W. Prindle, Vice President; Felix
Rovelli, Vice President; Richard Russell, Vice President; Kent C. Simons,
Vice President; Frederick B. Soule, Vice President; Judith M. Vale, Vice
President; Thomas Wolfe, Vice President; Andrea Trachtenberg, Vice
President of Marketing; Patrick T. Byrne, Assistant Vice President; Robert
Conti, Assistant Vice President; Stacy CooperShugrue, Assistant Vice
President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio,
Assistant Vice President; Roberta D'Orio, Assistant Vice President;
Robert I. Gendelman, Assistant Vice President; Leslie HollidaySoto,
Assistant Vice President; Carmen G. Martinez, Assistant Vice President;
Paul Metzger, Assistant Vice President; Susan Switzer, Assistant Vice
President; Susan Walsh, Assistant Vice President; and Celeste Wischerth,
Assistant Vice President. Messrs. Cantor, Egener, Lainoff, Schwartz,
B-42
<PAGE>
Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Havell and Prindle
are general partners of Neuberger & Berman.
Mr. Egener is a trustee and officer of the Trust. Mr. Zicklin is an
officer of the Trust. Messrs. Sullivan, Weiner, and Russell and Mmes.
Brandon and CooperShugrue are officers of the Trust. C. Carl Randolph, a
general partner of Neuberger & Berman, also is an officer of the Trust.
B-43
<PAGE>
Custodian and Transfer Agent
----------------------------
The Portfolio has selected State Street Bank and Trust Company
("State Street"), 225 Franklin Street, Boston, MA 02210, as custodian for
its securities and cash held inside and outside the U.S. State Street
Cayman serves as transfer agent to the Portfolio.
Independent Auditors
--------------------
The Portfolio has selected Ernst & Young, Shedden Road, George
Town, Grand Cayman, Cayman Islands, as the independent auditors who will
audit its financial statements.
Legal Counsel
-------------
The Portfolio has selected Kirkpatrick & Lockhart LLP, 1800 M
Street, N.W., Washington, D.C. 20036, as its legal counsel.
Item 17. Brokerage Allocation and Other Practices.
--------------------------------------------------
Neuberger & Berman and BNPInternational Financial Services
Corporation ("BNPInternational"), a wholly owned subsidiary of BNP and an
affiliate of an affiliate of Neuberger & Berman, may act as the
Portfolio's broker in the purchase and sale of its portfolio securities
and the purchase and sale of options on its securities. Neuberger &
Berman acts as the principal broker in the purchase and sale of portfolio
securities of the other portfolios managed by N&B Management.
Transactions in portfolio securities for which Neuberger & Berman or any
other affiliate serves as broker will be effected in accordance with Rule
17e-1 under the 1940 Act.
For the fiscal year ended August 31, 1995, and for the period
June 15, 1994 (commencement of operations) through August 31, 1994, the
Portfolio paid brokerage commissions of $128,324 and $24,554,
respectively. During those periods, the Portfolio paid commissions of
$4,110 and $330, respectively, to Neuberger & Berman and $0 and $0,
respectively, to BNPInternational. Transactions in which the Portfolio
used Neuberger & Berman as broker comprised 5.22% of the aggregate dollar
amount of transactions involving the payment of commissions, and 3.20% of
the aggregate brokerage commissions paid by the Portfolio, during the
fiscal year ended August 31, 1995. Of the $124,214 paid to other brokers
by the Portfolio during that fiscal year, $99,897 (representing
commissions on transactions involving approximately $24,688,049) was
directed to those brokers because of research service they provided.
During the fiscal year ended August 31, 1995, the Portfolio acquired
securities of the following of its "regular brokers or dealers" (as
defined in the 1940 Act) ("Regular B/Ds"): HSBC Securities, Nomura
Securities International, and Kleinwart Benson North America Inc.; at that
B-44
<PAGE>
date, the Portfolio held the securities of its Regular B/Ds with an
aggregate value as follows: HSBC Securities, Inc., $150,471.
Portfolio securities are, from time to time, loaned by the
Portfolio to Neuberger & Berman in accordance with the terms and
conditions of an order issued by the SEC. The order exempts such
transactions from provisions of the 1940 Act that would otherwise prohibit
such transactions, subject to certain conditions. Among the conditions of
the order, securities loans made by the Portfolio to Neuberger & Berman
must be fully secured by cash collateral. Under the order, the portion of
the income on cash collateral which may be shared with Neuberger & Berman
is determined with reference to concurrent arrangements between Neuberger
& Berman and nonaffiliated lenders with which it engages in similar
transactions. In addition, where Neuberger & Berman borrows securities
from the Portfolio in order to relend them to others, Neuberger & Berman
is required to pay over to the Portfolio, on a quarterly basis, certain
"excess earnings" that Neuberger & Berman otherwise has derived from the
relending of the borrowed securities. When Neuberger & Berman desires to
borrow a security that the Portfolio has indicated a willingness to lend,
Neuberger & Berman must borrow such security from the Portfolio, rather
than from an unaffiliated lender, unless the unaffiliated lender is
willing to lend such security on more favorable terms (as specified in the
order) than the Portfolio. If the Portfolio's expenses exceed its income
in any securities loan transaction with Neuberger & Berman, Neuberger &
Berman must reimburse the Portfolio for such loss.
During the fiscal year ended August 31, 1995, and the period
June 15, 1994 (commencement of operations) to August 31, 1994, the
Portfolio earned no interest income from the collateralization of
securities loans.
The Portfolio may also lend securities to unaffiliated
entities, including brokers or dealers, banks and other recognized
institutional borrowers of securities, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the securities
loaned, is continuously maintained by the borrower with the Portfolio.
During the time securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividends or interest paid on such
securities. The Portfolio may invest the cash collateral and earn income,
or it may receive an agreed upon amount of interest income from the
borrower who has delivered equivalent collateral. These loans are subject
to termination at the option of the Portfolio or the borrower. The
Portfolio may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing
broker. The Portfolio does not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
A committee of Independent Trustees from time to time reviews,
among other things, information relating to securities loans by the
Portfolio.
B-45
<PAGE>
In effecting securities transactions, the Portfolio generally
seeks to obtain the best price and execution of orders. Commission rates,
being a component of price, are considered along with other relevant
factors. The Portfolio plans to continue to use Neuberger & Berman (or
any other affiliated broker or dealer) as its broker where, in the judg-
ment of N&B Management (the Portfolio's investment manager and an
affiliate of the broker), that firm is able to obtain a price and
execution at least as favorable as other qualified brokers. To the
Portfolio's knowledge, however, no affiliate of the Portfolio receives
giveups or reciprocal business in connection with its securities
transactions.
The use of Neuberger & Berman (or other affiliates) as a
broker for the Portfolio is subject to the requirements of Section 11(a)
of the Securities Exchange Act of 1934. Section 11(a) prohibits members
of national securities exchanges from retaining compensation for executing
exchange transactions for accounts which they or their affiliates manage,
except in situations where they have the authorization of the persons
authorized to transact business for the account and comply with certain
annual reporting requirements. The Trustees have expressly authorized
Neuberger & Berman and other affiliates to retain such compensation, and
Neuberger & Berman and other affiliates comply with the reporting
requirements of Section 11(a).
Under the 1940 Act, commissions paid by the Portfolio to
Neuberger & Berman (or other affiliates) in connection with a purchase or
sale of securities on a securities exchange may not exceed the usual and
customary broker's commission. Accordingly, it is the Portfolio's policy
that the commissions paid to Neuberger & Berman (or other affiliates)
must, in N&B Management's judgment, be (1) at least as favorable as those
charged by other brokers having comparable execution capability and (2) at
least as favorable as commissions contemporaneously charged by Neuberger &
Berman (or other affiliates) on comparable transactions for its most
favored unaffiliated customers, except for accounts for which Neuberger &
Berman acts as a clearing broker for another brokerage firm and customers
of Neuberger & Berman considered by a majority of the Independent Trustees
not to be comparable to the Portfolio. The Portfolio does not deem it
practicable and in its best interest to solicit competitive bids for
commissions on each transaction effected by Neuberger & Berman (or other
affiliates). However, consideration regularly is given to information
concerning the prevailing level of commissions charged by other brokers on
comparable transactions during comparable periods of time. The 1940 Act
generally prohibits Neuberger & Berman (or other affiliates) from acting
as principal in the purchase or sale of securities for the Portfolio's
account, unless an appropriate exemption is available.
A committee of Independent Trustees from time to time reviews,
among other things, information relating to the commissions charged by
Neuberger & Berman to the Portfolio and to its other customers and
information concerning the prevailing level of commissions charged by
other brokers having comparable execution capability. In addition, the
procedures pursuant to which Neuberger & Berman effects brokerage
B-46
<PAGE>
transactions for the Portfolio must be reviewed and approved no less often
than annually by a majority of the Independent Trustees.
The Portfolio expects that it will continue to execute
transactions through brokers other than Neuberger & Berman. In selecting
those brokers, N&B Management considers the quality and reliability of
brokerage services, including execution capability, performance, and
financial responsibility, and may consider the research and other
investment information provided by, and sale of Fund shares effected
through, those brokers.
A committee comprised of officers of N&B Management and
partners of Neuberger & Berman who are portfolio managers of the Portfolio
and/or Other N&B Funds (collectively, "N&B Funds") and some of Neuberger &
Berman's managed accounts ("Managed Accounts") evaluates semiannually the
nature and quality of the brokerage and research services provided by
other brokers. Based on this evaluation, the committee establishes a list
and projected rankings of preferred brokers for use in determining the
relative amounts of commissions to be allocated to those brokers.
Ordinarily, the brokers on the list effect a large portion of the
brokerage commissions for the N&B Funds and the Managed Accounts that are
not effected by Neuberger & Berman. However, in any semiannual period,
brokers not on the list may be used, and the relative amounts of brokerage
commissions paid to the brokers on the list may vary substantially from
the projected rankings. These variations reflect the following factors,
among others: (1) brokers not on the list or ranking below other brokers
on the list may be selected for particular transactions because they
provide better price and/or execution, which is the primary consideration
in allocating brokerage; (2) adjustments may be required because of
periodic changes in the execution or research capabilities of particular
brokers, or in the execution or research needs of the N&B Funds and/or the
Managed Accounts; and (3) the aggregate amount of brokerage commissions
generated by transactions for the N&B Funds and the Managed Accounts may
change substantially from one semiannual period to the next.
The commissions charged by a broker other than Neuberger &
Berman (or other affiliates) may be higher than the amount another firm
might charge if N&B Management determines in good faith that the amount of
those commissions is reasonable in relation to the value of the brokerage
and research services provided by the broker. N&B Management believes
that those research services benefit the Portfolio by supplementing the
research otherwise available to N&B Management. That research may be used
by N&B Management in servicing Other N&B Funds and, in some cases, by
Neuberger & Berman in servicing the Managed Accounts. On the other hand,
research received by N&B Management from brokers effecting portfolio
transactions on behalf of Other N&B Funds and by Neuberger & Berman from
brokers effecting portfolio transactions on behalf of the Managed Accounts
may be used for the Portfolio's benefit.
Felix Rovelli, a Vice President of N&B Management, is the
person primarily responsible for making decisions as to specific action to
be taken with respect to the investment portfolio of the Portfolio. He
B-47
<PAGE>
has full authority to take action with respect to portfolio transactions
and may or may not consult with other personnel of N&B Management prior to
taking such action. If Mr. Rovelli is unavailable to perform his
responsibilities, Robert Cresci, who is an Assistant Vice President of N&B
Management, will assume responsibility for the Portfolio.
B-48
<PAGE>
Item 18. Capital Stock and Other Securities.
--------------------------------------------
Each investor in the Portfolio is entitled to a vote in
proportion to the amount of its investment therein. Investors in the
Portfolio and other series of the Trust, if any, will all vote together in
certain circumstances (e.g., election of the Trustees and ratification of
the selection of auditors, as provided by the 1940 Act and the rules
thereunder). One or more series of the Trust could control the outcome of
these votes. Investors do not have cumulative voting rights, and
investors holding more than 50% of the aggregate beneficial interests in
the Trust or in the Portfolio, as the case may be, may control the outcome
of votes. The Trust is not required and has no current intention to hold
annual meetings of investors, but the Trust will hold special meetings of
investors when (1) a majority of the Trustees determines to do so or
(2) investors holding at least 10% of the interests in the Trust (or the
Portfolio) request in writing a meeting of investors in the Trust (or the
Portfolio).
The Trust, with respect to the Portfolio, may enter into a
merger or consolidation or sell all or substantially all of its assets, if
approved by a 1940 Act majority vote. The Portfolio may be terminated
(1) upon liquidation and distribution of its assets, if approved by the
vote of at least two-thirds of its investors, or (2) by the Trustees on
written notice to the Portfolio's investors.
The Trust is organized as a trust under the laws of the State
of New York. Investors in the Portfolio will be held personally liable
for its obligations and liabilities, subject, however, to indemnification
by the Trust in the event that there is imposed upon an investor a greater
portion of the liabilities and obligations than its proportionate
beneficial interest. The Declaration of Trust also provides that the
Trust shall maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Portfolio,
investors, Trustees, officers, employees, and agents covering possible
tort and other liabilities. Thus, the risk of an investor incurring
financial loss on account of such liability is limited to circumstances in
which the Portfolio had inadequate insurance and was unable to meet its
obligations out of its assets.
The Declaration of Trust further provides that obligations of
the Portfolio are not binding upon the Trustees individually but only upon
the property of the Portfolio and that the Trustees will not be liable for
any action or failure to act, but nothing in the Declaration of Trust
protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Upon liquidation or dissolution of the Portfolio, the
investors therein would be entitled to share pro rata in its net assets
available for distribution to investors.
B-49
<PAGE>
Item 19. Purchase, Redemption and Pricing of Securities.
--------------------------------------------------------
Beneficial interests in the Portfolio are issued solely in
private placement transactions that do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act. See Items 4, 7, and 8
in Part A.
Net Asset Value. The Portfolio invests primarily in
securities of foreign issuers which are traded on foreign exchanges or in
other foreign markets. Foreign securities may trade on days when the NYSE
is closed, such as Saturdays and U.S. national holidays. However, the
Portfolio's NAV is determined only on the days when the NYSE is open for
trading. Therefore, the Portfolio's NAV may be significantly affected by
such foreign trading on days when investors therein have no access to
redeem or purchase interests in the Portfolio.
Item 20. Tax Status.
--------------------
Certain portfolios of Equity Managers Trust, Income Managers
Trust, and Advisers Managers Trust -- open-end management investment
companies that are managed by N&B Management and are similar to the Trust
have received a ruling from the Internal Revenue Service ("Service") to
the effect that, among other things, each such portfolio will be treated
as a separate partnership for federal income tax purposes and will not be
a "publicly traded partnership." Although these rulings may not be relied
on as precedent by the Portfolio, N&B Management believes the reasoning
thereof and, hence, this conclusion apply to the Portfolio as well. As a
result, the Portfolio is not subject to federal income tax; instead, each
investor in the Portfolio is required to take into account in determining
its federal income tax liability its share of the Portfolio's income,
gains, losses, deductions, and credits, without regard to whether it has
received any cash distributions from the Portfolio. The Portfolio also is
not subject to Delaware or New York income or franchise tax.
Because each investor in the Portfolio that intends to qualify
for federal income tax purposes as a RIC (a "RIC investor") is deemed to
own a proportionate share of the Portfolio's assets and income for
purposes of determining whether the investor satisfies the requirements to
so qualify, the Portfolio intends to continue to conduct its operations so
that its RIC investors will be able to satisfy or to continue to satisfy
all those requirements.
Distributions to an investor from the Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result
in the investor's recognition of any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent any cash
that is distributed exceeds the investor's basis for its interest in the
Portfolio before the distribution, (2) income or gain will be recognized
if the distribution is in liquidation of the investor's entire interest in
the Portfolio and includes a disproportionate share of any unrealized
B-50
<PAGE>
receivables held by the Portfolio, and (3) loss will be recognized if a
liquidation distribution consists solely of cash and/or unrealized
receivables. An investor's basis for its interest in the Portfolio
generally equals the amount of cash and the basis of any property it
invests in the Portfolio, increased by the investor's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash
and the basis of any property the Portfolio distributes to the investor
and (b) the investor's share of the Portfolio's losses.
Dividends and interest received by the Portfolio may be
subject to income, withholding, or other taxes imposed by foreign
countries and U.S. possessions that would reduce the yield on its
securities. Tax treaties between certain countries and the United States
may reduce or eliminate these foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments
by foreign investors. If more than 50% of the value of a RIC investor's
total assets (including its share of the Portfolio's total assets) at the
close of its taxable year consists of securities of foreign corporations,
the RIC investor will be eligible to file an election with the Service
that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign and U.S. possessions
income taxes paid by the Portfolio that are treated as paid by the RIC
investor. Pursuant to the election, the RIC investor would treat those
taxes as dividends paid to its shareholders and each shareholder would be
required to (1) include in gross income, and treat as paid by the
shareholder, his or her proportionate share of those taxes, (2) treat his
or her share of those taxes and of any dividend paid by the RIC investor
that represents income from foreign or U.S. possessions sources as his or
her own income from those sources, and (3) either deduct the taxes deemed
paid by him or her in computing his or her taxable income or,
alternatively, use the foregoing information in calculating the foreign
tax credit against his or her federal income tax.
The Portfolio may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is a foreign corporation that, in
general, meets either of the following tests: (1) at least 75% of its
gross income is passive or (2) an average of at least 50% of its assets
produce, or are held for the production of, passive income. Under certain
circumstances, if the Portfolio holds stock of a PFIC, an investor
(indirectly through its interest in the Portfolio) will be subject to
federal income tax on a portion of any "excess distribution" received on
the stock or of any gain on disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if, in the case of a RIC investor,
the RIC investor distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the RIC
investor's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its
shareholders.
If the Portfolio invests in a PFIC and elects to treat the
PFIC as a "qualified electing fund," then in lieu of an investor's
incurring the foregoing tax and interest obligation, each investor would
B-51
<PAGE>
be required to include in income each year its pro rata share of the
Portfolio's pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which, in the case of a
RIC investor, most likely would have to be distributed to satisfy the
distribution requirement it must satisfy to qualify for treatment as a RIC
and to avoid imposition of an excise tax imposed on certain undistributed
income and gain of RICs -- even if those earnings and gain were not
received by the Portfolio. In most instances it will be very difficult,
if not impossible, to make this election because of certain requirements
thereof.
Pursuant to proposed regulations, open-end RICs would be
entitled to elect to mark to market their stock in certain PFICs. Marking
to market, in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of
each such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in
effect).
The Portfolio's use of hedging strategies, such as writing
(selling) and purchasing options and futures contracts and entering into
forward contracts, involves complex rules that will determine for income
tax purposes the character and timing of recognition of the gains and
losses the Portfolio realizes in connection therewith. Income from
foreign currencies (except certain gains therefrom that may be excluded by
future regulations), and income from transactions in options, futures, and
forward contracts (collectively, "Financial Instruments") derived by the
Portfolio with respect to its business of investing in securities or
foreign currencies, will qualify as permissible income for the Portfolio's
RIC investors under a requirement applicable to RICs regarding permissible
sources of income. However, income from the disposition by the Portfolio
of Financial Instruments (other than those on foreign currencies) will be
subject to a limit on income that may be derived by a RIC from certain
short-term investments ("Short-Short Limitation") for the Portfolio's RIC
investors if they are held for less than three months. Income from the
disposition of foreign currencies, and Financial Instruments on foreign
currencies, that are not directly related to the Portfolio's principal
business of investing in securities (or options and futures with respect
thereto) also will be subject to the Short-Short Limitation for its RIC
investors if they are held for less than three months.
If the Portfolio satisfies certain requirements, any increase
in value of a position that is part of a "designated hedge" will be offset
by any decrease in value (whether realized or not) of the offsetting
hedging position during the period of the hedge for purposes of
determining whether the Portfolio's RIC investors satisfy the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. The
Portfolio will consider whether it should seek to qualify for this
treatment for its hedging transactions. To the extent the Portfolio does
not so qualify, it may be forced to defer the closing out of certain
B-52
<PAGE>
Financial Instruments beyond the time when it otherwise would be
advantageous to do so, in order for its RIC investors to qualify or
continue to qualify as RICs.
Exchange-traded futures contracts and listed options thereon
("Section 1256 contracts") are required to be "marked to market" (that is,
treated as having been sold at market value) at the end of the Portfolio's
taxable year. Sixty percent of any gain or loss recognized as a result of
these "deemed sales," and 60% of any net realized gain or loss from any
actual sales, of Section 1256 contracts are treated as long-term capital
gain or loss; the remainder is treated as short-term capital gain or loss.
Item 21. Underwriters.
---------------------
N&B Management, 605 Third Avenue, New York, NY 101580180, a
New York corporation that is the Portfolio's investment manager, serves as
the Trust's placement agent. N&B Management receives no compensation for
such placement agent services.
Item 22. Calculation of Performance Data.
-----------------------------------------
Not applicable.
Item 23. Financial Statements.
------------------------------
Financial statements for the Portfolio for the fiscal year
ended August 31, 1995, and the report thereon of Ernst & Young,
independent auditors for the Portfolio are incorporated by reference to
the Annual Report to Shareholders of Neuberger & Berman Equity Funds for
the period ended August 31, 1995, File Nos. 2-11357 and 811-582, Edgar
Accession No. 0000898432-95-000350.
B-53
<PAGE>
Appendix A
RATINGS OF SECURITIES
S&P corporate bond ratings:
--------------------------
AAA Bonds rated AAA have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA Bonds rated AA have a very strong capacity to pay interest
and repay principal and differ from the higher rated issues only in small
degree.
A Bonds rated A have a strong capacity to pay interest and
repay principal, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories.
BBB Bonds rated BBB are regarded as having an adequate
capacity to pay principal and interest. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in higher
rated categories.
BB, B, CCC, CC, C Bonds rated BB, B, CCC, CC, and C are
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CI The rating CI is reserved for income bonds on which no
interest is being paid.
D Bonds rated D are in default, and payment of interest
and/or repayment of principal is in arrears.
Plus (+) or Minus () The ratings above may be modified by the
addition of a plus or minus sign to show relative standing within the
major categories.
Moody's corporate bond ratings:
Aaa Bonds rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
an exceptionally stable margin, and principal is secure. Although the
various protective elements are likely to change, the changes that can be
B-54
<PAGE>
visualized are most unlikely to impair the fundamentally strong position
of the issuer.
Aa Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as "high grade bonds." They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa-rated
securities, fluctuation of protective elements may be of greater
amplitude, or there may be other elements present that make the long-term
risks appear somewhat larger than in Aaa-rated securities.
A Bonds rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations; i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. These bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba Bonds rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B Bonds rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Modifiers Moody's may apply numerical modifiers 1, 2, and 3
in each generic rating classification described above. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
B-55
<PAGE>
indicates that the issuer ranks in the lower end of its generic rating
category.
S&P commercial paper ratings:
A1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+).
Moody's commercial paper ratings
Issuers rated Prime-1 (or related supporting institutions),
also known as P1, have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will normally be
evidenced by the following characteristics:
Leading market positions in well-established
industries.
High rates of return on funds employed.
Conservative capitalization structures with
moderate reliance on debt and ample asset
protection. Broad margins in earnings coverage
of fixed financial charges and high internal cash
generation. Well-established access to a range
of financial markets and assured sources of
alternate liquidity.
B-56
<PAGE>
GLOBAL MANAGERS TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
------- ---------------------------------
(a) Financial Statements
Audited financial statements for Neuberger & Berman International
Portfolio are incorporated into Part B by reference to the Annual
Report to Shareholders of Neuberger & Berman Equity Funds for the
period ended August 31, 1995, File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000350.
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -------------------
<S> <C>
(1) (a) Declaration of Trust of Global Managers Trust. Filed herewith.
(b) Schedule A - Current Series of Global Managers Trust. Filed herewith.
(2) By-laws of Global Managers Trust. Incorporated by Reference to Amendment No. 1 to Registrant's
Registration Statement, File No. 811-8422.
(3) Voting Trust Agreement. None.
(4) Specimen Share Certificate. None.
(5) (a) (i) Investment Advisory Agreement between Global Managers Trust and BNP-N&B Global Asset
Management L.P. Incorporated by Reference to Amendment No. 1 to Registrant's
Registration Statement, File No. 811-8422.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the Investment
Advisory Agreement. Incorporated by Reference to Amendment No. 1 to Registrant's
Registration Statement, File No. 811-8422.
(iii) Schedule B - Schedule of Compensation under the Investment Advisory Agreement.
Incorporated by Reference to Amendment No. 1 to Registrant's Registration Statement,
File No. 811-8422.
(b) (i) Administration Agreement between Global Managers Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to Amendment No. 1 to Registrant's Registration
Statement, File No. 811-8422.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the Investment
Advisory Agreement. Incorporated by Reference to Amendment No. 1 to Registrant's
Registration Statement, File No. 811-8422.
<PAGE>
(iii) Schedule B - Schedule of Compensation under the Investment Advisory Agreement.
Incorporated by Reference to Amendment No. 1 to Registrant's Registration Statement,
File No. 811-8422.
(c) (i) Management Agreement between Global Managers Trust and Neuberger & Berman Management
Incorporated. Incorporated by Reference to Post-Effective Amendment No. 74 to
Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-
582, EDGAR Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the Management
Agreement. Incorporated by Reference to Post-Effective Amendment No. 74 to Registration
Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation Under the Management Agreement. Incorporated by
Reference to Post-Effective Amendment No. 74 to Registration Statement of Neuberger &
Berman Equity Funds, File Nos. 2-11357 and 811-582, EDGAR Accession No. 0000898432-95-
000426.
(d) (i) Sub-Advisory Agreement between Neuberger & Berman Management Incorporated and Neuberger
& Berman, L.P. Incorporated by Reference to Post-Effective Amendment No. 74 to
Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-
582, EDGAR Accession No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to Sub-Advisory
Agreement. Incorporated by Reference to Post-Effective Amendment No. 74 to Registration
Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, EDGAR
Accession No. 0000898432-95-000426.
(6) Distribution Agreement. None.
(7) Bonus, Profit Sharing or Pension Plans. None.
(8) Form of Custodian Contract between Global Managers Trust and State Street Bank and Trust Company.
Incorporated by Reference to Amendment No. 1 to Registrant's Registration Statement, File No. 811-
8422.
(9) Form of Transfer Agency and Service Agreement between Global Managers Trust and State Street Bank
and Trust Company. Incorporated by Reference to Amendment No. 1 to Registrant's Registration
Statement, File No. 811-8422.
(10) Opinions. None.
(11) Opinions, Appraisals, Rulings and Consents: None.
(12) Financial Statements Omitted from Prospectus. None.
(13) Letter of Investment Intent. None.
(14) Prototype Retirement Plan. None.
C-2
<PAGE>
(15) Plan pursuant to Rule 12b-1. None.
(16) Schedule of Computation of Performance Quotations. None.
(17) Financial Data Schedule. Filed herewith.
(18) Plan Pursuant to Rule 18f-3. None.
</TABLE>
Item 25. Persons Controlled By or Under Common Control with Registrant.
-----------------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities.
-----------------------------------------
The following information is given as of November 30, 1995.
Number of
Title of Class Record Holders
-------------- --------------
International Portfolio [3]
Item 27. Indemnification.
-------------------------
A New York trust may provide in its governing instrument for
indemnification of its officers and trustees from and against all claims
and demands whatsoever. Article V, Section 5.4 of the Declaration of
Trust provides that the Registrant shall indemnify, to the fullest extent
permitted by law (including the Investment Company Act of 1940, as amended
(the "1940 Act")), each trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Registrant
(including any individual, corporation, partnership, trust, association,
joint venture or other entities, whether or not legal entities, and
governments and agencies and political subdivision thereof ("Person"), who
serves at the Registrant's request as a director, officer or trustee of
another organization in which the Registrant has any interest as a
shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred by such
Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, in which such Person may
be involved or with which such Person may be threatened, while in office
or thereafter, by reason of such Person being or having been such a
trustee, officer, employee, agent or independent contractor, except with
C-3
<PAGE>
respect to any matter as to which such Person shall have been adjudicated
to have acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of such Person's duties, such liabilities and expenses
being liabilities only of the series out of which such claim for
indemnification arises; provided, however, that as to any matter disposed
of by a compromise payment by such Person, pursuant to a consent decree or
otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless there has been a determination that such
Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
Person's office: (i) by the court or other body approving the settlement
or other disposition; or (ii) based upon a review of readily available
facts (as opposed to a full trial-type inquiry), by written opinion from
independent legal counsel approved by the trustees; or (iii) by a majority
of the trustees who are neither "interested persons" (as defined in the
1940 Act) of the Registrant nor parties to the matter, based upon a review
of readily available facts (as opposed to a full trial-type inquiry). The
rights accruing to any Person under these provisions shall not exclude any
other right to which such Person may be lawfully entitled; provided that
no Person may satisfy any right of indemnity or reimbursement granted in
the Registrant's Declaration of Trust or to which such Person may be
otherwise entitled except out of the Trust Property (as defined in the
Declaration of Trust). The rights of indemnification provided herein may
be insured against by policies maintained by the Registrant. The trustees
may make advance payments in connection with this indemnification,
provided that the indemnified Person shall have given a written
undertaking to reimburse the Registrant in the event it is subsequently
determined that such Person is not entitled to such indemnification, and
provided further that either: (i) such Person shall have provided
appropriate security for such undertaking; or (ii) the Registrant is
insured against losses arising out of any such advance payments; or
(iii) either a majority of the trustees who are neither "interested
persons" (as defined in the 1940 Act) of the Registrant nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to
a trial-type inquiry or full investigation), that there is reason to
believe that such Person will not be disqualified from indemnification.
Pursuant to Article V Section 5.1 of the Registrant's Declaration of
Trust, each holder of an interest in a series of the Registrant shall be
jointly and severally liable with every other holder of an interest in
that series (with rights of contribution inter se in proportion to their
respective interests in the series) for the liabilities and obligations of
that series (and of no other series) in the event that the Registrant
fails to satisfy such liabilities and obligations from the assets of that
series; provided, however, that, to the extent assets of that series are
available, the Registrant shall indemnify and hold each holder harmless
from and against any claim or liability to which such holder may become
subject by reason of being or having been a holder of an interest in that
series to the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
C-4
<PAGE>
liabilities imposed on other holders of interests in that series, is
greater than such holder's interest (proportionate share), and shall
reimburse such holder for all legal and other expenses reasonably incurred
by such holder in connection with any such claim or liability. The rights
accruing to a holder under the Registrant's Declaration of Trust shall not
exclude any other right to which such holder may be lawfully entitled, nor
shall anything contained herein restrict the right of the Registrant to
indemnify or reimburse a holder in any appropriate situation even though
not specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each holder of an interest
in a series shall remain jointly and severally liable to the creditors of
that series as a legal matter. The liabilities of a particular series and
the right to indemnification granted hereunder to holders of interests in
such series shall not be enforceable against any other series or holders
of interests in any other series.
Section 9 of the Management Agreement between the Registrant and
Neuberger & Berman Management Incorporated ("N&B Management") provides
that neither N&B Management nor any director, officer or employee of N&B
Management performing services for the series of the Registrant at the
direction or request of N&B Management in connection with N&B Management's
discharge of its obligations under the agreement shall be liable for any
error of judgment or mistake of law or for any loss suffered by a series
in connection with any matter to which the agreement relates; provided,
that nothing in the agreement shall be construed (i) to protect N&B
Management against any liability to the Registrant or any series thereof
or its holders to which N&B Management would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of N&B Management's duties, or by reason of N&B Management's
reckless disregard of its obligations and duties under the agreement, or
(ii) to protect any director, officer or employee of N&B Management who is
or was a trustee or officer of the Registrant against any liability to the
Registrant or any series thereof or its interest holders to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such person's office with the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
trustees, officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
C-5
<PAGE>
indemnification by it is against public policy as expressed in the
1933 Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager and Sub-
Adviser.
-----------------------------------------------------------------------
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of N&B Management and each partner of the Sub-Adviser
is, or at any time during the past two years has been, engaged for his or
her own account or in the capacity of director, officer, employee, partner
or trustee.
<TABLE>
<CAPTION>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
<S> <C>
Claudia A. Brandon Secretary, Neuberger & Berman Advisers Management Trust
Vice President, (Delaware business trust); Secretary, Advisers Managers
N&B Management Trust; Secretary, Neuberger & Berman Advisers Management
Trust (Massachusetts business trust) (1); Secretary,
Neuberger & Berman Income Funds; Secretary, Neuberger &
Berman Income Trust; Secretary, Neuberger & Berman Equity
Funds; Secretary, Neuberger & Berman Equity Trust;
Secretary, Income Managers Trust; Secretary, Equity Managers
Trust; Secretary, Global Managers Trust; Secretary,
Neuberger & Berman Equity Assets.
Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman Advisers Management
Assistant Vice President, Trust (Delaware business trust); Assistant Secretary,
N&B Management Advisers Managers Trust; Assistant Secretary, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); Assistant Secretary, Neuberger & Berman Income
Funds; Assistant Secretary, Neuberger & Berman Income Trust;
Assistant Secretary, Neuberger & Berman Equity Funds;
Assistant Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant Secretary,
Global Managers Trust; Assistant Secretary, Neuberger &
Berman Equity Assets.
Robert Cresci Assistant Portfolio Manager, BNP-N&B Global Asset Management
Assistant Vice President, L.P. (joint venture of Neuberger & Berman and Banque
N&B Management Nationale de Paris) (2); Assistant Portfolio Manager,
Vontobel (Swiss bank) (3).
C-6
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Stanley Egener Chairman of the Board and Trustee, Neuberger & Berman
President and Director, Advisers Management Trust (Delaware business trust);
N&B Management; General Partner, Neuberger & Berman Chairman of the Board and Trustee, Advisers Managers Trust;
Chairman of the Board and Trustee, Neuberger & Berman
Advisers Management Trust (Massachusetts business trust)
(1); Chairman of the Board and Trustee, Neuberger & Berman
Income Funds; Chairman of the Board and Trustee, Neuberger &
Berman Income Trust; Chairman of the Board and Trustee,
Neuberger & Berman Equity Funds; Chairman of the Board and
Trustee, Neuberger & Berman Equity Trust; Chairman of the
Board and Trustee, Income Managers Trust; Chairman of the
Board and Trustee, Equity Managers Trust; Chairman of the
Board and Trustee, Global Managers Trust; Chairman of the
Board and Trustee, Neuberger & Berman Equity Assets.
Robert I. Gendelman Senior Portfolio Manager, Harpel Advisors (4).
Assistant Vice President,
N&B Management
Theodore P. Giuliano Executive Vice President and Trustee, Neuberger & Berman
Vice President, N&B Management (5); General Income Funds (6); Executive Vice President and Trustee,
Partner, Neuberger & Berman Neuberger & Berman Income Trust (6); Executive Vice
President and Trustee, Income Managers Trust (6).
Theresa A. Havell President and Trustee, Neuberger & Berman Income Funds;
Vice President and Director, N&B Management; President and Trustee, Neuberger & Berman Income Trust;
General Partner, Neuberger & Berman President and Trustee, Income Managers Trust
C. Carl Randolph Assistant Secretary, Neuberger & Berman Advisers Management
General Partner, Neuberger & Berman Trust (Delaware business trust); Assistant Secretary,
Advisers Managers Trust; Assistant Secretary, Neuberger &
Berman Advisers Management Trust (Massachusetts business
trust) (1); Assistant Secretary, Neuberger & Berman Income
Funds; Assistant Secretary, Neuberger & Berman Income Trust;
Assistant Secretary, Neuberger & Berman Equity Funds;
Assistant Secretary, Neuberger & Berman Equity Trust;
Assistant Secretary, Income Managers Trust; Assistant
Secretary, Equity Managers Trust; Assistant Secretary,
Global Managers Trust; Assistant Secretary, Neuberger &
Berman Equity Assets.
Felix Rovelli Senior Vice President-Senior Equity Portfolio Manager, BNP-
Vice President, N&B Management N&B Global Asset Management L.P. (joint venture of Neuberger
& Berman and Banque Nationale de Paris) (2); Portfolio
Manager, Vontobel (Swiss bank) (7).
C-7
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Richard Russell Treasurer, Neuberger & Berman Advisers Management Trust
Vice President, N&B Management (Delaware business trust); Treasurer, Advisers Managers
Trust; Treasurer, Neuberger & Berman Advisers Management
Trust (Massachusetts business trust) (1); Treasurer,
Neuberger & Berman Income Funds; Treasurer, Neuberger &
Berman Income Trust; Treasurer, Neuberger & Berman Equity
Funds; Treasurer, Neuberger & Berman Equity Trust;
Treasurer, Income Managers Trust; Treasurer, Equity Managers
Trust; Treasurer, Global Managers Trust; Treasurer,
Neuberger & Berman Equity Assets.
Daniel J. Sullivan Vice President, Neuberger & Berman Advisers Management Trust
Senior Vice President, N&B Management (Delaware business trust); Vice President, Advisers Managers
Trust; Vice President, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust) (1); Vice
President, Neuberger & Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice President, Neuberger &
Berman Equity Funds; Vice President, Neuberger & Berman
Equity Trust; Vice President, Income Managers Trust; Vice
President, Equity Managers Trust; Vice President, Global
Managers Trust; Vice President, Neuberger & Berman Equity
Assets.
Susan Switzer Portfolio Manager, Mitchell Hutchins Asset Management Inc.,
Assistant Vice President, 1285 Avenue of the Americas, New York, New York 10019 (8).
N&B Management
Michael J. Weiner Vice President, Neuberger & Berman Advisers Management Trust
Senior Vice President and (Delaware business trust); Vice President, Advisers Managers
Treasurer, N&B Management Trust; Vice President, Neuberger & Berman Advisers
Management Trust (Massachusetts business trust) (1); Vice
President, Neuberger & Berman Income Funds; Vice President,
Neuberger & Berman Income Trust; Vice President, Neuberger &
Berman Equity Funds; Vice President, Neuberger & Berman
Equity Trust; Vice President, Income Managers Trust; Vice
President, Equity Managers Trust; Vice President, Global
Managers Trust; Vice President, Neuberger & Berman Equity
Assets.
C-8
<PAGE>
NAME BUSINESS AND OTHER CONNECTIONS
---- ------------------------------
Lawrence Zicklin President and Trustee, Neuberger & Berman Advisers
Director, N&B Management; Management Trust (Delaware business trust); President and
General Partner, Neuberger & Trustee, Advisers Managers Trust; President and Trustee,
Berman Neuberger & Berman Advisers Management Trust (Massachusetts
business trust) (1); President and Trustee, Neuberger &
Berman Equity Funds; President and Trustee, Neuberger &
Berman Equity Trust; President and Trustee, Equity Managers
Trust; President, Global Managers Trust; President and
Trustee, Neuberger & Berman Equity Assets
</TABLE>
The principal address of N&B Management, Neuberger & Berman, BNP-N&B
Global Asset Management L.P. and of each of the investment companies named
above, is 605 Third Avenue, New York, New York 10158. Other addresses to
be provided by amendment.
------------------
(1) Until April 30, 1995.
(2) Until October 31, 1995.
(3) Until May 1994.
(4) Until 1993.
(5) Until November 4, 1994.
(6) Until June 22, 1994.
(7) Until April 1994.
(8) Until 1994.
Item 29. Principal Underwriters.
--------------------------------
Not applicable.
Item 30. Location of Accounts and Records.
------------------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder with
respect to the Registrant are maintained at the offices of State Street
Cayman Trust Company, Ltd., Elizabethan Square, P.O. Box 1984, George
Town, Grand Cayman, Cayman Islands, BWI.
Item 31. Management Services.
-----------------------------
Other than as set forth in Parts A and B of this Registration
Statement, the Registrant is not a party to any management-related service
contract.
C-9
<PAGE>
Item 32. Undertakings.
----------------------
None.
C-10
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment No. 2 to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned,
thereunto duly authorized, at Paradise Island, the Bahamas, on the 17th
day of November, 1995.
GLOBAL MANAGERS TRUST
By /s/ Stanley Egener
------------------------
Stanley Egener, Chairman
C-11
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MANAGERS TRUST
REGISTRATION STATEMENT ON FORM N-1A
INDEX TO EXHIBITS
Exhibit Sequentially
Number Description Numbered Page
------- ------------------------------------ ------------
<S> <C> <C>
(1) (a) Declaration of Trust of Global Managers Trust. Filed herewith. ____
(b) Schedule A - Current Series of Global Managers Trust. Filed herewith. ____
(2) By-laws of Global Managers Trust. Incorporated by Reference to Amendment No. 1 to N.A.
Registrant's Registration Statement, File No. 811-8422.
(3) Voting Trust Agreement. None. N.A.
(4) Specimen Share Certificate. None. N.A.
(5) (a) (i) Investment Advisory Agreement between Global Managers Trust and BNP- N.A.
N&B Global Asset Management L.P. Incorporated by Reference to
Amendment No. 1 to Registrant's Registration Statement, File No. 811-
8422.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the N.A.
Investment Advisory Agreement. Incorporated by Reference to
Amendment No. 1 to Registrant's Registration Statement, File No. 811-
8422.
(iii) Schedule B - Schedule of Compensation under the Investment Advisory N.A.
Agreement. Incorporated by Reference to Amendment No. 1 to
Registrant's Registration Statement, File No. 811-8422.
(b) (i) Administration Agreement between Global Managers Trust and Neuberger N.A.
& Berman Management Incorporated. Incorporated by Reference to
Amendment No. 1 to Registrant's Registration Statement, File No. 811-
8422.
C-12
<PAGE>
Exhibit Sequentially
Number Description Numbered Page
------- ------------------------------------ ------------
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the N.A.
Investment Advisory Agreement. Incorporated by Reference to
Amendment No. 1 to Registrant's Registration Statement, File No. 811-
8422.
(iii) Schedule B - Schedule of Compensation under the Investment Advisory N.A.
Agreement. Incorporated by Reference to Amendment No. 1 to
Registrant's Registration Statement, File No. 811-8422.
(c) (i) Management Agreement between Global Managers Trust and Neuberger & N.A.
Berman Management Incorporated. Incorporated by Reference to Post-
Effective Amendment No. 74 to Neuberger & Berman Equity Funds
Registration Statement, File Nos. 2-11357 and 811-582 EDGAR Accession
No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the N.A.
Management Agreement. Incorporated by Reference to Post-Effective
Amendment No. 74 to Neuberger & Berman Equity Funds Registration
Statement, File Nos. 2-11357 and 811-582 EDGAR Accession No.
0000898432-95-000426.
(iii) Schedule B - Schedule of Compensation Under the Management Agreement. N.A.
Incorporated by Reference to Post-Effective Amendment No. 74 to
Neuberger & Berman Equity Funds Registration Statement, File Nos. 2-
11357 and 811-582 EDGAR Accession No. 0000898432-95-000426.
(d) (i) Sub-Advisory Agreement between Neuberger and Berman Management N.A.
Incorporated and Neuberger & Berman, L.P. Incorporated by Reference
to Post-Effective Amendment No. 74 to Neuberger & Berman Equity Funds
Registration Statement, File Nos. 2-11357 and 811-582 EDGAR Accession
No. 0000898432-95-000426.
(ii) Schedule A - Series of Global Managers Trust Currently Subject to the N.A.
Sub-Advisory Agreement. Incorporated by Reference to Post-Effective
Amendment No. 74 to Neuberger & Berman Equity Funds Registration
Statement, File Nos. 2-11357 and 811-582 EDGAR Accession No.
0000898432-95-000426.
(6) Distribution Agreement. None. N.A.
(7) Bonus, Profit Sharing or Pension Plans. None. N.A.
C-13
<PAGE>
Exhibit Sequentially
Number Description Numbered Page
------- ------------------------------------ ------------
(8) Form of Custodian Contract between Global Managers Trust and State Street Bank and
Trust Company. Incorporated by Reference to Amendment No. 1 to Registrant's N.A.
Registration Statement, File No. 811-8422.
(9) Form of Transfer Agency and Service Agreement between Global Managers Trust and State
Street Bank and Trust Company. Incorporated by Reference to Amendment No. 1 to N.A.
Registrant's Registration Statement, File No. 811-8422.
(10) Opinion and Consent of Kirkpatrick & Lockhart on Securities Matters. None. N.A.
(11) Opinions, Appraisals, Rulings and Consents: Consent of Independent Auditors. None. N.A.
(12) Financial Statements Omitted from Prospectus. None. N.A.
(13) Letter of Investment Intent. None. N.A.
(14) Prototype Retirement Plan. None. N.A.
(15) Plan pursuant to Rule 12b-1. None. N.A.
(16) Schedule of Computation of Performance Quotations. None. N.A.
(17) Financial Data Schedule. Filed herewith. ____
(18) Plan pursuant to Rule 18f-3. None. N.A.
</TABLE>
C-14
<PAGE>
<PAGE>
GLOBAL MANAGERS TRUST
DECLARATION OF TRUST
Dated as of March 18, 1994
<PAGE>
DECLARATION OF TRUST
OF
GLOBAL MANAGERS TRUST
This DECLARATION OF TRUST of Global Managers Trust is
made as of the 18th day of March, 1994 by the parties signatory hereto, as
Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a master trust fund
under the law of the State of New York consisting of one or more subtrusts
or series for the investment and reinvestment of assets contributed
thereto; and
WHEREAS, it is proposed that the trust assets be composed
of money and other property contributed to the subtrusts of the trust fund
established hereby, such assets to be held and managed in trust for the
benefit of the holders of beneficial interests in such subtrusts;
NOW, THEREFORE, the Trustees hereby declare that they
will hold in trust all money and other property contributed to the master
trust fund established hereby and will manage and dispose of the same for
the benefit of such holders of beneficial interests and subject to the
provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the master trust fund
established hereby (the "Trust") shall be Global Managers Trust and so far
as may be practicable the Trustees shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name (and
the word "Trust" wherever hereinafter used) shall refer to the Trustees as
Trustees, and not individually, and shall not refer to the officers,
employees, agents or independent contractors of the Trust or its holders
of beneficial interests.
1.2. Definitions. As used in this Declaration, the
following terms shall have the following meanings:
"Administrator" shall mean any party furnishing services
to the Trust pursuant to any administration contract described in Section
4.1 hereof.
"Book Capital Account" shall mean, for any Holder (as
hereinafter defined) at any time, the Book Capital Account of the Holder
<PAGE>
at such time with respect to the Holder's beneficial interest in the Trust
Property (as hereinafter defined) of any Series (as hereinafter defined),
determined in accordance with the method established by the Trustees
pursuant to Section 8.1 hereof. Each Holder shall have a separate Book
Capital Account for each such Series.
"Code" shall mean the United States Internal Revenue Code
of 1986, as amended from time to time, as well as any non-superseded
provisions of the Internal Revenue Code of 1954, as amended (or any
corresponding provision or provisions of succeeding law).
"Commission" shall mean the United States Securities and
Exchange Commission.
"Declaration" shall mean this Declaration of Trust as
amended from time to time. References in this Declaration to
"Declaration", "hereof", "herein" and "hereunder" shall be deemed to refer
to this Declaration rather than the article or section in which any such
word appears.
"Fiscal Year" shall mean an annual period determined by
the Trustees which ends on August 31 of each year or on such other day as
is permitted or required by the Code.
"Holders" shall mean as of any particular time all
holders of record of beneficial interests in the Trust Property of any
Series.
"Institutional Investor(s)" shall mean any regulated
investment company, segregated asset account, foreign investment company,
common trust fund, group trust or other investment arrangement, whether
organized within or without the United States of America, other than an
individual, S corporation, partnership or grantor trust beneficially owned
by any individual, S corporation or partnership.
"Interested Person" shall have the meaning given it in
the 1940 Act (as hereinafter defined).
"Interest(s)" shall mean the beneficial interest of a
Holder in the Trust Property of any Series, including all rights, powers
and privileges accorded to Holders by this Declaration, which interest may
be expressed as a percentage, determined by calculating for a particular
Series, at such times and on such basis as the Trustees shall from time to
time determine, the ratio of each Holder's Book Capital Account balance to
the total of all Holders' Book Capital Account balances. Reference
herein to a specified percentage of, or fraction of, Interests, means
Holders whose combined Book Capital Account balances represent such
specified percentage or fraction of the combined Book Capital Account
balances of all, or a specified group of, Holders.
"Investment Adviser" shall mean any party furnishing
services to one or more Series of the Trust pursuant to any investment
advisory contract described in Section 4.1 hereof.
<PAGE>
"Majority Interests Vote" shall mean the vote, at a
meeting of Holders (or Holders of one or more Series as the context may
require), of (A) 67% or more of the Interests present or represented at
such meeting, if Holders of more than 50% of all Interests are present or
represented by proxy, or (B) more than 50% of all Interests, whichever is
less.
"1940 Act" shall mean the United States Investment
Company Act of 1940, as amended from time to time, and the rules and
regulations thereunder.
"Person" shall mean and include individuals,
corporations, partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an
Interest of a Holder the result of which is to reduce the Book Capital
Account balance of that Holder to zero, and the term "redeem" shall mean
to effect a Redemption.
"Series" shall mean the subtrusts of the trust fund
established hereby as the same are established and designated pursuant to
Article VI hereof, each of which shall be a separate subtrust.
"Trust" shall mean the master trust fund established
hereby and shall include each Series hereof.
"Trust Property" shall mean as of any particular time any
and all assets or other property, real or personal, tangible or
intangible, which at such time is owned or held by or for the account of
the Trust or the Trustees, each component of which shall be allocated and
belong to a specific Series to the exclusion of all other Series.
"Trustees" shall mean each signatory to this Declaration,
so long as such signatory shall continue in office in accordance with the
terms hereof, and all other individuals who at the time in question have
been duly elected or appointed and have qualified as Trustees in
accordance with the provisions hereof and are then in office, and
reference in this Declaration to a Trustee or Trustees shall refer to such
individual or individuals in their capacity as Trustees hereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees
shall be fixed from time to time by action of the Trustees taken as
provided in Section 2.5 hereof; provided, however, that the number of
Trustees so fixed shall in no event be less than two. Any vacancy created
by an increase in the number of Trustees may be filled by the appointment
of an individual having the qualifications described in this Section 2.1
made by action of the Trustees taken as provided in Section 2.5 hereof.
<PAGE>
Any such appointment shall not become effective, however, until the
individual named in the written instrument of appointment shall have
accepted in writing such appointment and agreed in writing to be bound by
the terms of this Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office. Whenever a
vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all
the duties imposed upon the Trustees by this Declaration. A Trustee shall
be an individual at least 21 years of age who is not under legal
disability.
2.2. Term and Election. Each Trustee named herein, or
elected or appointed prior to the first meeting of Holders, shall (except
in the event of resignations, retirements, removals or vacancies pursuant
to Section 2.3 or Section 2.4 hereof) hold office until a successor to
such Trustee has been elected at such meeting and has qualified to serve
as Trustee, as required under the 1940 Act. Subject to the provisions of
Section 16(a) of the 1940 Act and except as provided in Section 2.3
hereof, each Trustee shall hold office during the lifetime of the Trust
and until its termination as hereinafter provided.
2.3. Resignation. Removal and Retirement. Any Trustee
may resign his or her trust (without need for prior or subsequent
accounting) by an instrument in writing executed by such Trustee and
delivered or mailed to the Chairman, if any, the President or the
Secretary of the Trust and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the instrument.
Any Trustee may be removed with or without cause by the affirmative vote
of Holders of two-thirds of the Interests or (provided the aggregate
number of Trustees, after such removal and after giving effect to any
appointment made to fill the vacancy created by such removal, shall not be
less than the number required by Section 2.1 hereof) by the action of
two-thirds of the remaining Trustees. Any Trustee who has attained a
mandatory retirement age, if any, established pursuant to any written
policy adopted from time to time by a majority of the Trustees shall,
automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such
policy, effective as of the date determined in accordance with such
policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the
date of such Trustee's retirement. Upon the resignation, retirement or
removal of a Trustee, or a Trustee otherwise ceasing to be a Trustee, such
resigning, retired, removed or former Trustee shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held
in the name of such resigning, retired, removed or former Trustee. Upon
the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of
such deceased, removed, retired or resigning Trustee shall execute and
deliver on behalf of such deceased, removed, retired or resigning Trustee
such documents as the remaining Trustees shall require for the purpose set
forth in the preceding sentence.
<PAGE>
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, retirement or removal of a Trustee. No such vacancy shall
operate to annul this Declaration or to revoke any existing agency created
pursuant to the terms of this Declaration. In the case of a vacancy,
Holders of at least a majority of the Interests entitled to vote, acting
at any meeting of Holders held in accordance with Section 9.2 hereof, or,
to the extent permitted by the 1940 Act, a majority vote of the Trustees
continuing in office acting by written instrument or instruments, may fill
such vacancy, and any Trustee so elected by the Trustees or the Holders
shall hold office as provided in this Declaration. The Trustees may
appoint a new Trustee as provided above in anticipation of a vacancy
expected to occur because of the retirement, resignation or removal of a
Trustee, or an increase in number of Trustees, provided that such
appointment shall become effective only when or after the expected vacancy
occurs. As soon as any Trustee has accepted his appointment in writing,
the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance, and he or she
shall be deemed a Trustee hereunder. The power of appointment is subject
to Section 16(a) of the 1940 Act.
2.5. Meetings. Meetings of the Trustees shall be held
from time to time upon the call of the Chairman, if any, the President,
the Secretary, an Assistant Secretary or any two Trustees. Regular
meetings of the Trustees may be held without call or notice at a time and
place fixed by the By-Laws or by resolution of the Trustees. Notice of
any other meeting shall be mailed or otherwise given not less than 24
hours before the meeting but may be waived in writing by any Trustee
either before or after such meeting. The attendance of a Trustee at a
meeting shall constitute a waiver of notice of such meeting except in the
situation in which a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the
meeting was not lawfully called or convened. The Trustees may act with or
without a meeting. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in this Declaration,
any action of the Trustees may be taken at a meeting by vote of a majority
of the Trustees present (a quorum being present) or without a meeting by
written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive
committee, if any, may act with or without a meeting. A quorum for all
meetings of any such committee shall be a majority of the members thereof.
Unless provided otherwise in this Declaration, any action of any such
committee may be taken at a meeting by vote of a majority of the members
present (a quorum being present) or without a meeting by written consent
of a majority of the members.
Any notice, waiver or written consent hereunder may be
provided and delivered to the Trust or a Trustee by facsimile or other
similar electronic mechanism.
With respect to actions of the Trustees and any committee
of the Trustees, Trustees who are Interested Persons of the Trust or
otherwise interested in any action to be taken may be counted for quorum
<PAGE>
purposes under this Section 2.5 and shall be entitled to vote to the
extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a
meeting of the Trustees or any committee thereof by means of a conference
telephone or similar communications equipment by means of which all
individuals participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
Any Trustee may, by power of attorney, delegate his or
her powers as Trustee for a period not exceeding six months at any one
time to any other Trustee or Trustees.
2.6. Officers; Chairman of the Board. The Trustees
shall, from time to time, elect a President, a Secretary and a Treasurer.
The Trustees may elect or appoint, from time to time, a Chairman of the
Board who shall preside at all meetings of the Trustees and carry out such
other duties as the Trustees may designate. The Trustees may elect or
appoint or authorize the President to appoint such other officers, agents
or independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to
time, amend or repeal By-Laws for the conduct of the business of the
Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the
Trust and each Series to the same extent as if the Trustees were the sole
owners of the Trust Property and such business in their own right, but
with such powers of delegation as may be permitted by this Declaration.
The Trustees may perform such acts as in their sole discretion they deem
proper for conducting the business of the Trust and any Series. The
enumeration of or failure to mention any specific power herein shall not
be construed as limiting such exclusive and absolute control. The powers
of the Trustees may be exercised without order of or resort to any court.
3.2. Investments. The Trustees shall have the power
with respect to the Trust and each Series to:
(a) conduct, operate and carry on the business of
an investment company;
(b) subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign, transfer,
exchange, distribute or otherwise deal in or dispose of United States and
foreign currencies and related instruments including forward contracts,
<PAGE>
and securities, including common and preferred stock, warrants, bonds,
debentures, time notes and all other evidences of indebtedness, negotiable
or non-negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, options, futures contracts, and other
securities, including, without limitation, those issued, guaranteed or
sponsored by any state, territory or possession of the United States and
the District of Columbia and their political subdivisions, agencies and
instrumentalities, or by the United States Government, any foreign
government, or any agency, instrumentality or political subdivision of the
United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of any kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust, nor
shall the Trustees be limited by any law limiting the investments which
may be made by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees
shall have the power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the
Trust or any Series, or in the name or nominee name of any other Person on
behalf of the Trust or any Series, on such terms as the Trustees may
determine.
The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each individual who may
hereafter become a Trustee upon his due election and qualification. Upon
the resignation, removal or death of a Trustee, such resigning, removed or
deceased Trustee shall automatically cease to have any right, title or
interest in any Trust Property, and the right, title and interest of such
resigning, removed or deceased Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in
their discretion, may, from time to time, without a vote of the Holders,
permit any Institutional Investor to purchase an Interest in a Series, or
increase such Interest, for such type of consideration, including cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best, and may in
such manner acquire other assets (including the acquisition of assets
subject to, and in connection with the assumption of, liabilities) and
<PAGE>
businesses. Individuals, S corporations, partnerships and grantor trusts
that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. The Trustees, in their
discretion, may refuse to sell an Interest in a Series to any person
without any cause or reason therefor. A Holder which has redeemed its
Interest in a Series may not be permitted to purchase an Interest in such
Series until the later of 60 calendar days after the date of such
Redemption or the first day of the Fiscal Year next succeeding the Fiscal
Year during which such Redemption occurred.
3.5. Decreases and Redemptions of Interests. Subject to
Article VII hereof, the Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit a Holder to redeem its
Interest in a Series, or decrease such Interest, for either cash or
property, at such time or times (including, without limitation, each
business day), and on such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to
borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the Trust
Property, including the lending of portfolio securities, and to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person.
3.7. Delegation; Committees. The Trustees shall have
power, consistent with their continuing exclusive and absolute control
over the Trust Property and over the business of the Trust or any Series,
to delegate from time to time to such of their number or to officers,
employees, agents or independent contractors of the Trust or any Series
the doing of such things and the execution of such instruments in either
the name of the Trust or any Series or the names of the Trustees or
otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have
power to collect all property due to the Trust or any Series; and to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust or any
Series or the Trust Property; to foreclose any security interest securing
any obligation, by virtue of which any property is owed to the Trust or
any Series; and to enter into releases, agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur
and pay any expenses from the Trust Property or the assets belonging to a
particular Series which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to
pay reasonable compensation from the Trust Property or the assets
belonging to a particular Series to themselves as Trustees. Permitted
expenses of the Trust or a particular Series include, but are not limited
to, interest charges, taxes, brokerage fees and commissions; expenses of
sales, increases, decreases or redemptions of Interests; certain insurance
premiums; applicable fees, interest charges and expenses of third parties,
including the Trust's investment advisers, managers, administrators,
placement agents, custodians transfer agents and fund accountants; fees of
pricing, interest, dividend, credit and other reporting services; costs of
<PAGE>
membership in trade associations; telecommunications expenses; costs of
forming the Trust and its Series and maintaining its existence; costs of
preparing and printing the registration statements and Holder reports of
the Trust and each Series and delivering them to Holders; expenses of
meetings of Holders; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other
personnel performing services for the Trust or any Series; costs of
Trustee meetings; Commission registration fees and related expenses; state
or foreign securities laws registration fees and related expenses; and for
such non-recurring items as may arise, including litigation to which the
Trust or a Series (or a Trustee or officer of the Trust acting as such) is
a party, and for all losses and liabilities by them incurred in
administering the Trust. The Trustees shall have a lien on the assets
belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series,
prior to any rights or interests of the Holders thereto, for the
reimbursement to them of such expenses, disbursements, losses and
liabilities. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal and brokerage services, as they in
good faith may deem reasonable, and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust or any Series.
3.10. Miscellaneous Powers. The Trustees shall have
power to: (a) employ or contract with such Persons as the Trustees may
deem appropriate for the transaction of the business of the Trust or any
Series and terminate such employees or contractual relationships as they
consider appropriate; (b) enter into joint ventures, partnerships and any
other combinations or associations; (c) purchase, and pay for out of Trust
Property, insurance policies insuring the Investment Adviser,
Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust or any Series against all
claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or
not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing and other retirement,
incentive and benefit plans for the Trustees, officers, employees or
agents of the Trust or any Series; (e) prosecute, defend and settle
lawsuits in the name of the Trust or any Series and pay settlements and
judgments out of the Trust Property; (f) to the extent permitted by law,
indemnify any Person with whom the Trust or any Series has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the
Trust or any Series, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine
and change the Fiscal Year of the Trust or any Series and the method by
which its accounts shall be kept; and (i) adopt a seal for the Trust or
any Series, but the absence of such a seal shall not impair the validity
of any instrument executed on behalf of the Trust or such Series.
3.11. Further Powers. The Trustees shall have power to
conduct the business of the Trust or any Series and carry on its
operations in any and all of its branches and maintain offices, whether
<PAGE>
within or without the State of New York, in any and all states of the
United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies
or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such
instruments as they deem necessary, proper, appropriate or desirable in
order to promote the interests of the Trust or any Series although such
things are not herein specifically mentioned. Any determination as to
what is in the interests of the Trust or any Series which is made by the
Trustees in good faith shall be conclusive. In construing the provisions
of this Declaration, the presumption shall be in favor of a grant of power
to the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements; Custodian
4.1. Investment Advisory and Other Arrangements. The
Trustees may in their discretion, from time to time, enter into investment
advisory and administration contracts or placement agent agreements
whereby the other party to such contract or agreement shall undertake to
furnish with respect to one or more particular Series such investment
advisory, administration, placement agent and/or other services as the
Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole
discretion determine, provided that any investment advisory contract shall
be subject to a Majority Interests Vote. Notwithstanding any provision of
this Declaration, the Trustees may authorize any Investment Adviser
(subject to such general or specific instructions as the Trustees may,
from time to time, adopt) to employ one or more subadvisers and to effect
purchases, sales, loans or exchanges of Trust Property on behalf of any
Series or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any
such Investment Adviser (all without any further action by the Trustees).
Any such purchase, sale, loan or exchange shall be deemed to have been
authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 or Section 4.3 hereof or in the By-Laws of the
Trust may be entered into with any corporation, firm, trust or
association, although one or more of the Trustees or officers of the Trust
may be an officer, director, Trustee, shareholder or member of such other
party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor
shall any individual holding such relationship be liable merely by reason
of such relationship for any loss or expense to the Trust or any Series
under or by reason of any such contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was reasonable and fair and not inconsistent with the
provisions of this Article IV or the By-Laws. The same Person may be the
other party to one or more contracts entered into pursuant to Section 4.1
<PAGE>
or Section 4.3 hereof or the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.2 or in
the By-Laws.
4.3. Custodian. The Trustees shall at all times place
and maintain the securities and similar investments of the Trust and of
each Series in custody meeting the requirements of Section 17(f) of the
1940 Act and the rules thereunder. The Trustees, on behalf of the Trust
or any Series, may enter into an agreement with a custodian on terms and
conditions acceptable to the Trustees, providing for the custodian, among
other things, (a) to hold the securities owned by the Trust or any Series
and deliver the same upon written order or oral order confirmed in
writing, (b) to receive and receipt for any moneys due to the Trust or any
Series and deposit the same in its own banking department or elsewhere,
(c) to disburse such funds upon orders or vouchers, and (d) to employ one
or more subcustodians.
4.4. 1940 Act Governance. Any contract referred to in
Section 4.1 hereof shall be consistent with and subject to the applicable
requirements of Section 15 of the 1940 Act and the rules and orders
thereunder with respect to its continuance in effect, its termination, and
the method of authorization and approval of such contract or renewal. No
amendment to a contract referred to in Section 4.1 hereof shall be
effective unless assented to in a manner consistent with the requirements
of Section 15 of the 1940 Act, and the rules and orders thereunder.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each
Holder of an Interest in a Series shall be jointly and severally liable
with every other Holder of an Interest in that Series (with rights of
contribution inter se in proportion to their respective Interests in the
Series) for the liabilities and obligations of that Series (and of no
other Series) in the event that the Trust fails to satisfy such
liabilities and obligations from the assets of that Series; provided,
however, that, to the extent assets of that Series are available in the
Trust, the Trust shall indemnify and hold each Holder harmless from and
against any claim or liability to which such Holder may become subject by
reason of being or having been a Holder of an Interest in that Series to
the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders of Interests in that Series, is
greater than such Holder's Interest (proportionate share), and shall
reimburse such Holder for all legal and other expenses reasonably incurred
by such Holder in connection with any such claim or liability. The
rights accruing to a Holder under this Section 5.1 shall not exclude any
other right to which such Holder may be lawfully entitled, nor shall
anything contained herein restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not
<PAGE>
specifically provided herein. Notwithstanding the indemnification
procedure described above, it is intended that each Holder of an Interest
in a Series shall remain jointly and severally liable to the creditors of
that Series as a legal matter. The liabilities of a particular Series and
the right to indemnification granted hereunder to Holders of Interests in
such Series shall not be enforceable against any other Series or Holders
of Interests in any other Series.
5.2. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Third Parties. No Trustee,
officer, employee, agent or independent contractor (except in the case of
an agent or independent contractor to the extent expressly provided by
written contract) of the Trust or any Series shall be subject to any
personal liability whatsoever to any Person, other than the Trust or the
Holders, in connection with Trust Property or the affairs of the Trust;
and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee,
agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written
contract) of the Trust arising in connection with the affairs of the
Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust shall be liable to the Trust or
the Holders for any action or failure to act (including, without
limitation, the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for such Person's own bad faith,
willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall
indemnify, to the fullest extent permitted by law (including the 1940
Act), each Trustee, officer, employee, agent or independent contractor
(except in the case of an agent or independent contractor to the extent
expressly provided by written contract) of the Trust (including any Person
who serves at the Trust's request as a director, officer or trustee of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to
any matter as to which such Person shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of such Person's duties, such liabilities and expenses being
liabilities only of the Series out of which such claim for indemnification
arises; provided, however, that as to any matter disposed of by a
compromise payment by such Person, pursuant to a consent decree or
<PAGE>
otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless there has been a determination that such
Person did not engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such
Person's office (i) by the court or other body approving the settlement or
other disposition; or (ii) based upon a review of readily available facts
(as opposed to a full trial-type inquiry), by written opinion from
independent legal counsel approved by the Trustees; or (iii) by a majority
of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, based upon a review of readily available facts (as
opposed to a full trial-type inquiry). The rights accruing to any Person
under these provisions shall not exclude any other right to which such
Person may be lawfully entitled; provided that no Person may satisfy any
right of indemnity or reimbursement granted in this Section 5.4 or in
Section 5.2 hereof or to which such Person may be otherwise entitled
except out of the Trust Property. The rights of indemnification provided
herein may be insured against by policies maintained by the Trust. The
Trustees may make advance payments in connection with indemnification
under this Section 5.4, provided that the indemnified Person shall have
given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification, and provided further that either (i) such Person shall
have provided appropriate security for such undertaking, or (ii) the Trust
is insured against losses arising out of any such advance payments, or
(iii) either a majority of the Trustees who are neither Interested Persons
of the Trust nor parties to the matter, or independent legal counsel in a
written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Person will not
be disqualified from indemnification under this Section 5.4.
5.5. No Bond Required of Trustees. No Trustee shall, as
such, be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instru-
ments, etc. No purchaser, lender or other Person dealing with any
Trustee, officer, employee, agent or independent contractor of the Trust
or any Series shall be bound to make any inquiry concerning the validity
of any transaction purporting to be made by such Trustee, officer,
employee, agent or independent contractor or be liable for the application
of money or property paid, loaned or delivered to or on the order of such
Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series, and every other act or thing
whatsoever executed in connection with the Trust or any Series shall be
conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees, officers, employees, agents or
independent contractors of the Trust or any Series. Every written
obligation, contract, instrument, certificate or other interest or
undertaking of the Trust or any Series made or sold by any Trustee,
officer, employee, agent or independent contractor of the Trust or any
Series, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent
<PAGE>
contractor of the Trust or any Series shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for
the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust or any
Series. Subject to the provisions of the 1940 Act, the Trust may
maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, employees, agents and independent contractors
of the Trust and any Series in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust and any Series
shall, in the performance of such Person's duties, be fully and completely
justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other
records of the Trust or any Series (whether or not the Trust or any Series
would have the power to indemnify such Persons against such liability),
upon an opinion of counsel, or upon reports made to the Trust or any
Series by any of its officers or employees or by any Investment Adviser or
Administrator, accountant, appraiser or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of
the Trust or any Series, regardless of whether such counsel or expert may
also be a Trustee.
5.8. No Repeal or Modification. Any repeal or modifi-
cation of this Article V by the Holders, or adoption or modification of
any other provision of this Declaration or the By-Laws inconsistent with
this Article V, shall be prospective only, to the extent that such repeal
or modification would, if applied retrospectively, adversely affect any
limitation on the liability of any Person or indemnification available to
any indemnified Person with respect to any act or omission which occurred
prior to such repeal, modification or adoption.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust
Property shall consist of non-transferable Interests. Interests may be
sold only to Institutional Investors, as may be approved by the Trustees,
for cash or other consideration acceptable to the Trustees, subject to the
requirements of the 1940 Act. The Interests shall be personal property
giving only the rights in this Declaration specifically set forth. The
value of an Interest shall be equal to the Book Capital Account balance of
the Holder of the Interest.
The Trustees shall have authority, from time to time, to
establish Series, each of which shall be a separate subtrust and the
Interests in which shall be separate and distinct from the Interests in
<PAGE>
any other Series. The Series shall include, without limitation, the
Series specifically established and designated pursuant to Section 6.2
hereof, and such other Series as the Trustees may deem necessary or
desirable. The Trustees shall have exclusive power without the
requirement of Holder approval to establish and designate such separate
and distinct Series, and, subject to the provisions of this Declaration
and the 1940 Act, to fix and determine the rights of Holders of Interests
in such Series, including with respect to the price, terms and manner of
purchase and redemption, dividends and other distributions, rights on
liquidation, sinking or purchase fund provisions, conversion rights and
conditions under which the Holders of the several Series shall have
separate voting rights or no voting rights.
6.2. Establishment and Designation of Series. The
establishment and designation of any Series shall be effective upon the
execution by the Secretary or an Assistant Secretary of the Trust,
pursuant to authorization by a majority of the Trustees, of an instrument
setting forth such establishment and designation and the relative rights
and preferences of the Interests in such Series, or as otherwise provided
in such instrument. At any time that there are no Interests outstanding
of any particular Series previously established and designated, the
Trustees may by resolution adopted by a majority of their number, and
evidenced by an instrument executed by the Secretary or an Assistant
Secretary of the Trust, abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration of Trust.
Without limiting the authority of the Trustees set forth
above to establish and designate further Series, the Trustees hereby
establish and designate the subtrust or Series set forth on Schedule A
hereto. The Interests in this Series and any Interests in any further
Series that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to
some further Series at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Series. All
consideration received by the Trust for the issue or sale of Interests in
a particular Series, together with all assets in which such consideration
is invested or reinvested, all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in a separate trust for the benefit of the Holders of
Interests in that Series and shall irrevocably belong to that Series for
all purposes, and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets belonging to" that Series. No Series shall
have any right to or interest in the assets belonging to any other Series,
and no Holder shall have any right or interest with respect to the assets
belonging to any Series in which it does not hold an Interest.
<PAGE>
(b) Liabilities Belonging to Series. The assets
belonging to each particular Series shall be charged with the liabilities
in respect of that Series and all expenses, costs, charges and reserves
attributable to that Series. The liabilities, expenses, costs, charges
and reserves so charged to a Series are herein referred to as "liabilities
belonging to" that Series. No Series shall be liable for or charged with
the liabilities belonging to any other Series, and no Holder shall be
subject to any liabilities belonging to any Series in which it does not
hold an Interest.
(c) Voting. On each matter submitted to a vote
of the Holders, each Holder of an Interest in each Series shall be
entitled to a vote proportionate to its Interest in such Series as
recorded on the books of the Trust and all Holders of Interests in each
Series shall vote as a separate class except as to voting for Trustees and
as otherwise required by the 1940 Act. As to any matter which does not
affect the interest of a particular Series, only the Holders of Interests
in the one or more affected Series shall be entitled to vote.
6.3. Non-Transferability. A Holder may not transfer its
Interest.
6.4. Register of Interests. A register shall be kept at
the Trust under the direction of the Trustees which shall contain the
name, address and Book Capital Account balance of each Holder in each
Series. Such register shall be conclusive as to the identity of the
Holders. No Holder shall be entitled to receive payment of any
distribution, nor to have notice given to it as herein provided, until it
has given its address to such officer or agent of the Trust as is keeping
such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this
Declaration and to such restrictions as may from time to time be adopted
by the Trustees, each Holder may vary its Interest in any Series at any
time by increasing (through a capital contribution) or decreasing (through
a capital withdrawal) or by a Redemption of its Interest. An increase in
the Interest of a Holder in a Series shall be reflected as an increase in
the Book Capital Account balance of that Holder in that Series and a
decrease in the Interest of a Holder in a Series or the Redemption of the
Interest of that Holder shall be reflected as a decrease in the Book
Capital Account balance of that Holder in that Series. The Trust shall,
upon appropriate and adequate notice from any Holder, increase, decrease
or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the
Trustees; provided that (a) the amount received by the Holder upon any
such decrease or Redemption shall not exceed the decrease in the Holder's
Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at
any time and from time to time, charge fees for effecting any such
<PAGE>
decrease or Redemption, at such rates as the Trustees may establish, and
may, at any time and from time to time, suspend such right of decrease or
Redemption. The procedures for effecting decreases or Redemptions shall
be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital
Account balance of Holders with respect to a particular Series shall be
determined on such days and at such time or times as the Trustees may
determine. The Trustees shall adopt resolutions setting forth the method
of determining the Book Capital Account balance of each Holder. The power
and duty to make calculations pursuant to such resolutions may be
delegated by the Trustees to the Investment Adviser or Administrator,
custodian, or such other Person as the Trustees may determine. Upon the
Redemption of an Interest, the Holder of that Interest shall be entitled
to receive the balance of its Book Capital Account. A Holder may not
transfer its Book Capital Account balance.
8.2. Allocations and Distributions to Holders. The
Trustees shall, in compliance with the Code, the 1940 Act and generally
accepted accounting principles, establish the procedures by which the
Trust shall make with respect to each Series (i) the allocation of
unrealized gains and losses, taxable income and tax loss, and profit and
loss, or any item or items thereof, to each Holder, (ii) the payment of
distributions, if any, to Holders, and (iii) upon liquidation, the final
distribution of items of taxable income and expense. Such procedures
shall be set forth in writing and be furnished to the Trust's accountants.
The Trustees may amend the procedures adopted pursuant to this Section 8.2
from time to time. The Trustees may retain from the net profits of each
Series such amount as they may deem necessary to pay the liabilities and
expenses of that Series.
8.3. Power to Modify Foregoing Procedures. Notwith-
standing any of the foregoing provisions of this Article VIII, the
Trustees may prescribe, in their absolute discretion, such other bases and
times for determining the net income and net assets of the Trust and of
each Series, the allocation of income of the Trust and of each Series, the
Book Capital Account balance of each Holder, or the payment of
distributions to the Holders as they may deem necessary or desirable to
enable the Trust or a Series to comply with any provision of the 1940 Act
or any order of exemption issued by the Commission or with the Code.
<PAGE>
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust
Property and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests
and they shall have no power or right to call for any partition or
division of any Trust Property. In addition, the Holders shall have power
to vote only with respect to (a) the election of Trustees as provided in
Article II, Section 2.4; (b) the removal of Trustees as provided in
Article II, Section 2.3; (c) any investment advisory contract as provided
in Article IV, Section 4.1; (d) dissolution of a Series, to the extent
provided in Article X, Section 10.2; (e) the amendment of this Declaration
to the extent and as provided in Article X, Section 10.4; (f) any merger,
consolidation or sale of assets as provided in Article X, Section 10.5;
and (9) such additional matters relating to the Trust as may be required
or authorized by law, by this Declaration or the By-Laws or any
registration statement of the Trust filed with the Commission, or as the
Trustees may consider desirable.
9.2. Meetings of Holders. Meetings of Holders may be
called at any time by a majority of the Trustees and shall be called by
any Trustee upon written request of Holders holding, in the aggregate, not
less than 10% of the Interests in a Series (if the meeting relates solely
to that Series), or not less than 10% of the Interests in the Trust (if
the meeting relates to the Trust and not solely to a particular Series),
such request specifying the purpose or purposes for which such meeting is
to be called. Any such meeting shall be held within or without the State
of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of at least
one-third of the Interests in the Series (if the meeting relates solely to
that Series) or Holders of at least one-third of the Interests in the
Trust (if the meeting relates to the Trust and not solely to a particular
Series), present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the
1940 Act, other applicable law, this Declaration or the By-Laws. If a
quorum is present at a meeting, an affirmative vote of the Holders
present, in person or by proxy, holding more than 50% of the total
Interests of the Holders present, either in person or by proxy, at such
meeting constitutes the action of the Holders, unless a greater number of
affirmative votes is required by the 1940 Act, other applicable law, this
Declaration or the By-Laws, and except that a plurality of the total
Interests of the Holders present shall elect a Trustee. All or any one or
more Holders may participate in a meeting of Holders by means of a
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
9.3. Notice of Meetings. Notice of each meeting of
Holders, stating the time, place and purposes of the meeting, shall be
<PAGE>
given by the Trustees by mail to each Holder of the Series or the Trust,
as the case may be, at its registered address, mailed at least 10 days and
not more than 60 days before the meeting. Notice of any meeting may be
waived in writing by any Holder either before or after such meeting. The
attendance of a Holder at a meeting shall constitute a waiver of notice of
such meeting except in the situation in which a Holder attends a meeting
for the express purpose of objecting to the transaction of any business on
the ground that the meeting was not lawfully called or convened. At any
meeting, any business properly before the meeting may be considered
whether or not stated in the notice of the meeting. Any adjourned meeting
may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For
the purpose of determining the Holders who are entitled to notice of and
to vote at any meeting, or to participate in any distribution, or for the
purpose of any other action, the Trustees may from time to time fix a
date, not more than 90 days prior to the date of any meeting of Holders or
the payment of any distribution or the taking of any other action, as the
case may be, as a record date for the determination of the Persons to be
treated as Holders of the Series or the Trust, as the case may be, for
such purpose.
9.5. Proxies, etc. At any meeting of Holders, any
Holder entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as
the Secretary may direct, for verification prior to the time at which such
vote is to be taken. A proxy may be revoked by a Holder at any time
before it has been exercised by placing on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the
Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such
Holder shall be entitled to a vote proportionate to its Interest in the
Series or the Trust, as the case may be. When an Interest is held jointly
by several Persons, any one of them may vote at any meeting in person or
by proxy in respect of such Interest, but if more than one of them is
present at such meeting in person or by proxy, and such joint owners or
their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Interest. A proxy purporting to
be executed by or on behalf of a Holder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger.
9.6. Reports. The Trustees shall cause to be prepared
and furnished to each Holder, at least annually as of the end of each
Fiscal year, a report of operations containing a balance sheet and a
statement of income of each Series prepared in conformity with generally
accepted accounting principles and an opinion of an independent public
accountant on such financial statements. The Trustees shall, in addition,
with respect to each Series furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of
the end of such period and an unaudited statement of income for the period
<PAGE>
from the beginning of the then-current Fiscal year to the end of such
period.
9.7. Inspection of Records. The records of the Trust
shall be open to inspection by Holders during normal business hours for
any purpose not harmful to the Trust.
9.8. Holder Action by Written Consent. Any action
which may be taken on behalf of the Trust or any Series by Holders may be
taken without a meeting if Holders holding more than 50% of all Interests
entitled to vote (or such larger proportion thereof as shall be required
by any express provision of this Declaration or of applicable law) consent
to the action in writing and the written consents are filed with the
records of the meetings of Holders. Such consents shall be treated for
all purposes as a vote taken at a meeting of Holders. Each such written
consent shall be executed by or on behalf of the Holder delivering such
consent and shall bear the date of such execution. No such written
consent shall be effective to take the action referred to therein unless,
within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the
records of the meetings of Holders.
9.9. Notices. Any and all communications, including any
and all notices to which any Holder may be entitled, shall be deemed duly
served or given if mailed, postage prepaid, addressed to a Holder at its
last known address as recorded on the register of the Trust or if
delivered to a Holder by courier or by facsimile or other similar
electronic mechanism.
ARTICLE X
Duration; Termination; Dissolution;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible dissolution or
termination in accordance with the provisions of Section 10.2 and Section
10.3 hereof, respectively, the Trust created hereby shall continue until
the expiration of 20 years after the death of the last survivor of the
initial Trustees named herein and the following named persons:
Name Address Date of Birth
---- ------- -------------
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Amanda Jehan Sher 483 Pleasant Street, No. 08/16/89
Coolidge 9, Belmont, MA 02178
David Cornelius Johnson 752 West End Avenue, Apt. 04/10/91
10J, New York, NY 10025
<PAGE>
Name Address Date of Birth
---- ------- -------------
Conner Leahy McCabe 100 Parkway Road, Apt. 3C, 02/22/89
Bronxville, NY 10708
Andrea Hellegers 530 East 84th Street, Apt. 12/22/88
5H, New York, NY 10028
Emilie Blair Ruble 65 Duck Pond Road Glen 02/24/89
Cove, NY 11542
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Carolina Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
or until such later date as may be permitted by the applicable law of the
State of New York.
lO.2. Dissolution. Any Series shall be dissolved (a)
by the affirmative vote of the Holders of not less than two-thirds of the
Interests in the Series at any meeting of the Holders or by an instrument
in writing, without a meeting, signed by a majority of the Trustees and
consented to by the Holders of not less than two-thirds of such Interests,
or (b) by the Trustees by written notice of dissolution to the Holders of
the Interests in the Series, or (c) 120 days after a Holder of an Interest
in the Series either (i) makes an assignment for the benefit of creditors,
or (ii) files a voluntary petition in bankruptcy, or (iii) is adjudged a
bankrupt or insolvent, or has entered against it an order for relief in
any bankruptcy or insolvency proceeding, or (iv) files a petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
bankruptcy statute or regulation, (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against it in any proceeding referred to in clauses (iii) or (iv),
or (vi) seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of such Holder or of all or any substantial part of
its properties, whichever shall first occur; provided, however, that if
within such 120 days Holders (excluding the Holder with respect to which
such event of dissolution has occurred) owning a majority of the Interests
in such Series vote to continue the Series, such Series shall not dissolve
and shall continue as if such event of dissolution had not occurred.
10.3. Termination.
(a) Upon an event of dissolution of the Trust
or a Series, the Trust or Series shall be terminated
in accordance with the following provisions:
(i) the Trust or Series, as applicable, shall
carry on no business except for the purpose of winding up its affairs;
<PAGE>
(ii) the Trustees shall proceed to wind up
the affairs of the Trust or Series, as applicable, and all of the powers
of the Trustees under this Declaration shall continue until the affairs of
the Trust or Series have been wound up, including the power to fulfill or
discharge the contracts of the Trust or Series, collect the assets of the
Trust of Series, sell, convey, assign, exchange or otherwise dispose of
all or any part of the Trust Property affected to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
the liabilities of the Trust or Series, and do all other acts appropriate
to liquidate the business of the Trust or Series; provided that any sale,
conveyance, assignment, exchange or other disposition of all or
substantially all the Trust Property or substantially all of the assets
belonging to a particular Series, other than for cash, shall require
approval of the principal terms of the transaction and the nature and
amount of the consideration by the vote of Holders holding more than 50%
of the total Interests in the Trust or Series, as applicable; and
(iii) after paying or adequately providing
for the payment of all liabilities of the Trust or of the Series being
terminated, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees shall
distribute the remaining Trust Property of the Trust or Series, as
applicable, in cash or in kind or partly each, among the Holders according
to their respective rights as set forth in the procedures established
pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust or Series
and distribution to the Holders as herein provided, a majority of the
Trustees shall execute and file with the records of the Trust an
instrument in writing setting forth the fact of such termination and
distribution. Upon termination of the Trust, the Trustees shall thereupon
be discharged from all further liabilities and duties hereunder, and the
rights and interests of all Holders shall thereupon cease.
10.4. Amendment Procedure.
(a) The Trustees may, without any vote of
Holders, amend or otherwise supplement this Declaration by an instrument
in writing executed by a majority of the Trustees, provided that Holders
shall have the right to vote on any amendment (a) which would affect the
voting rights of Holders granted in Article IX, Section 9.1, (b) to this
Section 10.4, (c) required to be approved by Holders by law or by the
Trust's registration statement filed with the Commission, or (d) submitted
to them by the Trustees. Any amendment submitted to Holders which the
Trustees determine would affect the Holders of any Series shall be
authorized by vote of the Holders of such Series and no vote shall be
required of Holders of a Series not affected. Notwithstanding anything
else herein, any amendment to Article V which would have the effect of
reducing the indemnification and other rights provided thereby and any
repeal or amendment of this sentence shall each require the affirmative
vote of the Holders of two-thirds of the Interests entitled to vote
thereon.
<PAGE>
(b) No amendment may be made under Section
10.4(a) hereof which would change any rights with respect to any Interest
by reducing the amount payable thereon upon liquidation of the Trust or
any Series or by diminishing or eliminating any voting rights pertaining
thereto, except with the vote or consent of Holders of two-thirds of all
Interests which would be so affected by such amendment.
(c) A certification in recordable form
executed by a majority of the Trustees setting forth an amendment and
reciting that it was duly adopted by the Holders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable form,
and executed by a majority of the Trustees, shall be conclusive evidence
of such amendment when filed with the records of the Trust.
Notwithstanding any other provision hereof, until such
time as Interests are first sold, this Declaration may be terminated or
amended in any respect by the affirmative vote of a majority of the
Trustees at any meeting of Trustees or by an instrument executed by a
majority of the Trustees.
10.5. Merger, Consolidation and Sale of Assets. The
Trust or any Series may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange
all or substantially all of the Trust Property, or assets belonging to
such Series, as applicable, including good will, upon such terms and
conditions and for such consideration when and as authorized at any
meeting of Holders called for such purpose by Majority Interests Vote of
Interests in the Series affected by such action, or by an instrument in
writing without a meeting, consented to by Holders of not less than a
majority of the Interests in the Series affected by such action, and any
such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the law of
the State of New York.
ARTICLE XI
Miscellaneous
11.1. Certificate of Designation; Agent for Service
of Process. If required by New York law, the Trust shall file, with the
Department of State of the State of New York, a certificate, in the name
of the Trust and executed by an officer of the Trust, designating the
Secretary of State of the State of New York as an agent upon whom process
in any action or proceeding against the Trust or any Series may be served.
11.2. Governing Law. This Declaration is executed by
the Trustees and delivered in the State of New York and with reference to
the law thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
in accordance with the law of the State of New York and reference shall be
specifically made to the trust law of the State of New York as to the
<PAGE>
construction of matters not specifically covered herein or as to which an
ambiguity exists.
11.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be
deemed to be an original, and such counterparts, together, shall
constitute one and the same instrument, which shall be sufficiently
evidenced by any one such original counterpart.
11.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust or of
any recording office in which this Declaration may be recorded, appears to
be a Trustee hereunder, certifying to: (a) the number or identity of
Trustees or Holders, (b) the due authorization of the execution of any
instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Holders, (d) the fact that the number of Trustees or Holders
present at any meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-Laws adopted by
or the identity of any officer elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs
of the Trust, shall be conclusive evidence as to the matters so certified
in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with the 1940 Act, or
with other applicable law and regulations, the conflicting provision shall
be deemed never to have constituted a part of this Declaration; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration
shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in any
other jurisdiction or any other provision of this Declaration in any
jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Declaration
of Trust of Global Managers Trust as of the day and year first above
written.
/s/ Allan R. Dynner
-------------------------------
Alan R. Dynner
As Trustee and not individually
/s/ Stanley Egener
-------------------------------
Stanley Egener
As Trustee and not individually
/s/ Ellen Metzger
-------------------------------
Ellen Metzger
As Trustee and not individually
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . 2
1.1. Name . . . . . . . . . . . . . . . . . . . . . 2
1.2. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . 5
2.1. Number and Qualification . . . . . . . . . . . 5
2.2. Term and Election . . . . . . . . . . . . . . 5
2.3. Resignation Removal and Retirement . . . . . . 5
2.4. Vacancies . . . . . . . . . . . . . . . . . . 6
2.5. Meetings . . . . . . . . . . . . . . . . . . . 6
2.6. Officers; Chairman of the Board . . . . . . . 7
2.7. By-Laws . . . . . . . . . . . . . . . . . . . 8
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . 8
3.1. General . . . . . . . . . . . . . . . . . . . 8
3.2. Investments . . . . . . . . . . . . . . . . . 8
3.3. Legal Title . . . . . . . . . . . . . . . . . 9
3.4. Sale and Increases of Interests . . . . . . . 9
3.5. Decreases and Redemptions of Interests . . . . 10
3.6. Borrow Money . . . . . . . . . . . . . . . . . 10
3.7. Delegation; Committees . . . . . . . . . . . . 10
3.8. Collection and Payment . . . . . . . . . . . . 10
3.9. Expenses . . . . . . . . . . . . . . . . . . . 10
3.10. Miscellaneous Powers . . . . . . . . . . . . . 11
3.11. Further Powers . . . . . . . . . . . . . . . . 12
ARTICLE IV--Investment Advisory, Administration and
Placement Agent Arrangements; Custodian . . . . . 12
4.1. Investment Advisory and Other Arrangements . . 12
4.2. Parties to Contract . . . . . . . . . . . . . 13
4.3. Custodian . . . . . . . . . . . . . . . . . . 13
4.4. 1940 Act Governance . . . . . . . . . . . . . 13
ARTICLE V--Liability of Holders; Limitations of
Liability of Trustees, Officers, etc. . . . . . . 13
5.1. Liability of Holders; Indemnification . . . . 13
5.2. Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties . . . . . . . . . 14
5.3. Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. . . . . . 14
5.4. Mandatory Indemnification . . . . . . . . . . 15
5.5. No Bond Required of Trustees . . . . . . . . . 16
<PAGE>
5.6. No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . 16
5.7. Reliance on Experts, etc. . . . . . . . . . . 17
5.8. No Repeal or Modification . . . . . . . . . . 17
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . 17
6.1. Interests . . . . . . . . . . . . . . . . . . 17
6.2. Establishment and Designation of Series. . . . 18
6.3. Non-Transferability . . . . . . . . . . . . . 19
6.4. Register of Interests . . . . . . . . . . . . 19
ARTICLE VII-- Increases, Decreases And Redemptions of
Interests . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII-- Determination of Book Capital Account
Balances and Distributions . . . . . . . . . . 20
8.1. Book Capital Account Balances . . . . . . . . 20
8.2. Allocations and Distributions to Holders . . . 20
8.3. Power to Modify Foregoing Procedures . . . . . 20
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . 21
9.1. Rights of Holders . . . . . . . . . . . . . . 21
9.2. Meetings of Holders . . . . . . . . . . . . . 21
9.3. Notice of Meetings . . . . . . . . . . . . . . 22
9.4. Record Date for Meetings,
Distributions, etc. . . . . . . . . . . . . 22
9.5. Proxies, etc. . . . . . . . . . . . . . . . . 22
9.6. Reports . . . . . . . . . . . . . . . . . . . 23
9.7. Inspection of Records . . . . . . . . . . . . 23
9.8. Holder Action by Written Consent . . . . . . . 23
9.9. Notices . . . . . . . . . . . . . . . . . . . 23
ARTICLE X--Duration; Termination; Termination; Dissolution;
Amendment; Mergers; Etc. . . . . . . . . . . . . . . . . . . 24
10.1. Duration . . . . . . . . . . . . . . . . . . 24
lO.2. Dissolution . . . . . . . . . . . . . . . . . 24
10.3. Termination . . . . . . . . . . . . . . . . . 25
10.4. Amendment Procedure . . . . . . . . . . . . . 26
10.5. Merger, Consolidation and Sale of Assets . . 27
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . 27
11.1. Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . . 27
11.2. Governing Law . . . . . . . . . . . . . . . . 27
11.3. Counterparts . . . . . . . . . . . . . . . . . 27
11.4. Reliance by Third Parties . . . . . . . . . . 28
11.5. Provisions in Conflict with Law or
Regulations. . . . . . . . . . . . . . . . . . 28
<PAGE>
<PAGE>
SCHEDULE A
----------
Initial Series
--------------
International Portfolio
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
International Portfolio Annual Report and is qualified in its entirety
by reference to such document.
</LEGEND>
<CIK> 0000922246
<NAME> GLOBAL MANAGERS TRUST
<SERIES>
<NUMBER> 01
<NAME> INTERNATIONAL PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> AUG-31-1995
<INVESTMENTS-AT-COST> 23,412
<INVESTMENTS-AT-VALUE> 25,918
<RECEIVABLES> 1,043
<ASSETS-OTHER> 44
<OTHER-ITEMS-ASSETS> 6
<TOTAL-ASSETS> 27,011
<PAYABLE-FOR-SECURITIES> 528
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77
<TOTAL-LIABILITIES> 605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,628
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 342
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,244)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,680
<NET-ASSETS> 26,406
<DIVIDEND-INCOME> 295
<INTEREST-INCOME> 166
<OTHER-INCOME> 0
<EXPENSES-NET> (133)
<NET-INVESTMENT-INCOME> 328
<REALIZED-GAINS-CURRENT> (1,230)
<APPREC-INCREASE-CURRENT> 2,468
<NET-CHANGE-FROM-OPS> 1,566
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 20,354
<ACCUMULATED-NII-PRIOR> 4
<ACCUMULATED-GAINS-PRIOR> (14)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 94
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 423
<AVERAGE-NET-ASSETS> 18,885
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
