-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WdiCIB1eS0+b+pObT3+/t5geYSVZQFr+2tPswKEMQlcG/HGcjHgL1B2maxDPNPTz bj9Hz3aBJRA7Wp9mLu/2nA== 0000898432-95-000427.txt : 19951218 0000898432-95-000427.hdr.sgml : 19951218 ACCESSION NUMBER: 0000898432-95-000427 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 28 FILED AS OF DATE: 19951215 EFFECTIVENESS DATE: 19951215 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEUBERGER & BERMAN EQUITY TRUST CENTRAL INDEX KEY: 0000906926 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-64368 FILM NUMBER: 95602062 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07784 FILM NUMBER: 95602063 BUSINESS ADDRESS: STREET 1: 605 THIRD AVE STREET 2: 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10158-0006 BUSINESS PHONE: 2124768800 485BPOS 1 As filed with the Securities and Exchange Commission on December 15, 1995 1933 Act Registration No. 33-64368 1940 Act Registration No. 811-7784 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ] Pre-Effective Amendment No. [_____] [_____] Post-Effective Amendment No. [ 8 ] [ X ] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ] Amendment No. [ 6 ] [ X ] (Check appropriate box or boxes) NEUBERGER & BERMAN EQUITY TRUST (Exact Name of the Registrant as Specified in Charter) 605 Third Avenue, 2nd Floor New York, New York 10158-0180 (Address of Principal Executive Offices) Registrant's Telephone Number, including area code: (212) 476-8800 Lawrence Zicklin, President Neuberger & Berman Equity 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, D.C. 20036-5891 (Names and Addresses of agents for service) Approximate Date of Proposed Public Offering: Continuous It is proposed that this filing will become effective: _____ immediately upon filing pursuant to paragraph (b) __X__ on December 15, 1995 pursuant to paragraph (b) _____ 60 days after filing pursuant to paragraph (a)(1) _____ on __________ pursuant to paragraph (a)(1) _____ 75 days after filing pursuant to paragraph (a)(2) _____ on __________ pursuant to paragraph (a)(2) Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended, and filed the notice required by such Rule for its 1995 fiscal year on October 24, 1995. Neuberger & Berman Equity Trust is a "master/feeder fund." This Post-Effective Amendment No. 8 includes a signature page for the master fund, Equity Managers Trust, and appropriate officers and trustees thereof. Page _______ of _______ Exhibit Index Begins on Page _______ NEUBERGER & BERMAN EQUITY TRUST CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 8 ON FORM N-1A This post-effective amendment consists of the following papers and documents: Cover Sheet Contents of Post-Effective Amendment No. 8 on Form N-1A Cross Reference Sheet Neuberger & Berman Focus Trust Neuberger & Berman Genesis Trust Neuberger & Berman Guardian Trust Neuberger & Berman Manhattan Trust Neuberger & Berman Partners Trust Part A - Prospectus Part B - Statement of Additional Information Neuberger & Berman Guardian Trust Part A - Prospectus Part B - Statement of Additional Information Neuberger & Berman NYCDC Socially Responsive Trust Part A - Prospectus Part B - Statement of Additional Information Part C - Other Information Signature Pages Exhibits NEUBERGER & BERMAN EQUITY TRUST POST-EFFECTIVE AMENDMENT NO. 8 ON FORM N-1A Cross Reference Sheet This cross reference sheet relates to the Prospectus and Statement of Additional Information for Neuberger & Berman Focus Trust, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger & Berman Manhattan Trust, and Neuberger & Berman Partners Trust
Form N-1A Item No. Caption in Part A Prospectus ------------------ ---------------------------- Item 1. Cover Page Front Cover Page Item 2. Synopsis Expense Information; Summary Item 3. Condensed Financial Financial Highlights; Performance Information Information Item 4. General Description of Investment Program; Description of Registrant Investments; Special Information Regarding Organization, Capitalization, and Other Matters Item 5. Management of the Fund Management and Administration; Other Information; Back Cover Page Item 6. Capital Stock and Other Front Cover Page; Dividends, Other Securities Distributions, and Taxes; Special Information Regarding Organization, Capitalization, and Other Matters Item 7. Purchase of Securities Shareholder Services; Share Information; Being Offered Management and Administration Item 8. Redemption or Repurchase Shareholder Services; Share Information Item 9. Pending Legal Not Applicable Proceedings Caption in Part B Form N-1A Item No. Statement of Additional Information ------------------ ----------------------------------- Item 10. Cover Page Cover Page Item 11. Table of Contents Table of Contents Item 12. General Information and Organization History Caption in Part B Form N-1A Item No. Statement of Additional Information ------------------ ----------------------------------- Item 13. Investment Objectives Investment Information; Certain Risk and Policies Considerations Item 14. Management of the Fund Trustees And Officers Item 15. Control Persons and Control Persons and Principal Holders of Principal Holders of Securities Securities Item 16. Investment Advisory and Investment Management and Administration Other Services Services; Trustees And Officers; Distribution Arrangements; Reports To Shareholders; Custodian And Transfer Agent; Independent Auditors/Accountants Item 17. Brokerage Allocation Portfolio Transactions Item 18. Capital Stock and Other Investment Information; Additional Redemption Securities Information; Dividends and Other Distributions Item 19. Purchase, Redemption Distribution Arrangements; Additional Exchange Information; Additional Redemption Information Item 20. Tax Status Dividends and Other Distributions; Additional Tax Information Item 21. Underwriters Investment Management and Administration Services; Distribution Arrangements Item 22. Calculation of Performance Information Performance Data Item 23. Financial Statements Financial Statements
Prospectus and Statement of Additional Information for Neuberger & Berman Guardian Trust
Form N-1A Item No. Caption in Part A Prospectus ------------------ ----------------------------- Item 1. Cover Page Front Cover Page Item 2. Synopsis Expense Information; Summary Item 3. Condensed Financial Financial Highlights; Performance Information Information Item 4. General Description of Investment Program; Description of Registrant Investments; Special Information Regarding Organization, Capitalization, and Other Matters Item 5. Management of the Fund Management and Administration; Directory; Back Cover Page Item 6. Capital Stock and Other Front Cover Page; Dividends, Other Securities Distributions, and Taxes; Special Information Regarding Organization, Capitalization, and Other Matters Item 7. Purchase of Securities How to Buy Shares; Share Information; Being Offered Management and Administration Item 8. Redemption or Repurchase How to Sell Shares; Share Information Item 9. Pending Legal Not Applicable Proceedings Caption in Part B Form N-1A Item No. Statement of Additional Information ------------------ ----------------------------------- Item 10. Cover Page Cover Page Item 11. Table of Contents Table of Contents Item 12. General Information and Not Applicable History Item 13. Investment Objectives Investment Information; Certain Risk and Policies Considerations Item 14. Management of the Fund Trustees And Officers Caption in Part B Form N-1A Item No. Statement of Additional Information ------------------ ----------------------------------- Item 15. Control Persons and Control Persons and Principal Holders of Principal Holders of Securities Securities Item 16. Investment Advisory and Investment Management and Administration Other Services Services; Trustees And Officers; Distribution Arrangements; Reports To Shareholders; Custodian And Transfer Agent; Independent Auditors Item 17. Brokerage Allocation Portfolio Transactions Item 18. Capital Stock and Other Investment Information; Additional Securities Redemption Information; Dividends and Other Distributions Item 19. Purchase, Redemption Distribution Arrangements; Additional Redemption Information Item 20. Tax Status Dividends and Other Distributions; Additional Tax Information Item 21. Underwriters Investment Management and Administration Services; Distribution Arrangements Item 22. Calculation of Performance Information Performance Data Item 23. Financial Statements Financial Statements
Prospectus and Statement of Additional Information for Neuberger & Berman NYCDC Socially Responsive Trust
Form N-1A Item No. Caption in Part A Prospectus ------------------ ---------------------------- Item 1. Cover Page Front Cover Page Item 2. Synopsis Expense Information; Summary Item 3. Condensed Financial Information Financial Highlights; Performance Information Item 4. General Description of Investment Program; Description of Investments; Registrant Special Information Regarding Organization, Capitalization, and Other Matters Item 5. Management of the Fund Management and Administration; Directory; Back Cover Page Item 6. Capital Stock and Other Front Cover Page; Dividends, Other Securities Distributions, and Taxes; Special Information Regarding Organization, Capitalization, and Other Matters Item 7. Purchase of Securities Being How to Buy and Sell Shares; Share Information; Offered Management and Administration Item 8. Redemption or Repurchase How to Buy and Sell Shares; Share Information Item 9. Pending Legal Proceedings Not Applicable Form N-1A Item No. Caption in Part B ------------------ Statement of Additional Information ----------------------------------- Item 10. Cover Page Cover Page Item 11. Table of Contents Table of Contents Item 12. General Information and History Not Applicable Item 13. Investment Objectives and Investment Information; Certain Risk Policies Considerations Item 14. Management of the Fund Trustees And Officers Item 15. Control Persons and Principal Control Persons and Principal Holders of Holders of Securities Securities Form N-1A Item No. Caption in Part B ------------------ Statement of Additional Information ----------------------------------- Item 16. Investment Advisory and Other Investment Management and Administration Services Services; Trustees And Officers; Distribution Arrangements; Reports To Shareholders; Custodian And Transfer Agent; Independent Accountants Item 17. Brokerage Allocation Portfolio Transactions Item 18. Capital Stock and Other Investment Information; Additional Redemption Securities Information; Dividends and Other Distributions Item 19. Purchase, Redemption Distribution Arrangements; Additional Redemption Information Item 20. Tax Status Dividends and Other Distributions; Additional Tax Information Item 21. Underwriters Investment Management and Administration Services; Distribution Arrangements Item 22. Calculation of Performance Data Performance Information Item 23. Financial Statements Financial Statements
Part C Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this Post-Effective Amendment No. 8. PROSPECTUS December 15, 1995 NEUBERGER&BERMAN EQUITY TRUST -SM- NEUBERGER&BERMAN FOCUS TRUST NEUBERGER&BERMAN GENESIS TRUST NEUBERGER&BERMAN GUARDIAN TRUST NEUBERGER&BERMAN MANHATTAN TRUST NEUBERGER&BERMAN PARTNERS TRUST No Sales Charges No Redemption Fees No 12b-1 Fees Neuberger&Berman EQUITY TRUST No-Load Equity Funds - ---------------------------------------------------------------------- Neuberger&Berman FOCUS TRUST Neuberger&Berman MANHATTAN TRUST Neuberger&Berman GENESIS TRUST Neuberger&Berman PARTNERS TRUST Neuberger&Berman GUARDIAN TRUST YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A PENSION PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN "INSTITUTION") WHICH PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"). - ---------------------------------------------------------------------- EACH OF THE ABOVE-NAMED FUNDS (A "FUND") INVESTS ALL OF ITS NET INVESTABLE ASSETS IN ITS CORRESPONDING PORTFOLIO (A "PORTFOLIO") OF EQUITY MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY N&B MANAGEMENT. EACH PORTFOLIO INVESTS IN SECURITIES IN ACCORDANCE WITH AN INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS IDENTICAL TO THOSE OF ITS CORRESPONDING FUND. THE INVESTMENT PERFORMANCE OF EACH FUND DIRECTLY CORRESPONDS WITH THE INVESTMENT PERFORMANCE OF ITS CORRESPONDING PORTFOLIO. THIS "MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES. FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SUMMARY" ON PAGE 3, AND "SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS" ON PAGE 25. Please read this Prospectus before investing in any of the Funds and keep it for future reference. It contains information about the Funds that a prospective investor should know before investing. A Statement of Additional Information ("SAI") about the Funds and Portfolios, dated December 15, 1995, is on file with the Securities and Exchange Commission. The SAI is incorporated herein by reference (so it is legally considered a part of this Prospectus). You can obtain a free copy of the SAI by calling N&B Management at 800-877-9700. PROSPECTUS DATED DECEMBER 15, 1995 MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
SUMMARY 3 The Funds and Portfolios; Risk Factors 3 Management 5 The Neuberger&Berman Investment Approach 5 EXPENSE INFORMATION 7 Shareholder Transaction Expenses for Each Fund 7 Annual Fund Operating Expenses 7 Example 9 FINANCIAL HIGHLIGHTS 10 Focus Trust 11 Genesis Trust 12 Guardian Trust 13 Manhattan Trust 14 Partners Trust 15 INVESTMENT PROGRAMS 18 Focus Portfolio 18 Genesis Portfolio 19 Guardian Portfolio 20 Manhattan Portfolio 20 Partners Portfolio 21 Short-Term Trading; Portfolio Turnover 21 Borrowings 22 Other Investments 22 PERFORMANCE INFORMATION 23 Total Return Information 24 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS 25 The Funds 25 The Portfolios 26 SHAREHOLDER SERVICES 28 How to Buy Shares 28 How to Sell Shares 28 Exchanging Shares 29 SHARE INFORMATION 30 Share Prices and Net Asset Value 30 DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES 31 Distribution Options 31 Taxes 31 MANAGEMENT AND ADMINISTRATION 33 Trustees and Officers 33 Investment Manager, Administrator, Distributor, and Sub-Adviser 33 Expenses 35 Transfer Agent 37 DESCRIPTION OF INVESTMENTS 38 USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION 41 OTHER INFORMATION 42 Directory 42 Funds Eligible For Exchange 42
SUMMARY The Funds and Portfolios; Risk Factors - ---------------------------------------------------------------------- Each Fund is a series of Neuberger&Berman Equity Trust (the "Trust") and invests in a corresponding Portfolio that, in turn, invests in securities in accordance with an investment objective, policies, and limitations that are identical to those of the Fund. This is sometimes called a master/feeder fund structure, because each Fund "feeds" shareholders' investments into its corresponding Portfolio, a "master" fund. The structure looks like this: ------------------------- Shareholders ------------------------- (down arrow) BUY SHARES IN ------------------------- Funds ------------------------- (down arrow) INVEST IN ------------------------- Portfolios ------------------------- (down arrow) INVEST IN ------------------------- Stocks & Other Securities ------------------------- The trustees who oversee the Funds believe that this structure may benefit shareholders; investment in a Portfolio by investors in addition to a Fund may enable the Portfolio to achieve economies of scale that could reduce expenses. For more information about the organization of the Funds and the Portfolios, including certain features of the master/feeder fund structure, see "Special Information Regarding Organization, Capitalization, and Other Matters" on page 25. An investment in any Fund involves certain risks, depending upon the types of investments made by its corresponding Portfolio. For more details about each Portfolio, its investments and their risks, see "Investment Programs" on page 18 and "Description of Investments" on page 38. The following table is a summary highlighting features of the Funds and their corresponding Portfolios. You may want to invest in a variety of Funds to fit your particular investment needs. Of course, there can be no assurance that a Fund will meet its investment objective. 3
NEUBERGER&BERMAN INVESTMENT PORTFOLIO EQUITY TRUST STYLE CHARACTERISTICS GUARDIAN TRUST Broadly diversified, A growth and income fund that large-cap value fund. invests in stocks of Relatively low portfolio established, high-quality turnover. companies that are not well followed on Wall Street or are temporarily out of favor. FOCUS TRUST Large-cap value fund, more Invests in common stocks concentrated portfolio than selected from 13 multi- Guardian. Relatively low industry sectors of the portfolio turnover. economy. To maximize potential return, the Portfolio normally makes at least 90% of its investments in not more than six sectors believed by the portfolio managers to be undervalued. GENESIS TRUST Broadly diversified, Invests in stocks of small-cap value fund. companies with small market Relatively low portfolio capitalizations (usually up turnover. to $750 million). Portfolio manager seeks to buy the stocks of strong companies with a history of solid performance and a proven management team, which are selling at attractive prices. MANHATTAN TRUST Broadly diversified, medium- Invests in securities to large-cap growth fund. believed to have the maximum Relatively low portfolio potential for long-term turnover. capital appreciation. Portfolio manager follows a "growth at a reasonable price" philosophy and searches for financially sound, growing companies with a special competitive advantage or a product that makes their stocks attractive. PARTNERS TRUST Broadly diversified, medium- Seeks capital growth through to large-cap value fund. an approach that is intended Moderate portfolio turnover. to increase capital with reasonable risk. Portfolio managers look at fundamentals, focusing particularly on cash flow, return on capital, and asset values.
4 Management - ---------------------------------------------------------------------- N&B Management, with the assistance of Neuberger&Berman, L.P. ("Neuberger&Berman") as sub-adviser, selects investments for the Portfolios. N&B Management also provides administrative services to the Portfolios and the Funds and acts as distributor of Fund shares. See "Management and Administration" on page 33. If you want to know how to buy and sell shares of the Funds or exchange them for shares of other Neuberger&Berman Funds-SM- made available through an Institution, see "Shareholder Services -- How to Buy Shares" on page 28, "Shareholder Services -- How to Sell Shares" on page 28, "Shareholder Services -- Exchanging Shares" on page 29, and the policies of the Institution through which you are purchasing shares. The Neuberger&Berman Investment Approach - ---------------------------------------------------------------------- While each Portfolio has its own investment objective, policies, and limitations, each Portfolio is managed using one of two basic investment approaches -- value and growth. A value-oriented portfolio manager buys stocks that are selling for less than their perceived market value. These include stocks that are currently under-researched or are temporarily out of favor on Wall Street. Portfolio managers identify value stocks in several ways. One of the most common identifiers is a low price-to-earnings ratio -- that is, stocks selling at multiples of earnings per share that are lower than that of the market as a whole. Other criteria are high dividend yield, a strong balance sheet and financial position, a recent company restructuring with the potential to realize hidden values, strong management, and low price-to-book value (net value of the company's assets). While a value approach concentrates on undervalued securities in relation to their fundamental economic value, a growth approach seeks out stocks of companies that are projected to grow at above-average rates and may appear poised for a period of accelerated earnings. The growth portfolio manager is willing to pay a higher share price in the hopes that the stock's earnings momentum will carry the stock's price higher. As a stock's price increases based on strong earnings, the stock's original price appears low in relation to the growth rate of its earnings. Sometimes this happens when a particular company or industry is temporarily out of favor with the market or under-researched. This strategy is called "growth at a reasonable price." Neuberger&Berman believes that, over time, securities that are undervalued are more likely to appreciate in price and be subject to less risk of price decline than 5 securities whose market prices have already reached their perceived economic value. This approach also contemplates selling portfolio securities when they are considered to have reached their potential. In general, Neuberger&Berman FOCUS, Neuberger&Berman GENESIS, Neuberger&Berman GUARDIAN, and Neuberger&Berman PARTNERS Portfolios adhere to a value-oriented investment approach. Neuberger&Berman MANHATTAN Portfolio places a greater emphasis on finding securities whose measures of fundamental value are low in relation to the growth rate of their future earnings and cash flow, as projected by the portfolio manager, and that Portfolio is therefore willing to invest in securities with prices that are somewhat higher multiples of earnings. 6 EXPENSE INFORMATION This section gives you certain information about the expenses of each Fund and its corresponding Portfolio. See "Performance Information" for important facts about the investment performance of each Fund, after taking expenses into account. Shareholder Transaction Expenses for Each Fund - ---------------------------------------------------------------------- As shown by this table, there are no transaction charges when you buy or sell Fund shares. Sales Charge Imposed on Purchases NONE Sales Charge Imposed on Reinvested Dividends NONE Deferred Sales Charges NONE Redemption Fees NONE Exchange Fees NONE
Annual Fund Operating Expenses (AS A PERCENTAGE OF AVERAGE NET ASSETS) - -------------------------------------------------------------------------------- The following table shows annual Total Operating Expenses for each Fund, which are paid out of the assets of the Fund and which include the Fund's pro rata portion of the Operating Expenses of its corresponding Portfolio. These expenses are borne indirectly by Fund shareholders. Each Fund pays N&B Management an administration fee, based on the Fund's average daily net assets. Each Portfolio pays N&B Management a management fee, based on the Portfolio's average daily net assets; a pro rata portion of this fee is borne indirectly by the corresponding Fund. Therefore, the table combines management and administration fees. The Funds and Portfolios also incur other expenses for things such as accounting and legal fees, maintaining shareholder records, and furnishing shareholder statements and Fund reports. "Operating Expenses" exclude interest, taxes, brokerage commissions, and extraordinary expenses. The Funds' expenses are factored into their share prices and dividends and are not charged directly to Fund shareholders. For more information, see "Management and Administration" and the SAI.
NEUBERGER&BERMAN MANAGEMENT AND 12B-1 OTHER TOTAL OPERATING EQUITY TRUST ADMINISTRATION FEES* FEES EXPENSES EXPENSES* - -------------------------------------------------------------------------------------------------- FOCUS TRUST 0.00% None 1.02%* 1.02% GENESIS TRUST 0.90%+ None 0.53% 1.43%+ GUARDIAN TRUST 0.84% None 0.10% 0.94% MANHATTAN TRUST 0.60% None 0.52% 1.12% PARTNERS TRUST 0.63% None 0.34% 0.97%
*(REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW) +(REFLECTS N&B MANAGEMENT'S WAIVER OF CERTAIN MANAGEMENT FEES DESCRIBED BELOW) 7 Total Operating Expenses for each Fund have been restated based upon current administration fees for the Fund and management fees for its corresponding Portfolio and the current expense reimbursement undertaking (and, in the case of Neuberger&Berman GENESIS Trust, the current fee waiver). "Other Expenses" are based on each Fund's and Portfolio's expenses for the past fiscal year. The trustees of the Trust believe that the aggregate per share expenses of each Fund and its corresponding Portfolio will be approximately equal to the expenses the Fund would incur if its assets were invested directly in the type of securities held by its corresponding Portfolio. The trustees of the Trust also believe that investment in a Portfolio by investors in addition to a Fund may enable the Portfolio to achieve economies of scale which could reduce expenses. The expenses and returns of other funds that may invest in the Portfolios may differ from those of the Funds. Five mutual funds that are series of Neuberger&Berman Equity Funds ("N&B Equity Funds") and are administered by N&B Management, each of which has a name similar to a Fund and the same investment objective, policies, and limitations as that Fund ("Sister Fund"), also invest in the five corresponding Portfolios. The previous table reflects N&B Management's voluntary undertaking until December 31, 1996, to reimburse each Fund for its Operating Expenses and its pro rata share of its corresponding Portfolio's Operating Expenses so that each Fund's expense ratio per annum will not exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the Fund's average daily net assets. A Fund's per annum "expense ratio" means the sum of the Fund's Total Operating Expenses and its pro rata share of its corresponding Portfolio's Total Operating Expenses, divided by that Fund's average daily net assets for the year. The expense ratios of the Sister Funds of Neuberger& Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger&Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust and Neuberger&Berman PARTNERS Trust are anticipated to be, respectively, 0.92%, 1.33%, 0.84%, 1.02%, and 0.87% per annum of such Sister Fund's average net assets. Based on those expectations, the expense ratios for Neuberger&Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger&Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust and Neuberger&Berman PARTNERS Trust are not anticipated to exceed 1.02%, 1.43%, 0.94%, 1.12%, and 0.97% per annum, respectively. The above ratios reflect N&B Management's voluntary agreement to waive a portion of the management fee borne directly by Neuberger&Berman GENESIS Portfolio and indirectly by Neuberger&Berman GENESIS Trust to reduce that fee by 0.10% per annum of the average daily net assets of Neuberger&Berman GENESIS Portfolio. Absent the reimbursement and fee waiver, Management and Administration Fees would be 0.93%, 1.25%, 0.86%, 0.94%, and 0.90% per annum, and Other Expenses would be 1.57%, 0.53%, 0.10%, 0.52%, and 0.34% per annum, of the average daily net assets of Neuberger&Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger& 8 Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust, and Neuberger& Berman PARTNERS Trust, respectively; Total Operating Expenses would be 2.50%, 1.78%, 0.96%, 1.46%, and 1.24% per annum of the average daily net assets of Neuberger&Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger& Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust, and Neuberger& Berman PARTNERS Trust, respectively (or slightly higher if permitted by state securities authorities). Example - ---------------------------------------------------------------------- To illustrate the effect of Operating Expenses, let's assume that each Fund's annual return is 5% and that it had Total Operating Expenses described in the table above. For every $1,000 you invested in each Fund, you would have paid the following amounts of total expenses if you closed your account at the end of each of the following time periods:
NEUBERGER&BERMAN 1 3 5 10 EQUITY TRUST YEAR YEARS YEARS YEARS - --------------------------------------------------------------- FOCUS TRUST $10 $32 $56 $125 GENESIS TRUST $15 $45 $78 $171 GUARDIAN TRUST $10 $30 $52 $115 MANHATTAN TRUST $11 $36 $62 $136 PARTNERS TRUST $10 $31 $54 $119
The assumption in this example of a 5% annual return is required by regulations of the Securities and Exchange Commission applicable to all mutual funds. THE INFORMATION IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE. 9 FINANCIAL HIGHLIGHTS Selected Per Share Data and Ratios - ---------------------------------------------------------------------- The financial information in the following tables is for each Fund as of August 31, 1995 and prior periods. This information has been audited by the Funds' respective independent auditors/accountants. You may obtain, at no cost, further information about the performance of the Funds in their annual report to shareholders. The annual report contains the auditors'/accountants' reports. Please call 800-877-9700 for a free copy and for up-to-date information. Also, see "Performance Information." 10 FINANCIAL HIGHLIGHTS Neuberger&Berman Focus Trust(1) - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and expenses, including the Fund's proportionate share of its corresponding Portfolio's income and expenses. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
PERIOD FROM AUGUST 30, YEAR ENDED AUGUST 31, 1993(2) TO AUGUST 1995 1994 31, 1993 - ---------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Year $ 11.36 $ 10.03 $10.00 ---------- ---------- ---------- Income from Investment Operations Net Investment Income .05 .05 -- Net Gains or Losses on Securities (both realized and unrealized) 3.05 1.31 .03 ---------- ---------- ---------- Total from Investment Operations 3.10 1.36 .03 ---------- ---------- ---------- Less Distributions Dividends (from net investment income) (.05) (.02) -- Distributions (from capital gains) -- (.01) -- ---------- ---------- ---------- Total Distributions (.05) (.03) -- ---------- ---------- ---------- Net Asset Value, End of Year $ 14.41 $ 11.36 $10.03 ---------- ---------- ---------- Total Return+ +27.44% +13.58% +0.30%(3) ---------- ---------- ---------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 14.5 $ 1.6 -- ---------- ---------- ---------- Ratio of Expenses to Average Net Assets(4) .96% .85% .92%(5) ---------- ---------- ---------- Ratio of Net Income to Average Net Assets(4) .67% .92% .05%(5) ---------- ---------- ----------
SEE NOTES TO FINANCIAL HIGHLIGHTS 11 FINANCIAL HIGHLIGHTS Neuberger&Berman Genesis Trust - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and expenses, including the Fund's proportionate share of its corresponding Portfolio's income and expenses. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
YEAR ENDED PERIOD FROM AUGUST 31, AUGUST 26, 1993(2) 1995 1994 TO AUGUST 31, 1993 - -------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Year $ 10.59 $ 10.05 $10.00 -------- -------- ------ Income from Investment Operations Net Investment Income (Loss) (.01) (.01) -- Net Gains or Losses on Securities (both realized and unrealized) 2.08 .56 .05 -------- -------- ------ Total from Investment Operations 2.07 .55 .05 -------- -------- ------ Less Distributions Distributions (from capital gains) (.01) (.01) -- -------- -------- ------ Net Asset Value, End of Year $ 12.65 $ 10.59 $10.05 -------- -------- ------ Total Return+ +19.51% +5.47% +0.50%(3) -------- -------- ------ Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 30.6 $ 3.1 -- -------- -------- ------ Ratio of Expenses to Average Net Assets(4) 1.42% 1.36% 1.51%(5) -------- -------- ------ Ratio of Net Income (Loss) to Average Net Assets(4) (.24%) (.21%) (.44%)(5) -------- -------- ------
SEE NOTES TO FINANCIAL HIGHLIGHTS 12 FINANCIAL HIGHLIGHTS Neuberger&Berman Guardian Trust - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and expenses, including the Fund's proportionate share of its corresponding Portfolio's income and expenses. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
YEAR ENDED PERIOD FROM AUGUST 31, AUGUST 3, 1993(2) 1995 1994 TO AUGUST 31, 1993 - -------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Year $11.27 $10.27 $10.00 ------ ------ ------ Income from Investment Operations Net Investment Income .13 .09 -- Net Gains or Losses on Securities (both realized and unrealized) 2.55 .99 .27 ------ ------ ------ Total from Investment Operations 2.68 1.08 .27 ------ ------ ------ Less Distributions Dividends (from net investment income) (.12) (.07) -- Distributions (from capital gains) -- (.01) -- ------ ------ ------ Total Distributions (.12) (.08) -- ------ ------ ------ Net Asset Value, End of Year $13.83 $11.27 $10.27 ------ ------ ------ Total Return+ +24.01% +10.57% +2.70%(3) ------ ------ ------ Ratios/Supplemental Data Net Assets, End of Year (in millions) $683.1 $ 75.8 -- ------ ------ ------ Ratio of Expenses to Average Net Assets(4) .90% .80% .81%(5) ------ ------ ------ Ratio of Net Income to Average Net Assets(4) 1.35% 1.50% 1.00%(5) ------ ------ ------
SEE NOTES TO FINANCIAL HIGHLIGHTS 13 FINANCIAL HIGHLIGHTS Neuberger&Berman Manhattan Trust - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and expenses, including the Fund's proportionate share of its corresponding Portfolio's income and expenses. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
YEAR ENDED PERIOD FROM AUGUST 31, AUGUST 30, 1993(2) 1995 1994 TO AUGUST 31, 1993 - ------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Year $10.37 $10.01 $ 10.00 ------ ------ ------ Income from Investment Operations Net Investment Income -- .01 -- Net Gains or Losses on Securities (both realized and unrealized) 2.67 .36 .01 ------ ------ ------ Total from Investment Operations 2.67 .37 .01 ------ ------ ------ Less Distributions Dividends (from net investment income) (.01) (.01) Distributions (from capital gains) (.04) -- -- ------ ------ ------ Total Distributions (.05) (.01) -- ------ ------ ------ Net Asset Value, End of Year $12.99 $10.37 $ 10.01 ------ ------ ------ Total Return+ +25.90% + 3.70% + 0.10%(3) ------ ------ ------ Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 35.6 $ 12.1 -- ------ ------ ------ Ratio of Expenses to Average Net Assets(4) 1.06% .96% 1.04%(5) ------ ------ ------ Ratio of Net Income (Loss) to Average Net Assets(4) (.03%) .16% 5.48%(5) ------ ------ ------
SEE NOTES TO FINANCIAL HIGHLIGHTS 14 FINANCIAL HIGHLIGHTS Neuberger&Berman Partners Trust - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and expenses, including the Fund's proportionate share of its corresponding Portfolio's income and expenses. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
YEAR ENDED PERIOD FROM AUGUST 31, AUGUST 30, 1993(2) 1995 1994 TO AUGUST 31, 1993 - ------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Year $10.54 $10.01 $ 10.00 ------ ------ ------ Income from Investment Operations Net Investment Income .05 .03 -- Net Gains or Losses on Securities (both realized and unrealized) 2.19 .53 .01 ------ ------ ------ Total from Investment Operations 2.24 .56 .01 ------ ------ ------ Less Distributions Dividends (from net investment income) (.02) (.01) -- Distributions (from capital gains) (.08) (.02) -- ------ ------ ------ Total Distributions (.10) (.03) -- ------ ------ ------ Net Asset Value, End of Year $12.68 $10.54 $ 10.01 ------ ------ ------ Total Return+ +21.52% + 5.61% + 0.10%(3) ------ ------ ------ Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 61.3 $ 4.7 -- ------ ------ ------ Ratio of Expenses to Average Net Assets(4) .92% .81% .84%(5) ------ ------ ------ Ratio of Net Income to Average Net Assets(4) .81% .47% 2.65%(5) ------ ------ ------
SEE NOTES TO FINANCIAL HIGHLIGHTS 15 NOTES TO FINANCIAL HIGHLIGHTS 1)Prior to January 1, 1995, the name of Neuberger&Berman FOCUS Trust was Neuberger&Berman Selected Sectors Trust. 2)The date investment operations commenced. 3)Not annualized. 4)After reimbursement of expenses by N&B Management. Had N&B Management not undertaken such action the annualized ratios to average daily net assets would have been:
PERIOD FROM NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 30, 1993 FOCUS TRUST 1995 1994 TO AUGUST 31, 1993 ----- ----- ----- Expenses 2.50% 2.50% 2.50% ----- ----- ----- Net Investment Loss (.87%) (.73%) (1.53%) ----- ----- ----- PERIOD FROM NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 3, 1993 GUARDIAN TRUST 1995 1994 TO AUGUST 31, 1993 ----- ----- ----- Expenses .96% 1.52% 2.50% ----- ----- ----- Net Investment Income (Loss) 1.29% .78% (.69%) ----- ----- ----- PERIOD FROM NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 30, 1993 MANHATTAN TRUST 1995 1994 TO AUGUST 31, 1993 ----- ----- ----- Expenses 1.46% 2.50% 2.50% ----- ----- ----- Net Investment Income (Loss) (.43%) (1.38%) 4.02% ----- ----- ----- PERIOD FROM NEUBERGER&BERMAN YEAR ENDED AUGUST 31, AUGUST 30, 1993 PARTNERS TRUST 1995 1994 TO AUGUST 31, 1993 ----- ----- ----- Expenses 1.24% 2.50% 2.50% ----- ----- ----- Net Investment Income (Loss) .49% (1.22%) .99% ----- ----- -----
After reimbursement of expenses by N&B Management as described in Note B of Notes to Financial Statements and the waiver of a portion of the Portfolio's management fee as described in Note B of Notes to Financial Statements of Neuberger& Berman GENESIS Portfolio. Had N&B Management not undertaken such action the annualized ratios to average daily net assets would have been:
NEUBERGER&BERMAN PERIOD FROM YEAR ENDED AUGUST 31, AUGUST 26, 1993 GENESIS TRUST 1995 1994 TO AUGUST 31, 1993 ----- ----- ----- Expenses 1.78% 2.50% 2.50% ----- ----- ----- Net Investment Loss (.60%) (1.35%) (1.43%) ----- ----- -----
5)Annualized. 16 6)Because each Fund invests only in its corresponding Portfolio and that Portfolio (rather than the Fund) engages in securities transactions, no Fund calculates a portfolio turnover rate. The portfolio turnover rates for each Portfolio were as follows:
YEAR ENDED AUGUST PERIOD FROM 31, AUGUST 2, 1993 1995 1994 TO AUGUST 31, 1993 - -------------------------------------------------------------------------------------- Neuberger&Berman FOCUS Portfolio 36% 52% 4% --------- --------- ------------------- Neuberger&Berman GENESIS Portfolio 37% 63% 3% --------- --------- ------------------- Neuberger&Berman GUARDIAN Portfolio 26% 24% 3% --------- --------- ------------------- Neuberger&Berman MANHATTAN Portfolio 44% 50% 3% --------- --------- ------------------- Neuberger&Berman PARTNERS Portfolio 98% 75% 8% --------- --------- -------------------
+ Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of each Fund during each year and assumes dividends and other distributions, if any, were reinvested. Results represent past performance and do not guarantee future results. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Total return would have been lower if N&B Management had not reimbursed certain expenses. For Neuberger&Berman GENESIS Trust, total return would have been lower if N&B Management had not waived a portion of the Portfolio's management fee. 17 INVESTMENT PROGRAMS The investment policies and limitations of each Fund and its corresponding Portfolio are identical. Each Fund invests only in its corresponding Portfolio. Therefore, the following shows you the kinds of securities in which each Portfolio invests. For an explanation of some types of investments, see "Description of Investments" on page 38. Investment policies and limitations of the Funds and Portfolios are not fundamental unless otherwise specified in this Prospectus or the SAI. While a non-fundamental policy or limitation may be changed by the trustees of the Trust or of Managers Trust without shareholder approval, the Funds intend to notify shareholders before making any material change to such policies or limitations. Fundamental policies may not be changed without shareholder approval. The investment objectives of the Funds and Portfolios are not fundamental. The Funds have undertaken to a state securities commission that they will seek shareholder approval before changing any investment objective. The Funds have also undertaken not to change their investment objective without 30 days' prior notice to shareholders. There can be no assurance that the Funds or Portfolios will achieve their objectives. Each Fund, by itself, does not represent a comprehensive investment program. Additional investment techniques, features, and limitations concerning the Portfolios' investment programs are described in the SAI. Neuberger&Berman Focus Portfolio - ---------------------------------------------------------------------- The investment objective of Neuberger&Berman FOCUS Portfolio and Neuberger&Berman FOCUS Trust is to seek long-term capital appreciation. Neuberger&Berman FOCUS Portfolio invests principally in common stocks selected from the following 13 multi-industry sectors of the economy: / / Autos & Housing / / Health Care / / Technology / / Consumer Goods & Services / / Heavy Industry / / Transportation / / Defense & Aerospace / / Machinery & Equipment / / Utilities / / Energy / / Media & Entertainment / / Financial Services / / Retailing
To maximize potential return, the Portfolio normally makes at least 90% of its investments in not more than six sectors it identifies as undervalued. Where a particular industry may fall within more than one sector, N&B Management uses its judgment and experience to determine the placement of that industry within a sector. The Portfolio uses the value-oriented investment approach to identify stocks believed to be undervalued, including stocks that are temporarily out of favor in the market. The Portfolio then focuses its investments in the sectors in which the undervalued stocks are clustered. These sectors are believed to offer the greatest potential for capital 18 growth. This investment approach is different from that of most other mutual funds that emphasize sector investment. Those funds either invest in only a single economic sector or choose a number of sectors by analyzing general economic trends. Further information on the Portfolio's securities holdings and their allocation by sector is included in the Fund's annual report to shareholders, which is available at no cost upon request. The sectors are more fully described in the SAI. The Portfolio may be affected more by any single economic, political, or regulatory development than a more diversified mutual fund. The risk of decline in the Portfolio's asset value due to an adverse development may be partially offset by the value-oriented investment approach. To further reduce this risk, the Portfolio may not (1) invest more than 50% of its total assets in any one sector, (2) as a fundamental policy, concentrate 25% or more of its total assets in the securities of companies having their principal business activities in any one industry, or (3) invest more than 5% of its total assets in the securities of any one company. Neuberger&Berman Genesis Portfolio - ---------------------------------------------------------------------- The investment objective of Neuberger&Berman GENESIS Portfolio and Neuberger&Berman GENESIS Trust is to seek capital appreciation. Neuberger&Berman GENESIS Portfolio invests principally in common stocks of companies with small market capitalizations ("small-cap companies"). Market capitalization means the total market value of a company's outstanding common stock. The Portfolio regards companies with market capitalizations of up to $750 million as small-cap companies. There is no necessary correlation between market capitalization and the financial attributes -- such as levels of assets, revenues, or income -- commonly used to measure the size of a company. Studies indicate that the market values of small-cap company stocks, such as those included in the Russell 2000 Index and the Wilshire 1750 or quoted on Nasdaq, have a cyclical relationship with larger capitalization stocks. Over the last 30 years, small-cap company stocks have outperformed larger capitalization stocks about two-thirds of the time, even though small-cap stocks have usually declined more than larger capitalization stocks in declining markets. There can be no assurance that this pattern will continue. Small-cap company stocks generally are considered to offer greater potential for appreciation than securities of companies with larger market capitalization. Most small-cap company stocks pay low or no dividends, and the Portfolio seeks long-term appreciation, rather than income. Small-cap company stocks also have higher risk and volatility, because most are not as broadly traded as stocks of companies with larger capitalization and their prices thus may fluctuate more widely and abruptly. Small-cap company securities are also less researched and often overlooked and undervalued in the market. 19 The Portfolio tries to enhance the potential for appreciation and limit the risk of decline in the value of its securities by employing the value-oriented investment approach. The Portfolio seeks securities that appear to be underpriced and are issued by companies with proven management, sound finances, and strong potential for market growth. To reduce risk, the Portfolio diversifies its holdings among many companies and industries. The Portfolio focuses on the fundamentals of each small-cap company, instead of trying to anticipate what changes might occur in the stock market, the economy, or the political environment. This approach differs from that used by many other funds investing in small-cap company stocks, which often buy stocks of companies they believe will have above-average earnings growth, based on ANTICIPATED FUTURE developments. In contrast, the Portfolio's securities are generally selected in the belief that they are currently undervalued, based on EXISTING conditions. The Portfolio generally expects to be almost fully invested in small-cap stocks, but it may invest up to 15% of its total assets in securities of companies whose market capitalizations exceed $750 million. Neuberger&Berman Guardian Portfolio - ---------------------------------------------------------------------- The investment objective of Neuberger&Berman GUARDIAN Portfolio and Neuberger&Berman GUARDIAN Trust is to seek capital appreciation and, secondarily, current income. Neuberger&Berman GUARDIAN Portfolio invests primarily in a large number of common stocks of long-established, high-quality companies. The Portfolio uses the value-oriented investment approach in selecting securities. Thus, N&B Management looks for such factors as low price-to-earnings ratios, strong balance sheets, solid management, and consistent earnings. The Portfolio diversifies its holdings among many different companies and industries. Neuberger&Berman GUARDIAN Trust, its Sister Fund and the Sister Fund's predecessor have paid their shareholders an income dividend every quarter and a capital gain distribution every year since the predecessor's inception in 1950. Of course, this past record does not necessarily predict the Fund's future practices. Neuberger&Berman Manhattan Portfolio - ---------------------------------------------------------------------- The investment objective of Neuberger&Berman MANHATTAN Portfolio and Neuberger&Berman MANHATTAN Trust is to seek capital appreciation without regard to income. Neuberger&Berman MANHATTAN Portfolio generally invests in securities of medium- to large-capitalization companies believed to have the maximum potential for long-term capital appreciation. It does not seek to invest in securities that pay 20 dividends or interest, and any such income is incidental. The Portfolio expects to be almost fully invested in common stocks, often of companies that may be temporarily out of favor in the market. The Portfolio's growth investment program involves greater risks and share price volatility than programs that invest in more conservative securities. Moreover, the Portfolio does not follow a policy of active trading for short-term profits. Accordingly, the Portfolio may be more appropriate for investors with a longer-range perspective. The Portfolio uses a "growth at a reasonable price" investment approach. When N&B Management believes that particular securities have greater potential for long-term capital appreciation, the Portfolio may purchase such securities at prices with relatively higher multiples to measures of economic value (such as earnings or cash flow) than other Portfolios. In addition, the Portfolio focuses on companies with strong balance sheets and reasonable valuations relative to their growth rates. It also diversifies its investments into many companies and industries. Neuberger&Berman Partners Portfolio - ---------------------------------------------------------------------- The investment objective of Neuberger&Berman PARTNERS Portfolio and Neuberger&Berman PARTNERS Fund is to seek capital growth. Neuberger&Berman PARTNERS Portfolio invests principally in common stocks of medium- to large-capitalization established companies, using the value-oriented investment approach. The Portfolio seeks capital growth through an investment approach that is designed to increase capital with reasonable risk. Its investment program seeks securities believed to be undervalued based on strong fundamentals, including low price-to-earnings ratios, consistent cash flow, and the company's track record through all parts of the market cycle. The Portfolio considers additional factors when selecting securities, including ownership by a company's management of the company's stock and the dominance of a company in its particular field. Short-Term Trading; Portfolio Turnover - ---------------------------------------------------------------------- Although the Portfolios do not purchase securities with the intention of profiting from short-term trading, each Portfolio may sell portfolio securities when N&B Management believes that such action is advisable. The portfolio turnover rates for each Portfolio are set forth under "Notes to Financial Highlights." It is anticipated that the annual turnover rate of Neuberger&Berman MANHATTAN Portfolio and of Neuberger&Berman PARTNERS Portfolio in some fiscal years may exceed 100%. Turnover rates in excess of 100% may result in higher transaction costs (which are borne directly by the Portfolio) and a possible increase in short-term capital gains (or losses). See "Dividends, Other Distributions, and Taxes" on page 31 and the SAI. 21 Borrowings - ---------------------------------------------------------------------- Each Portfolio has a fundamental policy that it may not borrow money, except that it may (1) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (2) enter into reverse repurchase agreements for any purpose, so long as the aggregate amount of borrowings and reverse repurchase agreements does not exceed one-third of the Portfolio's total assets (including the amount borrowed) less liabilities (other than borrowings). None of the Portfolios expects to borrow money. As a non-fundamental policy, none of the Portfolios may purchase portfolio securities if its outstanding borrowings, including reverse repurchase agreements, exceed 5% of its total assets. Other Investments - ---------------------------------------------------------------------- For temporary defensive purposes, each Portfolio may invest up to 100% of its total assets in cash and cash equivalents, U.S. Government and Agency Securities, commercial paper and certain other money market instruments, as well as repurchase agreements collateralized by the foregoing. 22 PERFORMANCE INFORMATION The performance of the Funds is commonly measured as TOTAL RETURN. TOTAL RETURN is the change in value of an investment in a fund over a particular period, assuming that all distributions have been reinvested. Thus, total return reflects dividend income, other distributions, and variations in share prices from the beginning to the end of a period. An average annual total return is a hypothetical rate of return that, if achieved annually, would result in the same cumulative total return as was actually achieved for the period. This smooths out variations in performance. Past results do not, of course, guarantee future performance. Share prices may vary, and your shares when redeemed may be worth more or less than your original purchase price. The Funds commenced operations in August 1993, and their first fiscal year ended August 31, 1993. The following table shows the average annual total returns for the period ended August 31, 1995 (the most recent fiscal year-end of the Funds), of a 1-year, 5-year, and 10-year investment in each Fund since its inception and, for periods prior to each Fund's inception, each Sister Fund and its predecessor. The table also shows a comparison with the S&P 500 Index for each Fund (except Neuberger& Berman GENESIS Trust, which is compared with the Russell 2000 Index), and its respective Sister Fund and Sister Fund's predecessor. The S&P 500 Index is the Standard & Poor's 500 Composite Stock Price Index, an unmanaged index generally considered to be representative of overall stock market activity. The Russell 2000 is an unmanaged index of the securities of the 2,000 issuers having the smallest capitalization in the Russell 3000 Index, representing about 7% of the Russell 3000's total market capitalization. Please note that indices do not take into account any fees and expenses of investing in the individual securities they track, and that individuals cannot invest directly in any index. Further information regarding the Funds' performance is presented in their annual report to shareholders, which is available without charge by calling 800-877-9700. 23 AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED AUGUST 31, 1995
NEUBERGER&BERMAN SINCE INCEPTION EQUITY TRUST 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------- FOCUS TRUST +27.44% +19.19% +15.09% +12.05% 10/19/55 GUARDIAN TRUST +24.01% +20.14% +15.66% +13.10% 6/1/50 MANHATTAN TRUST +25.90% +17.11% +15.02% +17.70% 3/1/79+ PARTNERS TRUST +21.52% +16.06% +14.44% +17.70% 1/20/75+ S&P 500 +21.42% +15.13% +15.17% N/A N/A GENESIS TRUST +19.51% +17.35% N/A +12.61% 9/27/88 RUSSELL 2000 +20.83% +19.01% N/A N/A N/A
+THE DATES WHEN N&B MANAGEMENT BECAME INVESTMENT ADVISER TO THE PREDECESSORS OF THE SISTER FUNDS. Prior to November 1991, the investment policies of the predecessor of Neuberger&Berman FOCUS Trust's Sister Fund required that a substantial percentage of its assets be invested in the energy field; accordingly, performance results prior to that time do not necessarily reflect the level of performance that might have been achieved had the Fund's current policies been in effect during that period. Had N&B Management not waived certain fees and reimbursed certain expenses since August 1993, the total returns of the Funds would have been lower. The total returns for periods prior to the Funds' inception, would have been lower had they reflected the higher fees of the Funds as compared to those of the Sister Funds and their predecessors. The Funds commenced operations in August 1993. The following table lets you take a closer look at how each Fund and the respective Sister Fund and its predecessor performed year by year, in terms of an annual per share total return for each calendar year (ending December 31). Please note that the above chart reflects information for periods ended on the Funds' last fiscal year-end (that is, as of August 31, 1995). TOTAL RETURN FOR CALENDAR YEARS ENDED DECEMBER 31
NEUBERGER&BERMAN EQUITY TRUST 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 - ------------------------------------------------------------------------------------------------------- FOCUS TRUST +4.8% +22.4% +10.1% +0.6% +16.5% +29.8% -5.9% +24.7% +21.1% +19.6% +0.9% GUARDIAN TRUST +7.3 +25.0 +11.9 -1.0 +28.0 +21.5 -4.7 +34.3 +19.0 +13.5 +1.5 MANHATTAN TRUST +7.1 +37.1 +16.8 +0.4 +18.3 +29.1 -8.1 +30.9 +17.8 +10.0 -3.4 PARTNERS TRUST +8.0 +29.9 +17.3 +4.3 +15.5 +22.8 -5.1 +22.4 +17.5 +15.5 -1.0 S&P 500 +6.2 +31.6 +18.6 +5.2 +16.5 +31.6 -3.1 +30.3 +7.6 +10.0 +1.4 GENESIS TRUST N/A N/A N/A N/A N/A +17.3 -16.2 +41.6 +15.6 +14.4 -1.7 RUSSELL 2000 N/A N/A N/A N/A N/A +16.3 -19.5 +46.0 +18.4 +18.9 -1.8
TOTAL RETURN INFORMATION. You can obtain current performance information about each Fund by calling N&B Management at 800-877-9700. 24 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS The Funds - ---------------------------------------------------------------------- Each Fund is a separate series of the Trust, a Delaware business trust organized pursuant to a Trust Instrument dated as of May 6, 1993. The Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end management investment company, commonly known as a mutual fund. The Trust has six separate series. The Trust and each Fund described herein commenced operations in August 1993. Another series, Neuberger&Berman NYCDC Socially Responsive Trust, commenced business in March 1994. Each Fund invests all of its net investable assets in its corresponding Portfolio, in each case receiving a beneficial interest in that Portfolio. The trustees of the Trust may establish additional series or classes of shares, without the approval of shareholders. The assets of each series belong only to that series, and the liabilities of each series are borne solely by that series and no other. DESCRIPTION OF SHARES. Each Fund is authorized to issue an unlimited number of shares of beneficial interest (par value $0.001 per share). Shares of each Fund represent equal proportionate interests in the assets of that Fund only and have identical voting, dividend, redemption, liquidation, and other rights. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares. SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual meetings of shareholders of the Funds. The trustees will call special meetings of shareholders of a Fund only if required under the 1940 Act or in their discretion or upon the written request of holders of 10% or more of the outstanding shares of that Fund entitled to vote. CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders of a Fund will not be personally liable for the obligations of any Fund; a shareholder is entitled to the same limitation of personal liability extended to shareholders of corporations. To guard against the risk that Delaware law might not be applied in other states, the Trust Instrument requires that every written obligation of the Trust or a Fund contain a statement that such obligation may be enforced only against the assets of the Trust or the Fund and provides for indemnification out of the Trust or Fund property of any shareholder nevertheless held personally liable for Trust or Fund obligations, respectively. 25 The Portfolios - ---------------------------------------------------------------------- Each Portfolio is a separate series of Managers Trust, a New York common law trust organized as of December 1, 1992. Managers Trust is registered under the 1940 Act as a diversified, open-end management investment company. Managers Trust has six separate Portfolios. The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. FUNDS' INVESTMENTS IN PORTFOLIOS. Each Fund is a "feeder fund" that seeks to achieve its investment objective by investing all of its net investable assets in its corresponding Portfolio, which is a "master fund." The Portfolio, which has the same investment objective, policies, and limitations as the Fund, in turn invests in securities; its corresponding Fund thus acquires an indirect interest in those securities. Historically, N&B Management, which is the administrator of each Fund and the investment manager of each Portfolio, has sponsored, with Neuberger&Berman, traditionally structured funds since 1950. However, it has operated 12 master funds and 20 feeder funds since August 1993 and now operates 21 master funds and 30 feeder funds. This "master/feeder fund" structure is depicted in the "Summary" on page 3. Each Fund's investment in its corresponding Portfolio is in the form of a non-transferable beneficial interest. Members of the general public may not purchase a direct interest in a Portfolio. The five Sister Funds that are series of N&B Equity Funds invest all of their respective net investable assets in the five Portfolios described herein. Four mutual funds that are series of Neuberger&Berman Equity Assets ("N&B Equity Assets") are expected to begin operations in 1996. These series will invest all of their respective net investable assets in four Portfolios of Equity Managers Trust. The shares of each series of N&B Equity Funds (but not of N&B Equity Assets) are available for purchase by members of the general public. Each Portfolio may also permit other investment companies and/or other institutional investors to invest in the Portfolio. All investors will invest in a Portfolio on the same terms and conditions as a Fund and will pay a proportionate share of the Portfolio's expenses. The Trust does not sell its shares directly to members of the general public. Other investors in a Portfolio (including the series of N&B Equity Funds) that might sell shares to members of the general public are not required to sell their shares at the same public offering price as a Fund, could have a different administration fee and expenses than a Fund, and (except N&B Equity Funds) might charge a sales commission. Therefore, Fund shareholders may have different returns than shareholders in another investment company that invests exclusively in the Portfolio. Information regarding any fund that may invest in a Portfolio in the future will be available from N&B Management by calling 800-877-9700. The trustees of the Trust believe that investment in a Portfolio by a series of N&B Equity Funds or N&B Equity Assets or other potential investors in addition to a Fund may enable the Portfolio to realize economies of scale that could reduce its operating 26 expenses, thereby producing higher returns and benefitting all shareholders. However, a Fund's investment in its corresponding Portfolio may be affected by the actions of other large investors in the Portfolio, if any. For example, if a large investor in a Portfolio (other than a Fund) redeemed its interest in the Portfolio, the Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. Each Fund may withdraw its entire investment from its corresponding Portfolio at any time, if the trustees of the Trust determine that it is in the best interests of the Fund and its shareholders to do so. A Fund might withdraw, for example, if there were other investors in a Portfolio with power to, and who did by a vote of all investors (including the Fund), change the investment objective, policies, or limitations of the Portfolio in a manner not acceptable to the trustees of the Trust. A withdrawal could result in a distribution in kind of securities (as opposed to a cash distribution) by the Portfolio. That distribution could result in a less diversified portfolio of investments for the Fund and could affect adversely the liquidity of the Fund's investment portfolio. If the Fund decided to convert those securities to cash, it usually would incur brokerage fees or other transaction costs. If a Fund withdrew its investment from a Portfolio, the trustees would consider what action might be taken, including the investment of all of the Fund's net investable assets in another pooled investment entity having substantially the same investment objective as the Fund or the retention by the Fund of its own investment manager to manage its assets in accordance with its investment objective, policies, and limitations. The inability of the Fund to find a suitable replacement could have a significant impact on shareholders. INVESTOR MEETINGS AND VOTING. Each Portfolio normally will not hold meetings of investors except as required by the 1940 Act. Each investor in a Portfolio will be entitled to vote in proportion to its relative beneficial interest in the Portfolio. On most issues subjected to a vote of investors, a Fund will solicit proxies from its shareholders and will vote its interest in the Portfolio in proportion to the votes cast by the Fund's shareholders. If there are other investors in a Portfolio, there can be no assurance that any issue that receives a majority of the votes cast by Fund shareholders will receive a majority of votes cast by all Portfolio investors; indeed, if other investors hold a majority interest in a Portfolio, they could have voting control of the Portfolio. CERTAIN PROVISIONS. Each investor in a Portfolio, including a Fund, will be liable for all obligations of the Portfolio. However, the risk of an investor in a 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 a Portfolio, investors would be entitled to share pro rata in the net assets of the Portfolio available for distribution to investors. 27 SHAREHOLDER SERVICES How to Buy Shares - ---------------------------------------------------------------------- YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION WHICH PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH N&B MANAGEMENT. N&B Management and the Funds do not recommend, endorse, or receive payments from any Institution. N&B Management compensates Institutions for services they provide under an administrative services agreement. N&B Management does not provide investment advice to any Institution or its clients or make decisions regarding their investments. Each Institution will establish its own procedures for the purchase of Fund shares in its account, including minimum initial and additional investments for shares of each Fund and the acceptable methods of payment for shares. Shares are purchased at the next price calculated on a day the New York Stock Exchange ("NYSE") is open, after a purchase order is received and accepted by an Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern time. Your Institution may be closed on days when the NYSE is open. As a result, the prices for Fund shares may be significantly affected on days when you have no access to your Institution. The Funds will not issue a certificate for your shares. Other Information: / / An Institution must pay for shares it purchases in U.S. dollars. / / Each Fund has the right to suspend the offering of its shares for a period of time. Each Fund also has the right to accept or reject a purchase order in its sole discretion, including certain purchase orders using an exchange of shares. See "Shareholder Services -- Exchanging Shares." How to Sell Shares - ---------------------------------------------------------------------- You can sell (redeem) all or some of your Fund shares only through an account with an Institution. Each Institution will establish its own procedures for the sale of Fund shares. Shares are sold at the next price calculated on a day the NYSE is open, after a sales order is received and accepted by an Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern time. Your Institution may be closed on days when the NYSE is open. As a result, the prices for Fund shares may be significantly affected on days when you have no access to your Institution. Each Fund has reserved the right, if conditions exist which make cash payments undesirable, to honor any request for a redemption by making payments in securities valued in the same way as they would be valued for purposes of computing that Fund's net asset value per share. If payment is made in securities, an Institution may incur 28 brokerage expenses or other transaction costs in converting those securities into cash and will be subject to fluctuation in the market prices of those securities until they are sold. Other Information: / / Redemption proceeds will be paid to Institutions as agreed with each Fund, but in any case within three calendar days (under unusual circumstances a Fund may take longer, as permitted by law). / / Each Fund may suspend redemptions or postpone payments on days when the NYSE is closed (besides weekends and holidays), when trading on the NYSE is restricted, or as permitted by the Securities and Exchange Commission. Exchanging Shares - ---------------------------------------------------------------------- Through an account with an Institution, you may be able to exchange shares of a Fund for shares of another Neuberger&Berman Fund.-SM- Each Institution will establish its own exchange policy and procedures for its accounts. Shares are exchanged at the next price calculated on a day the NYSE is open, after an exchange order is received and accepted by an Institution. / / Shares can be exchanged only between accounts registered in the same name, address, and taxpayer ID number of the Institution. / / An exchange can be made only into a fund whose shares are eligible for sale in the state where the Institution is located. / / An exchange may have tax consequences. / / Each Fund may refuse any exchange orders from any Institution if for any reason they are not deemed to be in the best interests of the Fund and its shareholders. / / Each Fund may impose other restrictions on the exchange privilege, or modify or terminate the privilege, but will try to give each Institution advance notice whenever it can reasonably do so. 29 SHARE INFORMATION Share Prices and Net Asset Value - ---------------------------------------------------------------------- Each Fund's shares are bought or sold at a price that is the Fund's net asset value ("NAV") per share. The NAVs for each Fund and its corresponding Portfolio are calculated by subtracting liabilities from total assets (in the case of a Portfolio, the market value of the securities the Portfolio holds plus cash and other assets; in the case of a Fund, its percentage interest in its corresponding Portfolio, multiplied by the Portfolio's NAV, plus any other assets). Each Fund's per share NAV is calculated by dividing its NAV by the number of Fund shares outstanding and rounding the result to the nearest full cent. Each Fund and its corresponding Portfolio calculate their NAVs as of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open. Each Portfolio values securities (including options) listed on the NYSE, the American Stock Exchange, or other national securities exchanges or quoted on Nasdaq, and other securities for which market quotations are readily available, at the last sale price on the day the securities are being valued. If there is no sale of such a security on that day, that security is valued at the mean between its closing bid and asked prices. The Portfolios value all other securities and assets, including restricted securities, by a method that the trustees of Managers Trust believe accurately reflects fair value. 30 DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES Each Fund distributes substantially all of its share of any net investment income (net of the Fund's expenses), net realized capital gains, and net realized gains from foreign currency transactions earned or realized by its corresponding Portfolio, normally in December. Investors who are considering the purchase of Fund shares in December should take this into account because of the tax consequences of such distributions. In addition, Neuberger&Berman GUARDIAN Trust distributes substantially all of its share of Neuberger&Berman GUARDIAN Portfolio's net investment income, if any, at the end of each calendar quarter. Distribution Options - ---------------------------------------------------------------------- REINVESTMENT IN SHARES. All dividends and other distributions paid on shares of a Fund are automatically reinvested in additional shares of that Fund, unless an Institution elects to receive them in cash. Dividends and other distributions are reinvested at the Fund's per share NAV, usually as of the date the dividend or other distribution is payable. DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in cash, with other distributions being reinvested in additional Fund shares, or to receive all dividends and other distributions in cash. Taxes - ---------------------------------------------------------------------- Each Fund intends to continue to qualify for treatment as a regulated investment company for federal income tax purposes so that it will be relieved of federal income tax on that part of its taxable income and realized gains that it distributes to its shareholders. An investment has certain tax consequences, depending on the type of account in which you invest. IF YOU HAVE AN ACCOUNT UNDER A QUALIFIED RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED. TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and may also be subject to state and local income taxes. Distributions are taxable when they are paid, whether in cash or by reinvestment in additional Fund shares, except that distributions declared in December to shareholders of record on a date in that month and paid in the following January are taxable as if they were paid on December 31 of the year in which the distributions were declared. For federal income tax purposes, dividends and distributions of net short-term capital gain and net gains from certain foreign currency transactions are taxed as ordinary income. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss), when designated as such, are generally taxed as 31 long-term capital gain, no matter how long you have owned your shares. Distributions of net capital gain may include gains from the sale of portfolio securities that appreciated in value before you bought your shares. Every January, each Fund will send each Institution that is a shareholder therein a statement showing the amount of distributions paid in the previous year. TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares, including redemptions in connection with exchanges to other Neuberger&Berman Funds,-SM- are subject to tax. A capital gain (or loss) is the difference between the amount paid for shares (including the value of any dividends and other distributions that were reinvested) and the amount received when shares are sold. When an Institution sells shares, it will receive a confirmation statement showing the number of shares sold and the price. Every January, Institutions will also receive a consolidated transaction statement for the previous year. Each Institution annually will send investors in its accounts statements showing distribution and transaction information for the previous year. The foregoing is only a summary of some of the important tax considerations affecting each Fund and its shareholders. See the SAI for additional tax information. There may be other federal, state, local, or foreign tax considerations applicable to a particular investor. Therefore, investors should consult their tax advisers. 32 MANAGEMENT AND ADMINISTRATION Trustees and Officers - ---------------------------------------------------------------------- The trustees of the Trust and the trustees of Managers Trust, who are currently the same individuals, have oversight responsibility for the operations of each Fund and each Portfolio, respectively. The SAI contains general background information about each trustee and officer of the Trust and of Managers Trust. The trustees and officers of the Trust and of Managers Trust who are officers and/or directors of N&B Management and/or partners of Neuberger&Berman serve without compensation from the Funds or the Portfolios. The trustees of the Trust and of Managers Trust, including a majority of those trustees who are not "interested persons" (as defined in the 1940 Act) of any Fund, have adopted written procedures reasonably appropriate to deal with potential conflicts of interest between the Trust and Managers Trust, including, if necessary, creating a separate board of trustees of Managers Trust. Investment Manager, Administrator, Distributor, and Sub-Adviser - ---------------------------------------------------------------------- N&B Management serves as the investment manager of each Portfolio, as administrator of each Fund, and as distributor of the shares of each Fund. N&B Management and its predecessor firms have specialized in the management of no-load mutual funds since 1950. In addition to serving the five Portfolios, N&B Management currently serves as investment manager of other mutual funds. Neuberger&Berman, which acts as sub-adviser for the Portfolios 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 Portfolios. Neuberger&Berman is a member firm of the NYSE and other principal exchanges and acts as the Portfolios' principal broker in the purchase and sale of their securities. 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. The following is information about the individuals who are primarily responsible for day-to-day management of the Portfolios: Neuberger&Berman FOCUS Portfolio and Neuberger&Berman GUARDIAN Portfolio -- Kent C. Simons and Lawrence Marx III. Mr. Simons and Mr. Marx are Vice Presidents of N&B Management and general partners of Neuberger&Berman. 33 Mr. Simons has had responsibility for Neuberger&Berman FOCUS Portfolio and Neuberger&Berman FOCUS Trust's Sister Fund's predecessor since 1988 and for Neuberger&Berman GUARDIAN Portfolio and Neuberger&Berman GUARDIAN Trust's Sister Fund's predecessor since 1983. Mr. Marx has had those responsibilities since 1988. Neuberger&Berman GENESIS Portfolio -- Judith M. Vale. Ms. Vale, who has been a member of the Small Cap Group of Neuberger&Berman since 1992 and a Vice President of N&B Management since November 1994, has been primarily responsible for the day-to-day management of the Neuberger&Berman GENESIS Portfolio since February 1994. Ms. Vale was a portfolio manager for another investment management group from 1990 to 1992, and was a senior fund analyst at another prominent investment adviser from 1987 to 1990. Neuberger&Berman MANHATTAN Portfolio -- Mark R. Goldstein and Susan Switzer. Mr. Goldstein is a Vice President of N&B Management and a general partner of Neuberger&Berman. Previously he was a securities analyst and portfolio manager with that firm. He has had responsibility for Neuberger&Berman MANHATTAN Portfolio and Neuberger&Berman MANHATTAN Trust's Sister Fund's predecessor since June 1992. Ms. Switzer has been an Assistant Vice President of N&B Management since March 1995 and a portfolio manager of Neuberger&Berman since January 1995. Ms. Switzer was a research analyst and assistant portfolio manager for another money management firm from 1989 to 1994. Neuberger&Berman PARTNERS Portfolio -- Michael M. Kassen and Robert I. Gendelman. Mr. Kassen is a Vice President of N&B Management and a general partner of Neuberger&Berman. He has had responsibility for Neuberger&Berman PARTNERS Portfolio and Neuberger&Berman PARTNERS Trust's Sister Fund's predecessor since June 1990. Mr. Kassen was an employee of N&B Management from 1990 to December 1992. Mr. Gendelman is a senior portfolio manager for Neuberger& Berman and an Assistant Vice President of N&B Management. Mr. Gendelman has had responsibility for Neuberger&Berman PARTNERS Portfolio since October 1994. He was a portfolio manager for another fund manager from 1992 to 1993 and was managing partner of an investment partnership from 1988 to 1992. Neuberger&Berman acts as the principal broker for the Portfolios in the purchase and sale of portfolio securities and in the sale of covered call options, and for those services receives brokerage commissions. In effecting securities transactions, each Portfolio seeks to obtain the best price and execution of orders. For more information, see the SAI. 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.-SM- 34 To mitigate the possibility that a Portfolio will be adversely affected by employees' personal trading, the Trust, Managers Trust, N&B Management, and Neuberger& Berman have adopted policies that restrict securities trading in the personal accounts of portfolio managers and others who normally come into possession of information on portfolio transactions. Expenses - ---------------------------------------------------------------------- N&B Management provides investment management services to each Portfolio that include, among other things, making and implementing investment decisions and providing facilities and personnel necessary to operate the Portfolio. N&B Management provides administrative services to each Fund that include furnishing similar facilities and personnel for the Fund and performing accounting, recordkeeping, and other services for Institutions and their accounts. For such administrative services, each Fund pays N&B Management a fee at the annual rate of 0.40% of that Fund's average daily net assets. With a Fund's consent, N&B Management may subcontract to third parties, including Institutions, some of its responsibilities to that Fund under the administration services agreement and may compensate third parties that provide such services. For investment management services, each Portfolio (except Neuberger& Berman GENESIS Portfolio) pays N&B Management a fee at the annual rate of 0.55% of the first $250 million of that Portfolio's average daily net assets, 0.525% of the next $250 million, 0.50% of the next $250 million, 0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of average daily net assets in excess of $1.5 billion. Neuberger&Berman GENESIS Portfolio pays N&B Management a fee for investment management services at the annual rate of 0.85% of the first $250 million of that Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75% of the next $250 million, 0.70% of the next $250 million, and 0.65% of average daily net assets in excess of $1 billion. During their 1995 fiscal years, each Fund accrued administration fees, and a pro rata portion of the corresponding Portfolio's management fees, as an annualized percentage of average daily net assets, as follows: Neuberger&Berman FOCUS Trust 0.93% Neuberger&Berman GENESIS Trust 1.25% Neuberger&Berman GUARDIAN Trust 0.86% Neuberger&Berman MANHATTAN Trust 0.94% Neuberger&Berman PARTNERS Trust 0.90%
See "Expense Information -- Annual Fund Operating Expenses" for anticipated fees for the current fiscal year. Each Fund bears all expenses of its operations other than those borne by N&B Management as administrator of the Fund and as distributor of its shares. Each 35 Portfolio bears all expenses of its operations other than those borne by N&B Management as investment manager of the Portfolio. These expenses include, but are not limited to, for the Funds and Portfolios, legal and accounting fees and compensation for trustees who are not affiliated with N&B Management; for the Funds, transfer agent fees, and the cost of printing and sending reports and proxy materials to shareholders; and for the Portfolios, custodial fees for securities. During their 1995 fiscal years, each Fund bore Total Operating Expenses as an annualized percentage of its average daily net assets (after taking into consideration N&B Management's expense reimbursement for each Fund and N&B Management's waiver of a portion of the management fee borne indirectly by Neuberger&Berman GENESIS Trust), as follows: Neuberger&Berman FOCUS Trust 0.96% Neuberger&Berman GENESIS Trust 1.42% Neuberger&Berman GUARDIAN Trust 0.90% Neuberger&Berman MANHATTAN Trust 1.06% Neuberger&Berman PARTNERS Trust 0.92%
N&B Management has voluntarily undertaken until December 31, 1996, to reimburse each Fund for its Operating Expenses and its pro rata share of its corresponding Portfolio's Operating Expenses so that each Fund's expense ratio per annum will not exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the Fund's average daily net assets. A Fund's per annum "expense ratio" means the sum of the Fund's Total Operating Expenses and its pro rata share of its corresponding Portfolio's Total Operating Expenses, divided by that Fund's average daily net assets for the year. The expense ratios of the Sister Funds of Neuberger&Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger&Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust and Neuberger&Berman PARTNERS Trust are anticipated to be, respectively, 0.92%, 1.33%, 0.84%, 1.02%, and 0.87% per annum of such Sister Fund's average net assets. Based on those expectations, the expense ratios for Neuberger&Berman FOCUS Trust, Neuberger&Berman GENESIS Trust, Neuberger&Berman GUARDIAN Trust, Neuberger&Berman MANHATTAN Trust and Neuberger&Berman PARTNERS Trust are not anticipated to exceed 1.02%, 1.43%, 0.94%, 1.12% and 0.97% per annum, respectively. The above ratios reflect N&B Management's voluntary agreement to waive a portion of the management fee borne directly by Neuberger&Berman GENESIS Portfolio and indirectly by Neuberger& Berman GENESIS Trust to reduce that fee by 0.10% per annum of the average daily net assets of Neuberger&Berman GENESIS Portfolio. The effect of reimbursement or a waiver by N&B Management is to reduce a Fund's expenses and thereby increase its total return. 36 Transfer Agent - ---------------------------------------------------------------------- The Funds' transfer agent is State Street Bank and Trust Company ("State Street"). State Street administers purchases, redemptions, and transfers of Fund shares with respect to Institutions and the payment of dividends and other distributions to Institutions. The main office of State Street is located at 225 Franklin Street, Boston, MA 02110. All correspondence should be addressed to the Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158. 37 DESCRIPTION OF INVESTMENTS In addition to common stocks and other securities referred to in "Investment Programs" herein, each Portfolio may make the following investments, among others, individually or in combination, although it may not necessarily buy all of the types of securities or use all of the investment techniques that are described. For additional information on the following investments and on other types of investments which the Portfolios may make, see the SAI. ILLIQUID SECURITIES. Each Portfolio may invest up to 10% of its net assets (5% in the case of Neuberger&Berman GENESIS Portfolio) 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, a Portfolio may experience difficulty in valuing or disposing of illiquid securities. N&B Management determines the liquidity of the Portfolios' securities, under supervision of the trustees of Managers Trust. Securities that are freely tradeable 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 SECURITIES AND RULE 144A SECURITIES. Each Portfolio may invest in restricted securities and Rule 144A securities. Restricted securities cannot be sold to the public without registration under the Securities Act of 1933 ("1933 Act"). Unless registered for sale, these securities can be sold only in privately negotiated transactions or pursuant to an exemption from registration. 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 of Managers Trust, may determine that some restricted securities are liquid. FOREIGN SECURITIES. Each Portfolio may invest up to 10% of the value of its total assets in foreign securities. Foreign securities are those of issuers organized and doing business principally outside the U.S., including non-U.S. governments, their agencies, and instrumentalities. The 10% limitation does not apply to foreign securities that are denominated in U.S. dollars, including American Depositary Receipts ("ADRs"). Foreign securities (including those denominated in U.S. dollars and ADRs) are affected by political or economic developments in foreign countries. Foreign companies may not be subject to accounting standards or governmental supervision comparable to U.S. companies, and there may be less public information about their operations. In addition, foreign markets may be less liquid or more volatile than U.S. markets and may offer less protection to investors. Investments in foreign securities that are not denominated in U.S. dollars (including those made through ADRs) may 38 be subject to special risks, such as governmental regulation of foreign exchange transactions and changes in rates of exchange with the U.S. dollar, irrespective of the performance of the underlying investment. COVERED CALL OPTIONS. Each Portfolio may try to reduce the risk of securities price changes (hedge) or generate income by writing (selling) covered call options against securities held in its portfolio having a market value not exceeding 10% of its net assets and may purchase call options in related closing transactions. The purchaser of a call option acquires the right to buy a portfolio security at a fixed price during a specified period. The maximum price the seller may realize on the security during the option period is the fixed price; the seller continues to bear the risk of a decline in the security's price, although this risk is reduced by the premium received for the option. The primary risks in using call options are (1) possible lack of a liquid secondary market for options and the resulting inability to close out options when desired; (2) the fact that the skills needed to use options are different from those needed to select a Portfolio's securities; (3) the fact that, although use of these instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain, by offsetting favorable price movements in underlying investments; and (4) the possible inability of a Portfolio to sell a security at a time that would otherwise be favorable for it to do so, or the possible need for a Portfolio to sell a security at a disadvantageous time, due to its need to maintain "cover" in connection with its use of these instruments. Options are considered "derivatives." SHORT SALES AGAINST-THE-BOX. Each Portfolio may make short sales against-the-box, in which it sells securities short only if it owns or has the right to obtain without payment of additional consideration an equal amount of the same type of securities sold. Short selling against-the-box may defer recognition of gains or losses to a later tax period. REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, a Portfolio buys a security from a Federal Reserve member bank or a securities dealer and simultaneously agrees to sell it back at a higher price, at a specified date, usually less than a week later. The underlying securities must fall within the Portfolio's investment policies and limitations. Each 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. OTHER INVESTMENTS. Although each Portfolio invests primarily in common stocks, when market conditions warrant it may invest in preferred stocks, securities convertible into or exchangeable for common stocks, U.S. Government and Agency Securities, investment grade debt securities, or money market instruments, or may retain assets in cash or cash equivalents. 39 U.S. Government securities are obligations of the U.S. Treasury backed by the full faith and credit of the United States. U.S. Government Agency Securities are issued or guaranteed by U.S. Government agencies or instrumentalities; by other U.S. Government-sponsored enterprises, such as the Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, and Tennessee Valley Authority; and by various federally chartered or sponsored banks. Some U.S. Government Agency Securities are supported by the full faith and credit of the United States, while others may be supported by the issuer's ability to borrow from the U.S. Treasury, subject to the Treasury's discretion in certain cases, or only by the credit of the issuer. U.S. Government Agency Securities include U.S. Government mortgage-backed securities. The market prices of U.S. Government securities are not guaranteed by the Government and generally fluctuate with changing interest rates. "Investment grade" debt securities are those receiving one of the four highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's ("S&P"), or another nationally recognized statistical rating organization ("NRSRO") or, if unrated by any NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable Unrated Securities") under guidelines established by the trustees of Managers Trust. The value of fixed income securities in which a Portfolio may invest is likely to decline in times of rising interest rates. Conversely, when rates fall, the value of a Portfolio's fixed income investments is likely to rise. Neuberger&Berman PARTNERS Portfolio may invest up to 15% of its net assets in debt securities rated below investment grade or Comparable Unrated Securities. Such securities, as well as those rated by Moody's in its fourth highest category (Baa) or Comparable Unrated Securities, may be considered 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. Neuberger&Berman PARTNERS Portfolio will invest in such securities only when N&B Management 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 the Appendix to the SAI. 40 USE OF JOINT PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION Each Fund and its corresponding Portfolio acknowledges that it is solely responsible for all information or lack of information about that Fund and Portfolio in this Prospectus or in the SAI, and no other Fund or Portfolio is responsible therefor. The trustees of the Trust and of Managers Trust have considered this factor in approving each Fund's use of a single combined Prospectus and combined SAI. 41 OTHER INFORMATION DIRECTORY INVESTMENT MANAGER, ADMINISTRATOR, AND DISTRIBUTOR Neuberger&Berman Management Incorporated 605 Third Avenue 2nd Floor New York, NY 10158-0180 SUB-ADVISER Neuberger&Berman, L.P. 605 Third Avenue New York, NY 10158-3698 CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 ADDRESS CORRESPONDENCE TO: Neuberger&Berman Funds Institutional Services 605 Third Avenue 2nd Floor New York, NY 10158-0180 800-877-9700 LEGAL COUNSEL Kirkpatrick & Lockhart LLP 1800 M Street, NW Washington, DC 20036-5891 FUNDS ELIGIBLE FOR EXCHANGE EQUITY TRUST Neuberger&Berman Focus Trust Neuberger&Berman Genesis Trust Neuberger&Berman Guardian Trust Neuberger&Berman Manhattan Trust Neuberger&Berman Partners Trust EQUITY ASSETS Neuberger&Berman Socially Responsive Trust INCOME TRUST Neuberger&Berman Ultra Short Bond Trust Neuberger&Berman Limited Maturity Bond Trust Neuberger&Berman Government Income Trust Neuberger&Berman, Neuberger&Berman Management Inc., and the above named Funds are service marks of Neuberger&Berman Management Inc. - -C- 1995 Neuberger&Berman Management Inc. 42 NEUBERGER&BERMAN MANAGEMENT INC. 605 THIRD AVENUE 2ND FLOOR NEW YORK, NY 10158-0180 SHAREHOLDER SERVICES 800.877.9700 THIS WRAPPER IS NOT PART OF THE PROSPECTUS. PRINTED ON RECYCLED PAPER [LOGO] WITH SOY BASED INKS NBEP0001295 ________________________________________________________________________ NEUBERGER & BERMAN EQUITY TRUST AND PORTFOLIOS STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 15, 1995 Neuberger & Berman Neuberger & Berman Manhattan Fund Genesis Fund (and Neuberger & Berman (and Neuberger & Berman Manhattan Portfolio) Genesis Portfolio) Neuberger & Berman Neuberger & Berman Focus Fund Guardian Fund (and Neuberger & Berman (and Neuberger & Berman Focus Portfolio) Guardian Portfolio) Neuberger & Berman Partners Trust (and Neuberger & Berman Partners Portfolio) No-Load Mutual Funds 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 Toll-Free 800-877-9700 ________________________________________________________________________ Neuberger & Berman MANHATTAN Trust, Neuberger & Berman GENESIS Trust, Neuberger & Berman FOCUS Trust, Neuberger & Berman GUARDIAN Trust, and Neuberger & Berman PARTNERS Trust (each a "Fund") are no-load mutual funds that offer shares pursuant to a Prospectus dated December 15, 1995. The above-named Funds invest all of their net investable assets in Neuberger & Berman MANHATTAN Portfolio, Neuberger & Berman GENESIS Port- folio, Neuberger & Berman FOCUS Portfolio, Neuberger & Berman GUARDIAN Portfolio, and Neuberger & Berman PARTNERS Portfolio (each a "Portfolio"), respectively. AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A BROKER-DEALER, PENSION PLAN ADMINISTRATOR, OR OTHER INSTITUTION (EACH AN "INSTITUTION") THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"). The Funds' Prospectus provides basic information that an investor should know before investing. A copy of the Prospectus may be obtained, without charge, from Neuberger & Berman Management Incorporated, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158- 0180, or by calling 800-877-9700. This Statement of Additional Information ("SAI") is not a prospectus and should be read in conjunction with the Prospectus. No person has been authorized to give any information or to make any representations not contained in the Prospectus or in this SAI in connection with the offering made by the Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by a Fund or its distributor. The Prospectus and this SAI do not constitute an offering by a Fund or its distributor in any jurisdiction in which such offering may not lawfully be made. TABLE OF CONTENTS Page INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Investment Policies and Limitations . . . . . . . . . . . . . 1 Mark R. Goldstein, Portfolio Manager of Neuberger & Berman MANHATTAN Portfolio . . . . . . . . . . . . . . . . . . 6 Judith M. Vale, Portfolio Manager of Neuberger & Berman GENESIS Portfolio . . . . . . . . . . . . . . . . . . . 6 Kent C. Simons and Lawrence Marx III, Portfolio Managers of Neuberger & Berman FOCUS and Neuberger & Berman GUARDIAN Portfolios . . . . . . . . . . . . . . . . . . 7 Michael M. Kassen and Robert I. Gendelman, Portfolio Managers of Neuberger & Berman PARTNERS Portfolio . . . . . . . . 8 Additional Investment Information . . . . . . . . . . . . . . 9 Neuberger & Berman FOCUS Portfolio - Description of Economic Sectors. . . . . . . . . . . . . . . . . . . . . . . . . 20 PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 23 Total Return Computations . . . . . . . . . . . . . . . . . . 23 Comparative Information . . . . . . . . . . . . . . . . . . . 25 Other Performance Information . . . . . . . . . . . . . . . . 26 CERTAIN RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . 27 TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 27 INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES . . . . . . . . . . . . 34 Investment Manager and Administrator . . . . . . . . . . . . . 34 Sub-Adviser . . . . . . . . . . . . . . . . . . . . . . . . . 37 Investment Companies Managed . . . . . . . . . . . . . . . . . 38 Management and Control of N&B Management . . . . . . . . . . . 41 DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 42 ADDITIONAL EXCHANGE INFORMATION . . . . . . . . . . . . . . . . . . . . . 43 ADDITIONAL REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . 44 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 45 ADDITIONAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 46 Taxation of the Funds . . . . . . . . . . . . . . . . . . . . 46 Taxation of the Portfolios . . . . . . . . . . . . . . . . . . 47 Taxation of the Funds' Shareholders . . . . . . . . . . . . . 50 PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . 57 REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 57 - i - Page ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . . . . 57 INDEPENDENT AUDITORS/ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . 58 LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . 58 REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 62 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER . . . . . . . 64 Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . 67 Appendix C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER . . 68 - ii - INVESTMENT INFORMATION Each Fund is a separate series of Neuberger & Berman Equity Trust ("Trust"), a Delaware business trust that is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company. Each Fund seeks its investment objective by investing all of its net investable assets in a Portfolio of Equity Managers Trust ("Managers Trust") that has an investment objective identical to, and a name similar to, that of the Fund. Each Portfolio, in turn, invests in accordance with an investment objective, policies, and limitations identical to those of its corresponding Fund. (The Trust and Managers Trust, which is an open-end management investment company managed by N&B Management, are together referred to below as the "Trusts.") Prior to January 1, 1995, the names of Neuberger & Berman FOCUS Trust and Neuberger & Berman FOCUS Portfolio were Neuberger & Berman Selected Sectors Trust and Neuberger & Berman Selected Sectors Portfolio, respectively. The following information supplements the discussion in the Prospectus of the investment objective, policies, and limitations of each Fund and Portfolio. The investment objective and, unless otherwise specified, the investment policies and limitations of each Fund and Portfolio are not fundamental. Although any investment policy or limitation that is not fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust ("Portfolio Trustees") without shareholder approval, each Fund intends to notify its shareholders before changing its investment objective or implementing any material change in any non-fundamental policy or limitation. The fundamental investment policies and limitations of a Fund or a Portfolio may not be changed without the approval of the lesser of (1) 67% of the total units of beneficial interest ("shares") of the Fund or Portfolio represented at a meeting at which more than 50% of the outstanding Fund or Portfolio shares are represented or (2) a majority of the outstanding shares of the Fund or Portfolio. This vote is required by the Investment Company Act of 1940 ("1940 Act") and is referred to in this SAI as a "1940 Act majority vote." Whenever a Fund is called upon to vote on a change in a fundamental investment policy or limitation of its corresponding Portfolio, the Fund casts its votes thereon in proportion to the votes of its shareholders at a meeting thereof called for that purpose. INVESTMENT POLICIES AND LIMITATIONS Each Fund has the following fundamental investment policy, to enable it to invest in its corresponding Portfolio: Notwithstanding any other investment policy of the Fund, the Fund may invest all of its investable assets (cash, securities, and receivables relating to securities) in an open-end management investment company having substantially the same investment objective, policies, and limitations as the Fund. All other fundamental investment policies and limitations and the non-fundamental investment policies and limitations of each Fund and its corresponding Portfolio are identical. Therefore, although the following discusses the investment policies and limitations of the Portfolios, it applies equally to their corresponding Funds. Except for the limitation on borrowing and the limitation on ownership of portfolio securities by officers and trustees, any investment policy or limitation that involves a maximum percentage of securities or assets will not be considered to be violated unless the percentage limitation is exceeded immediately after, and because of, a transaction by a Portfolio. The Portfolios' fundamental investment policies and limitations are as follows: 1. Borrowing. No Portfolio may borrow money, except that a Portfolio may (i) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (ii) enter into reverse repurchase agreements for any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If at any time borrowings exceed 33-1/3% of the value of a Portfolio's total assets, that Portfolio will reduce its borrowings within three days (excluding Sundays and holidays) to the extent necessary to comply with the 33-1/3% limitation. 2. Commodities. No Portfolio may purchase physical commodities or contracts thereon, unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit a Portfolio from purchasing futures contracts or options (including options on futures contracts, but excluding options or futures contracts on physical commodities) or from investing in securities of any kind. 3. Diversification. No Portfolio may, with respect to 75% of the value of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities) if, as a result, (i) more than 5% of the value of the Portfolio's total assets would be invested in the securities of that issuer or (ii) the Portfolio would hold more than 10% of the outstanding voting securities of that issuer. 4. Industry Concentration. No Portfolio may purchase any security if, as a result, 25% or more of its total assets (taken at current value) would be invested in the securities of issuers having their principal business activities in the same industry. This limitation does not apply to securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 5. Lending. No Portfolio may lend any security or make any other loan if, as a result, more than 33-1/3% of its total assets (taken at current value) would be lent to other parties, except, in - 2 - 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. No Portfolio may purchase real estate unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit a Portfolio from purchasing securities issued by entities or investment vehicles that own or deal in real estate or interests therein or instruments secured by real estate or interests therein. 7. Senior Securities. No Portfolio may issue senior securities, except as permitted under the 1940 Act. 8. Underwriting. No Portfolio may underwrite securities of other issuers, except to the extent that a Portfolio, in disposing of portfolio securities, may be deemed to be an underwriter within the meaning of the Securities Act of 1933 ("1933 Act"). The following non-fundamental investment policies and limitations apply to all Portfolios: 1. Borrowing. No Portfolio may purchase securities if outstanding borrowings, including any reverse repurchase agreements, exceed 5% of its total assets. 2. Lending. Except for the purchase of debt securities and engaging in repurchase agreements, no Portfolio may make any loans other than securities loans. 3. Investments in Other Investment Companies. No Portfolio may 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. No Portfolio may purchase securities on margin from brokers or other lenders, except that a 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. No Portfolio may sell securities short unless it owns, or has the right to obtain without payment of additional consideration, securities equivalent in kind and amount to the securities sold. Transactions in forward contracts, futures contracts and options shall not constitute selling securities short. - 3 - 6. Ownership of Portfolio Securities by Officers and Trustees. No Portfolio may purchase or retain the securities of any issuer if, to the knowledge of N&B Management, those officers and trustees of Managers Trust and officers and directors of N&B Management who each owns individually more than 1/2 of 1% of the outstanding securities of such issuer, together own more than 5% of such securities. 7. Unseasoned Issuers. No Portfolio may 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. Puts, Calls, Straddles, or Spreads. No Portfolio may invest in puts, calls, straddles, spreads, or any combination thereof, except that each Portfolio may (i) write (sell) covered call options against portfolio securities having a market value not exceeding 10% of its net assets and (ii) purchase call options in related closing transac- tions. The Portfolios do not construe the foregoing limitation to pre- clude them from purchasing or writing options on futures contracts or from purchasing securities with rights to put the securities to the issuer or a guarantor. 9. Illiquid Securities. No Portfolio may purchase any security if, as a result, more than 10% (5% in the case of Neuberger & Berman GENESIS Portfolio) 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. 10. Foreign Securities. No Portfolio may invest more than 10% of the value of its total assets in securities of foreign issuers, provided that this limitation shall not apply to foreign securities denominated in U.S. dollars, including American Depositary Receipts ("ADRs"). 11. Oil and Gas Programs. No Portfolio may invest in participations or other direct interests in oil, gas, or other mineral leases or exploration or development programs, but each Portfolio may purchase securities of companies that own interests in any of the foregoing. 12. Real Estate. No Portfolio may purchase or sell real property (including interests in real estate limited partnerships, but excluding readily marketable interests in real estate investment trusts and readily marketable securities of companies that invest in real estate); provided that no Portfolio may purchase any security if, as a result, more than 10% of its total assets would be invested in securities of real estate investment trusts. - 4 - In addition to the foregoing non-fundamental investment policies and limitations, which apply to each Portfolio, the following non-fundamental investment policies and limitations apply to the indicated Portfolios: 13. Investments in Any One Issuer (Neuberger & Berman GENESIS, Neuberger & Berman FOCUS, and Neuberger & Berman GUARDIAN Portfolios). None of these Portfolios may purchase the securities of any one issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities) if, as a result, more than 5% of the Portfolio's total assets would be invested in the securities of that issuer. 14. Warrants (Neuberger & Berman GENESIS, Neuberger & Berman FOCUS, and Neuberger & Berman GUARDIAN Portfolios). None of these Portfolios may invest more than 5% of its net assets in warrants, including warrants that are not listed on the New York Stock Exchange ("NYSE") or American Stock Exchange ("AmEx"), or more than 2% of its net assets in such unlisted warrants. For purposes of this limitation, warrants are valued at the lower of cost or market value, and warrants acquired by a Portfolio in units or attached to securities may be deemed to be without value. 15. Pledging (Neuberger & Berman GENESIS and Neuberger & Berman GUARDIAN Portfolios). Neither of these Portfolios may pledge or hypothecate any of its assets, except that (i) for Neuberger & Berman GENESIS Portfolio, this limitation does not apply to the deposit of portfolio securities as collateral in connection with short sales against- the-box, and the Portfolio may pledge or hypothecate up to 15% of its total assets to collateralize a borrowing permitted under fundamental policy 1 above or a letter of credit issued for a purpose set forth in that policy and (ii) each Portfolio may pledge or hypothecate up to 5% of its total assets in connection with its entry into any agreement or arrangement pursuant to which a bank furnishes a letter of credit to collateralize a capital commitment made by the Portfolio to a mutual insurance company of which the Portfolio is a member. 16. Sector Concentration (Neuberger & Berman FOCUS Portfolio). This Portfolio may not invest more than 50% of its total assets in any one economic sector. Each Portfolio, as an operating policy, does not intend to invest in futures contracts and options thereon during the coming year. MARK R. GOLDSTEIN, PORTFOLIO MANAGER OF NEUBERGER & BERMAN MANHATTAN PORTFOLIO Neuberger & Berman MANHATTAN Portfolio's objective is capital appreciation, without regard to income. "The Portfolio differs from the other Portfolios in its willingness to invest in stocks with - 5 - price/earnings ratios or price-to-cash-flow ratios that are reasonable relative to a company's growth prospects and that of the general market," says Mark Goldstein, its portfolio manager. Mr. Goldstein has consistently followed this approach as a portfolio manager at N&B Management. He looks for stocks of financially sound companies with a special market capability, a competitive advantage or a product that makes them particularly attractive over the long term, but likes to purchase them at a reasonable price relative to their growth rates. Mr. Goldstein calls this approach "GARP" -- growth at a reasonable price. "An investor shouldn't try to beat the market by trading funds like stocks. The hardest thing to do -- but the best thing to do -- is to put in some money when the market is down and keep it there. That's how one really builds wealth over the long term -- a mutual fund is a great long-term investment." "We view value both on a relative and an absolute basis, so we may buy stocks with somewhat above-market historical growth rates," Mr. Goldstein explains. "We also tend to stay more fully invested when we think the market is attractive for quality growth companies. But we will get out of stocks and into cash when we think there are no reasonable values available." JUDITH M. VALE, PORTFOLIO MANAGER OF NEUBERGER & BERMAN GENESIS PORTFOLIO The predecessor of Neuberger & Berman GENESIS Fund (which, like Neuberger & Berman GENESIS Trust, invests all its net investable assets in Neuberger & Berman GENESIS Portfolio) was established in 1988. A long-term growth fund dedicated to small capitalization stocks (companies with total market value of outstanding capital stock of less than $750 million), Neuberger & Berman GENESIS Portfolio is devoted to the same value principles as the other equity funds managed by N&B Management. "Neuberger & Berman GENESIS Portfolio buys stocks that we believe are currently undervalued, unlike small capitalization stock funds offered by many other firms, which look for companies whose earnings reflect future developments," says its portfolio manager Judith Vale. "Many people think that small capitalization stock funds are predominantly invested in high-risk, high-tech companies. Not Neuberger & Berman GENESIS Portfolio. We look for the same fundamentals in small capitalization stocks as our other funds look for in stocks of larger companies. We stick to the areas we understand. I'm looking for the most persistent earnings growth at the lowest multiple." Ms. Vale looks for well-established companies with entrepreneurial management and sound finances. She also looks for catalysts to exposing value, such as management changes and new product lines. Often, these are firms that have suffered temporary setbacks or undergone a restructuring. Why a small capitalization stock fund? Research has demonstrated that, over the last 30 years, smaller capitalization stocks - 6 - as a group have outperformed larger capitalization stocks two-thirds of the time.1/ Ms. Vale points out, "This Portfolio offers the ability to share in the growth potential of small capitalization stocks." KENT C. SIMONS AND LAWRENCE MARX III, PORTFOLIO MANAGERS OF NEUBERGER & BERMAN FOCUS AND NEUBERGER & BERMAN GUARDIAN PORTFOLIOS These Portfolios are managed by two veterans of N&B Manage- ment who have consistently followed their value-oriented philosophy over many years: Kent Simons and Larry Marx. Neuberger & Berman FOCUS Portfolio's investment objective is long-term capital appreciation. Like the other Portfolios that use a value-oriented investment approach, it seeks to buy undervalued securities that offer opportunities for growth, but then focuses its assets in those sectors where undervalued stocks are clustered. "We begin by looking for stocks that are selling for less than we think they're worth, a 'bottom-up approach'" says Mr. Simons. "More often than not, such stocks are in a few economic sectors that are out of favor and are undervalued as a group. I think 90% of cheap stocks deserve to be cheap. My job is to find the 10% that don't." "We don't pick sectors for Neuberger & Berman FOCUS Portfolio based on our perception of how the economy is going to do. Nor do we engage in making economic or currency predictions. We look for stocks with either low relative or low absolute valuations," explains Mr. Marx. "Often, these stocks will be found in a particular sector, but we didn't start out being bullish on that sector. It's just where we happened to find the values. We find that if one company comes under a cloud, it tends to happen to its whole industry. If an investment manager rotated the sectors in a portfolio by buying sectors when they are undervalued and selling them when they become fully valued, the manager would be able to achieve above-average performance." Neuberger & Berman GUARDIAN Portfolio subscribes to the same stock-picking philosophy followed since 1950, when Roy R. Neuberger founded the predecessor of Neuberger & Berman GUARDIAN Fund, which, like Neuberger & Berman GUARDIAN Trust, invests all its net investable assets in Neuberger & Berman GUARDIAN Portfolio. It's no great trick for a mutual fund to make money when the market is rising. The tide that lifts stock values will carry most funds along. The true test of management is its ability to make money even when the market is flat or declining. By that measure, the Fund, Neuberger & Berman GUARDIAN Fund and its predecessor have served shareholders well and 1/ Source: Ibbotson and Sinquefield. - 7 - have paid a dividend every quarter and a capital gain distribution every year since 1950. Of course, there can be no assurance that this trend will continue. Both Mr. Simons and Mr. Marx place a high premium on being knowledgeable about the companies whose stocks they buy for Neuberger & Berman GUARDIAN Portfolio. That knowledge is important, because sometimes it takes courage to buy stocks that the rest of the market has forsaken. Says Mr. Marx, "We're usually early in and early out. We'd rather buy an undervalued stock because we expect it to become fairly valued than buy one fairly valued and hope it becomes overvalued. We like a stock 'under a rock' or with a cloud over it; you are not going to get great companies at great valuations when the market perception is great." "People who switch around a lot are not going to benefit from our approach. They're following the market -- we're looking at fundamentals." MICHAEL M. KASSEN AND ROBERT I. GENDELMAN, PORTFOLIO MANAGERS OF NEUBERGER & BERMAN PARTNERS PORTFOLIO "Neuberger & Berman PARTNERS Portfolio's objective is capital growth," say its portfolio managers Michael Kassen and Robert Gendelman. "We want to make money in good markets and not give up those gains during rough times." "Our investors seek consistent performance and have a moderate risk tolerance. They do know, however, that stock investments can provide the long-term upside potential essential to meeting their long-term investment goals, particularly a comfortable retirement and planning for a college education." "We look for stocks that are undervalued in the marketplace either in relation to strong current fundamentals, such as low price-to- earnings ratios, consistent cash flow, and support from asset values, or in relation to the growth of their future earnings, as projected by N&B Management. If the market goes down, those stocks we elect to hold, historically, go down less." The co-portfolio managers monitor stocks of medium- to large- sized companies that often are not closely scrutinized by other investors. The managers research these companies in order to determine if they will produce a new product, become an acquisition target, or undergo a financial restructuring. What else catches Mr. Kassen's and Mr. Gendelman's eyes? "We like managements that own their own stock. These companies usually seek to build shareholder wealth by buying back shares or making acquisitions that have a swift and positive impact on the bottom line." - 8 - To increase the upside potential, the managers zero in on companies that dominate their industries or their specialized niches. Their reasoning? "Market leaders tend to earn higher levels of profits." Neuberger & Berman PARTNERS Portfolio invests in a wide array of stocks, and no single stock makes up more than a small fraction of the Portfolio's total assets. Of course, the Portfolio's holdings are subject to change. Additional Investment Information Some or all of the Portfolios, as indicated below, may make the following investments, among others, although they may not buy all of the types of securities or use all of the investment techniques that are described. Repurchase Agreements (All Portfolios). Repurchase agreements are agreements under which a Portfolio purchases securities from a bank that is a member of the Federal Reserve System or from a securities dealer that agrees to repurchase the securities from the Portfolio at a higher price on a designated future date. Repurchase agreements generally are for a short period of time, usually less than a week. No Portfolio may enter into a repurchase agreement with a maturity of more than seven days if, as a result, more than 10% (5% in the case of Neuberger & Berman GENESIS Portfolio) of the value of its net assets would then be invested in such repurchase agreements and other illiquid securities. A 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. Securities Loans (All Portfolios). In order to realize income, each Portfolio may lend portfolio securities with a value not exceeding 33-1/3% 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 satisfactory by the Portfolio Trustees. The collateral, which must be marked to market daily, must be equal to at least 100% of the market value of the loaned securities, which will also be marked to market daily. N&B Management believes the risk of loss on these transactions is slight because, if a borrower were to default for any reason, the collateral - 9 - should satisfy the obligation. However, as with other extensions of secured credit, loans of portfolio securities involve some risk of loss of rights in the collateral should the borrower fail financially. Restricted Securities and Rule 144A Securities (All Portfolios). Each 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 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 a 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 a Portfolio's illiquidity. N&B Management, acting under guide- lines established by the Portfolio 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, a 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 each Portfolio's 10% (5% in the case of Neuberger & Berman GENESIS Port- folio) limit on investments in illiquid securities. Restricted securities for which no market exists are priced at fair value as determined in accordance with procedures approved and periodically reviewed by the Portfolio Trustees. Reverse Repurchase Agreements (All Portfolios). In a reverse repurchase agreement, a 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 Portfolios' investment policies and limitations concerning borrowings. While a reverse repurchase agreement is outstanding, a Portfolio will maintain with its custodian in a segregated account cash, U.S. Government or Agency Securities, or other - 10 - 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. Foreign Securities (All Portfolios). Each 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 depo- sit ("CDs"), bankers' acceptances and commercial paper. These investments are subject to each Portfolio's quality standards. While investments in foreign securities are intended to reduce risk by providing further diver- sification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political instability) and the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial standards or the application of standards that are different or less stringent than those applied in the United States. Each Portfolio also may invest in equity, debt, or other income-producing securities that are denominated in or indexed to foreign currencies, including (1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits, and bankers' acceptances issued by foreign banks, (3) obligations of other corporations, and (4) obligations of foreign governments 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 Portfolios endeavor to achieve the most favorable net results on portfolio transactions. Each Portfolio may invest only in securities of issuers in countries whose governments are considered stable by N&B Management. Foreign securities often trade with less frequency and in less volume than domestic securities and therefore may exhibit greater - 11 - 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 a Portfolio are uninvested and no return is earned thereon. The inability of a Portfolio to make intended security purchases due to settlement problems could cause the Portfolio to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result in losses to a 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. In order to limit the risk inherent in investing in foreign currency denominated securities, a Portfolio may not purchase any such security if, after such purchase, more than 10% of its total assets (taken at market value) would be invested in foreign currency denominated securi- ties. Within that limitation, however, no Portfolio is restricted in the amount it may invest in securities denominated in any one foreign currency. Covered Call Options (All Portfolios). Each Portfolio may write or purchase covered call options on securities it owns valued at up to 10% of its net assets. Generally, the purpose of writing and purchasing these options is to reduce the effect of price fluctuations of securities held by the Portfolio on the Portfolio's and its corresponding Fund's net asset values ("NAVs"). Portfolio securities on which call options may be written and purchased by a Portfolio are purchased solely on the basis of investment considerations consistent with the Portfolio's investment objec tive. - 12 - When a 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. Each Portfolio writes only "covered" call options on securities it owns. 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 Portfolios will not do), but is capable of enhancing the Portfolios' total return. When writing a covered call option, a 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. If a call option that a Portfolio has written expires unexercised, the Portfolio will realize a gain in the amount of the premium; however, 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. When a 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. A Portfolio would purchase a call option to offset a previously written call option. The obligation under any option terminates upon expiration of the option or, at an earlier time, when the writer offsets the option by entering into a "closing purchase transaction" to purchase an option of the same series. If an option is purchased by the Portfolio and is never exercised, the Portfolio will lose the entire amount of the premium paid. Options are traded both on national securities exchanges and in the over-the-counter ("OTC") market. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed; the clearing organization in effect guarantees completion of every exchange-traded option. In contrast, OTC options are contracts between the Portfolio and its counter- party with no clearing organization guarantee. Thus, when the Portfolio writes an OTC option, it generally will be able to "close out" the option - 13 - prior to its expiration only by entering into a closing purchase transaction with the dealer to whom the Portfolio originally sold 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 a Portfolio is able to effect a closing purchase transaction in a covered OTC call option it has written, it will not be able to liquidate securities used as cover until the option expires or is exercised or until different cover is substituted. In the event of the counter-party's insolvency, a Portfolio may be unable to liquidate its options position and the associated cover. N&B Management monitors the creditworthiness of dealers with which a Portfolio may engage in OTC options transactions, and limits the Portfolios' counter-parties 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 for OTC options written by a Portfolio will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Portfolio may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC call option written subject to this procedure will be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option. The premium received (or paid) by the Portfolio when it writes (or purchases) an option is the amount at which the option is currently traded on the applicable exchange, less (or plus) a commission. The premium may reflect, among other things, the current market price of the underlying security, the relationship of the exercise price to the market price, the historical price volatility of the underlying security, the length of the option period, the general supply of and demand for credit, and the general interest rate environment. The premium received by the Portfolio for writing an option is recorded as a liability on the Portfolio's statement of assets and liabilities. This liability is adjusted daily to the option's current market value, which is the 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. If any Portfolio desires to sell a security on which it has written a call option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security. There is, of course, no assurance that a Portfolio will be able to effect closing transactions at favorable prices. If a Portfolio cannot enter into such a transaction, it may be required to hold a security that it might otherwise have sold, in which case it would continue to be at market risk on the security. - 14 - A 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 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. A Portfolio pays brokerage commissions in connection with purchasing or writing options, including those used to close out existing positions. These brokerage commissions normally are higher than those applicable to purchases and sales of portfolio securities. Options normally have expiration dates between three and nine months from the date written. 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. Forward Foreign Currency Contracts (All Portfolios). Each Portfolio may enter into contracts for the purchase or sale of a specific currency at a future date at a fixed price ("forward contracts") in amounts not exceeding 5% of its net assets. The Portfolios enter into forward contracts in an attempt to hedge against expected changes in prevailing currency exchange rates. The Portfolios do not engage in transactions in forward contracts for speculation; they view investments in forward contracts as a means of establishing more definitely the effec- tive return on securities denominated in foreign currencies that are held or intended to be acquired by them. Forward contract transactions include forward sales or purchases of foreign currencies for the purpose of pro- tecting the U.S. dollar value of securities held or to be acquired by a Portfolio or protecting the U.S. dollar equivalent of dividends, interest, or other payments on those securities. N&B Management believes that the use of foreign currency hedging techniques, including "cross-hedges," can help protect against declines in the U.S. dollar value of income available for distribution and declines in a Portfolio's NAV resulting from adverse changes in currency exchange rates. For example, the return available from securities denomi- nated in a particular foreign currency would diminish if the value of the U.S. dollar increased against that currency. Such a decline could be partially or completely offset by an increase in value of a cross-hedge involving a forward contract to sell a different foreign currency, where the contract is available on terms more advantageous to a Portfolio than a contract to sell the currency in which the securities being hedged are denominated. N&B Management believes that hedges and cross-hedges can, therefore, provide significant protection of NAV in the event of a general - 15 - rise in the U.S. dollar against foreign currencies. However, a hedge or cross-hedge cannot protect against exchange rate risks perfectly, and, if N&B Management is incorrect in its judgment of future exchange rate relationships, a Portfolio could be in a less advantageous position than if such a hedge had not been established. In addition, because forward contracts are not traded on an exchange, the assets used to cover such contracts may be illiquid. Options on Foreign Currencies (All Portfolios). Each Portfolio may write and purchase covered call and put options on foreign currencies, in amounts not exceeding 5% of its net assets. A Portfolio would engage in such transactions to protect against declines in the U.S. dollar value of portfolio securities or increases in the U.S. dollar cost of securities to be acquired, or to protect the U.S. dollar equivalent of dividends, interest, or other payments on those securities. As with other types of options, however, writing an option on foreign currency constitutes only a partial hedge, up to the amount of the premium received, and a Portfolio could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The risks of currency options are similar to the risks of other options, discussed herein. Certain options on foreign currencies are traded on the OTC market and involve liquidity and credit risks that may not be present in the case of exchange-traded currency options. To the extent a Portfolio writes options on foreign currencies that are traded on an exchange regulated by the Commodity Futures Trading Commission ("CFTC") other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums on those positions (excluding the amount by which options are "in-the-money") may not exceed 5% of the Portfolio's net assets. GENERAL CONSIDERATIONS INVOLVING OPTIONS AND FORWARD CONTRACTS (COLLECTIVELY, "HEDGING INSTRUMENTS") Risks Involved in Using Hedging Instruments. The primary risks in using Hedging Instruments are (1) imperfect correlation or no correlation between changes in market value of the securities held or to be acquired by a Portfolio and changes in market value of Hedging Instruments; (2) possible lack of a liquid secondary market for Hedging Instruments and the resulting inability to close out Hedging Instruments when desired; (3) the fact that the skills needed to use Hedging Instru- ments are different from those needed to select a Portfolio's securities; (4) the fact that, although use of these instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in hedged investments; and (5) the possible inability of a Portfolio to purchase or sell a portfolio security at a time that would otherwise be favorable for it to do so, or the possible need for a Portfolio to sell a portfolio security at a disadvantageous time, due to its need to maintain "cover" or to segregate securities in connection with its use of Hedging Instruments. N&B Management intends to reduce the risk of imperfect correlation by investing only in Hedging Instruments whose behavior is - 16 - expected to resemble that of a Portfolio's underlying securities. N&B Management intends to reduce the risk that a Portfolio will be unable to close out Hedging Instruments by entering into such transactions only if N&B Management believes there will be an active and liquid secondary market. Hedging Instruments used by the Portfolios are generally considered "derivatives." There can be no assurance that a Portfolio's use of Hedging Instruments will be successful. The Portfolios' use of Hedging Instruments may be limited by the requirements of the Internal Revenue Code of 1986, as amended ("Code"), that apply to each Fund for qualification as a regulated investment company ("RIC"). See "Additional Tax Information." Cover for Hedging Instruments. Each Portfolio will comply with SEC guidelines regarding cover for Hedging Instruments and, if the guidelines so require, set aside in a segregated account with its custodian cash, U.S. Government or Agency Securities, or other liquid, high-grade debt securities in the prescribed amount. Securities held in a segregated account cannot be sold while the option or forward strategy covered by those securities is outstanding, unless they are replaced with other suitable assets. As a result, segregation of a large percentage of a Portfolio's assets could impede portfolio management or the Portfolio's ability to meet current obligations. A Portfolio may be unable promptly to dispose of assets which cover, or are segregated with respect to, an illiquid option or forward position; this inability may result in a loss to the Portfolio. Fixed Income Securities (All Portfolios). While the emphasis of the Portfolios' investment programs is on common stocks and other equity securities (including preferred stocks and securities convertible into or exchangeable for common stocks), the Portfolios may also invest in money market instruments, U.S. Government or Agency Securities, and other fixed income securities. Each Portfolio may invest in corporate bonds and debentures receiving one of the four highest ratings from Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally recognized statistical rating organization ("NRSRO"), or, if not rated by any NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable Unrated Securities"). In addition, Neuberger & Berman PARTNERS Portfolio may invest up to 15% of its net assets in corporate debt securities rated below investment grade or Comparable Unrated Securities. The ratings of an NRSRO represent its opinion as to the quality of securities it undertakes to rate. Ratings are not absolute standards of quality; consequently, securities with the same maturity, coupon, and rating may have different yields. The Portfolios rely primarily on ratings assigned by S&P and Moody's, which are described in Appendix A to this SAI. - 17 - 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 Neuberger & Berman PARTNERS Portfolio and its corresponding Fund on such an investment warrants exposure to the additional level of risk. Subsequent to its purchase by a Portfolio, an issue of debt securities may cease to be rated or its rating may be reduced, so that the securities would not be eligible for purchase by that Portfolio. In such a case, N&B Management will engage in an orderly disposition of the downgraded securities to the extent necessary to ensure that the Portfolio's holdings of such securities will not exceed 5% of its net assets. Commercial Paper (All Portfolios). Commercial paper is a short-term debt security issued by a corporation or bank for purposes such as financing current operations. The Portfolios may invest only in commercial paper receiving the highest rating from S&P (A-1) or Moody's (P-1), or deemed by N&B Management to be of equivalent quality. Each Portfolio may invest in commercial paper that cannot be resold to the public without an effective registration statement under the 1933 Act. While restricted commercial paper normally is deemed illiquid, N&B Management may in certain cases determine that such paper is liquid, pursuant to guidelines established by the Portfolio Trustees. Zero Coupon Securities (Neuberger & Berman PARTNERS Portfolio). This Portfolio may invest up to 5% of its net assets in zero coupon securities, which are debt obligations that do not entitle the holder to any periodic payment of interest prior to maturity or that - 18 - specify a future date when the securities begin to pay current interest. Zero coupon securities are issued and traded at a discount from their face amount or par value. This discount varies depending on prevailing interest rates, the time remaining until cash payments begin, the liquidity of the security, and the perceived credit quality of the issuer. The discount on zero coupon securities ("original issue dis- count") is taken into account by the Portfolio prior to the receipt of any actual payments. Because Neuberger & Berman PARTNERS Trust must distribute substantially all of its income (including its pro rata share of the Portfolio's original issue discount) to its shareholders each year for income and excise tax purposes (see "Additional Tax Information -- Taxation of the Funds"), the Portfolio may have to dispose of portfolio securities under disadvantageous circumstances to generate cash, or may be required to borrow, to satisfy the corresponding Fund's distribution requirements. The market prices of zero coupon securities generally are more volatile than the prices of securities that pay interest periodi- cally. Zero coupon securities are likely to respond to changes in interest rates to a greater degree than other types of debt securities having similar maturities and credit quality. Convertible Securities (All Portfolios). The Portfolios may invest in 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 non- convertible debt. Convertible securities are usually subordinated to comparable-tier non-convertible securities but rank senior to common stock in a corporation's capital structure. The value of a convertible security is a function of (1) its yield in comparison to the yields of other securities of comparable maturity and quality that do not have a conversion privilege and (2) its worth if converted into the underlying common stock. Convertible 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 non-convertible 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 a 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 - 19 - of these actions could have an adverse effect on the Portfolio's and the corresponding Fund's ability to achieve their investment objectives. Preferred Stock (All Portfolios). The Portfolios 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. NEUBERGER & BERMAN FOCUS PORTFOLIO - DESCRIPTION OF ECONOMIC SECTORS. Neuberger & Berman FOCUS Portfolio seeks to achieve its investment objective by investing principally in common stocks in the following thirteen multi-industry economic sectors, normally concentrating at least 90% of its investments in not more than six such sectors: (1) AUTOS AND HOUSING SECTOR: Companies engaged in design, production, or sale of automobiles, automobile parts, mobile homes, or related products ("automobile industries") or design, construction, renovation, or refurbishing of residential dwellings. The value of securities of companies in the automobile industries is affected by, among other things, foreign competition, the level of consumer confidence and consumer debt, and installment loan rates. The housing construction industry may be affected by the level of consumer confidence and consumer debt, mortgage rates, tax laws, and the inflation outlook. (2) CONSUMER GOODS AND SERVICES SECTOR: Companies engaged in providing consumer goods or services, including design, processing, production, sale, or storage of packaged, canned, bottled, or frozen foods and beverages and design, production, or sale of home furnishings, appliances, clothing, accessories, cosmetics, or perfumes. Certain of these companies are subject to government regulation affecting the use of various food additives and production methods, which could affect profitability. Also, the success of food- and fashion-related products may be strongly affected by fads, marketing campaigns, health concerns, and other factors affecting supply and demand. (3) DEFENSE AND AEROSPACE SECTOR: Companies engaged in research, manufacture, or sale of products or services related to the defense or aerospace industries, including air transport; data processing or computer-related services; communications systems; military weapons or transportation; general aviation equipment, missiles, space launch vehicles, or spacecraft; machinery for guidance, propulsion, or control of flight vehicles; and airborne or ground-based equipment essential to the test, operation, or maintenance of flight vehicles. Because these companies rely largely on U.S. (and foreign) governmental demand for their - 20 - products and services, their financial conditions are heavily influenced by defense spending policies. (4) ENERGY SECTOR: Companies involved in the production, transmission, or marketing of energy from oil, gas, or coal, as well as nuclear, geothermal, oil shale, or solar sources of energy (but excluding public utility companies). Also included are companies that provide component products or services for those activities. The value of these companies' securities varies based on the price and supply of energy fuels and may be affected by international politics, energy conservation, the success of exploration projects, environmental considerations, and the tax and other regulatory policies of various governments. (5) FINANCIAL SERVICES SECTOR: Companies providing financial services to consumers or industry, including commercial banks and savings and loan associations, consumer and industrial finance companies, securities brokerage companies, leasing companies, and insurance companies. These companies are subject to extensive governmental regulations. Their profitability may fluctuate significantly as a result of volatile interest rates, concerns about particular banks and savings institutions, and general economic conditions. (6) HEALTH CARE SECTOR: Companies engaged in design, manu- facture, or sale of products or services used in connection with the provision of health care, including pharmaceutical companies; firms that design, manufacture, sell, or supply medical, dental, or optical products, hardware, or services; companies involved in biotechnology, medical diagnostic, or biochemical research and development; and companies that operate health care facilities. Many of these companies are subject to government regulation and potential health care reforms, which could affect the price and availability of their products and services. Also, products and services of these companies could quickly become obsolete. (7) HEAVY INDUSTRY SECTOR: Companies engaged in research, development, manufacture, or marketing of products, processes, or services related to the agriculture, chemicals, containers, forest products, non-ferrous metals, steel, or pollution control industries, including synthetic and natural materials (for example, chemicals, plastics, fertilizers, gases, fibers, flavorings, or fragrances), paper, wood products, steel, and cement. Certain of these companies are subject to state and federal regulation, which could require alteration or cessation of production of a product, payment of fines, or cleaning of a disposal site. Furthermore, because some of the materials and processes used by these companies involve hazardous components, there are additional risks associated with their production, handling, and disposal. The risk of product obsolescence also is present. (8) MACHINERY AND EQUIPMENT SECTOR: Companies engaged in the research, development, or manufacture of products, processes, or services relating to electrical equipment, machinery, pollution control, or construction services, including transformers, motors, turbines, hand tools, earth-moving equipment, and waste disposal services. The - 21 - profitability of most of these companies may fluctuate significantly in response to capital spending and general economic conditions. As is the case for the heavy industry sector, there are risks associated with the production, handling, and disposal of materials and processes that involve hazardous components and the risk of product obsolescence. (9) MEDIA AND ENTERTAINMENT SECTOR: Companies engaged in design, production, or distribution of goods or services for the media industries (including television or radio broadcasting or manufacturing, publishing, recordings and musical instruments, motion pictures, and photography) and the entertainment industries (including sports arenas, amusement and theme parks, gaming casinos, sporting goods, camping and recreational equipment, toys and games, travel-related services, hotels and motels, and fast food and other restaurants). Many products produced by companies in this sector -- for example, video and electronic games -- may become obsolete quickly. Additionally, companies engaged in television and radio broadcast are subject to government regulation. (10) RETAILING SECTOR: Companies engaged in retail distribution of home furnishings, food products, clothing, pharmaceuticals, leisure products, or other consumer goods, including department stores, supermarkets, and retail chains specializing in particular items such as shoes, toys, or pharmaceuticals. The value of these companies' securities fluctuates based on consumer spending patterns, which depend on inflation and interest rates, the level of consumer debt, and seasonal shopping habits. The success or failure of a company in this highly competitive sector depends on its ability to predict rapidly changing consumer tastes. (11) TECHNOLOGY SECTOR: Companies that are expected to have or develop products, processes, or services that will provide, or will benefit significantly from, technological advances and improvements or future automation trends, including semiconductors, computers and peripheral equipment, scientific instruments, computer software, telecommunications equipment, and electronic components, instruments, and systems. These companies are sensitive to foreign competition and import tariffs. Also, many of their products may become obsolete quickly. (12) TRANSPORTATION SECTOR: Companies involved in providing transportation of people and products, including airlines, railroads, and trucking firms. Revenues of these companies are affected by fluctuations in fuel prices and government regulation of fares. (13) UTILITIES SECTOR: Companies in the public utilities industry and companies that derive a substantial majority of their revenues through supplying public utilities (including companies engaged in the manufacture, production, generation, transmission, or sale of gas and electric energy) and that provide telephone, telegraph, satellite, microwave, and other communication facilities to the public. The gas and electric public utilities industries are subject to various uncertainties, including the outcome of political issues concerning the environment, prices of fuel for electric generation, availability of natural gas, and - 22 - risks associated with the construction and operation of nuclear power facilities. PERFORMANCE INFORMATION Each Fund's performance figures are based on historical earnings and are not intended to indicate future performance. The share price and total return of each Fund will vary, and an investment in a Fund, when redeemed, may be worth more or less than an investor's original cost. Total Return Computations Each Fund may advertise certain total return information. An average annual compounded rate of return ("T") may be computed by using the redeemable value at the end of a specified period ("ERV") of a hypothetical initial investment of $1,000 ("P") over a period of time ("n") according to the formula: (n) P(1+T) = ERV Average annual total return smooths out year-to-year variations and, in that respect, differs from actual year-to-year results. Although none of the Funds commenced operations until August 3, 1993, each Fund's investment objective, limitations, and policies are the same as another mutual fund administered by N&B Management, which has a name similar to the Fund's and invests in the same Portfolio ("Sister Fund"). Each Sister Fund had a predecessor. The following total return data is for each Fund since its inception and, for periods prior to each Fund's inception, its Sister Fund and that Sister Fund's predecessor. The total returns for periods prior to the Funds' inception would have been lower had they reflected the higher fees of the Funds, as compared to those of the Sister Funds and their predecessors. Appendix B to this SAI includes additional performance data. The average annual total returns for Neuberger & Berman MANHATTAN Trust, its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and ten-year periods ended August 31, 1995, were 25.90%, 17.11%, and 15.02% respectively. If an investor had invested $10,000 in that predecessor's shares on March 1, 1979 and had reinvested all distributions and income dividends, the NAV of that investor's holdings would have been $149,149 on August 31, 1995. The average annual total returns for Neuberger & Berman GENESIS Trust, its Sister Fund, and that Sister Fund's predecessor for the one- and five-year periods ended August 31, 1995, and for the period from - 23 - September 27, 1988 (commencement of operations), through August 31, 1995, were 19.51%, 17.35%, and 12.61%, respectively. If an investor had invested $10,000 in that predecessor's shares on September 27, 1988 and had reinvested all distributions and income dividends, the NAV of that investor's holdings would have been $22,780 on August 31, 1995. The average annual total returns for Neuberger & Berman FOCUS Trust, its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and ten-year periods ended August 31, 1995, were 27.44%, 19.19%, and 15.09%, respectively. If an investor had invested $10,000 in that predecessor's shares on October 19, 1955 and had reinvested all distributions and income dividends, the NAV of that investor's holdings would have been $932,053 on August 31, 1995. The average annual total returns for Neuberger & Berman GUARDIAN Trust, its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and ten-year periods ended August 31, 1995, were 24.01%, 20.14%, and 15.66%, respectively. If an investor had invested $10,000 in that predecessor's shares on June 1, 1950 and had reinvested all distributions and income dividends, the NAV of that investor's holdings would have been $2,629,312 on August 31, 1995. The average annual total returns for Neuberger & Berman PARTNERS Trust, its Sister Fund, and that Sister Fund's predecessor for the one-, five-, and ten-year periods ended August 31, 1995, were 21.52%, 16.06%, and 14.44%, respectively. If an investor had invested $10,000 in that predecessor's shares on January 20, 1975 and had reinvested all distributions and income dividends, the NAV of that investor's holdings would have been $287,463 on August 31, 1995. Comparative Information Prior to January 5, 1989, the investment policies of the predecessor of Neuberger & Berman FOCUS Trust's Sister Fund required that at least 80% of its investments normally be in energy-related investments; prior to November 1, 1991, those investment policies required that at least 25% of its investments normally be in the energy sector. Neuberger & Berman FOCUS Trust may be required, under applicable law, to include information reflecting the Sister Fund's predecessor's performance and expenses before November 1, 1991, in its advertisements, sales literature, financial statements, and other documents filed with the SEC and/or provided to current and prospective shareholders. Investors should be aware that such information may not accurately reflect the level of performance and expenses that would have been experienced had the Sister Fund's predecessor been operating under the Fund's current investment policies. - 24 - From time to time each Fund's performance may be compared with: (1) data (that may be expressed as rankings or ratings) published by independent services or publications (including newspapers, newsletters, and financial periodicals) that monitor the performance of mutual funds, such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies, Inc., Wiesenberger Investment Companies Service, Investment Company Data Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and U.S. News & World Report magazines, The Wall Street Journal, New York Times, Kiplingers Personal Finance, and Barron's Newspaper, or (2) recognized stock and other indices, such as the S&P 500 Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index ("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000 Stock Index, Dow Jones Industrial Average ("DJIA"), Wilshire 1750, Nasdaq Composite Index, Value Line Index, U.S. Department of Labor Consumer Price Index ("Consumer Price Index"), College Board Survey of Colleges Annual Increases of College Costs, Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra Value Index, and various other domestic, international, and global indices. The S&P 500 Index is a broad index of common stock prices, while the DJIA represents a narrower segment of industrial companies. The S&P 600 Index includes stocks that range in market value from $27 million to $880 million, with an average of $302 million. The S&P 400 Index measures mid- sized companies with an average market capitalization of $1.2 billion. Each assumes reinvestment of distributions and is calculated without regard to tax consequences or the costs of investing. Each Portfolio may invest in different types of securities from those included in some of the above indices. Evaluations of the Funds' performance, their total returns, and comparisons may be used in advertisements and in information furnished to current and prospective shareholders (collectively, "Advertisements"). The Funds may also be compared to individual asset classes such as common stocks, small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson and Sinquefield. Other Performance Information From time to time, information about a Portfolio's portfolio allocation and holdings as of a particular date may be included in Advertisements for the corresponding Fund. This information, for example, - 25 - may include the Portfolio's portfolio diversification by asset type. Information used in Advertisements may include statements or illustrations relating to the appropriateness of types of securities and/or mutual funds that may be employed to meet specific financial goals, such as (1) funding retirement, (2) paying for children's education, and (3) financially supporting aging parents. N&B Management believes that many of its common stock funds may be attractive investment vehicles for conservative investors who are interested in long-term appreciation from stock investments, but who have a moderate tolerance for risk. Such investors may include, for example, individuals (1) planning for or facing retirement, (2) receiving or expecting to receive lump-sum distributions from individual retirement accounts ("IRAs"), self-employed individual retirement plans ("Keogh plans"), or other retirement plans, (3) anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans, and (4) receiving a significant amount of money as a result of inheritance, sale of a business, or termination of employment. Investors who may find Neuberger & Berman PARTNERS Trust, Neuberger & Berman GUARDIAN Trust or Neuberger & Berman FOCUS Trust to be an attractive investment vehicle also include parents saving to meet college costs for their children. For instance, the cost of a college education is rapidly approaching the cost of the average family home. Four years' tuition, room and board at a top private institution can already cost over $80,000. If college expenses continue to increase at current rates, by the time today's pre-schooler enters the ivy-covered halls in 2009, four years at a private college may easily cost $200,000!2/ Information relating to inflation and its effects on the dollar also may be included in Advertisements. For example, after ten years, the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100, respectively, if the annual rates of inflation during that period were 4%, 5%, 6%, and 7%, respectively. (To calculate the purchasing power, the value at the end of each year is reduced by the inflation rate for the ten-year period.) From time to time the investment philosophy of N&B Man- agement's founder, Roy R. Neuberger, may be included in the Funds' Advertisements. This philosophy is described in further detail in "The Art of Investing: A Conversation with Roy Neuberger," attached as Appendix C to this SAI. 2/ Source: College Board, 1994, 1995 Annual Survey of Colleges, Princeton, NJ, assuming an average 6% increase in annual expenses. - 26 - CERTAIN RISK CONSIDERATIONS Although each Portfolio seeks to reduce risk by investing in a diversified portfolio, diversification does not eliminate all risk. There can, of course, be no assurance that any Portfolio will achieve its investment objective, and an investment in a Fund involves certain risks that are described in the sections entitled "Investment Programs" and "Description of Investments" in the Prospectus and "Investment Information -- Additional Investment Information" in this SAI. TRUSTEES AND OFFICERS The following table sets forth information concerning the trustees and officers of the Trusts, including their addresses and principal business experience during the past five years. Some persons named as trustees and officers also serve in similar capacities for other funds, and (where applicable) their corresponding portfolios, administered or managed by N&B Management and Neuberger & Berman, L.P. ("Neuberger & Berman").
Positions Held Name, Age, and Address(1) With the Trusts Principal Occupation(s)(2) ------------------------- --------------- -------------------------- Faith Colish (60) Trustee of each Trust Attorney at Law, Faith Colish, A 63 Wall Street Professional Corporation. 24th Floor New York, NY 10005 Donald M. Cox (73) Trustee of each Trust Retired. Formerly Senior Vice 435 East 52nd Street President and Director of Exxon New York, NY 10022 Corporation; Director of Emigrant Savings Bank. Stanley Egener* (61) Chairman of the Board, Partner of Neuberger & Berman; Chief Executive Officer, President and Director of N&B and Trustee of each Management; Chairman of the Trust Board, Chief Executive Officer, and Trustee of eight other mutual funds for which N&B Management acts as investment manager or administrator. - 27 - Positions Held Name, Age, and Address(1) With the Trusts Principal Occupation(s)(2) ------------------------- --------------- -------------------------- Alan R. Gruber (68) Trustee of each Trust Chairman and Chief Executive Orion Capital Corporation Officer of Orion Capital 600 Fifth Avenue Corporation (property and 24th Floor casualty insurance); Director of New York, NY 10020 Trenwick Group, Inc. (property and casualty reinsurance); Chair- man of the Board and Director of Guaranty National Corporation (property and casualty insurance); formerly Director of Ketema, Inc. (diversified manufac-turer). Howard A. Mileaf (57) Trustee of each Trust Vice President and Special Wheeling Pittsburgh Counsel to Wheeling Pittsburgh Corporation Corporation (holding company) 110 East 59th Street since 1992; formerly Vice Presi- New York, NY 10022 dent and General Counsel of Keene Corporation (manufacturer of industrial products); Director of Kevlin Corporation (manufacturer of microwave and other products). Edward I. O'Brien* (67) Trustee of each Trust Until 1993, President of the 12 Woods Lane Securities Industry Association Scarsdale, NY 10583 ("SIA") (securities industry's representative in government relations and regulatory matters at the federal and state levels); until November 1993, employee of the SIA; Director of Legg Mason, Inc. John T. Patterson, Jr. (67) Trustee of each Trust President of SOBRO (South Bronx 90 Riverside Drive Overall Economic Development Apartment 1B Corporation). New York, NY 10024 John P. Rosenthal (63) Trustee of each Trust Senior Vice President of Burnham Burnham Securities Inc. Securities Inc. (a registered Burnham Asset Management Corp. broker-dealer) since 1991; for- 1325 Avenue of the Americas merly Partner of Silberberg, 17th Floor Rosenthal & Co. (member of New York, NY 10019 National Association of Securities Dealers, Inc.); Director, Cancer Treatment Holdings, Inc. - 28 - Positions Held Name, Age, and Address(1) With the Trusts Principal Occupation(s)(2) ------------------------- --------------- -------------------------- Cornelius T. Ryan (64) Trustee of each Trust General Partner of Oxford Oxford Bioscience Partners Partners and Oxford Bioscience 315 Post Road West Partners (venture capital Westport, CT 06880 partnerships) and President of Oxford Venture Corporation; Director of Capital Cash Management Trust (money market fund) and Prime Cash Fund. Gustave H. Shubert (66) Trustee of each Trust Senior Fellow/Corporate Advisor 13838 Sunset Boulevard and Advisory Trustee of Rand (a Pacific Palisades, CA 90272 non-profit public interest research institution) since 1989; Honorary Member of the Board of Overseers of the Institute for Civil Justice, the Policy Advisory Committee of the Clinical Scholars Program at the University of California, the American Association for the Advancement of Science, the Counsel on Foreign Relations, and the Institute for Strategic Studies (London); advisor to the Program Evaluation and Methodology Division of the U.S. General Accounting Office; formerly Senior Vice President and Trustee of Rand. Lawrence Zicklin* (59) President and Trustee of Partner of Neuberger & Berman; each Trust Director of N&B Management; President and/or Trustee of five other mutual funds for which N&B Management acts as investment manager or administrator. Daniel J. Sullivan (55) Vice President of each Senior Vice President of N&B Trust 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. - 29 - Positions Held Name, Age, and Address(1) With the Trusts Principal Occupation(s)(2) ------------------------- --------------- -------------------------- Michael J. Weiner (48) Vice President and Senior Vice President and Principal Financial Treasurer of N&B Management since Officer of each Trust 1992; prior thereto, Vice President and Treasurer of N&B Management and Treasurer of certain mutual funds for which N&B Management acted as investment adviser; Vice President and Principal Financial Officer of eight other mutual funds for which N&B Management acts as investment manager or administrator. Claudia A. Brandon (38) Secretary of each Trust Vice President of N&B Management; Secretary of eight other mutual funds for which N&B Management acts as investment manager or administrator. Richard Russell (48) Treasurer and Principal Vice President of N&B Management Accounting Officer of since 1993; prior thereto, each Trust Assistant Vice President of N&B Management; Treasurer and Prin- cipal Accounting Officer of eight other mutual funds for which N&B Management acts as investment manager or administrator. Stacy Cooper-Shugrue (32) Assistant Secretary of Assistant Vice President of N&B each Trust 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 of Partner of Neuberger & Berman each Trust since 1992; employee thereof since 1971; Assistant Secretary of eight other mutual funds for which N&B Management acts as investment manager or administrator. ______________________________ - 30 - (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 each Trust within the meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by virtue of the fact that they are officers and/or directors of N&B Management and partners of Neuberger & Berman. Mr. O'Brien is an interested person by virtue of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of which, from time to time, serves as a broker or dealer to the Portfolios and other funds for which N&B Management serves as investment manager. The Trust's Trust Instrument and Managers Trust's Declaration of Trust each 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. For the fiscal year ended August 31, 1995, each Fund and Portfolio paid the following fees and expenses to Fund and Portfolio Trustees who were not affiliated with N&B Management or Neuberger & Berman: Neuberger & Berman MANHATTAN Trust and Portfolio - $901; Neuberger & Berman GENESIS Trust and Portfolio - $2,724; Neuberger & Berman FOCUS Trust and Portfolio - $224; Neuberger & Berman GUARDIAN Trust and Portfolio - $15,468; and Neuberger & Berman PARTNERS Trust and Portfolio - $2,015. The following table sets forth information concerning the compensation of the trustees and officers of the Trust. None of the Neuberger & Berman Funds(SERVICEMARK) has any retirement plan for its trustees or officers. - 31 -
TABLE OF COMPENSATION FOR FISCAL YEAR ENDED 8/31/95 Total Compensation from the Name and Position with Aggregate Compensation Neuberger & Berman Fund the Trust from the Trust Complex Paid to Trustees Faith Colish $1,336.05 $39,000 Trustee (5 other investment companies) Donald M. Cox $1,336.05 $31,000 Trustee (3 other investment companies) Stanley Egener $0 $0 Chairman of the Board, (9 other investment companies) Chief Executive Officer, and Trustee Alan R. Gruber $1,336.05 $31,000 Trustee (3 other investment companies) Howard A. Mileaf $1,404.81 $36,500 Trustee (4 other investment companies) Edward I. O'Brien Trustee $1,388.74 $31,500 (3 other investment companies) John T. Patterson, Jr. $1,371.96 $34,500 Trustee (4 other investment companies) John P. Rosenthal $1,309.92 $33,000 Trustee (4 other investment companies) Cornelius T. Ryan $1,404.81 $33,500 Trustee (3 other investment companies) Gustave H. Shubert $1,309.92 $30,000 Trustee (3 other investment companies) Lawrence Zicklin $0 $0 (5 other investment companies) President and Trustee
- 32 - INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES Investment Manager and Administrator Because all of the Funds' net investable assets are invested in their corresponding Portfolios, the Funds do not need an investment manager. N&B Management serves as the Portfolios' investment manager pursuant to a management agreement with Managers Trust, dated as of August 2, 1993 ("Management Agreement"). The Management Agreement was approved for each Portfolio by the Portfolio Trustees, including a majority of the Portfolio Trustees who were not "interested persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"), on July 15, 1993, and was approved by the holders of the interests in all the Portfolios on August 2, 1993. The Management Agreement provides, in substance, that N&B Management will make and implement investment decisions for the Portfolios in its discretion and will continuously develop an investment program for the Portfolios' assets. The Management Agreement permits N&B Management to effect securities transactions on behalf of each 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 Portfolios, although N&B Management has no current plans to do so. N&B Management provides to each Portfolio, without separate cost, office space, equipment, and facilities and the personnel necessary to perform executive, administrative, and clerical functions. N&B Management pays all salaries, expenses, and fees of the officers, trustees, and employees of Managers Trust who are officers, directors, or employees of N&B Management. Two directors of N&B Management (who also are partners of Neuberger & Berman), one of whom also serves as an officer of N&B Management, presently serve as trustees and officers of the Trusts. See "Trustees and Officers." Each Portfolio pays N&B Management a management fee based on the Portfolio's average daily net assets, as described in the Prospectus. N&B Management provides similar facilities, services and personnel, as well as shareholder accounting, recordkeeping, and other shareholder services, to each Fund pursuant to an administration agreement dated August 3, 1993 ("Administration Agreement"). For such administrative services, each Fund pays N&B Management a fee based on the Fund's average daily net assets, as described in the Prospectus. N&B Management enters into administrative services agreements with Institutions, pursuant to which it compensates such Institutions for accounting, recordkeeping and other services that they provide to investors who purchase shares of the Funds. - 33 - During the fiscal years ended August 31, 1995 and 1994 and the period from August 3 to August 31, 1993, each Fund accrued management and administration fees as follows: Neuberger & Berman MANHATTAN Trust - $202,729, $49,957, and $0.51; Neuberger & Berman GENESIS Trust - $274,709, $14,462, and $3.70; Neuberger & Berman FOCUS Trust - $43,330, $4,624, and $0.51; Neuberger & Berman GUARDIAN Trust - $2,417,586, $142,142, and $43.97; and Neuberger & Berman PARTNERS Trust - $292,161, $17,299, and $0.50, respectively. N&B Management has voluntarily undertaken until December 31, 1996, to reimburse each Fund for its Operating Expenses and its pro rata share of its corresponding Portfolio's Operating Expenses so that each Fund's expense ratio per annum will not exceed the expense ratio of its Sister Fund by more than 0.10% of the Fund's average daily net assets. "Operating Expenses" exclude interest, taxes, brokerage commissions, and extraordinary expenses. During the period from August 3, 1993 (commencement of operations of each Fund) to December 31, 1994, N&B Management voluntarily undertook to reimburse each Fund for its Operating Expenses and its pro rata share of its corresponding Portfolio's Operating Expenses which, in the aggregate, exceeded the aggregate Operating Expenses and pro rata share of corresponding Portfolio Operating Expenses of that Fund's Sister Fund. During the fiscal years ended August 31, 1995 and 1994, N&B Management reimbursed each Fund the following amounts of expenses under the above arrangements: Neuberger & Berman MANHATTAN Trust, $87,443 and $88,693, respectively; Neuberger & Berman GENESIS Trust, $69,047 and $73,439, respectively; Neuberger & Berman FOCUS Trust, $92,687 and $68,286, respectively; Neuberger & Berman GUARDIAN Trust, $171,796 and $116,354, respectively; and Neuberger & Berman PARTNERS Trust, $102,400 and $75,492, respectively. The Management Agreement continues with respect to each 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 each Portfolio, so long as its continuance is approved at least annually (1) by the vote of a majority of the Independent Portfolio Trustees, cast in person at a meeting called for the purpose of voting on such approval, and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act majority vote of the outstanding shares in that Portfolio. The Administration Agreement continues with respect to each Fund for a period of two years after the date the Fund became subject thereto. The Administration Agreement is renewable from year to year with respect to a Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the Fund Trustees who are not "interested persons" of N&B Management or the Trust ("Independent Fund Trustees"), cast in person at a meeting called for the purpose of voting on such approval, and (2) by the vote of a majority of the Fund Trustees or by a 1940 Act majority vote of the outstanding shares in the Fund. - 34 - The Management Agreement is terminable, without penalty, with respect to a Portfolio on 60 days' written notice either by Managers Trust or by N&B Management. The Administration Agreement is terminable, without penalty, with respect to a Fund on 60 days' written notice either by N&B Management or by the Trust if authorized by the Fund Trustees, including a majority of the Independent Fund Trustees. Each Agreement terminates automatically if it is assigned. In addition to the voluntary expense reimbursements described in the Prospectus under "Management and Administration -- Expenses," N&B Management has agreed in the Management Agreement to reimburse each Fund's expenses, as follows. If, in any fiscal year, a Fund's Aggregate Operating Expenses (as defined below) exceed the most restrictive expense limitation imposed under the securities laws of the states in which that Fund's shares are qualified for sale ("State Expense Limitation"), then N&B Management will pay the Fund the amount of that excess, less the amount of any reduction of the administration fee payable by the Fund under a similar State Expense Limitation contained in the Administration Agreement. N&B Management will have no obligation to pay a Fund, however, for any expenses that exceed the pro rata portion of the management fees attributable to that Fund's interest in its corresponding Portfolio. At the date of this SAI, the most restrictive State Expense Limitation to which any Fund expects to be subject is 2 1/2% of the first $30 million of average net assets, 2% of the next $70 million of average net assets, and 1-1/2% of average net assets over $100 million. For purposes of the State Expense Limitation, the term "Aggregate Operating Expenses" means a Fund's operating expenses plus its pro rata portion of its corresponding Portfolio's operating expenses (including any fees or expense reimbursements payable to N&B Management and any compensation payable thereto pursuant to (1) the Administration Agreement or (2) any other agreement or arrangement with Managers Trust in regard to the Portfolio; but excluding (with respect to both the Fund and the Portfolio) interest, taxes, brokerage commissions, litigation and indemnification expenses, and other extraordinary expenses not incurred in the ordinary course of business). Sub-Adviser N&B Management retains Neuberger & Berman, 605 Third Avenue, New York, NY 10158-3698, as sub-adviser with respect to each Portfolio pursuant to a sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The Sub-Advisory Agreement was approved by the Portfolio Trustees, including a majority of the Independent Portfolio Trustees, on July 15, 1993 and was approved by the holders of the interests in the Portfolios on August 2, 1993. - 35 - 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 sub-adviser for all of the other mutual funds managed by N&B Management. The Sub-Advisory Agreement continues with respect to each Portfolio 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 each Portfolio by the Portfolio Trustees, by a 1940 Act majority vote of the outstanding Portfolio shares, 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 each Portfolio if it is assigned or if the Management Agreement terminates with respect to that 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 Managed 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: - 36 - Approximate Net Assets at September 30, Name 1995 ---- ---------------------- Neuberger & Berman Cash Reserves Portfolio $ 377,608,619 (investment portfolio for Neuberger & Berman Cash Reserves) Neuberger & Berman Government Income $ 12,053,656 Portfolio (investment portfolio for Neuberger & Berman Government Income Fund and Neuberger & Berman Government Income Trust) Neuberger & Berman Government Money $ 346,898,132 Portfolio (investment portfolio for Neuberger & Berman Government Money Fund) Neuberger & Berman Limited Maturity Bond $ 309,540,451 Portfolio (investment portfolio for Neuberger & Berman Limited Maturity Bond Fund and Neuberger & Berman Limited Maturity Bond Trust) Neuberger & Berman Municipal Money $ 149,657,613 Portfolio (investment portfolio for Neuberger & Berman Municipal Money Fund) Neuberger & Berman Municipal Securities $ 44,568,635 Portfolio (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 $ 102,903,312 Portfolio (investment portfolio for Neuberger & Berman Ultra Short Bond Fund and Neuberger & Berman Ultra Short Bond Trust) - 37 - Approximate Net Assets at September 30, Name 1995 ---- ---------------------- Neuberger & Berman Focus Portfolio $1,031,915,664 (investment portfolio for Neuberger & Berman Focus Fund and Neuberger & Berman Focus Trust) 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 $ 102,675,093 Portfolio (investment portfolio for Neuberger & Berman Socially Responsive Fund, Neuberger & Berman Socially Responsive Trust, and Neuberger & Berman NYCDC Socially Responsive Trust) Neuberger & Berman Advisers $1,257,506,124 Managers Trust (six series) - 38 - 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. The investment decisions concerning the Portfolios 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, most of the Other N&B Funds differ from the Portfolios. Even where the investment objectives are similar, however, the methods used by the Other N&B Funds and the Portfolios to achieve their objectives may differ. There may be occasions when a 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 a Portfolio, in other cases it is believed that a Portfolio's ability to participate in volume transactions may produce better executions for it. In any case, it is the judgment of the Portfolio Trustees that the desirability of the Portfolios' having their 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; Farha-Joyce 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 Cooper-Shugrue, Assistant Vice President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Roberta D'Orio, Assistant Vice President; Robert - 39 - I. Gendelman, Assistant Vice President; Leslie Holliday-Soto, 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, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Havell and Prindle are general partners of Neuberger & Berman. Messrs. Egener and Zicklin are trustees and officers, and Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue are officers, of each Trust. C. Carl Randolph, a general partner of Neuberger & Berman, also is an officer of each Trust. All of the outstanding voting stock in N&B Management is owned by persons who are also general partners of Neuberger & Berman. DISTRIBUTION ARRANGEMENTS N&B Management serves as the distributor ("Distributor") in connection with the offering of each Fund's shares on a no-load basis to Institutions. In connection with the sale of its shares, each Fund has authorized the Distributor to give only the information, and to make only the statements and representations, contained in the Prospectus and this SAI or that properly may be included in sales literature and advertisements in accordance with the 1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales may be made only by the Prospectus, which may be delivered either personally, through the mails, or by electronic means. The Distributor is the Funds' "principal underwriter" within the meaning of the 1940 Act and, as such, acts as agent in arranging for the sale of each Fund's shares to Institutions without sales commission or other compensation and bears all advertising and promotion expenses incurred in the sale of the Funds' shares. The Distributor or one of its affiliates may, from time to time, deem it desirable to offer to a Fund's shareholders, through use of its shareholder list, the shares of other mutual funds for which the Distributor acts as distributor or other products or services. Any such use of the Funds' shareholder lists, however, will be made subject to terms and conditions, if any, approved by a majority of the Independent Fund Trustees. These lists will not be used to offer the Funds' shareholders any investment products or services other than those managed or distributed by N&B Management or Neuberger & Berman. The Trust, on behalf of each Fund, and the Distributor are parties to a Distribution Agreement that continues until August 3, 1996. The Distribution Agreement may be renewed annually if specifically approved by (1) the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the Fund's outstanding shares and (2) the vote of a - 40 - majority of the Independent Fund Trustees, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated by either party and will automatically terminate on its assignment, in the same manner as the Management Agreement. ADDITIONAL EXCHANGE INFORMATION As more fully set forth in the section of the Prospectus entitled "Exchanging Shares," an Institution may exchange shares of any Fund for shares of one or more of the other Funds or the income funds that are briefly described below ("Income Funds"). INCOME FUNDS Neuberger & Berman Seeks a higher total return than is Ultra Short Bond Trust available from money market funds, with minimal risk to principal and liquidity. Through its corresponding portfolio, the fund invests in high-quality money market instruments and short-term debt securities. Neuberger & Berman Seeks the highest current income con- Limited Maturity Bond Trust sistent with low risk to principal and liquidity and, secondarily, total return. Through its corresponding portfolio, the fund invests in short- to intermediate-term debt securities of at least investment grade. Neuberger & Berman Seeks a high level of current income and Government Income Trust total return, consistent with safety of principal. At least 65% of the corresponding portfolio's investments are in U.S. Government securities that are issued or guaranteed as to principal and interest by the U.S. Government or its agencies, including U.S. Government mortgage-backed securities; at least 25% of its investments are in mortgage- backed and asset-backed securities. Any Fund described herein, and any of the Income Funds, may terminate or modify its exchange privilege in the future. - 41 - Fund shareholders who are considering exchanging shares into any of the funds listed above should note that (1) the Income Funds are series of a Delaware business trust (named "Neuberger & Berman Income Trust") that is registered with the SEC as an open-end management investment company, and (2) each series of Neuberger & Berman Income Trust invests all its net investable assets in a portfolio of Income Managers Trust, an open-end management investment company that is managed by N&B Management. Each such portfolio has an investment objective identical to that of its corre- sponding fund and invests in accordance with investment policies and limitations identical to those of that fund. Before effecting an exchange, Fund shareholders must obtain and should review a currently effective prospectus of the fund into which the exchange is to be made. In this regard, it should be noted that the Income Funds share a prospectus. An exchange is treated as a sale for federal income tax purposes and, depending on the circumstances, a short- or long-term capital gain or loss may be realized. ADDITIONAL REDEMPTION INFORMATION Suspension of Redemptions The right to redeem a Fund's shares may be suspended or payment of the redemption price postponed (1) when the NYSE is closed (other than weekend and holiday closings), (2) when trading on the NYSE is restricted, (3) when an emergency exists as a result of which it is not reasonably practicable for the corresponding Portfolio to dispose of securities it owns or fairly to determine the value of its net assets, or (4) for such other period as the SEC may by order permit for the protection of a Fund's shareholders; provided that applicable SEC rules and regulations shall govern whether the conditions prescribed in (2) or (3) exist. If the right of redemption is suspended, shareholders may withdraw their offers of redemption, or they will receive payment at the NAV per share in effect at the close of business on the first day the NYSE is open ("Business Day") after termination of the suspension. Redemptions in Kind Each Fund reserves the right, under certain conditions, to honor any request for redemption by making payment in whole or in part in securities valued as described under "Share Information -- Share Prices and Net Asset Value" in the Prospectus. If payment is made in securities, a shareholder generally will incur brokerage expenses in converting those securities into cash and will be subject to fluctuations in the market price of those securities until they are sold. The Funds do not redeem in kind under normal circumstances, but would do so when the Fund Trustees determine that it is in the best interests of a Fund's shareholders as a whole. Redemptions in kind will be made with readily marketable securities to the extent possible. - 42 - DIVIDENDS AND OTHER DISTRIBUTIONS Each Fund distributes to its shareholders amounts equal to substantially all of its proportionate share of any net investment income (after deducting expenses incurred directly by the Fund), net capital gains (both long-term and short-term), and net gains from foreign currency transactions earned or realized by its corresponding Portfolio. Each Fund calculates its net investment income and NAV per share as of the close of regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern time). A Portfolio's net investment income consists of all income accrued on portfolio assets less accrued expenses, but does not include realized gains and losses. Net investment income and realized gains and losses are reflected in a Portfolio's NAV (and, hence, its corresponding Fund's NAV) until they are distributed. Dividends from net investment income and distributions of net realized capital and foreign currency gains, if any, normally are paid once annually, in December, except that Neuberger & Berman GUARDIAN Trust distributes substantially all of its share of Neuberger & Berman GUARDIAN Portfolio's net investment income, if any, at the end of each calendar quarter. Dividends and/or other distributions are automatically reinvested in additional shares of the distributing Fund, unless and until the Institution elects to receive them in cash ("cash election"). To the extent dividends and other distributions are subject to federal, state, or local income taxation, they are taxable to the shareholders whether received in cash or reinvested in Fund shares. A cash election with respect to any Fund remains in effect until the Institution notifies the Fund in writing to discontinue the election. ADDITIONAL TAX INFORMATION Taxation of the Funds In order to continue to qualify for treatment as a RIC under the Code, each Fund must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income, net short-term capital gain, and net gains from certain foreign currency transactions) ("Distribution Requirement") and must meet several additional requirements. With respect to each Fund, these requirements include the following: (1) the Fund must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from Hedging Instruments) derived with respect to its business of investing in securities or those currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its gross income each taxable year from the sale or other disposition of securities, or any of the following, that were held for less than three months -- (i) options - 43 - (other than those on foreign currencies), or (ii) foreign currencies or Hedging Instruments thereon that are not directly related to the Fund's principal business of investing in securities (or options with respect thereto) ("Short-Short Limitation"); and (3) at the close of each quarter of the Fund's taxable year, (i) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, and other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and does not represent more than 10% of the issuer's outstanding voting securities, and (ii) not more than 25% of the value of its total assets may be invested in securities (other than U.S. Government securities) of any one issuer. Certain funds managed by N&B Management, including the Sister Funds, have received a ruling from the Internal Revenue Service ("Service") that each such fund, as an investor in a corresponding portfolio of Managers Trust or Income Managers Trust, will be deemed to own a proportionate share of the portfolio's assets and income for pur- poses of determining whether the fund satisfies all the requirements described above to qualify as a RIC. Although that ruling may not be relied on as precedent by the Funds, N&B Management believes that the reasoning thereof and, hence, its conclusion apply to the Funds as well. Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ended on October 31 of that year, plus certain other amounts. See the next section for a discussion of the tax consequences to the Funds of distributions to them from the Portfolios, investments by the Portfolios in certain securities, and hedging transactions engaged in by the Portfolios. Taxation of the Portfolios The Portfolios have received a ruling from the Service to the effect that, among other things, each Portfolio will be treated as a separate partnership for federal income tax purposes and will not be a "publicly traded partnership." As a result, no Portfolio is subject to federal income tax; instead, each investor in a Portfolio, such as a Fund, is required to take into account in determining its federal income tax liability its share of the Portfolio's income, gains, losses, deductions, and credits, without regard to whether it has received any cash distributions from the Portfolio. Each Portfolio also is not subject to Delaware or New York income or franchise tax. - 44 - Because each Fund is deemed to own a proportionate share of its corresponding Portfolio's assets and income for purposes of determining whether the Fund satisfies the requirements to qualify as a RIC, each Portfolio intends to continue to conduct its operations so that its corresponding Fund will be able to continue to satisfy all those requirements. Distributions to a Fund from its corresponding Portfolio (whether pursuant to a partial or complete withdrawal or otherwise) will not result in the Fund's recognition of any gain or loss for federal income tax purposes, except that (1) gain will be recognized to the extent any cash that is distributed exceeds the Fund's basis for its interest in the Portfolio before the distribution, (2) income or gain will be recognized if the distribution is in liquidation of the Fund's entire interest in the Portfolio and includes a disproportionate share of any unrealized receivables held by the Portfolio, and (3) loss will be recognized if a liquidation distribution consists solely of cash and/or unrealized receivables. A Fund's basis for its interest in its corresponding Portfolio generally equals the amount of cash the Fund invests in the Portfolio, increased by the Fund's share of the Portfolio's net income and gains and decreased by (1) the amount of cash and the basis of any property the Portfolio distributes to the Fund and (2) the Fund's share of the Portfolio's losses. Dividends and interest received by a 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. A 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 a Portfolio holds stock of a PFIC, its corresponding Fund (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 the Fund distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in the Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent that income is distributed to its shareholders. If a Portfolio invests in a PFIC and elects to treat the PFIC as a "qualified electing fund," then in lieu of its corresponding Fund's - 45 - incurring the foregoing tax and interest obligation, the Fund would 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 most likely would have to be distributed by the Fund to satisfy the Distribution Requirement and to avoid imposition of the Excise Tax -- even if those earnings and gain were not received by the Portfolio. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof. Pursuant to proposed regulations, open-end RICs, such as the Funds, 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 Portfolios' use of hedging strategies, such as writing (selling) and purchasing options 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 Portfolios realize in connection therewith. Income from foreign currencies (except certain gains therefrom that may be excluded by future regulations), and income from transactions in Hedging Instruments derived by the Portfolio with respect to its business of investing in securities or foreign cur- rencies, will qualify as permissible income for its corresponding Fund under the Income Requirement. However, income from the disposition by a Portfolio of options (other than those on foreign currencies) will be subject to the Short-Short Limitation for its corresponding Fund if they are held for less than three months. Income from the disposition of foreign currencies, and Hedging Instruments on foreign currencies, that are not directly related to a Portfolio's principal business of investing in securities (or options with respect thereto) also will be subject to the Short-Short Limitation for its corresponding Fund if they are held for less than three months. If a 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 its corresponding Fund satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the designated hedge will be included in gross income for purposes of that limitation. Each Portfolio will consider whether it should seek to qualify for this treatment for its hedging transactions. To the extent a Portfolio does not so qualify, it may be forced to defer the closing out of certain Hedging Instruments beyond the time when it otherwise would be advantageous to do so, in order for its corresponding Fund to continue to qualify as a RIC. - 46 - Neuberger & Berman PARTNERS Portfolio may acquire zero coupon securities or other securities issued with original issue discount ("OID"). As a holder of those securities, that Portfolio (and, through it, its corresponding Fund) must take into account the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on the securities during the year. Because Neuberger & Berman PARTNERS Trust annually must distribute substantially all of its investment company taxable income (including its share of the Portfolio's accrued OID) to satisfy the Distribution Requirement and to avoid imposition of the Excise Tax, that Fund may be required in a parti- cular year to distribute as a dividend an amount that is greater than its proportionate share of the total amount of cash Neuberger & Berman PARTNERS Portfolio actually receives. Those distributions will be made from that Fund's (or its proportionate share of that Portfolio's) cash assets or, if necessary, from the proceeds of sales of that Portfolio's securities. That Portfolio may realize capital gains or losses from those sales, which would increase or decrease Neuberger & Berman PARTNERS Trust's investment company taxable income and/or net capital gain. In addition, any such gains may be realized on the disposition of securities held for less than three months. Because of the Short-Short Limitation, any such gains would reduce Neuberger & Berman PARTNERS Portfolio's ability to sell other securities, or certain Hedging Instruments, held for less than three months that it might wish to sell in the ordinary course of its portfolio management. Taxation of the Funds' Shareholders If Fund shares are sold at a loss after being held for six months or less, the loss will be treated as long-term, instead of short- term, capital loss to the extent of any capital gain distributions received on those shares. Investors also should be aware that if shares of any Fund are purchased shortly before the record date for a dividend or other distribution, the purchaser will receive some portion of the purchase price back as a taxable distribution. PORTFOLIO TRANSACTIONS Neuberger & Berman acts as each Portfolio's principal broker in the purchase and sale of its portfolio securities (other than the substantial portion of the portfolio transactions of Neuberger & Berman GENESIS Portfolio that involves securities traded on the OTC market, which that Portfolio purchases and sells in principal transactions with dealers who are the principal market makers for the securities) and in connection with the writing of covered call options on its securities. Transactions in portfolio securities for which Neuberger & Berman serves as broker will be effected in accordance with Rule 17e-1 under the 1940 Act. During the period August 3 to August 31, 1993, Neuberger & Berman MANHATTAN Portfolio paid brokerage commissions of $42,780, of which - 47 - $32,922 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1994, that Portfolio paid brokerage commissions of $655,640, of which $525,610 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, Neuberger & Berman MANHATTAN Portfolio paid brokerage commissions of $654,982, of which $436,568 was paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger & Berman as broker comprised 73.70% of the aggregate dollar amount of transactions involving the payment of commissions, and 66.65% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 94.53% of the $218,414 paid to other brokers by that Portfolio during that fiscal year (representing commissions on transactions involving approximately $81,737,328) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, that Portfolio acquired securities of the following of its "regular brokers or dealers" (as defined in the 1940 Act) ("Regular B/Ds"): Bear Stearns & Co. Inc., and Morgan Stanley & Co., Inc.; at that date, that Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: Bear Stearns & Co. Inc., $6,187,500, and Morgan Stanley & Co., Inc., $10,859,370. During the period August 3 to August 31, 1993, Neuberger & Berman GENESIS Portfolio paid brokerage commissions of $13,580, of which $10,660 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1994, that Portfolio paid brokerage commissions of $287,587, of which $170,883 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, Neuberger & Berman GENESIS Portfolio paid brokerage commissions of $199,718, of which $118,014 was paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger & Berman as broker comprised 55.55% of the aggregate dollar amount of transactions involving the payment of commissions, and 59.09% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 80.60% of the $81,704 paid to other brokers by that Portfolio during that fiscal year (representing commissions on transactions involving approximately $21,361,399) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, that Portfolio acquired securities of the following of its Regular B/Ds: EXXON Credit Corp., and General Electric Capital Corp.; at that date, that Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: None. During the period August 3 to August 31, 1993, Neuberger & Berman FOCUS Portfolio paid brokerage commissions of $46,296, of which $42,606 was paid to Neuberger & Berman. During the fiscal year ended - 48 - August 31, 1994, that Portfolio paid brokerage commissions of $719,994, of which $567,972 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, Neuberger & Berman FOCUS Portfolio paid brokerage commissions of $1,031,245, of which $617,957 was paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger & Berman as broker comprised 66.83% of the aggregate dollar amount of transactions involving the payment of commissions, and 59.92% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 89.62% of the $413,288 paid to other brokers by that Portfolio during that fiscal year (representing commissions on transactions involving approximately $160,855,610) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, that Portfolio acquired securities of the following of its Regular B/Ds: EXXON Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce, Fenner & Smith, Inc.; at that date, that Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: General Electric Capital Corp., $2,300,000, and Merrill Lynch, Pierce, Fenner & Smith, Inc., $14,406,250. During the period August 3 to August 31, 1993, Neuberger & Berman GUARDIAN Portfolio paid brokerage commissions of $201,981, of which $149,496 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1994, that Portfolio paid brokerage commissions of $2,207,401, of which $1,647,807 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, Neuberger & Berman GUARDIAN Portfolio paid brokerage commissions of $3,751,206, of which $2,521,523 was paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger & Berman as broker comprised 70.49% of the aggregate dollar amount of transactions involving the payment of commissions, and 67.22% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 82.78% of the $1,229,683 paid to other brokers by that Portfolio during that fiscal year (representing commissions on transactions involving approximately $509,609,733) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, that Portfolio acquired securities of the following of its Regular B/Ds: EXXON Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce, Fenner & Smith, Inc.; at that date, that Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: General Electric Capital Corp., $1,500,000, and Merrill Lynch, Pierce, Fenner & Smith, Inc., $48,116,875. During the period August 3 to August 31, 1993, Neuberger & Berman PARTNERS Portfolio paid brokerage commissions of $373,486, of which $272,542 was paid to Neuberger & Berman. During the fiscal year ended - 49 - August 31, 1994, that Portfolio paid brokerage commissions of $2,994,540, of which $2,031,570 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, Neuberger & Berman PARTNERS Portfolio paid brokerage commissions of $4,608,156, of which $3,092,789 was paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger & Berman as broker comprised 71.83% of the aggregate dollar amount of transactions involving the payment of commissions, and 67.12% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 95.02% of the $1,515,367 paid to other brokers by that Portfolio during that fiscal year (representing commissions on transactions involving approximately $600,676,631) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, that Portfolio acquired securities of the following of its Regular B/Ds: Salomon Brothers, Inc., EXXON Credit Corp., and General Electric Capital Corp.; at that date, that Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: General Electric Capital Corp., $7,600,000. Insofar as portfolio transactions of Neuberger & Berman PARTNERS Portfolio result from active management of equity securities, and insofar as portfolio transactions of Neuberger & Berman MANHATTAN Portfolio result from seeking capital appreciation by selling securities whenever sales are deemed advisable without regard to the length of time the securities may have been held, it may be expected that the aggregate brokerage commissions paid by those Portfolios to brokers (including Neuberger & Berman where it acts in that capacity) may be greater than if securities were selected solely on a long-term basis. Portfolio securities are, from time to time, loaned by a 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 a Portfolio to Neuberger & Berman must be fully secured by cash collateral. Under the order, the portion of the income on the cash collateral which may be shared with Neuberger & Berman is determined with reference to concurrent arrangements between Neuberger & Berman and non-affiliated lenders with which it engages in similar transactions. In addition, where Neuberger & Berman borrows securities from a Portfolio in order to relend them to others, Neuberger & Berman is required to pay that 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 a Portfolio has indicated a willingness to lend, Neuberger & Berman must borrow such security from that 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 that Portfolio. If a Portfolio's expenses exceed its income in any - 50 - securities loan transaction with Neuberger & Berman, Neuberger & Berman must reimburse that Portfolio for such loss. During the fiscal years ended August 31, 1995 and 1994, the Portfolios earned the following amounts of interest income from the collateralization of securities loans, from which Neuberger & Berman was paid the indicated amounts: - 51 -
1994 1995 ----- ---- Payment to Payment to Neuberger & Neuberger & Portfolio Interest Berman Interest Berman --------- -------- ---------- ------- --------- Neuberger & Berman $147,103 $119,620 $1,430,672 GUARDIAN Portfolio $1,252,190 Neuberger & Berman 38,627 33,225 327,447 291,207 FOCUS Portfolio Neuberger & Berman 16,085 13,880 52,410 48,736 PARTNERS Portfolio Neuberger & Berman 0 0 0 0 GENESIS Portfolio Neuberger & Berman 0 0 507,239 270,594 MANHATTAN Portfolio
During the period August 3 to August 31, 1993, Neuberger & Berman GUARDIAN Portfolio earned interest income of $3,164 from the collateralization of securities loans, from which Neuberger & Berman was paid $2,881. During the same period, none of the other Portfolios earned interest income from the collateralization of securities loans. Each 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 a borrower who has delivered equivalent collateral. These loans are subject to termination at the option of the Portfolio or the borrower. The Portfolio - 52 - may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or equivalent collateral to the borrower or placing broker. The Portfolio does not have the right to vote securities on loan, but would terminate the loan and regain the right to vote if that were considered important with respect to the investment. A committee of Independent Portfolio Trustees from time to time reviews, among other things, information relating to securities loans by the Portfolios. In effecting securities transactions, each Portfolio gen- erally seeks to obtain the best price and execution of orders. Commission rates, being a component of price, are considered along with other relevant factors. Each Portfolio plans to continue to use Neuberger & Berman as its principal broker where, in the judgment of N&B Management (the Portfolio's investment manager and an affiliate of Neuberger & Berman), that firm is able to obtain a price and execution at least as favorable as other qualified brokers. To the Portfolios' knowledge, however, no affiliate of any Portfolio receives give-ups or reciprocal business in connection with their securities transactions. The use of Neuberger & Berman as a broker for each 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 where they have the authorization of the persons authorized to transact business for the account and comply with certain annual reporting requirements. The Portfolio Trustees have expressly authorized Neuberger & Berman to retain such compensation, and Neuberger & Berman complies with the reporting requirements of Section 11(a). Under the 1940 Act, commissions paid by a Portfolio to Neuberger & Berman in connection with a purchase or sale of securities on a securities exchange may not exceed the usual and customary broker's commission. Accordingly, it is each Portfolio's policy that the commissions paid to Neuberger & Berman must, in N&B Management's judgment, be (1) at least as favorable as those charged by other brokers having comparable execution capability and (2) at least as favorable as commissions contemporaneously charged by Neuberger & Berman on comparable transactions for its most favored unaffiliated customers, except for accounts for which Neuberger & Berman acts as a clearing broker for another brokerage firm and customers of Neuberger & Berman considered by a majority of the Independent Portfolio Trustees not to be comparable to the Portfolio. The Portfolios do not deem it practicable and in their best interests to solicit competitive bids for commissions on each transaction effected by Neuberger & Berman. However, consideration regularly is given - 53 - to information concerning the prevailing level of commissions charged by other brokers on comparable transactions during comparable periods of time. The 1940 Act generally prohibits Neuberger & Berman from acting as principal in the purchase or sale of securities for a Portfolio's account, unless an appropriate exemption is available. A committee of Independent Portfolio Trustees from time to time reviews, among other things, information relating to the commissions charged by Neuberger & Berman to the Portfolios and to its other customers and information concerning the prevailing level of commissions charged by other brokers having comparable execution capability. In addition, the procedures pursuant to which Neuberger & Berman effects brokerage transactions for the Portfolios must be reviewed and approved no less often than annually by a majority of the Independent Portfolio Trustees. Each Portfolio expects that it will continue to execute a portion of its transactions through brokers other than Neuberger & Berman. In selecting those brokers, N&B Management considers the quality and reliability of brokerage services, including execution capability, performance, and financial responsibility, and may consider research and other investment information provided by, and sale of Fund shares effected through, those brokers. To ensure that accounts of all investment clients, including the Portfolio, are treated fairly in the event that transaction instructions for more than one investment account regarding the same security are received by Neuberger & Berman at or about the same time, Neuberger & Berman may combine transaction orders placed on behalf of clients, including advisory accounts in which affiliated persons have an investment interest, for the purpose of negotiating brokerage commissions or obtaining a more favorable price. Where appropriate, securities purchased or sold may be allocated, in terms of amount, to a client according to the proportion that the size of the transaction order actually placed by the account bears to the aggregate size of transaction orders simultaneously made by the other accounts, subject to de minimis exceptions, with all participating accounts paying or receiving the same price. A committee comprised of officers of N&B Management and partners of Neuberger & Berman who are portfolio managers of some of the Portfolios and Other N&B Funds (collectively, "N&B Funds") and some of Neuberger & Berman's managed accounts ("Managed Accounts") evaluates semi- annually the nature and quality of the brokerage and research services provided by other brokers. Based on this evaluation, the committee establishes a list and projected rankings of preferred brokers for use in determining the relative amounts of commissions to be allocated to those brokers. Ordinarily, the brokers on the list effect a large portion of the brokerage transactions for the N&B Funds and the Managed Accounts that are not effected by Neuberger & Berman. However, in any semi-annual period, brokers not on the list may be used, and the relative amounts of - 54 - 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 transac- tions 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 semi-annual period to the next. The commissions charged by a broker other than Neuberger & Berman may be higher than the amount another firm might charge if N&B Management determines in good faith that the amount of those commissions is reasonable in relation to the value of the brokerage and research services provided by the broker. N&B Management believes that those research services benefit the Portfolios 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 the Other N&B Funds and by Neuberger & Berman from brokers effecting portfolio transactions on behalf of the Managed Accounts may be used for the Portfolios' benefit. Mark R. Goldstein, Judith M. Vale, Lawrence Marx III and Kent C. Simons, and Michael M. Kassen and Robert I. Gendelman, each of whom is a Vice President of N&B Management (except for Mr. Gendelman, who is an Assistant Vice President) and a general partner of Neuberger & Berman (except for Ms. Vale and Mr. Gendelman), are the persons primarily respon- sible for making decisions as to specific action to be taken with respect to the investment portfolios of Neuberger & Berman MANHATTAN, Neuberger & Berman GENESIS, Neuberger & Berman FOCUS and Neuberger & Berman GUARDIAN, and Neuberger & Berman PARTNERS Portfolios, respectively. Each of them 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. Goldstein is unavailable to perform his responsibilities, Susan Switzer, who is an Assistant Vice President of N&B Management, will assume responsibility for the portfolio of Neuberger & Berman MANHATTAN Portfolio. Portfolio Turnover The portfolio turnover rate is the lesser of the cost of the securities purchased or the value of the securities sold, excluding all securities, including options, whose maturity or expiration date at the time of acquisition was one year or less, divided by the average monthly value of such securities owned during the year. - 55 - REPORTS TO SHAREHOLDERS Shareholders of each Fund receive unaudited semi-annual financial statements, as well as year-end financial statements audited by the independent auditors or independent accountants for the Fund and its corresponding Portfolio. Each Fund's statements show the investments owned by its corresponding Portfolio and the market values thereof and provide other information about the Fund and its operations, including the Fund's beneficial interest in its corresponding Portfolio. - 56 - ORGANIZATION Prior to January 1, 1995, the names of Neuberger and Berman FOCUS Trust and Neuberger & Berman FOCUS Portfolio were Neuberger & Berman Selected Sectors Trust and Neuberger & Berman Selected Sectors Portfolio, respectively. CUSTODIAN AND TRANSFER AGENT Each Fund and Portfolio has selected State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian for its securities and cash. All correspondence should be mailed to Neuberger & Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. State Street also serves as each Fund's transfer agent, administering purchases, redemptions, and transfers of Fund shares with respect to Institutions and the payment of dividends and other distributions to Institutions. INDEPENDENT AUDITORS/ACCOUNTANTS Each Fund and Portfolio (other than Neuberger & Berman MANHATTAN Trust and Portfolio) has selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116, as the independent auditors who will audit its financial statements. Neuberger & Berman MANHATTAN Trust and Portfolio have selected Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109, as the independent accountants who will audit their financial statements. LEGAL COUNSEL Each Fund and Portfolio has selected Kirkpatrick & Lockhart LLP, 1800 M Street, N.W., Washington, D.C. 20036, as its legal counsel. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES The following table sets forth the name, address, and percentage of ownership of each person who owned of record, or who was known by each Fund to own beneficially or of record, 5% or more of that Fund's outstanding shares at November 30, 1995: - 57 -
Name and Address Percentage of ---------------- Ownership at November 30, 1995 ----------------- Neuberger & Berman MAC & Co. 51.68% MANHATTAN Trust A/C 195-643 Mellon Bank N.A. Mutual Funds P.O. Box 320 Pittsburgh, PA 15230-0320 The Northern Trust Co., Trustee 25.56% FBO Case Corporation 22-75833 P.O. Box 92956 Chicago, IL 60675-0001 Riggs National Bank of Washington DC 7.40% Retirement Plan for Employees of Professional Golfers Assoc. of America 100 Avenue of the Champions Palm Beach Gardens, FL 33418-3653 National Finance Services Corp.* 5.19% P.O. Box 3908 Church Street Station New York, NY 100008-3908 Neuberger & Berman PRC Inc. 50.62% PARTNERS Trust c/o T. Rowe Price Financial Attn: Asset Recom. P.O. Box 17215 Baltimore, MD 21297-0354 The Bank of NY, Trustee 20.82% Chesapeake Corp. 401(k) Plan One Wall Street Master Trust 7th Floor New York, NY 10286-0001 - 58 - Name and Address Percentage of ---------------- Ownership at November 30, 1995 ----------------- National Financial Services Corp.* 12.18% P.O. Box 3908 Church Street Station New York, NY 10008-3908 Marshall & Isley Trust Co., Trustee 6.22% Mitra & Co. Attn: Exp Mutual Funds TR14 1000 N. Water Street Milwaukee, WI 53202-3197 Neuberger & Berman The Northern Trust Co., Trustee 27.18% GUARDIAN Trust Digital Equipment Corp. DTD 1-3-95 P.O. Box 92956 Chicago, IL 60675-0001 MAC & Co. 17.15% A/C 195-643 Mellon Bank N.A. P.O. Box 320 Pittsburgh, PA 15230-0320 National Financial Services Corp.* 9.54% P.O. Box 3908 Church Street Station New York, NY 100008-3908 The Bank of NY, Trustee 6.33% Melville Corp. 401(k) PSRP-General DTD 6/7/89 1 Wall Street, 7th Floor New York, NY 10286-0001 MAC & Co. 5.38% A/C #854-169 Mellon Bank N.A. Mutual Funds Dept. P.O. Box 320 Pittsburgh, PA 15230-0320 Neuberger & Berman National Financial Services Corp.* 51.22% FOCUS Trust P.O. Box 3908 Church Street Station New York, NY 100008-3908 - 59 - Name and Address Percentage of ---------------- Ownership at November 30, 1995 ----------------- MAC & Co. 21.80% A/C 195-643 Mellon Bank N.A. P.O. Box 320 Pittsburgh, PA 15230-0320 Aetna Life Insurance & Annuity Co. 8.97% ACES - Separate Account F Attn: Michael Weiner - RTAL 15 Farmington Ave. Hartford, CT 06156-0001 Neuberger & Berman Profit Sharing Plan for Partners & 72.78% GENESIS Trust Principals of Price Waterhouse P.O. Box 30004 Tampa, FL 33630-3004 MAC & Co. 22.34% A/C 195-643 Mellon Bank N.A. P.O. Box 320 Pittsburgh, PA 15230-0320
* National Financial Services Corp. holds these shares of record for the account of certain of its clients and has informed the Funds of its policy to maintain the confidentiality of holdings in its client accounts unless disclosure is expressly required by law. At December 6, 1995, the trustees and officers of the Trusts, as a group, owned beneficially or of record less than 1% of the outstanding shares of each Fund. REGISTRATION STATEMENT This SAI and the Prospectus do not contain all the infor- mation included in the Trust's registration statement filed with the SEC under the 1933 Act with respect to the securities offered by the Prospectus. Certain portions of the registration statement have been omitted pursuant to SEC rules and regulations. The registration statement, including the exhibits filed therewith, may be examined at the SEC's offices in Washington, D.C. - 60 - Statements contained in this SAI and in the Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. FINANCIAL STATEMENTS The following financial statements and related documents are incorporated herein by reference from the Funds' Annual Report to shareholders for the fiscal year ended August 31, 1995: The audited financial statements of the Funds and Portfolios and notes thereto for the fiscal year ended August 31, 1995, and the reports of Ernst & Young LLP, independent auditors, with respect to such audited financial statements of Neuberger & Berman GENESIS Trust and Portfolio, Neuberger & Berman FOCUS Trust and Portfolio, Neuberger & Berman GUARDIAN Trust and Portfolio, and Neuberger & Berman PARTNERS Trust and Portfolio, and the report of Coopers & Lybrand L.L.P., independent accountants, with respect to such audited financial statements of Neuberger & Berman MANHATTAN Trust and Portfolio. - 61 - Appendix A RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER S&P corporate bond ratings: AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA - Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A - Bonds rated A have a strong capacity to pay interest and repay principal, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories. BBB - Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in higher rated categories. 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 rating categories. Moody's corporate bond ratings: Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or an exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, the changes that can be visualized are most unlikely to impair the fundamentally strong position of the issuer. - 62 - 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 indicates that the issuer ranks in the lower end of its generic rating. - 63 - S&P commercial paper ratings: A-1 - This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+). Moody's commercial paper ratings Issuers rated Prime-1 (or related supporting institutions), also known as P-1, have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structures with moderate reliance on debt and ample asset protection. - 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. - 64 - Appendix B PERFORMANCE DATA - 65 - COST OF LIVING INDEX PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- --------- -------- --------- ---------- --------- 9/27/88 $10,000.00 $119.8000 0.00% 83.472 $119.8000 $10,000 Dividends and Capital Gains Reinvested =========== C O S T O F S H A R E S ============== Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- --------- --------- --------- 8/31/89 10,000 0 0 10,000 0 8/31/90 10,000 0 0 10,000 0 8/31/91 10,000 0 0 10,000 0 8/31/92 10,000 0 0 10,000 0 8/31/93 10,000 0 0 10,000 0 8/31/94 10,000 0 0 10,000 0 8/31/95 10,000 0 0 10,000 0 Totals 0 0 ================ V A L U E O F S H A R E S =============== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ 8/31/89 10,401 0 10,401 0 10,401 83 8/31/90 10,985 0 10,985 0 10,985 83 8/31/91 11,402 0 11,402 0 11,402 83 8/31/92 11,761 0 11,761 0 11,761 83 8/31/93 12,087 0 12,087 0 12,087 83 8/31/94 12,437 0 12,437 0 12,437 83 8/31/95 12,730 0 12,730 0 12,730 83 Totals 12,730 0 12,730 0 12,730 83 Average Annual Total Return for This Illustration: 3.55% (Annual Compounding)
FROM FOCUS TRUST PREPARED FOR: BARBARA
Net Asset Initial Initial Offering Sales Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- ----------- ---------- ---------- --------- 10/19/55 $200,000.00 $2.5084 0.00% 79,733.329 $2.5084 $200,000 Systematic Withdrawal Plan Dividends and Capital Gains Reinvested Monthly Withdrawals of $1,666.67 (10.0% Annually) Beginning 11/30/55 ====================== AMOUNTS WITHDRAWN ======================== From Income From Annual Cumulative Date Dividends Principal Total Total ---- --------- --------- ------ ---------- 12/31/55 0 3,333 3,333 3,333 12/31/56 3,075 16,925 20,000 23,333 12/31/57 2,911 17,089 20,000 43,333 12/31/58 3,531 16,469 20,000 63,333 12/31/59 2,647 17,353 20,000 83,333 12/31/60 2,638 17,362 20,000 103,333 12/31/61 1,514 18,486 20,000 123,333 12/31/62 2,823 17,177 20,000 143,333 12/31/63 4,158 15,842 20,000 163,333 12/31/64 4,580 15,420 20,000 183,333 12/31/65 4,878 15,122 20,000 203,333 12/31/66 5,474 14,526 20,000 223,333 12/31/67 6,001 13,999 20,000 243,333 12/31/68 7,814 12,186 20,000 263,333 12/31/69 10,904 9,096 20,000 283,333 12/31/70 11,517 8,483 20,000 303,333 12/31/71 8,939 11,061 20,000 323,333 12/31/72 6,963 13,037 20,000 343,333 12/31/73 7,714 12,286 20,000 363,333 12/31/74 10,666 9,334 20,000 383,333 12/31/75 11,931 8,069 20,000 403,333 12/31/76 11,691 8,309 20,000 423,333 12/31/77 12,064 7,936 20,000 443,333 12/31/78 14,895 5,105 20,000 463,333 12/31/79 17,745 2,255 20,000 483,333 12/31/80 24,168 -4,168 20,000 503,333 12/31/81 34,507 -14,507 20,000 523,333 12/31/82 35,376 -15,376 20,000 543,333 From Income From Annual Cumulative Date Dividends Principal Total Total ---- --------- --------- ------ ---------- 12/31/83 38,234 -18,234 20,000 563,333 12/31/84 34,870 -14,870 20,000 583,333 12/31/85 39,588 -19,588 20,000 603,333 12/31/86 40,877 -20,877 20,000 623,333 12/31/87 31,651 -11,651 20,000 643,333 12/31/88 31,622 -11,622 20,000 663,333 12/31/89 31,152 -11,152 20,000 683,333 12/31/90 25,865 -5,865 20,000 703,333 12/31/91 27,428 -7,428 20,000 723,333 12/31/92 22,593 -2,593 20,000 743,333 12/31/93 4,220 15,780 20,000 763,333 12/31/94 10,487 9,513 20,000 783,333 8/31/95 0 13,333 13,333 796,666 Totals 609,711 186,955 796,666 796,666
====== VALUE OF REMAINING SHARES ======= Annual Remaining Capital Cap Gain Original Gain Total Shares Date Distrib'n Shares Shares Value Held ---- --------- --------- -------- ----- ------ 12/31/55 0 224,392 0 224,392 78,535 12/31/56 7,330 243,982 8,155 252,137 75,616 12/31/57 8,869 182,115 14,547 196,662 73,399 12/31/58 5,116 239,403 26,648 266,051 69,711 12/31/59 14,487 260,750 47,285 308,035 69,413 12/31/60 12,216 244,571 60,887 305,458 68,446 12/31/61 12,799 262,910 83,479 346,389 67,418 12/31/62 6,319 191,487 73,223 264,710 65,143 12/31/63 9,227 205,607 94,268 299,875 63,590 12/31/64 9,923 198,421 107,998 306,419 62,459 12/31/65 12,757 225,255 145,661 370,916 61,763 12/31/66 24,135 189,601 158,410 348,011 64,430 12/31/67 28,440 228,946 232,144 461,090 66,401 12/31/68 29,099 211,733 256,462 468,195 69,003 12/31/69 12,581 162,510 218,142 380,652 69,986 12/31/70 4,495 139,496 203,486 342,982 69,223 12/31/71 9,498 133,615 219,440 353,055 69,109 12/31/72 9,192 129,330 243,386 372,716 68,633 12/31/73 4,408 103,616 223,115 326,731 66,855 12/31/74 0 73,168 173,873 247,041 64,865 12/31/75 0 85,275 223,115 308,390 63,102 12/31/76 10,166 98,133 289,582 387,715 63,565 12/31/77 13,091 87,043 290,631 377,674 64,760 12/31/78 16,463 78,911 298,167 377,078 66,370 12/31/79 18,820 106,167 433,773 539,940 68,772 12/31/80 55,081 136,243 600,430 736,673 75,144 12/31/81 65,009 120,522 518,239 638,761 86,666 12/31/82 18,042 128,437 493,997 622,434 92,304 12/31/83 29,906 161,024 578,434 739,458 98,760 12/31/84 26,760 170,504 584,155 754,659 104,585 12/31/85 40,018 211,307 690,668 901,975 112,723 12/31/86 77,109 226,632 745,438 972,070 125,890 12/31/87 174,683 200,276 760,369 960,645 148,345 12/31/88 33,263 231,501 866,455 1,097,956 154,853 12/31/89 166,796 269,717 1,133,269 1,402,986 177,282 12/31/90 28,044 250,146 1,049,910 1,300,056 182,282 12/31/91 66,461 300,626 1,298,210 1,598,836 191,508 12/31/92 170,497 327,575 1,586,004 1,913,579 212,897 12/31/93 2,110 372,854 1,893,677 2,266,531 211,430 12/31/94 0 365,190 1,902,509 2,267,699 210,557 8/31/95 0 473,197 2,545,512 3,018,709 209,487 Totals 1,233,211 473,197 2,545,512 3,018,709 209,487 Average Annual Total Return for This Illustration: 12.25% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 26.32% 16.13% 14.32%
NEUBERGER & BERMAN FOCUS
========================= COST OF SHARES =========================== Annual Cumulative Total Annual Cap Cumulative Income Income Investment Gain Date Investment Dividends Dividends Cost Distribution 8/31/77 10,000 2,230 17,323 27,232 1,939 8/31/78 10,000 2,425 19,748 29,748 2,631 8/31/79 10,000 3,158 22,906 32,906 3,490 8/31/80 10,000 3,951 26,857 36,857 4,191 8/31/81 10,00 5,579 32,436 42,436 12,716 8/31/82 10,000 8,199 40,635 50,635 15,446 8/31/83 10,000 8,699 49,334 59,334 4,436 8/31/84 10,000 9,691 59,025 69,025 7,580 8/31/85 10,000 9,081 68,106 78,106 6,969 8/31/86 10,000 10,569 78,675 88,675 10,684 8/31/87 10,000 11,157 89,832 99,832 21,046 8/31/88 10,000 8,807 98,639 108,639 48,561 8/31/89 10,000 8,973 107,612 117,612 9,433 8/31/90 10,000 8,987 116,599 126,599 48,090 8/31/91 10,000 7,572 124,172 134,172 8,209 8/31/92 10,000 8,144 132,316 142,316 19,739 8/31/93 10,000 6,791 139,107 149,107 51,238 8/31/94 10,000 6,710 145,817 155,817 45,629 8/31/95 10,000 5,822 151,639 161,639 43,083 Totals 151,639 387,682 =========================== VALUE OF SHARES================================= From Cap From From Gains Dividends Date Investment Reinvested Sub Total Reinvested Total Value Shares Held 8/31/77 24,299 29,207 53,506 21,716 75,222 5,159 8/31/78 26,133 34,517 60,650 26,217 86,867 5,540 8/31/79 29,884 43,675 73,559 33,784 107,343 5,987 8/31/80 37,917 61,280 99,197 48,394 147,591 6,488 8/31/81 35,767 70,225 105,992 51,100 157,092 7,320 8/31/82 26,550 66,476 93,026 45,548 138,574 8,699 8/31/83 32,801 88,080 120,881 67,947 188,828 9,595 8/31/84 31,416 92,348 123,764 75,287 199,051 10,560 8/31/85 33,167 105,513 138,680 89,933 228,613 11,488 8/31/86 35,117 124,321 159,438 107,689 267,127 12,678 8/31/87 40,650 172,364 213,014 139,741 352,755 14,643 8/31/88 28,766 163,857 192,623 106,906 299,529 17,354 8/31/89 36,333 219,324 255,657 146,768 402,425 18,460 8/31/90 30,083 227,279 257,362 130,065 387,427 21,464 8/31/91 33,416 262,297 295,713 153,540 449,253 22,407 =========================== VALUE OF SHARES================================= From Cap From From Gains Dividends Date Investment Reinvested Sub Total Reinvested Total Value Shares Held 8/31/92 35,084 297,046 332,130 170,166 502,296 23,862 8/31/93 39,999 401,852 441,851 202,320 644,171 26,840 8/31/94 40,700 457,204 497,904 212,966 710,870 29,110 8/31/95 48,134 598,363 646,497 259,653 906,150 31,376 Totals 48,134 598,363 646,497 259,653 906,150 31,376 Average Annual Total Return for This Illustration: 11.97% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value for Period Ending 6/30/95: 26.38% 15.48% 14.00%
FROM SELECTED SECTORS TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ----- ---------- -------- -------- --------- ---------- --------- 10/19/55 $10,000.00 $2.5084 0.00% 3,986.666 $2.5084 $10,000 Dividends and Capital Gains Reinvested ============= C O S T O F S H A R E S ============= Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 8/31/56 10,000 0 0 10,000 0 8/31/57 10,000 165 165 10,165 393 8/31/58 10,000 169 334 10,334 516 8/31/59 10,000 226 560 10,560 327 8/31/60 10,000 182 741 10,741 994 8/31/61 10,000 193 935 10,935 896 8/31/62 10,000 118 1,053 11,053 998 8/31/63 10,000 235 1,288 11,288 527 8/31/64 10,000 373 1,661 11,661 828 8/31/65 10,000 439 2,100 12,100 951 8/31/66 10,000 499 2,599 12,599 1,304 8/31/67 10,000 592 3,190 13,190 2,609 8/31/68 10,000 683 3,873 13,873 3,238 8/31/69 10,000 930 4,803 14,803 3,464 8/31/70 10,000 1,358 6,162 16,162 1,567 8/31/71 10,000 1,520 7,682 17,682 593 8/31/72 10,000 1,247 8,929 18,929 1,325 8/31/73 10,000 1,028 9,956 19,956 1,356 8/31/74 10,000 1,207 11,164 21,164 690 8/31/75 10,000 1,785 12,949 22,949 0 8/31/76 10,000 2,145 15,094 25,094 0 8/31/77 10,000 2,230 17,323 27,323 1,939 8/31/78 10,000 2,425 19,748 29,748 2,631 8/31/79 10,000 3,158 22,906 32,906 3,490 8/31/80 10,000 3,951 26,857 36,857 4,191 8/31/81 10,000 5,579 32,436 42,436 12,716 8/31/82 10,000 8,199 40,635 50,635 15,446 8/31/83 10,000 8,699 49,334 59,334 4,436 8/31/84 10,000 9,691 59,025 69,025 7,580 8/31/85 10,000 9,081 68,106 78,106 6,969 8/31/86 10,000 10,569 78,675 88,675 10,684 8/31/87 10,000 11,157 89,832 99,832 21,046 8/31/88 10,000 8,807 98,639 108,639 48,561 Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 8/31/89 10,000 8,973 107,612 117,612 9,433 8/31/90 10,000 8,987 116,599 126,599 48,090 8/31/91 10,000 7,572 124,172 134,172 8,209 8/31/92 10,000 8,144 132,316 142,316 19,739 8/31/93 10,000 6,791 139,107 149,107 51,238 8/31/94 10,000 1,284 140,391 150,391 642 8/31/95 10,000 3,219 143,610 153,610 0 Totals 143,610 299,612
===================== VALUE OF SHARES ========================== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held --- ---------- ---------- ----- ---------- ----- ----- 8/31/56 13,082 0 13,082 0 13,082 3,987 8/31/57 13,343 439 13,782 184 13,966 4,173 8/31/58 13,022 995 14,017 366 14,383 4,403 8/31/59 17,576 1,780 19,356 795 20,151 4,571 8/31/60 18,891 3,108 21,999 1,073 23,072 4,869 8/31/61 20,491 4,497 24,988 1,407 26,395 5,135 8/31/62 16,392 4,432 20,824 1,224 22,048 5,362 8/31/63 19,283 5,929 25,212 1,760 26,972 5,576 8/31/64 19,692 6,927 26,619 2,190 28,809 5,833 8/31/65 21,250 8,509 29,759 2,841 32,600 6,116 8/31/66 21,350 9,776 31,126 3,323 34,449 6,433 8/31/67 28,650 17,059 45,709 5,353 51,062 7,105 8/31/68 28,016 19,965 47,981 5,928 53,909 7,671 8/31/69 23,799 20,063 43,862 5,869 49,731 8,330 8/31/70 18,833 17,235 36,068 5,822 41,890 8,867 8/31/71 22,017 20,853 42,870 8,613 51,483 9,322 8/31/72 21,783 22,065 43,848 9,870 53,718 9,831 8/31/73 19,151 20,718 39,869 9,677 49,546 10,314 8/31/74 15,166 16,907 32,073 8,536 40,609 10,674 8/31/75 20,167 22,480 42,647 13,779 56,426 11,155 8/31/76 23,783 26,512 50,295 18,869 69,164 11,594 8/31/77 24,299 29,207 53,506 21,716 75,222 12,341 8/31/78 26,133 34,517 60,650 26,217 86,867 13,252 8/31/79 29,884 43,675 73,559 33,784 107,343 14,320 8/31/80 37,917 61,280 99,197 48,394 147,591 15,518 8/31/81 35,767 70,225 105,992 51,100 157,092 17,510 8/31/82 26,549 66,476 93,025 45,548 138,573 20,808 8/31/83 32,801 88,080 120,881 67,947 188,828 22,951 8/31/84 31,416 92,348 123,764 75,287 199,051 25,259 8/31/85 33,167 105,513 138,680 89,933 228,613 27,479 8/31/86 35,117 124,231 159,438 107,689 267,127 30,326 8/31/87 40,650 172,364 213,014 139,741 352,755 34,596 8/31/88 28,766 163,857 192,623 106,906 299,529 41,511 8/31/89 36,333 219,324 255,657 146,768 402,425 44,156 8/31/90 30,083 227,279 257,362 130,065 387,427 51,342 8/31/91 33,416 262,297 295,713 153,540 449,253 53,597 8/31/92 35,083 297,046 332,129 170,166 502,295 57,078 8/31/93 39,986 401,714 441,700 202,250 643,950 64,202 8/31/94 45,288 455,662 500,950 230,430 731,380 64,382 8/31/95 57,448 578,001 635,449 296,604 932,053 64,681 Totals 57,448 578,001 635,449 296,604 932,053 64,681 Average Annual Total Return for This Illustration: 12.05% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 26.32% 16.13% 14.32%
FROM GENESIS TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- -------- --------- ---------- --------- 9/27/88 $10,000.00 $5.8343 0.00% 1,714.000 $5.8343 $10,000 Dividends and Capital Gains Reinvested ============== C O S T O F S H A R E S ================= Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 13/31/88 10,000 20 20 10,020 0 12/31/89 10,000 40 60 10,060 240 12/31/90 10,000 82 142 10,142 0 12/31/91 10,000 21 163 10,163 186 12/31/92 10,000 0 163 10,163 0 12/31/93 10,000 0 163 10,163 18 12/31/94 10,000 0 163 10,163 9 8/31/95 10,000 0 163 10,163 0 Totals 163 454 =============== V A L U E O F S H A R E S ================== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ----- 13/31/88 10,320 0 10,320 20 10,340 1,717 12/31/89 11,820 240 12,060 63 12,123 1,758 12/31/90 9,820 200 10,020 134 10,154 1,772 12/31/91 13,700 465 14,165 208 14,373 1,798 12/31/92 15,840 537 16,377 241 16,618 1,798 12/31/93 18,100 632 18,732 275 19,007 1,800 12/31/94 17,792 630 18,422 270 18,692 1,801 8/31/95 21,683 768 22,451 329 22,780 1,801 Totals 21,683 768 22,451 329 22,780 1,801 Average Annual Total Return for This Illustration: 12.62% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year Since Inception (9/27/88) at Net Asset Value ------ ------ ------------------------- for Periods Ending 6/30/95: 16.33% 11.54% 11.68%
FROM GENESIS TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- ------- -------- --------- --------- --------- 9/27/88 $10,000.00 $5.8343 0.00% 1,714.000 $5.8343 $10,000 Dividends and Capital Gains Reinvested =============== C O S T O F S H A R E S ============== Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- --------- --------- --------- 8/31/89 10,000 20 20 10,020 0 8/31/90 10,000 40 60 10,060 240 8/31/91 10,000 82 142 10,142 0 8/31/92 10,000 21 163 10,163 186 8/31/93 10,000 0 163 10,163 0 8/31/94 10,000 0 163 10,163 18 8/31/95 10,000 0 163 10,163 9 Totals 163 454 ==================== VALUE OF SHARES ======================= From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ 8/31/89 13,020 0 13,020 25 13,045 1,717 8/31/90 9,980 203 10,183 53 10,236 1,758 8/31/91 13,400 273 13,673 183 13,856 1,772 8/31/92 13,880 471 14,351 211 14,562 1,798 8/31/93 17,226 584 17,810 262 18,072 1,798 8/31/94 18,151 634 18,785 276 19,061 1,800 8/31/95 21,683 768 22,451 329 22,780 1,801 Totals 21,683 768 22,451 329 22,780 1,801 Average Annual Total Return for This Illustration: 12.62% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year Since Inception (9/27/88) at Net Asset Value ------ ------ ------------------------- for Periods Ending 9/30/95: 22.18% 19.27% 12.66%
FROM GUARDIAN TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- -------- --------- --------- --------- 6/1/50 $200,000.00 $1.8674 0.00% 107,100.000 $1.8674 $200,000 Systematic Withdrawal Plan Dividends and Capital Gains Reinvested Monthly Withdrawals of $1,666.67 (10.0% Annually) Beginning 6/30/50 ================= AMOUNTS WITHDRAWN ======================== From Annual Income From Annual Cumulative Cap Gain Date Dividends Principal Total Total Distrib'n ---- --------- --------- ------ ---------- --------- 12/31/50 1,949 9,718 11,667 11,667 0 12/31/51 8,912 11,088 20,000 31,667 4,011 12/31/52 7,746 12,254 20,000 51,667 5,294 12/31/53 7,508 12,492 20,000 71,667 1,195 12/31/54 6,623 13,377 20,000 91,667 8,092 12/31/55 7,297 12,703 20,000 111,667 14,484 12/31/56 8,168 11,832 20,000 131,667 11,270 12/31/57 8,166 11,834 20,000 151,667 4,022 12/31/58 8,448 11,552 20,000 171,667 7,844 12/31/59 7,257 12,743 20,000 191,667 29,528 12/31/60 8,672 11,328 20,000 211,667 8,561 12/31/61 7,963 12,037 20,000 231,667 24,917 12/31/62 8,563 11,437 20,000 251,667 8,454 12/31/63 9,171 10,829 20,000 271,667 11,764 12/31/64 9,205 10,795 20,000 291,667 20,942 12/31/65 10,119 9,881 20,000 311,667 21,979 12/31/66 10,391 9,609 20,000 331,667 13,153 12/31/67 10,141 9,859 20,000 351,667 35,963 12/31/68 11,847 8,153 20,000 371,667 40,279 12/31/69 14,336 5,664 20,000 391,667 21,098 12/31/70 16,016 3,984 20,000 411,667 4,760 12/31/71 16,556 3,444 20,000 431,667 27,974 12/31/72 16,575 3,425 20,000 451,667 26,866 12/31/73 17,922 2,078 20,000 471,667 12,600 12/31/74 23,031 -3,031 20,000 491,667 2,344 12/31/75 27,310 -7,310 20,000 511.667 4,072 12/31/76 26,446 -6,446 20,000 531,667 40,400 12/31/77 27,585 -7,585 20,000 551,667 31,538 From Annual Income From Annual Cumulative Cap Gain Date Dividends Principal Total Total Distrib'n ---- --------- --------- ------ ---------- --------- 12/31/78 30,570 -10,570 20,000 571,667 46,444 12/31/79 34,576 -14,576 20,000 591,667 80,676 12/31/80 41,729 -21,729 20,000 611,667 165,482 12/31/81 66,294 -46,294 20,000 631,667 70,690 12/31/82 68,340 -48,340 20,000 651,667 35,556 12/31/83 66,325 -46,325 20,000 671,667 109,076 12/31/84 71,652 -51,652 20,000 691,667 56,355 12/31/85 93,224 -73,224 20,000 711,667 342,188 12/31/86 96,987 -76,987 20,000 731,667 290,204 12/31/87 112,025 -92,025 20,000 751,667 313,521 12/31/88 93,586 -73,586 20,000 771,667 315,070 12/31/89 104,904 -84,904 20,000 791,667 342,357 12/31/90 113,366 -93,366 20,000 811,667 53,901 12/31/91 105,305 -85,305 20,000 831,667 303,786 12/31/92 91,918 -71,918 20,000 851,667 237,107 12/31/93 50,982 -30,982 20,000 871,667 6,718 12/31/94 81,035 -61,035 20,000 891,667 0 8/31/95 33,973 -20,640 13,333 905,000 0 Totals 1,700,716 -795,716 905,000 905,000 3,212,534
======= VALUE OF REMAINING SHARES ======== Remaining Capital Original Gain Total Shares Date Shares Shares Value Held ---- --------- --------- ----- ------ 12/31/50 205,803 0 205,803 101,950 12/31/51 217,640 4,164 221,804 98,733 12/31/52 214,635 10,055 224,690 95,798 12/31/53 189,442 10,673 200,115 90,738 12/31/54 229,670 22,978 252,648 88,659 12/31/55 238,303 40,212 278,515 89,362 12/31/56 228,625 52,308 280,933 89,388 12/31/57 186,916 49,235 236,151 87,033 12/31/58 235,536 73,907 309,443 85,637 12/31/59 226,001 105,441 331,442 90,647 12/31/60 222,016 118,118 340,134 89,902 12/31/61 239,690 159,191 398,881 92,910 12/31/62 197,144 147,404 344,548 92,161 12/31/63 215,254 181,382 396,636 92,347 12/31/64 219,173 214,377 433,550 94,492 12/31/65 225,462 252,809 478,271 96,976 12/31/66 197,924 245,799 443,723 97,904 12/31/67 220,178 323,669 543,847 103,273 12/31/68 216,850 370,879 587,729 109,129 12/31/69 179,328 336,080 515,408 112,607 12/31/70 171,975 334,938 506,913 112,917 12/31/71 181,013 389,433 570,446 118,954 12/31/72 184,207 430,959 615,166 123,657 12/31/73 150,890 368,713 519,603 126,534 12/31/74 124,819 298,471 423,290 128,353 12/31/75 173,644 400,266 573,910 131,169 12/31/76 221,270 537,271 758,541 140,602 12/31/77 208,687 520,363 729,050 148,613 12/31/78 214,664 556,158 770,822 160,613 12/31/79 274,553 756,693 1,031,246 178,254 12/31/80 317,570 980,308 1,297,878 207,777 12/31/81 314,589 901,452 1,216,041 230,021 12/31/82 425,892 1,110,224 1,536,116 243,658 12/31/83 530,917 1,372,115 1,903,032 266,216 12/31/84 585,533 1,434,323 2,019,856 281,382 12/31/85 673,563 1,829,577 2,503,140 341,077 12/31/86 726,309 2,055,106 2,781,415 390,624 12/31/87 694,140 2,041,976 2,736,116 454,604 12/31/88 858,447 2,623,825 3,482,272 510,892 12/31/89 1,015,474 3,194,664 4,210,138 568,321 12/31/90 1,019,797 2,971,539 3,991,336 589,942 12/31/91 1,352,732 3,986,428 5,339,160 636,775 12/31/92 1,600,592 4,731,383 6,331,975 669,848 12/31/93 1,834,180 5,332,300 7,166,480 673,541 12/31/94 1,902,833 5,352,346 7,255,179 679,324 8/31/95 2,486,742 6,930,987 9,417,729 680,964 Remaining Capital Original Gain Total Shares Date Shares Shares Value Held ---- --------- --------- ----- ------ 12/31/50 205,803 0 205,803 101,950 Totals 2,486,742 6,930,987 9,417,729 680,964 Average Annual Return for This Illustration: 12.98% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 24.88% 16.17% 14.92%
FROM GUARDIAN TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ----- ----------- -------- --------- ---------- --------- --------- 6/1/50 $10,000.00 $1.8674 0.00% 5,355.000 $1.8674 $10,000 Dividends and Capital Gains Reinvested =============== C O S T O F S H A R E S ================ Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 8/31/50 10,000 0 0 10,000 0 8/31/51 10,000 406 406 10,406 0 8/31/52 10,000 511 917 10,917 228 8/31/53 10,000 488 1,404 11,404 330 8/31/54 10,000 512 1,916 11,916 82 8/31/55 10,000 506 2,421 12,421 609 8/31/56 10,000 611 3,033 13,033 1,177 8/31/57 10,000 729 3,761 13,761 984 8/31/58 10,000 867 4,629 14,629 378 8/31/59 10,000 869 5,498 15,498 797 8/31/60 10,000 842 6,340 16,340 3,194 8/31/61 10,000 1,013 7,352 17,352 985 8/31/62 10,000 1,012 8,364 18,364 3,028 8/31/63 10,000 1,117 9,481 19,481 1,086 8/31/64 10,000 1,268 10,750 20,750 1,597 8/31/65 10,000 1,353 12,102 22,102 2,983 8/31/66 10,000 1,553 13,656 23,656 3,275 8/31/67 10,000 1,649 15,305 25,305 2,046 8/31/68 10,000 1,724 17,029 27,029 5,829 8/31/69 10,000 2,081 19,110 29,110 6,776 8/31/70 10,000 2,566 21,676 31,676 3,678 8/31/71 10,000 3,298 24,974 34,974 866 8/31/72 10,000 3,258 28,232 38,232 5,285 8/31/73 10,000 3,355 31,587 41,587 5,256 8/31/74 10,000 3,872 35,458 45,458 2,555 8/31/75 10,000 5,577 41,036 51,036 495 8/31/76 10,000 6,125 47,161 57,161 895 8/31/77 10,000 6,287 53,448 63,448 9,159 8/31/78 10,000 6,693 60,142 70,142 7,349 8/31/79 10,000 7,695 67,837 77,837 11,115 8/31/80 10,000 9,009 76,845 86,845 19,773 Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 8/31/81 10,000 11,305 88,150 98,150 41,343 8/31/82 10,000 17,522 105,672 115,672 17,945 8/31/83 10,000 18,076 123,748 133,748 9,177 8/31/84 10,000 20,004 143,752 153,752 28,486 8/31/85 10,000 19,528 163,281 173,281 14,879 8/31/86 10,000 27,134 190,415 200,415 91,183 8/31/87 10,000 27,958 218,373 228,373 77,910 8/31/88 10,000 26,953 245,325 255,325 84,700 8/31/89 10,000 26,927 272,252 282,252 85,664 8/31/90 10,000 30,193 302,445 312,445 93,568 8/31/91 10,000 31,735 334,181 344,181 14,818 8/31/92 10,000 24,360 358,541 368,541 83,874 8/31/93 10,000 25,329 383,870 393,870 65,697 8/31/94 10,000 13,106 396,976 406,976 1,867 8/31/95 10,000 22,667 419,643 429,643 0 Totals 419,643 812,922
===================== VALUE OF SHARES ========================== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ 8/31/50 10,070 0 10,070 0 10,070 5,355 8/31/51 11,960 0 11,960 436 12,396 5,550 8/31/52 12,279 242 12,521 978 13,499 5,887 8/31/53 11,451 549 12,000 1,384 13,384 6,259 8/31/54 13,450 740 14,190 2,182 16,372 6,518 8/31/55 17,130 1,719 18,849 3,341 22,190 6,937 8/31/56 17,380 3,019 20,399 4,024 24,423 7,525 8/31/57 16,320 3,830 20,150 4,500 24,650 8,088 8/31/58 16,960 4,427 21,387 5,636 27,023 8,532 8/31/59 21,271 6,483 27,754 8,004 35,758 9,002 8/31/60 20,160 9,559 29,719 8,470 38,189 10,144 8/31/61 23,360 12,273 35,633 10,902 46,535 10,668 8/31/62 19,769 13,016 32,785 10,163 42,948 11,633 8/31/63 23,170 16,559 39,729 13,134 52,863 12,218 8/31/64 24,960 19,612 44,572 15,480 60,052 12,884 8/31/65 25,860 23,410 49,270 17,411 66,681 13,808 8/31/66 23,260 23,993 47,253 17,072 64,325 14,809 8/31/67 29,449 32,922 62,371 23,464 85,835 15,608 8/31/68 28,760 38,443 67,203 24,725 91,928 17,117 8/31/69 25,960 40,738 66,698 24,245 90,943 18,760 8/31/70 21,620 37,139 58,759 22,637 81,396 20,161 8/31/71 26,400 46,409 72,809 31,308 104,117 21,119 8/31/72 26,850 53,451 80,301 35,383 115,684 23,072 8/31/73 22,880 50,080 72,960 33,326 106,286 24,876 8/31/74 17,809 41,114 58,923 29,267 88,190 26,517 8/31/75 22,720 53,090 75,810 43,788 119,598 28,189 8/31/76 28,039 66,646 94,685 60,968 155,653 29,726 8/31/77 27,441 74,636 102,077 65,961 168,038 32,793 8/31/78 30,261 90,846 121,107 80,290 201,397 35,640 8/31/79 32,421 111,545 143,966 95,231 239,197 39,509 8/31/80 34,021 140,270 174,291 109,849 284,140 44,726 8/31/81 30,591 163,434 194,025 109,262 303,287 53,092 8/31/82 28,740 172,049 200,789 190,863 321,652 59,932 8/31/83 39,531 247,290 286,821 186,311 473,132 64,094 8/31/84 38,119 267,922 306,041 200,382 506,423 71,141 8/31/85 43,360 321,569 364,929 248,996 613,925 75,820 8/31/86 45,770 452,146 497,916 294,520 792,436 92,713 8/31/87 50,319 596,296 646,615 357,180 1,003,795 106,823 8/31/88 38,510 554,756 593,266 303,185 896,451 124,656 8/31/89 45,669 763,809 809,478 390,876 1,200,354 140,747 8/31/90 35,710 681,487 717,319 333,090 1,050,409 157,517 8/31/91 44,701 871,487 916,188 454,426 1,370,614 164,198 8/31/92 47,200 1,008,398 1,055,598 505,323 1,560,921 177,092 8/31/93 54,996 1,246,328 1,301,324 616,108 1,917,432 186,702 8/31/94 60,350 1,369,662 1,430,012 690,165 2,120,177 188,126 8/31/95 74,060 1,680,783 1,754,843 874,469 2,629,312 190,117 From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ Totals 74,060 1,680,783 1,754,843 874,469 2,629,312 190,117 Average Annual Total Return for This Illustration: 13.10% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 24.88% 16.17% 14.92%
FROM MANHATTAN TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- -------- --------- ---------- --------- 3/1/79 $100,000.00 $1.9814 0.00% 50,468.754 $1.9814 $100,000 Systematic Withdrawal Plan Dividends and Capital Gains Reinvested Monthly Withdrawals of $666.67 (8.0% Annually) Beginning 3/31/79 =============== AMOUNTS WITHDRAWN =================== From Annual Income From Annual Cumulative Cap Gain Date Dividends Principal Total Total Distrib'n ---- --------- --------- ----- ---------- --------- 12/31/79 1,883 4,784 6,667 6,667 0 12/31/80 3,280 4,720 8,000 14,667 0 12/31/81 3,547 4,453 8,000 22,667 0 12/31/82 4,551 3,449 8,000 30,667 0 12/31/83 5,835 2,165 8,000 38,667 0 12/31/84 6,138 1,862 8,000 46,667 0 12/31/85 3,726 4,274 8,000 54,667 0 12/31/86 2,675 5,325 8,000 62,667 42,676 12/31/87 3,393 4,607 8,000 70,667 5,279 12/31/88 13,101 -5,101 8,000 78,667 32,377 12/31/89 7,517 483 8,000 86,667 43,849 12/31/90 7,337 663 8,000 94,667 6,879 12/31/91 5,131 2,869 8,000 102,667 18,658 12/31/92 2,400 5,600 8,000 110,667 80,646 12/31/93 351 7,649 8,000 118,667 351 12/31/94 694 7,306 8,000 126,667 2,776 8/31/95 0 5,333 5,333 132,000 0 Totals 71,560 60,440 132,000 132,000 233,490
===== VALUE OF REMAINING SHARES ===== Remaining Capital Original Gain Total Shares Date Shares Shares Value Held ---- --------- ------ ----- ------ 12/31/79 127,622 0 127,622 48,354 12/31/80 164,831 0 164,831 46,805 12/31/81 145,245 0 145,245 45,437 12/31/82 177,074 0 177,074 44,510 12/31/83 216,209 0 216,209 44,200 12/31/84 222,819 0 222,819 43,884 12/31/85 296,292 0 296,292 43,206 12/31/86 294,506 43,543 338,049 48,800 12/31/87 285,291 47,334 332,625 48,879 12/31/88 298,976 84,694 383,670 54,834 12/31/89 345,026 141,659 486,685 60,230 12/31/90 306,649 132,934 439,583 61,135 12/31/91 381,160 185,362 566,522 62,828 12/31/92 386,526 271,417 657,943 70,898 12/31/93 416,710 298,670 715,380 70,135 12/31/94 393,206 289,733 682,939 69,688 8/31/95 515,056 384,045 899,101 69,215 Totals 515,056 384,045 899,101 69,215 Average Annual Total Return for This Illustration: 18.35% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 28.38% 12.59% 13.93%
FROM MANHATTAN TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- -------- --------- --------- --------- 3/1/79 $10,000.00 $1.9814 0.00% 5,046.875 $1.9814 $10,000 Dividends and Capital Gains Reinvested ============== C O S T O F S H A R E S ================= Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- --------- --------- --------- 8/31/79 10,000 0 0 10,000 0 8/31/80 10,000 553 553 10,553 0 8/31/81 10,000 407 960 10,960 0 8/31/82 10,000 542 1,501 11,501 0 8/31/83 10,000 733 2,234 12,234 0 8/31/84 10,000 801 3,035 13,035 0 8/31/85 10,000 505 3,540 13,540 0 8/31/86 10,000 373 3,913 13,913 2,749 8/31/87 10,000 485 4,398 14,398 4,022 8/31/88 10,000 937 5,335 15,335 4,464 8/31/89 10,000 989 6,324 16,324 247 8/31/90 10,000 1,137 7,461 17,461 6,632 8/31/91 10,000 1,130 8,590 18,590 1,059 8/31/92 10,000 803 9,393 19,393 2,919 8/31/93 10,000 381 9,774 19,774 12,795 8/31/94 10,000 56 9,830 19,830 56 8/31/95 10,000 113 9,943 19,943 451 Totals 9,943 35,395
=============== V A L U E O F S H A R E S ================== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ----- ---------- ---------- ------ ---------- ----- ------ 8/31/79 12,383 0 12,383 0 12,383 5,047 8/31/80 15,469 0 15,469 649 16,118 5,259 8/31/81 15,586 0 15,586 1,037 16,623 5,383 8/31/82 16,015 0 16,015 1,661 17,676 5,570 8/31/83 23,633 0 23,633 3,290 26,923 5,750 8/31/84 25,039 0 25,039 4,385 29,424 5,931 8/31/85 30,430 0 30,430 5,872 36,302 6,021 8/31/86 38,632 3,199 41,831 7,889 49,720 6,495 8/31/87 47,343 9,210 56,553 10,245 66,798 7,121 8/31/88 33,867 11,378 45,245 8,334 53,579 7,984 8/31/89 47,187 16,184 63,371 12,933 76,304 8,161 8/31/90 36,954 18,683 55,637 11,158 66,795 9,123 8/31/91 45,117 24,128 69,245 15,028 84,273 9,427 8/31/92 45,273 27,115 72,388 15,879 88,267 9,840 8/31/93 50,519 44,058 94,577 18,129 112,706 11,259 8/31/94 52,337 45,699 98,036 18,838 116,874 11,270 8/31/95 65,559 57,843 123,402 23,747 147,149 11,328 Totals 65,559 57,843 123,402 23,747 147,149 11,328 Average Annual Total Return for This Illustration: 17.70% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 28.38% 12.59% 13.93%
FROM PARTNERS TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- --------- ---------- --------- --------- 1/20/75 $100,000.00 $2.9100 0.00% 34,364.471 $2.9100 $100,000 Systematic Withdrawal Plan Dividends and Capital Gains Reinvested Monthly Withdrawals of $666.67 (8.0% Annually) Beginning 2/28/75 ============== AMOUNTS WITHDRAWN =============== From Annual Date Income From Annual Cumulative Cap Gain ---- Dividends Principal Total Total Distrib'n --------- --------- ------ --------- --------- 12/31/75 5,318 2,015 7,333 7,333 0 12/31/76 4,233 3,767 8,000 15,333 0 12/31/77 3,267 4,733 8,000 23,333 0 12/31/78 4,122 3,878 8,000 31,333 0 12/31/79 6,168 1,832 8,000 39,333 0 12/31/80 9,210 -1,210 8,000 47,333 40,179 12/31/81 15,507 -7,507 8,000 55,333 53,866 12/31/82 23,564 -15,564 8,000 63,333 0 12/31/83 19,017 -11,017 8,000 71,333 44,374 12/31/84 19,169 -11,169 8,000 79,333 7,188 12/31/85 18,242 -10,242 8,000 87,333 35,642 12/31/86 13,684 -5,684 8,000 95,333 69,975 12/31/87 26,170 -18,170 8,000 103,333 102,242 12/31/88 27,730 -19,730 8,000 111,333 0 12/31/89 33,949 -25,949 8,000 119,333 75,346 12/31/90 36,929 -28,929 8,000 127,333 16,660 12/31/91 18,002 -10,002 8,000 135,333 40,788 12/31/92 10,393 -2,393 8,000 143,333 97,911 12/31/93 1,342 6,658 8,000 151,333 2,685 12/31/94 2,677 5,323 8,000 159,333 10,707 8/31/95 0 5,333 5,333 164,666 0 Totals 298,694 -134,028 164,666 164,666 597,564
======= VALUE OF REMAINING SHARES====== Remaining Capital Original Gain Total Shares Date Shares Shares Value Held ---- --------- ------- ----- ------ 12/31/75 110,735 0 110,735 33,808 12/31/76 136,496 0 136,496 32,829 12/31/77 137,664 0 137,664 31,716 12/31/78 151,649 0 151,649 30,824 12/31/79 207,212 0 207,212 30,511 12/31/80 222,076 45,753 267,829 37,168 12/31/81 184,895 91,414 276,309 48,327 12/31/82 234,349 105,949 340,298 51,354 12/31/83 245,016 152,082 397,098 60,372 12/31/84 259,418 160,969 420,387 63,525 12/31/85 311,544 225,673 537,217 70,251 12/31/86 321,789 300,102 621,891 80,341 12/31/87 295,384 346,029 641,413 95,573 12/31/88 348,049 384,170 732,219 98,272 12/31/89 401,420 489,025 890,445 110,640 12/31/90 386,054 450,928 836,982 117,240 12/31/91 454,523 561,044 1,015,567 123,586 12/31/92 487,673 696,987 1,184,660 135,011 12/31/93 554,180 804,960 1,359,140 134,568 12/31/94 538,043 799,728 1,337,771 135,128 8/31/95 683,111 1,024,298 1,707,409 134,654 Totals 683,111 1,024,298 1,707,409 134,654 Average Annual Total Return for This Illustration: 18.21% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------- ------ ------- for Periods Ending 6/30/95: 23.93% 13.22% 13.61%
FROM PARTNERS TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- ------- -------- --------- --------- --------- 1/20/75 $10,000.00 $2.9100 0.00% 3,436.447 $2.9100 $10,000 Dividends and Capital Gains Reinvested =============== C O S T O F S H A R E S ================ Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- --------- 8/31/75 10,000 551 551 10,551 0 8/31/76 10,000 467 1,018 11,018 0 8/31/77 10,000 383 1,401 11,401 0 8/31/78 10,000 511 1,912 11,912 0 8/31/79 10,000 804 2,716 12,716 0 8/31/80 10,000 1,248 3,965 13,965 5,446 8/31/81 10,000 2,167 6,131 16,131 7,527 8/31/82 10,000 3,390 9,521 19,521 0 8/31/83 10,000 2,802 12,323 22,323 6,537 8/31/84 10,000 2,883 15,206 25,206 1,081 8/31/85 10,000 2,795 18,001 28,001 5,461 8/31/86 10,000 2,127 20,128 30,128 10,879 8/31/87 10,000 2,409 22,537 32,537 12,101 8/31/88 10,000 3,739 26,276 36,276 4,006 8/31/89 10,000 4,786 31,063 41,063 4,206 8/31/90 10,000 3,090 34,152 44,152 7,945 8/31/91 10,000 6,011 40,163 50,163 2,709 8/31/92 10,000 2,956 43,120 53,120 6,694 8/31/93 10,000 1,722 44,841 54,841 16,219 8/31/94 10,000 224 45,065 55,065 448 8/31/95 10,000 449 45,514 55,514 1,796 Totals 45,514 93,055
=============== V A L U E O F S H A R E S ================= From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ 8/31/75 11,011 0 11,011 562 11,573 3,612 8/31/76 13,017 0 13,017 1,122 14,139 3,733 8/31/77 14,272 0 14,272 1,611 15,883 3,824 8/31/78 18,039 0 18,039 2,553 20,592 3,923 8/31/79 21,807 0 21,807 3,959 25,766 4,060 8/31/80 22,221 5,565 27,786 5,310 33,096 5,118 8/31/81 18,714 12,022 30,736 6,583 37,319 6,853 8/31/82 19,295 12,396 31,691 10,333 42,024 7,484 8/31/83 21,623 20,503 42,126 14,413 56,539 8,985 8/31/84 21,853 21,871 43,724 17,634 61,358 9,649 8/31/85 23,630 29,113 52,743 21,864 74,607 10,850 8/31/86 27,320 45,104 72,424 27,517 99,941 12,571 8/31/87 30,368 62,659 93,027 33,079 126,106 14,270 8/31/88 24,809 55,507 80,316 30,914 111,230 15,407 8/31/89 30,489 72,629 103,118 43,355 146,473 16,509 8/31/90 26,233 70,024 96,257 40,232 136,489 17,880 8/31/91 28,943 80,548 109,491 51,605 161,096 19,127 8/31/92 29,540 89,421 118,961 55,825 174,786 20,333 8/31/93 34,399 122,629 157,028 66,970 223,998 22,377 8/31/94 36,221 129,589 165,810 70,749 236,559 22,444 8/31/95 43,574 158,200 201,774 85,689 287,463 22,671 Totals 43,574 158,200 201,774 85,689 287,463 22,671 Average Annual Total Return for This Illustration: 17.69% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 23.93% 13.22% 13.61%
Appendix C THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER The Art of Investing: A Conversation with Roy Neuberger "I firmly believe that if you want to manage your own money, you must be a student of the market. If you are unwilling or unable to do that, find someone else to manage your money for you." NEUBERGER & BERMAN [THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE] [PICTURE OF ROY NEUBERGER] During my more than sixty-five years of buying and selling securities, I've been asked many questions about my approach to investing. On the pages that follow are a variety of my thoughts, ideas and investment principles which have served me well over the years. If you gain useful knowledge in the pursuit of profit as well as enjoyment from these comments, I shall be more than content. \s\ Roy R. Neuberger - 1 -
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE CHARACTERISTICS OF SUCCESSFUL INVESTING INTO FIVE "RULES." WHAT ARE THEY? Rule #1: Be flexible. My philosophy has necessarily changed from time to time because of events and because of mistakes. My views change as economic, political, and technological changes occur both on and sometimes off our planet. It is imperative that you be willing to change your thoughts to meet new conditions. Rule #2: Take your temperament into account. Recognize whether you are by nature very speculative or just the opposite - fearful, timid of taking risks. But in any event -- Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure that some of your investments, make sure that some of your principal is kept safe, and principal is kept safe, and try to increase try to increase your income your income as well as your capital. as well as your capital. [PICTURE OF ROY NEUBERGER] Rule #4: Always remember there are many ways to skin a cat! Ben Graham and David Dodd did it by understanding basic values. Warren Buffet invested his portfolio in a handful of long- term holdings, while staying involved with the companies' managements. Peter Lynch chose to understand, first-hand, the products of many hundreds of the companies he invested in. George Soros showed his genius as a hedge fund investor who could decipher world currency trends. Each has been successful in his own way. But to be successful, remember to - 2 - Rule #5: Be skeptical. To repeat a few well- worn useful phrases: A. Dig for yourself. B. Be from Missouri. C. If it sounds too good to be true, it probably is. IN YOUR 65 YEARS OF INVESTING ARE THERE ANY GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW THE MARKET BEHAVES? Every decade that I've been involved with Wall Street has a nuance of its own, an economic and social climate that influences investors. But generally, bull markets tend to be longer than bear markets, and stock prices tend to go up more slowly and erratically than they go down. Bear markets tend to be shorter and of greater intensity. The market rarely rises or declines concurrently with business cycles longer than six months. AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU DEFINE VALUE INVESTING? Value investing means finding the best values - - either absolute or relative. Absolute means a stock has a low market price relative to its own fundamentals. Relative value means the price is attractive relative to the market as a whole. COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"? A classic example is a company that has a low price to earnings ratio, a low price to book ratio, free cash flow, a strong balance sheet, undervalued corporate assets, unrecognized earnings turnaround and is selling at a discount to private market value. These characteristics usually lead to companies that are under-researched and have a high degree of inside ownership and entrepreneurial management. - 3 - One of my colleagues at Neuberger & Berman says he finds his value stocks either "under a cloud" or "under a rock." "Under a cloud" stocks are those Wall Street in general doesn't like, because an entire industry is out of favor and even the good stocks are being dropped. "Under a rock" stocks are those Wall Street is ignoring, so you have to uncover them on your own. ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE STOCKS? I'm more interested in longer-term trends in earnings than short-term trends. Earnings gains should be the product of long-term strategies, superior management, taking advantage of business opportunities and so on. If these factors are in their proper place, short-term earnings should not be of major concern. Dividends are an important extra because, if they're stable, they help support the price of the stock. WHAT ABOUT SELLING STOCKS? Most individual investors should invest for the long term but not mindlessly. A sell discipline, often neglected by investors, is vitally important. "One should fall in love One should fall in love with ideas, with with ideas, with people or people, or with idealism. But in my book, the with idealism. But in my last thing to fall in love with is a particular book, the last thing to security. It is after all just a sheet of paper fall in love with is a indicating a part ownership in a corporation particular security." and its use is purely mercenary. If you must love a security, stay in love with it until it gets overvalued; then let somebody else fall in love. [PICTURE OF ROY NEUBERGER] - 4 - ANY OTHER ADVICE FOR INVESTORS? I firmly believe that if you want to manage your own money, you must be a student of the market. If you're unwilling or unable to do that, find someone else to manage your money for you. Two options are a well-managed no- load mutual fund or, if you have enough assets for separate account management, a money manager you trust with a good record. HOW WOULD YOU DESCRIBE YOUR PERSONAL INVESTING STYLE? Every stock I buy is bought to be sold. The market is a daily event, and I continually review my holdings looking for selling opportunities. I take a profit occasionally on something that has gone up in price over what was expected and simultaneously take losses whenever misjudgment seems evident. This creates a reservoir of buying power that can be used to make fresh judgments on what are the best values in the market at that time. My active investing style has worked well for me over the years, but for most investors I recommend a longer-term approach. I tend not to worry very must about the day to day swings of the market, which are very hard to comprehend. Instead, I try to be rather clever in diagnosing values and trying to win 70 to 80 percent of the time. YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR EXPERIENCE WITH THE "GREAT CRASH"? - 5 - The only money I managed in the Panic of 1929 was my own. My portfolio was down about 12 percent, and I had an uneasy feeling about the market and conditions in general. Those were the days of 10 percent margin. I studied the lists carefully for a stock that was overvalued in my opinion and which I could sell short as a hedge. I came across RCA at about $100 per share. It had recently split 5 for 1 and appeared overvalued. There were no dividends, little income, a low net worth and a weak financial position. I sold RCA short in the amount equal to the dollar value of my long portfolio. It proved to be a timely and profitable move. HOW DID THE CRASH OF 1929 AFFECT YOUR INVESTING STYLE? I am prematurely bearish when the market goes up for a long time and everybody is happy because they are richer. I am very bullish when the market has gone down perceptibly and I feel it has discounted any troubles we are going to have. HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO MARKET BEHAVIOR? There are many factors in addition to economic statistics or security analysis in a buy or sell decision. I believe psychology plays an important role in the Market. Some people follow the crowd in hopes they'll be swept along in the right direction, but if the crowd is late in acting, this can be a bad move. I like to be contrary. When things look bad, I become optimistic. When everything looks rosy, and the crowd is optimistic, I like to be a seller. Sometimes I'm too early, but I generally profit. AS A RENOWNED ART COLLECTOR, DO YOU FIND SIMILARITIES BETWEEN SELECTING STOCKS AND SELECTING WORKS OF ART? - 6 - Both are an art, although picking stocks is a minor art compared with painting, sculpture or "When things look bad, I literature. I started buying art in the 30s, become optimistic. When and in the 40s it was a daily, almost hourly everything looks rosy, and occurrence. My inclination to buy the works of the crowd is optimistic, I living artists comes from Van Gogh, who sold like to be a seller." only one painting during his lifetime. He died in poverty, only then to become a legend and have his work sold for millions of dollars. [PICTURE OF ROY NEUBERGER] There are more variables to consider now in both buying art and picking stocks. In the modern stock markets, the heavy use of futures and options has changed the nature of the investment world. In past times, the stock market was much less complicated, as was the art world. Artists rose and fell on their own merits without a lot of publicity and attention. As more and more dealers are involved with artists, the price of their work becomes inflated. So I almost always buy works of unknown, relatively undiscovered artists, which, I suppose is similar to value investing. But the big difference in my view of art and stocks is that I buy a stock to sell it and make money. I never bought paintings or sculptures for investment in my life. The objective is to enjoy their beauty. - 7 - WHAT DO YOU CONSIDER THE BUSINESS MILESTONES IN YOUR LIFE? Being a founder of Neuberger & Berman and creating one of the first no-load mutual funds. I started on Wall Street in 1929, and during the depression I managed my own money and that of my clientele. We all prospered, but I wanted to have my own firm. In 1939 I became a founder of Neuberger & Berman, and for about 10 years we managed money for individuals with substantial financial assets. But I also wanted to offer the smaller investor the benefits of professional money management, so in 1950 I created the Guardian Mutual Fund (now known as the Neuberger & Berman Guardian Fund). The Fund was kind of an innovation in its time because it didn't charge a sales commission. I thought the public was being overcharged for mutual funds, so I wanted to create a fund that would be offered directly to the public without a sales charge. Now of course the "no-load" fund business is a huge industry. I managed the Fund myself for over 28 years. [PICTURE OF ROY NEUBERGER] YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO THE OFFICE EVERY DAY TO MANAGE YOUR INVESTMENTS. WHY? I like the fun of being nimble in the stock market, and I'm addicted to the market's fascinations. WHAT CLOSING WORDS OF ADVICE DO YOU HAVE ABOUT INVESTING? Realize that there are opportunities at all times for the adventuresome investor. And stay in good physical condition. It's a strange thing. You do not dissipate your energies by using them. Exercise your body and your brain every day, and you'll do better in investments and in life. - 8 - ROY NEUBERGER: A BRIEF BIOGRAPHY Roy Neuberger is a founder of the investment management firm Neuberger & Berman, and a renowned value investor. He is also a recognized collector of contemporary American art, much of which he has given away to museums and colleges across the country. During the 1920s, Roy studied art in Paris. When he realized he didn't possess the talent to become an artist, he decided to collect art, and to support this passion, Roy turned to investing -- a pursuit for which his talents have proven more than adequate. A TALENT FOR INVESTING Roy began his investment career by joining a brokerage firm in 1929, seven months before the "Great Crash." Just weeks before "Black Monday," he shorted the stock of RCA, thinking it was overvalued. He profited from the falling market and gained a reputation for market prescience and stock selection that has lasted his entire career. NEUBERGER & BERMAN'S FOUNDING Roy's investing acumen attracted many people who wished to have him manage their money. In 1939, at the age of 36, after purchasing a seat on the New York Stock Exchange, Roy founded Neuberger & Berman to provide money management services to people who lacked the time, interest or expertise to manage their own assets. - 9 - NEUBERGER & BERMAN -- OVER FIVE DECADES OF GROWTH Neuberger & Berman has grown through the years and now manages approximately $30 billion of equity and fixed income assets, both domestic and international, for individuals, institutions, and its family of no-load mutual funds. Today, as when the firm was founded, Neuberger & Berman follows a value approach to investing, designed to enable clients to advance in good markets and minimize losses when conditions are less favorable. For more complete information about the Neuberger & Berman Guardian Fund, including fees and expenses, call Neuberger & Berman Management at 800- 877-9700 for a free prospectus. Please read it carefully, before you invest or send money. - 10 - Neuberger & Berman Management Inc.[SERVICE MARK] 605 Third Avenue, 2nd Floor New York, NY 10158- 0006 Shareholder Services (800) 877-9700 [COPYRIGHT SYMBOL]1995 Neuberger & Berman PRINTED ON RECYCLED PAPER WITH SOY BASED INKS
- 11 - PROSPECTUS - ---------------------------------------- December 15, 1995 Neuberger&Berman EQUITY TRUST-SM- Neuberger&Berman GUARDIAN TRUST No Sales Charges No Redemption Fees No 12b-1 Fees Neuberger&Berman GUARDIAN TRUST A No-Load Equity Fund - ---------------------------------------------------------------------- Neuberger&Berman GUARDIAN TRUST (the "Fund") is a growth and income fund that emphasizes investments in stocks of established, high-quality companies considered to be undervalued in comparison to stocks of similar companies. YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A PENSION PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN "INSTITUTION") WHICH PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER& BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"). - ---------------------------------------------------------------------- THE FUND INVESTS ALL OF ITS NET INVESTABLE ASSETS IN NEUBERGER&BERMAN GUARDIAN PORTFOLIO (THE "PORTFOLIO") OF EQUITY MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY N&B MANAGEMENT. THE PORTFOLIO INVESTS IN SECURITIES IN ACCORDANCE WITH AN INVESTMENT OBJECTIVE, POLICIES, AND LIMITATIONS IDENTICAL TO THOSE OF THE FUND. THE INVESTMENT PERFORMANCE OF THE FUND DIRECTLY CORRESPONDS WITH THE INVESTMENT PERFORMANCE OF THE PORTFOLIO. THIS "MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES. FOR MORE INFORMATION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SUMMARY" ON PAGE 3, AND "SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS" ON PAGE 14. Please read this Prospectus before investing in the Fund and keep it for future reference. It contains information about the Fund that a prospective investor should know before investing. A Statement of Additional Information ("SAI") about the Fund and Portfolio, dated December 15, 1995, is on file with the Securities and Exchange Commission. The SAI is incorporated herein by reference (so it is legally considered a part of this Prospectus). You can obtain a free copy of the SAI for the Fund and Portfolio by calling N&B Management at 800-877-9700. PROSPECTUS DATED DECEMBER 15, 1995 MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
SUMMARY 3 The Fund and Portfolio; Risk Factors 3 Management 4 The Neuberger&Berman Investment Approach 4 EXPENSE INFORMATION 6 Shareholder Transaction Expenses for the Fund 6 Annual Fund Operating Expenses 6 Example 7 FINANCIAL HIGHLIGHTS 8 INVESTMENT PROGRAM 11 Short-Term Trading; Portfolio Turnover 12 Borrowings 12 Other Investments 12 PERFORMANCE INFORMATION 13 Total Return Information 13 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS 14 The Fund 14 The Portfolio 15 HOW TO BUY SHARES 17 HOW TO SELL SHARES 18 SHARE INFORMATION 19 Share Prices and Net Asset Value 19 DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES 20 Distribution Options 20 Taxes 20 MANAGEMENT AND ADMINISTRATION 22 Trustees and Officers 22 Investment Manager, Administrator, Distributor, and Sub-Adviser 22 Expenses 23 Transfer Agent 24 DESCRIPTION OF INVESTMENTS 25 DIRECTORY 28
SUMMARY The Fund and Portfolio; Risk Factors - ---------------------------------------------------------------------- The Fund is a series of Neuberger&Berman Equity Trust (the "Trust") and invests in the Portfolio which, in turn, invests in securities in accordance with an investment objective, policies, and limitations identical to those of the Fund. This is sometimes called a master/feeder fund structure, because the Fund "feeds" shareholders' investments into the Portfolio, a "master" fund. The structure looks like this: ------------------------- Shareholders ------------------------- (down arrow) BUY SHARES IN ------------------------- Fund ------------------------- (down arrow) INVESTS IN ------------------------- Portfolio ------------------------- (down arrow) INVESTS IN ------------------------- Stocks & Other Securities ------------------------- The trustees who oversee the Fund believe that this structure may benefit shareholders; investment in the Portfolio by investors in addition to the Fund may enable the Portfolio to achieve economies of scale that could reduce expenses. For more information about the organization of the Fund and the Portfolio, including certain features of the master/feeder fund structure, see "Special Information Regarding Organization, Capitalization, and Other Matters" on page 14. An investment in the Fund involves certain risks, depending upon the types of investments made by the Portfolio. For more details about the Portfolio, its investments and their risks, see "Investment Program" on page 11 and "Description of Investments" on page 25. 3 Here is a summary highlighting features of the Fund and the Portfolio. Of course, there can be no assurance that the Fund will meet its investment objective. NEUBERGER&BERMAN INVESTMENT PORTFOLIO EQUITY TRUST STYLE CHARACTERISTICS GUARDIAN TRUST Broadly diversified, large-cap A growth and income fund that value fund. Relatively low invests in stocks of established, portfolio turnover. high-quality companies that are not well followed on Wall Street or are temporarily out of favor.
Management - ---------------------------------------------------------------------- N&B Management, with the assistance of Neuberger&Berman, L.P. ("Neuberger&Berman") as sub-adviser, selects investments for the Portfolio. N&B Management also provides administrative services to the Portfolio and the Fund and acts as distributor of Fund shares. See "Management and Administration" on page 22. If you want to know how to buy and sell shares of the Fund, see "How to Buy Shares" on page 17 and "How to Sell Shares" on page 18, and the policies of the Institution through which you are purchasing shares. The Neuberger&Berman Investment Approach - ---------------------------------------------------------------------- There are two basic investment approaches -- value and growth. A value-oriented portfolio manager buys stocks that are selling for less than their perceived market value. These include stocks that are currently under-researched or are temporarily out of favor on Wall Street. Portfolio managers identify value stocks in several ways. One of the most common identifiers is a low price-to-earnings ratio -- that is, stocks selling at multiples of earnings per share that are lower than that of the market as a whole. Other criteria are high dividend yield, a strong balance sheet and financial position, a recent company restructuring with the potential to realize hidden values, strong management, and low price-to-book value (net value of the company's assets). While a value approach concentrates on undervalued securities in relation to their fundamental economic value, a growth approach seeks out stocks of companies that are projected to grow at above-average rates and may appear poised for a period of accelerated earnings. The growth portfolio manager is willing to pay a higher share price in the hopes that the stock's earnings momentum will carry the stock's price higher. As a stock's price increases based on strong earnings, the stock's original price appears low in 4 relation to the growth rate of its earnings. Sometimes this happens when a particular company or industry is temporarily out of favor with the market or under-researched. This strategy is called "growth at a reasonable price." Neuberger&Berman believes that, over time, securities that are undervalued are more likely to appreciate in price and be subject to less risk of price decline than securities whose market prices have already reached their perceived economic value. This approach also contemplates selling portfolio securities when they are considered to have reached their potential. In general, Neuberger&Berman GUARDIAN Portfolio adheres to a value-oriented investment approach. 5 EXPENSE INFORMATION This section gives you certain information about the expenses of the Fund and the Portfolio. See "Performance Information" for important facts about the investment performance of the Fund, after taking expenses into account. Shareholder Transaction Expenses For The Fund - ---------------------------------------------------------------------- As shown by this table, there are no transaction charges when you buy or sell Fund shares. Sales Charge Imposed on Purchases NONE Sales Charge Imposed on Reinvested Dividends NONE Deferred Sales Charges NONE Redemption Fees NONE Exchange Fees NONE
Annual Fund Operating Expenses (AS A PERCENTAGE OF AVERAGE NET ASSETS) - -------------------------------------------------------------------------------- The following table shows annual Total Operating Expenses, which are paid out of the assets of the Fund and which include the Fund's pro rata portion of the Operating Expenses of the Portfolio. These expenses are borne indirectly by Fund shareholders. The Fund pays N&B Management an administration fee, based on the Fund's average daily net assets. The Portfolio pays N&B Management a management fee, based on the Portfolio's average daily net assets; a pro rata portion of this fee is borne indirectly by the Fund. Therefore, the table combines management and administration fees. The Fund and Portfolio also incur other expenses for things such as accounting and legal fees, maintaining shareholder records, and furnishing shareholder statements and Fund reports. "Operating Expenses" exclude interest, taxes, brokerage commissions, and extraordinary expenses. The Fund's expenses are factored into its share price and dividends and are not charged directly to Fund shareholders. For more information, see "Management and Administration" and the SAI.
MANAGEMENT AND NEUBERGER&BERMAN ADMINISTRATION 12B-1 OTHER TOTAL OPERATING EQUITY TRUST FEES* FEES EXPENSES EXPENSES* GUARDIAN TRUST 0.84% None 0.10% 0.94%
*(REFLECTS N&B MANAGEMENT'S EXPENSE REIMBURSEMENT UNDERTAKING DESCRIBED BELOW) Total Operating Expenses for the Fund have been restated based upon current administration fees for the Fund and management fees for the Portfolio and the current expense reimbursement undertaking. "Other Expenses" are based on the Fund's and Portfolio's expenses for the past fiscal year. The trustees of the Trust believe 6 that the aggregate per share expenses of the Fund and the Portfolio will be approximately equal to the expenses the Fund would incur if its assets were invested directly in the type of securities held by the Portfolio. The trustees of the Trust also believe that investment in a Portfolio by investors in addition to the Fund may enable the Portfolio to achieve economies of scale which could reduce expenses. The expenses and returns of other funds that may invest in the Portfolio may differ from those of the Fund. A mutual fund that is a series of Neuberger&Berman Equity Funds ("N&B Equity Funds") and is administered by N&B Management has a name similar to the Fund and the same investment objective, policies, and limitations as the Fund ("Sister Fund") and also invests in the Portfolio. The previous table reflects N&B Management's voluntary undertaking until December 31, 1996, to reimburse the Fund for its Operating Expenses and its pro rata share of the Portfolio's Operating Expenses so that the Fund's expense ratio per annum will not exceed the expense ratio per annum of the Sister Fund by more than 0.10% of the Fund's average daily net assets. A Fund's per annum "expense ratio" means the sum of the Fund's Total Operating Expenses and its pro rata share of the Portfolio's Total Operating Expenses, divided by the Fund's average daily net assets for the year. The expense ratio of the Sister Fund is anticipated to be 0.84% per annum of the Sister Fund's average daily net assets. Based on that expectation, the expense ratio for the Fund is not anticipated to exceed 0.94% per annum. Absent the reimbursement, Management and Administration Fees would be 0.86% per annum of the average daily net assets of the Fund and the Total Operating Expenses would be 0.96% per annum of the average daily net assets of the Fund. Example - ---------------------------------------------------------------------- To illustrate the effect of Operating Expenses, let's assume that the Fund's annual return is 5% and that it had Total Operating Expenses described in the table above. For every $1,000 you invested in the Fund, you would have paid the following amounts of total expenses if you closed your account at the end of each of the following time periods:
NEUBERGER&BERMAN 10 EQUITY TRUST 1 YEAR 3 YEARS 5 YEARS YEARS GUARDIAN TRUST $ 10 $ 30 $ 52 $ 115
The assumption in this example of a 5% annual return is required by regulations of the Securities and Exchange Commission applicable to all mutual funds. THE INFORMATION IN THE TABLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EXPENSE REIMBURSEMENTS CHANGE. 7 FINANCIAL HIGHLIGHTS Selected Per Share Data and Ratios - ---------------------------------------------------------------------- The financial information in the following table is for the Fund as of August 31, 1995 and prior periods. This information has been audited by the Fund's independent auditors. You may obtain, at no cost, further information about the performance of the Fund in its annual report to shareholders. The annual report contains the auditors' report. Please call 800-877-9700 for a free copy and for up-to-date information. Also, see "Performance Information." 8 FINANCIAL HIGHLIGHTS Neuberger&Berman Guardian Trust - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and expenses, including the Fund's proportionate share of the Portfolio's income and expenses. It should be read in conjunction with the Portfolio's Financial Statements and notes thereto.
PERIOD FROM YEAR ENDED AUGUST 3, 1993(1) AUGUST 31, TO AUGUST 31, 1995 1994 1993 Net Asset Value, Beginning of Year $ 11.27 $10.27 $10.00 ------- ------ ------ Income from Investment Operations Net Investment Income .13 .09 -- Net Gains or Losses on Securities (both realized and unrealized) 2.55 .99 .27 ------- ------ ------ Total from Investment Operations 2.68 1.08 .27 ------- ------ ------ Less Distributions Dividends (from net investment income) (.12) (.07) -- Distributions (from capital gains) -- (.01) -- ------- ------ ------ Total Distributions (.12) (.08) -- ------- ------ ------ Net Asset Value, End of Year $ 13.83 $11.27 $10.27 ------- ------ ------ Total Return+ +24.01% +10.57% +2.70%(2) ------- ------ ------ Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 683.1 $75.8 -- ------- ------ ------ Ratio of Expenses to Average Net Assets(4) .90% .80% .81%(3) ------- ------ ------ Ratio of Net Income to Average Net Assets(4) 1.35% 1.50% 1.00%(3) ------- ------ ------
9 SEE NOTES TO FINANCIAL HIGHLIGHTS. NOTES TO FINANCIAL HIGHLIGHTS 1)The date investment operations commenced. 2)Not annualized. 3)Annualized. 4)After reimbursement of expenses by N&B Management. Had N&B Management not undertaken such action, the annualized ratios of expenses and net investment income (loss) to average daily net assets would have been 0.96% and 1.29%, respectively, in 1995; 1.52% and 0.78%, respectively, in 1994; and 2.50% and (0.69%), respectively, for the period ended August 31, 1993. 5)Because the Fund invests only in the Portfolio and the Portfolio (rather than the Fund) engages in securities transactions, the Fund does not calculate a portfolio turnover rate. The portfolio turnover rate for the Portfolio was 26% for the year ended August 31, 1995, 24% for the year ended August 31, 1994, and 3% for the period from August 2, 1993 to August 31, 1993. + Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of the Fund during each year, and assumes dividends and other distributions, if any, were reinvested. Results represent past performance and do not guarantee future results. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Had N&B Management not reimbursed certain expenses of the Fund, total return would have been lower. 10 INVESTMENT PROGRAM The investment policies and limitations of the Fund and the Portfolio are identical. The Fund invests only in the Portfolio. Therefore, the following shows you the kinds of securities in which the Portfolio invests. For an explanation of some types of investments, see "Description of Investments" on page 25. Investment policies and limitations of the Fund and Portfolio are not fundamental unless otherwise specified in this Prospectus or the SAI. While a non-fundamental policy or limitation may be changed by the trustees of the Trust or of Managers Trust without shareholder approval, the Fund intends to notify shareholders before making any material change to such policies or limitations. Fundamental policies may not be changed without shareholder approval. The investment objective of the Fund and Portfolio is not fundamental. The Fund has undertaken to a state securities commission that it will seek shareholder approval before changing its investment objective. The Fund has also undertaken not to change its investment objective without 30 days' prior notice to shareholders. There can be no assurance that the Fund or Portfolio will achieve its objectives. The Fund, by itself, does not represent a comprehensive investment program. Additional investment techniques, features, and limitations concerning the Portfolio's investment program are described in the SAI. The investment objective of the Fund and Portfolio is to seek capital appreciation and secondarily, current income. The Portfolio invests primarily in a large number of common stocks of long- established, high-quality companies. The Portfolio uses the value-oriented investment approach in selecting securities. Thus, N&B Management looks for such factors as low price-to-earnings ratios, strong balance sheets, solid management, and consistent earnings. The Portfolio diversifies its holdings among many different companies and industries. The Fund, the Sister Fund and the Sister Fund's predecessor have paid their shareholders an income dividend every quarter and a capital gain distribution every year since the predecessor's inception in 1950. Of course, this past record does not necessarily predict the Fund's future practices. 11 Short-Term Trading; Portfolio Turnover - ---------------------------------------------------------------------- Although the Portfolio does not purchase securities with the intention of profiting from short-term trading, the Portfolio may sell portfolio securities when N&B Management believes such action is advisable. The portfolio turnover rate for the Portfolio is set forth under "Notes to Financial Highlights." Borrowings - ---------------------------------------------------------------------- The Portfolio has a fundamental policy that it may not borrow money, except that it may (1) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (2) enter into reverse repurchase agreements for any purpose, so long as the aggregate amount of borrowings and reverse repurchase agreements does not exceed one-third of the Portfolio's total assets (including the amount borrowed) less liabilities (other than borrowings). The Portfolio does not expect to borrow money. As a non-fundamental policy, the Portfolio may not purchase portfolio securities if its outstanding borrowings, including reverse repurchase agreements, exceed 5% of its total assets. Other Investments - ---------------------------------------------------------------------- For temporary defensive purposes, the Portfolio may invest up to 100% of its total assets in cash and cash equivalents, U.S. Government and Agency Securities, commercial paper and certain other money market instruments, as well as repurchase agreements collateralized by the foregoing. 12 PERFORMANCE INFORMATION The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL RETURN is the change in value of an investment in a fund over a particular period, assuming that all distributions have been reinvested. Thus, total return reflects dividend income, other distributions, and variations in share prices from the beginning to the end of a period. An average annual total return is a hypothetical rate of return that, if achieved annually, would result in the same cumulative total return as was actually achieved for the period. This smooths out variations in performance. Past results do not, of course, guarantee future performance. Share prices may vary and your shares when redeemed may be worth more or less than your original purchase price. The Fund commenced operations in August 1993, and its first fiscal year ended August 31, 1993. The following table shows the average annual total returns for the period ended August 31, 1995 (the most recent fiscal year-end of the Fund), of a 1-year, 5-year, and 10-year investment in the Fund since its inception and, for periods prior to the Fund's inception, the Sister Fund and its predecessor. The table also shows a comparison with the S&P 500 Index for the Fund, the Sister Fund, and the Sister Fund's predecessor. The S&P 500 Index is the Standard & Poor's 500 Composite Stock Price Index, an unmanaged index generally considered to be representative of overall stock market activity. Please note that an index does not take into account any fees and expenses of investing in the individual securities it tracks, and that individuals cannot invest directly in an index. Further information regarding the Fund's performance is presented in its annual report to shareholders, which is available without charge by calling 800-877-9700. AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED AUGUST 31, 1995
NEUBERGER&BERMAN SINCE INCEPTION EQUITY TRUST 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE GUARDIAN TRUST +24.01% +20.14% +15.66% +13.10% 6/1/50 S&P 500 +21.42 +15.13 +15.17 N/A N/A
The Fund commenced operations in August 1993. The following table lets you take a closer look at how the Fund, the Sister Fund, and its predecessor performed year by year, in terms of an annual per share total return for each calendar year (that is, as of December 31). Please note that the above chart reflects information for periods ended on the Fund's last fiscal year-end (that is, as of August 31, 1995). Had N&B Management not waived certain fees since August 1993, the total return of the Fund would have been lower. The total returns for periods prior to the Fund's inception would have been lower had they reflected the higher fees of the Fund, as compared to those of the Sister Fund and its predecessor. TOTAL RETURN FOR CALENDAR YEARS ENDED DECEMBER 31
NEUBERGER&BERMAN EQUITY TRUST 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 GUARDIAN TRUST +7.3% +25.0% +11.9% -1.0% +28.0% +21.5% -4.7% +34.3% +19.0% +13.5% +1.5% S&P 500 +6.2 +31.6 +18.6 +5.2 +16.5 +31.6 -3.1 +30.3 +7.6 +10.0 +1.4
TOTAL RETURN INFORMATION. You can obtain current performance information about the Fund by calling N&B Management at 800-877-9700. 13 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS The Fund - ---------------------------------------------------------------------- The Fund is a separate series of the Trust, a Delaware business trust organized pursuant to a Trust Instrument dated as of May 6, 1993. The Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end management investment company, commonly known as a mutual fund. The Trust has six separate series. The Trust and the Fund commenced operations in August 1993. The Fund invests all of its net investable assets in the Portfolio, receiving a beneficial interest in the Portfolio. The trustees of the Trust may establish additional series or classes of shares, without the approval of shareholders. The assets of a series belong only to that series, and the liabilities of a series are borne solely by that series and no other. DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number of shares of beneficial interest (par value $0.001 per share). Shares of the Fund represent equal proportionate interests in the assets of the Fund only and have identical voting, dividend, redemption, liquidation, and other rights. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares. SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual meetings of shareholders of the Fund. The trustees will call special meetings of shareholders of the Fund only if required under the 1940 Act or in their discretion or upon the written request of holders of 10% or more of the outstanding shares of the Fund entitled to vote. CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the shareholders of the Fund will not be personally liable for the obligations of the Fund; a shareholder is entitled to the same limitation of personal liability extended to shareholders of corporations. To guard against the risk that Delaware law might not be applied in other states, the Trust Instrument requires that every written obligation of the Trust or the Fund contain a statement that such obligation may be enforced only against the assets of the Trust or the Fund and provides for indemnification out of the Trust or Fund property of any shareholder nevertheless held personally liable for Trust or Fund obligations, respectively. 14 The Portfolio - ---------------------------------------------------------------------- The Portfolio is a separate series of Managers Trust, a New York common law trust organized as of December 1, 1992. Managers Trust is registered under the 1940 Act as a diversified, open-end management investment company. Managers Trust has six separate portfolios. The assets of the Portfolio belong only to the Portfolio, and the liabilities of the Portfolio are borne solely by the Portfolio and no other. FUND'S INVESTMENT IN PORTFOLIO. The Fund is a "feeder fund" that seeks to achieve its investment objective by investing all of its net investable assets in the Portfolio, which is a "master fund." The Portfolio, which has the same investment objective, policies, and limitations as the Fund, in turn invests in securities; the Fund thus acquires an indirect interest in those securities. Historically, N&B Management, which is the administrator of the Fund and the investment manager of the Portfolio, has sponsored, with Neuberger&Berman, traditionally structured funds since 1950. However, it has operated 12 master funds and 20 feeder funds since August 1993 and now operates 21 master funds and 30 feeder funds. This "master/feeder fund" structure is depicted in the "Summary" on page 3. The Fund's investment in the Portfolio is in the form of a non-transferable beneficial interest. Members of the general public may not purchase a direct interest in the Portfolio. The Sister Fund, a series of N&B Equity Funds, invests all of its net investable assets in the Portfolio. A mutual fund that is a series of Neuberger&Berman Equity Assets ("N&B Equity Assets") is expected to begin operations in 1996. This series will invest all of its net investable assets in the Portfolio. The shares of the series of N&B Equity Funds (but not of N&B Equity Assets) are available for purchase by members of the general public. The Portfolio may also permit other investment companies and/or other institutional investors to invest in the Portfolio. All investors will invest in the Portfolio on the same terms and conditions as the Fund and will pay a proportionate share of the Portfolio's expenses. The Fund does not sell its shares directly to members of the general public. Other investors in the Portfolio (including the series of N&B Equity Funds) that might sell shares to members of the general public are not required to sell their shares at the same public offering price as the Fund, could have a different administration fee and expenses than the Fund, and (except N&B Equity Funds) might charge a sales commission. Therefore, Fund shareholders may have different returns than shareholders in another investment company that invests exclusively in the Portfolio. Information regarding any fund that may invest in the Portfolio in the future will be available from N&B Management by calling 800-877-9700. The trustees of the Trust believe that investment in the Portfolio by a series of N&B Equity Funds or N&B Equity Assets or other potential investors in addition to the Fund may enable the Portfolio to realize economies of scale that could reduce its operating expenses, thereby producing higher returns and benefitting all shareholders. 15 However, the Fund's investment in the Portfolio may be affected by the actions of other large investors in the Portfolio, if any. For example, if a large investor in the Portfolio (other than the Fund) redeemed its interest in the Portfolio, the Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. The Fund may withdraw its entire investment from the Portfolio at any time, if the trustees of the Trust determine that it is in the best interests of the Fund and its shareholders to do so. The Fund might withdraw, for example, if there were other investors in the Portfolio with power to, and who did by a vote of all investors (including the Fund), change the investment objective, policies, or limitations of the Portfolio in a manner not acceptable to the trustees of the Trust. A withdrawal could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the Portfolio. That distribution could result in a less diversified portfolio of investments for the Fund and could affect adversely the liquidity of the Fund's investment portfolio. If the Fund decided to convert those securities to cash, it usually would incur brokerage fees or other transaction costs. If the Fund withdrew its investment from the Portfolio, the trustees would consider what action might be taken, including the investment of all of the Fund's net investable assets in another pooled investment entity having substantially the same investment objective as the Fund or the retention by the Fund of its own investment manager to manage its assets in accordance with its investment objective, policies, and limitations. The inability of the Fund to find a suitable replacement could have a significant impact on shareholders. INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings of investors except as required by the 1940 Act. Each investor in the Portfolio will be entitled to vote in proportion to its relative beneficial interest in the Portfolio. On most issues subjected to a vote of investors, the Fund will solicit proxies from its shareholders and will vote its interest in the Portfolio in proportion to the votes cast by the Fund's shareholders. If there are other investors in the Portfolio, there can be no assurance that any issue that receives a majority of the votes cast by Fund shareholders will receive a majority of votes cast by all Portfolio investors; indeed, if other investors hold a majority interest in the Portfolio, they could have voting control of the Portfolio. CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund, will be liable for all obligations of the Portfolio. However, the risk of an investor in the Portfolio incurring financial loss 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. 16 HOW TO BUY SHARES YOU CAN BUY AND OWN FUND SHARES ONLY THROUGH AN ACCOUNT WITH AN INSTITUTION WHICH PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND WHICH HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH N&B MANAGEMENT. N&B Management and the Fund do not recommend, endorse, or receive payments from any Institution. N&B Management compensates Institutions for services they provide under an administrative services agreement. N&B Management does not provide investment advice to any Institution or its clients or make decisions regarding their investments. Each Institution will establish its own procedures for the purchase of Fund shares in its account, including minimum initial and additional investments for shares of the Fund and the acceptable methods of payment for shares. Shares are purchased at the next price calculated on a day the New York Stock Exchange ("NYSE") is open, after a purchase order is received and accepted by an Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern time. Your Institution may be closed on days when the NYSE is open. As a result, prices for Fund shares may be significantly affected on days when you have no access to your Institution. The Fund will not issue a certificate for your shares. Other Information - ---------------------------------------------------------------------- / / An Institution must pay for shares it purchases in U.S. dollars. / / The Fund has the right to suspend the offering of its shares for a period of time. The Fund also has the right to accept or reject a purchase order in its sole discretion. 17 HOW TO SELL SHARES You can sell (redeem) all or some of your Fund shares only through an account with an Institution. Each Institution will establish its own procedures for the sale of Fund shares. Shares are sold at the next price calculated on a day the NYSE is open, after a sales order is received and accepted by an Institution. Prices for Fund shares are usually calculated as of 4 p.m. Eastern time. Your Institution may be closed on days when the NYSE is open. As a result, prices for Fund shares may be significantly affected on days when you have no access to your Institution. The Fund has reserved the right, if conditions exist which make cash payments undesirable, to honor any request for a redemption by making payments in securities valued in the same way as they would be valued for purposes of computing the Fund's net asset value per share. If payment is made in securities, an Institution may incur brokerage expenses or other transaction costs in converting those securities into cash and will be subject to fluctuation in the market prices of those securities until they are sold. Other Information - ---------------------------------------------------------------------- / / Redemption proceeds will be paid to Institutions as agreed with the Fund, but in any case within three calendar days (under unusual circumstances the Fund may take longer, as permitted by law). / / The Fund may suspend redemptions or postpone payments on days when the NYSE is closed (besides weekends and holidays), when trading on the NYSE is restricted, or as permitted by the Securities and Exchange Commission. 18 SHARE INFORMATION Share Prices and Net Asset Value - ---------------------------------------------------------------------- The Fund's shares are bought or sold at a price that is the Fund's net asset value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated by subtracting liabilities from total assets (in the case of the Portfolio, the market value of the securities the Portfolio holds plus cash and other assets; in the case of the Fund, its percentage interest in the Portfolio, multiplied by the Portfolio's NAV, plus any other assets). The Fund's per share NAV is calculated by dividing its NAV by the number of Fund shares outstanding and rounding the result to the nearest full cent. The Fund and the Portfolio calculate their NAVs as of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open. The Portfolio values securities (including options) listed on the NYSE, the American Stock Exchange, or other national securities exchanges or quoted on Nasdaq, and other securities for which market quotations are readily available, at the last sale price on the day the securities are being valued. If there is no sale of such a security on that day, that security is valued at the mean between its closing bid and asked prices. The Portfolio values all other securities and assets, including restricted securities, by a method that the trustees of Managers Trust believe accurately reflects fair value. 19 DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES The Fund distributes substantially all of its share of any net investment income (net of the Fund's expenses) earned by the Portfolio, at the end of each calendar quarter. The Fund distributes substantially all of its share of the Portfolio's net realized capital gains and net realized gains from foreign currency transactions, if any, normally in December. Investors who are considering the purchase of Fund shares in December should take this into account because of the tax consequences of such distributions. Distribution Options - ---------------------------------------------------------------------- REINVESTMENT IN SHARES. All dividends and other distributions paid on shares of the Fund are automatically reinvested in additional shares of the Fund, unless an Institution elects to receive them in cash. Dividends and other distributions are reinvested at the Fund's per share NAV, usually as of the date the dividend or other distribution is payable. DISTRIBUTIONS IN CASH. An Institution may elect to receive dividends in cash, with other distributions, being reinvested in additional Fund shares, or to receive all dividends and other distributions in cash. Taxes - ---------------------------------------------------------------------- The Fund intends to continue to qualify for treatment as a regulated investment company for federal income tax purposes so that it will be relieved of federal income tax on that part of its taxable income and realized gains that it distributes to its shareholders. An investment has certain tax consequences, depending on the type of account in which you invest. IF YOU HAVE AN ACCOUNT UNDER A QUALIFIED RETIREMENT PLAN OR AN INDIVIDUAL RETIREMENT ACCOUNT, TAXES ARE DEFERRED. TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax and may also be subject to state and local income taxes. Distributions are taxable when they are paid, whether in cash or by reinvestment in additional Fund shares, except that distributions declared in December to shareholders of record on a date in that month and paid in the following January are taxable as if they were paid on December 31 of the year in which the distributions were declared. For federal income tax purposes, dividends and distributions of net short-term capital gain and net gains from certain foreign currency transactions are taxed as ordinary income. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss), when designated as such, are generally taxed as long-term capital gain, no matter how long you have owned your shares. Distributions of net capital gain may include gains from the sale of portfolio securities that 20 appreciated in value before you bought your shares. Every January, the Fund will send each Institution that is a shareholder therein a statement showing the amount of distributions paid in the previous year. TAXES ON REDEMPTIONS. Capital gains realized on redemptions of Fund shares are subject to tax. A capital gain (or loss) is the difference between the amount paid for shares (including the value of any dividends and other distributions that were reinvested) and the amount received when shares are sold. When an Institution sells shares, it will receive a confirmation statement showing the number of shares sold and the price. Every January, Institutions will also receive a consolidated transaction statement for the previous year. Each Institution annually will send investors in its accounts statements showing distribution and transaction information for the previous year. The foregoing is only a summary of some of the important tax considerations affecting the Fund and its shareholders. See the SAI for additional tax information. There may be other federal, state, local, or foreign tax considerations applicable to a particular investor. Therefore, investors should consult their tax advisers. 21 MANAGEMENT AND ADMINISTRATION Trustees and Officers - ---------------------------------------------------------------------- The trustees of the Trust and the trustees of Managers Trust, who are currently the same individuals, have oversight responsibility for the operations of the Fund and Portfolio, respectively. The SAI contains general background information about each trustee and officer of the Trust and of Managers Trust. The trustees and officers of the Trust and of Managers Trust who are officers and/or directors of N&B Management or partners of Neuberger&Berman serve without compensation from the Fund or the Portfolio. The trustees of the Trust and of Managers Trust, including a majority of those trustees who are not "interested persons" (as defined in the 1940 Act) of the Fund, have adopted written procedures reasonably appropriate to deal with potential conflicts of interest between the Trust and Managers Trust, including, if necessary, creating a separate board of trustees of Managers Trust. Investment Manager, Administrator, Distributor, and Sub-Adviser - ---------------------------------------------------------------------- N&B Management serves as the investment manager of the Portfolio, as administrator of the Fund, and as distributor of the shares of the Fund. N&B Management and its predecessor firms have specialized in the management of no-load mutual funds since 1950. In addition to serving the Portfolio, N&B Management currently serves as investment manager of other mutual funds. Neuberger&Berman, which acts as sub-adviser for the Portfolio and other mutual funds managed by N&B Management, also serves as investment adviser of three other 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 NYSE and other principal exchanges and acts as the Portfolio's principal broker in the purchase and sale of its securities. Neuberger&Berman and its affiliates, including N&B Management, manage securities accounts that had approximately $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. Kent C. Simons and Lawrence Marx III are primarily responsible for the day-to-day management of the Portfolio. Mr. Simons and Mr. Marx are Vice Presidents of N&B Management and general partners of Neuberger&Berman. Mr. Simons has had 22 responsibility for Neuberger&Berman GUARDIAN Portfolio and Neuberger&Berman GUARDIAN Trust's Sister Fund's predecessor since 1983, and Mr. Marx has had those responsibilities since 1988. Neuberger&Berman acts as the principal broker for the Portfolio in the purchase and sale of portfolio securities and in the sale of covered call options, and for those services receives brokerage commissions. In effecting securities transactions, the Portfolio seeks to obtain the best price and execution of orders. For more information, see the SAI. The 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.-SM- To mitigate the possibility that the Portfolio will be adversely affected by personal trading of employees, the Trust, Managers 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. N&B Management provides administrative services to the Fund that include furnishing similar facilities and personnel for the Fund and performing accounting, recordkeeping, and other services for Institutions and their accounts. For such administrative services, the Fund pays N&B Management a fee at the annual rate of 0.40% of the Fund's average daily net assets. With the Fund's consent, N&B Management may subcontract to third parties, including Institutions, some of its responsibilities to the Fund under the administration agreement and may compensate third parties that provide such services. For investment management services, the Portfolio pays N&B Management a fee at the annual rate of 0.55% of the first $250 million of the Portfolio's average daily net assets, 0.525% of the next $250 million, 0.50% of the next $250 million, 0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of average daily net assets in excess of $1.5 billion. During its 1995 fiscal year, the Fund accrued administration fees and a pro rata portion of the Portfolio's management fees, as an annualized percentage of its average daily net assets, of 0.86%. See "Expense Information -- Annual Fund Operating Expenses" for anticipated fees for the current fiscal year. 23 The Fund bears all expenses of its operations other than those borne by N&B Management as administrator of the Fund and as distributor of its shares. The Portfolio bears all expenses of its operations other than those borne by N&B Management as investment manager of the Portfolio. These expenses include, but are not limited to, for the Fund and Portfolio, legal and accounting fees, and compensation for trustees who are not affiliated with N&B Management; for the Fund, transfer agent fees, and the cost of printing and sending reports and proxy materials to shareholders; and for the Portfolio, custodial fees for securities. During its 1995 fiscal year, the Fund bore Total Operating Expenses as an annualized percentage of its average daily net assets, after taking into consideration N&B Management's expense reimbursement, of 0.90% per annum. N&B Management has voluntarily undertaken until December 31, 1996, to reimburse the Fund for its Operating Expenses and its pro rata share of the Portfolio's Operating Expenses so that the Fund's expense ratio per annum will not exceed the expense ratio per annum of its Sister Fund by more than 0.10% of the Fund's average daily net assets. A Fund's per annum "expense ratio" means the sum of the Fund's Total Operating Expenses and its pro rata share of the Portfolio's Total Operating Expenses, divided by the Fund's average daily net assets for the year. The expense ratio of the Sister Fund is anticipated to be 0.84% per annum of the Sister Fund's average daily net assets. Based on that expectation, the expense ratio for the Fund is not anticipated to exceed 0.94% per annum. The effect of reimbursement by N&B Management is to reduce the Fund's expenses and thereby increase its total return. Transfer Agent - ---------------------------------------------------------------------- The Fund's transfer agent is State Street Bank and Trust Company ("State Street"). State Street administers purchases, redemptions, and transfers of Fund shares with respect to Institutions and the payment of dividends and other distributions to Institutions. The main office of State Street is located at 225 Franklin Street, Boston, MA 02110. All correspondence should be addressed to Neuberger&Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158. 24 DESCRIPTION OF INVESTMENTS In addition to common stocks and other securities referred to in "Investment Program" herein, the Portfolio may make the following investments, among others, individually or in combination, although it may not necessarily buy all of the types of securities or use all of the investment techniques that are described. For additional information on the following investments and on other types of investments which the Portfolio may make, see the SAI. ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net assets in illiquid securities, which are securities that cannot be expected to be sold within seven days at approximately the price at which they are valued. Due to the absence of an active trading market, the Portfolio may experience difficulty in valuing or disposing of illiquid securities. N&B Management determines the liquidity of the Portfolio's securities, under supervision of the trustees of Managers Trust. Securities that are freely tradeable 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 SECURITIES AND RULE 144A SECURITIES. The Portfolio may invest in restricted securities and Rule 144A securities. Restricted securities cannot be sold to the public without registration under the Securities Act of 1933 ("1933 Act"). Unless registered for sale, these securities can be sold only in privately negotiated transactions or pursuant to an exemption from registration. 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 of Managers Trust, may determine that some restricted securities are liquid. FOREIGN SECURITIES. The Portfolio may invest up to 10% of the value of its total assets in foreign securities. Foreign securities are those of issuers organized and doing business principally outside the U.S., including non-U.S. governments, their agencies, and instrumentalities. The 10% limitation does not apply to foreign securities that are denominated in U.S. dollars, including American Depositary Receipts ("ADRs"). Foreign securities (including those denominated in U.S. dollars and ADRs) are affected by political or economic developments in foreign countries. Foreign companies may not be subject to accounting standards or governmental supervision comparable to U.S. companies, and there may be less public information about their operations. In addition, foreign markets may be less liquid or more volatile than U.S. markets and may offer less protection to investors. Investments in foreign securities that are not denominated in U.S. dollars (including those made through ADRs) may be subject to special risks, such as governmental regulation of foreign exchange transactions and changes in rates of exchange with the U.S. dollar, irrespective of the performance of the underlying investment. 25 COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of securities price changes (hedge) or generate income by writing (selling) covered call options against securities held in its portfolio having a market value not exceeding 10% of its net assets, and may purchase call options in related closing transactions. The purchaser of a call option acquires the right to buy a portfolio security at a fixed price during a specified period. The maximum price the seller may realize on the security during the option period is the fixed price; the seller continues to bear the risk of a decline in the security's price, although this risk is reduced by the premium received for the option. The primary risks in using call options are (1) possible lack of a liquid secondary market for options and the resulting inability to close out options when desired; (2) the fact that the skills needed to use options are different from those needed to select the Portfolio's securities; (3) the fact that, although use of these instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain by offsetting favorable price movements in underlying investments; and (4) the possible inability of the Portfolio to sell a security at a time that would otherwise be favorable for it to do so, or the possible need for the Portfolio to sell a security at a disadvantageous time, due to its need to maintain "cover" in connection with its use of these instruments. Options are considered "derivatives." SHORT SALES AGAINST-THE-BOX. The Portfolio may make short sales against-the- box, in which it sells securities short only if it owns or has the right to obtain without payment of additional consideration an equal amount of the same type of securities sold. Short selling against-the-box may defer recognition of gains or losses to a later tax period. REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the Portfolio buys a security from a Federal Reserve member bank or a securities dealer and simultaneously agrees to sell it back at a higher price, at a specified date, usually less than a week later. The underlying securities must fall within the Portfolio's investment policies and limitations. The Portfolio also may lend portfolio securities to banks, brokerage firms, or institutional investors to earn income. Costs, delays, or losses could result if the selling party to a repurchase agreement or the borrower of portfolio securities becomes bankrupt or otherwise defaults. N&B Management monitors the creditworthiness of sellers and borrowers. OTHER INVESTMENTS. Although the Portfolio invests primarily in common stocks, when market conditions warrant it may invest in preferred stocks, securities convertible into or exchangeable for common stocks, U.S. Government and Agency Securities, investment grade debt securities, or money market instruments, or may retain assets in cash or cash equivalents. U.S. Government securities are obligations of the U.S. Treasury backed by the full faith and credit of the United States. U.S. Government Agency Securities are issued or 26 guaranteed by U.S. Government agencies or instrumentalities; by other U.S. Government-sponsored enterprises, such as the Government National Mortgage Association, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, and Tennessee Valley Authority; and by various federally chartered or sponsored banks. Some U.S. Government Agency Securities are supported by the full faith and credit of the United States, while others may be supported by the issuer's ability to borrow from the U.S. Treasury, subject to the Treasury's discretion in certain cases, or only by the credit of the issuer. U.S. Government Agency Securities include U.S. Government mortgage-backed securities. The market prices of U.S. Government securities are not guaranteed by the Government and generally fluctuate with changing interest rates. "Investment grade" debt securities are those receiving one of the four highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's, or another nationally recognized statistical rating organization ("NRSRO") or, if unrated by any NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable Unrated Securities") under guidelines established by the trustees of Managers Trust. Securities rated by Moody's in its fourth highest category (Baa) or Comparable Unrated Securities may be considered speculative; a change in economic factors could lead to a weakened capacity of the issuer to repay. The value of fixed income securities in which the Portfolio may invest is likely to decline in times of rising interest rates. Conversely, when rates fall, the value of the Portfolio's fixed income in investments is likely to rise. 27 DIRECTORY INVESTMENT MANAGER, ADMINISTRATOR, AND DISTRIBUTOR Neuberger&Berman Management Incorporated 605 Third Avenue 2nd Floor New York, NY 10158-0180 SUB-ADVISER Neuberger&Berman, L.P. 605 Third Avenue New York, NY 10158-3698 CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 ADDRESS CORRESPONDENCE TO: Neuberger&Berman Funds Institutional Services 605 Third Avenue 2nd Floor New York, NY 10158-0180 LEGAL COUNSEL Kirkpatrick & Lockhart LLP 1800 M Street, NW Washington, DC 20036-5891 Neuberger&Berman, Neuberger&Berman Management Inc., and Neuberger&Berman Guardian Trust are service marks of Neuberger&Berman Management Inc. - -C- 1995 Neuberger&Berman Management Inc. 28 Neuberger&Berman Management Inc. 605 THIRD AVENUE 2ND FLOOR NEW YORK, NY 10158-0180 SHAREHOLDER SERVICES 800-877-9700 THE WRAPPER IS NOT PART OF THE PROSPECTUS. [recycle PRINTED ON RECYCLED PAPER logo] WITH SOY BASED INKS NBEP0001295 -------------------------------------------------------------------------- NEUBERGER & BERMAN GUARDIAN TRUST AND PORTFOLIO STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 15, 1995 No-Load Mutual Fund 605 Third Avenue, 2nd Floor, New York, NY 10158-0180 Toll-Free 800-877-9700 -------------------------------------------------------------------------- Neuberger & Berman GUARDIAN Trust ("Fund"), a series of Neuberger & Berman Equity Trust ("Trust"), is a no-load mutual fund that offers shares pursuant to a Prospectus dated December 15, 1995. The Fund invests all of its net investable assets in Neuberger & Berman GUARDIAN Portfolio ("Portfolio"). AN INVESTOR CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH AN ACCOUNT WITH A PENSION PLAN ADMINISTRATOR, BROKER-DEALER, OR OTHER INSTITUTION (EACH AN "INSTITUTION") THAT PROVIDES ACCOUNTING, RECORDKEEPING, AND OTHER SERVICES TO INVESTORS AND THAT HAS AN ADMINISTRATIVE SERVICES AGREEMENT WITH NEUBERGER & BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"). The Fund's Prospectus provides basic information that an investor should know before investing. A copy of the Prospectus may be obtained, without charge, from Neuberger & Berman Management Incorporated, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158- 0180, or by calling 800-877-9700. This Statement of Additional Information ("SAI") is not a prospectus and should be read in conjunction with the Prospectus. No person has been authorized to give any information or to make any representations not contained in the Prospectus or in this SAI in connection with the offering made by the Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus and this SAI do not constitute an offering by the Fund or its distributor in any jurisdiction in which such offering may not lawfully be made. INVESTMENT INFORMATION The Fund is a separate series of the Trust, a Delaware business trust that is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company. The Fund seeks its investment objective by investing all of its net investable assets in the Portfolio, a series of Equity Managers Trust ("Managers Trust") that has an investment objective identical to, and a name similar to, that of the Fund. The Portfolio, in turn, invests in accordance with an investment objective, policies, and limitations identical to those of the Fund. (The Trust and Managers Trust, which is an open-end management investment company managed by N&B Management, are together referred to below as the "Trusts.") The following information supplements the discussion in the Prospectus of the investment objective, policies, and limitations of the Fund and Portfolio. The investment objective and, unless otherwise specified, the investment policies and limitations of the Fund and Portfolio are not fundamental. Although any investment policy or limitation that is not fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust ("Portfolio Trustees") without shareholder approval, the Fund intends to notify its shareholders before changing its investment objective or implementing any material change in any non-fundamental policy or limitation. The fundamental investment policies and limitations of the Fund or the Portfolio may not be changed without the approval of the lesser of (1) 67% of the total units of beneficial interest ("shares") of the Fund or Portfolio represented at a meeting at which more than 50% of the outstanding Fund or Portfolio shares are represented or (2) a majority of the outstanding shares of the Fund or Portfolio. This vote is required by the Investment Company Act of 1940 ("1940 Act") and is referred to in this SAI as a "1940 Act majority vote." Whenever the Fund is called upon to vote on a change in the fundamental investment policy or limitation of the Portfolio, the Fund casts its votes thereon in proportion to the votes of its shareholders at a meeting thereof called for that purpose. Investment Policies and Limitations ----------------------------------- The Fund has the following fundamental investment policy, to enable it to invest in the Portfolio: Notwithstanding any other investment policy of the Fund, the Fund may invest all of its investable assets (cash, securities, and receivables relating to securities) in an open-end management investment company having substan- tially the same investment objective, policies, and limitations as the Fund. All other fundamental investment policies and limitations and the non-fundamental investment policies and limitations of the Fund and the Portfolio are identical. Therefore, although the following dis- - 1 - cusses the investment policies and limitations of the Portfolio, it applies equally to the Fund. Except for the limitation on borrowing and the limitation on ownership of portfolio securities by officers and trustees, any investment policy or limitation that involves a maximum percentage of securities or assets will not be considered to be violated unless the percentage limitation is exceeded immediately after, and because of, a transaction by the Portfolio. The Portfolio's fundamental investment policies and limitations are as follows: 1. Borrowing. The Portfolio may not borrow money, except that the Portfolio may (i) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (ii) enter into reverse repurchase agreements for any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If at any time borrowings exceed 33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce its borrowings within three days (excluding Sundays and holidays) to the extent necessary to comply with the 33-1/3% limitation. 2. Commodities. The Portfolio may not purchase physical commodities or contracts thereon, unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit the Portfolio from purchasing futures contracts or options (including options on futures contracts, but excluding options or futures contracts on physical commodities) or from investing in securities of any kind. 3. Diversification. The Portfolio may not, with respect to 75% of the value of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities) if, as a result, (i) more than 5% of the value of the Portfolio's total assets would be invested in the securities of that issuer or (ii) the Portfolio would hold more than 10% of the outstanding voting securities of that issuer. 4. Industry Concentration. The Portfolio may not purchase any security if, as a result, 25% or more of its total assets (taken at current value) would be invested in the securities of issuers having their principal business activities in the same industry. This limitation does not apply to securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 5. Lending. The Portfolio may not lend any security or make any other loan if, as a result, more than 33-1/3% of its total assets (taken at current value) would be lent to other parties, except, in accordance with its investment objective, policies, and limitations, (i) - 2 - through the purchase of a portion of an issue of debt securities or (ii) by engaging in repurchase agreements. 6. Real Estate. The Portfolio may not purchase real estate unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit the Portfolio from purchasing securities issued by entities or investment vehicles that own or deal in real estate or interests therein or instruments secured by real estate or interests therein. 7. Senior Securities. The Portfolio may not issue senior securities, except as permitted under the 1940 Act. 8. Underwriting. The Portfolio may not underwrite securities of other issuers, except to the extent that the Portfolio, in disposing of portfolio securities, may be deemed to be an underwriter within the meaning of the Securities Act of 1933 ("1933 Act"). The following non-fundamental investment policies and limitations apply to the Portfolio: 1. Borrowing. The Portfolio may not purchase secu- rities if outstanding borrowings, including any reverse repurchase agree- ments, exceed 5% of its total assets. 2. Lending. Except for the purchase of debt securities and engaging in repurchase agreements, the Portfolio may not make any loans other than securities loans. 3. Investments in Other Investment Companies. The Portfolio may not purchase securities of other investment companies, except to the extent permitted by the 1940 Act and in the open market at no more than customary brokerage commission rates. This limitation does not apply to securities received or acquired as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. 4. Margin Transactions. The Portfolio may not purchase securities on margin from brokers or other lenders, except that the Portfolio may obtain such short-term credits as are necessary for the clearance of securities transactions. Margin payments in connection with transactions in futures contracts and options on futures contracts shall not constitute the purchase of securities on margin and shall not be deemed to violate the foregoing limitation. 5. Short Sales. The Portfolio may not sell securities short unless it owns, or has the right to obtain without payment of additional consideration, securities equivalent in kind and amount to the securities sold. Transactions in forward contracts, futures contracts and options shall not constitute selling securities short. - 3 - 6. Ownership of Portfolio Securities by Officers and Trustees. The Portfolio may not purchase or retain the securities of any issuer if, to the knowledge of N&B Management, those officers and trustees of Managers Trust and officers and directors of N&B Management who each owns individually more than 1/2 of 1% of the outstanding securities of such issuer, together own more than 5% of such securities. 7. Unseasoned Issuers. The Portfolio may not purchase the securities of any issuer (other than securities issued or guaranteed by domestic or foreign governments or political subdivisions thereof) if, as a result, more than 5% of the Portfolio's total assets would be invested in the securities of business enterprises that, including predecessors, have a record of less than three years of continuous operation. 8. Puts, Calls, Straddles, or Spreads. The Portfolio may not invest in puts, calls, straddles, spreads, or any combination thereof, except that the Portfolio may (i) write (sell) covered call options against portfolio securities having a market value not exceeding 10% of its net assets and (ii) purchase call options in related closing transactions. The Portfolio does not construe the foregoing limitation to preclude it from purchasing or writing options on futures contracts or from purchasing securities with rights to put the securities to the issuer or a guarantor. 9. 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. 10. Foreign Securities. The Portfolio may not invest more than 10% of the value of its total assets in securities of foreign issuers, provided that this limitation shall not apply to foreign securities denominated in U.S. dollars, including American Depositary Receipts ("ADRs"). 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 purchase or sell real property (including interests in real estate limited partnerships, but excluding readily marketable interests in real estate investment trusts and readily marketable securities of companies that invest in real estate); provided that the Portfolio may not purchase any security if, as a result, more than 10% of its total assets would be invested in securities of real estate investment trusts. - 4 - 13. Investments in Any One Issuer. The Portfolio may not purchase the securities of any one issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities) if, as a result, more than 5% of the Portfolio's total assets would be invested in the securities of that issuer. 14. Warrants. The Portfolio may not invest more than 5% of its net assets in warrants, including warrants that are not listed on the New York Stock Exchange ("NYSE") or American Stock Exchange ("AmEx"), or more than 2% of its net assets in such 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 may be deemed to be without value. 15. Pledging. The Portfolio may not pledge or hypothecate any of its assets, except that the Portfolio may pledge or hypothecate up to 5% of its total assets in connection with its entry into any agreement or arrangement pursuant to which a bank furnishes a letter of credit to collateralize a capital commitment made by the Portfolio to a mutual insurance company of which the Portfolio is a member. The Portfolio, as an operating policy, does not intend to invest in futures contracts and options thereon during the coming year. Kent C. Simons and Lawrence Marx III, Portfolio Managers of the Portfolio ------------------------------------------------------------------------- The Portfolio is managed by two veterans of N&B Manage- ment who have consistently followed their value-oriented philosophy over many years: Kent Simons and Larry Marx. The Portfolio subscribes to the same stock-picking philosophy followed since 1950, when Roy R. Neuberger founded the predecessor of Neuberger & Berman GUARDIAN Fund, which, like the Fund, invests all its net investable assets in the Portfolio. It's no great trick for a mutual fund to make money when the market is rising. The tide that lifts stock values will carry most funds along. The true test of management is its ability to make money even when the market is flat or declining. By that measure, the Fund, Neuberger & Berman GUARDIAN Fund and its predecessor have served shareholders well and have paid a dividend every quarter and a capital gain distribution EVERY YEAR since 1950. Of course, there can be no assurance that this trend will continue. Both Mr. Simons and Mr. Marx place a high premium on being knowledgeable about the companies whose stocks they buy for the Portfolio. That knowledge is important, because sometimes it takes courage to buy stocks that the rest of the market has forsaken. Says Mr. Marx, "We're usually early in and early out. We'd rather buy an - 5 - undervalued stock because we expect it to become fairly valued than buy one fairly valued and hope it becomes overvalued. We like a stock 'under a rock' or with a cloud over it; you are not going to get great companies at great valuations when the market perception is great." "People who switch around a lot are not going to benefit from our approach. They're following the market -- we're looking at fundamentals." Additional Investment Information --------------------------------- The Portfolio, as indicated below, may make the following investments, among others, although 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 or from a securities dealer that agrees to repurchase the securities from the Portfolio at a higher price on a designated future date. Repurchase agreements generally are for a short period of time, usually less than a week. 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. Securities Loans. In order to realize income, the Portfolio may lend portfolio securities with a value not exceeding 33-1/3% of its total assets to banks, brokerage firms, or 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 Portfolio Trustees. The collateral, which must be marked to market daily, must be equal to at least 100% of the market value of the loaned securities, which will also be marked to market daily. N&B Man- agement believes the risk of loss on these transactions is slight because, if a borrower were to default for any reason, the collateral should satisfy the obligation. However, as with other extensions of secured credit, loans of portfolio securities involve some risk of loss of rights in the collateral should the borrower fail financially. - 6 - 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 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 regis- tering them under the 1933 Act. To the extent that institutional buyers become, for a time, uninterested in purchasing these securities, investing in Rule 144A securities could increase the level of the Portfolio's illiquidity. N&B Management, acting under guidelines established by the Portfolio Trustees, may determine that certain securities qualified for trading under Rule 144A are liquid. Foreign securities that 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 priced at fair value as determined in accordance with procedures approved and periodically reviewed by the Portfolio 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, U.S. Government or Agency Securities, or other 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. - 7 - 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 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 also may invest in equity, debt, or other income-producing securities that are denominated in or indexed to foreign currencies, including (1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits, and bankers' acceptances issued by foreign banks, (3) obligations of other corporations, and (4) obligations of foreign governments 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. The Portfolio may invest only in securities of issuers in countries whose governments are considered stable by N&B Man- agement. 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. - 8 - 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 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. In order to limit the risk inherent in investing in foreign currency denominated securities, the Portfolio may not purchase any such security if, after such purchase, more than 10% of its total assets (taken at market value) would be invested in foreign currency denominated securities. Within that limitation, however, the Portfolio is not restricted in the amount it may invest in securities denominated in any one foreign currency. Covered Call Options. The Portfolio may write or purchase covered call options on securities it owns valued at up to 10% of its net assets. Generally, the purpose of writing and purchasing these options is to reduce the effect of price fluctuations of securities held by the Portfolio on the Portfolio's and the Fund's net asset values ("NAVs"). Portfolio securities on which call 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. 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. - 9 - 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 writes only "covered" call options on securities it owns. 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. If a call option that the Portfolio has written expires unexercised, the Portfolio will realize a gain in the amount of the premium; however, 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. 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. A Portfolio would purchase a call option to offset a previously written call option. The obligation under any option terminates upon expiration of the option or, at an earlier time, when the writer offsets the option by entering into a "closing purchase transaction" to purchase an option of the same series. If an option is purchased by the Portfolio and is never exercised, the Portfolio will lose the entire amount of the premium paid. Options are traded both on national securities exchanges and in the over-the-counter ("OTC") market. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed; the clearing organization in effect guarantees completion of every exchange-traded option. In contrast, OTC options are contracts between the Portfolio and its counter- party with no clearing organization guarantee. Thus, when the Portfolio writes an OTC option, it generally will be able to "close out" the option prior to its expiration only by entering into a closing purchase transaction with the dealer to whom the Portfolio originally sold 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 - 10 - OTC call option it has written, it will not be able to liquidate securities used as cover until the option expires or is exercised or until different cover is substituted. In the event of the counter-party's insolvency, the Portfolio may be unable to liquidate its options position and the associated cover. N&B Management monitors the creditworthiness of dealers with which the Portfolio may engage in OTC options transactions, and limits the Portfolios' counter-parties 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 for OTC options written by the Portfolio will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Portfolio may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC call option written subject to this procedure will be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option. The premium received (or paid) by the Portfolio when it writes (or purchases) an option is the amount at which the option is currently traded on the applicable exchange, less (or plus) a commission. The premium may reflect, among other things, the current market price of the underlying security, the relationship of the exercise price to the market price, the historical price volatility of the underlying security, the length of the option period, the general supply of and demand for credit, and the general interest rate environment. The premium received by the Portfolio for writing an option is recorded as a liability on the Portfolio's statement of assets and liabilities. This liability is adjusted daily to the option's current market value, which is the 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. If the Portfolio desires to sell a security on which it has written a call option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security. There is, of course, no assurance that the Portfolio will be able to effect closing transactions at favorable prices. If the Portfolio cannot enter into such a transaction, it may be required to hold a security that it might otherwise have sold, in which case it would continue to be at market risk on the security. The Portfolio will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or - 11 - more than the premium received from writing the call 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. The Portfolio pays brokerage commissions in connection with purchasing or writing options, including those used to close out existing positions. These brokerage commissions normally are higher than those applicable to purchases and sales of portfolio securities. Options normally have expiration dates between three and nine months from the date written. 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. Forward Foreign Currency Contracts. The Portfolio may enter into contracts for the purchase or sale of a specific currency at a future date at a fixed price ("forward contracts") in amounts not exceeding 5% of its net assets. The Portfolio enters into forward contracts in an attempt to hedge against expected changes in prevailing currency exchange rates. The Portfolio does not engage in transactions in forward contracts for speculation; it views investments in forward contracts as a means of establishing more definitely the effective return on securities denominated in foreign currencies that are held or intended to be acquired by it. Forward contract transactions include forward sales or purchases of foreign currencies for the purpose of protecting the U.S. dollar value of securities held or to be acquired by the Portfolio or protecting the U.S. dollar equivalent of dividends, interest, or other payments on those securities. N&B Management believes that the use of foreign currency hedging techniques, including "cross-hedges," can help protect against declines in the U.S. dollar value of income available for distribution and declines in the Portfolio's NAV resulting from adverse changes in currency exchange rates. For example, the return available from securities denomi- nated in a particular foreign currency would diminish if the value of the U.S. dollar increased against that currency. Such a decline could be partially or completely offset by an increase in value of a cross-hedge involving a forward contract to sell a different foreign currency, where the contract is available on terms more advantageous to the Portfolio than a contract to sell the currency in which the securities being hedged are denominated. N&B Management believes that hedges and cross-hedges can, therefore, provide significant protection of NAV in the event of a general rise in the U.S. dollar against foreign currencies. However, a hedge or cross-hedge cannot protect against exchange rate risks perfectly, and if N&B Management is incorrect in its judgment of future exchange rate - 12 - relationships, the Portfolio could be in a less advantageous position than if such a hedge had not been established. In addition, because forward contracts are not traded on an exchange, the assets used to cover such contracts may be illiquid. Options on Foreign Currencies. The Portfolio may write and purchase covered call and put options on foreign currencies, in amounts not exceeding 5% of its net assets. The Portfolio would engage in such transactions to protect against declines in the U.S. dollar value of portfolio securities or increases in the U.S. dollar cost of securities to be acquired, or to protect the U.S. dollar equivalent of dividends, interest, or other payments on those securities. As with other types of options, however, writing an option on foreign currency constitutes only a partial hedge, up to the amount of the premium received, and the Portfolio could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The risks of currency options are similar to the risks of other options, discussed herein. Certain options on foreign currencies are traded on the OTC market and involve liquidity and credit risks that may not be present in the case of exchange-traded currency options. To the extent the Portfolio writes options on foreign currencies that are traded on an exchange regulated by the Commodity Futures Trading Commission ("CFTC") other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums on those positions (excluding the amount by which options are "in-the-money") may not exceed 5% of the Portfolio's net assets. GENERAL CONSIDERATIONS INVOLVING OPTIONS AND FORWARD CONTRACTS (COLLECTIVELY, "HEDGING INSTRUMENTS") Risks Involved in Using Hedging Instruments. The primary risks in using Hedging Instruments are (1) imperfect correlation or no correlation between changes in market value of the securities held or to be acquired by the Portfolio and changes in market value of Hedging Instruments; (2) possible lack of a liquid secondary market for Hedging Instruments and the resulting inability to close out Hedging Instruments when desired; (3) the fact that the skills needed to use Hedging Instru- ments are different from those needed to select the Portfolio's securities; (4) the fact that, although use of these instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in hedged investments; and (5) the possible inability of the Portfolio to purchase or sell a portfolio security at a time that would otherwise be favorable for it to do so, or the possible need for the Portfolio to sell a portfolio security at a disadvantageous time, due to its need to maintain "cover" or to segregate securities in connection with its use of Hedging Instruments. N&B Management intends to reduce the risk of imperfect correlation by investing only in Hedging Instruments whose behavior is expected to resemble that of the Portfolio's underlying securities. N&B Management intends to reduce the risk that the Portfolio will be unable to close out Hedging Instruments by entering into such - 13 - transactions only if N&B Management believes there will be an active and liquid secondary market. Hedging Instruments used by the Portfolio are generally considered "derivatives." There can be no assurance that the Portfolio's use of Hedging Instruments will be successful. The Portfolio's use of Hedging Instruments may be limited by the requirements of the Internal Revenue Code of 1986, as amended ("Code"), that apply to the Fund for qualification as a regulated investment company ("RIC"). See "Additional Tax Information." Cover for Hedging Instruments. The Portfolio will comply with SEC guidelines regarding cover for Hedging Instruments and, if the guidelines so require, set aside in a segregated account with its custodian cash, U.S. Government or Agency Securities, or other liquid, high-grade debt securities in the prescribed amount. Securities held in a segregated account cannot be sold while the option or forward strategy covered by those securities is outstanding, unless they are replaced with other suitable assets. As a result, segregation of a large percentage of the Portfolio's assets could impede portfolio management or the Portfolio's ability to meet current obligations. The Portfolio may be unable promptly to dispose of assets which cover, or are segregated with respect to, an illiquid option or forward position; this inability may result in a loss to the Portfolio. 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), it may also invest in money market in- struments, U.S. Government or Agency Securities, and other fixed income securities. The Portfolio may invest in corporate bonds and debentures receiving one of the four highest ratings from Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally recognized statistical rating organization ("NRSRO"), or, if not rated by any NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable Unrated Securities"). The ratings of an NRSRO represent its opinion as to the quality of securities it undertakes to rate. Ratings are not absolute standards of quality; consequently, securities with the same maturity, coupon, and rating may have different yields. The Port- folio relies primarily on ratings assigned by S&P and Moody's, which are described in Appendix A to this SAI. Fixed income securities are subject to the risk of an issuer's inability to meet principal and interest payments on its obligations ("credit risk") and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and 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, - 14 - which react primarily to movements in the general level of interest rates. Subsequent to its purchase by the Portfolio, an issue of debt securities may cease to be rated or its rating may be reduced, so that the securities would not be eligible for purchase by the Portfolio. In such a case, N&B Management will engage in an orderly disposition of the downgraded securities to the extent necessary to ensure that the Portfolio's holdings of such securities will not exceed 5% of its net assets. 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 (A-1) or Moody's (P-1), or deemed by N&B Management to be of equivalent quality. The Portfolio may invest in commercial paper that cannot be resold to the public without an effective registration statement under the 1933 Act. While restricted commercial paper normally is deemed illiquid, N&B Management may in certain cases determine that such paper is liquid, pursuant to guidelines established by the Portfolio Trustees. Convertible Securities. The Portfolio may invest in 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 non-convertible debt. Convertible securities are usually subordinated to comparable-tier non- convertible securities but rank senior to common stock in a corporation's capital structure. The value of a convertible security is a function of (1) its yield in comparison to the yields of other securities of comparable maturity and quality that do not have a conversion privilege and (2) its worth if converted into the underlying common stock. Convertible 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 non-convertible 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 and the Fund's ability to achieve their investment objectives. Preferred Stock. The Portfolio may invest in preferred stock. Unlike interest payments on debt securities, dividends on - 15 - 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. PERFORMANCE INFORMATION The Fund's performance figures are based on historical earnings and are not intended to indicate future performance. The share price and total return of the Fund will vary, and an investment in the Fund, when redeemed, may be worth more or less than an investor's original cost. Total Return Computations ------------------------- The Fund may advertise certain total return information. An average annual compounded rate of return ("T") may be computed by using the redeemable value at the end of a specified period ("ERV") of a hypothetical initial investment of $1,000 ("P") over a period of time ("n") according to the formula: n P(1+T) = ERV Average annual total return smooths out year-to-year variations and, in that respect, differs from actual year-to-year results. Although the Fund commenced operations on August 3, 1993, the Fund's investment objective, limitations, and policies are the same as another mutual fund administered by N&B Management, which has a name similar to the Fund's and invests in the same Portfolio ("Sister Fund"). The Sister Fund had a predecessor. The following total return data is for the Fund since its inception and, for periods prior to the Fund's inception, the Sister Fund and the Sister Fund's predecessor. The total returns for periods prior to the Fund's inception would have been lower had they reflected the higher fees of the Fund, as compared to those of the Sister Fund and its predecessor. Appendix B to this SAI includes additional performance data. The average annual total returns for the Fund, its Sister Fund, and the Sister Fund's predecessor for the one-, five-, and ten-year periods ended August 31, 1995, were 24.01%, 20.14%, and 15.66%, respec- tively. If an investor had invested $10,000 in the predecessor's shares on June 1, 1950 and had reinvested all distributions and income dividends, the NAV of that investor's holdings would have been $2,629,312 on August 31, 1995. - 16 - Comparative Information ----------------------- From time to time the Fund's performance may be compared with: (1) data (that may be expressed as rankings or ratings) published by independent services or publications (including newspapers, newsletters, and financial periodicals) that monitor the performance of mutual funds, such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies, Inc., Wiesenberger Investment Companies Service, Investment Company Data Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and U.S. News & World Report magazines, The Wall Street Journal, New York Times, Kiplingers Personal Finance, and Barron's News- paper, or (2) recognized stock and other indices, such as the S&P 500 Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index ("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000 Stock Index, Dow Jones Industrial Average ("DJIA"), Wilshire 1750, Nasdaq Composite Index, Value Line Index, U.S. Department of Labor Consumer Price Index ("Consumer Price Index"), College Board Survey of Colleges Annual Increases of College Costs, Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra Value Index, and various other domestic, international, and global indices. The S&P 500 Index is a broad index of common stock prices, while the DJIA represents a narrower segment of industrial companies. The S&P 600 Index includes stocks that range in market value from $27 million to $880 million, with an average of $302 million. The S&P 400 Index measures mid-sized companies with an average market capitalization of $1.2 billion. Each assumes reinvestment of distributions and is calculated without regard to tax consequences or the costs of investing. The Portfolio may invest in different types of securities from those included in some of the above indices. Evaluations of the Fund's performance, its total returns, and comparisons may be used in advertisements and in information furnished to current and prospective shareholders (collectively, "Advertisements"). The Fund may also be compared to individual asset classes such as common - 17 - stocks, small-cap stocks, or Treasury bonds, based on information supplied by Ibbotson and Sinquefield. Other Performance Information ----------------------------- From time to time, information about the Portfolio's portfolio allocation and holdings as of a particular date may be included in Advertisements for the Fund. This information, for example, may include the Portfolio's portfolio diversification by asset type. Information used in Advertisements may include statements or illustrations relating to the appropriateness of types of securities and/or mutual funds that may be employed to meet specific financial goals, such as (1) funding retirement, (2) paying for children's education, and (3) financially supporting aging parents. N&B Management believes that many of its common stock funds may be attractive investment vehicles for conservative investors who are interested in long-term appreciation from stock investments, but who have a moderate tolerance for risk. Such investors may include, for example, individuals (1) planning for or facing retirement, (2) receiving or expecting to receive lump-sum distributions from individual retirement accounts ("IRAs"), self-employed individual retirement plans ("Keogh plans"), or other retirement plans, (3) anticipating rollovers of CDs or IRAs, Keogh plans, or other retirement plans, and (4) receiving a significant amount of money as a result of inheritance, sale of a business, or termination of employment. Investors who may find the Fund to be an attractive investment vehicle also include parents saving to meet college costs for their children. For instance, the cost of a college education is rapidly approaching the cost of the average family home. Four years' tuition, room and board at a top private institution can already cost over $80,000. If college expenses continue to increase at current rates, by the time today's pre-schooler enters the ivy-covered halls in 2009, four years at a private college may easily cost $200,000!3/ Information relating to inflation and its effects on the dollar also may be included in Advertisements. For example, after ten years, the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100, respectively, if the annual rates of inflation during that period were 4%, 5%, 6%, and 7%, respectively. (To calculate the purchasing power, the value at the end of each year is reduced by the inflation rate for the ten-year period.) 3/ Source: College Board, 1994, 1995 Annual Survey of Colleges, Princeton, NJ, assuming an average 6% increase in annual expenses. - 18 - From time to time the investment philosophy of N&B Man- agement's founder, Roy R. Neuberger, may be included in the Fund's Advertisements. This philosophy is described in further detail in "The Art of Investing: A Conversation with Roy Neuberger," attached as Appendix C to this SAI. CERTAIN RISK CONSIDERATIONS Although the Portfolio seeks to reduce risk by investing in a diversified portfolio, diversification does not eliminate all risk. There can, of course, be no assurance that the Portfolio will achieve its investment objective, and an investment in the Fund involves certain risks that are described in the sections entitled "Investment Program" and "Description of Investments" in the Prospectus and "Investment Information -- Additional Investment Information" in this SAI. TRUSTEES AND OFFICERS The following table sets forth information concerning the trustees and officers of the Trusts, including their addresses and principal business experience during the past five years. Some persons named as trustees and officers also serve in similar capacities for other funds, and (where applicable) their corresponding portfolios, administered or managed by N&B Management and Neuberger & Berman, L.P. ("Neuberger & Berman").
Name, Age, and Positions Held Address(1) With the Trusts Principal Occupation(s)(2) -------------- ---------------- -------------------------- Faith Colish (60) Trustee of each Trust Attorney at Law, Faith Colish, 63 Wall Street A Professional Corporation. 24th Floor New York, NY 10005 - 19 - Donald M. Cox (73) Trustee of each Trust Retired. Formerly Senior Vice 435 East 52nd Street President and Director of Exxon New York, NY 10022 Corporation; Director of Emigrant Savings Bank. Stanley Egener* (61) Chairman of the Board, Partner of Neuberger & Berman; Chief Executive Officer, President and Director of N&B and Trustee of each Trust Management; Chairman of the Board, Chief Executive Officer, and Trustee of eight other mutual funds for which N&B Management acts as investment manager or administrator. Alan R. Gruber (68) Trustee of each Trust Chairman and Chief Executive Orion Capital Corporation Officer of Orion Capital 600 Fifth Avenue Corporation (property and 24th Floor casualty insurance); Director New York, NY 10020 of Trenwick Group, Inc. (property and casualty reinsurance); Chairman of the Board and Director of Guaranty National Corporation (property and casualty insurance); formerly Director of Ketema, Inc. (diversified manufactur- er). - 20 - Howard A. Mileaf (57) Trustee of each Trust Vice President and Special Wheeling Pittsburgh Corporation Counsel to Wheeling Pittsburgh 110 East 59th Street Corporation (holding company) New York, NY 10022 since 1992; formerly Vice President and General Counsel of Keene Corporation (manu- facturer of industrial products); Director of Kevlin Corporation (manufacturer of microwave and other products). Edward I. O'Brien* (67) Trustee of each Trust Until 1993, President of the 12 Woods Lane Securities Industry Association Scarsdale, NY 10583 ("SIA") (securities industry's representative in government relations and regulatory matters at the federal and state levels); until November 1993, employee of the SIA; Director of Legg Mason, Inc. John T. Patterson, Jr. (67) Trustee of each Trust President of SOBRO (South Bronx 90 Riverside Drive Overall Economic Development Apartment 1B Corporation). New York, NY 10024 John P. Rosenthal (63) Trustee of each Trust Senior Vice President of Burnham Securities Inc. Burnham Securities Inc. (a Burnham Asset Management Corp. registered broker-dealer) since 1325 Avenue of the Americas 1991; formerly Partner of 17th Floor Silberberg, Rosenthal & Co. New York, NY 10019 (member of National Association of Securities Dealers, Inc.); Director, Cancer Treatment Holdings, Inc. - 21 - Cornelius T. Ryan (64) Trustee of each Trust General Partner of Oxford Oxford Bioscience Partners Partners and Oxford Bioscience 315 Post Road West Partners (venture capital Westport, CT 06880 partnerships) and President of Oxford Venture Corporation; Director of Capital Cash Management Trust (money market fund) and Prime Cash Fund. Gustave H. Shubert (66) Trustee of each Trust Senior Fellow/Corporate Advisor 13838 Sunset Boulevard and Advisory Trustee of Rand (a Pacific Palisades, CA 90272 non-profit public interest research institution) since 1989; Member of the Board of Overseers of the Institute for Civil Justice, the Policy Advisory Committee of the Clinical Scholars Program at the University of California, the American Association for the Advancement of Science, the Counsel on Foreign Relations, and the Institute for Strategic Studies (London); advisor to the Program Evaluation and Methodology Division of the U.S. General Accounting Office; formerly Senior Vice President and Trustee of Rand. Lawrence Zicklin* (59) President and Trustee of Partner of Neuberger & Berman; each Trust Director of N&B Management; President of five other mutual funds for which N&B Management acts as investment manager or administrator. - 22 - Daniel J. Sullivan (55) Vice President of each Senior Vice President of N&B Trust 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. Michael J. Weiner (48) Vice President and Senior Vice President and Principal Financial Treasurer of N&B Management Officer of each Trust since 1992; prior thereto, Vice President and Treasurer of N&B Management and Treasurer of certain mutual funds for which N&B Management acted as investment adviser; Vice President and Principal Financial Officer of eight other mutual funds for which N&B Management acts as invest- ment manager or administrator. Claudia A. Brandon (38) Secretary of each Trust Vice President of N&B Man- agement; Secretary of eight other mutual funds for which N&B Management acts as investment manager or administrator. Richard Russell (48) Treasurer and Principal Vice President of N&B Accounting Officer of Management since 1993; prior each Trust thereto, Assistant Vice President of N&B Management; Treasurer and Principal Ac- counting Officer of eight other mutual funds for which N&B Management acts as investment manager or administrator. - 23 - Stacy Cooper-Shugrue (32) Assistant Secretary of Assistant Vice President of N&B each Trust 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 of Partner of Neuberger & Berman each Trust since 1992; employee thereof since 1971; Assistant Secretary of eight other mutual funds for which N&B Management acts as investment manager or administrator.
____________________ (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 each Trust within the meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by virtue of the fact that they are officers and/or directors of N&B Management and partners of Neuberger & Berman. Mr. O'Brien is an interested person by virtue of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of which, from time to time, serves as a broker or dealer to the Portfolio and other funds for which N&B Management serves as investment manager. The Trust's Trust Instrument and Managers Trust's Declaration of Trust each provides that it will indemnify its trustees and officers against liabilities and expenses reasonably incurred in - 24 - 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. For the fiscal year ended August 31, 1995, the Fund and Portfolio paid fees and expenses of $15,468 to the Fund and Portfolio Trustees who were not affiliated with N&B Management or Neuberger & Berman. The following table sets forth information concerning the compensation of the trustees and officers of the Trust. None of the Neuberger & Berman Funds(SERVICEMARK) has any retirement plan for its trustees or officers. - 25 -
TABLE OF COMPENSATION FOR FISCAL YEAR ENDED 8/31/95 ----------------------------- Total Compensation from the Name and Position Aggregate Compensation Neuberger & Berman Fund Complex with the Trust from the Trust Paid to Trustees ----------------- ---------------------- ------------------------------- Faith Colish $1,336.05 $39,000 Trustee (5 other investment companies) Donald M. Cox $1,336.05 $31,000 Trustee (3 other investment companies) Stanley Egener $0 $0 Chairman of the Board, Chief Executive (9 other investment companies) Officer, and Trustee Alan R. Gruber $1,336.05 $31,000 Trustee (3 other investment companies) Howard A. Mileaf $1,404.81 $36,500 Trustee (4 other investment companies) Edward I. O'Brien $1,388.74 $31,500 Trustee (3 other investment companies) John T. Patterson, Jr. $1,371.96 $34,500 Trustee (4 other investment companies) John P. Rosenthal $1,309.92 $33,000 Trustee (4 other investment companies) Cornelius T. Ryan $1,404.81 $33,500 Trustee (3 other investment companies) Gustave H. Shubert $1,309.92 $30,000 Trustee (3 other investment companies) Lawrence Zicklin $0 $0 President and Trustee (5 other investment companies)
- 26 - INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES Investment Manager and Administrator ------------------------------------ Because all of the Fund's net investable assets are invested in the Portfolio, the Fund does not need an investment manager. N&B Management serves as the Portfolio's investment manager pursuant to a management agreement with Managers Trust, dated as of August 2, 1993 ("Management Agreement"). The Management Agreement was approved for the Portfolio by the Portfolio Trustees, including a majority of the Portfolio Trustees who were not "interested persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"), on July 15, 1993, and was approved by the holders of the interests in the Portfolio on August 2, 1993. 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 Managers 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 officers of the Trusts. See "Trustees and Officers." Each Portfolio pays N&B Management a management fee based on the Portfolio's average daily net assets, as described in the Prospectus. N&B Management provides similar facilities, services and personnel, as well as shareholder accounting, recordkeeping, and other shareholder services, to the Fund pursuant to an administration agreement dated August 3, 1993 ("Administration Agreement"). For such administrative services, the Fund pays N&B Management a fee based on the Fund's daily net assets, as described in the Prospectus. N&B Management enters into administrative services agreements with Institutions, pursuant to which it compensates such Institutions for accounting, recordkeeping, and other services that they provide to investors who purchase shares of the Fund. - 27 - During the fiscal years ended August 31, 1995 and 1994, and the period from August 3 to August 31, 1993, the Fund accrued management and administration fees of $2,417,586, $142,142, and $43.97, respectively. N&B Management has voluntarily undertaken until December 31, 1996, to reimburse the Fund for its Operating Expenses and its pro rata share of the Portfolio's Operating Expenses so that the Fund's expense ratio per annum will not exceed the expense ratio of its Sister Fund by more than 0.10% of the Fund's average daily net assets. "Operating Expenses" exclude interest, taxes, brokerage commissions, and extraordinary expenses. During the period from August 3, 1993 (commencement of operations of the Fund) to December 31, 1994, N&B Management voluntarily undertook to reimburse the Fund for its Operating Expenses and its pro rata share of the Portfolio's Operating Expenses which, in the aggregate, exceeded the aggregate Operating Expenses and pro rata share of Portfolio Operating Expenses of the Sister Fund. During the fiscal years ended August 31, 1995 and 1994, N&B Management reimbursed the Fund $171,796 and $116,354, respectively, of expenses, under this arrangement. 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 Independent Portfolio Trustees, cast in person at a meeting called for the purpose of voting on such approval, and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act majority vote of the outstanding shares in the Portfolio. The Administration Agreement continues with respect to the Fund for a period of two years after the date the Fund became subject thereto. The Administration Agreement is renewable from year to year with respect to the Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the Fund Trustees who are not "interested persons" of N&B Management or the Trust ("Independent Fund Trustees"), cast in person at a meeting called for the purpose of voting on such approval, and (2) by the vote of a majority of the Fund Trustees or by a 1940 Act majority vote of the outstanding shares in the Fund. The Management Agreement is terminable, without penalty, with respect to the Portfolio on 60 days' written notice either by Managers Trust or by N&B Management. The Administration Agreement is terminable, without penalty, with respect to the Fund on 60 days' written notice either by N&B Management or by the Trust if authorized by the Fund Trustees, including a majority of the Independent Fund Trustees. Each Agreement terminates automatically if it is assigned. - 28 - In addition to the voluntary expense reimbursements described in the Prospectus under "Management and Administration -- Expenses," N&B Management has agreed in the Management Agreement to reimburse the Fund's expenses, as follows. If, in any fiscal year, the Fund's Aggregate Operating Expenses (as defined below) exceed the most restrictive expense limitation imposed under the securities laws of the states in which the Fund's shares are qualified for sale ("State Expense Limitation"), then N&B Management will pay the Fund the amount of that excess, less the amount of any reduction of the administration fee payable by the Fund under a similar State Expense Limitation contained in the Administration Agreement. N&B Management will have no obligation to pay the Fund, however, for any expenses that exceed the pro rata portion of the management fees attributable to the Fund's interest in the Portfolio. At the date of this SAI, the most restrictive State Expense Limitation to which the Fund expects to be subject is 2 1/2% of the first $30 million of average net assets, 2% of the next $70 million of average net assets, and 1 1/2% of average net assets over $100 million. For purposes of the State Expense Limitation, the term "Aggregate Operating Expenses" means the Fund's operating expenses plus its pro rata portion of the Portfolio's operating expenses (including any fees or expense reimbursements payable to N&B Management and any compensation payable thereto pursuant to (1) the Administration Agreement or (2) any other agreement or arrangement with Managers Trust in regard to the Portfolio; but excluding (with respect to both the Fund and the Portfolio) interest, taxes, brokerage commissions, litigation and indemnification expenses, and other extraordinary expenses not incurred in the ordinary course of business). Sub-Adviser ----------- N&B Management retains Neuberger & Berman, 605 Third Avenue, New York, NY 10158-3698, as sub-adviser with respect to the Portfolio pursuant to a sub-advisory agreement dated August 2, 1993 ("Sub- Advisory Agreement"). The Sub-Advisory Agreement was approved by the Portfolio Trustees, including a majority of the Independent Portfolio Trustees, on July 15, 1993 and was approved by the holders of the inter- ests in the Portfolio on August 2, 1993. 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 - 29 - investment analysts, each of whom specializes in studying one or more industries, under the supervision of the Director of Research, who is also available for consultation with N&B Management. The Sub-Advisory Agreement provides that N&B Management will pay for the services rendered by Neuberger & Berman based on the direct and indirect costs to Neuberger & Berman in connection with those services. Neuberger & Berman also serves as sub-adviser for all of the other mutual funds managed by N&B Management. The Sub-Advisory Agreement continues with respect to the Portfolio 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 Portfolio Trustees, by a 1940 Act majority vote of the outstanding Portfolio shares, 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 Managed ---------------------------- 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: - 30 -
Approximate Net Assets at September 30, Name 1995 ---- ------------------------ Neuberger & Berman Cash Reserves Portfolio (investment portfolio for Neuberger & Berman Cash Reserves) $ 377,608,619 Neuberger & Berman Government Income Portfolio (investment portfolio for Neuberger & Berman Government Income Fund and Neuberger & Berman Government Income Trust) $ 12,053,656 Neuberger & Berman Government Money Portfolio (investment portfolio for Neuberger & Berman Government Money Fund) $ 346,898,132 Neuberger & Berman Limited Maturity Bond Portfolio (investment portfolio for Neuberger & Berman Limited Maturity Bond Fund and Neuberger & Berman Limited Maturity Bond Trust) $ 309,540,451 Neuberger & Berman Municipal Money Portfolio (investment portfolio for Neuberger & Berman Municipal Money Fund) $ 149,657,613 Neuberger & Berman Municipal Securities Portfolio (investment portfolio for Neuberger & Berman Municipal Securities Trust) $ 44,568,635 Neuberger & Berman New York Insured Intermediate Portfolio (investment portfolio for Neuberger & Berman New York Insured Intermediate Fund) $ 10,679,324 Neuberger & Berman Ultra Short Bond Portfolio (investment portfolio for Neuberger & Berman Ultra Short Bond Fund and Neuberger & Berman Ultra Short Bond Trust) $ 102,903,312 - 31 - Approximate Net Assets at September 30, Name 1995 ---- ------------------------ Neuberger & Berman Focus Portfolio (investment portfolio for Neuberger & Berman Focus Fund and Neuberger & Berman Focus Trust) $ 1,031,915,664 Neuberger & Berman Genesis Portfolio (investment portfolio for Neuberger & Berman Genesis Fund and Neuberger & Berman Genesis Trust) $ 145,188,783 Neuberger & Berman Guardian Portfolio (investment portfolio for Neuberger & Berman Guardian Fund and Neuberger & Berman Guardian Trust) $4,943,764,830 Neuberger & Berman International Portfolio (investment portfolio for Neuberger & Berman International Fund) $ 29,990,616 Neuberger & Berman Manhattan Portfolio (investment portfolio for Neuberger & Berman Manhattan Fund and Neuberger & Berman Manhattan Trust) $ 670,916,038 Neuberger & Berman Partners Portfolio (investment portfolio for Neuberger & Berman Partners Fund and Neuberger & Berman Partners Trust) $1,664,460,688 Neuberger & Berman Socially Responsive Portfolio (investment portfolio for Neuberger & Berman Socially Responsive Fund, Neuberger & Berman Socially Responsive Trust, and Neuberger & Berman NYCDC Socially Responsive Trust) $ 102,675,093 Neuberger & Berman Advisers Managers Trust (six series) $1,257,506,124
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. - 32 - 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, most of the Other N&B Funds differ from the Portfolio. Even where the investment objectives are similar, however, the methods used by the Other N&B Funds and the Portfolio to achieve their objectives may differ. 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 Portfolio Trustees that the desirability of the Portfolio's having its advisory arrangements with N&B Management outweighs any disadvantages that may result from contemporaneous transactions. The 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; Farha-Joyce 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 Cooper-Shugrue, 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 Holliday-Soto, 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, - 33 - Assistant Vice President. Messrs. Cantor, Egener, Lainoff, Schwartz, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Havell and Prindle are general partners of Neuberger & Berman. Messrs. Egener and Zicklin are trustees and officers, and Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue are officers, of each Trust. C. Carl Randolph, a general partner of Neuberger & Berman, also is an officer of each Trust. All of the outstanding voting stock in N&B Management is owned by persons who are also general partners of Neuberger & Berman. DISTRIBUTION ARRANGEMENTS N&B Management serves as the distributor ("Distributor") in connection with the offering of the Fund's shares on a no-load basis to Institutions. In connection with the sale of its shares, the Fund has authorized the Distributor to give only the information, and to make only the statements and representations, contained in the Prospectus and this SAI or that properly may be included in sales literature and advertisements in accordance with the 1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales may be made only by the Prospectus, which may be delivered either personally, through the mails, or by electronic means. The Distributor is the Fund's "principal underwriter" within the meaning of the 1940 Act and, as such, acts as agent in arranging for the sale of the Fund's shares to Institutions without sales commission or other compensation and bears all advertising and promotion expenses incurred in the sale of the Fund's shares. The Distributor or one of its affiliates may, from time to time, deem it desirable to offer to the Fund's shareholders, through use of its shareholder list, the shares of other mutual funds for which the Distributor acts as distributor or other products or services. Any such use of the Fund's shareholder lists, however, will be made subject to terms and conditions, if any, approved by a majority of the Independent Fund Trustees. These lists will not be used to offer the Fund's shareholders any investment products or services other than those managed or distributed by N&B Management or Neuberger & Berman. The Trust, on behalf of the Fund, and the Distributor are parties to a Distribution Agreement that continues until August 3, 1996. The Distribution Agreement may be renewed annually if specifically approved by (1) the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the Fund's outstanding shares and (2) the vote of a majority of the Independent Fund Trustees, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated by either party and will automatically terminate on its assignment, in the same manner as the Management Agreement. - 34 - ADDITIONAL REDEMPTION INFORMATION Suspension of Redemptions ------------------------- The right to redeem the Fund's shares may be suspended or payment of the redemption price postponed (1) when the NYSE is closed (other than weekend and holiday closings), (2) when trading on the NYSE is restricted, (3) when an emergency exists as a result of which it is not reasonably practicable for the Portfolio to dispose of securities it owns or fairly to determine the value of its net assets, or (4) for such other period as the SEC may by order permit for the protection of the Fund's shareholders; provided that applicable SEC rules and regulations shall govern whether the conditions prescribed in (2) or (3) exist. If the right of redemption is suspended, shareholders may withdraw their offers of redemption, or they will receive payment at the NAV per share in effect at the close of business on the first day the NYSE is open ("Business Day") after termination of the suspension. Redemptions in Kind ------------------- The Fund reserves the right, under certain conditions, to honor any request for redemption by making payment in whole or in part in securities valued as described under "Share Information -- Share Prices and Net Asset Value" in the Prospectus. If payment is made in securities, a shareholder generally will incur brokerage expenses in converting those securities into cash and will be subject to fluctuations in the market price of those securities until they are sold. The Fund does not redeem in kind under normal circumstances, but would do so when the Fund Trustees determine that it is in the best interests of the Fund's shareholders as a whole. Redemptions in kind will be made with readily marketable securities to the extent possible. DIVIDENDS AND OTHER DISTRIBUTIONS The Fund distributes to its shareholders amounts equal to substantially all of its proportionate share of any net investment income (after deducting expenses incurred directly by the Fund), net capital gains (both long-term and short-term), and net gains from foreign currency transactions earned or realized by the Portfolio. The Fund calculates its net investment income and NAV per share as of the close of regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern time). The Portfolio's net investment income consists of all income accrued on portfolio assets less accrued expenses, but does not include realized gains and losses. Net investment income and realized gains and losses are reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. The Fund generally distributes - 35 - substantially all of its share of the Portfolio's net investment income, if any, at the end of each calendar quarter. Distributions of net realized capital and foreign currency gains, if any, normally are paid once annually, in December. Dividends and/or other distributions are automatically reinvested in additional shares of the Fund, unless and until the Institution elects to receive them in cash ("cash election"). To the extent dividends and other distributions are subject to federal, state, or local income taxation, they are taxable to the shareholders whether received in cash or reinvested in Fund shares. A cash election with respect to the Fund remains in effect until the Institution notifies the Fund in writing to discontinue the election. ADDITIONAL TAX INFORMATION Taxation of the Fund -------------------- In order to continue to qualify for treatment as a RIC under the Code, the Fund must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income, net short-term capital gain, and net gains from certain foreign currency transactions) ("Distribution Requirement") and must meet several additional requirements. With respect to the Fund, these requirements include the following: (1) the Fund must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from Hedging Instruments) derived with respect to its business of investing in secu- rities or those currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its gross income each taxable year from the sale or other disposition of securities, or any of the following, that were held for less than three months -- (i) options (other than those on foreign currencies), or (ii) foreign currencies or Hedging Instruments thereon that are not directly related to the Fund's principal business of investing in securities (or options with respect thereto) ("Short-Short Limitation"); and (3) at the close of each quarter of the Fund's taxable year, (i) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, and other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and does not represent more than 10% of the issuer's outstanding voting securities, and (ii) not more than 25% of the value of its total assets may be invested in securities (other than U.S. Government securities) of any one issuer. Certain funds managed by N&B Management, including the Sister Fund, have received a ruling from the Internal Revenue Service - 36 - ("Service") that each such fund, as an investor in a corresponding portfolio of Managers Trust or Income Managers Trust, will be deemed to own a proportionate share of the portfolio's assets and income for pur- poses of determining whether the fund satisfies all the requirements described above to qualify as a RIC. Although that ruling may not be relied on as precedent by the Fund, N&B Management believes that the reasoning thereof and, hence, its conclusion apply to the Fund as well. The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and capital gain net income for the one-year period ended on October 31 of that year, plus certain other amounts. See the next section for a discussion of the tax conse- quences to the Fund of distributions to it from the Portfolio, investments by the Portfolio in certain securities, and hedging transactions engaged in by the Portfolio. Taxation of the Portfolio ------------------------- The Portfolio has received a ruling from the Service to the effect that, among other things, the Portfolio will be treated as a separate partnership for federal income tax purposes and will not be a "publicly traded partnership." As a result, the Portfolio is not subject to federal income tax; instead, each investor in the Portfolio, such as the Fund, is required to take into account in determining its federal income tax liability its share of the Portfolio's income, gains, losses, deductions, and credits, without regard to whether it has received any cash distributions from the Portfolio. The Portfolio also is not subject to Delaware or New York income or franchise tax. Because the Fund is deemed to own a proportionate share of the Portfolio's assets and income for purposes of determining whether the Fund satisfies the requirements to qualify as a RIC, the Portfolio intends to continue to conduct its operations so that the Fund will be able to continue to satisfy all those requirements. Distributions to the Fund from the Portfolio (whether pursuant to a partial or complete withdrawal or otherwise) will not result in the Fund's recognition of any gain or loss for federal income tax purposes, except that (1) gain will be recognized to the extent any cash that is distributed exceeds the Fund's basis for its interest in the Portfolio before the distribution, (2) income or gain will be recognized if the distribution is in liquidation of the Fund's entire interest in the Portfolio and includes a disproportionate share of any unrealized receivables held by the Portfolio, and (3) loss will be recognized if a - 37 - liquidation distribution consists solely of cash and/or unrealized receivables. The Fund's basis for its interest in the Portfolio generally equals the amount of cash the Fund invests in the Portfolio, increased by the Fund's share of the Portfolio's net income and gains and decreased by (1) the amount of cash and the basis of any property the Portfolio distri- butes to the Fund and (2) the Fund's share of the Portfolio's losses. Dividends and interest received by the Portfolio may be subject to income, withholding, or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield on its securities. Tax treaties between certain countries and the United States may reduce or eliminate these foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors. The Portfolio may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the following tests: (1) at least 75% of its gross income is passive or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, if the Portfolio holds stock of a PFIC, the Fund (indirectly through its interest in the Portfolio) will be subject to federal income tax on 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 the Fund distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in the Fund'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 the Fund's incurring the foregoing tax and interest obligation, the Fund would 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 most likely would have to be distributed by the Fund to satisfy the Distribution Requirement and to avoid imposition of the Excise Tax -- even if those earnings and gain were not received by the Portfolio. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof. Pursuant to proposed regulations, open-end RICs, such as the Fund, would be entitled to elect to mark to market their stock in certain PFICs. Marking to market, in this context, means recognizing as gain for each taxable year the excess, as of the end of that year, of the fair market value of each such PFIC's stock over the adjusted basis in - 38 - 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 writ- ing (selling) and purchasing options 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 Hedging Instruments derived by the Portfolio with respect to its business of investing in securities or foreign cur- rencies, will qualify as permissible income for the Fund under the Income Requirement. However, income from the disposition by the Portfolio of options (other than those on foreign currencies) will be subject to the Short-Short Limitation for the Fund if they are held for less than three months. Income from the disposition of foreign currencies, and Hedging Instruments on foreign currencies, that are not directly related to the Portfolio's principal business of investing in securities (or options with respect thereto) also will be subject to the Short-Short Limitation for the Fund if they are held for less than three months. If the Portfolio satisfies certain requirements, any in- crease in value of a position that is part of a "designated hedge" will be offset by any decrease in value (whether realized or not) of the offsetting hedging position during the period of the hedge for purposes of determining whether the Fund satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the designated hedge will be included in gross income for purposes of that limitation. The Portfolio will consider whether it should seek to 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 Hedging Instruments beyond the time when it otherwise would be advantageous to do so, in order for the Fund to continue to qualify as a RIC. Taxation of the Fund's Shareholders ----------------------------------- If Fund shares are sold at a loss after being held for six months or less, the loss will be treated as long-term, instead of short-term, capital loss to the extent of any capital gain distributions received on those shares. Investors also should be aware that if shares of the Fund are purchased shortly before the record date for a dividend or other distribution, the purchaser will receive some portion of the purchase price back as a taxable distribution. PORTFOLIO TRANSACTIONS Neuberger & Berman acts as the Portfolio's principal broker in the purchase and sale of its portfolio securities and in connec- tion with the writing of covered call options on its securities. - 39 - Transactions in portfolio securities for which Neuberger & Berman serves as broker will be effected in accordance with Rule 17e-1 under the 1940 Act. During the period August 3 to August 31, 1993, the Portfolio paid brokerage commissions of $201,981, of which $149,496 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1994, the Portfolio paid brokerage commissions of $2,207,401, of which $1,647,807 was paid to Neuberger & Berman. During the fiscal year ended August 31, 1995, the Portfolio paid brokerage commissions of $3,751,206, of which $2,521,523 was paid to Neuberger & Berman. Transactions in which the Portfolio used Neuberger & Berman as broker comprised 70.49% of the aggregate dollar amount of transactions involving the payment of commissions, and 67.22% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 82.78% of the $1,229,683 paid to other brokers by the Portfolio during that fiscal year (representing commissions on transactions involving approximately $509,609,733) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, the Portfolio acquired securities of the following of its Regular B/Ds: EXXON Credit Corp., General Electric Capital Corp., and Merrill Lynch, Pierce, Fenner & Smith, Inc.; at that date, the Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: General Electric Capital Corp., $1,500,000, and Merrill Lynch, Pierce, Fenner & Smith, Inc., $48,116,875. 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 the cash collateral which may be shared with Neuberger & Berman is determined with reference to concurrent arrangements between Neuberger & Berman and non-affiliated lenders with which it engages in similar transactions. In addition, where Neuberger & Berman borrows securities from the Portfolio in order to relend them to others, Neuberger & Berman is required to pay the Portfolio, on a quarterly basis, certain "excess earnings" that Neuberger & Berman otherwise has derived from the 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. - 40 - During the fiscal years ended August 31, 1995 and 1994, the Portfolio earned $1,430,672 and $147,103, respectively in interest income from the collateralization of securities loans, from which Neuberger & Berman was paid $1,252,190 and $119,620, respectively. During the period August 3 to August 31, 1993, the Portfolio earned interest income of $3,164 from the collateralization of securities loans, from which Neuberger & Berman was paid $2,881. 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 a 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 Portfolio Trustees from time to time reviews, among other things, information relating to securities loans by the Portfolio. In effecting securities transactions, the Portfolio gen- erally seeks to obtain the best price and execution of orders. Commission rates, being a component of price, are considered along with other relevant factors. The Portfolio plans to continue to use Neuberger & Berman as its principal broker where, in the judgment of N&B Management (the Portfolio's investment manager and an affiliate of Neuberger & Berman), 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 give-ups or reciprocal business in connection with its securities transactions. The use of Neuberger & Berman as a broker for the Port- folio 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 - 41 - where they have the authorization of the persons authorized to transact business for the account and comply with certain annual reporting requirements. The Portfolio Trustees have expressly authorized Neuberger & Berman to retain such compensation, and Neuberger & Berman complies with the reporting requirements of Section 11(a). Under the 1940 Act, commissions paid by the Portfolio to Neuberger & Berman in connection with a purchase or sale of securities on a securities exchange may not exceed the usual and customary broker's commission. Accordingly, it is the Portfolio's policy that the commissions paid to Neuberger & Berman must, in N&B Management's judgment, be (1) at least as favorable as those charged by other brokers having comparable execution capability and (2) at least as favorable as commissions contemporaneously charged by Neuberger & Berman on comparable transactions for its most favored unaffiliated customers, except for accounts for which Neuberger & Berman acts as a clearing broker for another brokerage firm and customers of Neuberger & Berman considered by a majority of the Independent Portfolio Trustees not to be comparable to the Portfolio. The Portfolio does not deem it practicable and in its best interests to solicit competitive bids for commissions on each transaction effected by Neuberger & Berman. However, consideration regularly is given to information concerning the prevailing level of commissions charged by other brokers on comparable transactions during comparable periods of time. The 1940 Act generally prohibits Neuberger & Berman from acting as principal in the purchase or sale of securities for the Portfolio's account, unless an appropriate exemption is available. A committee of Independent Portfolio Trustees from time to time reviews, among other things, information relating to the commissions charged by Neuberger & Berman to the Portfolio and to its other customers and information concerning the prevailing level of commissions charged by other brokers having comparable execution capability. In addition, the procedures pursuant to which Neuberger & Berman effects brokerage transactions for the Portfolio must be reviewed and approved no less often than annually by a majority of the Independent Portfolio Trustees. The Portfolio expects that it will continue to execute a portion of its transactions through brokers other than Neuberger & Berman. In selecting those brokers, N&B Management considers the quality and reliability of brokerage services, including execution capability, performance, and financial responsibility, and may consider research and other investment information provided by, and sale of Fund shares effected through, those brokers. To ensure that accounts of all investment clients, including the Portfolio, are treated fairly in the event that transaction instructions for more than one investment account regarding the same - 42 - security are received by Neuberger & Berman at or about the same time, Neuberger & Berman may combine transaction orders placed on behalf of clients, including advisory accounts in which affiliated persons have an investment interest, for the purpose of negotiating brokerage commissions or obtaining a more favorable price. Where appropriate, securities purchased or sold may be allocated, in terms of amount, to a client according to the proportion that the size of the transaction order actually placed by the account bears to the aggregate size of transaction orders simultaneously made by the other accounts, subject to de minimis exceptions, with all participating accounts paying or receiving the same price. A committee comprised of officers of N&B Management and partners of Neuberger & Berman who are portfolio managers of the Portfolio and Other N&B Funds (collectively, "N&B Funds") and some of Neuberger & Berman's managed accounts ("Managed Accounts") evaluates semi-annually the nature and quality of the brokerage and research services provided by other brokers. Based on this evaluation, the committee establishes a list and projected rankings of preferred brokers for use in determining the relative amounts of commissions to be allocated to those brokers. Ordinarily, the brokers on the list effect a large portion of the brokerage transactions for the N&B Funds and the Managed Accounts that are not effected by Neuberger & Berman. However, in any semi-annual period, brokers not on the list may be used, and the relative amounts of brokerage commissions paid to the brokers on the list may vary substantially from the projected rankings. These variations reflect the following factors, among others: (1) brokers not on the list or ranking below other brokers on the list may be selected for particular transactions because they provide better price and/or execution, which is the primary consideration in allocating brokerage; (2) adjustments may be required because of periodic changes in the execution 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 semi-annual period to the next. The commissions charged by a broker other than Neuberger & Berman may be higher than the amount another firm might charge if N&B Management determines in good faith that the amount of those commissions is reasonable in relation to the value of the brokerage and research services provided by the broker. N&B Management believes that those research services benefit the Portfolio by supplementing the 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 the Other N&B Funds and by Neuberger & Berman from brokers effecting portfolio transactions on behalf of the Managed Accounts may be used for the Portfolio's benefit. - 43 - Lawrence Marx III and Kent C. Simons, each of whom is a Vice President of N&B Management and a general partner of Neuberger & Berman, are the persons primarily responsible for making decisions as to specific action to be taken with respect to the investment portfolio of the Portfolio. Each of them has full authority to take action with respect to portfolio transactions and may or may not consult with other personnel of N&B Management prior to taking such action. Portfolio Turnover ------------------ The portfolio turnover rate is the lesser of the cost of the securities purchased or the value of the securities sold, excluding all securities, including options, whose maturity or expiration date at the time of acquisition was one year or less, divided by the average monthly value of such securities owned during the year. REPORTS TO SHAREHOLDERS Shareholders of the Fund receive unaudited semi-annual financial statements, as well as year-end financial statements audited by the independent auditors for the Fund and Portfolio. The Fund's statements show the investments owned by the Portfolio and the market values thereof and provide other information about the Fund and its operations, including the Fund's beneficial interest in the Portfolio. CUSTODIAN AND TRANSFER AGENT The Fund and Portfolio have selected State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110, as custodian for their respective securities and cash. All correspondence should be mailed to Neuberger & Berman Funds, Institutional Services, 605 Third Avenue, 2nd Floor, New York, NY 10158-0180. State Street also serves as the Fund's transfer agent, administering purchases, redemptions, and transfers of Fund shares with respect to Institutions and the payment of dividends and other distributions to Institutions. INDEPENDENT AUDITORS The Fund and Portfolio have selected Ernst & Young LLP, 200 Clarendon Street, Boston, MA 02116, as the independent auditors who will audit their financial statements. - 44 - LEGAL COUNSEL The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP, 1800 M Street, N.W., Washington, D.C. 20036, as their legal counsel. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES The following table sets forth the name, address, and percentage of ownership of each person who owned of record, or who was known by the Fund to own beneficially or of record, 5% or more of the Fund's outstanding shares at November 30, 1995: - 45 -
Percentage of Ownership at Name and Address November 30, 1995 ----------------- -------------------------- Neuberger & Berman The Northern Trust Co., 27.18% GUARDIAN Trust Trustee Digital Equipment Corp. DTD 1-3-95 P.O. Box 92956 Chicago, IL 60675-0001 MAC & Co. 17.15% A/C 195-643 Mellon Bank N.A. P.O. Box 320 Pittsburgh, PA 15230-0320 National Financial Services 9.54% Corp.* P.O. Box 3908 Church Street Station New York, NY 10008-3908 The Bank of NY, Trustee 6.33% Melville Corp. 401(k) PSRP - General DTD 6/7/89 1 Wall Street, 7th Floor New York, NY 10286-0001 MAC & Co. 5.38% A/C #854-169 Mellon Bank N.A. Mutual Funds Dept. P.O. Box 320 Pittsburgh, PA 15230-0320
* National Financial Services Corp. holds these shares of record for the account of certain of its clients and has informed the Fund of its policy to maintain the confidentiality of holdings in its client accounts unless disclosure is expressly required by law. At December 6, 1995, the trustees and officers of the Trusts, as a group, owned beneficially or of record less than 1% of the outstanding shares of the Fund. - 46 - REGISTRATION STATEMENT This SAI and the Prospectus do not contain all the infor- mation included in the Trust's registration statement filed with the SEC under the 1933 Act with respect to the securities offered by the Prospectus. Certain portions of the registration statement have been omitted pursuant to SEC rules and regulations. The registration statement, including the exhibits filed therewith, may be examined at the SEC's offices in Washington, D.C. Statements contained in this SAI and in the Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. FINANCIAL STATEMENTS The following financial statements and related documents are incorporated herein by reference from the Fund's Annual Report to shareholders for the fiscal year ended August 31, 1995: The audited financial statements of the Fund and Portfolio and notes thereto for the fiscal year ended August 31, 1995, and the reports of Ernst & Young LLP, independent auditors, with respect to such audited financial statements. - 47 - Appendix A RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER S&P corporate bond ratings: AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA - Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A - Bonds rated A have a strong capacity to pay interest and repay principal, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories. BBB - Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in higher rated categories. 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 rating categories. Moody's corporate bond ratings: Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or an exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, the changes that can be visualized are most unlikely to impair the fundamentally strong position of the issuer. - 48 - 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 indicates that the issuer ranks in the lower end of its generic rating. - 49 - S&P commercial paper ratings: A-1 - This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+). Moody's commercial paper ratings Issuers rated Prime-1 (or related supporting institutions), also known as P-1, have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structures with moderate reliance on debt and ample asset protection. - 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. - 50 - Appendix B PERFORMANCE DATA - 51 - COST OF LIVING INDEX PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- --------- -------- --------- ---------- --------- 9/27/88 $10,000.00 $119.8000 0.00% 83.472 $119.8000 $10,000 Dividends and Capital Gains Reinvested =========== C O S T O F S H A R E S ============== Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- --------- --------- --------- 8/31/89 10,000 0 0 10,000 0 8/31/90 10,000 0 0 10,000 0 8/31/91 10,000 0 0 10,000 0 8/31/92 10,000 0 0 10,000 0 8/31/93 10,000 0 0 10,000 0 8/31/94 10,000 0 0 10,000 0 8/31/95 10,000 0 0 10,000 0 Totals 0 0 ================ V A L U E O F S H A R E S =============== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ 8/31/89 10,401 0 10,401 0 10,401 83 8/31/90 10,985 0 10,985 0 10,985 83 8/31/91 11,402 0 11,402 0 11,402 83 8/31/92 11,761 0 11,761 0 11,761 83 8/31/93 12,087 0 12,087 0 12,087 83 8/31/94 12,437 0 12,437 0 12,437 83 8/31/95 12,730 0 12,730 0 12,730 83 Totals 12,730 0 12,730 0 12,730 83 Average Annual Total Return for This Illustration: 3.55% (Annual Compounding)
FROM GUARDIAN TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ---- ---------- -------- -------- --------- --------- --------- 6/1/50 $200,000.00 $1.8674 0.00% 107,100.000 $1.8674 $200,000 Systematic Withdrawal Plan Dividends and Capital Gains Reinvested Monthly Withdrawals of $1,666.67 (10.0% Annually) Beginning 6/30/50 ================= AMOUNTS WITHDRAWN ======================== From Annual Income From Annual Cumulative Cap Gain Date Dividends Principal Total Total Distrib'n ---- --------- --------- ------ ---------- --------- 12/31/50 1,949 9,718 11,667 11,667 0 12/31/51 8,912 11,088 20,000 31,667 4,011 12/31/52 7,746 12,254 20,000 51,667 5,294 12/31/53 7,508 12,492 20,000 71,667 1,195 12/31/54 6,623 13,377 20,000 91,667 8,092 12/31/55 7,297 12,703 20,000 111,667 14,484 12/31/56 8,168 11,832 20,000 131,667 11,270 12/31/57 8,166 11,834 20,000 151,667 4,022 12/31/58 8,448 11,552 20,000 171,667 7,844 12/31/59 7,257 12,743 20,000 191,667 29,528 12/31/60 8,672 11,328 20,000 211,667 8,561 12/31/61 7,963 12,037 20,000 231,667 24,917 12/31/62 8,563 11,437 20,000 251,667 8,454 12/31/63 9,171 10,829 20,000 271,667 11,764 12/31/64 9,205 10,795 20,000 291,667 20,942 12/31/65 10,119 9,881 20,000 311,667 21,979 12/31/66 10,391 9,609 20,000 331,667 13,153 12/31/67 10,141 9,859 20,000 351,667 35,963 12/31/68 11,847 8,153 20,000 371,667 40,279 12/31/69 14,336 5,664 20,000 391,667 21,098 12/31/70 16,016 3,984 20,000 411,667 4,760 12/31/71 16,556 3,444 20,000 431,667 27,974 12/31/72 16,575 3,425 20,000 451,667 26,866 12/31/73 17,922 2,078 20,000 471,667 12,600 12/31/74 23,031 -3,031 20,000 491,667 2,344 12/31/75 27,310 -7,310 20,000 511.667 4,072 12/31/76 26,446 -6,446 20,000 531,667 40,400 12/31/77 27,585 -7,585 20,000 551,667 31,538 From Annual Income From Annual Cumulative Cap Gain Date Dividends Principal Total Total Distrib'n ---- --------- --------- ------ ---------- --------- 12/31/78 30,570 -10,570 20,000 571,667 46,444 12/31/79 34,576 -14,576 20,000 591,667 80,676 12/31/80 41,729 -21,729 20,000 611,667 165,482 12/31/81 66,294 -46,294 20,000 631,667 70,690 12/31/82 68,340 -48,340 20,000 651,667 35,556 12/31/83 66,325 -46,325 20,000 671,667 109,076 12/31/84 71,652 -51,652 20,000 691,667 56,355 12/31/85 93,224 -73,224 20,000 711,667 342,188 12/31/86 96,987 -76,987 20,000 731,667 290,204 12/31/87 112,025 -92,025 20,000 751,667 313,521 12/31/88 93,586 -73,586 20,000 771,667 315,070 12/31/89 104,904 -84,904 20,000 791,667 342,357 12/31/90 113,366 -93,366 20,000 811,667 53,901 12/31/91 105,305 -85,305 20,000 831,667 303,786 12/31/92 91,918 -71,918 20,000 851,667 237,107 12/31/93 50,982 -30,982 20,000 871,667 6,718 12/31/94 81,035 -61,035 20,000 891,667 0 8/31/95 33,973 -20,640 13,333 905,000 0 Totals 1,700,716 -795,716 905,000 905,000 3,212,534
======= VALUE OF REMAINING SHARES ======== Remaining Capital Original Gain Total Shares Date Shares Shares Value Held ---- --------- --------- ----- ------ 12/31/50 205,803 0 205,803 101,950 12/31/51 217,640 4,164 221,804 98,733 12/31/52 214,635 10,055 224,690 95,798 12/31/53 189,442 10,673 200,115 90,738 12/31/54 229,670 22,978 252,648 88,659 12/31/55 238,303 40,212 278,515 89,362 12/31/56 228,625 52,308 280,933 89,388 12/31/57 186,916 49,235 236,151 87,033 12/31/58 235,536 73,907 309,443 85,637 12/31/59 226,001 105,441 331,442 90,647 12/31/60 222,016 118,118 340,134 89,902 12/31/61 239,690 159,191 398,881 92,910 12/31/62 197,144 147,404 344,548 92,161 12/31/63 215,254 181,382 396,636 92,347 12/31/64 219,173 214,377 433,550 94,492 12/31/65 225,462 252,809 478,271 96,976 12/31/66 197,924 245,799 443,723 97,904 12/31/67 220,178 323,669 543,847 103,273 12/31/68 216,850 370,879 587,729 109,129 12/31/69 179,328 336,080 515,408 112,607 12/31/70 171,975 334,938 506,913 112,917 12/31/71 181,013 389,433 570,446 118,954 12/31/72 184,207 430,959 615,166 123,657 12/31/73 150,890 368,713 519,603 126,534 12/31/74 124,819 298,471 423,290 128,353 12/31/75 173,644 400,266 573,910 131,169 12/31/76 221,270 537,271 758,541 140,602 12/31/77 208,687 520,363 729,050 148,613 12/31/78 214,664 556,158 770,822 160,613 12/31/79 274,553 756,693 1,031,246 178,254 12/31/80 317,570 980,308 1,297,878 207,777 12/31/81 314,589 901,452 1,216,041 230,021 12/31/82 425,892 1,110,224 1,536,116 243,658 12/31/83 530,917 1,372,115 1,903,032 266,216 12/31/84 585,533 1,434,323 2,019,856 281,382 12/31/85 673,563 1,829,577 2,503,140 341,077 12/31/86 726,309 2,055,106 2,781,415 390,624 12/31/87 694,140 2,041,976 2,736,116 454,604 12/31/88 858,447 2,623,825 3,482,272 510,892 12/31/89 1,015,474 3,194,664 4,210,138 568,321 12/31/90 1,019,797 2,971,539 3,991,336 589,942 12/31/91 1,352,732 3,986,428 5,339,160 636,775 12/31/92 1,600,592 4,731,383 6,331,975 669,848 12/31/93 1,834,180 5,332,300 7,166,480 673,541 12/31/94 1,902,833 5,352,346 7,255,179 679,324 8/31/95 2,486,742 6,930,987 9,417,729 680,964 Remaining Capital Original Gain Total Shares Date Shares Shares Value Held ---- --------- --------- ----- ------ 12/31/50 205,803 0 205,803 101,950 Totals 2,486,742 6,930,987 9,417,729 680,964 Average Annual Return for This Illustration: 12.98% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 24.88% 16.17% 14.92%
FROM GUARDIAN TRUST PREPARED FOR: BARBARA
Sales Net Asset Initial Initial Offering Charge Shares Value Net Asset Date Investment Price Included Purchased per Share Value ----- ----------- -------- --------- ---------- --------- --------- 6/1/50 $10,000.00 $1.8674 0.00% 5,355.000 $1.8674 $10,000 Dividends and Capital Gains Reinvested =============== C O S T O F S H A R E S ================ Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 8/31/50 10,000 0 0 10,000 0 8/31/51 10,000 406 406 10,406 0 8/31/52 10,000 511 917 10,917 228 8/31/53 10,000 488 1,404 11,404 330 8/31/54 10,000 512 1,916 11,916 82 8/31/55 10,000 506 2,421 12,421 609 8/31/56 10,000 611 3,033 13,033 1,177 8/31/57 10,000 729 3,761 13,761 984 8/31/58 10,000 867 4,629 14,629 378 8/31/59 10,000 869 5,498 15,498 797 8/31/60 10,000 842 6,340 16,340 3,194 8/31/61 10,000 1,013 7,352 17,352 985 8/31/62 10,000 1,012 8,364 18,364 3,028 8/31/63 10,000 1,117 9,481 19,481 1,086 8/31/64 10,000 1,268 10,750 20,750 1,597 8/31/65 10,000 1,353 12,102 22,102 2,983 8/31/66 10,000 1,553 13,656 23,656 3,275 8/31/67 10,000 1,649 15,305 25,305 2,046 8/31/68 10,000 1,724 17,029 27,029 5,829 8/31/69 10,000 2,081 19,110 29,110 6,776 8/31/70 10,000 2,566 21,676 31,676 3,678 8/31/71 10,000 3,298 24,974 34,974 866 8/31/72 10,000 3,258 28,232 38,232 5,285 8/31/73 10,000 3,355 31,587 41,587 5,256 8/31/74 10,000 3,872 35,458 45,458 2,555 8/31/75 10,000 5,577 41,036 51,036 495 8/31/76 10,000 6,125 47,161 57,161 895 8/31/77 10,000 6,287 53,448 63,448 9,159 8/31/78 10,000 6,693 60,142 70,142 7,349 8/31/79 10,000 7,695 67,837 77,837 11,115 8/31/80 10,000 9,009 76,845 86,845 19,773 Annual Cumulative Total Annual Cumulative Income Income Investment Cap Gain Date Investment Dividends Dividends Cost Distrib'n ---- ---------- --------- ---------- --------- ----------- 8/31/81 10,000 11,305 88,150 98,150 41,343 8/31/82 10,000 17,522 105,672 115,672 17,945 8/31/83 10,000 18,076 123,748 133,748 9,177 8/31/84 10,000 20,004 143,752 153,752 28,486 8/31/85 10,000 19,528 163,281 173,281 14,879 8/31/86 10,000 27,134 190,415 200,415 91,183 8/31/87 10,000 27,958 218,373 228,373 77,910 8/31/88 10,000 26,953 245,325 255,325 84,700 8/31/89 10,000 26,927 272,252 282,252 85,664 8/31/90 10,000 30,193 302,445 312,445 93,568 8/31/91 10,000 31,735 334,181 344,181 14,818 8/31/92 10,000 24,360 358,541 368,541 83,874 8/31/93 10,000 25,329 383,870 393,870 65,697 8/31/94 10,000 13,106 396,976 406,976 1,867 8/31/95 10,000 22,667 419,643 429,643 0 Totals 419,643 812,922
===================== VALUE OF SHARES ========================== From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ 8/31/50 10,070 0 10,070 0 10,070 5,355 8/31/51 11,960 0 11,960 436 12,396 5,550 8/31/52 12,279 242 12,521 978 13,499 5,887 8/31/53 11,451 549 12,000 1,384 13,384 6,259 8/31/54 13,450 740 14,190 2,182 16,372 6,518 8/31/55 17,130 1,719 18,849 3,341 22,190 6,937 8/31/56 17,380 3,019 20,399 4,024 24,423 7,525 8/31/57 16,320 3,830 20,150 4,500 24,650 8,088 8/31/58 16,960 4,427 21,387 5,636 27,023 8,532 8/31/59 21,271 6,483 27,754 8,004 35,758 9,002 8/31/60 20,160 9,559 29,719 8,470 38,189 10,144 8/31/61 23,360 12,273 35,633 10,902 46,535 10,668 8/31/62 19,769 13,016 32,785 10,163 42,948 11,633 8/31/63 23,170 16,559 39,729 13,134 52,863 12,218 8/31/64 24,960 19,612 44,572 15,480 60,052 12,884 8/31/65 25,860 23,410 49,270 17,411 66,681 13,808 8/31/66 23,260 23,993 47,253 17,072 64,325 14,809 8/31/67 29,449 32,922 62,371 23,464 85,835 15,608 8/31/68 28,760 38,443 67,203 24,725 91,928 17,117 8/31/69 25,960 40,738 66,698 24,245 90,943 18,760 8/31/70 21,620 37,139 58,759 22,637 81,396 20,161 8/31/71 26,400 46,409 72,809 31,308 104,117 21,119 8/31/72 26,850 53,451 80,301 35,383 115,684 23,072 8/31/73 22,880 50,080 72,960 33,326 106,286 24,876 8/31/74 17,809 41,114 58,923 29,267 88,190 26,517 8/31/75 22,720 53,090 75,810 43,788 119,598 28,189 8/31/76 28,039 66,646 94,685 60,968 155,653 29,726 8/31/77 27,441 74,636 102,077 65,961 168,038 32,793 8/31/78 30,261 90,846 121,107 80,290 201,397 35,640 8/31/79 32,421 111,545 143,966 95,231 239,197 39,509 8/31/80 34,021 140,270 174,291 109,849 284,140 44,726 8/31/81 30,591 163,434 194,025 109,262 303,287 53,092 8/31/82 28,740 172,049 200,789 190,863 321,652 59,932 8/31/83 39,531 247,290 286,821 186,311 473,132 64,094 8/31/84 38,119 267,922 306,041 200,382 506,423 71,141 8/31/85 43,360 321,569 364,929 248,996 613,925 75,820 8/31/86 45,770 452,146 497,916 294,520 792,436 92,713 8/31/87 50,319 596,296 646,615 357,180 1,003,795 106,823 8/31/88 38,510 554,756 593,266 303,185 896,451 124,656 8/31/89 45,669 763,809 809,478 390,876 1,200,354 140,747 8/31/90 35,710 681,487 717,319 333,090 1,050,409 157,517 8/31/91 44,701 871,487 916,188 454,426 1,370,614 164,198 8/31/92 47,200 1,008,398 1,055,598 505,323 1,560,921 177,092 8/31/93 54,996 1,246,328 1,301,324 616,108 1,917,432 186,702 8/31/94 60,350 1,369,662 1,430,012 690,165 2,120,177 188,126 8/31/95 74,060 1,680,783 1,754,843 874,469 2,629,312 190,117 From From From Cap Gains Sub- Dividends Total Shares Date Investment Reinvested Total Reinvested Value Held ---- ---------- ---------- ----- ---------- ----- ------ Totals 74,060 1,680,783 1,754,843 874,469 2,629,312 190,117 Average Annual Total Return for This Illustration: 13.10% (Annual Compounding) Average Annual Total Returns 1-Year 5-Year 10-Year at Net Asset Value ------ ------ ------- for Periods Ending 6/30/95: 24.88% 16.17% 14.92%
Appendix C THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER The Art of Investing: A Conversation with Roy Neuberger "I firmly believe that if you want to manage your own money, you must be a student of the market. If you are unwilling or unable to do that, find someone else to manage your money for you." NEUBERGER & BERMAN [THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE] [PICTURE OF ROY NEUBERGER] During my more than sixty-five years of buying and selling securities, I've been asked many questions about my approach to investing. On the pages that follow are a variety of my thoughts, ideas and investment principles which have served me well over the years. If you gain useful knowledge in the pursuit of profit as well as enjoyment from these comments, I shall be more than content. \s\ Roy R. Neuberger - 1 -
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE CHARACTERISTICS OF SUCCESSFUL INVESTING INTO FIVE "RULES." WHAT ARE THEY? Rule #1: Be flexible. My philosophy has necessarily changed from time to time because of events and because of mistakes. My views change as economic, political, and technological changes occur both on and sometimes off our planet. It is imperative that you be willing to change your thoughts to meet new conditions. Rule #2: Take your temperament into account. Recognize whether you are by nature very speculative or just the opposite - fearful, timid of taking risks. But in any event -- Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure that some of your investments, make sure that some of your principal is kept safe, and principal is kept safe, and try to increase try to increase your income your income as well as your capital. as well as your capital. [PICTURE OF ROY NEUBERGER] Rule #4: Always remember there are many ways to skin a cat! Ben Graham and David Dodd did it by understanding basic values. Warren Buffet invested his portfolio in a handful of long- term holdings, while staying involved with the companies' managements. Peter Lynch chose to understand, first-hand, the products of many hundreds of the companies he invested in. George Soros showed his genius as a hedge fund investor who could decipher world currency trends. Each has been successful in his own way. But to be successful, remember to - 2 - Rule #5: Be skeptical. To repeat a few well- worn useful phrases: A. Dig for yourself. B. Be from Missouri. C. If it sounds too good to be true, it probably is. IN YOUR 65 YEARS OF INVESTING ARE THERE ANY GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW THE MARKET BEHAVES? Every decade that I've been involved with Wall Street has a nuance of its own, an economic and social climate that influences investors. But generally, bull markets tend to be longer than bear markets, and stock prices tend to go up more slowly and erratically than they go down. Bear markets tend to be shorter and of greater intensity. The market rarely rises or declines concurrently with business cycles longer than six months. AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU DEFINE VALUE INVESTING? Value investing means finding the best values - - either absolute or relative. Absolute means a stock has a low market price relative to its own fundamentals. Relative value means the price is attractive relative to the market as a whole. COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"? A classic example is a company that has a low price to earnings ratio, a low price to book ratio, free cash flow, a strong balance sheet, undervalued corporate assets, unrecognized earnings turnaround and is selling at a discount to private market value. These characteristics usually lead to companies that are under-researched and have a high degree of inside ownership and entrepreneurial management. - 3 - One of my colleagues at Neuberger & Berman says he finds his value stocks either "under a cloud" or "under a rock." "Under a cloud" stocks are those Wall Street in general doesn't like, because an entire industry is out of favor and even the good stocks are being dropped. "Under a rock" stocks are those Wall Street is ignoring, so you have to uncover them on your own. ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE STOCKS? I'm more interested in longer-term trends in earnings than short-term trends. Earnings gains should be the product of long-term strategies, superior management, taking advantage of business opportunities and so on. If these factors are in their proper place, short-term earnings should not be of major concern. Dividends are an important extra because, if they're stable, they help support the price of the stock. WHAT ABOUT SELLING STOCKS? Most individual investors should invest for the long term but not mindlessly. A sell discipline, often neglected by investors, is vitally important. "One should fall in love One should fall in love with ideas, with with ideas, with people or people, or with idealism. But in my book, the with idealism. But in my last thing to fall in love with is a particular book, the last thing to security. It is after all just a sheet of paper fall in love with is a indicating a part ownership in a corporation particular security." and its use is purely mercenary. If you must love a security, stay in love with it until it gets overvalued; then let somebody else fall in love. [PICTURE OF ROY NEUBERGER] - 4 - ANY OTHER ADVICE FOR INVESTORS? I firmly believe that if you want to manage your own money, you must be a student of the market. If you're unwilling or unable to do that, find someone else to manage your money for you. Two options are a well-managed no- load mutual fund or, if you have enough assets for separate account management, a money manager you trust with a good record. HOW WOULD YOU DESCRIBE YOUR PERSONAL INVESTING STYLE? Every stock I buy is bought to be sold. The market is a daily event, and I continually review my holdings looking for selling opportunities. I take a profit occasionally on something that has gone up in price over what was expected and simultaneously take losses whenever misjudgment seems evident. This creates a reservoir of buying power that can be used to make fresh judgments on what are the best values in the market at that time. My active investing style has worked well for me over the years, but for most investors I recommend a longer-term approach. I tend not to worry very must about the day to day swings of the market, which are very hard to comprehend. Instead, I try to be rather clever in diagnosing values and trying to win 70 to 80 percent of the time. YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR EXPERIENCE WITH THE "GREAT CRASH"? - 5 - The only money I managed in the Panic of 1929 was my own. My portfolio was down about 12 percent, and I had an uneasy feeling about the market and conditions in general. Those were the days of 10 percent margin. I studied the lists carefully for a stock that was overvalued in my opinion and which I could sell short as a hedge. I came across RCA at about $100 per share. It had recently split 5 for 1 and appeared overvalued. There were no dividends, little income, a low net worth and a weak financial position. I sold RCA short in the amount equal to the dollar value of my long portfolio. It proved to be a timely and profitable move. HOW DID THE CRASH OF 1929 AFFECT YOUR INVESTING STYLE? I am prematurely bearish when the market goes up for a long time and everybody is happy because they are richer. I am very bullish when the market has gone down perceptibly and I feel it has discounted any troubles we are going to have. HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO MARKET BEHAVIOR? There are many factors in addition to economic statistics or security analysis in a buy or sell decision. I believe psychology plays an important role in the Market. Some people follow the crowd in hopes they'll be swept along in the right direction, but if the crowd is late in acting, this can be a bad move. I like to be contrary. When things look bad, I become optimistic. When everything looks rosy, and the crowd is optimistic, I like to be a seller. Sometimes I'm too early, but I generally profit. AS A RENOWNED ART COLLECTOR, DO YOU FIND SIMILARITIES BETWEEN SELECTING STOCKS AND SELECTING WORKS OF ART? - 6 - Both are an art, although picking stocks is a minor art compared with painting, sculpture or "When things look bad, I literature. I started buying art in the 30s, become optimistic. When and in the 40s it was a daily, almost hourly everything looks rosy, and occurrence. My inclination to buy the works of the crowd is optimistic, I living artists comes from Van Gogh, who sold like to be a seller." only one painting during his lifetime. He died in poverty, only then to become a legend and have his work sold for millions of dollars. [PICTURE OF ROY NEUBERGER] There are more variables to consider now in both buying art and picking stocks. In the modern stock markets, the heavy use of futures and options has changed the nature of the investment world. In past times, the stock market was much less complicated, as was the art world. Artists rose and fell on their own merits without a lot of publicity and attention. As more and more dealers are involved with artists, the price of their work becomes inflated. So I almost always buy works of unknown, relatively undiscovered artists, which, I suppose is similar to value investing. But the big difference in my view of art and stocks is that I buy a stock to sell it and make money. I never bought paintings or sculptures for investment in my life. The objective is to enjoy their beauty. - 7 - WHAT DO YOU CONSIDER THE BUSINESS MILESTONES IN YOUR LIFE? Being a founder of Neuberger & Berman and creating one of the first no-load mutual funds. I started on Wall Street in 1929, and during the depression I managed my own money and that of my clientele. We all prospered, but I wanted to have my own firm. In 1939 I became a founder of Neuberger & Berman, and for about 10 years we managed money for individuals with substantial financial assets. But I also wanted to offer the smaller investor the benefits of professional money management, so in 1950 I created the Guardian Mutual Fund (now known as the Neuberger & Berman Guardian Fund). The Fund was kind of an innovation in its time because it didn't charge a sales commission. I thought the public was being overcharged for mutual funds, so I wanted to create a fund that would be offered directly to the public without a sales charge. Now of course the "no-load" fund business is a huge industry. I managed the Fund myself for over 28 years. [PICTURE OF ROY NEUBERGER] YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO THE OFFICE EVERY DAY TO MANAGE YOUR INVESTMENTS. WHY? I like the fun of being nimble in the stock market, and I'm addicted to the market's fascinations. WHAT CLOSING WORDS OF ADVICE DO YOU HAVE ABOUT INVESTING? Realize that there are opportunities at all times for the adventuresome investor. And stay in good physical condition. It's a strange thing. You do not dissipate your energies by using them. Exercise your body and your brain every day, and you'll do better in investments and in life. - 8 - ROY NEUBERGER: A BRIEF BIOGRAPHY Roy Neuberger is a founder of the investment management firm Neuberger & Berman, and a renowned value investor. He is also a recognized collector of contemporary American art, much of which he has given away to museums and colleges across the country. During the 1920s, Roy studied art in Paris. When he realized he didn't possess the talent to become an artist, he decided to collect art, and to support this passion, Roy turned to investing -- a pursuit for which his talents have proven more than adequate. A TALENT FOR INVESTING Roy began his investment career by joining a brokerage firm in 1929, seven months before the "Great Crash." Just weeks before "Black Monday," he shorted the stock of RCA, thinking it was overvalued. He profited from the falling market and gained a reputation for market prescience and stock selection that has lasted his entire career. NEUBERGER & BERMAN'S FOUNDING Roy's investing acumen attracted many people who wished to have him manage their money. In 1939, at the age of 36, after purchasing a seat on the New York Stock Exchange, Roy founded Neuberger & Berman to provide money management services to people who lacked the time, interest or expertise to manage their own assets. - 9 - NEUBERGER & BERMAN -- OVER FIVE DECADES OF GROWTH Neuberger & Berman has grown through the years and now manages approximately $30 billion of equity and fixed income assets, both domestic and international, for individuals, institutions, and its family of no-load mutual funds. Today, as when the firm was founded, Neuberger & Berman follows a value approach to investing, designed to enable clients to advance in good markets and minimize losses when conditions are less favorable. For more complete information about the Neuberger & Berman Guardian Fund, including fees and expenses, call Neuberger & Berman Management at 800- 877-9700 for a free prospectus. Please read it carefully, before you invest or send money. - 10 - Neuberger & Berman Management Inc.[SERVICE MARK] 605 Third Avenue, 2nd Floor New York, NY 10158- 0006 Shareholder Services (800) 877-9700 [COPYRIGHT SYMBOL]1995 Neuberger & Berman PRINTED ON RECYCLED PAPER WITH SOY BASED INKS
- 11 - Table of Contents ----------------- INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1 Investment Policies and Limitations . . . . . . . . . . . . 1 Kent C. Simons and Lawrence Marx III, Portfolio Managers of the Portfolio . . . . . . . . . . . . . . . . . . 5 Additional Investment Information . . . . . . . . . . . . . 6 PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 16 Total Return Computations . . . . . . . . . . . . . . . . . 16 Comparative Information . . . . . . . . . . . . . . . . . . 17 Other Performance Information . . . . . . . . . . . . . . . 18 CERTAIN RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 19 TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . 19 INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES . . . . . . . . . . 26 Investment Manager and Administrator . . . . . . . . . . . . 26 Sub-Adviser . . . . . . . . . . . . . . . . . . . . . . . . 29 Investment Companies Managed . . . . . . . . . . . . . . . . 29 Management and Control of N&B Management . . . . . . . . . . 33 DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 34 ADDITIONAL REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . 34 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 35 ADDITIONAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . 36 Taxation of the Fund . . . . . . . . . . . . . . . . . . . . 36 Taxation of the Portfolio . . . . . . . . . . . . . . . . . 37 Taxation of the Fund's Shareholders . . . . . . . . . . . . 39 PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 39 Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . 43 REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 44 CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . 44 INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . 44 LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . 44 REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 45 - i - Page FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 46 Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER . . . . . . 47 Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . 50 Appendix C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER . 51 - ii - PROSPECTUS - -------------------------------------------------------------------------------- December 15, 1995 NEUBERGER&BERMAN EQUITY TRUSTSM Neuberger&Berman NYCDC SOCIALLY RESPONSIVE TRUST No Sales Charges No Redemption Fees No 12b-1 Fees Neuberger&Berman NYCDC SOCIALLY RESPONSIVE TRUST A No-Load Equity Fund - -------------------------------------------------------------------------------- Neuberger&Berman NYCDC SOCIALLY RESPONSIVE TRUST (the "Fund") is an equity fund that seeks long-term capital appreciation through investments primarily in securities of companies that meet both financial and social criteria. The Fund was created as an investment vehicle for participants in the Deferred Compensation Plan of the City of New York and Related Agencies and Instrumentalities ("Plan") who are concerned about the relationship between business and society and are seeking to invest their assets in a manner consistent with their social sensibilities. YOU CAN BUY, OWN, AND SELL FUND SHARES ONLY THROUGH THE PLAN. - -------------------------------------------------------------------------------- THE FUND INVESTS ALL OF ITS NET INVESTABLE ASSETS IN THE NEUBERGER&BERMAN SOCIALLY RESPONSIVE PORTFOLIO (THE "PORTFOLIO") OF EQUITY MANAGERS TRUST ("MANAGERS TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COM- PANY MANAGED BY NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGE- MENT"). THE PORTFOLIO INVESTS IN SECURITIES IN ACCORDANCE WITH AN INVEST- MENT OBJECTIVE, POLICIES, AND LIMITATIONS IDENTICAL TO THOSE OF THE FUND. THE INVESTMENT PERFORMANCE OF THE FUND DIRECTLY CORRESPONDS WITH THE IN- VESTMENT PERFORMANCE OF THE PORTFOLIO. THIS "MASTER/FEEDER FUND" STRUCTURE IS DIFFERENT FROM THAT OF MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIOS OF SECURITIES. FOR MORE INFORMA- TION ON THIS UNIQUE STRUCTURE THAT YOU SHOULD CONSIDER, SEE "SPECIAL IN- FORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS" ON PAGE 15. The Portfolio seeks to achieve its objective by investing in securities considered by N&B Management to be undervalued in relation to recognized measures of fundamental economic value, such as earnings, cash flow, tan- gible book value, and asset value. For a description of the investment policies and techniques of the Portfolio, see "Investment Program" and "Description of Investments." The Fund is a no-load mutual fund, so you pay no sales commissions or other charges when you buy or redeem shares. The Fund does not pay "12b-1 fees" to promote or distribute its shares. Please read this Prospectus before investing in the Fund and keep it for future reference. It contains information about the Fund that a pro- spective investor should know before investing. A Statement of Additional Information ("SAI") about the Fund and Portfolio, dated December 15, 1995, is on file with the Securities and Exchange Commission. The SAI is incor- porated herein by reference (so it is legally considered a part of this Prospectus). You can obtain a free copy of the SAI by calling the Plan at 212-306-7760. PROSPECTUS DATED DECEMBER 15, 1995 MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI- TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA- TION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS SUMMARY 3 The Fund and Portfolio; Risk Factors 3 Management 4 The Neuberger&Berman Investment Approach 4 EXPENSE INFORMATION 6 Shareholder Transaction Expenses 6 Annual Fund Operating Expenses 6 Example 7 FINANCIAL HIGHLIGHTS 8 INVESTMENT PROGRAM 10 Social Policy 11 Short-Term Trading; Portfolio Turnover 13 Borrowings 13 PERFORMANCE INFORMATION 14 Total Return Information 14 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS 15 The Fund 15 The Portfolio 16
HOW TO BUY AND SELL SHARES 19 SHARE INFORMATION 20 Share Prices and Net Asset Value 20 DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES 21 Distribution Options 21 Taxes 21 MANAGEMENT AND ADMINISTRATION 22 Trustees and Officers 22 Investment Manager, Administrator, Distributor, and Sub-Adviser 22 Expenses 23 Transfer Agent 24 DESCRIPTION OF INVESTMENTS 25 DIRECTORY 28
2 SUMMARY The Fund and Portfolio; Risk Factors - -------------------------------------------------------------------------------- The Fund is a series of Neuberger&Berman Equity Trust (the "Trust") and invests in the Portfolio which, in turn, invests in securities in accor- dance with an investment objective, policies and limitations identical to those of the Fund. This is sometimes called a master/feeder fund struc- ture, because the Fund "feeds" shareholders' investments into the Portfo- lio, a "master" fund. The structure looks like this: SHAREHOLDERS [DOWN ARROW] BUY SHARES IN FUND [DOWN ARROW] INVESTS IN PORTFOLIO [DOWN ARROW] INVESTS IN STOCKS & OTHER SECURITIES The trustees who oversee the Fund believe that this structure may bene- fit shareholders; investment in the Portfolio by investors in addition to the Fund may enable the Portfolio to realize economies of scale that could reduce expenses. The Portfolio seeks long-term capital appreciation by in- vesting primarily in securities considered by N&B Management to be under- valued relative to the market as a whole and whose issuers meet certain social criteria established by N&B Management ("Social Policy"). N&B Man- agement evaluates companies to determine if they meet the Social Policy by analyzing their policies, practices, products, and services in the follow- ing major areas of concern: the environment and workplace diversity and employment. Companies are further evaluated to determine if they 3 meet other aspects of the Social Policy, such as public health, type of products, and corporate citizenship. The Portfolio does not invest in com- panies which derive a significant portion of their total annual revenue from the following industries: nuclear power, tobacco, alcohol, gambling, or weapons. The Portfolio will seek to dispose of a security as soon as reasonably practicable when the issuer no longer meets the Social Policy, even though a sale at that time might not be desirable from a purely fi- nancial standpoint. For more information about the organization of the Fund and the Portfo- lio, including certain features of the master/feeder fund structure, see "Special Information Regarding Organization, Capitalization, and Other Matters" on page 15. An investment in the Fund involves certain risks, de- pending upon the types of investments made by the Portfolio. For more de- tails about the Portfolio, its investments and their risks, see "Invest- ment Program" on page 10, "Social Policy" on page 11, and "Description of Investments" on page 25. INVESTMENT STYLE: Broadly diversified, large-cap value fund. PORTFOLIO CHARACTERISTICS: Seeks long-term capital appreciation by in- vesting in common stocks of companies that meet both financial and social criteria. Management - -------------------------------------------------------------------------------- N&B Management, with the assistance of Neuberger&Berman, L.P. ("Neuberger&Berman") as sub-adviser, selects investments for the Portfo- lio. N&B Management also provides administrative services to the Portfolio and the Fund and acts as distributor of Fund shares. See "Management and Administration" on page 22. If you want to know how to buy and sell shares of the Fund, see "How to Buy and Sell Shares" on page 19, and the policies set forth in the Plan. The Neuberger&Berman Investment Approach - -------------------------------------------------------------------------------- In general, Neuberger&Berman SOCIALLY RESPONSIVE Portfolio adheres to a value-oriented investment approach. A value-oriented portfolio manager buys stocks that are selling for less than their perceived market value. These include stocks that are currently under-researched or are temporar- ily out of favor on Wall Street. Portfolio managers identify value stocks in several ways. One of the most common identifiers is a low price-to-earnings ratio -- that is, stocks selling at multiples of earnings per share that are lower than that of the market as a whole. Other criteria are high dividend yield, a strong balance sheet and financial position, a recent company restructuring with the potential to realize hidden values, strong management, and low price- to-book value (net value of the company's assets). 4 Neuberger&Berman believes that, over time, securities that are under- valued are more likely to appreciate in price and be subject to less risk of price decline than securities whose market prices have already reached their perceived economic value. This approach also contemplates selling portfolio securities when they are considered to have reached their poten- tial. 5 EXPENSE INFORMATION This section gives you certain information about the expenses of the Fund and the Portfolio. See "Performance Information" for important facts about the investment performance of the Fund, after taking expenses into account. Shareholder Transaction Expenses - -------------------------------------------------------------------------------- As shown by this table, you pay no transaction charges when you buy or sell Fund shares. Sales Charge Imposed on Purchases NONE Sales Charge Imposed on Reinvested Dividends NONE Deferred Sales Charges NONE Redemption Fees NONE Exchange Fees NONE
Annual Fund Operating Expenses (as a percentage of average net assets) - -------------------------------------------------------------------------------- The following table shows annual Total Operating Expenses for the Fund, which are paid out of the assets of the Fund and which include the Fund's pro rata portion of the Operating Expenses of the Portfolio. These ex- penses are borne indirectly by Fund shareholders. The Fund pays N&B Man- agement an administration fee, based on the Fund's average daily net as- sets. The Portfolio pays N&B Management a management fee, based on the Portfolio's average daily net assets; a pro rata portion of this fee is borne indirectly by the Fund. Therefore, the table combines management and administration fees. The Fund and the Portfolio also incur other expenses for things such as accounting and legal fees, maintaining shareholder rec- ords, and furnishing shareholder statements and Fund reports. "Operating Expenses" exclude interest, taxes, brokerage commissions, and extraordi- nary expenses. The Fund's expenses are factored into its share prices and dividends and are not charged directly to Fund shareholders. For more in- formation, see "Management and Administration" and the SAI.
TOTAL MANAGEMENT AND 12B-1 OTHER OPERATING ADMINISTRATION FEES FEES EXPENSES EXPENSES - --------------------------------------------------------------------------------------------- 0.35%* None 0.25% 0.60%*
*(Reflects N&B Management's expense reimbursement undertaking described below) 6 Total Operating Expenses for the Fund are annualized projections based upon current administration fees for the Fund and management fees for the Portfolio; "Other Expenses" are based on the Fund's and Portfolio's ex- penses for the past fiscal year. The trustees of the Trust believe that the aggregate per share expenses of the Fund and the Portfolio will be ap- proximately equal to the expenses the Fund would incur if its assets were invested directly in the type of securities held by the Portfolio. The trustees of the Trust also believe that investment in the Portfolio by in- vestors in addition to the Fund may enable the Portfolio to achieve econo- mies of scale which could reduce expenses. The expenses and returns of other funds that may invest in the Portfolio may differ from those of the Fund. The table reflects N&B Management's voluntary undertaking to reimburse the Fund for its Operating Expenses and its pro rata share of the Portfo- lio's Operating Expenses which, in the aggregate, exceed 0.60% per annum of the Fund's average daily net assets. Absent the reimbursement, Manage- ment and Administration Fees would be 0.60% per annum of the average daily net assets of the Fund, and Total Operating Expenses would be 0.85% per annum of the average daily net assets of the Fund. Example - -------------------------------------------------------------------------------- To illustrate the effect of Operating Expenses, let's assume that the Fund's annual return is 5% and that it had annual Total Operating Expenses described in the table above. For every $1,000 you invested in the Fund, you would have paid the following amounts of total expenses if you closed your account at the end of each of the following time periods:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- $6 $19 $33 $75
The assumption in this example of a 5% annual return is required by regulations of the Securities and Exchange Commission applicable to all mutual funds. THE INFORMATION IN THE TABLE SHOULD NOT BE CONSIDERED A REP- RESENTATION OF PAST OR FUTURE EXPENSES OR RATES OF RETURN; ACTUAL EXPENSES OR RETURNS MAY BE GREATER OR LESS THAN THOSE SHOWN, AND MAY CHANGE IF EX- PENSE REIMBURSEMENTS CHANGE. 7 FINANCIAL HIGHLIGHTS Neuberger&Berman NYCDC Socially Responsive Trust - ------------------------------------------------------------------------------- The financial information in the following ta- ble is for the Fund as of August 31, 1995 and prior periods. This information has been audited by the Fund's independent accountants. You may obtain, at no cost, further information about the performance of the Fund in its annual report to shareholders, which may be obtained by call- ing 212-306-7760. The annual report contains the accountants' report. Also, see "Performance In- formation." The following table includes selected data for a share outstanding throughout each year and other performance information derived from the Financial Statements. The per share amounts and ratios which are shown reflect income and ex- penses, including the Fund's proportionate share of the Portfolio's income and expenses. It should be read in conjunction with the Portfo- lio's Financial Statements and notes thereto.
PERIOD FROM YEAR ENDED MARCH 14, 1994(/1/) TO AUGUST 31, 1995 AUGUST 31, 1994 - ------------------------------------------------------------------------------- Net Asset Value, Beginning of Year $10.43 $10.20 -------------------------- Income from Investment Operations Net Investment Income .13 .06 Net Gains or Losses on Securities (both realized and unrealized) 1.82 .17 -------------------------- Total from Investment Operations 1.95 .23 -------------------------- Less Distributions Dividends (from net investment income) (.11) -- -------------------------- Net Asset Value, End of Year $12.27 $10.43 -------------------------- Total Return+ +18.95% +2.26%(/2/) -------------------------- Ratios/Supplemental Data Net Assets, End of Year (in millions) $ 88.5 $ 68.6 -------------------------- Ratio of Expenses to Average Net Assets(/4/) .60% .60%(/3/) -------------------------- Ratio of Net Income to Average Net Assets(/4/) 1.26% 1.42%(/3/) --------------------------
See Notes to Financial Highlights. 8 NOTES TO FINANCIAL HIGHLIGHTS 1) The date investment operations commenced. 2) Not annualized. 3) Annualized. 4) After reimbursement of expenses by N&B Management. Had N&B Management not undertaken such action the annualized ratios to average net assets would have been:
PERIOD FROM YEAR ENDED MARCH 14, 1994 TO AUGUST 31, 1995 AUGUST 31, 1994 - ---------------------------------------------------------- Expenses .85% .84% ------------ Net Investment Income 1.01% 1.18% ------------
5) Because the Fund invests only in the Portfolio and the Portfolio (rather than the Fund) engages in securities transactions, the Fund does not calculate a portfolio turnover rate. The portfolio turnover rates for the Portfolio for the period from March 14, 1994 to August 31, 1994 and the year ended August 31, 1995 were 14% and 58%, respec- tively. + Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of the Fund during each year and assumes dividends and other distributions, if any, were rein- vested. Results represent past performance and do not guarantee future results. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Total return would have been lower if N&B Management had not reimbursed certain ex- penses. 9 INVESTMENT PROGRAM The investment policies and limitations of the Fund and the Portfolio are identical. The Fund invests only in the Portfolio. Therefore, the fol- lowing shows you the kinds of securities in which the Portfolio invests. For an explanation of some types of investments, see "Description of In- vestments," on page 25. Investment policies and limitations of the Fund and Portfolio are not fundamental unless otherwise specified in this Prospectus or the SAI. While a non- fundamental policy or limitation may be changed by the trust- ees of the Trust or of Managers Trust without shareholder approval, the Fund intends to notify shareholders before making any material change to such policies or limitations. Fundamental policies may not be changed without shareholder approval. Additional investment techniques, features, and limitations concerning the Portfolio's investment programs are described in the SAI. The investment objective of the Fund and Portfolio is to seek long-term capital appreciation by investing primarily in securities of companies that meet both financial criteria and the Social Policy. This investment objective is not fundamental. The Fund intends to notify shareholders 30 days in advance of making any change in its investment objective. There can be no assurance that the Fund or Portfolio will achieve its objec- tives. The Fund, by itself, does not represent a comprehensive investment program. In seeking capital appreciation, the Portfolio generally follows a val- ue-oriented investment approach to the selection of individual securities. Prospective investments are first subjected to detailed financial analysis and are not studied further unless N&B Management believes that they are currently undervalued relative to the issuer's assets and potential earn- ing power. The Portfolio expects to be nearly fully invested at all times, primar- ily in common stock. It may also invest in convertible securities and pre- ferred stock and in foreign securities and American Depositary Receipts ("ADRs") of foreign companies that meet the Social Policy. However, any part of the Portfolio's assets may be retained temporarily in investment grade debt securities and other investment grade fixed income securities of non-governmental issuers, U.S. Government and Agency Securities, repur- chase agreements, money market instruments, commercial paper, and cash and cash equivalents when N&B Management believes that significant adverse market, economic, political, or other circumstances require prompt action to avoid losses. In addition, because of the master/feeder fund structure, the Fund and the Portfolio deal with large institutional investors, and the Portfolio may hold such instruments pending investment or payout when the Portfolio has re 10 ceived a large influx of cash due to sales of Fund shares, or shares of other funds that invest in the Portfolio, or when it anticipates a sub- stantial redemption. Generally, the foregoing temporary investments are selected with a concern for the social impact of each investment. On occa- sion, deposits with community banks and credit unions may be considered for investment. Under normal conditions, at least 65% of the Portfolio's total assets are invested in accordance with the Social Policy, and at least 65% of total assets are invested in equity securities. The Portfolio may also engage in portfolio management techniques that are not subject to the Social Policy, such as selling short against-the- box, lending securities, and purchasing and selling put and call options on securities or currencies, futures contracts, options on futures con- tracts, and forward contracts. Social Policy - -------------------------------------------------------------------------------- Companies deemed acceptable from a financial standpoint are evaluated by N&B Management using a proprietary database that Neuberger&Berman has designed to develop and monitor information on companies in various cate- gories of social criteria. N&B Management seeks to invest in issuers that show leadership in the following major areas of social impact: environment and workplace diversity and employment. N&B Management also evaluates in- vestments based on companies' records in other areas of concern: public health, type of products, and corporate citizenship. The Portfolio's social orientation is predicated in part on the belief that good corporate citizenship is good business; that is, good policies with respect to such social criteria as employment and environmental prac- tices may often have a positive impact on the company's "bottom line." N&B Management recognizes, however, that many social criteria represent goals rather than achievements and that goals are often difficult to quantify. In each area, N&B Management seeks to elicit and understand management's vision of the company's social role, giving weight to enlightened, pro- gressive policies. N&B Management attempts to assess the objectivity of all information included in the database. However, decisions made by N&B Management inevitably involve some level of subjective judgment. N&B Management seeks to invest in companies that show leadership in ad- dressing environmental problems effectively and in promoting progressive workplace policies, especially as they affect women and minorities. It seeks to identify companies committed to improving their environmental performance by examining their policies and programs in such areas as en- ergy conservation, pollution reduction and control, waste management, re- cycling, and careful stewardship of natural resources. In a similar man- ner, N&B Management seeks to identify companies whose policies 11 and practices recognize the importance of human resources to corporate productivity and the centrality of the work experience to the quality of life of all employees. N&B Management seeks to invest in companies which demonstrate leadership in such areas as providing and promoting equal op- portunity, investing in the training and re-training of workers, promoting a safe working environment, providing family-oriented flexible benefits, and involving workers in job and workflow engineering. In making investment decisions, N&B Management takes into account a company's record as a member of the various communities of which it is a part and its commitment to product quality and value. Currently, the So- cial Policy screens out any company which derives more than (i) 5% of its total annual revenue from manufacturing and selling alcohol and/or tobac- co, (ii) 5% of its total annual revenue from sales in or services related to gambling, or (iii) 10% of its total annual revenue from the manufactur- ing of weapons systems. Additionally, the Portfolio does not invest in any company which derives its total annual revenue primarily from non-consumer sales to the military, or which owns or operates one or more nuclear power facilities or is a major supplier of nuclear power services. The information used by N&B Management in evaluating prospective in- vestments for conformity with the Social Policy is obtained primarily from services that specialize in reporting information from issuers or from agencies that oversee issuers' activities or compliance with laws and reg- ulations. Additionally, the information may come from public interest groups and from N&B Management's discussions with company representatives. Not every issuer selected by N&B Management will demonstrate leadership in each category of the Social Policy. The social records of most compa- nies are written in shades of gray. For example, a company may have a pro- gressive record in employee relations and community affairs but a poor one on product marketing issues. Another company may have a mixed record within a single area. Finally, it is often difficult to distinguish be- tween a substantive commitment and public relations. This principle works both ways: there are many companies with excellent records on social is- sues that maintain a low profile for one reason or another. Taking these factors into consideration, N&B Management emphasizes the overall direc- tion that companies take toward demonstrating leadership in the areas of social impact, paying particular attention to progress achieved toward these goals. If securities held by the Portfolio no longer satisfy the Social Poli- cy, the Portfolio will seek to dispose of the securities as soon as rea- sonably practicable, which may cause the Portfolio to sell the securities at a time not desirable from a purely financial standpoint. 12 Short-Term Trading; Portfolio Turnover - -------------------------------------------------------------------------------- Although the Portfolio does not purchase securities with the intention of profiting from short-term trading, the Portfolio may sell portfolio se- curities when N&B Management believes that such action is advisable. The portfolio turnover rate for the Portfolio is set forth under "Notes to Fi- nancial Highlights." Borrowings - -------------------------------------------------------------------------------- The Portfolio has a fundamental policy that it may not borrow money, except that it may (1) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (2) enter into reverse repurchase agreements for any purpose, so long as the aggregate amount of borrowings and reverse repurchase agreements does not exceed one-third of the Portfolio's total assets (including the amount borrowed) less liabili- ties (other than borrowings). The Portfolio does not expect to borrow mon- ey. As a non-fundamental policy, the Portfolio may not purchase portfolio securities if its outstanding borrowings, including reverse repurchase agreements, exceed 5% of its total assets. 13 PERFORMANCE INFORMATION The performance of the Fund is commonly measured as TOTAL RETURN. TOTAL RETURN is the change in value of an investment in a fund over a particular period, assuming that all distributions have been reinvested. Thus, total return reflects dividend income, other distributions, and variations in share prices from the beginning to the end of a period. An average annual total return is a hypothetical rate of return that, if achieved annually, would result in the same cumulative total return as was actually achieved for the period. This smooths out variations in per- formance. Past results do not, of course, guarantee future performance. Share prices may vary, and your shares when redeemed may be worth more or less than your original purchase price. The Fund's average annual total returns for the period ended August 31, 1995 (the most recent fiscal year-end of the Fund) of a one-year invest- ment in the Fund and of an investment in the Fund since its inception were 18.95% and 14.25%, respectively. Had N&B Management not waived certain fees, total return would have been lower. Further information regarding the Fund's performance is presented in its annual report to shareholders, which is available without charge by calling the Plan at 212-306-7760. Total Return Information - -------------------------------------------------------------------------------- You can obtain current performance information about the Fund by call- ing the Plan at 212-306-7760. 14 SPECIAL INFORMATION REGARDING ORGANIZATION, CAPITALIZATION, AND OTHER MATTERS The Fund - -------------------------------------------------------------------------------- The Fund is a separate series of the Trust, a Delaware business trust organized pursuant to a Trust Instrument dated May 6, 1993. The Trust is registered under the Investment Company Act of 1940 (the "1940 Act") as a diversified, open-end management investment company, commonly known as a mutual fund. The Trust has six separate series. The Fund invests all of its net investable assets in the Portfolio, receiving a beneficial inter- est in the Portfolio. The trustees of the Trust may establish additional series or classes of shares, without the approval of shareholders. The as- sets of a series belong only to that series, and the liabilities of a se- ries are borne solely by that series and no other. DESCRIPTION OF SHARES. The Fund is authorized to issue an unlimited number of shares of beneficial interest (par value $0.001 per share). Shares of the Fund represent equal proportionate interests in the assets of the Fund only and have identical voting, dividend, redemption, liquida- tion, and other rights. All shares issued are fully paid and non-assessa- ble, and shareholders have no preemptive or other right to subscribe to any additional shares. SHAREHOLDER MEETINGS. The trustees of the Trust do not intend to hold annual meetings of shareholders of the Fund. The trustees will call spe- cial meetings of shareholders of the Fund only if required under the 1940 Act or in their discretion or upon the written request of holders of 10% or more of the outstanding shares of the Fund entitled to vote. CERTAIN PROVISIONS OF TRUST INSTRUMENT. Under Delaware law, the share- holders of the Fund will not be personally liable for the obligations of the Fund; a shareholder is entitled to the same limitation of personal li- ability extended to shareholders of corporations. To guard against the risk that Delaware law might not be applied in other states, the Trust In- strument requires that every written obligation of the Trust or the Fund contain a statement that such obligation may be enforced only against the assets of the Trust or Fund and provides for indemnification out of Trust or Fund property of any shareholder nevertheless held personally liable for Trust or Fund obligations, respectively. 15 The Portfolio - -------------------------------------------------------------------------------- The Portfolio is a separate series of Managers Trust, a New York common law trust organized as of December 1, 1992. Managers Trust is registered under the 1940 Act as a diversified, open-end management investment compa- ny. Managers Trust has six separate portfolios. The assets of the Portfo- lio belong only to the Portfolio, and the liabilities of the Portfolio are borne solely by the Portfolio and no other. FUND'S INVESTMENT IN THE PORTFOLIO. The Fund is a "feeder fund" that seeks to achieve its investment objective by investing all of its net investable assets in the Portfolio, which is a "master fund." The Portfo- lio, which has the same investment objective, policies and limitations as the Fund, in turn invests in securities; the Fund thus acquires an indi- rect interest in those securities. Historically, N&B Management, which is the administrator of the Fund and the investment manager of the Portfolio, has sponsored, with Neuberger&Berman, traditionally structured funds since 1950. However, it has operated 12 master funds and 20 feeder funds since August 1993 and now operates 21 master funds and 30 feeder funds. This "master/feeder fund" structure is depicted in the "Summary" on page 3. The Fund's investment in the Portfolio is in the form of a non-trans- ferable beneficial interest. Members of the general public may not pur- chase a direct interest in the Portfolio. Neuberger&Berman Socially Re- sponsive Fund, a mutual fund that is a series of Neuberger&Berman Equity Funds ("N&B Equity Funds"), invests all of its net investable assets in the Portfolio. Neuberger&Berman Socially Responsive Trust, a mutual fund that is a series of Neuberger&Berman Equity Assets ("N&B Equity Assets") and is expected to commence operations in early 1996, will invest all of its net investable assets in the Portfolio. The shares of Neuberger& Berman Socially Responsive Fund (but not of Neuberger&Berman Socially Re- sponsive Trust) are available for purchase by members of the general pub- lic. The Portfolio may also permit other investment companies and/or other institutional investors to invest in the Portfolio. All investors will in- vest in the Portfolio on the same terms and conditions as the Fund and will pay a proportionate share of the Portfolio's expenses. The Fund does not sell its shares directly to members of the general public. Other in- vestors in the Portfolio (including the series of N&B Equity Funds) that might sell shares to members of the general public are not required to sell their shares at the same public offering price as the Fund, could have a different administration fee and expenses than the Fund, and (ex- cept N&B Equity Funds) might charge a sales commission. Therefore, Fund shareholders may have different returns than shareholders in another in- vestment company that invests exclusively in the Portfolio. Information regarding any fund that may invest in the Portfolio in the future will be available from N&B Management by calling 800-877-9700. 16 The trustees of the Trust believe that investment in the Portfolio by the series of N&B Equity Funds or N&B Equity Assets or other potential in- vestors in addition to the Fund may enable the Portfolio to realize econo- mies of scale that could reduce operating expenses, thereby producing higher returns and benefitting all shareholders. However, the Fund's in- vestment in the Portfolio may be affected by the actions of other large investors in the Portfolio, if any. For example, if a large investor in the Portfolio (other than the Fund) redeemed its interest in the Portfo- lio, the Portfolio's remaining investors (including the Fund) might, as a result, experience higher pro rata operating expenses, thereby producing lower returns. The Fund may withdraw its entire investment from the Portfolio at any time, if the trustees of the Trust determine that it is in the best inter- ests of the Fund and its shareholders to do so. The Fund might withdraw, for example, if there were other investors in the Portfolio with power to, and who did by a vote of all investors (including the Fund), change the investment objective, policies, or limitations of the Portfolio in a man- ner not acceptable to the trustees of the Trust. A withdrawal could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) by the Portfolio to the Fund. That distribution could result in a less diversified portfolio of investments for the Fund and could af- fect adversely the liquidity of the Fund's investment portfolio. If the Fund decided to convert those securities to cash, it usually would incur brokerage fees or other transaction costs. If the Fund withdrew its in- vestment from the Portfolio, the trustees would consider what action might be taken, including the investment of all of the Fund's net investable as- sets in another pooled investment entity having substantially the same in- vestment objective as the Fund or the retention by the Fund of its own in- vestment manager to manage its assets in accordance with its investment objective, policies, and limitations. The inability of the Fund to find a suitable replacement could have a significant impact on shareholders. INVESTOR MEETINGS AND VOTING. The Portfolio normally will not hold meetings of investors except as required by the 1940 Act. Each investor in the Portfolio will be entitled to vote in proportion to its relative bene- ficial interest in the Portfolio. On most issues subjected to a vote of investors, the Fund will solicit proxies from its shareholders and will vote its interest in the Portfolio in proportion to the votes cast by the Fund's shareholders. If there are other investors in the Portfolio, there can be no assurance that any issue that receives a majority of the votes cast by Fund shareholders will receive a majority of votes cast by all Portfolio investors; indeed, if other investors hold a majority interest in the Portfolio, they could have voting control of the Portfolio. CERTAIN PROVISIONS. Each investor in the Portfolio, including the Fund, will be liable for all obligations of the Portfolio. However, the risk of an investor in the Portfolio incurring financial loss on account of such liability would be limited to 17 circumstances in which the Portfolio had inadequate insurance and was un- able 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. 18 HOW TO BUY AND SELL SHARES YOU CAN BUY AND SELL (REDEEM) SHARES OF THE FUND ONLY AS SET FORTH IN THE PLAN. Shares are purchased and sold at the next price calculated on a day the New York Stock Exchange ("NYSE") is open, after your purchase or sales order is received and accepted by the trustee of the Plan as set forth in the Plan. Prices for shares of the Fund are usually calculated as of 4 p.m. Eastern time. The Plan may be closed on days when the NYSE is open. As a result, the prices for Fund shares may be significantly af- fected on days when you have no access to the Plan. Other Information - -------------------------------------------------------------------------------- .The Plan must pay for shares it purchases in U.S. dollars. . The Fund has the right to suspend the offering of its shares for a period of time. The Fund also has the right to accept or reject a purchase order in its sole discretion. . Redemption proceeds will be paid to the Plan in the manner and at the times agreed with the Fund, but in any case within three calendar days (under unusual circumstances the Fund may take longer, as per- mitted by law). . The Fund may suspend redemptions or postpone payments on days when the NYSE is closed (besides weekends and holidays), when trading on the NYSE is restricted, or as permitted by the Securities and Ex- change Commission. 19 SHARE INFORMATION Share Prices and Net Asset Value - -------------------------------------------------------------------------------- The Fund's shares are bought or sold at a price that is the Fund's net asset value ("NAV") per share. The NAVs for the Fund and the Portfolio are calculated by subtracting liabilities from total assets (in the case of the Portfolio, the market value of the securities the Portfolio holds plus cash and other assets; in the case of the Fund, its percentage interest in the Portfolio, multiplied by the Portfolio's NAV, plus any other assets). The Fund's per share NAV is calculated by dividing its NAV by the number of Fund shares outstanding and rounding the result to the nearest full cent. The Fund and the Portfolio calculate their NAVs as of the close of regular trading on the NYSE, usually 4 p.m. Eastern time, on each day the NYSE is open. The Portfolio values securities (including options) listed on the NYSE, the American Stock Exchange, or other national securities ex- changes or quoted on Nasdaq, and other securities for which market quota- tions are readily available, at the last sale price on the day the securi- ties are being valued. If there is no sale of such a security on that day, that security is valued at the mean between its closing bid and asked prices. The Portfolio values all other securities and assets, including restricted securities, by a method that the trustees of Managers Trust be- lieve accurately reflects fair value. 20 DIVIDENDS, OTHER DISTRIBUTIONS, AND TAXES The Fund distributes substantially all of its share of any net invest- ment income (net of the Fund's expenses), net realized capital gains, and net realized gains from foreign currency transactions earned or realized by the Portfolio, normally in December. Distribution Options - -------------------------------------------------------------------------------- REINVESTMENT IN SHARES. All dividends and other distributions paid on shares of the Fund are automatically reinvested in additional shares of the Fund, unless the Plan elects to receive them in cash. Dividends and other distributions are reinvested at the Fund's per share NAV, usually as of the date the dividend or other distribution is payable. DISTRIBUTIONS IN CASH. The Plan may elect to receive dividends in cash, with other distributions being reinvested in additional Fund shares, or to receive all dividends and other distributions in cash. Taxes - -------------------------------------------------------------------------------- The Fund intends to continue to qualify for treatment as a regulated investment company under the Internal Revenue Code of 1986, as amended ("Code"), so that it will be relieved of federal income tax on that part of its taxable income and realized gains that it distributes to the Plan. Fund shares currently are offered only to the trustee of the Plan act- ing on behalf of the participants in the Plan. Because the Plan is an eli- gible deferred compensation plan under section 457 of the Code, taxes on distributions from the Fund to the Plan are deferred. Individual partici- pants in the Plan should consult the Plan documents and their own tax ad- visers for information on the tax consequences associated with participat- ing in an investment in the Fund through the Plan. See the SAI for additional tax information. 21 MANAGEMENT AND ADMINISTRATION Trustees and Officers - -------------------------------------------------------------------------------- The trustees of the Trust and the trustees of Managers Trust, who are currently the same individuals, have oversight responsibility for the op- erations of the Fund and the Portfolio, respectively. The SAI contains general background information about each trustee and officer of the Trust and of Managers Trust. The trustees and officers of the Trust and of Man- agers Trust who are officers and/or directors of N&B Management and/or partners of Neuberger&Berman serve without compensation from the Fund or the Portfolio. The trustees of the Trust and of Managers Trust, including a majority of those trustees who are not "interested persons" (as defined in the 1940 Act) of the Fund, have adopted written procedures reasonably appropriate to deal with potential conflicts of interest between the Trust and Managers Trust, including, if necessary, creating a separate board of trustees of Managers Trust. Investment Manager, Administrator, Distributor, and Sub-Adviser - -------------------------------------------------------------------------------- N&B Management serves as the investment manager of the Portfolio, as administrator of the Fund, and as distributor of the shares of the Fund. N&B Management and its predecessor firms have specialized in the manage- ment of no-load mutual funds since 1950. In addition to serving the Port- folio, N&B Management currently serves as investment manager of other mu- tual funds. Neuberger&Berman, which acts as sub-adviser for the Portfolio and other mutual funds managed by N&B Management, also serves as invest- ment adviser of three investment companies. The mutual funds managed by N&B Management and Neuberger&Berman had aggregate net assets of approxi- mately $11.4 billion as of September 30, 1995. As sub-adviser, Neuberger&Berman furnishes N&B Management with invest- ment recommendations and research without added cost to the Portfolio. Neuberger&Berman has advised clients in selecting socially responsive investments since 1990. Neuberger&Berman is a member firm of the NYSE and other principal exchanges and acts as the Portfolio's principal broker in the purchase and sale of its securities. Neuberger&Berman and its affili- ates, including N&B Management, manage securities accounts that had ap- proximately $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. Janet Prindle and Farha-Joyce Haboucha are primarily responsible for the day-to-day management of the Portfolio. Ms. Prindle, a Vice President of N&B 22 Management since November 1993, has been a general partner of Neuberger&Berman since 1985. Ms. Haboucha has been a Vice President of N&B Management since November 1994 and an employee of Neuberger&Berman since 1986. Mmes. Prindle and Haboucha, who are Co-Directors of Socially Respon- sive Investment Services at Neuberger&Berman, have been researching and developing corporate responsibility criteria as they apply to investments since 1989. They have been managing money using these criteria since 1990. Ms. Prindle has been responsible for Neuberger&Berman SOCIALLY RESPONSIVE Portfolio since its inception in March 1994. Neuberger&Berman acts as the principal broker for the Portfolio in the purchase and sale of portfolio securities and in the sale of covered call options, and for those services receives brokerage commissions. In effect- ing securities transactions, the Portfolio seeks to obtain the best price and execution of orders. For more information, see the SAI. The partners and employees of Neuberger&Berman and officers and employ- ees of N&B Management, together with their families, have invested over $100 million of their own money in Neuberger&Berman FundsSM. To mitigate the possibility that the Portfolio will be adversely af- fected by employees' personal trading, the Trust, Managers Trust, N&B Man- agement, and Neuberger&Berman have adopted policies that restrict securi- ties 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 deci- sions and providing facilities and personnel necessary to operate the Portfolio. N&B Management provides administrative services to the Fund that include furnishing similar facilities and personnel for the Fund. For such administrative services, the Fund pays N&B Management a fee at the annual rate of 0.05% of the Fund's average daily net assets. With the Fund's consent, N&B Management is authorized to subcontract to third par- ties some of its responsibilities under the administration agreement. For investment management services, the Portfolio pays N&B Management a fee at the annual rate of 0.55% of the first $250 million of the Portfolio's av- erage daily net assets, 0.525% of the next $250 million, 0.50% of the next $250 million, 0.475% of the next $250 million, 0.45% of the next $500 mil- lion, and 0.425% of average daily net assets in excess of $1.5 billion. During its 1995 fiscal 23 year, the Fund accrued administration fees, and a pro rata portion of the Portfolio's management fees, as a percentage of the Fund's average daily net assets, of 0.60%. See "Expense Information -- Annual Fund Operating Expenses" for antici- pated fees for the current fiscal year. The Fund bears all expenses of its operations other than those borne by N&B Management as administrator of the Fund and as distributor of its shares. The Portfolio bears all expenses of its operations other than those borne by N&B Management as investment manager of the Portfolio. These expenses include, but are not limited to, for the Fund and Portfo- lio, legal and accounting fees, and compensation for trustees who are not affiliated with N&B Management; for the Fund, transfer agent fees, and the cost of printing and sending reports and proxy materials to shareholders; and for the Portfolio, custodial fees for securities. N&B Management has voluntarily undertaken until December 31, 1996 to reimburse the Fund for its Operating Expenses and its pro rata share of the Portfolio's Operating Expenses which exceed, in the aggregate, 0.60% per annum of the Fund's average daily net assets. N&B Management may ter- minate this undertaking to the Fund by giving at least 60 days' prior written notice to the Fund. The effect of the reimbursement by N&B Manage- ment is to reduce the Fund's expenses and thereby increase its total re- turn. During its 1995 fiscal year, the Fund bore Total Operating Expenses as a percentage of its average daily net assets, after taking into considera- tion N&B Management's expense reimbursement, of 0.60%. Transfer Agent - -------------------------------------------------------------------------------- The Fund's transfer agent is State Street Bank and Trust Company ("State Street"). State Street administers purchases, redemptions, and transfers of Fund shares with respect to the Plan and the payment of divi- dends and other distributions to the Plan. Questions should be directed to the Plan's address. 24 DESCRIPTION OF INVESTMENTS In addition to common stocks and other securities referred to in "In- vestment Program" above, the Portfolio may make the following investments, among others, individually or in combination, although it may not neces- sarily buy all of the types of securities or use all of the investment techniques that are described. For additional information on the following investments or other types of investments which the Portfolio may make, see the SAI. ILLIQUID SECURITIES. The Portfolio may invest up to 10% of its net as- sets 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 of Managers Trust. Securities that are freely tradeable 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 SECURITIES AND RULE 144A SECURITIES. The Portfolio may in- vest in restricted securities and Rule 144A securities. Restricted securi- ties cannot be sold to the public without registration under the Securi- ties Act of 1933 ("1933 Act"). Unless registered for sale, these securities can be sold only in privately negotiated transactions or pursu- ant 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 un- der 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 of Managers Trust, may determine that some restricted securities are liquid. FOREIGN SECURITIES. The Portfolio may invest up to 10% of the value of its total assets in foreign securities. Foreign securities are those of issuers organized and doing business principally outside the U.S., includ- ing non-U.S. governments, their agencies, and instrumentalities. The 10% limitation does not apply to foreign securities that are denominated in U.S. dollars, including ADRs. Foreign securities (including those denomi- nated in U.S. dollars, such as ADRs) are affected by political or economic developments in foreign countries. Foreign companies may not be subject to accounting standards or governmental supervision comparable to U.S. compa- nies, and there may be less public information about their operations. In addition, foreign markets may be less liquid or more volatile than U.S. markets and may offer less protection to investors. Investments in foreign securities that are not denominated in U.S. dollars (including those made through ADRs) may be subject to special risks, 25 such as governmental regulation of foreign exchange transactions and changes in rates of exchange with the U.S. dollar, irrespective of the performance of the underlying investment. COVERED CALL OPTIONS. The Portfolio may try to reduce the risk of secu- rities price changes (hedge) or generate income by writing (selling) cov- ered call options against securities held in its portfolio having a market value not exceeding 10% of its net assets and may purchase call options in related closing transactions. The purchaser of a call option acquires the right to buy a portfolio security at a fixed price during a specified pe- riod. The maximum price the seller may realize on the security during the option period is the fixed price; the seller continues to bear the risk of a decline in the security's price, although this risk is reduced by the premium received for the option. The primary risks in using call options are (1) possible lack of a liq- uid secondary market for options and the resulting inability to close out options when desired; (2) the fact that the skills needed to use options are different from those needed to select the Portfolio's securities; (3) the fact that, although use of these instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain by offsetting favorable price movements in underlying investments; and (4) the possible inability of the Portfolio to purchase or sell a security at a time that would otherwise be favorable for it to do so, or the possible need for the Portfolio to sell a security at a disadvantageous time, due to its need to maintain "cover" in connection with its use of these in- struments. Options are considered "derivatives." CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets in convertible securities. A convertible security is a bond, deben- ture, 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 dif- ferent issuer within a particular period of time at a specified price or formula. The Portfolio does not intend to purchase any convertible securi- ties that are not investment grade. "Investment grade" debt securities are those receiving one of the four highest ratings from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's, or another nationally recog- nized statistical rating organization or, if unrated by any NRSRO, deemed by N&B Management to be of comparable quality to such rated securities ("Comparable Unrated Securities") under guidelines established by the trustees of Managers Trust. Moody's deems securities rated in its fourth highest category (Baa) to have speculative characteristics; a change in economic factors could lead to a weakened capacity of the issuer to make interest and principal payments. 26 U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may purchase U.S. Government and Agency Securities. U.S. Government securities are obliga- tions of the U.S. Treasury backed by the full faith and credit of the United States. U.S. Government Agency Securities are issued or guaranteed by U.S. Government agencies or instrumentalities; by other U.S. Govern- ment-sponsored enterprises, such as the Government National Mortgage Asso- ciation ("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Student Loan Mortgage Associa- tion, and Tennessee Valley Authority; and by various federally chartered or sponsored banks. Some U.S. Government Agency securities are supported by the full faith and credit of the United States, while others may be supported by the issuer's ability to borrow from the U.S. Treasury, sub- ject to the Treasury's discretion in certain cases, or only by the credit of the issuer. U.S. Government Agency securities include U.S. Government mortgage-backed securities. The market prices of U.S. Government securi- ties are not guaranteed by the Government and generally fluctuate with changing interest rates. The value of the fixed income securities in which the Portfolio may invest is likely to decline in times of rising interest rates. Conversely, when rates fall, the value of the Portfolio's fixed in- come investments is likely to rise. SHORT SALES AGAINST-THE-BOX. The Portfolio may make short sales against-the-box, in which it sells securities short only if it owns or has the right to obtain without payment of additional consideration an equal amount of the same type of securities sold. Short selling against-the-box may defer recognition of gains or losses to a later tax period. REPURCHASE AGREEMENTS/SECURITIES LOANS. In a repurchase agreement, the Portfolio buys a security from a Federal Reserve member bank or a securi- ties dealer and simultaneously agrees to sell it back at a higher price, at a specified date, usually less than a week later. The underlying secu- rities must fall within the Portfolio's investment policies and limita- tions. The Portfolio also may lend portfolio securities to banks, broker- age 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. 27 DIRECTORY INVESTMENT MANAGER, ADMINISTRATOR, AND DISTRIBUTOR Neuberger&Berman Management Incorporated 605 Third Avenue 2nd Floor New York, NY 10158-0180 PLAN Deferred Compensation Plan of the City of New York and Related Agencies and Instrumentalities 40 Rector Street, 3rd Floor New York, NY 10006 212-306- 7760 SUB-ADVISER Neuberger&Berman, L.P. 605 Third Avenue New York, NY 10158-3698 CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 Correspondence should be sent to: Deferred Compensation Plan of the City of New York and Related Agencies and Instrumentalities 40 Rector Street, 3rd Floor New York, NY 10006 212-306- 7760 LEGAL COUNSEL Kirkpatrick & Lockhart LLP 1800 M Street, NW Washington, DC 20036-5891 Neuberger&Berman NYCDC Socially Responsive Trust is a service mark of Neuberger&Berman Management Inc. (C)1995 Neuberger&Berman Management Inc. 28 NEUBERGER&BERMAN MANAGEMENT INC. 605 THIRD AVENUE 2ND FLOOR NEW YORK, NY 10158-0180 DEFERRED COMPENSATION PLAN OF THE CITY OF NEW YORK AND RELATED AGENCIES AND INSTRUMENTALITIES 212.306.7760 This wrapper is not part of the Prospectus. [LOGO] PRINTED ON RECYCLED PAPER WITH SOY BASED INKS NBEP0061295 ________________________________________________________________________ NEUBERGER & BERMAN NYCDC SOCIALLY RESPONSIVE TRUST AND PORTFOLIO STATEMENT OF ADDITIONAL INFORMATION DATED DECEMBER 15, 1995 A No-Load Mutual Fund 605 Third Avenue, 2nd Floor, New York, NY 10158- 0180 ________________________________________________________________________ Neuberger & Berman NYCDC Socially Responsive Trust ("Fund"), a series of Neuberger & Berman Equity Trust ("Trust"), is a no-load mutual fund that offers shares pursuant to a Prospectus dated December 15, 1995. The Fund invests all of its net investable assets in Neuberger & Berman Socially Responsive Portfolio ("Portfolio"). You can buy, own, and sell Fund shares only through the Deferred Compensation Plan of the City of New York and Related Agencies and Instrumentalities ("Plan"). The Fund's Prospectus provides basic information that an investor should know before investing. A copy of the Prospectus may be obtained, without charge, from the Plan by calling 212-306-7760. This Statement of Additional Information ("SAI") is not a prospectus and should be read in conjunction with the Prospectus. No person has been authorized to give any information or to make any representations not contained in the Prospectus or in this SAI in connection with the offering made by the Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Fund or its distributor. The Prospectus and this SAI do not constitute an offering by the Fund or its distributor in any jurisdiction in which such offering may not lawfully be made. Table of Contents Page INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1 Investment Policies and Limitations . . . . . . . . . . . . . . 1 Janet Prindle, Portfolio Manager of the Portfolio . . . . . . . 5 Background Information on Socially Responsive Investing . . . . 5 The Socially Responsive Database . . . . . . . . . . . . . . . 6 Implementation of Social Policy . . . . . . . . . . . . . . . . 8 Additional Investment Information . . . . . . . . . . . . . . . 8 PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 22 Total Return Computations . . . . . . . . . . . . . . . . . . . 22 Comparative Information . . . . . . . . . . . . . . . . . . . . 23 Other Performance Information . . . . . . . . . . . . . . . . . 24 CERTAIN RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 24 TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . 25 INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES . . . . . . . . . . 31 Investment Manager and Administrator . . . . . . . . . . . . . 31 Sub-Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Investment Companies Managed . . . . . . . . . . . . . . . . . 34 Management and Control of N&B Management . . . . . . . . . . . 36 DISTRIBUTION ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . 37 ADDITIONAL REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . 38 Suspension of Redemptions . . . . . . . . . . . . . . . . . . . 38 Redemptions in Kind . . . . . . . . . . . . . . . . . . . . . . 38 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . 38 ADDITIONAL TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . 39 Taxation of the Fund . . . . . . . . . . . . . . . . . . . . . 39 Taxation of the Portfolio . . . . . . . . . . . . . . . . . . . 40 PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 43 Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . 47 REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 47 CUSTODIAN AND TRANSFER AGENT . . . . . . . . . . . . . . . . . . . . 47 INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . 47 LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . 48 - i - REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 48 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 48 Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER . . . . . . . . 49 Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER . . . 52 - ii - INVESTMENT INFORMATION The Fund is a separate series of the Trust, a Delaware business trust that is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company. The Fund seeks its investment objective by investing all of its net investable assets in the Portfolio, which is a series of Equity Managers Trust ("Managers Trust") that has an investment objective identical to, and a name similar to, that of the Fund. The Portfolio, in turn, invests in accordance with an investment objective, policies, and limitations identical to those of the Fund. (The Trust and Managers Trust, which is an open-end management investment company managed by Neuberger & Berman Management Incorporated ("N&B Management") are together referred to below as the "Trusts.") The following information supplements the discussion in the Prospectus of the investment objective, policies, and limitations of the Fund and the Portfolio. The investment objective and, unless otherwise specified, the investment policies and limitations of the Fund and Portfolio are not fundamental. Although any investment policy or limitation that is not fundamental may be changed by the trustees of the Trust ("Fund Trustees") or of Managers Trust ("Portfolio Trustees") without shareholder approval, the Fund intends to notify its shareholders before changing its investment objective or implementing any material change in any non-fundamental policy or limitation. The fundamental investment policies and limitations of the Fund or the Portfolio may not be changed without the approval of the lesser of (1) 67% of the total units of beneficial interest ("shares") of the Fund or Portfolio represented at a meeting at which more than 50% of the outstanding Fund or Portfolio shares are represented or (2) a majority of the outstanding shares of the Fund or Portfolio. This vote is required by the Investment Company Act of 1940 ("1940 Act") and is referred to in this SAI as a "1940 Act majority vote." Whenever the Fund is called upon to vote on a change in a fundamental investment policy or limitation of the Portfolio, the Fund casts its votes thereon in proportion to the votes of its shareholders at a meeting thereof called for that purpose. Investment Policies and Limitations The Fund has the following fundamental investment policy, to enable it to invest in the Portfolio: Notwithstanding any other investment policy of the Fund, the Fund may invest all of its investable assets in an open-end management investment company having substantially the same investment objective, policies, and limitations as the Fund. All other fundamental investment policies and limitations and the non-fundamental investment policies and limitations of the Fund and the Portfolio are identical. Therefore, although the following discusses the investment policies and limitations of the Portfolio, it applies equally to the Fund. - 1 - Except for the limitation on borrowing and the limitation on ownership of portfolio securities by officers and trustees, any investment policy or limitation that involves a maximum percentage of securities or assets will not be considered to be violated unless the percentage limitation is exceeded immediately after, and because of, a transaction by the Portfolio. The Portfolio's fundamental investment policies and limitations are as follows: 1. Borrowing. The Portfolio may not borrow money, except that the Portfolio may (i) borrow money from banks for temporary or emergency purposes and not for leveraging or investment and (ii) enter into reverse repurchase agreements for any purpose; provided that (i) and (ii) in combination do not exceed 33-1/3% of the value of its total assets (including the amount borrowed) less liabilities (other than borrowings). If at any time borrowings exceed 33-1/3% of the value of the Portfolio's total assets, the Portfolio will reduce its borrowings within three days (excluding Sundays and holidays) to the extent necessary to comply with the 33-1/3% limitation. 2. Commodities. The Portfolio may not purchase physical commodities or contracts thereon, unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit the Portfolio from purchasing futures contracts or options (including options on futures contracts, but excluding options or futures contracts on physical commodities) or from investing in securities of any kind. 3. Diversification. The Portfolio may not, with respect to 75% of the value of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities) if, as a result, (i) more than 5% of the value of the Portfolio's total assets would be invested in the securities of that issuer or (ii) the Portfolio would hold more than 10% of the outstanding voting securities of that issuer. 4. Industry Concentration. The Portfolio may not purchase any security if, as a result, 25% or more of its total assets (taken at current value) would be invested in the securities of issuers having their principal business activities in the same industry. This limitation does not apply to securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 5. Lending. The Portfolio may not lend any security or make any other loan if, as a result, more than 33-1/3% of its total assets (taken 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. - 2 - 6. Real Estate. The Portfolio may not purchase real estate unless acquired as a result of the ownership of securities or instruments, but this restriction shall not prohibit the Portfolio from purchasing securities issued by entities or investment vehicles that own or deal in real estate or interests therein or instruments secured by real estate or interests therein. 7. Senior Securities. The Portfolio may not issue senior securities, except as permitted under the 1940 Act. 8. Underwriting. The Portfolio may not underwrite securities of other issuers, except to the extent that the Portfolio, in disposing of portfolio securities, may be deemed to be an underwriter within the meaning of the Securities Act of 1933 ("1933 Act"). The following non-fundamental investment policies and limitations apply to the Portfolio: 1. Borrowing. The Portfolio may not purchase securities if outstanding borrowings, including any reverse repurchase agreements, exceed 5% of its total assets. 2. Lending. Except for the purchase of debt securities and engaging in repurchase agreements, the Portfolio may not make any loans other than securities loans. 3. Investments in Other Investment Companies. The Portfolio may not purchase securities of other investment companies, except to the extent permitted by the 1940 Act and in the open market at no more than customary brokerage commission rates. This limitation does not apply to securities received or acquired as dividends, through offers of exchange, or as a result of a reorganization, consolidation, or merger. 4. Margin Transactions. The Portfolio may not purchase securities on margin from brokers or other lenders, except that the Port- folio 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 sell securities short unless it owns, or has the right to obtain without payment of additional consideration, securities equivalent in kind and amount to the securities sold. Transactions in forward contracts, futures contracts and options shall not constitute selling securities short. 6. Ownership of Portfolio Securities by Officers and Trustees. The Portfolio may not purchase or retain the securities of any issuer if, - 3 - to the knowledge of N&B Management, those officers and trustees of Managers Trust and officers and directors of N&B Management who each owns individually more than 1/2 of 1% of the outstanding securities of such issuer, together own more than 5% of such securities. 7. Unseasoned Issuers. The Portfolio may not purchase the securities of any issuer (other than securities issued or guaranteed by domestic or foreign governments or political subdivisions thereof) if, as a result, more than 5% of the Portfolio's total assets would be invested in the securities of business enterprises that, including predecessors, have a record of less than three years of continuous operation. 8. Illiquid Securities. The Portfolio may not purchase any security if, as a result, more than 10% of its net assets would be in- vested in illiquid securities. Illiquid securities include securities that cannot be sold within seven days in the ordinary course of business for approximately the amount at which the Portfolio has valued the securities, such as repurchase agreements maturing in more than seven days. 9. Foreign Securities. The Portfolio may not invest more than 10% of the value of its total assets in securities of foreign issuers, provided that this limitation shall not apply to foreign securities denominated in U.S. dollars, including American Depositary Receipts ("ADRs"). 10. Oil and Gas Programs. The Portfolio may not invest in participations or other direct interests in oil, gas, or other mineral leases or exploration or development programs, but the Portfolio may purchase securities of companies that own interests in any of the foregoing. 11. Real Estate. The Portfolio may not invest in real estate limited partnerships. 12. Warrants. The Portfolio does not intend to invest in warrants (but may hold warrants obtained in units or attached to securities). Janet Prindle, Portfolio Manager of the Portfolio How does Janet Prindle manage the Portfolio? "We select securities through a two phase detection process. The first is financial. We analyze a universe of companies according to N&B Management's value-oriented philosophy, looking for stocks which are undervalued for any number of reasons. We focus on financial fundamentals including balance sheet ratios and cash flow analysis, and we meet with company management in an effort to understand how those unrecognized values might be realized in the market. The second part of the process is social screening. Our social research is based on the same kind of philosophy that governs our financial approach: we believe that first-hand knowledge and experience are our most important tools. Utilizing a proprietary - 4 - database, we do careful, in-depth tracking and we analyze a large number of companies on some eighty issues in six broad social categories. We use a wide variety of sources to determine company practices and policies in these areas, and we analyze performance in light of our knowledge of the issues and of the best practices in each industry. We understand that, for many issues and in many industries, absolute standards are elusive and often counterproductive. Thus, in addition to quantitative measurements, we place value on such indicators as management commitment, progress, direction, and industry leadership." Background Information on Socially Responsive Investing In an era when many people are concerned about the relationship between business and society, socially responsive investing ("SRI") is a mechanism for assuring that investors' social values are reflected in their investment decisions. As such, SRI is a direct descendent of the successful effort begun in the early 1970's to encourage companies to divest their South African operations and subscribe to the Sullivan Principles. Today, a growing number of individuals and institutions are applying similar strategies to a broad range of problems. Although there are many strategies available to the socially responsive investor, including proxy activism, below-market loans to community projects, and venture capital, the SRI strategies used by the Portfolio generally fall into two categories: Avoidance Investing. Most socially responsive investors seek to avoid holding securities of companies whose products or policies are seen as being at odds with the social good. The most common exclusions historically have involved tobacco companies and weapons manufacturers. Leadership Investing. A growing number of investors actively look for companies with progressive programs that are exemplary or companies which make it their business to try to solve some of the problems of today's society. The marriage of social and financial objectives would not have surprised Adam Smith who was, first and foremost, a moral philosopher. The Wealth of Nations is firmly rooted in the Enlightenment conviction that the purpose of capital is the social good and the related belief that idle capital is both wasteful and unethical. But, what very likely would have surprised Smith is the sheer complexity of the social issues we face today and the diversity of our attitudes toward the social good. War and peace, race and gender, the distribution of wealth, and the conservation of natural resources -- the social agenda is long and compelling. It is also something about which reasonable people differ. What should society's priorities be? What can and should be done about them? And what is the role of business in addressing them? Since corporations are on the front lines of so many key issues in today's world, a growing number of investors feel that a corporation's role cannot be ignored. This is true of some of the most important issues of the day such as equal opportunity and the environment. - 5 - The Socially Responsive Database Neuberger & Berman, L.P. ("Neuberger & Berman"), the Portfolio's sub-adviser, maintains a proprietary database of information about the social impact of the companies it follows. N&B Management uses the database to evaluate social issues after it deems a stock acceptable from a financial standpoint for acquisition by the Portfolio. More and more frequently, however, N&B Management is finding that, by monitoring social issues, it gains insight into the financial well-being of a company because of a convergence of social and financial criteria on a company's bottom line. This is especially evident in the areas of product quality and marketing, workforce diversity, and the environment. The aim of the database is to be as accurate, comprehensive, and flexible as possible, given that much of the information concerning corporate responsibility comes from subjective sources. Information for the database is gathered by Neuberger & Berman in many categories and then analyzed by N&B Management in the following six categories of corporate responsibility: Workplace Diversity and Employment. N&B Management looks for companies that show leadership in areas such as employee training and promotion policies and benefits, such as flextime, generous profit sharing, and parental leave. N&B Management looks for active programs to promote women and minorities and takes into account their representation among the officers and members of an issuer's board of directors. As a basis for exclusion, N&B Management looks for Equal Employment Opportunity Act infractions and Occupational Safety and Health Act violations ; examines each case in terms of severity, frequency, and time elapsed since the incident; and considers actions taken by the company since the violation. N&B Management also monitors companies' progress and attitudes toward these issues. Environment. A company's impact on the environment depends largely on the industry. Therefore, N&B Management examines a company's environmental record vis-a-vis those of its peers in the industry. All companies operating in an industry with inherently high environmental risks are likely to have had problems in such areas as toxic chemical emissions, federal and state fines, and Superfund sites. For these companies, N&B Management examines their problems in terms of severity, frequency, and elapsed time. N&B Management then balances the record against whatever leadership the company may have demonstrated in terms of environmental policies, procedures, and practices. N&B Management defines an environmental leadership company as one that puts into place strong affirmative programs to minimize emissions, promote safety, reduce waste at the source, insure energy conservation, protect natural resources, and incorporate recycling into its processes and products. N&B Management looks for the commitment and active involvement of senior management in all these areas. Several major manufacturers which still produce substantial amounts of pollution are among the leaders in developing outstanding waste source reduction and remediation programs. - 6 - Product. N&B Management considers company announcements, press reports, and public interest publications relating to the health, safety, quality, labeling, advertising, and promotion of both consumer and industrial products. N&B Management takes note of companies with a strong commitment to quality and with marketing practices which are ethical and consumer-friendly. N&B Management pays particular attention to companies whose products and services promote progressive solutions to social problems. Public Health. N&B Management measures the participation of companies in such industries and markets as alcohol, tobacco, gambling and nuclear power. N&B Management also considers the impact of products and marketing activities related to those products on nutritional and other health concerns, both domestically and in foreign markets. Weapons. N&B Management keeps track of domestic military sales and, whenever possible, foreign military sales and categorizes them as nuclear weapons related, other weapons related, and non-weapon military supplies, such as micro-chip manufacturers and companies that make uniforms for military personnel. Corporate Citizenship. N&B Management gathers information about a company's participation in community affairs, its policies with respect to charitable contributions, and its support of education and the arts. N&B Management looks for companies with a focus, dealing with issues not just by making financial contributions, but also by asking the questions: What can we do to help? What do we have to offer? Volunteerism, high-school mentoring programs, scholarships and grants, and in-kind donations to specific groups are just a few ways that companies have responded to these questions. Implementation of Social Policy Companies deemed acceptable by N&B Management from a financial standpoint are analyzed using Neuberger & Berman's database. The companies are then evaluated by the portfolio managers to determine if the companies' policies, practices, products, and services withstand scrutiny in the following major areas of concern: the environment and workplace diversity and employment. Companies are then further evaluated to determine their track record in issues and areas of concern such as public health, weapons, product, and corporate citizenship. The issues and areas of concern that are tracked lend themselves to objective analysis in varying degrees. Few, however, can be resolved entirely on the basis of scientifically demonstrable facts. Moreover, a substantial amount of important information comes from sources that do not purport to be disinterested. Thus, the quality and usefulness of the information in the database depend upon Neuberger & Berman's ability to tap a wide variety of sources and on the experience and judgement of the people at N&B Management who interpret the information. - 7 - In applying the information in the database to stock selection for the Portfolio, N&B Management considers several factors. N&B Management examines the severity and frequency of various infractions, as well as the time elapsed since their occurrence. N&B Management also takes into account any remedial action which has been taken by the company relating to these infractions. N&B Management notes any quality innovations made by the company in its effort to create positive change and looks at the company's overall social trend. 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 or from a securities dealer that agrees to repurchase the securities from the Portfolio at a higher price on a designated future date. Repurchase agreements generally are for a short period of time, usually less than a week. 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. Securities Loans. In order to realize income, the Portfolio may lend portfolio securities with a value not exceeding 33-1/3% of its total assets to banks, brokerage firms, or institutional investors judged creditworthy by N&B Management. Borrowers are required continuously to secure their obligations to return securities on loan from the Portfolio by depositing collateral in a form determined to be satisfactory by the Portfolio Trustees. The collateral, which must be marked to market daily, must be equal to at least 100% of the market value of the loaned securi- ties, 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 obli- gation. However, as with other extensions of secured credit, loans of portfolio securities involve some risk of loss of rights in the collateral should the borrower fail financially. - 8 - 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 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 Portfolio 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 priced at fair value as determined in accordance with procedures approved and periodically reviewed by the Portfolio 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, U.S. Government or Agency Securities, or other 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. - 9 - 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 diver- sification, such investments involve sovereign and other risks, in addition to the credit and market risks normally associated with domestic securities. These additional risks include the possibility of adverse political and economic developments (including political instability) and the potentially adverse effects of unavailability of public information regarding issuers, less governmental supervision and regulation of financial markets, reduced liquidity of certain financial markets, and the lack of uniform accounting, auditing, and financial standards or the application of standards that are different or less stringent than those applied in the United States. The Portfolio also may invest in equity, debt, or other income-producing securities that are denominated in or indexed to foreign currencies, including (1) common and preferred stocks, (2) CDs, commercial paper, fixed time deposits, and bankers' acceptances issued by foreign banks, (3) obligations of other corporations, and (4) obligations of foreign governments 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. The Portfolio may invest only in securities of issuers in countries whose governments are considered stable by N&B Management. Foreign securities often trade with less frequency and in less volume than domestic securities and therefore may exhibit greater price volatility. Additional costs associated with an investment in foreign securities may include higher custodial fees than apply to domestic custody arrangements, and transaction costs of foreign currency conversions. - 10 - 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 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. In order to limit the risk inherent in investing in foreign currency denominated securities, the Portfolio may not purchase any such security if, after such purchase, more than 10% of its total assets (taken at market value) would be invested in foreign currency denominated securi- ties. Within that limitation, however, the Portfolio is not restricted in the amount it may invest in securities denominated in any one foreign currency. Futures Contracts and Options Thereon. The Portfolio may purchase and sell interest rate futures contracts, stock and bond index futures contracts, and foreign currency futures contracts and options thereon in an attempt to hedge against changes in the prices of securities or, in the case of foreign currency futures and options thereon, to hedge against expected changes in prevailing currency exchange rates. Because the futures markets may be more liquid than the cash markets, the use of futures contracts permits the Portfolio to enhance portfolio liquidity and maintain a defensive position without having to sell portfolio securities. The Portfolio does not engage in transactions in futures or options on futures for speculation. The Portfolio views investment in (i) interest rate and securities index futures and options thereon as a maturity management device and/or a device to reduce risk or preserve total return in an adverse environment for the hedged securities, and (ii) foreign currency futures and options thereon as a means of establishing more definitely the effective return on securities denominated in foreign currencies that are held or intended to be acquired by the Portfolio. - 11 - Futures contracts and options thereon are traded only on national futures exchanges. A "sale" of a futures contract (or a "short" futures position) entails the assumption of a contractual obligation to deliver the securities or currency underlying the contract at a specified price at a specified future time. A "purchase" of a futures contract (or a "long" futures position) entails the assumption of a contractual obligation to acquire the securities or currency underlying the contract at a specified price at a specified future time. Certain futures, including stock and bond index futures, are settled on a net cash payment basis rather than by the sale and delivery of the securities underlying the futures. "Margin" with respect to a futures contract is the amount of assets that must be deposited by the Portfolio with, or for the benefit of, a futures commission merchant in order to initiate and maintain the Portfolio's futures positions. The margin deposit made by the Portfolio when it enters into a futures contract ("initial margin") is intended to assure its performance of the contract. If the price of the futures contract changes --increases in the case of a short (sale) position or decreases in the case of a long (purchase) position -- so that the unrealized loss on the contract causes the margin deposit not to satisfy margin requirements, the Portfolio will be required to make an additional margin deposit ("variation margin"). However, if favorable price changes in the futures contract cause the margin deposit to exceed the required margin, the excess will be paid to the Portfolio. In computing its daily net asset value ("NAV"), the Portfolio marks to market the current value of its open futures positions. The Portfolio also must make margin deposits with respect to options on futures that it has written. If the futures commission merchant holding the margin deposit goes bankrupt, the Portfolio could suffer a delay in recovering its funds and could ultimately suffer a loss. U.S. futures contracts (except certain currency futures) are traded on exchanges that have been designated as "contract markets" by the Commodity Futures Trading Commission ("CFTC"), an agency of the U.S. Government; futures transactions must be executed through a futures commission merchant that is a member of the relevant contract market. The exchange's affiliated clearing organization guarantees performance of the contracts between the clearing members of the exchange. Although futures contracts by their terms may require the actual delivery or acquisition of the underlying securities or currency, in most cases the contractual obligation is extinguished by being offset before the expiration of the contract, without the parties having to make or take delivery of the assets. A futures position is offset by buying (to offset an earlier sale) or selling (to offset an earlier purchase) an identical futures contract calling for delivery in the same month. - 12 - Although the Portfolio believes that the use of futures contracts will benefit it, if N&B Management's judgment about the general direction of the markets is incorrect, the Portfolio's overall return would be lower than if it had not entered into any such contracts. Moreover, the spread between values in the cash and futures markets is subject to distortion due to differences in the character of those markets. Because of the possibility of distortion, even a correct forecast of general market trends by N&B Management may not result in a successful transaction. An option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in the contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the option exercise period. The writer of the option is required upon exercise to assume a short futures position (if the option is a call) or a long futures position (if the option is a put). Upon exercise of the option, the assumption of offsetting futures positions by the writer and holder of the option is accompanied by delivery of the accumulated cash balance in the writer's futures margin account. That balance represents the amount by which the market price of the futures contract at exercise exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the option. The prices of futures contracts are volatile and are influenced by, among other things, actual and anticipated changes in interest rates, which in turn are affected by fiscal and monetary policies and by national and international political and economic events. At best, the correlation between changes in prices of futures contracts and of the securities being hedged can be only approximate. Decisions regarding whether, when, and how to hedge involve skill and judgment. Even a well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior or interest rate trends or lack of correlation between the futures markets and the securities markets. Because of the low margin deposits required, futures trading involves an extremely high degree of leverage; as a result, a relatively small price movement in a futures contract may result in immediate and substantial loss, or gain, to the investor. Losses that may arise from certain futures transactions are potentially unlimited. Most U.S. futures exchanges limit the amount of fluctuation in the price of a futures contract or option thereon during a single trading day; once the daily limit has been reached, no trades thereof may be made on that day at a price beyond that limit. The daily limit only governs price movements during a particular trading day, however; it thus does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Prices can move to the daily limit for several consecutive trading days with little or no trading, thereby preventing - 13 - liquidation of futures and options positions and subjecting traders to substantial losses. If this were to happen with respect to a position held by the Portfolio, it could (depending on the size of the position) have an adverse impact on the NAV of the Portfolio. Put and Call Options. The Portfolio may write or purchase put and call options on securities. Generally, the purpose of writing and purchasing these options is to reduce the effect of price fluctuations of securities held by the Portfolio on the Portfolio's and the Fund's NAVs. The Portfolio may also write covered call options to earn premium income. 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. The Portfolio intends to write only "covered" call options on securities it owns. So long as the obligation of the call option continues, the Portfolio may be assigned an exercise notice, requiring it to deliver the underlying security against payment of the exercise price. The Portfolio may be obligated to deliver securities underlying a call option at less than the market price, thereby giving up any additional gain on the security. When the Portfolio purchases a call option, it pays a premium for the right to purchase a security from the writer at a specified price until a specified date. The Portfolio would purchase a call option in order to protect against an increase in the price of securities it intends to purchase or to offset a previously written call option. - 14 - 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 national securities exchanges and in the over-the-counter ("OTC") market. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed; the clearing organization in effect guarantees completion of every exchange-traded option. In contrast, OTC options are contracts between the Portfolio and its counter-party with no clearing organization guarantee. Thus, when the Portfolio sells (or purchases) an OTC option, it generally will be able to "close out" the option prior to its expiration only by entering into a closing transaction with the dealer to whom (or from whom) the Portfolio originally sold (or purchased) the option. There can be no assurance that the Portfolio would be able to liquidate an OTC option at any time prior to expiration. Unless the Portfolio is able to effect a closing purchase transaction in a covered OTC call option it has written, it will not be able to liquidate securities used as cover until the option expires or is exercised or until different cover is substituted. In the event of the counter-party's insolvency, the Portfolio may be unable to liquidate its options position and the associated cover. N&B Management monitors the creditworthiness of dealers with which the Portfolio may engage in OTC options transactions, and limits the Portfolio's counter-parties in such transactions to dealers with a net worth of at least $20 million as reported in their latest financial statements. The assets used as cover for OTC options written by the Portfolio will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Portfolio may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC call option written subject to this procedure will be considered illiquid only to the extent - 15 - that the maximum repurchase price under the formula exceeds the intrinsic value of the option. The premium received (or paid) by the Portfolio when it writes (or purchases) an option is the amount at which the option is currently traded on the applicable exchange, less (or plus) a commission. The premium may reflect, among other things, the current market price of the underlying security, the relationship of the exercise price to the market price, the historical price volatility of the underlying security, the length of the option period, the general supply of and demand for credit, and the general interest rate environment. The premium received by the Portfolio for writing an option is recorded as a liability on the Portfolio's statement of assets and liabilities. This liability is adjusted daily to the option's current market value, which is the 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 at market risk on the security. The Portfolio will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from writing the call or put option. 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. The Portfolio pays brokerage commissions in connection with purchasing or writing options, including those used to close out existing positions. These brokerage commissions normally are higher than those applicable to purchases and sales of portfolio securities. - 16 - Options normally have expiration dates between three and nine months from the date written. 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 underlying security for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering the security from its portfolio. In those cases, additional brokerage commissions are incurred. Forward Foreign Currency Contracts. The Portfolio may enter into contracts for the purchase or sale of a specific currency at a future date at a fixed price ("forward contracts") in amounts not exceeding 5% of its net assets. The Portfolio enters into forward contracts in an attempt to hedge against expected changes in prevailing currency exchange rates. The Portfolio does not engage in transactions in forward contracts for speculation; it views investments in forward contracts as a means of establishing more definitely the effective return on securities denominated in foreign currencies that are held or intended to be acquired by it. Forward contract transactions include forward sales or purchases of foreign currencies for the purpose of protecting the U.S. dollar value of securities held or to be acquired by the Portfolio or protecting the U.S. dollar equivalent of dividends, interest, or other payments on those securities. N&B Management believes that the use of foreign currency hedging techniques, including "cross-hedges," can help protect against declines in the U.S. dollar value of income available for distribution and declines in the Portfolio's NAV resulting from adverse changes in currency exchange rates. For example, the return available from securities denominated in a particular foreign currency would diminish if the value of the U.S. dollar increased against that currency. Such a decline could be partially or completely offset by an increase in value of a cross-hedge involving a forward contract to sell a different foreign currency, where the contract is available on terms more advantageous to the Portfolio than a contract to sell the currency in which the securities being hedged are denominated. N&B Management believes that hedges and cross-hedges can, therefore, provide significant protection of NAV in the event of a general rise in the U.S. dollar against foreign currencies. However, a hedge or cross-hedge cannot protect against exchange rate risks perfectly, and if N&B Management is incorrect in its judgment of future exchange rate relationships, the Portfolio could be in a less advantageous position than if such a hedge had not been established. In addition, because forward contracts are not traded on an exchange, the assets used to cover such contracts may be illiquid. Options on Foreign Currencies. The Portfolio may write and purchase covered call and put options on foreign currencies, in amounts not exceeding 5% of its net assets. The Portfolio would engage in such transactions to protect against declines in the U.S. dollar value of - 17 - portfolio securities or increases in the U.S. dollar cost of securities to be acquired or to protect the U.S. dollar equivalent of dividends, interest, or other payments on those securities. As with other types of options, however, writing an option on foreign currency constitutes only a partial hedge, up to the amount of the premium received, and the Portfolio could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The risks of currency options are similar to the risks of other options, discussed herein. Certain options on foreign currencies are traded on the OTC market and involve liquidity and credit risks that may not be present in the case of exchange-traded currency options. General Considerations Involving Futures, Options on Futures, Options on Securities and Indices, Forward Contracts, and Options on Foreign Currencies (collectively, "Hedging Instruments") To the extent the Portfolio sells or purchases futures contracts, and/or writes options thereon or options on foreign currencies that are traded on an exchange regulated by the CFTC other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums on those positions (excluding the amount by which options are "in-the-money") may not exceed 5% of the Portfolio's net assets. In addition, pursuant to state securities laws, (1) the aggregate premiums paid by the Portfolio on all options (both exchange-traded and OTC) held by it at any time may not exceed 20% of its net assets, and (2) the aggregate margin deposits required on all exchange-traded futures contracts and related options held by the Portfolio at any time may not exceed 5% of its total assets. Also, pursuant to an undertaking to a state securities law administrator, the Portfolio will not purchase puts, calls, straddles, spreads, or any combination thereof if, by reason of such purchase the value of its aggregate investment in such instruments will exceed 5% of its total assets. Risks Involved in Using Hedging Instruments. The primary risks in using Hedging Instruments are (1) imperfect correlation or no correlation between changes in market value of the securities held or to be acquired by the Portfolio and changes in market value of Hedging Instruments; (2) possible lack of a liquid secondary market for Hedging Instruments and the resulting inability to close out Hedging Instruments when desired; (3) the fact that the skills needed to use Hedging Instru- ments are different from those needed to select the Portfolio's securities; (4) the fact that, although use of Hedging Instruments for hedging purposes can reduce the risk of loss, they also can reduce the opportunity for gain, or even result in losses, by offsetting favorable price movements in hedged investments; and (5) the possible inability of - 18 - the Portfolio to purchase or sell a portfolio security at a time that would otherwise be favorable for it to do so, or the possible need for the Portfolio to sell a portfolio security at a disadvantageous time, due to its need to maintain "cover" or to segregate securities in connection with its use of Hedging Instruments. N&B Management intends to reduce the risk of imperfect correlation by investing only in Hedging Instruments whose behavior is expected to resemble that of the Portfolio's underlying securities. N&B Management intends to reduce the risk that the Portfolio will be unable to close out Hedging Instruments by entering into such transactions only if N&B Management believes there will be an active and liquid secondary market. Hedging Instruments used by the Portfolio are generally considered "derivatives." There can be no assurance that the Portfolio's use of Hedging Instruments will be successful. The Portfolio's use of Hedging Instruments may be limited by the requirements of the Internal Revenue Code of 1986, as amended ("Code") for qualification as a regulated investment company ("RIC"). See "Additional Tax Information." Cover for Hedging Instruments. The Portfolio will comply with SEC guidelines regarding cover for Hedging Instruments and, if the guidelines so require, set aside in a segregated account with its custodian cash, U.S. Government or Agency Securities, or other liquid, high-grade debt securities in the prescribed amount. Securities held in a segregated account cannot be sold while the futures, option, or forward strategy is outstanding, unless they are replaced with other suitable assets. As a result, segregation of a large percentage of the Portfolio's assets could impede portfolio management or the Portfolio's ability to meet current obligations. The Portfolio may be unable promptly to dispose of assets which cover, or are segregated with respect to, an illiquid futures, option, or forward position ; this inability may result in a loss to the Portfolio. 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), it may also invest in money market in- struments, U.S. Government or Agency Securities, and other fixed income securities. The Portfolio may invest in corporate bonds and debentures receiving one of the four highest ratings from Standard & Poor's ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or any other nationally recognized statistical rating organization ("NRSRO"), or, if not rated by any NRSRO, deemed comparable by N&B Management to such rated securities ("Comparable Unrated Securities"). The ratings of an NRSRO represent its opinion as to the quality of securities it undertakes to rate. Ratings are not absolute standards of quality; consequently, securities with the same maturity, coupon, and rating may have different yields. The Port- folio relies primarily on ratings assigned by S&P and Moody's, which are described in Appendix A to this SAI. - 19 - 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. Subsequent to its purchase by the Portfolio, an issue of debt securities may cease to be rated or its rating may be reduced, so that the securities would not be eligible for purchase by the Portfolio. In such a case, N&B Management will engage in an orderly disposition of the downgraded securities. Commercial Paper. Commercial paper is a short-term debt security issued by a corporation or bank, among others, for purposes such as financing current operations. The Portfolio may invest only in commercial paper receiving the highest rating from S&P (A-1) or Moody's (P-1), or deemed by N&B Management to be of equivalent quality. The Portfolio may invest in commercial paper that cannot be resold to the public without an effective registration statement under the 1933 Act. While restricted commercial paper normally is deemed illiquid, N&B Management may in certain cases determine that such paper is liquid, pursuant to guidelines established by the Portfolio Trustees. Zero Coupon Securities. The Portfolio may invest up to 5% of its net assets in zero coupon securities, which are debt obligations that do not entitle the holder to any periodic payment of interest prior to maturity or that specify a future date when the securities begin to pay current interest. Zero coupon securities are issued and traded at a discount from their face amount or par value. This discount varies depending on prevailing interest rates, the time remaining until cash payments begin, the liquidity of the security, and the perceived credit quality of the issuer. The discount on zero coupon securities ("original issue dis- count") is taken into account by the Portfolio prior to the receipt of any actual payments. Because the Fund must distribute substantially all of its income (including its pro rata share of the Portfolio's original issue discount) to the Plan each year for income and excise tax purposes (see "Additional Tax Information --Taxation of the Fund"), the Portfolio may have to dispose of portfolio securities under disadvantageous circumstances to generate cash, or may be required to borrow, to satisfy the Fund's distribution requirements. - 20 - The market prices of zero coupon securities generally are more volatile than the prices of securities that pay interest periodically. Zero coupon securities are likely to respond to changes in interest rates to a greater degree than other types of debt securities having similar maturities and credit quality. Convertible Securities. The Portfolio may invest in 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 non-convertible debt. Convertible securities are usually subordinated to comparable-tier non-convertible securities but rank senior to common stock in a corporation's capital structure. The value of a convertible security is a function of (1) its yield in comparison to the yields of other securities of comparable maturity and quality that do not have a conversion privilege and (2) its worth if converted into the underlying common stock. Convertible 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 non-convertible 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 and the Fund's ability to achieve their 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. PERFORMANCE INFORMATION The Fund's performance figures are based on historical earnings and are not intended to indicate future performance. The share price and total return of the Fund will vary, and an investment in the Fund, when redeemed, may be worth more or less than an investor's original cost. - 21 - Total Return Computations The Fund may advertise certain total return information. An average annual compounded rate of return ("T") may be computed by using the redeemable value at the end of a specified period ("ERV") of a hypothetical initial investment of $1,000 ("P") over a period of time ("n") according to the formula: n P(1+T) = ERV Average annual total return smooths out year-to-year variations and, in that respect, differs from actual year-to-year results. The average annual total returns for the Fund for the one-year period ended August 31, 1995, and for the period from March 14, 1994 (commencement of operations) through August 31, 1995 were 17.82% and 12.42%, respectively. Had N&B Management not waived certain fees, total return would have been lower. Comparative Information From time to time the Fund's performance may be compared with: (1) data (that may be expressed as rankings or ratings) published by independent services or publications (including newspapers, newsletters, and financial periodicals) that monitor the performance of mutual funds, such as Lipper Analytical Services, Inc., C.D.A. Investment Technologies, Inc., Wiesen- berger Investment Companies Service, Investment Company Data Inc., Morningstar, Inc., Micropal Incorporated, and quarterly mutual fund rankings by Money, Fortune, Forbes, Business Week, Personal Investor, and U.S. News & World Report magazines, The Wall Street Journal, New York Times, Kiplingers Personal Fi- nance, and Barron's Newspaper, or (2) recognized stock and other indices, such as the S&P 500 Composite Stock Price Index ("S&P 500 Index"), S&P Small Cap 600 Index ("S&P 600 Index"), S&P Mid Cap 400 Index ("S&P 400 Index"), Russell 2000 Stock Index, Dow Jones Industrial Average ("DJIA"), Wilshire 1750, Nasdaq Composite Index, Value Line Index, U.S. Department of Labor Consumer Price Index ("Consumer Price Index"), College Board Survey of Colleges Annual Increases of College Costs, Kanon Bloch's Family Performance Index, the Barra Growth Index, the Barra Value Index, and various other domestic, international, and global indices. The S&P 500 Index is a broad index of common stock prices, while the DJIA repre- - 22 - sents a narrower segment of industrial companies. The S&P 600 Index includes stocks that range in market value from $27 million to $880 million, with an average of $302 million. The S&P 400 Index measures mid-sized companies with an average market capitalization of $1.2 billion. Each assumes reinvestment of distributions and is calculated without regard to tax consequences or the costs of investing. The Portfolio may invest in different types of securities from those included in some of the above indices. The Fund may also be compared to various socially responsive indices, including The Domini Social Index and those developed by the quantitative department of Prudential Securities, such as that department's Large and Mid-Cap portfolio indices for various breakdowns ("Sin" Stock Free, Cigarette-Stock Free, S&P Composite, etc.). Evaluations of the Fund's performance, its total return and comparisons may be used in advertisements and in information furnished to current and prospective shareholders (collectively, "Advertisements"). The Fund may also be compared to individual asset classes such as common stocks, small cap stocks, or Treasury bonds, based on information supplied by Ibbotson and Sinquefield. Other Performance Information From time to time, information about the Portfolio's portfolio allocation and holdings as of a particular date may be included in Advertisements. This information, for example, may include the Portfolio's portfolio diversification by asset type or by the social characteristics of companies owned. Information used in Advertisements may include statements or illustrations relating to the appropriateness of types of securities and/or mutual funds that may be employed to meet specific financial goals, such as (1) funding retirement, (2) paying for children's education, and (3) financially supporting aging parents. Information relating to inflation and its effects on the dollar also may be included in Advertisements. For example, after ten years, the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465, and $12,100, respectively, if the annual rates of inflation during that period were 4%, 5%, 6%, and 7%, respectively. (To calculate the purchasing power, the value at the end of each year is reduced by the inflation rate for the ten-year period.) From time to time the investment philosophy of N&B Management's founder, Roy R. Neuberger, may be included in the Fund's Advertisements. This philosophy is described in further detail in "The Art of Investing: A Conversation with Roy Neuberger," attached as Appendix B to this SAI. - 23 - CERTAIN RISK CONSIDERATIONS Although the Portfolio seeks to reduce risk by investing in a diversified portfolio, diversification does not eliminate all risk. There can, of course, be no assurance that the Portfolio will achieve its investment objective, and an investment in the Fund involves certain risks that are described in the sections entitled "Investment Program" and "Description of Investments" in the Prospectus and "Investment Information" in this SAI. TRUSTEES AND OFFICERS The following table sets forth information concerning the trustees and officers of the Trusts, including their addresses and principal business experience during the past five years. Some persons named as trustees and officers also serve in similar capacities for other funds, and (where applicable) their corresponding portfolios, administered or managed by N&B Management and Neuberger & Berman.
Name, Age and Positions Held Address(1) With the Trusts Principal Occupation(s)(2) Faith Colish (60) Trustee of each Trust Attorney at Law, Faith Colish, A 63 Wall Street Professional Corporation. 24th Floor New York, NY 10005 Donald M. Cox (73) Trustee of each Trust Retired. Formerly Senior Vice President 435 East 52nd Street and Director of Exxon Corporation; Director New York, NY 10022 of Emigrant Savings Bank. Stanley Egener* (61) Chairman of the Board, Partner of Neuberger & Berman; President Chief Executive Officer, and Director of N&B Management; Chairman of and Trustee of each Trust the Board, Chief Executive Officer, and Trustee of eight other mutual funds for which N&B Management acts as investment manager or administrator. - 24 - Name, Age and Positions Held Address(1) With the Trusts Principal Occupation(s)(2) Alan R. Gruber (68) Trustee of each Trust Chairman and Chief Executive Officer of Orion Capital Corporation Orion Capital Corporation (property and 600 Fifth Avenue casualty insurance); Director of Trenwick 24th Floor Group, Inc. (property and casualty New York, NY 10020 reinsurance); Chairman of the Board and Director of Guaranty National Corporation (property and casualty insurance); formerly Director of Ketema, Inc. (diversified manufacturer). Howard A. Mileaf (57) Trustee of each Trust Vice President and Special Counsel to Wheeling Pittsburgh Corporation Wheeling Pittsburgh Corporation (holding 110 East 59th Street company) since 1992; formerly Vice New York, NY 10022 President and General Counsel of Keene Corporation (manufacturer of industrial products); Director of Kevlin Corporation (manufacturer of microwave and other products). Edward I. O'Brien* (67) Trustee of each Trust Until 1993, President of the Securities 12 Woods Lane Industry Association ("SIA") (securities Scarsdale, NY 10583 industry's representative in government relations and regulatory matters at the federal and state levels); until November 1993, employee of the SIA; Director of Legg Mason, Inc. John T. Patterson, Jr. (67) Trustee of each Trust President of SOBRO (South Bronx Overall 90 Riverside Drive Economic Development Corporation). Apartment 1B New York, NY 10024 John P. Rosenthal (63) Trustee of each Trust Senior Vice President of Burnham Securities Burnham Securities Inc. Inc. (a registered broker-dealer) since Burnham Asset Management Corp. 1991; formerly Partner of Silberberg, 1325 Avenue of the Americas Rosenthal & Co. (member of National 17th Floor Association of Securities Dealers, Inc.); New York, NY 10019 Director, Cancer Treatment Holdings, Inc. Cornelius T. Ryan (64) Trustee of each Trust General Partner of Oxford Partners and Oxford Bioscience Partners Oxford Bioscience Partners (venture capital 315 Post Road West partnerships) and President of Oxford Westport, CT 06880 Venture Corporation; Director of Capital Cash Management Trust (money market fund) and Prime Cash Fund. - 25 - Name, Age and Positions Held Address(1) With the Trusts Principal Occupation(s)(2) Gustave H. Shubert (66) Trustee of each Trust Senior Fellow/Corporate Advisor and 13838 Sunset Boulevard Advisory Trustee of Rand (a non-profit Pacific Palisades, CA 90272 public interest research institution) since 1989; Honorary Member of the Board of Overseers of the Institute for Civil Justice, the Policy Advisory Committee of the Clinical Scholars Program at the University of California, the American Association for the Advancement of Science, the Counsel on Foreign Relations, and the Institute for Strategic Studies (London); advisor to the Program Evaluation and Methodology Division of the U.S. General Accounting Office; formerly Senior Vice President and Trustee of Rand. Lawrence Zicklin* (59) President and Trustee of Partner of Neuberger & Berman; Director of each Trust N&B Management; President and/or Trustee of five other mutual funds for which N&B Management acts as investment manager or administrator. Daniel J. Sullivan (55) Vice President of each Senior Vice President of N&B Management Trust 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. Michael J. Weiner (48) Vice President and Senior Vice President and Treasurer of N&B Principal Financial Management since 1992; prior thereto, Vice Officer of each Trust President and Treasurer of N&B Management and Treasurer of certain mutual funds for which N&B Management acted as investment adviser; Vice President and Principal Financial Officer of eight other mutual funds for which N&B Management acts as investment manager or administrator. Claudia A. Brandon (38) Secretary of each Trust Vice President of N&B Management; Secretary of eight other mutual funds for which N&B Management acts as investment manager or administrator. - 26 - Name, Age and Positions Held Address(1) With the Trusts Principal Occupation(s)(2) Richard Russell (48) Treasurer and Principal Vice President of N&B Management since Accounting Officer of 1993; prior thereto, Assistant Vice each Trust 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. Stacy Cooper- Shugrue (32) Assistant Secretary of Assistant Vice President of N&B Management each Trust since 1993; employee of N&B Management since August 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 of Partner of Neuberger & Berman since 1992; each Trust employee thereof since 1971; Assistant Secretary of eight other mutual funds for which N&B Management acts as investment manager or administrator.
____________________ (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 each Trust within the meaning of the 1940 Act. Messrs. Egener and Zicklin are interested persons by virtue of the fact that they are officers and/or directors of N&B Management and partners of Neuberger & Berman. Mr. O'Brien is an interested person by virtue of the fact that he is a director of Legg Mason, Inc., a wholly owned subsidiary of which, from time to time, serves as a broker or dealer to the Portfolio and other funds for which N&B Management serves as investment manager. The Trust's Trust Instrument and Managers Trust's Declaration of Trust each 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 - 27 - 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. For the fiscal year ended August 31, 1995, the Fund and Portfolio paid fees and expenses of $13,318 to those Fund and Portfolio Trustees who were not affiliated with N&B Management or Neuberger & Berman. 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 Total Compensation from the Aggregate Neuberger & Berman Fund Complex Name and Position with Compensation from the Paid the Trust Trust to Trustees Faith Colish $14,140 $39,000 Trustee (5 other investment companies) Donald M. Cox $14,140 $31,000 Trustee (3 other investment companies) Stanley Egener $0 $0 Chairman of the Board, Chief Executive (9 other investment companies) Officer, and Trustee Alan R. Gruber $14,140 $31,000 Trustee (3 other investment companies) Howard A. Mileaf $15,571 $36,500 Trustee (4 other investment companies) Edward I. O'Brien $14,587 $31,500 Trustee (3 other investment companies) John T. Patterson, Jr. $14,604 $34,500 Trustee (4 other investment companies) - 28 - TABLE OF COMPENSATION FOR FISCAL YEAR ENDED 8/31/95 John P. Rosenthal $13,916 $33,000 Trustee (4 other investment companies) Cornelius T. Ryan $15,571 $33,500 Trustee (3 other investment companies) Gustave H. Shubert $13,916 $30,000 Trustee (3 other investment companies) Lawrence Zicklin $0 $0 President and Trustee (5 other investment companies)
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES Investment Manager and Administrator Because the Fund's net investable assets are invested in the Portfolio, the Fund does not need an investment manager. N&B Management serves as the investment manager to the Portfolio pursuant to a management agreement with Managers Trust, on behalf of the Portfolio, dated as of August 2, 1993 ("Management Agreement"). The Management Agreement was approved by the holders of the interests in the Portfolio on March 9, 1994. The Portfolio was authorized to become subject to the Management Agreement by vote of the Portfolio Trustees on October 20, 1993, and became subject to it on March 14, 1994. The Management Agreement provides, in substance, that N&B Management will make and implement investment decisions for the Portfolio in its discretion and will continuously develop an investment program for the Portfolio's assets. The Management Agreement permits N&B Management to effect securities transactions on behalf of the Portfolio through associated persons of N&B Management. The Management Agreement also specifically permits N&B Management to compensate, through higher commissions, brokers and dealers who provide investment research and analysis to the Portfolio, although N&B Management has no current plans to 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 Managers 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 - 29 - Management, presently serve as trustees and officers of the Trusts. See "Trustees and Officers." The Portfolio pays N&B Management a management fee based on the Portfolio's average daily net assets, as described in the Prospectus. N&B Management provides similar facilities, services, and personnel to the Fund pursuant to an administration agreement dated August 3, 1993 ("Administration Agreement"). The Fund was authorized to become subject to the Administration Agreement by vote of the Fund Trustees on October 20, 1993, and became subject to it on March 14, 1994. For such administrative services, the Fund pays N&B Management a fee based on the Fund's average daily net assets, as described in the Prospectus. During the fiscal year ended August 31, 1995 and the period from March 14, 1994 (commencement of operations) to August 31, 1994, the Fund accrued management and administration fees of $440,649 and $179,578, respectively. During those same periods, N&B Management reimbursed the Fund for $186,559 and $70,891, respectively, of expenses. 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 Portfolio Trustees who are not "interested persons" of N&B Management or Managers Trust ("Independent Portfolio Trustees"), cast in person at a meeting called for the purpose of voting on such approval, and (2) by the vote of a majority of the Portfolio Trustees or by a 1940 Act majority vote of the outstanding shares in the Portfolio. The Administration Agreement continues with respect to the Fund for a period of two years after the date the Fund became subject thereto. The Administration Agreement is renewable from year to year with respect to the Fund, so long as its continuance is approved at least annually (1) by the vote of a majority of the Fund Trustees who are not "interested persons" of N&B Management or the Trust ("Independent Fund Trustees"), cast in person at a meeting called for the purpose of voting on such approval, and (2) by the vote of a majority of the Fund Trustees or by a 1940 Act majority vote of the outstanding shares in the Fund. The Management Agreement is terminable, without penalty, with respect to the Portfolio on 60 days' written notice either by Managers Tr- ust or by N&B Management. The Administration Agreement is terminable, without penalty, with respect to the Fund on 60 days' written notice either by N&B Management or by the Trust if authorized by the Fund Trustees, including a majority of the Independent Fund Trustees. Each Agreement terminates automatically if it is assigned. - 30 - In addition to the voluntary expense reimbursements described in the Prospectus under "Management and Administration --Expenses," N&B Management has agreed in the Management Agreement to reimburse the Fund's expenses, as follows. If, in any fiscal year, the Fund's Aggregate Operating Expenses (as defined below) exceed the most restrictive expense limitation imposed under the securities laws of the states in which the Fund's shares are qualified for sale ("State Expense Limitation"), then N&B Management will pay the Fund the amount of that excess, less the amount of any reduction of the administration fee payable by the Fund under a similar State Expense Limitation contained in the Administration Agreement. N&B Management will have no obligation to pay the Fund, however, for any expenses that exceed the pro rata portion of the management fees attributable to the Fund's interest in the Portfolio. At the date of this SAI, the most restrictive State Expense Limitation to which the Fund expects to be subject is 2 1/2% of the first $30 million of average net assets, 2% of the next $70 million of average net assets, and 1-1/2% of average net assets over $100 million. For purposes of the State Expense Limitation, the term "Aggregate Operating Expenses" means the Fund's operating expenses plus its pro rata portion of the Portfolio's operating expenses (including any fees or expense reimbursements payable to N&B Management and any compensation payable thereto pursuant to (1) the Administration Agreement or (2) any other agreement or arrangement with Managers Trust with respect to the Portfolio; but excluding (with respect to both the Fund and the Portfolio) interest, taxes, brokerage commissions, litigation and indemnification expenses, and other extraordinary expenses not incurred in the ordinary course of business). Sub-Adviser N&B Management retains Neuberger & Berman, 605 Third Avenue, New York, NY 10158-3698, as a sub-adviser with respect to the Portfolio pursuant to a sub-advisory agreement dated August 2, 1993 ("Sub-Advisory Agreement"). The Sub-Advisory Agreement was approved by the holders of the interests in the Portfolio on March 9, 1994. The Portfolio was authorized to become subject to the Sub-Advisory Agreement by vote of the Portfolio Trustees on October 20, 1993, and became subject to it on March 14, 1994. The Sub-Advisory Agreement provides in substance that Neuberger & Berman will furnish to N&B Management, upon reasonable request, the same type of investment recommendations and research that Neuberger & Berman, from time to time, provides to its 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 - 31 - Management. The Sub-Advisory Agreement provides that N&B Management will pay for the services rendered by Neuberger & Berman based on the direct and indirect costs to Neuberger & Berman in connection with those services. Neuberger & Berman also serves as sub-adviser for all of the other mutual funds managed by N&B Management. The Sub-Advisory Agreement continues with respect to the Portfolio for a period of two years after 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 Portfolio Trustees, by a 1940 Act majority vote of the outstanding Portfolio shares, 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. Investment Companies Managed 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: Approximate Net Assets at Name September 30, 1995 ----- ------------------ 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) - 32 - Approximate Net Assets at Name September 30, 1995 ----- ------------------ Neuberger & Berman Municipal Securities Portfolio . . . . . $44,568,635 (investment portfolio for Neuberger & Berman Municipal Securities Trust) Neuberger & Berman New York Insured Intermediate Portfolio . . . . . . . . . . . . . . . . . . . . . . $10,679,324 (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) Neuberger & Berman Focus Portfolio . . . . . . . . . . . . $1,031,915,664 (investment portfolio for Neuberger & Berman Focus Fund and Neuberger & Berman Focus Trust) 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 - 33 - 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. 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, most of the Other N&B Funds differ from the Portfolio. Even where the investment objectives are similar, however, the methods used by the Other N&B Funds and the Portfolio to achieve their objectives may differ. 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 Portfolio Trustees that the desirability of the Portfolio's having its advisory arrangements with N&B Management outweighs any disadvantages that may result from contemporaneous transactions. The 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; Farha-Joyce 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 Cooper-Shugrue, Assistant Vice President; Robert Cresci, Assistant Vice President; Barbara DiGiorgio, Assistant Vice President; Roberta D'Orio, Assistant Vice President; Robert - 34 - I. Gendelman, Assistant Vice President; Leslie Holliday-Soto, 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, Zicklin, Goldstein, Kassen, Marx, and Simons and Mmes. Havell and Prindle are general partners of Neuberger & Berman. Messrs. Egener and Zicklin are trustees and officers, and Messrs. Sullivan, Weiner, and Russell and Mmes. Brandon and Cooper-Shugrue are officers, of each Trust. C. Carl Randolph, a general partner of Neuberger & Berman, also is an officer of each Trust. All of the outstanding voting stock in N&B Management is owned by persons who are also general partners of Neuberger & Berman. DISTRIBUTION ARRANGEMENTS N&B Management serves as the distributor ("Distributor") in connection with the offering of the Fund's shares on a no-load basis to the Plan. In connection with the sale of its shares, the Fund has authorized the Distributor to give only the information, and to make only the statements and representations, contained in the Prospectus and this SAI or that properly may be included in sales literature and advertisements in accordance with the 1933 Act, the 1940 Act, and applicable rules of self-regulatory organizations. Sales may be made only by the Prospectus, which may be delivered either personally, through the mails, or by electronic means. The Distributor is the Fund's "principal underwriter" within the meaning of the 1940 Act and, as such, acts as agent in arranging for the sale of the Fund's shares without sales commission or other compensation and bears all advertising and promotion expenses incurred in the sale of the Fund's shares. The Trust, on behalf of the Fund, and the Distributor are parties to a Distribution Agreement that continues until August 3, 1996. The Distribution Agreement may be renewed annually if specifically approved by (1) the vote of a majority of the Fund Trustees or a 1940 Act majority vote of the Fund's outstanding shares and (2) the vote of a majority of the Independent Fund Trustees, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated by either party and will automatically terminate on its assignment, in the same manner as the Management Agreement. ADDITIONAL REDEMPTION INFORMATION Suspension of Redemptions - 35 - The right to redeem the Fund's shares may be suspended or payment of the redemption price postponed (1) when the New York Stock Exchange ("NYSE") is closed (other than weekend and holiday closings), (2) when trading on the NYSE is restricted, (3) when an emergency exists as a result of which it is not reasonably practicable for the Portfolio to dispose of securities it owns or fairly to determine the value of its net assets, or (4) for such other period as the SEC may by order permit for the protection of the Fund's shareholders; provided that applicable SEC rules and regulations shall govern whether the conditions prescribed in (2) or (3) exist. If the right of redemption is suspended, the Plan may withdraw its offers of redemption, or it will receive payment at the NAV per share in effect at the close of business on the first day the NYSE is open ("Business Day") after termination of the suspension. Redemptions in Kind The Fund reserves the right, under certain conditions, to honor any request for redemption by making payment in whole or in part by securities valued as described under" Share Information -- Share Prices and Net Asset Value" in the Prospectus. If payment is made in securities, a shareholder generally will incur brokerage expenses in converting those securities into cash and will be subject to fluctuations in the market price of those securities until they are sold. The Fund does not redeem in kind under normal circumstances, but would do so when the Fund Trustees determine that it is in the best interest of the Fund's shareholders as a whole. Redemptions in kind will be made with readily marketable securities to the extent possible. DIVIDENDS AND OTHER DISTRIBUTIONS The Fund distributes to the Plan amounts equal to substantially all of its proportionate share of any net investment income (after deducting expenses incurred directly by the Fund), net capital gains (both long-term and short-term), and net gains from foreign currency transactions earned or realized by the Portfolio. The Fund calculates its net investment income and NAV per share as of the close of regular trading on the NYSE on each Business Day (usually 4:00 p.m. Eastern time). The Portfolio's net investment income consists of all income accrued on portfolio assets less accrued expenses, but does not include realized gains and losses. Net investment income and realized gains and losses are reflected in the Portfolio's NAV (and, hence, the Fund's NAV) until they are distributed. Dividends from net investment income and distributions of realized net capital and foreign currency gains, if any, normally are paid once annually, in December. Dividends and/or other distributions are automatically reinvested in additional shares of the Fund, unless and until the Plan elects to receive them in cash ("cash election"). A cash election remains - 36 - in effect until the Plan notifies State Street Bank and Trust Company in writing to discontinue the election. ADDITIONAL TAX INFORMATION Taxation of the Fund In order to continue to qualify for treatment as a RIC under the Code, the Fund must distribute to the Plan for each taxable year at least 90% of its investment company taxable income (consisting generally of net investment income, net short-term capital gain, and net gains from certain foreign currency transactions) ("Distribution Requirement") and must meet several additional requirements. These requirements include the follow- ing: (1) the Fund must derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies, or other income (including gains from Hedging Instruments) derived with respect to its business of investing in securities or those currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its gross income each taxable year from the sale or other disposition of securities, or any of the following, that were held for less than three months --Hedging Instruments (other than those on foreign currencies), or foreign currencies (or Hedging Instruments thereon) that are not directly related to the Fund's principal business of investing in securities (or options and futures with respect thereto) ("Short-Short Limitation"); and (3) at the close of each quarter of the Fund's taxable year, (i) at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, and other securities limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Fund's total assets and does not represent more than 10% of the issuer's outstanding voting securities, and (ii) not more than 25% of the value of its total assets may be invested in securities (other than U.S. Government securities) of any one issuer. Certain funds that invest in portfolios managed by N&B Management, including funds that invest in other portfolios of Managers Trust, have received a ruling from the Internal Revenue Service ("Service") that each such fund, as an investor in a corresponding portfolio of Managers Trust, will be deemed to own a proportionate share of the portfolio's assets and income for purposes of determining whether the fund satisfies all the requirements described above to qualify as a RIC. Although this ruling may not be relied on as precedent by the Fund, N&B Management believes that the reasoning thereof and, hence, its conclusion apply to the Fund as well. The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the extent it fails to distribute by the end of any calendar year substantially all of its ordinary income for that year and - 37 - capital gain net income for the one-year period ended on October 31 of that year, plus certain other amounts. See the next section for a discussion of the tax consequences to the Fund of distributions to it from the Portfolio, investments by the Portfolio in certain securities, and hedging transactions engaged in by the Portfolio. Taxation of the Portfolio Certain portfolios managed by N&B Management, including the other portfolios of Managers Trust, have received a ruling from the Service to the effect that, among other things, each such portfolio will be treated as a separate partnership for federal income tax purposes and will not be a "publicly traded partnership." Although this ruling may not be relied on as precedent by the Portfolio, N&B Management believes the reasoning thereof and, hence, its conclusion apply to the Portfolio as well. As a result, the Portfolio is subject to federal income tax; instead, each investor in the Portfolio, such as the Fund, is required to take into account in determining its federal income tax liability its share of the Portfolio's income, gains, losses, deductions, and credits, without regard to whether it has received any cash distributions from the Portfolio. The Portfolio also is not subject to Delaware or New York income or franchise tax. Because the Fund is deemed to own a proportionate share of the Portfolio's assets and income for purposes of determining whether the Fund satisfies the requirements as a RIC, the Portfolio intends to continue to conduct its operations so that the Fund will be able to continue to satisfy all those requirements. Distributions to the Fund from the Portfolio (whether pursuant to a partial or complete withdrawal or otherwise) will not result in the Fund's recognition of any gain or loss for federal income tax purposes, except that (1) gain will be recognized to the extent any cash that is distributed exceeds the Fund's basis for its interest in the Portfolio before the distribution, (2) income or gain will be recognized if the distribution is in liquidation of the Fund's entire interest in the Portfolio and includes a disproportionate share of any unrealized receivables held by the Portfolio, and (3) loss will be recognized if a liquidation distribution consists solely of cash and/or unrealized receivables. The Fund's basis for its interest in the Portfolio generally equals the amount of cash and the basis of any property the Fund invests in the Portfolio, increased by the Fund's share of the Portfolio's net income and gains and decreased by (1) the amount of cash and the basis of any property the Portfolio distributes to the Fund and (2) the Fund's share of the Portfolio's losses. - 38 - Dividends and interest received by the Portfolio may be subject to income, withholding, or other taxes imposed by foreign countries and U.S. possessions that would reduce the yield on its securities. Tax treaties between certain countries and the United States may reduce or eliminate these foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors. The Portfolio may invest in the stock of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the following tests: (1) at least 75% of its gross income is passive or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, if the Portfolio holds stock of a PFIC, the Fund (indirectly through its interest in the Portfolio) will be subject to federal income tax on 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 the Fund distributes the PFIC income as a taxable dividend to the Plan. The balance of the PFIC income will be included in the Fund's investment company taxable income and, accordingly, will not be taxable to it to the extent that income is distributed to the Plan. If the Portfolio invests in a PFIC and elects to treat the PFIC as a "qualified electing fund," then in lieu of the Fund's incurring the foregoing tax and interest obligation, the Fund would be required to include in income each year its 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 most likely would have to be distributed by the Fund to satisfy the Distribution Requirement and to avoid imposition of the Excise Tax -- even if those earnings and gain were not received by the Portfolio. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof. Pursuant to proposed regulations, open-end RICs, such as the Fund, would be entitled to elect to mark to market their stock in certain PFICs. Marking to market, in this context, means recognizing as gain for each taxable year the excess, as of the end of that year, of the fair market value of each such PFIC's stock over the adjusted basis in that stock (including mark to market gain for each prior year for which an election was in effect). The Portfolio's use of hedging strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the character and timing of recognition of the gains and losses the Portfolio realizes in connection therewith. Income from foreign - 39 - currencies (except certain gains therefrom that may be excluded by future regulations), and income from transactions in Hedging Instruments derived by the Portfolio with respect to its business of investing in securities or foreign currencies, will qualify as permissible income for the Fund under the Income Requirement. However, income from the disposition by the Portfolio of Hedging Instruments (other than those on foreign currencies) will be subject to the Short-Short Limitation for the Fund if they are held for less than three months. Income from the disposition of foreign currencies, and Hedging Instruments on foreign currencies, that are not directly related to the Portfolio's principal business of investing in securities (or options and futures with respect thereto) also will be subject to the Short-Short Limitation for the Fund if they are held for less than three months. If the Portfolio satisfies certain requirements, any increase in value of a position that is part of a "designated hedge" will be offset by any decrease in value (whether realized or not) of the offsetting hedging position during the period of the hedge for purposes of determining whether the Fund satisfies the Short-Short Limitation. Thus, only the net gain (if any) from the designated hedge will be included in gross income for purposes of that limitation. The Portfolio will consider whether it should seek to 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 Hedging Instruments beyond the time when it otherwise would be advantageous to do so, in order for the Fund to continue to qualify as a RIC. Exchange-traded futures contracts and listed options thereon ("Section 1256 contracts") are required to be marked to market (that is, treated as having been sold at market value) at the end of the Portfolio's taxable year. Sixty percent of any gain or loss recognized as a result of these "deemed sales," and 60% of any net realized gain or loss from any actual sales, of Section 1256 contracts are treated as long-term capital gain or loss; the remainder is treated as short-term capital gain or loss. The Portfolio may acquire zero coupon securities or other securities issued with original issue discount ("OID"). As a holder of those securities, the Portfolio (and, through it, the Fund) must take into account the OID that accrues on the securities during the taxable year, even if it receives no corresponding payment on the securities during the year. Because the Fund annually must distribute substantially all of its investment company taxable income (including its share of the Portfolio's accrued OID) to satisfy the Distribution Requirement and to avoid imposition of the Excise Tax, the Fund may be required in a particular year to distribute as a dividend an amount that is greater than its proportionate share of the total amount of cash the Portfolio actually receives. Those distributions will be made from the Fund's (or its proportionate share of the Portfolio's) cash assets or, if necessary, from the proceeds of sales of the Portfolio's securities. The Portfolio may realize capital gains or losses from those sales, which would increase or decrease the Fund's investment company taxable income and/or net capital - 40 - gain. In addition, any such gains may be realized on the disposition of securities held for less than three months. Because of the Short-Short Limitation, any such gains would reduce the Portfolio's ability to sell other securities, or certain Hedging Instruments, held for less than three months that it might wish to sell in the ordinary course of its portfolio management. PORTFOLIO TRANSACTIONS Neuberger & Berman acts as the Portfolio's principal broker in the purchase and sale of its portfolio securities and in connection with the purchase and sale of options on its securities. Transactions in portfolio securities for which Neuberger & Berman serves as broker will be effected in accordance with Rule 17e-1 under the 1940 Act. During the period from March 14, 1994 (commencement of operations) through August 31, 1994, and the fiscal year ended August 31, 1995, the Portfolio paid brokerage commissions of $46,374 and $138,378, respectively, of which $46,050 and $95,964, respectively, were paid to Neuberger & Berman. Transactions in which that Portfolio used Neuberger & Berman as broker comprised 72.32% of the aggregate dollar amount of transactions involving the payment of commissions, and 69.35% of the aggregate brokerage commissions paid by the Portfolio, during the fiscal year ended August 31, 1995. 93.17% of the $42,414 paid to other brokers by that Portfolio during that fiscal year (representing commissions on transactions involving approximately $17,590,257) was directed to those brokers because of research services they provided. During the fiscal year ended August 31, 1995, the Portfolio acquired securities of the following of its Regular B/Ds: none; at that date, that Portfolio held the securities of its Regular B/Ds with an aggregate value as follows: none. Portfolio securities are, from time to time, loaned by the Portfolio to Neuberger & Berman in accordance with the terms and conditions of an order issued by the SEC. The order exempts such transactions from provisions of the 1940 Act that would otherwise prohibit such transactions, subject to certain conditions. Among the conditions of the order, securities loans made by the Portfolio to Neuberger & Berman must be fully secured by cash collateral. 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 non-affiliated 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 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 - 41 - 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 March 14, 1994 (commencement of operations) to August 31, 1994, the Portfolio earned no interest income from the collateralization of securities loans. The Portfolio may also lend securities to unaffiliated entities, including 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 a 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 Portfolio Trustees from time to time reviews, among other things, information relating to securities loans by the Portfolio. In effecting securities transactions, the Portfolio generally seeks to obtain the best price and execution of orders. Commission rates, being a component of price, are considered along with other relevant factors. The Portfolio plans to continue to use Neuberger & Berman as its principal broker where, in the judgment of N&B Management (the Portfolio's investment manager and an affiliate of the broker), that firm is able to obtain a price and execution at least as favorable as other qualified brokers. To the Portfolio's knowledge, however, no affiliate of the Port- folio receives give-ups or reciprocal business in connection with its securities transactions. The use of Neuberger & Berman as a broker for the Portfolio is subject to the requirements of Section 11(a) of the Securities Exchange - 42 - 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 where they have the authorization of the persons authorized to transact business for the account and comply with certain annual reporting requirements. The Port- folio Trustees have expressly authorized Neuberger & Berman to retain such compensation, and Neuberger & Berman complies with the reporting requirements of Section 11(a). Under the 1940 Act, commissions paid by the Portfolio to Neuberger & Berman in connection with a purchase or sale of securities on a securities exchange may not exceed the usual and customary broker's commission. Accordingly, it is the Portfolio's policy that the commissions to be paid to Neuberger & Berman must, in N&B Management's judgment, be (1) at least as favorable as those charged by other brokers having comparable execution capability and (2) at least as favorable as commissions contemporaneously charged by Neuberger & Berman on comparable transactions for its most favored unaffiliated customers, except for accounts for which Neuberger & Berman acts as a clearing broker for another brokerage firm and customers of Neuberger & Berman considered by a majority of the Independent Portfolio Trustees not to be comparable to the Portfolio. The Portfolio does not deem it practicable and in its best interest to solicit competitive bids for commissions on each transaction effected by Neuberger & Berman. However, consideration regularly is given to information concerning the prevailing level of commissions charged by other brokers on comparable transactions during comparable periods of time. The 1940 Act generally prohibits Neuberger & Berman from acting as principal in the purchase or sale of securities for the Portfolio's account, unless an appropriate exemption is available. A committee of Independent Portfolio Trustees, from time to time, reviews among other things, information relating to the commissions charged by Neuberger & Berman to the Portfolio and to its other customers and information concerning the prevailing level of commissions charged by other brokers having comparable execution capability. In addition, the procedures pursuant to which Neuberger & Berman effects brokerage transactions for the Portfolio must be reviewed and approved no less often than annually by a majority of the Independent Portfolio Trustees. The Portfolio expects that it will continue to execute a portion of its transactions through brokers other than Neuberger & Berman. In selecting those brokers, N&B Management considers the quality and reliability of brokerage services, including execution capability, performance, and financial responsibility, and may consider research and other investment information provided by, and sale of Fund shares effected through, those brokers. To ensure that accounts of all investment clients, including the Portfolio, are treated fairly in the event that transaction instructions for more than one investment account regarding the same security are - 43 - received by Neuberger & Berman at or about the same time, Neuberger & Berman may combine transaction orders placed on behalf of clients, including advisory accounts in which affiliated persons have an investment interest, for the purpose of negotiating brokerage commissions or obtaining a more favorable price. Where appropriate, securities purchased or sold may be allocated, in terms of amount, to a client according to the proportion that the size of the transaction order actually placed by the account bears to the aggregate size of transaction orders simultaneously made by the other accounts, subject to de minimis exceptions, with all participating accounts paying or receiving the same price. 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 semi-annually the nature and quality of the brokerage and research services provided by other brokers. Based on this evaluation, the committee establishes a list and projected rankings of preferred brokers for use in determining the relative amounts of commissions to be allocated to those brokers. Ordinarily, the brokers on the list effect a large portion of the brokerage transactions for the N&B Funds and the Managed Accounts that are not effected by Neuberger & Berman. However, in any semi-annual period, brokers not on the list may be used, and the relative amounts of brokerage commissions paid to the brokers on the list may vary substantially from the projected rankings. These variations reflect the following factors, among others: (1) brokers not on the list or ranking below other brokers on the list may be selected for particular transactions because they provide better price and/or execution, which is the primary consideration in allocating brokerage; (2) adjustments may be required because of periodic changes in the execution 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 semi-annual period to the next. The commissions charged by a broker other than Neuberger & Berman may be higher than the amount another firm might charge if N&B Management determines in good faith that the amount of those commissions is reasonable in relation to the value of the brokerage and research services provided by the broker. N&B Management believes that those research services benefit the Portfolio by supplementing the 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 the Other N&B Funds and by Neuberger & Berman from brokers effecting portfolio transactions on behalf of the Managed Accounts may be used for the Portfolio's benefit. - 44 - Janet Prindle, a Vice President of N&B Management and a partner of Neuberger & Berman, is the person primarily responsible for making decisions as to specific action to be taken with respect to the investment portfolio of the Portfolio. She has full authority to take action with respect to portfolio transactions and may or may not consult with other personnel of N&B Management prior to taking such action. If Ms. Prindle is unavailable to perform her responsibilities, Farha-Joyce Haboucha, who is a Vice President of N&B Management, will assume responsibility of the Portfolio. Portfolio Turnover The portfolio turnover rate is the lesser of the cost of the securities purchased or the value of the securities sold, excluding all securities, including options, whose maturity or expiration date at the time of acquisition was one year or less, divided by the average monthly value of such securities owned during the year. REPORTS TO SHAREHOLDERS Shareholders of the Fund receive unaudited semi-annual financial statements and audited year-end financial statements certified by the independent accountants for the Fund and Portfolio. The Fund's statements show the investments owned by the Portfolio and the market values thereof and provide other information about the Fund and its operations, including the Fund's beneficial interest in the Portfolio. CUSTODIAN AND TRANSFER AGENT The Fund and Portfolio have each selected Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110 as custodian for its securities and cash. All correspondence should be mailed to the Deferred Compensation Plan of the City of New York and Related Agencies and Instrumentalities, 40 Rector Street, 3rd Floor, New York, NY 10006. State Street also serves as the Fund's transfer agent, administering purchases, redemptions, and transfers of Fund shares and the payment of dividends and other distributions to the Plan, and as transfer agent for the Portfolio. INDEPENDENT ACCOUNTANTS The Fund and Portfolio have selected Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109, as the independent accountants who will audit their financial statements. - 45 - LEGAL COUNSEL The Fund and Portfolio have selected Kirkpatrick & Lockhart LLP, 1800 M Street, N.W., Washington, D.C. 20036, as their legal counsel. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of December 11, 1995, the Deferred Compensation Plan of the City of New York and Related Agencies and Instrumentalities, 40 Rector Street, 3rd Floor, New York, New York 10006, owned 100% of the outstanding shares of the Fund; and the Fund held 90.02% of the interests in the Portfolio. REGISTRATION STATEMENT This SAI and the Prospectus do not contain all the information included in the Trust's registration statement filed with the SEC under the 1933 Act with respect to the securities offered by the Prospectus. Certain portions of the registration statement have been omitted pursuant to SEC rules and regulations. The registration statement, including the exhibits filed therewith, may be examined at the SEC's offices in Wash- ington, D.C. Statements contained in this SAI and in the Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. FINANCIAL STATEMENTS The following financial statements and related documents are incorporated herein by reference from the Fund's Annual Report to shareholders for the fiscal year ended August 31, 1995: The audited financial statements of the Fund and Portfolio and notes thereto for the fiscal year ended August 31, 1995, and the reports of Coopers & Lybrand L.L.P., independent accountants, with respect to such audited financial statements of the Fund and the Portfolio. - 46 - Appendix A RATINGS OF CORPORATE BONDS AND COMMERCIAL PAPER S&P corporate bond ratings: AAA - Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA - Bonds rated AA have a very strong capacity to pay interest and repay principal and differ from the higher rated issues only in small degree. A - Bonds rated A have a strong capacity to pay interest and repay principal, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than bonds in higher rated categories. BBB - Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in higher rated categories. Plus (+) or Minus (-) - The ratings above may be modified by the addition of a plus or minus sign to show relative standing within the major categories. Moody's corporate bond ratings: Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or an exceptionally stable margin, and principal is secure. Although the various protective elements are likely to change, the changes that can be visualized are most unlikely to impair the fundamentally strong position of the issue. Aa - Bonds rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as "high grade bonds." They are rated lower than the best bonds because margins of protection may not be as large as in Aaa-rated securities, fluctuation of protective elements may be of greater amplitude, or there may be other elements present that make the long-term risks appear somewhat larger than in Aaa-rated securities. A - Bonds rated A possess many favorable investment attributes and are considered to be as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but - 47 - elements may be present that suggest a susceptibility to impairment sometime in the future. Baa - Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. These bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Modifiers - Moody's may apply numerical modifiers 1, 2, and 3 in each generic rating classification described above. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issuer ranks in the lower end of its generic rating category. S&P commercial paper ratings: A-1 - This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+). A-2 - This designation denotes satisfactory capacity for timely payment. However, the relative degree of safety is not as high as for issues designated A-1. Moody's commercial paper ratings: Issuers rated Prime-1 (or related supporting institutions), also known as P-1, have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: - Leading market positions in well-established industries. - High rates of return on funds employed. - Conservative capitalization structures with moderate reliance on debt and ample asset protection. - Broad margins in earnings coverage of fixed financial charges and high internal cash generation. - Well-established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or related supporting institutions), also known as P-2, have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. - 48 - Appendix B THE ART OF INVESTMENT: A CONVERSATION WITH ROY NEUBERGER - 49 - The Art of Investing: A Conversation with Roy Neuberger "I firmly believe that if you want to manage your own money, you must be a student of the market. If you are unwilling or unable to do that, find someone else to manage your money for you." NEUBERGER & BERMAN [THIS PAGE IS BLANK - IT IS AN INSIDE PAGE OF THIS BROCHURE] [PICTURE OF ROY NEUBERGER] During my more than sixty-five years of buying and selling securities, I've been asked many questions about my approach to investing. On the pages that follow are a variety of my thoughts, ideas and investment principles which have served me well over the years. If you gain useful knowledge in the pursuit of profit as well as enjoyment from these comments, I shall be more than content. \s\ Roy R. Neuberger - 1 -
YOU'VE BEEN ABLE TO CONDENSE SOME OF THE CHARACTERISTICS OF SUCCESSFUL INVESTING INTO FIVE "RULES." WHAT ARE THEY? Rule #1: Be flexible. My philosophy has necessarily changed from time to time because of events and because of mistakes. My views change as economic, political, and technological changes occur both on and sometimes off our planet. It is imperative that you be willing to change your thoughts to meet new conditions. Rule #2: Take your temperament into account. Recognize whether you are by nature very speculative or just the opposite - fearful, timid of taking risks. But in any event -- Diversify your investments, Rule #3: Be broad-gauged. Diversify your make sure that some of your investments, make sure that some of your principal is kept safe, and principal is kept safe, and try to increase try to increase your income your income as well as your capital. as well as your capital. [PICTURE OF ROY NEUBERGER] Rule #4: Always remember there are many ways to skin a cat! Ben Graham and David Dodd did it by understanding basic values. Warren Buffet invested his portfolio in a handful of long- term holdings, while staying involved with the companies' managements. Peter Lynch chose to understand, first-hand, the products of many hundreds of the companies he invested in. George Soros showed his genius as a hedge fund investor who could decipher world currency trends. Each has been successful in his own way. But to be successful, remember to - 2 - Rule #5: Be skeptical. To repeat a few well- worn useful phrases: A. Dig for yourself. B. Be from Missouri. C. If it sounds too good to be true, it probably is. IN YOUR 65 YEARS OF INVESTING ARE THERE ANY GENERAL PATTERNS YOU'VE OBSERVED AS TO HOW THE MARKET BEHAVES? Every decade that I've been involved with Wall Street has a nuance of its own, an economic and social climate that influences investors. But generally, bull markets tend to be longer than bear markets, and stock prices tend to go up more slowly and erratically than they go down. Bear markets tend to be shorter and of greater intensity. The market rarely rises or declines concurrently with business cycles longer than six months. AS A LEGENDARY "VALUE INVESTOR," HOW DO YOU DEFINE VALUE INVESTING? Value investing means finding the best values - - either absolute or relative. Absolute means a stock has a low market price relative to its own fundamentals. Relative value means the price is attractive relative to the market as a whole. COULD YOU DESCRIBE A STOCK WITH "GOOD VALUE"? A classic example is a company that has a low price to earnings ratio, a low price to book ratio, free cash flow, a strong balance sheet, undervalued corporate assets, unrecognized earnings turnaround and is selling at a discount to private market value. These characteristics usually lead to companies that are under-researched and have a high degree of inside ownership and entrepreneurial management. - 3 - One of my colleagues at Neuberger & Berman says he finds his value stocks either "under a cloud" or "under a rock." "Under a cloud" stocks are those Wall Street in general doesn't like, because an entire industry is out of favor and even the good stocks are being dropped. "Under a rock" stocks are those Wall Street is ignoring, so you have to uncover them on your own. ARE THERE OTHER KEY CRITERIA YOU USE TO JUDGE STOCKS? I'm more interested in longer-term trends in earnings than short-term trends. Earnings gains should be the product of long-term strategies, superior management, taking advantage of business opportunities and so on. If these factors are in their proper place, short-term earnings should not be of major concern. Dividends are an important extra because, if they're stable, they help support the price of the stock. WHAT ABOUT SELLING STOCKS? Most individual investors should invest for the long term but not mindlessly. A sell discipline, often neglected by investors, is vitally important. "One should fall in love One should fall in love with ideas, with with ideas, with people or people, or with idealism. But in my book, the with idealism. But in my last thing to fall in love with is a particular book, the last thing to security. It is after all just a sheet of paper fall in love with is a indicating a part ownership in a corporation particular security." and its use is purely mercenary. If you must love a security, stay in love with it until it gets overvalued; then let somebody else fall in love. [PICTURE OF ROY NEUBERGER] - 4 - ANY OTHER ADVICE FOR INVESTORS? I firmly believe that if you want to manage your own money, you must be a student of the market. If you're unwilling or unable to do that, find someone else to manage your money for you. Two options are a well-managed no- load mutual fund or, if you have enough assets for separate account management, a money manager you trust with a good record. HOW WOULD YOU DESCRIBE YOUR PERSONAL INVESTING STYLE? Every stock I buy is bought to be sold. The market is a daily event, and I continually review my holdings looking for selling opportunities. I take a profit occasionally on something that has gone up in price over what was expected and simultaneously take losses whenever misjudgment seems evident. This creates a reservoir of buying power that can be used to make fresh judgments on what are the best values in the market at that time. My active investing style has worked well for me over the years, but for most investors I recommend a longer-term approach. I tend not to worry very must about the day to day swings of the market, which are very hard to comprehend. Instead, I try to be rather clever in diagnosing values and trying to win 70 to 80 percent of the time. YOU BEGAN INVESTING IN 1929. WHAT WAS YOUR EXPERIENCE WITH THE "GREAT CRASH"? - 5 - The only money I managed in the Panic of 1929 was my own. My portfolio was down about 12 percent, and I had an uneasy feeling about the market and conditions in general. Those were the days of 10 percent margin. I studied the lists carefully for a stock that was overvalued in my opinion and which I could sell short as a hedge. I came across RCA at about $100 per share. It had recently split 5 for 1 and appeared overvalued. There were no dividends, little income, a low net worth and a weak financial position. I sold RCA short in the amount equal to the dollar value of my long portfolio. It proved to be a timely and profitable move. HOW DID THE CRASH OF 1929 AFFECT YOUR INVESTING STYLE? I am prematurely bearish when the market goes up for a long time and everybody is happy because they are richer. I am very bullish when the market has gone down perceptibly and I feel it has discounted any troubles we are going to have. HOW IMPORTANT ARE PSYCHOLOGICAL FACTORS TO MARKET BEHAVIOR? There are many factors in addition to economic statistics or security analysis in a buy or sell decision. I believe psychology plays an important role in the Market. Some people follow the crowd in hopes they'll be swept along in the right direction, but if the crowd is late in acting, this can be a bad move. I like to be contrary. When things look bad, I become optimistic. When everything looks rosy, and the crowd is optimistic, I like to be a seller. Sometimes I'm too early, but I generally profit. AS A RENOWNED ART COLLECTOR, DO YOU FIND SIMILARITIES BETWEEN SELECTING STOCKS AND SELECTING WORKS OF ART? - 6 - Both are an art, although picking stocks is a minor art compared with painting, sculpture or "When things look bad, I literature. I started buying art in the 30s, become optimistic. When and in the 40s it was a daily, almost hourly everything looks rosy, and occurrence. My inclination to buy the works of the crowd is optimistic, I living artists comes from Van Gogh, who sold like to be a seller." only one painting during his lifetime. He died in poverty, only then to become a legend and have his work sold for millions of dollars. [PICTURE OF ROY NEUBERGER] There are more variables to consider now in both buying art and picking stocks. In the modern stock markets, the heavy use of futures and options has changed the nature of the investment world. In past times, the stock market was much less complicated, as was the art world. Artists rose and fell on their own merits without a lot of publicity and attention. As more and more dealers are involved with artists, the price of their work becomes inflated. So I almost always buy works of unknown, relatively undiscovered artists, which, I suppose is similar to value investing. But the big difference in my view of art and stocks is that I buy a stock to sell it and make money. I never bought paintings or sculptures for investment in my life. The objective is to enjoy their beauty. - 7 - WHAT DO YOU CONSIDER THE BUSINESS MILESTONES IN YOUR LIFE? Being a founder of Neuberger & Berman and creating one of the first no-load mutual funds. I started on Wall Street in 1929, and during the depression I managed my own money and that of my clientele. We all prospered, but I wanted to have my own firm. In 1939 I became a founder of Neuberger & Berman, and for about 10 years we managed money for individuals with substantial financial assets. But I also wanted to offer the smaller investor the benefits of professional money management, so in 1950 I created the Guardian Mutual Fund (now known as the Neuberger & Berman Guardian Fund). The Fund was kind of an innovation in its time because it didn't charge a sales commission. I thought the public was being overcharged for mutual funds, so I wanted to create a fund that would be offered directly to the public without a sales charge. Now of course the "no-load" fund business is a huge industry. I managed the Fund myself for over 28 years. [PICTURE OF ROY NEUBERGER] YOU'RE IN YOUR NINETIES AND STILL YOU GO INTO THE OFFICE EVERY DAY TO MANAGE YOUR INVESTMENTS. WHY? I like the fun of being nimble in the stock market, and I'm addicted to the market's fascinations. WHAT CLOSING WORDS OF ADVICE DO YOU HAVE ABOUT INVESTING? Realize that there are opportunities at all times for the adventuresome investor. And stay in good physical condition. It's a strange thing. You do not dissipate your energies by using them. Exercise your body and your brain every day, and you'll do better in investments and in life. - 8 - ROY NEUBERGER: A BRIEF BIOGRAPHY Roy Neuberger is a founder of the investment management firm Neuberger & Berman, and a renowned value investor. He is also a recognized collector of contemporary American art, much of which he has given away to museums and colleges across the country. During the 1920s, Roy studied art in Paris. When he realized he didn't possess the talent to become an artist, he decided to collect art, and to support this passion, Roy turned to investing -- a pursuit for which his talents have proven more than adequate. A TALENT FOR INVESTING Roy began his investment career by joining a brokerage firm in 1929, seven months before the "Great Crash." Just weeks before "Black Monday," he shorted the stock of RCA, thinking it was overvalued. He profited from the falling market and gained a reputation for market prescience and stock selection that has lasted his entire career. NEUBERGER & BERMAN'S FOUNDING Roy's investing acumen attracted many people who wished to have him manage their money. In 1939, at the age of 36, after purchasing a seat on the New York Stock Exchange, Roy founded Neuberger & Berman to provide money management services to people who lacked the time, interest or expertise to manage their own assets. - 9 - NEUBERGER & BERMAN -- OVER FIVE DECADES OF GROWTH Neuberger & Berman has grown through the years and now manages approximately $30 billion of equity and fixed income assets, both domestic and international, for individuals, institutions, and its family of no-load mutual funds. Today, as when the firm was founded, Neuberger & Berman follows a value approach to investing, designed to enable clients to advance in good markets and minimize losses when conditions are less favorable. For more complete information about the Neuberger & Berman Guardian Fund, including fees and expenses, call Neuberger & Berman Management at 800-877- 9700 for a free prospectus. Please read it carefully, before you invest or send money. - 10 - Neuberger & Berman Management Inc.[SERVICE MARK] 605 Third Avenue, 2nd Floor New York, NY 10158-0006 Shareholder Services (800) 877-9700 [COPYRIGHT SYMBOL]1995 Neuberger & Berman PRINTED ON RECYCLED PAPER WITH SOY BASED INKS
- 11 - NEUBERGER & BERMAN EQUITY TRUST POST-EFFECTIVE AMENDMENT NO. 8 ON FORM N-1A PART C OTHER INFORMATION Item 24. Financial Statements and Exhibits (a) Financial Statements: The audited financial statements contained in the Annual Reports to Shareholders of the Registrant for the fiscal year ended August 31, 1995 for Neuberger & Berman Equity Trust (with respect to Neuberger & Berman Focus Trust, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger & Berman Manhattan Trust, Neuberger & Berman Partners Trust, and Neuberger & Berman NYCDC Socially Responsive Trust) and Equity Managers Trust (with respect to Neuberger & Berman Focus Portfolio, Neuberger & Berman Genesis Portfolio, Neuberger & Berman Guardian Portfolio, Neuberger & Berman Manhattan Portfolio, Neuberger & Berman Partners Portfolio, and Neuberger & Berman Socially Responsive Portfolio) and the reports of the independent auditors/accountants are incorporated into the Statement of Additional Information by reference. Included in Part A of this Post-Effective Amendment: FINANCIAL HIGHLIGHTS for the period indicated therein for Neuberger & Berman Focus Trust, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger & Berman Manhattan Trust, Neuberger & Berman Partner Trust, and the Neuberger & Berman NYCDC Socially Responsive Trust. (b) Exhibits: Exhibit Number Description ------- ----------- (1) (a) Certificate of Trust. Filed herewith. (b) Trust Instrument of Neuberger & Berman Equity Trust. Filed herewith. (c) Schedule A - Current Series of Neuberger & Berman Equity Trust. Filed herewith. (2) By-laws of Neuberger & Berman Equity Trust. Filed herewith. (3) Voting Trust Agreement. None. Exhibit Number Description ------- ----------- (4) Specimen Share Certificate. Incorporated by reference to Post-Effective Amendment No. 4 to Registrant's Registration Statement, File Nos. 33- 64368 and 811-7784. (5) (a) (i) Management Agreement Between Equity Managers Trust and Neuberger & Berman Management Incorporated. Incorporated by Reference to Post- Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2- 11357 and 811-582, Edgar Accession No. 0000898432-000314. (ii) Schedule A - Series of Equity Managers Trust Currently Subject to the Management Agreement. Incorporated by Reference to Post- Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2- 11357 and 811-582, Edgar Accession No. 0000898432-000314. (iii) Schedule B - Schedule of Compensation Under the Management Agreement. Incorporated by Reference to Post-Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, Edgar Accession No. 0000898432-000314. (b) (i) Sub-Advisory Agreement Between Neuberger & Berman Management Incorporated and Neuberger & Berman, L.P. with Respect to Equity Managers Trust. Incorporated by Reference to Post-Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2- 11357 and 811-582, Edgar Accession No. 0000898432-000314. - 2 - Exhibit Number Description ------- ----------- (ii) Schedule A - Series of Equity Managers Trust Currently Subject to the Sub-Advisory Agreement. Incorporated by Reference to Post- Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2- 11357 and 811-582, Edgar Accession No. 0000898432-000314. (6) (a) Distribution Agreement Between Neuberger & Berman Equity Trust and Neuberger & Berman Management Incorporated. Filed herewith. (b) Schedule A - Series of Neuberger & Berman Equity Trust Currently Subject to the Distribution Agreement. Filed herewith. (7) Bonus, Profit Sharing or Pension Plans. None. (8) (a) Custodian Contract Between Neuberger & Berman Equity Trust and State Street Bank and Trust Company. Filed herewith. (b) Schedule A - Approved Foreign Banking Institutions and Securities Depositories Under the Custodian Contract. To be Filed by Amendment. (9) (a) (i) Transfer Agency Agreement Between Neuberger & Berman Equity Trust and State Street Bank and Trust Company. Filed herewith. (ii) Agreement Between Neuberger & Berman Equity Trust and State Street Bank and Trust Company Adding Neuberger & Berman NYCDC Socially Responsive Trust as a Portfolio Governed by the Transfer Agency Agreement. Filed herewith. (iii) First Amendment to Transfer Agency and Service Agreement between Equity Trust and State Street Bank and Trust Company. Filed herewith. - 3 - Exhibit Number Description ------- ----------- (b) (i) Administration Agreement Between Neuberger & Berman Equity Trust and Neuberger & Berman Management Incorporated. Filed herewith. (ii) Schedule A - Series of Neuberger & Berman Equity Trust Currently Subject to the Administration Agreement. Filed herewith. (iii) Schedule B - Schedule of Compensation Under the Administration Agreement. Filed herewith. (10) Opinion and Consent of Kirkpatrick & Lockhart LLP on Securities Matters. Incorporated by Reference to Registrant's Rule 24f-2 Notice for the Fiscal Year ended August 31, 1995, File Nos. 33-64368 and 811-7784, Edgar Accession No. 0000898432- 95-000340. (11) (a) Consent of Ernst & Young LLP, Independent Auditors. Filed herewith. (b) Consent of Coopers & Lybrand L.L.P., Independent Accountants. Filed herewith. (12) Financial Statements Omitted from Prospectus. None. (13) Letter of Investment Intent. None. (14) Prototype Retirement Plan. None. (15) Plan Pursuant to Rule 12b-1. None (16) Schedule of Computation of Performance Quotations. Incorporated by Reference to Post-Effective Amendment No. 4 to Registrant's Registration Statement, File Nos. 33-64368 and 811-7784. (17) Financial Data Schedule. Filed herewith. (18) Plan Pursuant to Rule 18f-3. None. - 4 - 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 -------------- -------------- Shares of beneficial interest, $0.001 par value, of: Neuberger & Berman Focus Trust 38 Neuberger & Berman Genesis Trust 20 Neuberger & Berman Guardian Trust 250 Neuberger & Berman Manhattan Trust 24 Neuberger & Berman Partners Trust 55 Neuberger & Berman NYCDC Socially Responsive Trust 3 Item 27. Indemnification. A Delaware business trust may provide in its governing instrument for indemnification of its officers and trustees from and against any and all claims and demands whatsoever. Article IX, Section 2 of the Trust Instrument provides that the Registrant shall indemnify any present or former trustee, officer, employee or agent of the Registrant ("Covered Person") to the fullest extent permitted by law against liability and all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding ("Action") in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in settlement thereof. Indemnification will not be provided to a person adjudged by a court or other body to be liable to the Registrant or its shareholders by reason of "willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office" ("Disabling Conduct"), or not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Registrant. In the event of a settlement, no indemnification may be provided unless there has been a determination that the officer or trustee did not engage in Disabling Conduct (i) by the court or other body approving the settlement; (ii) by at least a majority of those trustees who are neither interested persons, as that term is defined in the Investment Company Act of 1940, of the Registrant ("Independent Trustees"), nor are parties to the matter based upon a review of readily - 5 - available facts; or (iii) by written opinion of independent legal counsel based upon a review of readily available facts. Pursuant to Article IX, Section 3 of the Trust Instrument, if any present or former shareholder of any series ("Series") of the Registrant shall be held personally liable solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason, the present or former shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Registrant, on behalf of the affected Series, shall, upon request by such shareholder, assume the defense of any claim made against such shareholder for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series. Section 9 of the Management Agreement between Equity Managers Trust and Neuberger and 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 any series of Equity Managers Trust (each a "Portfolio") 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 Portfolio 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 Equity Managers Trust or a Portfolio of Equity Managers Trust or its interestholders 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 Equity Managers Trust against any liability to Equity Managers Trust or a Portfolio or its interestholders 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 Equity Managers Trust. Section 1 of the Sub-Advisory Agreement between Equity Managers Trust and Neuberger & Berman, L.P. ("Sub-Adviser") provides that in the absence of willful misfeasance, bad faith or gross negligence in the performance of its duties, or of reckless disregard of its duties and obligations under the Agreement, the Sub-Adviser will not be subject to liability for any act or omission or any loss suffered by any Portfolio of Equity Managers Trust or its interestholders in connection with the matters to which the Agreement relates. Section 11 of the Distribution Agreement between the Registrant and N&B Management provides that N&B Management shall look only to the assets of a Series for the Registrant's performance of the Agreement by the Registrant on behalf of such Series, and neither the Trustees nor any of - 6 - the Registrant's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("1933 Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. Item 28. Business and Other Connections of Adviser and Sub-Adviser. There is set forth below information as to any other business, profession, vocation or employment of a substantial nature in which each director or officer of N&B Management and each 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. - 7 -
NAME BUSINESS AND OTHER CONNECTIONS Claudia A. Brandon Secretary, Neuberger & Berman Advisers Vice President, N&B Management Trust (Delaware business trust); Management Secretary, Advisers Managers Trust; Secretary, Neuberger & Berman Advisers Management Trust (Massachusetts business trust) (1); Secretary, Neuberger & Berman Income Funds; Secretary, Neuberger & Berman Income Trust; Secretary, Neuberger & Berman Equity Funds; Secretary, Neuberger & Berman Equity Trust; Secretary, Income Managers Trust; Secretary, Equity Managers Trust; Secretary, Global Managers Trust; Secretary, Neuberger & Berman Equity Assets. Stacy Cooper-Shugrue Assistant Secretary, Neuberger & Berman Assistant Vice President, Advisers Management Trust (Delaware business N&B Management 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. Robert Cresci Assistant Portfolio Manager, BNP-N&B Global Assistant Vice President, Asset Management L.P. (joint venture of N&B Management Neuberger & Berman and Banque Nationale de Paris) (2); Assistant Portfolio Manager, Vontobel (Swiss bank) (3). - 8 - NAME BUSINESS AND OTHER CONNECTIONS Stanley Egener Chairman of the Board and Trustee, Neuberger & President and Director, Berman Advisers Management Trust (Delaware N&B Management; General business trust); Chairman of the Board and Partner, Neuberger & Berman 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, Vice President, N&B Neuberger & Berman Income Funds (6); Executive Management (5); General Vice President and Trustee, Neuberger & Berman Partner, Neuberger & Berman Income Trust (6); Executive Vice President and Trustee, Income Managers Trust (6). Theresa A. Havell President and Trustee, Neuberger & Berman Vice President and Income Funds; President and Trustee, Director, N&B Management; Neuberger & Berman Income Trust; President and General Partner, Neuberger & Trustee, Income Managers Trust Berman - 9 - NAME BUSINESS AND OTHER CONNECTIONS C. Carl Randolph Assistant Secretary, Neuberger & Berman General Partner, Neuberger & Advisers Management Trust (Delaware business Berman 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 Vice President, Manager, BNP-N&B Global Asset Management L.P. N&B Management (joint venture of Neuberger & Berman and Banque Nationale de Paris) (2); Portfolio Manager, Vontobel (Swiss bank) (7). Richard Russell Treasurer, Neuberger & Berman Advisers Vice President, Management Trust (Delaware business trust); N&B Management 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. - 10 - NAME BUSINESS AND OTHER CONNECTIONS Daniel J. Sullivan Vice President, Neuberger & Berman Advisers Senior Vice President, Management Trust (Delaware business trust); N&B Management 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 Assistant Vice President, Management Inc., 1285 Avenue of the Americas, N&B Management New York, New York 10019 (8). Michael J. Weiner Vice President, Neuberger & Berman Advisers Senior Vice President and Management Trust (Delaware business trust); Treasurer, N&B Management 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. Lawrence Zicklin President and Trustee, Neuberger & Berman Director, N&B Management; Advisers Management Trust (Delaware business General Partner, Neuberger & trust); President and Trustee, Advisers Berman Managers Trust; President and Trustee, Neuberger & Berman Advisers Management Trust (Massachusetts business trust) (1); President and Trustee, Neuberger & Berman Equity Funds; President and Trustee, Neuberger & Berman Equity Trust; President and Trustee, Equity Managers Trust; President, Global Managers Trust; President and Trustee, Neuberger & Berman Equity Assets
- 11 - 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. (a) Neuberger & Berman Management Incorporated, the principal underwriter distributing securities of the Registrant, is also the principal underwriter and distributor for each of the following investment companies: Neuberger & Berman Advisers Management Trust Neuberger & Berman Equity Funds Neuberger & Berman Equity Assets Neuberger & Berman Income Funds Neuberger & Berman Income Trust Neuberger & Berman Management Incorporated is also the investment manager to the master funds in which the above-named investment companies invest. (b) Set forth below is information concerning the directors and officers of the Registrant's principal underwriter. The principal business address of each of the persons listed is 605 Third Avenue, New York, New York 10158-0180, which is also the address of the Registrant's principal underwriter.
POSITIONS AND OFFICES POSITIONS AND OFFICES NAME WITH UNDERWRITER WITH REGISTRANT Claudia A. Brandon Vice President Secretary Patrick T. Byrne Assistant Vice President None - 12 - POSITIONS AND OFFICES POSITIONS AND OFFICES NAME WITH UNDERWRITER WITH REGISTRANT Richard A. Cantor Chairman of the Board and None Director Robert Conti Assistant Vice President None Stacy Cooper-Shugrue Assistant Vice President Assistant Secretary Robert Cresci Assistant Vice President None William Cunningham Vice President None Barbara DiGiorgio Assistant Vice President None Roberta D'Orio Assistant Vice President None Stanley Egener President and Director Chairman of the Board of Trustees (Chief Executive Officer) Robert I. Gendelman Assistant Vice President None Mark R. Goldstein Vice President None Farha-Joyce Haboucha Vice President None Theresa A. Havell Vice President and Director None Leslie Holliday-Soto Assistant Vice President None Michael M. Kassen Vice President None Irwin Lainoff Director None Michael Lamberti Vice President None Josephine Mahaney Vice President None Carmen G. Martinez Assistant Vice President None Lawrence Marx III Vice President None Ellen Metzger Vice President and Secretary None Paul Metzger Assistant Vice President None Janet W. Prindle Vice President None - 13 - POSITIONS AND OFFICES POSITIONS AND OFFICES NAME WITH UNDERWRITER WITH REGISTRANT Felix Rovelli Vice President None Richard Russell Vice President Treasurer (Principal Accounting Officer) Marvin C. Schwartz Director None Kent C. Simons Vice President None Frederick B. Soule Vice President None Daniel J. Sullivan Senior Vice President Vice President Susan Switzer Assistant Vice President None Andrea Trachtenberg Vice President of Marketing None Judith M. Vale Vice President None Clara Del Villar Vice President None Susan Walsh Assistant Vice President None Michael J. Weiner Senior Vice President and Vice President Treasurer (Principal Financial Officer) Celeste Wischerth Assistant Vice President None Thomas Wolfe Vice President None Lawrence Zicklin Director Trustee and President
(c) No commissions or other compensation were received directly or indirectly from the Registrant by any principal underwriter who was not an affiliated person of the Registrant. Item 30. Location of Accounts and Records. All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder with respect to the Registrant are maintained at the offices of State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except for the Registrant's Trust Instrument and By-laws, minutes of meetings of the - 14 - Registrant's Trustees and shareholders and the Registrant's policies and contracts, which are maintained at the offices of the Registrant, 605 Third Avenue, New York, New York 10158. All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder with respect to Equity Managers Trust are maintained at the offices of State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, except for the Equity Managers Trust's Declaration of Trust and By-laws, minutes of meetings of Equity Managers Trust's Trustees and shareholders and Equity Managers Trust's policies and contracts, which are maintained at the offices of the Equity Managers Trust, 605 Third Avenue, New York, New York 10158. 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. Item 32. Undertakings Registrant undertakes to furnish each person to whom a prospectus is delivered with a copy of Registrant's latest annual report to shareholders of Neuberger & Berman Focus, Neuberger & Berman Genesis, Neuberger & Berman Guardian, Neuberger & Berman Manhattan, and Neuberger & Berman Partners Trusts and/or a copy of Registrant's latest annual report to shareholders of Neuberger & Berman NYCDC Socially Responsive Trust, upon request and without charge. - 15 - SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, NEUBERGER & BERMAN EQUITY TRUST certifies that it meets all of the requirements for effectiveness of this Post-Effective Amendment No. 8 to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City and State of New York on the 15th day of December 1995. NEUBERGER & BERMAN EQUITY TRUST By: /s/ Lawrence Zicklin __________________________ Lawrence Zicklin President Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 8 has been signed below by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- /s/ Faith Colish Trustee December 15, 1995 ---------------------- Faith Colish /s/ Donald M. Cox Trustee December 15, 1995 ---------------------- Donald M. Cox /s/ Stanley Egener Chairman of the Board December 15, 1995 ---------------------- and Trustee (Chief Stanley Egener Executive Officer) /s/ Howard A. Mileaf Trustee December 15, 1995 ------------------------- Howard A. Mileaf /s/ Edward I. O'Brien Trustee December 15, 1995 -------------------------- Edward I. O'Brien - 16 - Signature Title Date --------- ----- ---- /s/ John T. Patterson, Jr. Trustee December 15, 1995 -------------------------- John T. Patterson, Jr. /s/ John P. Rosenthal Trustee December 15, 1995 -------------------------- John P. Rosenthal /s/ Cornelius T. Ryan Trustee December 15, 1995 -------------------------- Cornelius T. Ryan /s/ Gustave H. Shubert Trustee December 15, 1995 -------------------------- Gustave H. Shubert /s/ Alan R. Gruber Trustee December 15, 1995 -------------------------- Alan R. Gruber /s/ Lawrence Zicklin President and Trustee December 15, 1995 -------------------------- Lawrence Zicklin /s/ Michael J. Weiner Vice President December 15, 1995 -------------------------- (Principal Financial Michael J. Weiner Officer) /s/ Richard Russell Treasurer (Principal December 15, 1995 -------------------------- Accounting Officer) Richard Russell - 17 - SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, EQUITY MANAGERS TRUST certifies that it meets all of the requirements for effectiveness of the Post-Effective Amendment No. 8 to the Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City and State of New York on the 15th day of December, 1995. EQUITY MANAGERS TRUST By: /s/ Lawrence Zicklin _____________________________ Lawrence Zicklin President Pursuant to the requirements of the Securities Act of 1933, the Post-Effective Amendment No. 8 has been signed below by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- ----- /s/ Faith Colish Trustee December 15, 1995 ---------------------- Faith Colish /s/ Donald M. Cox Trustee December 15, 1995 ---------------------- Donald M. Cox /s/ Stanley Egener Chairman of the Board and December 15, 1995 ---------------------- Trustee (Chief Executive Stanley Egener Officer) /s/ Howard A. Mileaf Trustee December 15, 1995 ------------------------- Howard A. Mileaf /s/ Edward I. O'Brien Trustee December 15, 1995 -------------------------- Edward I. O'Brien - 18 - Signature Title Date --------- ----- ----- /s/ John T. Patterson, Jr. Trustee December 15, 1995 -------------------------- John T. Patterson, Jr. /s/ John P. Rosenthal Trustee December 15, 1995 -------------------------- John P. Rosenthal /s/ Cornelius T. Ryan Trustee December 15, 1995 -------------------------- Cornelius T. Ryan /s/ Gustave H. Shubert Trustee December 15, 1995 -------------------------- Gustave H. Shubert /s/ Alan R. Gruber Trustee December 15, 1995 -------------------------- Alan R. Gruber /s/ Lawrence Zicklin President and Trustee December 15, 1995 -------------------------- Lawrence Zicklin /s/ Michael J. Weiner Vice President (Principal December 15, 1995 -------------------------- Financial Officer) Michael J. Weiner /s/ Richard Russell Treasurer (Principal December 15, 1995 -------------------------- Accounting Officer) Richard Russell
- 19 - NEUBERGER & BERMAN EQUITY TRUST POST-EFFECTIVE AMENDMENT NO. 8 ON FORM N-1A INDEX TO EXHIBITS
Sequentially Exhibit Numbered Number Description Page ------- ----------- ----------- (1) (a) Certificate of Trust. Filed herewith. _____ (b) Trust Instrument of Neuberger & Berman Equity _____ Trust. Filed herewith (c) Schedule A - Current Series of Neuberger & _____ Berman Equity Trust. Filed herewith. (2) By-laws of Neuberger & Berman Equity Trust. Filed _____ herewith. (3) Voting Trust Agreement. None. N.A. (4) Specimen Share Certificate. Incorporated by N.A. Reference to Post-Effective Amendment No. 4 to Registrant's Registration Statement, File Nos. 33- 64368 and 811-7784. (5) (a) (i) Management Agreement Between Equity N.A. Managers Trust and Neuberger & Berman Management Incorporated. Incorporated by Reference to Post-Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, Edgar Accession No. 0000898432-000314. (ii) Schedule A - Series of Neuberger & N.A. Berman Equity Managers Trust Currently Subject to the Management Agreement. Incorporated by Reference to Post- Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, Edgar Accession No. 0000898432-000314. Sequentially Exhibit Numbered Number Description Page ------- ----------- ----------- (iii) Schedule B - Schedule of Compensation N.A. Under the Management Agreement. Incorporated by Reference to Post- Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, Edgar Accession No. 0000898432-000314. (b) (i) Sub-Advisory Agreement Between N.A. Neuberger & Berman Management Incorporated and Neuberger & Berman, L.P. with Respect to Equity Managers Trust. Incorporated by Reference to Post-Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, Edgar Accession No. 0000898432-000314. (ii) Schedule A - Series of Neuberger & N.A. Berman Equity Managers Trust Currently Subject to the Sub-Advisory Agreement. Incorporated by Reference to Post- Effective Amendment No. 70 to Registration Statement of Neuberger & Berman Equity Funds, File Nos. 2-11357 and 811-582, Edgar Accession No. 0000898432-000314. (6) (a) Distribution Agreement Between Neuberger & _____ Berman Equity Trust and Neuberger & Berman Management Incorporated. Filed herewith. (b) Schedule A - Series of Neuberger & Berman _____ Equity Trust Currently Subject to the Distribution Agreement. Filed herewith. (7) Bonus, Profit Sharing or Pension Plans. None. N.A. (8) (a) Custodian Contract Between Neuberger & Berman _____ Equity Trust and State Street Bank and Trust Company. Filed herewith. _____ Sequentially Exhibit Numbered Number Description Page ------- ----------- ----------- (b) Schedule A - Approved Foreign Banking N.A. Institutions and Securities Depositories Under the Custodian Contract. To be Filed by Amendment. (9) (a) (i) Transfer Agency Agreement Between _____ Neuberger & Berman Equity Trust and State Street Bank and Trust Company. Filed herewith. (ii) Agreement Between Neuberger & Berman _____ Equity Trust and State Street Bank and Trust Company Adding Neuberger & Berman NYCDC Socially Responsive Trust as a Portfolio Governed by the Transfer Agency Agreement. Filed herewith. (iii) First Amendment to Transfer Agency and _____ Service Agreement between Equity Trust and State Street Bank and Trust Company. Filed herewith. (b) (i) Administration Agreement Between _____ Neuberger & Berman Equity Trust and Neuberger & Berman Management Incorporated. Filed herewith. (ii) Schedule A - Series of Neuberger & _____ Berman Equity Trust Currently Subject to the Administration Agreement. Filed herewith. (iii) Schedule B - Schedule of Compensation _____ Under the Administration Agreement. Filed herewith. (10) Opinion and Consent of Kirkpatrick & Lockhart N.A. LLP on Securities Matters. Incorporated by Reference to Registrant's Rule 24f-2 Notice for the Fiscal Year Ended August 31, 1995, File Nos. 33-64368 and 811-7784, Edgar Accession No. 0000898432-95-000340. (11) (a) Consent of Ernst & Young LLP, Independent _____ Auditors. Filed herewith. Sequentially Exhibit Numbered Number Description Page ------- ----------- ----------- (b) Consent of Coopers & Lybrand L.L.P., _____ Independent Accountants. Filed herewith. (12) Financial Statements Omitted from Prospectus. N.A. None. (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 N.A. Quotations. Incorporated by Reference to Post- Effective Amendment No. 4 to Registrant's Registration Statement, File Nos. 33-64368 and 811-7784. (17) Financial Data Schedule. Filed herewith. _____ (18) Plan Pursuant to Rule 18f-3. None N.A.
EX-99.B1(A) 2 Exhibit 1(a) CERTIFICATE OF TRUST OF NEUBERGER & BERMAN EQUITY TRUST This Certificate of Trust ("Certificate") is filed in accordance with the provisions of the Delaware Business Trust Act (12 Del. Code Ann. Tit. 12 Section 3801 et seq.) and sets forth the following: 1. The name of the trust is: Neuberger & Berman Equity Trust ("Trust"). 2. The business address of the registered office of the Trust and of the registered agent of the Trust is: The Corporation Trust Company Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 3. This Certificate is effective upon filing. 4. The Trust is a Delaware business trust to be registered under the Investment Company Act of 1940. Notice is hereby given that the Trust shall consist of one or more series. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series of the Trust shall be enforceable against the assets of such series only, and not against the assets of the Trust generally or any other series. IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have executed this Certificate on this 11th day of May, 1993. /s/ Claudia A. Brandon ------------------------------ Claudia A. Brandon, as Trustee and not individually /s/ Ellen Metzger ------------------------------ Ellen Metzger, as Trustee and not individually /s/ Michael J. Weiner ------------------------------ Michael J. Weiner, as Trustee and not individually Address: 605 Third Avenue New York, NY 10158 STATE OF NEW YORK CITY OF NEW YORK Before me this 11th day of May, 1993, personally appeared the above-named Claudia A. Brandon, Ellen Metzger, and Michael J. Weiner, known to me to be the persons who executed the foregoing instrument and who acknowledged that they executed the same. /s/ Loraine Olavarria ------------------------------ Loraine Olavarria Notary Public My commission expires April 15, 1995 - 2 - EX-99.B1(B) 3 TABLE OF CONTENTS PAGE ---- ARTICLE I--Definitions . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II--The Trustees . . . . . . . . . . . . . . . . . . . . . . 2 Section 1. Management of the Trust . . . . . . . . . . . . 2 Section 2. Initial Trustees; Election and Number of Trustees . . . . . . . . . . . . . . . . . . . 2 Section 3. Term of Office of Trustees . . . . . . . . . . . 3 Section 4. Vacancies; Appointment of Trustees . . . . . . . 3 Section 5. Temporary Vacancy or Absence . . . . . . . . . . 3 Section 6. Chairman . . . . . . . . . . . . . . . . . . . . 3 Section 7. Action by the Trustees . . . . . . . . . . . . . 4 Section 8. Ownership of Trust Property . . . . . . . . . . 4 Section 9. Effect of Trustees Not Serving . . . . . . . . . 4 Section 10. Trustees, etc. as Shareholders . . . . . . . . . 4 ARTICLE III--Powers of the Trustees . . . . . . . . . . . . . . . . . 5 Section 1. Powers . . . . . . . . . . . . . . . . . . . . . 5 Section 2. Certain Transactions . . . . . . . . . . . . . . 7 ARTICLE IV--Series; Classes; Shares . . . . . . . . . . . . . . . . . 8 Section 1. Establishment of Series or Class . . . . . . . . 8 Section 2. Shares . . . . . . . . . . . . . . . . . . . . . 8 Section 3. Investment in the Trust . . . . . . . . . . . . 9 Section 4. Assets and Liabilities of Series . . . . . . . . 9 Section 5. Ownership and Transfer of Shares . . . . . . . . 10 Section 6. Status of Shares; Limitation of Shareholder Liability . . . . . . . . . . . . 10 ARTICLE V--Distributions and Redemptions . . . . . . . . . . . . . . 11 Section 1. Distributions . . . . . . . . . . . . . . . . . 11 Section 2. Redemptions . . . . . . . . . . . . . . . . . . 11 Section 3. Determination of Net Asset Value . . . . . . . . 12 Section 4. Suspension of Right of Redemption . . . . . . . 12 Section 5. Redemptions Necessary for Qualification as Regulated Investment Company . . . . . . . . . 12 ARTICLE VI--Shareholders' Voting Powers and Meetings . . . . . . . . 13 Section 1. Voting Powers . . . . . . . . . . . . . . . . . 13 Section 2. Meetings of Shareholders . . . . . . . . . . . . 13 Section 3. Quorum; Required Vote . . . . . . . . . . . . . 14 ARTICLE VII--Contracts With Service Providers . . . . . . . . . . . . 14 Section 1. Investment Adviser . . . . . . . . . . . . . . . 14 Section 2. Principal Underwriter . . . . . . . . . . . . . 14 Section 3. Transfer Agency, Shareholder Services, and Administration Agreements . . . . . . . . . . 15 Section 4. Custodian . . . . . . . . . . . . . . . . . . . 15 Section 5. Parties to Contracts with Service Providers . . . . . . . . . . . . . . . . . . 15 ARTICLE VIII--Expenses of the Trust and Series . . . . . . . . . . . 16 ARTICLE IX--Limitation of Liability and Indemnification . . . . . . . 16 Section 1. Limitation of Liability . . . . . . . . . . . . 16 Section 2. Indemnification . . . . . . . . . . . . . . . . 17 Section 3. Indemnification of Shareholders . . . . . . . . 18 ARTICLE X--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 19 Section 1. Trust Not a Partnership . . . . . . . . . . . . 19 Section 2. Trustee Action; Expert Advice; No Bond or Surety . . . . . . . . . . . . . . . . . . . . 19 Section 3. Record Dates . . . . . . . . . . . . . . . . . . 19 Section 4. Termination of the Trust . . . . . . . . . . . . 19 Section 5. Reorganization . . . . . . . . . . . . . . . . . 20 Section 6. Trust Instrument . . . . . . . . . . . . . . . . 21 Section 7. Applicable Law . . . . . . . . . . . . . . . . . 21 Section 8. Amendments . . . . . . . . . . . . . . . . . . . 22 Section 9. Fiscal Year . . . . . . . . . . . . . . . . . . 22 Section 10. Severability . . . . . . . . . . . . . . 22 NEUBERGER & BERMAN EQUITY TRUST ------------------------------- TRUST INSTRUMENT ---------------- This TRUST INSTRUMENT is made as of May 6, 1993, by the Trustees, to establish a business trust for the investment and reinvestment of funds contributed to the Trust by investors. The Trustees declare that all money and property contributed to the Trust shall be held and managed in trust pursuant to this Trust Instrument. The name of the Trust created by this Trust Instrument is Neuberger & Berman Equity Trust. ARTICLE I --------- DEFINITIONS ----------- Unless otherwise provided or required by the context: (a) "By-laws" means the By-laws of the Trust adopted by the Trustees, as amended from time to time; (b) "Class" means the class of Shares of a Series established pursuant to Article IV; (c) "Commission," "Interested Person," and "Principal Underwriter" have the meanings provided in the 1940 Act; (d) "Covered Person" means a person so defined in Article IX, Section 2; (e) "Delaware Act" means Chapter 38 of Title 12 of the Delaware Code entitled "Treatment of Delaware Business Trusts," as amended from time to time; (f) "Majority Shareholder Vote" means "the vote of a majority of the outstanding voting securities" as defined in the 1940 Act; (g) "Net Asset Value" means the net asset value of each Series of the Trust, determined as provided in Article V, Section 3; (h) "Outstanding Shares" means Shares shown in the books of the Trust or its transfer agent as then issued and outstanding, but does not include Shares which have been repurchased or redeemed by the Trust and which are held in the treasury of the Trust; (i) "Series" means a series of Shares established pursuant to Article IV; (j) "Shareholder" means a record owner of Outstanding Shares; (k) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest of each Series or Class is divided from time to time (including whole Shares and fractions of Shares); (l) "Trust" means Neuberger & Berman Equity Trust established hereby, and reference to the Trust, when applicable to one or more Series, refers to that Series; (m) "Trustees" means the persons who have signed this Trust Instrument, so long as they shall continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly qualified and serving as Trustees in accordance with Article II, in all cases in their capacities as Trustees hereunder; (n) "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the Trust or any Series or the Trustees on behalf of the Trust or any Series; (o) The "1940 Act" means the Investment Company Act of 1940, as amended from time to time. ARTICLE II ---------- THE TRUSTEES ------------ Section 1. Management of the Trust. The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees may execute all instruments and take all action they deem necessary or desirable to promote the interests of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Section 2. Initial Trustees; Election and Number of Trustees. The initial Trustees shall be the persons initially signing this Trust Instrument. The number of Trustees (other than the initial Trustees) shall be fixed from time to time by a majority of the Trustees; provided, that there shall be at least two (2) Trustees. The Shareholders shall elect the Trustees (other than the initial Trustees) on such dates as the Trustees may fix from time to time. Section 3. Term of Office of Trustees. Each Trustee shall hold office for life or until his successor is elected or the Trust terminates; except that (a) any Trustee may resign by delivering to the other Trustees or to any Trust officer a written resignation effective upon such delivery or a later date specified therein; (b) any Trustee may be removed with or without cause at any time by a written instrument signed by at least two-thirds of the other Trustees, specifying the effective date of - 2 - removal; (c) any Trustee who requests to be retired, or who has become physically or mentally incapacitated or is otherwise unable to serve, may be retired by a written instrument signed by a majority of the other Trustees, specifying the effective date of retirement; and (d) any Trustee may be removed at any meeting of the Shareholders by a vote of at least two-thirds of the Outstanding Shares. Section 4. Vacancies; Appointment of Trustees. Whenever a vacancy shall exist in the Board of Trustees, regardless of the reason for such vacancy, the remaining Trustees shall appoint any person as they determine in their sole discretion to fill that vacancy, consistent with the limitations under the 1940 Act. Such appointment shall be made by a written instrument signed by a majority of the Trustees or by a resolution of the Trustees, duly adopted and recorded in the records of the Trust, specifying the effective date of the appointment. 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 at or after the expected vacancy occurs. As soon as any such 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 shall be deemed a Trustee hereunder. The power of appointment is subject to Section 16(a) of the 1940 Act. Section 5. Temporary Vacancy or Absence. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled, or while any Trustee is absent from his domicile (unless that Trustee has made arrangements to be informed about, and to participate in, the affairs of the Trust during such absence), or is physically or mentally incapacitated, the remaining Trustees shall have all the powers hereunder and their certificate as to such vacancy, absence, or incapacity shall be conclusive. Any Trustee may, by power of attorney, delegate his powers as Trustee for a period not exceeding six (6) months at any one time to any other Trustee or Trustees. Section 6. Chairman. The Trustees shall appoint one of their number to be Chairman of the Board of Trustees. The Chairman shall preside at all meetings of the Trustees, shall be responsible for the execution of policies established by the Trustees and the administration of the Trust, and may be the chief executive, financial and/or accounting officer of the Trust. Section 7. Action by the Trustees. The Trustees shall act by majority vote at a meeting duly called (including at a telephonic meeting, unless the 1940 Act requires that a particular action be taken only at a meeting of Trustees in person) at which a quorum is present or by written consent of a majority of Trustees (or such greater number as may be required by applicable law) without a meeting. A majority of the Trustees shall constitute a quorum at any meeting. Meetings of the Trustees may be called orally or in writing by the Chairman of the Board of Trustees or by any two other Trustees. Notice of the time, date and place of all - 3 - Trustees meetings shall be given to each Trustee by telephone, facsimile or other electronic mechanism sent to his home or business address at least twenty-four hours in advance of the meeting or by written notice mailed to his home or business address at least seventy-two hours in advance of the meeting. Notice need not be given to any Trustee who attends the meeting without objecting to the lack of notice or who signs a waiver of notice either before or after the meeting. Subject to the requirements of the 1940 Act, the Trustees by majority vote may delegate to any Trustee or Trustees authority to approve particular matters or take particular actions on behalf of the Trust. Any written consent or waiver may be provided and delivered to the Trust by facsimile or other similar electronic mechanism. Section 8. Ownership of Trust Property. The Trust Property of the Trust and of each Series shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. All of the Trust Property and legal title thereto shall at all times be considered as vested in the Trustees on behalf of the Trust, except that the Trustees may cause legal title to any Trust Property to be held by or in the name of the Trust, or in the name of any person as nominee. No Shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or of any Series or any right of partition or possession thereof, but each Shareholder shall have, as provided in Article IV, a proportionate undivided beneficial interest in the Trust or Series represented by Shares. Section 9. Effect of Trustees Not Serving. The death, resignation, retirement, removal, incapacity, or inability or refusal to serve of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Trust Instrument. Section 10. Trustees, etc. as Shareholders. Subject to any restrictions in the By-laws, any Trustee, officer, agent or independent contractor of the Trust may acquire, own and dispose of Shares to the same extent as any other Shareholder; the Trustees may issue and sell Shares to and buy Shares from any such person or any firm or company in which such person is interested, subject only to any general limitations herein. ARTICLE III ----------- POWERS OF THE TRUSTEES ---------------------- Section 1. Powers. The Trustees in all instances shall act as principals, free of the control of the Shareholders. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. The Trustees shall not in any way be bound or limited by current or future laws or customs - 4 - applicable to trust investments, but shall have full power and authority to make any investments which they, in their sole discretion, deem proper to accomplish the purposes of the Trust. The Trustees may exercise all of their powers without recourse to any court or other authority. Subject to any applicable limitation herein or in the By-laws or resolutions of the Trust, the Trustees shall have power and authority, without limitation: (a) To invest and reinvest cash and other property, and to hold cash or other property uninvested, without in any event being bound or limited by any current or future law or custom concerning investments by trustees, and to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the Trust Property; to invest in obligations and securities of any kind, and without regard to whether they may mature before the possible termination of the Trust; and without limitation to invest all or any part of its cash and other property in securities issued by a registered investment company or series thereof, subject to the provisions of the 1940 Act; (b) To operate as and carry on the business of a registered investment company, and exercise all the powers necessary and proper to conduct such a business; (c) To adopt By-laws not inconsistent with this Trust Instrument providing for the conduct of the business of the Trust and to amend and repeal them to the extent such right is not reserved to the Shareholders; (d) To elect and remove such officers and appoint and terminate such agents as they deem appropriate; (e) To employ as custodian of any assets of the Trust, subject to any provisions herein or in the By-laws, one or more banks, trust companies or companies that are members of a national securities exchange, or other entities permitted by the Commission to serve as such; (f) To retain one or more transfer agents and Shareholder servicing agents, or both; (g) To provide for the distribution of Shares either through a Principal Underwriter as provided herein or by the Trust itself, or both, or pursuant to a distribution plan of any kind; (h) To set record dates in the manner provided for herein or in the By-laws; (i) To delegate such authority as they consider desirable to any officers of the Trust and to any agent, independent contractor, manager, investment adviser, custodian or underwriter; (j) To sell or exchange any or all of the assets of the Trust, subject to Article X, Section 4; - 5 - (k) To vote or give assent, or exercise any rights of ownership, with respect to other securities or property; and to execute and deliver powers of attorney delegating such power to other persons; (l) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities; (m) To hold any security or other property (i) in a form not indicating any trust, whether in bearer, book entry, unregistered or other negotiable form, or (ii) either in the Trust's or Trustees' own name or in the name of a custodian or a nominee or nominees, subject to safeguards according to the usual practice of business trusts or investment companies; (n) To establish separate and distinct Series with separately defined investment objectives and policies and distinct investment purposes, and with separate Shares representing beneficial interests in such Series, and to establish separate Classes, all in accordance with the provisions of Article IV; (o) To the full extent permitted by Section 3804 of the Delaware Act, to allocate assets, liabilities and expenses of the Trust to a particular Series and liabilities and expenses to a particular Class or to apportion the same between or among two or more Series or Classes, provided that any liabilities or expenses incurred by a particular Series or Class shall be payable solely out of the assets belonging to that Series or Class as provided for in Article IV, Section 4; (p) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or concern whose securities are held by the Trust; to consent to any contract, lease, mortgage, purchase, or sale of property by such corporation or concern; and to pay calls or subscriptions with respect to any security held in the Trust; (q) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy including, but not limited to, claims for taxes; (r) To make distributions of income and of capital gains to Shareholders in the manner hereinafter provided for; (s) To borrow money; (t) To establish, from time to time, a minimum total investment for Shareholders, and to require the redemption of the Shares of any Shareholders whose investment is less than such minimum upon giving notice to such Shareholder; (u) To establish committees for such purposes, with such membership, and with such responsibilities as the Trustees may consider proper, including a committee consisting of fewer than all of the Trustees then in office, which may act for and bind the Trustees and the Trust with respect - 6 - to the institution, prosecution, dismissal, settlement, review or investigation of any legal action, suit or proceeding, pending or threatened; (v) To issue, sell, repurchase, redeem, cancel, retire, acquire, hold, resell, reissue, dispose of and otherwise deal in Shares; to establish terms and conditions regarding the issuance, sale, repurchase, redemption, cancellation, retirement, acquisition, holding, resale, reissuance, disposition of or dealing in Shares; and, subject to Articles IV and V, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the Trust or of the particular Series with respect to which such Shares are issued; and (w) To carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary or desirable to accomplish any purpose or to further any of the foregoing powers, and to take every other action incidental to the foregoing business or purposes, objects or powers. The clauses above shall be construed as objects and powers, and the enumeration of specific powers shall not limit in any way the general powers of the Trustees. Any action by one or more of the Trustees in their capacity as such hereunder shall be deemed an action on behalf of the Trust or the applicable Series, and not an action in an individual capacity. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the Trustees, or to see to the application of any payments made or property transferred to the Trustees or upon their order. In construing this Trust Instrument, the presumption shall be in favor of a grant of power to the Trustees. Section 2. Certain Transactions. Except as prohibited by applicable law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any investment adviser, administrator, distributor or transfer agent for the Trust or with any Interested Person of such person. The Trust may employ any such person or entity in which such person is an Interested Person, as broker, legal counsel, registrar, investment adviser, administrator, distributor, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms. ARTICLE IV ---------- SERIES; CLASSES; SHARES ----------------------- Section 1. Establishment of Series or Class. The Trust shall consist of one or more Series. The Trustees hereby establish the Series listed in Schedule A attached hereto and made a part hereof. Each - 7 - additional Series shall be established by the adoption of a resolution of the Trustees. The Trustees may designate the relative rights and preferences of the Shares of each Series. The Trustees may divide the Shares of any Series into Classes. In such case each Class of a Series shall represent interests in the assets of that Series and have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that expenses allocated to a Class may be borne solely by such Class as determined by the Trustees and a Class may have exclusive voting rights with respect to matters affecting only that Class. The Trust shall maintain separate and distinct records for each Series and hold and account for the assets thereof separately from the other assets of the Trust or of any other Series. A Series may issue any number of Shares and need not issue Shares. Each Share of a Series shall represent an equal beneficial interest in the net assets of such Series. Each holder of Shares of a Series shall be entitled to receive his pro rata share of all distributions made with respect to such Series. Upon redemption of his Shares, such Shareholder shall be paid solely out of the funds and property of such Series. The Trustees may change the name of any Series or Class. Section 2. Shares. The beneficial interest in the Trust shall be divided into Shares of one or more separate and distinct Series or Classes established by the Trustees. The number of Shares of each Series and Class is unlimited and each Share shall have a par value of $0.001 per Share. All Shares issued hereunder shall be fully paid and nonassessable. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust. The Trustees shall have full power and authority, in their sole discretion and without obtaining Shareholder approval: to issue original or additional Shares at such times and on such terms and conditions as they deem appropriate; to issue fractional Shares and Shares held in the treasury; to establish and to change in any manner Shares of any Series or Classes with such preferences, terms of conversion, voting powers, rights and privileges as the Trustees may determine (but the Trustees may not change Outstanding Shares in a manner materially adverse to the Shareholders of such Shares); to divide or combine the Shares of any Series or Classes into a greater or lesser number; to classify or reclassify any unissued Shares of any Series or Classes into one or more Series or Classes of Shares; to abolish any one or more Series or Classes of Shares; to issue Shares to acquire other assets (including assets subject to, and in connection with, the assumption of liabilities) and businesses; and to take such other action with respect to the Shares as the Trustees may deem desirable. Shares held in the treasury shall not confer any voting rights on the Trustees and shall not be entitled to any dividends or other distributions declared with respect to the Shares. Section 3. Investment in the Trust. The Trustees shall accept investments in any Series from such persons and on such terms as they may from time to time authorize. At the Trustees' discretion, such investments, subject to applicable law, may be in the form of cash or securities in which that Series is authorized to invest, valued as provided in Article V, Section 3. Investments in a Series shall be - 8 - credited to each Shareholder's account in the form of full Shares at the Net Asset Value per Share next determined after the investment is received or accepted as may be determined by the Trustees; provided, however, that the Trustees may, in their sole discretion, (a) impose a sales charge upon investments in any Series or Class, (b) issue fractional Shares, or (c) determine the Net Asset Value per Share of the initial capital contribution. The Trustees shall have the right to refuse to accept investments in any Series at any time without any cause or reason therefor whatsoever. Section 4. Assets and Liabilities of Series. All consideration received by the Trust for the issue or sale of Shares of 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 and accounted for separately from the other assets of the Trust and every other Series and are referred to as "assets belonging to" that Series. The assets belonging to a Series shall belong only to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. Any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Series shall be allocated by the Trustees between and among one or more Series as the Trustees deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes, and such assets, earnings, income, profits or funds, or payments and proceeds thereof shall be referred to as assets belonging to that Series. The assets belonging to a Series shall be so recorded upon the books of the Trust, and shall be held by the Trustees in trust for the benefit of the Shareholders of that Series. The assets belonging to a Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series, except that liabilities and expenses allocated solely to a particular Class shall be borne by that Class. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series or Class shall be allocated and charged by the Trustees between or among any one or more of the Series or Classes in such manner as the Trustees deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series or Classes for all purposes. Without limiting the foregoing, but subject to the right of the Trustees to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets of such Series only, and not against the assets of the Trust generally or of any other Series. Notice of this contractual limitation on liabilities among Series may, in the Trustees' discretion, be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant - 9 - to the Delaware Act, and upon the giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the Delaware Act relating to limitations on liabilities among Series (and the statutory effect under Section 3804 of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each Series. Any person extending credit to, contracting with or having any claim against any Series may look only to the assets of that Series to satisfy or enforce any debt, with respect to that Series. No Shareholder or former Shareholder of any Series shall have a claim on or any right to any assets allocated or belonging to any other Series. Section 5. Ownership and Transfer of Shares. The Trust shall maintain a register containing the names and addresses of the Shareholders of each Series and Class thereof, the number of Shares of each Series and Class held by such Shareholders, and a record of all Share transfers. The register shall be conclusive as to the identity of Shareholders of record and the number of Shares held by them from time to time. The Trustees may authorize the issuance of certificates representing Shares and adopt rules governing their use. The Trustees may make rules governing the transfer of Shares, whether or not represented by certificates. Section 6. Status of Shares; Limitation of Shareholder Liability. Shares shall be deemed to be personal property giving Shareholders only the rights provided in this Trust Instrument. Every Shareholder, by virtue of having acquired a Share, shall be held expressly to have assented to and agreed to be bound by the terms of this Trust Instrument and to have become a party hereto. No Shareholder shall be personally liable for the debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or any Series. Neither the Trust nor the Trustees shall have any power to bind any Shareholder personally or to demand payment from any Shareholder for anything, other than as agreed by the Shareholder. Shareholders shall have the same limitation of personal liability as is extended to shareholders of a private corporation for profit incorporated in the State of Delaware. Every written obligation of the Trust or any Series shall contain a statement to the effect that such obligation may only be enforced against the assets of the Trust or such Series; however, the omission of such statement shall not operate to bind or create personal liability for any Shareholder or Trustee. ARTICLE V --------- DISTRIBUTIONS AND REDEMPTIONS ----------------------------- Section 1. Distributions. The Trustees may declare and pay dividends and other distributions, including dividends on Shares of a particular Series and other distributions from the assets belonging to that Series. The amount and payment of dividends or distributions and their form, whether they are in cash, Shares or other Trust Property, shall be determined by the Trustees. Dividends and other distributions - 10 - may be paid pursuant to a standing resolution adopted once or more often as the Trustees determine. All dividends and other distributions on Shares of a particular Series shall be distributed pro rata to the Shareholders of that Series in proportion to the number of Shares of that Series they held on the record date established for such payment, except that such dividends and distributions shall appropriately reflect expenses allocated to a particular Class of such Series. The Trustees may adopt and offer to Shareholders such dividend reinvestment plans, cash dividend payout plans or similar plans as the Trustees deem appropriate. Section 2. Redemptions. Each Shareholder of a Series shall have the right at such times as may be permitted by the Trustees to require the Series to redeem all or any part of his Shares at a redemption price per Share equal to the Net Asset Value per Share at such time as the Trustees shall have prescribed by resolution. In the absence of such resolution, the redemption price per Share shall be the Net Asset Value next determined after receipt by the Series of a request for redemption in proper form less such charges as are determined by the Trustees and described in the Trust's Registration Statement for that Series under the Securities Act of 1933. The Trustees may specify conditions, prices, and places of redemption, and may specify binding requirements for the proper form or forms of requests for redemption. Payment of the redemption price may be wholly or partly in securities or other assets at the value of such securities or assets used in such determination of Net Asset Value, or may be in cash. Upon redemption, Shares may be reissued from time to time. The Trustees may require Shareholders to redeem Shares for any reason under terms set by the Trustees, including the failure of a Shareholder to supply a personal identification number if required to do so, or to have the minimum investment required, or to pay when due for the purchase of Shares issued to him. To the extent permitted by law, the Trustees may retain the proceeds of any redemption of Shares required by them for payment of amounts due and owing by a Shareholder to the Trust or any Series or Class. Notwithstanding the foregoing, the Trustees may postpone payment of the redemption price and may suspend the right of the Shareholders to require any Series or Class to redeem Shares during any period of time when and to the extent permissible under the 1940 Act. Section 3. Determination of Net Asset Value. The Trustees shall cause the Net Asset Value of Shares of each Series or Class to be determined from time to time in a manner consistent with applicable laws and regulations. The Trustees may delegate the power and duty to determine Net Asset Value per Share to one or more Trustees or officers of the Trust or to a custodian, depository or other agent appointed for such purpose. The Net Asset Value of Shares shall be determined separately for each Series or Class at such times as may be prescribed by the Trustees or, in the absence of action by the Trustees, as of the close of trading on the New York Stock Exchange on each day for all or part of which such Exchange is open for unrestricted trading. Section 4. Suspension of Right of Redemption. If, as referred to in Section 2 of this Article, the Trustees postpone payment of the redemption price and suspend the right of Shareholders to redeem their Shares, such - 11 - suspension shall take effect at the time the Trustees shall specify, but not later than the close of business on the business day next following the declaration of suspension. Thereafter Shareholders shall have no right of redemption or payment until the Trustees declare the end of the suspension. If the right of redemption is suspended, a Shareholder may either withdraw his request for redemption or receive payment based on the Net Asset Value per Share next determined after the suspension terminates. Section 5. Redemptions Necessary for Qualification as Regulated Investment Company. If the Trustees shall determine that direct or indirect ownership of Shares of any Series has or may become concentrated in any person to an extent which would disqualify any Series as a regulated investment company under the Internal Revenue Code, then the Trustees shall have the power (but not the obligation) by lot or other means they deem equitable to (a) call for redemption by any such person of a number, or principal amount, of Shares sufficient to maintain or bring the direct or indirect ownership of Shares into conformity with the requirements for such qualification and (b) refuse to transfer or issue Shares to any person whose acquisition of Shares in question would, in the Trustees' judgment, result in such disqualification. Any such redemption shall be effected at the redemption price and in the manner provided in this Article. Shareholders shall upon demand disclose to the Trustees in writing such information concerning direct and indirect ownership of Shares as the Trustees deem necessary to comply with the requirements of any taxing authority. ARTICLE VI ---------- SHAREHOLDERS' VOTING POWERS AND MEETINGS ---------------------------------------- Section 1. Voting Powers. The Shareholders shall have power to vote only with respect to (a) the election of Trustees as provided in Section 2 of this Article; (b) the removal of Trustees as provided in Article II, Section 3(d); (c) any investment advisory or management contract as provided in Article VII, Section 1; (d) any termination of the Trust as provided in Article X, Section 4; (e) the amendment of this Trust Instrument to the extent and as provided in Article X, Section 8; and (f) such additional matters relating to the Trust as may be required or authorized by law, this Trust Instrument, or the By-laws or any registration of the Trust with the Commission or any State, or as the Trustees may consider desirable. On any matter submitted to a vote of the Shareholders, all Shares shall be voted by individual Series or Class, except (a) when required by the 1940 Act, Shares shall be voted in the aggregate and not by individual Series or Class, and (b) when the Trustees have determined that the matter affects the interests of more than one Series or Class, then the Shareholders of all such Series or Classes shall be entitled to vote thereon. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote, and each fractional Share shall be - 12 - entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy or in any manner provided for in the By-laws. The By-laws may provide that proxies may be given by any electronic or telecommunications device or in any other manner, but if a proposal by anyone other than the officers or Trustees is submitted to a vote of the Shareholders of any Series or Class, or if there is a proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees, Shares may be voted only in person or by written proxy. Until Shares of a Series are issued, as to that Series the Trustees may exercise all rights of Shareholders and may take any action required or permitted to be taken by Shareholders by law, this Trust Instrument or the By-laws. Section 2. Meetings of Shareholders. The first Shareholders' meeting shall be held to elect Trustees at such time and place as the Trustees designate. Special meetings of the Shareholders of any Series or Class may be called by the Trustees and shall be called by the Trustees upon the written request of Shareholders owning at least ten percent of the Outstanding Shares of such Series or Class entitled to vote. Shareholders shall be entitled to at least fifteen days' notice of any meeting, given as determined by the Trustees. Section 3. Quorum; Required Vote. One-third of the Outstanding Shares of each Series or Class, or one-third of the Outstanding Shares of the Trust, entitled to vote in person or by proxy shall be a quorum for the transaction of business at a Shareholders' meeting with respect to such Series or Class, or with respect to the entire Trust, respectively. Any lesser number shall be sufficient for adjournments. Any adjourned session of a Shareholders' meeting may be held within a reasonable time without further notice. Except when a larger vote is required by law, this Trust Instrument or the By-laws, a majority of the Outstanding Shares voted in person or by proxy shall decide any matters to be voted upon with respect to the entire Trust and a plurality of such Outstanding Shares shall elect a Trustee; provided, that if this Trust Instrument or applicable law permits or requires that Shares be voted on any matter by individual Series or Classes, then a majority of the Outstanding Shares of that Series or Class (or, if required by law, a Majority Shareholder Vote of that Series or Class) voted in person or by proxy voted on the matter shall decide that matter insofar as that Series or Class is concerned. Shareholders may act as to the Trust or any Series or Class by the written consent of a majority (or such greater amount as may be required by applicable law) of the Outstanding Shares of the Trust or of such Series or Class, as the case may be. ARTICLE VII ----------- CONTRACTS WITH SERVICE PROVIDERS -------------------------------- Section 1. Investment Adviser. Subject to a Majority Shareholder Vote, the Trustees may enter into one or more investment advisory - 13 - contracts on behalf of the Trust or any Series, providing for investment advisory services, statistical and research facilities and services, and other facilities and services to be furnished to the Trust or Series on terms and conditions acceptable to the Trustees. Any such contract may provide for the investment adviser to effect purchases, sales or exchanges of portfolio securities or other Trust Property on behalf of the Trustees or may authorize any officer or agent of the Trust to effect such purchases, sales or exchanges pursuant to recommendations of the investment adviser. The Trustees may authorize the investment adviser to employ one or more sub-advisers. Section 2. Principal Underwriter. The Trustees may enter into contracts on behalf of the Trust or any Series or Class, providing for the distribution and sale of Shares by the other party, either directly or as sales agent, on terms and conditions acceptable to the Trustees. The Trustees may adopt a plan or plans of distribution with respect to Shares of any Series or Class and enter into any related agreements, whereby the Series or Class finances directly or indirectly any activity that is primarily intended to result in sales of its Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1 thereunder, and other applicable rules and regulations. Section 3. Transfer Agency, Shareholder Services, and Administration Agreements. The Trustees, on behalf of the Trust or any Series or Class, may enter into transfer agency agreements, Shareholder service agreements, and administration and management agreements with any party or parties on terms and conditions acceptable to the Trustees. Section 4. Custodian. The Trustees shall at all times place and maintain the securities and similar investments of the Trust and of each Series in custody with a custodian 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, to (a) 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 sub-custodians. Section 5. Parties to Contracts with Service Providers. The Trustees may enter into any contract referred to in this Article with any entity, although one more of the Trustees or officers of the Trust may be an officer, director, trustee, partner, shareholder, or member of such entity, and no such contract shall be invalidated or rendered void or voidable because of such relationship. No person having such a relationship shall be disqualified from voting on or executing a contract in his capacity as Trustee and/or Shareholder, or be liable merely by reason of such relationship for any loss or expense to the Trust with respect to such a contract or accountable for any profit realized directly - 14 - or indirectly therefrom; provided, that the contract was reasonable and fair and not inconsistent with this Trust Instrument or the By-laws. Any contract referred to in Sections 1 and 2 of this Article 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 1 of this Article 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 VIII ------------ EXPENSES OF THE TRUST AND SERIES -------------------------------- Subject to Article IV, Section 4, the Trust or a particular Series shall pay, or shall reimburse the Trustees from the Trust estate or the assets belonging to the particular Series, for their expenses and disbursements, including, but not limited to, interest charges, taxes, brokerage fees and commissions; expenses of issue, repurchase and redemption of Shares; certain insurance premiums; applicable fees, interest charges and expenses of third parties, including the Trust's investment advisers, managers, administrators, distributors, custodians, transfer agents and fund accountants; fees of pricing, interest, dividend, credit and other reporting services; costs of membership in trade associations; telecommunications expenses; funds transmission expenses; auditing, legal and compliance expenses; costs of forming the Trust and its Series and maintaining its existence; costs of preparing and printing the prospectuses of the Trust and each Series, statements of additional information and Shareholder reports and delivering them to Shareholders; expenses of meetings of Shareholders and proxy solicitations therefor; 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 Shareholders thereto, for the reimbursement to them of such expenses, disbursements, losses and liabilities. - 15 - ARTICLE IX ---------- LIMITATION OF LIABILITY AND INDEMNIFICATION ------------------------------------------- Section 1. Limitation of Liability. All persons contracting with or having any claim against the Trust or a particular Series shall look only to the assets of the Trust or such Series for payment under such contract or claim; and neither the Trustees nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Every written instrument or obligation on behalf of the Trust or any Series shall contain a statement to the foregoing effect, but the absence of such statement shall not operate to make any Trustee or officer of the Trust liable thereunder. Provided they have exercised reasonable care and have acted under the reasonable belief that their actions are in the best interest of the Trust, the Trustees and officers of the Trust shall not be responsible or liable for any act or omission or for neglect or wrongdoing of them or any officer, agent, employee, investment adviser or independent contractor of the Trust, but nothing contained in this Trust Instrument or in the Delaware Act shall protect any Trustee or officer of the Trust against liability to the Trust or to Shareholders 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. Section 2. Indemnification. (a) Subject to the exceptions and limitations contained in subsection (b) below: (i) every person who is, or has been, a Trustee or an officer, employee or agent of the Trust ("Covered Person") shall be indemnified by the Trust or the appropriate Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Covered Person and against amounts paid or incurred by him in the settlement thereof; (ii) as used herein, the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened, and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Covered Person: (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, - 16 - gross negligence or reckless disregard of the duties involved in the conduct of his office, or (B) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; or (ii) in the event of a settlement, unless there has been a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (A) by the court or other body approving the settlement; (B) by at least a majority of those Trustees who are neither Interested Persons of the Trust nor are parties to the matter based upon a review of readily available facts (as opposed to a full trial-type inquiry); or (C) by written opinion of independent legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry). (c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not be exclusive of or affect any other rights to which any Covered Person may now or hereafter be entitled, and shall inure to the benefit of the heirs, executors and administrators of a Covered Person. (d) To the maximum extent permitted by applicable law, expenses in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in subsection (a) of this Section may be paid by the Trust or applicable Series from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him to the Trust or applicable Series if it is ultimately determined that he is not entitled to indemnification under this Section; provided, however, that either (i) such Covered Person shall have provided appropriate security for such undertaking, (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 full trial-type inquiry) that there is reason to believe that such Covered Person will not be disqualified from indemnification under this Section. (e) Any repeal or modification of this Article IX by the Shareholders of the Trust, or adoption or modification of any other provision of the Trust Instrument or By-laws inconsistent with this Article, 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 Covered Person or indemnification available to any Covered Person with respect to any act or omission which occurred prior to such repeal, modification or adoption. Section 3. Indemnification of Shareholders. If any Shareholder or former Shareholder of any Series shall be held personally liable solely by - 17 - reason of his being or having been a Shareholder and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives or in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable Series to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by such Shareholder, assume the defense of any claim made against such Shareholder for any act or obligation of the Series and satisfy any judgment thereon from the assets of the Series. ARTICLE X --------- MISCELLANEOUS ------------- Section 1. Trust Not a Partnership. This Trust Instrument creates a trust and not a partnership. No Trustee shall have any power to bind personally either the Trust's officers or any Shareholder. Section 2. Trustee Action; Expert Advice; No Bond or Surety. The exercise by the Trustees of their powers and discretion hereunder in good faith and with reasonable care under the circumstances then prevailing shall be binding upon everyone interested. Subject to the provisions of Article IX, the Trustees shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Trust Instrument, and subject to the provisions of Article IX, shall not be liable for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is obtained. Section 3. Record Dates. The Trustees may fix in advance a date up to ninety (90) days before the date of any Shareholders' meeting, or the date for the payment of any dividends or other distributions, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of such dividend or other distribution, or to receive any such allotment of rights, or to exercise such rights in respect of any such change, conversion or exchange of Shares. Section 4. Termination of the Trust. (a) This Trust shall have perpetual existence. Subject to a Majority Shareholder Vote of the Trust or of each Series to be affected, the Trustees may (i) sell and convey all or substantially all of the assets of the Trust or any affected Series to another Series or to another entity which is an open-end investment company as defined in the 1940 Act, or is a series thereof, for adequate consideration, - 18 - which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, of the Trust or any affected Series, and which may include shares of or interests in such Series, entity, or series thereof; or (ii) at any time sell and convert into money all or substantially all of the assets of the Trust or any affected Series. Upon making reasonable provision for the payment of all known liabilities of the Trust or any affected Series in either (i) or (ii), by such assumption or otherwise, the Trustees shall distribute the remaining proceeds or assets (as the case may be) ratably among the Shareholders of the Trust or any affected Series; however, the payment to any particular Class of such Series may be reduced by any fees, expenses or charges allocated to that Class. (b) The Trustees may take any of the actions specified in subsection (a) (i) and (ii) above without obtaining a Majority Shareholder Vote of the Trust or any Series if a majority of the Trustees determines that the continuation of the Trust or Series is not in the best interests of the Trust, such Series, or their respective Shareholders as a result of factors or events adversely affecting the ability of the Trust or such Series to conduct its business and operations in an economically viable manner. Such factors and events may include the inability of the Trust or a Series to maintain its assets at an appropriate size, changes in laws or regulations governing the Trust or the Series or affecting assets of the type in which the Trust or Series invests, or economic developments or trends having a significant adverse impact on the business or operations of the Trust or such Series. (c) Upon completion of the distribution of the remaining proceeds or assets pursuant to subsection (a), the Trust or affected Series shall terminate and the Trustees and the Trust shall be discharged of any and all further liabilities and duties hereunder with respect thereto and the right, title and interest of all parties therein shall be canceled and discharged. Upon termination of the Trust, following completion of winding up of its business, the Trustees shall cause a certificate of cancellation of the Trust's certificate of trust to be filed in accordance with the Delaware Act, which certificate of cancellation may be signed by any one Trustee. Section 5. Reorganization. Notwithstanding anything else herein, to change the Trust's form of organization the Trustees may, without Shareholder approval, (a) cause the Trust to merge or consolidate with or into one or more entities, if the surviving or resulting entity is the Trust or another open-end management investment company under the 1940 Act, or a series thereof, that will succeed to or assume the Trust's registration under the 1940 Act, or (b) cause the Trust to incorporate under the laws of Delaware. Any agreement of merger or consolidation or certificate of merger may be signed by a majority of Trustees and - 19 - facsimile signatures conveyed by electronic or telecommunication means shall be valid. Pursuant to and in accordance with the provisions of Section 3815(f) of the Delaware Act, an agreement of merger or consolidation approved by the Trustees in accordance with this Section 5 may effect any amendment to the Trust Instrument or effect the adoption of a new trust instrument of the Trust if it is the surviving or resulting trust in the merger or consolidation. Section 6. Trust Instrument. The original or a copy of this Trust Instrument and of each amendment hereto or Trust Instrument supplemental shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by a Trustee or an officer of the Trust as to the authenticity of the Trust Instrument or any such amendments or supplements and as to any matters in connection with the Trust. The masculine gender herein shall include the feminine and neuter genders. Headings herein are for convenience only and shall not affect the construction of this Trust Instrument. This Trust Instrument may be executed in any number of counterparts, each of which shall be deemed an original. Section 7. Applicable Law. This Trust Instrument and the Trust created hereunder are governed by and construed and administered according to the Delaware Act and the applicable laws of the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware Code, or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the Delaware Act) pertaining to trusts which relate to or regulate (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (ii) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding of trust assets, or (vii) the establishment of fiduciary or other standards of responsibilities or limitations on the acts or powers of trustees, which are inconsistent with the limitations or liabilities or authorities and powers of the Trustees set forth or referenced in this Trust Instrument. The Trust shall be of the type commonly called a Delaware business trust, and, without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to trusts or actions that may be engaged in by trusts under the Delaware Act, and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may not exercise such power or privilege or take such actions. - 20 - Section 8. Amendments. The Trustees may, without any Shareholder vote, amend or otherwise supplement this Trust Instrument by making an amendment, a Trust Instrument supplemental hereto or an amended and restated trust instrument; provided, that Shareholders shall have the right to vote on any amendment (a) which would affect the voting rights of Shareholders granted in Article VI, Section 1, (b) to this Section 8, (c) required to be approved by Shareholders by law or by the Trust's registration statement(s) filed with the Commission, and (d) submitted to them by the Trustees in their discretion. Any amendment submitted to Shareholders which the Trustees determine would affect the Shareholders of any Series shall be authorized by vote of the Shareholders of such Series and no vote shall be required of Shareholders of a Series not affected. Notwithstanding anything else herein, any amendment to Article IX which would have the effect of reducing the indemnification and other rights provided thereby to Trustees, officers, employees, and agents of the Trust or to Shareholders or former Shareholders, and any repeal or amendment of this sentence shall each require the affirmative vote of the holders of two-thirds of the Outstanding Shares of the Trust entitled to vote thereon. Section 9. Fiscal Year. The fiscal year of the Trust shall end on a specified date as set forth in the By-Laws. The Trustees may change the fiscal year of the Trust without Shareholder approval. Section 10. Severability. The provisions of this Trust Instrument are severable. If the Trustees determine, with the advice of counsel, that any provision hereof conflicts with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Trust Instrument; provided, however, that such determination shall not affect any of the remaining provisions of this Trust Instrument or render invalid or improper any action taken or omitted prior to such determination. If any provision - 21 - hereof shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision only in such jurisdiction and shall not affect any other provision of this Trust Instrument. IN WITNESS WHEREOF, the undersigned, being the initial Trustees, have executed this Trust Instrument as of the date first above written. /s/ Claudia A. Brandon -------------------------- Claudia A. Brandon, as Trustee and not individually /s/ Ellen Metzger -------------------------- Ellen Metzger, as Trustee and not individually /s/ Michael J. Weiner -------------------------- Michael J. Weiner, as Trustee and not individually Address: 605 Third Avenue New York, New York 10058 STATE OF NEW YORK ss CITY OF NEW YORK Before me this 11th day of May, 1993, personally appeared the above-named Claudia A. Brandon, Ellen Metzger, and Michael J. Weiner, known to me to be the persons who executed the foregoing instrument and who acknowledged that they executed the same. /s/ Loraine Olavarria --------------------------------- Notary Public My Commission expires 4-15-95 . LORAINE OLVAARRIA Notary Public, State of New York No. 03-4979299 Qualified in Bronx County Commission Expires in 4-15-95 - 22 - EX-99.B1(C) 4 NEUBERGER & BERMAN EQUITY TRUST SCHEDULE A Initial Series -------------- Neuberger & Berman Focus Trust Neuberger & Berman Genesis Trust Neuberger & Berman Guardian Trust Neuberger & Berman Manhattan Trust Neuberger & Berman Partners Trust Additional Series ----------------- Neuberger & Berman NYDC Socially Responsive Trust EX-99.B2 5 NEUBERGER & BERMAN EQUITY TRUST BY-LAWS May 12, 1993 TABLE OF CONTENTS Page ---- ARTICLE I PRINCIPAL OFFICE AND SEAL . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Principal Office . . . . . . . . . . . . 1 Section 2. Seal . . . . . . . . . . . . . . . . . . 1 ARTICLE II MEETINGS OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Action by Trustees . . . . . . . . . . . 1 Section 2. Compensation of Trustees . . . . . . . . 1 ARTICLE III COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1. Establishment . . . . . . . . . . . . . 1 Section 2. Proceedings; Quorum; Action . . . . . . 2 Section 3. Executive Committee . . . . . . . . . . 2 Section 4. Nominating Committee . . . . . . . . . . 2 Section 5. Audit Committee . . . . . . . . . . . . 2 Section 6. Compensation of Committee Members . . . 2 ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1. General . . . . . . . . . . . . . . . . 2 Section 2. Election, Tenure and Qualifications of Officers . . . . . . . . . . . . . . . 2 Section 3. Vacancies and Newly Created Offices . . 3 Section 4. Removal and Resignation . . . . . . . . 3 Section 5. Chairman . . . . . . . . . . . . . . . . 3 Section 6. President . . . . . . . . . . . . . . . 3 Section 7. Vice President(s) . . . . . . . . . . . 3 Section 8. Treasurer and Assistant Treasurer(s) . . 4 Section 9. Secretary and Assistant Secretaries . . 4 Section 10. Compensation of Officers . . . . . . . . 4 Section 11. Surety Bond . . . . . . . . . . . . . . 4 ARTICLE V MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 5 Section 1. No Annual Meetings . . . . . . . . . . . 5 Section 2. Special Meetings . . . . . . . . . . . . 5 Section 3. Notice of Meetings; Waiver . . . . . . . 5 Section 4. Adjourned Meetings . . . . . . . . . . . 6 Section 5. Validity of Proxies . . . . . . . . . . 6 Section 6. Record Date . . . . . . . . . . . . . . 7 Section 7. Action Without a Meeting . . . . . . . . 7 - i - ARTICLE VI SHARES OF BENEFICIAL INTEREST . . . . . . . . . . . . . . . . . . . . 7 Section 1. No Share Certificates . . . . . . . . . 7 Section 2. Transfer of Shares . . . . . . . . . . . 7 ARTICLE VII FISCAL YEAR AND ACCOUNTANT . . . . . . . . . . . . . . . . . . . . . 7 Section 1. Fiscal Year . . . . . . . . . . . . . . 7 Section 2. Accountant . . . . . . . . . . . . . . . 7 ARTICLE VIII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 1. General . . . . . . . . . . . . . . . . 8 Section 2. By Shareholders Only . . . . . . . . . . 8 ARTICLE IX NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE X CONFLICT OF INTEREST PROCEDURES . . . . . . . . . . . . . . . . . . . 9 Section 1. Monitoring and Reporting Conflicts . . . 9 Section 2. Annual Report . . . . . . . . . . . . . 9 Section 3. Resolution of Conflicts . . . . . . . . 9 Section 4. Annual Review . . . . . . . . . . . . . 9 - ii - BY-LAWS OF NEUBERGER & BERMAN EQUITY TRUST These By-laws of Neuberger & Berman Equity Trust (the "Trust"), a Delaware business trust, are subject to the Trust Instrument of the Trust dated as of May 6, 1993, as from time to time amended, supplemented or restated (the "Trust Instrument"). Capitalized terms used herein have the same meanings as in the Trust Instrument. ARTICLE I --------- PRINCIPAL OFFICE AND SEAL ------------------------- Section 1. Principal Office. The principal office of the Trust shall be located in New York, New York, or such other location as the Trustees determine. The Trust may establish and maintain other offices and places of business as the Trustees determine. Section 2. Seal. The Trustees may adopt a seal for the Trust in such form and with such inscription as the Trustees determine. Any Trustee or officer of the Trust shall have authority to affix the seal to any document. ARTICLE II ---------- MEETINGS OF TRUSTEES -------------------- Section 1. Action by Trustees. Trustees may take actions at meetings held at such places and times as the Trustees may determine, or without meetings, all as provided in Article II, Section 7, of the Trust Instrument. Section 2. Compensation of Trustees. Each Trustee who is neither an employee of an investment adviser of the Trust or any Series nor an employee of an entity affiliated with the investment adviser may receive such compensation from the Trust for services and reimbursement for expenses as the Trustees may determine. ARTICLE III ----------- COMMITTEES ---------- Section 1. Establishment. The Trustees may designate one or more committees of the Trustees, which shall include an Executive Committee, a Nominating Committee, and an Audit Committee (collectively, the "Established Committees"). The Trustees shall determine the number of members of each committee and its powers and shall appoint its members and its chair. Each committee member shall serve at the pleasure of the Trustees. The Trustees may abolish any committee, other than the Established Committees, at any time. Each committee shall maintain records of its meetings and report its actions to the Trustees. The Trustees may rescind any action of any committee, but such rescission shall not have retroactive effect. The Trustees may delegate to any committee any of its powers, subject to the limitations of applicable law. Section 2. Proceedings; Quorum; Action. Each committee may adopt such rules governing its proceedings, quorum and manner of acting as it shall deem proper and desirable. In the absence of such rules, a majority of any committee shall constitute a quorum, and a committee shall act by the vote of a majority of a quorum. Section 3. Executive Committee. The Executive Committee shall have all the powers of the Trustees when the Trustees are not in session. The Chairman shall be a member and the chair of the Executive Committee. A majority of the members of the Executive Committee shall be trustees who are not "interested persons" of the Trust, as defined in the 1940 Act ("Disinterested Trustees"). Section 4. Nominating Committee. The Nominating Committee shall nominate individuals to serve as Trustees (including Disinterested Trustees), as members of committees, and as officers of the Trust. The members of the Committee shall be Disinterested Trustees. Section 5. Audit Committee. The Audit Committee shall review and evaluate the audit function, including recommending the selection of independent certified public accountants for each Series. The members of the Committee shall be Disinterested Trustees. Section 6. Compensation of Committee Members. Each committee member who is a Disinterested Trustee may receive such compensation from the Trust for services and reimbursement for expenses as the Trustees may determine. ARTICLE IV ---------- OFFICERS -------- Section 1. General. The officers of the Trust shall be a Chairman, a President, one or more Vice Presidents, a Treasurer, and a Secretary, and may include one or more Assistant Treasurers or Assistant Secretaries and such other officers ("Other Officers") as the Trustees may determine. Section 2. Election, Tenure and Qualifications of Officers. The Trustees shall elect the officers of the Trust, except those appointed as provided in Section 9 of this Article. Each officer elected by the Trustees shall hold office until his or her successor shall have been elected and qualified or until his or her earlier death, inability to serve, or - 2 - resignation. Any person may hold one or more offices, except that the Chairman and the Secretary may not be the same individual. A person who holds more than one office in the Trust may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. No officer other than the Chairman need be a Trustee or Shareholder. Section 3. Vacancies and Newly Created Offices. Whenever a vacancy shall occur in any office or if any new office is created, the Trustees may fill such vacancy or new office. Section 4. Removal and Resignation. Officers serve at the pleasure of the Trustees and may be removed at any time with or without cause. The Trustees may delegate this power to the Chairman or President with respect to any Other Officer. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer may resign from office at any time by delivering a written resignation to the Trustees, Chairman, or the President. Unless otherwise specified therein, such resignation shall take effect upon delivery. Section 5. Chairman. The Chairman shall be the chief executive officer of the Trust. Subject to the direction of the Trustees, the Chairman shall have general charge, supervision and control over the Trust's business affairs and shall be responsible for the management thereof and the execution of policies established by the Trustees. The Chairman shall preside at any Shareholders' meetings and at all meetings of the Trustees and shall in general exercise the powers and perform the duties of the Chairman of the Trustees. Except as the Trustees may otherwise order, the Chairman shall have the power to grant, issue, execute or sign such powers of attorney, proxies, agreements or other documents. The Chairman also shall have the power to employ attorneys, accountants and other advisers and agents for the Trust. The Chairman shall exercise such other powers and perform such other duties as the Trustees may assign to the Chairman. Section 6. President. The President shall have such powers and perform such duties as the Trustees or the Chairman may determine. At the request or in the absence or disability of the Chairman, the President shall perform all the duties of the President and, when so acting, shall have all the powers of the President. Section 7. Vice President(s). The Vice President(s) shall have such powers and perform such duties as the Trustees or the Chairman may determine. At the request or in the absence or disability of the President, the Vice President (or, if there are two or more Vice Presidents, then the senior of the Vice Presidents present and able to act) shall perform all the duties of the President and, when so acting, shall have all the powers of the President. The Trustees may designate a Vice President as the principal financial officer of the Trust or to serve one or more other functions. If a Vice President is designated as principal financial officer of the Trust, he or she shall have general charge of the finances and books of the Trust and shall report to the Trustees annually regarding the financial condition of each Series as soon - 3 - as possible after the close of such Series's fiscal year. The Trustees also may designate one of the Vice Presidents as Executive Vice President. Section 8. Treasurer and Assistant Treasurer(s). The Treasurer may be designated as the principal financial officer or as the principal accounting officer of the Trust. If designated as principal financial officer, the Treasurer shall have general charge of the finances and books of the Trust, and shall report to the Trustees annually regarding the financial condition of each Series as soon as possible after the close of such Series' fiscal year. The Treasurer shall be responsible for the delivery of all funds and securities of the Trust to such company as the Trustees shall retain as Custodian. The Treasurer shall furnish such reports concerning the financial condition of the Trust as the Trustees may request. The Treasurer shall perform all acts incidental to the office of Treasurer, subject to the Trustees' supervision, and shall perform such additional duties as the Trustees may designate. Any Assistant Treasurer may perform such duties of the Treasurer as the Trustees or the Treasurer may assign, and, in the absence of the Treasurer, may perform all the duties of the Treasurer. Section 9. Secretary and Assistant Secretaries. The Secretary shall record all votes and proceedings of the meetings of Trustees and Shareholders in books to be kept for that purpose. The Secretary shall be responsible for giving and serving notices of the Trust. The Secretary shall have custody of any seal of the Trust and shall be responsible for the records of the Trust, including the Share register and such other books and documents as may be required by the Trustees or by law. The Secretary shall perform all acts incidental to the office of Secretary, subject to the supervision of the Trustees, and shall perform such additional duties as the Trustees may designate. Any Assistant Secretary may perform such duties of the Secretary as the Trustees or the Secretary may assign, and, in the absence of the Secretary, may perform all the duties of the Secretary. Section 10. Compensation of Officers. Each officer may receive such compensation from the Trust for services and reimbursement for expenses as the Trustees may determine. Section 11. Surety Bond. The Trustees may require any officer or agent of the Trust to execute a bond (including, without limitation, any bond required by the 1940 Act and the rules and regulations of the Securities and Exchange Commission ("Commission")) to the Trust in such sum and with such surety or sureties as the Trustees may determine, conditioned upon the faithful performance of his or her duties to the Trust, including responsibility for negligence and for the accounting of any of the Trust's property, funds or securities that may come into his or her hands. - 4 - ARTICLE V ---------- MEETINGS OF SHAREHOLDERS ------------------------ Section 1. No Annual Meetings. There shall be no annual Shareholders' meetings, unless required by law. Section 2. Special Meetings. The Secretary shall call a special meeting of Shareholders of any Series or Class whenever ordered by the Trustees. The Secretary also shall call a special meeting of Shareholders of any Series or Class upon the written request of Shareholders owning at least ten percent of the Outstanding Shares of such Series or Class entitled to vote at such meeting; provided, that (1) such request shall state the purposes of such meeting and the matters proposed to be acted on, and (2) the Shareholders requesting such meeting shall have paid to the Trust the reasonably estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such Shareholders. If the Secretary fails for more than thirty days to call a special meeting when required to do so, the Trustees or the Shareholders requesting such a meeting may, in the name of the Secretary, call the meeting by giving the required notice. The Secretary shall not call a special meeting upon the request of Shareholders of any Series or Class to consider any matter that is substantially the same as a matter voted upon at any special meeting of Shareholders of such Series or Class held during the preceding twelve months, unless requested by the holders of a majority of the Outstanding Shares of such Series or Class entitled to be voted at such meeting. A special meeting of Shareholders of any Series or Class shall be held at such time and place as is determined by the Trustees and stated in the notice of that meeting. Section 3. Notice of Meetings; Waiver. The Secretary shall call a special meeting of Shareholders by giving written notice of the place, date, time, and purposes of that meeting at least fifteen days before the date of such meeting. The Secretary may deliver or mail, postage prepaid, the written notice of any meeting to each Shareholder entitled to vote at such meeting. If mailed, notice shall be deemed to be given when deposited in the United States mail directed to the Shareholder at his or her address as it appears on the records of the Trust. Section 4. Adjourned Meetings. A Shareholders' meeting may be adjourned one or more times for any reason, including the failure of a quorum to attend the meeting. No notice of adjournment of a meeting to another time or place need be given to Shareholders if such time and place are announced at the meeting at which the adjournment is taken or reasonable notice is given to persons present at the meeting, and if the adjourned meeting is held within a reasonable time after the date set for the original meeting. Any business that might have been transacted at the original meeting may be transacted at any adjourned meeting. If after the - 5 - adjournment a new record date is fixed for the adjourned meeting, the Secretary shall give notice of the adjourned meeting to Shareholders of record entitled to vote at such meeting. Any irregularities in the notice of any meeting or the nonreceipt of any such notice by any of the Shareholders shall not invalidate any action otherwise properly taken at any such meeting. Section 5. Validity of Proxies. Subject to the provisions of the Trust Instrument, Shareholders entitled to vote may vote either in person or by proxy; provided, that either (1) the Shareholder or his or her duly authorized attorney has signed and dated a written instrument authorizing such proxy to act, or (2) the Trustees adopt by resolution an electronic, telephonic, computerized or other alternative to execution of a written instrument authorizing the proxy to act, but if a proposal by anyone other than the officers or Trustees is submitted to a vote of the Shareholders of any Series or Class, or if there is a proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees, Shares may be voted only in person or by written proxy. Unless the proxy provides otherwise, it shall not be valid for more than eleven months before the date of the meeting. All proxies shall be delivered to the Secretary or other person responsible for recording the proceedings before being voted. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Trust receives a specific written notice to the contrary from any one of them. Unless otherwise specifically limited by their terms, proxies shall entitle the Shareholder to vote at any adjournment of a Shareholders' meeting. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. At every meeting of Shareholders, unless the voting is conducted by inspectors, the chairman of the meeting shall decide all questions concerning the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes. Subject to the provisions of the Delaware Business Trust Act, the Trust Instrument, or these By-laws, the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder shall govern all matters concerning the giving, voting or validity of proxies, as if the Trust were a Delaware corporation and the Shareholders were shareholders of a Delaware corporation. Section 6. Record Date. The Trustees may fix in advance a date up to ninety days before the date of any Shareholders' meeting as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting. The Shareholders of record entitled to vote at a Shareholders' meeting shall be deemed the Shareholders of record at any meeting reconvened after one or more adjournments, unless the Trustees have fixed a new record date. If the Shareholders' meeting is adjourned for more than sixty days after the original date, the Trustees shall establish a new record date. Section 7. Action Without a Meeting. Shareholders may take any action without a meeting if a majority (or such greater amount as may be required - 6 - by law) of the Outstanding Shares entitled to vote on the matter consent to the action in writing and such written consents are filed with the records of Shareholders' meetings. Such written consent shall be treated for all purposes as a vote at a meeting of the Shareholders. ARTICLE VI ---------- SHARES OF BENEFICIAL INTEREST ----------------------------- Section 1. No Share Certificates. Neither the Trust nor any Series or Class shall issue certificates certifying the ownership of Shares, unless the Trustees may otherwise specifically authorize such certificates. Section 2. Transfer of Shares. Shares shall be transferable only by a transfer recorded on the books of the Trust by the Shareholder of record in person or by his or her duly authorized attorney or legal representative. Shares may be freely transferred and the Trustees may, from time to time, adopt rules and regulations regarding the method of transfer of such Shares. ARTICLE VII ----------- FISCAL YEAR AND ACCOUNTANT -------------------------- Section 1. Fiscal Year. The fiscal year of the Trust shall end on August 31. Section 2. Accountant. The Trust shall employ independent certified public accountants as its Accountant to examine the accounts of the Trust and to sign and certify financial statements filed by the Trust. The Accountant's certificates and reports shall be addressed both to the Trustees and to the Shareholders. A majority of the Disinterested Trustees shall select the Accountant at any meeting held within ninety days before or after the beginning of the fiscal year of the Trust, acting upon the recommendation of the Audit Committee. The Trust shall submit the selection for ratification or rejection at the next succeeding Shareholders' meeting, if such a meeting is to be held within the Trust's fiscal year. If the selection is rejected at that meeting, the Accountant shall be selected by majority vote of the Trust's outstanding voting securities, either at the meeting at which the rejection occurred or at a subsequent meeting of Shareholders called for the purpose of selecting an Accountant. The employment of the Accountant shall be conditioned upon the right of the Trust to terminate such employment without any penalty by vote of a Majority Shareholder Vote at any Shareholders' meeting called for that purpose. - 7 - ARTICLE VIII ------------ AMENDMENTS ---------- Section 1. General. Except as provided in Section 2 of this Article, these By-laws may be amended by the Trustees, or by the affirmative vote of a majority of the Outstanding Shares entitled to vote at any meeting. Section 2. By Shareholders Only. After the issue of any Shares, this Article may only be amended by the affirmative vote of the holders of the lesser of (a) at least two-thirds of the Outstanding Shares present and entitled to vote at any meeting, or (b) at least fifty percent of the Outstanding Shares. ARTICLE IX ---------- NET ASSET VALUE --------------- The term "Net Asset Value" of any Series shall mean that amount by which the assets belonging to that Series exceed its liabilities, all as determined by or under the direction of the Trustees. Net Asset Value per Share shall be determined separately for each Series and shall be determined on such days and at such times as the Trustees may determine. The Trustees shall make such determination with respect to securities for which market quotations are readily available, at the market value of such securities, and with respect to other securities and assets, at the fair value as determined in good faith by the Trustees; provided, however, that the Trustees, without Shareholder approval, may alter the method of appraising portfolio securities insofar as permitted under the 1940 Act and the rules, regulations and interpretations thereof promulgated or issued by the SEC or insofar as permitted by any order of the SEC applicable to the Series. The Trustees may delegate any of their powers and duties under this Article X with respect to appraisal of assets and liabilities. At any time the Trustees may cause the Net Asset Value per Share last determined to be determined again in a similar manner and may fix the time when such redetermined values shall become effective. ARTICLE X --------- CONFLICT OF INTEREST PROCEDURES ------------------------------- Section 1. Monitoring and Reporting Conflicts. The trustees of Equity Managers Trust and the Trust (collectively, the "Trusts") are the same individuals. Set forth in this Article are procedures established to address potential conflicts of interest that may arise between the Trusts. On an ongoing basis, the investment adviser ("Manager") of Equity Managers Trust shall be responsible for monitoring the Trusts for the existence of any material conflicts of interest between the Trusts. The Manager shall - 8 - be responsible for reporting any potential or existing conflicts to trustees of the Trusts as they may develop. Section 2. Annual Report. The Manager shall report to the trustees of the Trusts annually regarding its monitoring of the Trusts for conflicts of interest. Section 3. Resolution of Conflicts. If a potential conflict of interest arises, the Trustees shall take such action as is reasonably appropriate to deal with the conflict, up to and including recommending a change in the trustees and implementing such recommendation, consistent with applicable law. Section 4. Annual Review. The Trustees, including a majority of the Disinterested Trustees, shall determine no less frequently than annually that the operating structure is in the best interest of Shareholders. The Trustees shall consider, among other things, whether the expenses incurred by the Trust are approximately the same or less than the expenses that the Trust would incur if it invested directly in the type of securities being held by Equity Managers Trust. The Trustees, including a majority of the Disinterested Trustees, shall review no less frequently than annually these procedures for their continuing appropriateness. - 9 - EX-99.B6(A) 6 DISTRIBUTION AGREEMENT This Agreement is made as of August 3, 1993, between Neuberger & Berman Equity Trust, a Delaware business trust ("Trust"), and Neuberger & Berman Management Incorporated, a New York corporation (the "Distributor"). WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end, diversified management investment company and has established several separate series of shares ("Series"), with each Series having its own assets and investment policies; and WHEREAS, the Trust desires to retain the Distributor to furnish distribution services to each Series listed in Schedule A attached hereto, and to such other Series of the Trust hereinafter established as agreed to from time to time by the parties, evidenced by an addendum to Schedule A (hereinafter "Series" shall refer to each Series which is subject to this Agreement and all agreements and actions described herein to be made or taken by a Series shall be made or taken by the Trust on behalf of the Series), and the Distributor is willing to furnish such services, NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties agree as follows: 1. The Trust hereby appoints the Distributor as agent to sell the shares of beneficial interest of each Series (the "Shares") and the Distributor hereby accepts such appointment. All sales by the Distributor shall be expressly subject to acceptance by the Trust, acting on behalf of the Series. 2. (a) The Distributor agrees that (i) all Shares sold by the Distributor shall be sold at the net asset value ("NAV") thereof as described in Section 3 hereof, and (ii) the Series shall receive 100% of such NAV. (b) The Distributor may enter into agreements, in form and substance satisfactory to the Trust, with dealers selected by the Distributor, providing for the sale to such dealers and resale by such dealers of Shares at their NAV. 3. The Trust agrees to supply to the Distributor, promptly after the time or times at which NAV is determined, on each day on which the New York Stock Exchange is open for business and on such other days as the Board of Trustees of the Trust ("Trustees") may from time to time determine (each such day being hereinafter called a "business day"), a statement of the NAV of each Series having been determined in the manner set forth in the then-current Prospectus and Statement of Additional Information ("SAI") of each Series. Each determination of NAV shall take effect as of such time or times on each business day as set forth in the then-current Prospectus of each Series and shall prevail until the time as of which the next determination is made. 4. Upon receipt by the Trust at its principal place of business of a written order from the Distributor, together with delivery instructions, the Trust shall, if it elects to accept such order, as promptly as practicable, cause the Shares purchased by such order to be delivered in such amounts and in such names as the Distributor shall specify, against payment therefor in such manner as may be acceptable to the Trust. The Trust may, in its discretion, refuse to accept any order for the purchase of Shares that the Distributor may tender to it. 5. (a) All sales literature and advertisements used by the Distributor in connection with sales of Shares shall be subject to approval by the Trust. The Trust authorizes the Distributor, in connection with the sale or arranging for the sale of Shares of any Series, to provide only such information and to make only such statements or representations as are contained in the Series's then-current Prospectus and SAI or in such financial and other statements furnished to the Distributor pursuant to the next paragraph or as may properly be included in sales literature or advertisements in accordance with the provisions of the Securities Act of 1933 (the "1933 Act"), the 1940 Act and applicable rules of self-regulatory organizations. Neither the Trust nor any Series shall be responsible in any way for any information provided or statements or representations made by the Distributor or its representatives or agents other than the information, statements and representations described in the preceding sentence. (b) Each Series shall keep the Distributor fully informed with regard to its affairs, shall furnish the Distributor with a certified copy of all of its financial statements and a signed copy of each report prepared for it by its independent auditors, and shall cooperate fully in the efforts of the Distributor to negotiate and sell Shares of such Series and in the Distributor's performance of all its duties under this Agreement. 6. The Distributor, as agent of each Series and for the account and risk of each Series, is authorized, subject to the direction of the Trust, to redeem outstanding Shares of such Series when properly tendered by shareholders pursuant to the redemption right granted to such Series's shareholders by the Trust Instrument of the Trust, as from time to time in effect, at a redemption price equal to the NAV per Share of such Series next determined after proper tender and acceptance. The Trust has delivered to the Distributor a copy of the Trust's Trust Instrument as currently in effect and agrees to deliver to the Distributor any amendments thereto promptly upon filing thereof with the Office of the Secretary of State of the State of Delaware. 7. The Distributor shall assume and pay or reimburse each Series for the following expenses of such Series: (i) costs of preparing, printing and distributing reports, prospectuses and SAIs used - 2 - by such Series in connection with the sale or offering of its Shares and all advertising and sales literature relating to such Series printed at the instruction of the Distributor; and (ii) counsel fees and expenses in connection with the foregoing. The Distributor shall also pay all its own costs and expenses connected with the sale of Shares. 8. Each Series shall maintain a currently effective Registration Statement on Form N-1A with respect to such Series and shall file with the Securities and Exchange Commission (the "SEC") such reports and other documents as may be required under the 1933 Act and the 1940 Act or by the rules and regulations of the SEC thereunder. Each Series represents and warrants that the Registration Statement, post-effective amendments, Prospectus and SAI (excluding statements relating to the Distributor and the services it provides that are based upon written information furnished by the Distributor expressly for inclusion therein) of such Series shall not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that all statements or information furnished to the Distributor, pursuant to Section 5(b) hereof, shall be true and correct in all material respects. 9. (a) This Agreement shall become effective on the date hereof and shall remain in full force and effect until August 3, 1995 and may be continued from year to year thereafter; PROVIDED, that such continuance shall be specifically approved each year by the Trustees or by a majority of the outstanding voting securities of the Series, and in either case, also by a majority of the Trustees who are not interested persons of the Trust or the Distributor ("Disinterested Trustees"). This Agreement may be amended as to any Series with the approval of the Trustees or of a majority of the outstanding voting securities of such Series; PROVIDED, that in either case, such amendment also shall be approved by a majority of the Disinterested Trustees. (b) Either party may terminate this Agreement without the payment of any penalty, upon not more than sixty days' nor less than thirty days' written notice delivered personally or mailed by registered mail, postage prepaid, to the other party; PROVIDED, that in the case of termination by any Series, such action shall have been authorized (i) by resolution of the Trustees, or (ii) by vote of a majority of the outstanding voting securities of such Series, or (iii) by written consent of a majority of the Disinterested Trustees. (c) This Agreement shall automatically terminate if it is assigned by the Distributor. (d) Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act shall be resolved by reference to such term or provision of the 1940 Act and to interpretation - 3 - thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the SEC validly issued pursuant to the 1940 Act. Specifically, the terms "interested persons," "assignment" and "vote of a majority of the outstanding voting securities," as used in this Agreement, shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition, when the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is modified, interpreted or relaxed by a rule, regulation or order of the SEC, whether of special or of general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order. The Trust and the Distributor may from time to time agree on such provisions interpreting or clarifying the provisions of this Agreement as, in their joint opinion, are consistent with the general tenor of this Agreement and with the specific provisions of this Section 9(d). Any such interpretations or clarifications shall be in writing signed by the parties and annexed hereto, but no such interpretation or clarification shall be effective if in contravention of any applicable federal or state law or regulations, and no such interpretation or clarification shall be deemed to be an amendment of this Agreement. No term or provision of this Agreement shall be construed to require the Distributor to provide distribution services to any series of the Trust other than the Series, or to require any Series to pay any compensation or expenses that are properly allocable, in a manner approved by the Trustees, to a series of the Trust other than such Series. (e) This Agreement is made and to be principally performed in the State of New York, and except insofar as the 1940 Act or other federal laws and regulations may be controlling, this Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York. (f) This Agreement is made by the Trust solely with respect to the Series, and the obligations created hereby are not binding on any other series of the Trust, but bind only assets belonging to the Series. 10. The Distributor or one of its affiliates may from time to time deem it desirable to offer to the list of shareholders of each Series the shares of other mutual funds for which it acts as Distributor, including other series of the Trust or other products or services; however, any such use of the list of shareholders of any Series shall be made subject to such terms and conditions, if any, as shall be approved by a majority of the Disinterested Trustees. 11. The Distributor shall look only to the assets of a Series for the performance of this Agreement by the Trust on behalf of such Series, and neither the Trustees nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. - 4 - IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed by their duly authorized officers and under their respective seals. NEUBERGER & BERMAN EQUITY TRUST Attest: By: /s/ Michael J. Weiner ------------------------ Michael J. Weiner /s/ Claudia A. Brandon Title: Vice President ----------------------- Claudia A. Brandon Secretary NEUBERGER & BERMAN MANAGEMENT INCORPORATED Attest: By: /s/ Stanley Egener ------------------------- Stanley Egener /s/ Ellen Metzger Title: President ----------------------- Ellen Metzger Secretary Dated: August 3, 1993 - 5 - EX-99.B6(B) 7 DISTRIBUTION AGREEMENT SCHEDULE A The Series of Neuberger & Berman Equity Trust currently subject to this Agreement are as follows: INITIAL SERIES Neuberger & Berman Focus Trust Neuberger & Berman Genesis Trust Neuberger & Berman Guardian Trust Neuberger & Berman Manhattan Trust Neuberger & Berman Partners Trust ADDITIONAL SERIES Neuberger & Berman NYCDC Socially Responsive Trust EX-99.B8(A) 8 CUSTODIAN CONTRACT Between NEUBERGER & BERMAN EQUITY TRUST and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS ----------------- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page ---- 1. Employment of Custodian and Property to be Held By It . . . . 1 2. Duties of the Custodian with Respect to Property of the Fund Held by the Custodian in the United States . . . . 2 2.1 Holding Securities . . . . . . . . . . . . . . . . . . 2 2.2 Delivery of Securities . . . . . . . . . . . . . . . . 2 2.3 Registration of Securities . . . . . . . . . . . . . . 5 2.4 Bank Accounts . . . . . . . . . . . . . . . . . . . . 5 2.5 Availability of Federal Funds . . . . . . . . . . . . 5 2.6 Collection of Income . . . . . . . . . . . . . . . . . 6 2.7 Payment of Fund Monies . . . . . . . . . . . . . . . . 6 2.8 Liability for Payment in Advance of Receipt of Securities Purchased . . . . . . . . . . . . . . . . . 8 2.9 Appointment of Agents . . . . . . . . . . . . . . . . 8 2.10 Deposit of Fund Assets in Securities System . . . . . 8 2.11 Fund Assets Held in the Custodian's Direct Paper System . . . . . . . . . . . . . . . . . 9 2.12 Segregated Account . . . . . . . . . . . . . . . . . . 10 2.13 Ownership Certificates for Tax Purposes . . . . . . . 11 2.14 Proxies . . . . . . . . . . . . . . . . . . . . . . . 11 2.15 Communications Relating to Portfolio Securities . . . 11 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States . . . . . . . . . . 12 3.1 Appointment of Foreign Sub-Custodians . . . . . . . 12 3.2 Assets to be Held . . . . . . . . . . . . . . . . . . 12 3.3 Foreign Securities Depositories . . . . . . . . . . . 12 3.4 Agreements with Foreign Banking Institutions . . . . . 12 3.5 Access of Independent Accountants of the Fund . . . . 13 3.6 Reports by Custodian . . . . . . . . . . . . . . . . . 13 3.7 Transactions in Foreign Custody Account . . . . . . . 13 3.8 Liability of Foreign Sub-Custodians . . . . . . . . . 14 3.9 Liability of Custodian . . . . . . . . . . . . . . . . 14 3.10 Reimbursement for Advances . . . . . . . . . . . . . . 15 3.11 Monitoring Responsibilities . . . . . . . . . . . . . 16 3.12 Branches of U.S. Banks . . . . . . . . . . . . . . . . 16 3.13 Foreign Exchange Transactions . . . . . . . . . . . . 17 3.13 Tax Law . . . . . . . . . . . . . . . . . . . . . . . 17 4. Payments for Sales or Repurchase or Redemptions of Shares of the Fund . . . . . . . . . . . . . . . . . . . . 18 5. Proper Instructions . . . . . . . . . . . . . . . . . . . . . 19 6. Actions Permitted Without Express Authority . . . . . . . . . 19 7. Evidence of Authority . . . . . . . . . . . . . . . . . . . . 20 8. Duties of Custodian With Respect to the Books of Account and Calculation of Net Asset Value and Net Income . . . . . . . . 20 9. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 10. Opinion of Fund's Independent Accountants . . . . . . . . . . 21 11. Reports to Fund by Independent Public Accountants . . . . . . 21 12. Compensation of Custodian . . . . . . . . . . . . . . . . . . 21 13. Responsibility of Custodian . . . . . . . . . . . . . . . . . 22 14. Effective Period, Termination and Amendment . . . . . . . . . 23 15. Successor Custodian . . . . . . . . . . . . . . . . . . . . . 24 16. Interpretive and Additional Provisions . . . . . . . . . . . . 24 17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . . 25 18. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 25 19. Limitation of Trustee, Officer and Shareholder Liability . . . 25 20. No Liability of Other Portfolios . . . . . . . . . . . . . . . 26 21. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 26 22. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 26 23. Severability . . . . . . . . . . . . . . . . . . . . . . . . . 26 24. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . 26 25. Shareholder Communications Election . . . . . . . . . . . . . 26 CUSTODIAN CONTRACT ------------------ This Contract between Neuberger & Berman Equity Trust, a business trust organized and existing under the laws of Delaware, having its principal place of business at 605 Third Avenue, New York, New York 10158 hereinafter called the "Fund", and State Street Bank and Trust Company, a Massachusetts trust company, having its principal place of business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the "Custodian", WITNESSETH: WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund intends to initially offer shares in six series, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger & Berman Partners Trust, Neuberger & Berman Manhattan Trust, and Neuberger & Berman Selected Sectors Trust (such series together with all other series subsequently established by the Fund and made subject to this Contract in accordance with paragraph 17, being herein referred to as the "Portfolio(s)"); NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows: 1. Employment of Custodian and Property to be Held by It ----------------------------------------------------- The Fund hereby employs the Custodian as the custodian of the assets of each Portfolio, including securities which the Fund, on behalf of the applicable Portfolio desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities") pursuant to the provisions of the Trust Instrument. The Fund on behalf of each Portfolio agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of beneficial interest of the Fund representing interests in the Portfolios, ("Shares") as may be issued or sold from time to time. The Custodian shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to the Custodian. Upon receipt of "Proper Instructions" (within the meaning of Article 5), the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians, located in the United States but only in accordance with an applicable vote by the Board of 1 Trustees of the Fund on behalf of the applicable Portfolio(s), and provided that the Custodian shall have no more or less responsibility or liability to the Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for the Fund's foreign securities on behalf of the applicable Portfolio(s) the foreign banking institutions and foreign securities depositories designated in Schedule A hereto but only in accordance with the provisions of Article 3. 2. Duties of the Custodian with Respect to Property of the Fund Held By the Custodian in the United States ----------------------------------------------------------------- 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States including all domestic securities owned by such Portfolio, other than (a) securities which are maintained pursuant to Section 2.10 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury, collectively referred to herein as "Securities System" and (b) commercial paper of an issuer for which State Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper") which is deposited and/or maintained in the Direct Paper System of the Custodian pursuant to Section 2.11. 2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian or in a Securities System account of the Custodian or in the Custodian's Direct Paper book entry system account ("Direct Paper System Account") only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: 1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor; 2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio; 3) In the case of a sale effected through a Securities System, in accordance with the provisions of Section 2.10 hereof; 4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio; 5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become 2 payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian; 6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.9 or into the name or nominee name of any sub-custodian appointed pursuant to Article 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; PROVIDED that, in any such case, the new securities are to be delivered to the Custodian; 7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct; 8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian; 10) For delivery in connection with any loans of securities made by the Portfolio, BUT ONLY against receipt of adequate collateral as agreed upon from time to time by the Custodian and the Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery 3 of securities owned by the Portfolio prior to the receipt of such collateral; 11) For delivery as security in connection with any borrowings by the Fund on behalf of the Portfolio requiring a pledge of assets by the Fund on behalf of the Portfolio, BUT ONLY against receipt of amounts borrowed; 12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio of the Fund; 13) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian, and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio of the Fund; 14) Upon receipt of instructions from the transfer agent ("Transfer Agent") for a Portfolio, for delivery to such Transfer Agent or to the holders of shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund, related to the Portfolio ("Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption; and 15) For any other proper corporate purpose, BUT ONLY upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Trustees or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, specifying the securities of the Portfolio to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 4 2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, UNLESS the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having the same investment adviser as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.9 or in the name or nominee name of any sub-custodian appointed pursuant to Article 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Contract shall be in "street name" or other good delivery form. If, however, the Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers. 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of the Fund which shall contain only property held by the Custodian as custodian for that Portfolio, subject only to draft or order by the Custodian acting pursuant to the terms of this Contract, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the Investment Company Act of 1940. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the Banking Department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; PROVIDED, however, that every such bank or trust company shall be qualified to act as a custodian under the Investment Company Act of 1940 and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board of Trustees of the Fund. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity. 2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon the receipt of Proper Instructions from the Fund on behalf of a Portfolio, make federal funds available to such Portfolio as of specified times agreed upon from time to time by the Fund and the Custodian in the amount of checks 5 received in payment for Shares of such Portfolio which are deposited into the Portfolio's account. 2.6 Collection of Income. Subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Collection of income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the Custodian so long as the securities are registered and remain in the name of the Fund, the Custodian, or its nominee, or in the Depository Trust Company account of the Custodian, but otherwise shall be the responsibility of the Fund and the Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled. 2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only: 1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the Investment Company Act of 1940, as amended, to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a Securities System, in accordance with the conditions set forth in Section 2.10 hereof; (c) in the case of a purchase involving the Direct Paper System, in accordance with the 6 conditions set forth in Section 2.11; (d) in the case of repurchase agreements entered into between the Fund on behalf of the Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined in Article 5; 2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof; 3) For the redemption or repurchase of Shares issued by the Portfolio as set forth in Article 4 hereof; 4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses; 5) For the payment of any dividends on Shares of the Portfolio declared pursuant to the governing documents of the Fund; 6) For payment of the amount of dividends received in respect of securities sold short; 7) For any other proper purpose, BUT ONLY upon receipt of, in addition to Proper Instructions from the Fund on behalf of the Portfolio, a certified copy of a resolution of the Board of Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. 7 2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except as specifically stated otherwise in this Contract, in any and every case where payment for purchase of domestic securities for the account of a Portfolio is made by the Custodian in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund on behalf of such Portfolio to so pay in advance, the Custodian shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by the Custodian. 2.9 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the Investment Company Act of 1940, as amended, and its rules or regulations to act as a custodian, as its agent to carry out such of the provisions of this Article 2 as the Custodian may from time to time direct; PROVIDED, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. 2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit and/or maintain securities owned by a Portfolio in a clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a securities depository, or in the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies, collectively referred to herein as "Securities System" in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, if any, and subject to the following provisions: 1) The Custodian may keep securities of the Portfolio in a Securities System provided that such securities are represented in an account ("Account") of the Custodian in the Securities System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 2) The records of the Custodian with respect to securities of the Portfolio which are maintained in a Securities System shall identify by book-entry those securities belonging to the Portfolio; 3) The Custodian shall pay for securities purchased for the account of the Portfolio upon (i) receipt of advice from the Securities System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon (i) receipt of advice from 8 the Securities System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transactions in the Securities System for the account of the Portfolio; 4) The Custodian shall provide the Fund for the Portfolio with any report obtained by the Custodian (or by any agent appointed by the Custodian pursuant to Section 2.9) on the Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities System; 5) The Custodian shall have received from the Fund on behalf of the Portfolio the certificate required by Article 14 hereof; 6) Anything to the contrary in this Contract notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage. 2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may deposit and/or maintain securities owned by a Portfolio in the Direct Paper System of the Custodian subject to the following provisions: 9 1) No transaction relating to securities in the Direct Paper System will be effected in the absence of Proper Instructions from the Fund on behalf of the Portfolio; 2) The Custodian may keep securities of the Portfolio in the Direct Paper System only if such securities are represented in an account ("Account") of the Custodian in the Direct Paper System which shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers; 3) The records of the Custodian with respect to securities of the Portfolio which are maintained in the Direct Paper System shall identify by book-entry those securities belonging to the Portfolio; 4) The Custodian shall pay for securities purchased for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such payment and transfer of securities to the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon the making of an entry on the records of the Custodian to reflect such transfer and receipt of payment for the account of the Portfolio; 5) The Custodian shall furnish the Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio, in the form of a written advice or notice, of Direct Paper on the next business day following such transfer and shall furnish to the Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transaction in the Securities System for the account of the Portfolio; 6) The Custodian shall provide the Fund on behalf of the Portfolio with any report on the Custodian's system of internal accounting control as the Fund may reasonably request from time to time. 2.12 Segregated Account. The Custodian shall upon receipt of Proper Instructions from the Fund on behalf of each applicable Portfolio establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity 10 Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in addition to Proper Instructions from the Fund on behalf of the applicable Portfolio, a certified copy of a resolution of the Board of Trustees or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities. 2.14 Proxies. The Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Portfolio such proxies, all proxy soliciting materials and all notices relating to such securities. 2.15 Communications Relating to Portfolio Securities. Subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Portfolio all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Portfolio desires to take action with respect to any tender 11 offer, exchange offer or any other similar transaction, the Portfolio shall when reasonably possible notify the Custodian at least three business days prior to the date on which the Custodian is to take such action. 3. Duties of the Custodian with Respect to Property of the Fund Held Outside of the United States ----------------------------------------------------------------- 3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and instructs the Custodian to employ as sub-custodians for each Portfolio's securities and other assets maintained outside the United States the foreign banking institutions and foreign securities depositories designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as defined in Section 5 of this Contract, together with a certified resolution of the Fund's Board of Trustees, the Custodian and the Fund may agree to amend Schedule A hereto from time to time to designate additional foreign banking institutions and foreign securities depositories to act as sub-custodian. Upon receipt of Proper Instructions, the Fund may instruct the Custodian to cease the employment of any one or more such sub-custodians for maintaining custody of a Portfolio's assets. 3.2 Assets to be Held. The Custodian shall limit the securities and other assets maintained in the custody of the foreign sub-custodians to: (a) "foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of 1940, and (b) cash and cash equivalents in such amounts as the Custodian or the Fund may determine to be reasonably necessary to effect a Portfolio's foreign securities transactions. The Custodian shall identify on its books as belonging to each Portfolio, the foreign securities of the Portfolio held by each foreign sub-custodian. 3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon in writing by the Custodian and the Fund, assets of each Portfolio shall be maintained in foreign securities depositories only through arrangements implemented by the foreign banking institutions serving as sub-custodians pursuant to the terms hereof. Where possible, such arrangements shall include entry into agreements containing the provisions set forth in Section 3.4 hereof. 3.4 Agreements with Foreign Banking Institutions. Each agreement with a foreign banking institution shall be substantially in the form set forth in Exhibit 1 hereto and shall provide that: (a) the assets of each Portfolio will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the foreign banking institution or its creditors or agent, except a claim of payment for their safe custody or administration; (b) 12 beneficial ownership for the assets of each Portfolio will be freely transferable without the payment of money or value other than for custody or administration; (c) adequate records will be maintained identifying the assets as belonging to each applicable Portfolio; (d) officers of or auditors employed by, or other representatives of the Custodian, including to the extent permitted under applicable law the independent public accountants for the Fund, will be given access to the books and records of the foreign banking institution relating to its actions under its agreement with the Custodian; and (e) assets of each Portfolio held by the foreign sub-custodian will be subject only to the instructions of the Custodian or its agents. 3.5 Access of Independent Accountants of the Fund. Upon request of the Fund, the Custodian will use its best efforts to arrange for the independent accountants of the Fund to be afforded access to the books and records of any foreign banking institution employed as a foreign sub-custodian insofar as such books and records relate to the performance of such foreign banking institution under its agreement with the Custodian. 3.6 Reports by Custodian. The Custodian will supply to the Fund from time to time, as mutually agreed upon, statements in respect of the securities and other assets of each Portfolio held by foreign sub-custodians, including but not limited to an identification of entities having possession of each Portfolio's securities and other assets and advices or notifications of any transfers of securities to or from each custodial account maintained by a foreign banking institution for the Custodian on behalf of each applicable Portfolio indicating, as to securities acquired for a Portfolio, the identity of the entity having physical possession of such securities. 3.7 Transactions in Foreign Custody Account. (a) Except as otherwise provided in paragraph (b) of this Section 3.7, the provision of Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS MUTANDIS to the foreign securities of the Fund held outside the United States by foreign sub-custodians. (b) Notwithstanding any provision of this Contract to the contrary, settlement and payment for securities received for the account of each applicable Portfolio and delivery of securities maintained for the account of each applicable Portfolio may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer. 13 (c) Securities maintained in the custody of a foreign sub-custodian may be maintained in the name of such entity's nominee to the same extent as set forth in Section 2.3 of this Contract, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such securities. 3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a foreign banking institution as a foreign sub-custodian shall require the institution to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian and the Fund from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the institution's performance of such obligations. At the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a foreign banking institution as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund has not been made whole for any such loss, damage, cost, expense, liability or claim. 3.9 Liability of Custodian. The Custodian shall be liable for the acts or omissions of a foreign banking institution to the same extent as set forth with respect to sub-custodians generally in this Contract and, regardless of whether assets are maintained in the custody of a foreign banking institution, a foreign securities depository or a branch of a U.S. bank as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism or any loss where the sub-custodian has otherwise exercised reasonable care. Notwithstanding the foregoing provisions of this paragraph 3.9, in delegating custody duties to State Street London Ltd., the Custodian shall not be relieved of any responsibility to the Fund for any loss due to such delegation, except such loss as may result from (a) political risk (including, but not limited to, exchange control restrictions, confiscation, expropriation, nationalization, insurrection, civil strife or armed hostilities) or (b) other losses (excluding a bankruptcy or insolvency of State Street London Ltd. not caused by political risk) due to Acts of God, nuclear incident or the like, in each case under circumstances where the Custodian and State Street London Ltd. have exercised reasonable care. 3.10 Reimbursement for Advances. If the Fund requires the Custodian to advance cash or securities for any purpose for the benefit of a Portfolio including the purchase or sale of foreign exchange or of contracts for foreign exchange ("Advance"), or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Contract, except such as 14 may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct ("Liability") then in such event property equal in value to not more than 125% of such Advance and accrued interest on the Advance or the anticipated amount of such Liability, held at any time for the account of the appropriate Portfolio by the Custodian or sub- custodian may be held as security for such Liability or for such Advance and accrued interest on the Advance. The Custodian shall designate the security or securities constituting security for an Advance or Liability (the "Designated Securities") by notice in writing to the Fund (which may be sent by tested telefax or telex). In the event the value of the Designated Securities shall decline to less than 110% of the amount of such Advance and accrued interest on the Advance or the anticipated amount of such Liability, then the Custodian may designate in the same manner an additional security for such obligation ("Additional Securities"), but the aggregate value of the Designated Securities and Additional Securities shall not be in excess of 125% of the amount of such Advance and the accrued interest on the Advance or the anticipated amount of such Liability. At the request of the Fund, on behalf of a Portfolio, the Custodian shall agree to substitution of a security or securities which have a value equal to the value of the Designated or Additional Securities which the Fund desires be released from their status as security, and such release from status as security shall be effective upon the Custodian and the Fund agreeing in writing as to the identity of the substituted security or securities, which shall thereupon become Designated Securities. Notwithstanding the above, the Custodian shall, at the request of the Fund, on behalf of a Portfolio, immediately release from their status as security any or all of the Designated Securities or Additional Securities upon the Custodian's receipt from such of Portfolio cash or cash equivalents in an amount equal to 100% of the value of the Designated Securities or Additional Securities that the Fund desires to be released from their status as security pursuant to this Section. The applicable Portfolio shall reimburse or indemnify the Custodian in respect of a Liability and shall pay any Advances upon demand; provided, however, that the Custodian first notified the Fund on behalf of the Portfolio of such demand for repayment, reimbursement or indemnification. If, upon notification, the Portfolio shall fail to pay such Advance or interest when due or shall fail to reimburse or indemnify the Custodian promptly in respect of a Liability, the Custodian shall be entitled to dispose of the Designated Securities and Additional Securities to the extent necessary to obtain repayment, reimbursement or indemnification. Interest, dividends and other distributions paid or received on the Designated Securities and Additional Securities, other than payments of principal or payments upon retirement, redemption or repurchase, shall remain the property of the Portfolio, and shall not be subject to this Section. To the extent that the 15 disposition of the Portfolio's property, designated as security for such Advance or Liability, results in an amount less than necessary to obtain repayment, reimbursement or indemnification, the Portfolio shall continue to be liable to the Custodian for the differences between the proceeds of the disposition of the Portfolio's property, designated as security for such Advance or Liability, and the amount of the repayment, reimbursement or indemnification due to the Custodian and the Custodian shall have the right to designate in the same manner described above an additional security for such obligation which shall constitute Additional Securities hereunder. 3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the Fund, during the month of June, information concerning the foreign sub-custodians employed by the Custodian. Such information shall be similar in kind and scope to that furnished to the Fund in connection with the initial approval of this Contract. In addition, the Custodian will promptly inform the Fund in the event that the Custodian learns of a material adverse change in the financial condition of a foreign sub-custodian or any material loss of the assets of the Fund or in the case of any foreign sub-custodian not the subject of an exemptive order from the Securities and Exchange Commission is notified by such foreign sub-custodian that there appears to be a substantial likelihood that its shareholders' equity will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has declined below $200 million (in each case computed in accordance with generally accepted U.S. accounting principles). 3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this Contract, the provisions hereof shall not apply where the custody of a Portfolio's assets are maintained in a foreign branch of a banking institution which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of 1940 meeting the qualification set forth in Section 26(a) of said Act. The appointment of any such branch as a sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash held for each Portfolio of the Fund in the United Kingdom shall be maintained in an interest bearing account established for the Fund with the Custodian's London branch, which account shall be subject to the direction of the Custodian, State Street London Ltd. or both. 3.13 Foreign Exchange Transactions. (a) Upon receipt of Proper Instructions, the Custodian shall settle foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of a Portfolio with such brokers, banks or trust companies other than the Custodian ("Currency Brokers") as the Fund may determine and 16 direct pursuant to Proper Instructions or as the Custodian may select ("Transactions Other Than As Principal"). (b). The Custodian shall not be obligated to enter into foreign exchange transactions as principal ("Transactions As Principal"). However, if the Custodian has made available to the Fund its services as a principal in foreign exchange transactions and subject to any separate agreement between the parties relating to such transactions, the Custodian shall enter into foreign exchange contracts or options to purchase and sell foreign currencies for spot and future delivery on behalf of and for the account of a Portfolio, with the Custodian as principal. (c) If, in a Transaction Other Than As Principal, a Currency Broker is selected by the Fund, on behalf of a Portfolio, the Custodian shall have no duty with respect to the selection of the Currency Broker, or, so long as the Custodian acts in accordance with Proper Instructions, for the failure of such Currency Broker to comply with the terms of any contract or option. If, in a Transaction Other Than As Principal, the Currency Broker is selected by the Custodian or if the Custodian enters into a Transaction As Principal, the Custodian shall be responsible for the selection of the Currency Broker and the failure of such Currency Broker to comply with the terms of nay contract or option. (d) In Transactions Other Than As Principal and Transactions As Principal, the Custodian shall be responsible for any transfer of cash, the transmission of instructions to and from a Currency Broker, if any, the safekeeping of all certificates and other documents and agreements evidencing or relating to such foreign exchange transactions and the maintenance of proper records as set forth in Section 9 of this Contract. 3.14 Tax Law. Except to the extent that imposition of any tax liability arises from State Street's failure to perform in accordance with the terms of this Section 3.14 or from the failure of any sub-custodian to perform in accordance with the terms of the applicable subcustody agreement, State Street shall have no responsibility or liability for any obligations now or hereafter imposed on each Portfolio by the tax law of the domicile of each Portfolio or of any jurisdiction in which each Portfolio is invested or any political subdivision thereof. It shall be the responsibility of State Street to use due care to perform such steps as are required to collect any tax refund, to ascertain the appropriate rate of tax withholding and to provide such information and documents as may be required to enable each Portfolio to receive appropriate tax treatment under applicable tax laws and any applicable treaty provisions. Unless otherwise informed by each Portfolio, State Street, in performance of its duties under this Section, shall be entitled to apply categorical treatment of each Portfolio according to the nationality of each Portfolio, the particulars of its organization and other relevant 17 details that shall be supplied by each Portfolio. State Street shall be entitled to rely on any information supplied by each Portfolio. State Street may engage reasonable professional advisors disclosed to each Portfolio by State Street, which may include attorneys, accountants or financial institutions in the regular business of investment administration and may rely upon advice received therefrom. It shall be the duty of each Portfolio to inform State Street of any change in the organization, domicile or other relevant fact concerning tax treatment of each Portfolio and further to inform State Street if each Portfolio is or becomes the beneficiary of any special ruling or treatment not applicable to the general nationality and category of entity of which each Portfolio is a part under general laws and treaty provisions. 4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund ----------------------------------------------------------------- The Custodian shall receive from the distributor for the Shares or from the Transfer Agent of the Fund and deposit into the account of the appropriate Portfolio such payments as are received for Shares of that Portfolio issued or sold from time to time by the Fund. The Custodian will provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio. From such funds as may be available for the purpose but subject to the limitations of the Trust Instrument and any applicable votes of the Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by the Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between the Fund and the Custodian. 5. Proper Instructions ------------------- Proper Instructions as used throughout this Contract means a writing signed or initialled by two or more person or persons as the Board of Trustees shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if 18 the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of Trustees of the Fund accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Fund and the Custodian are satisfied that such procedures afford adequate safeguards for the Portfolios' assets. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three - party agreement which requires a segregated asset account in accordance with Section 2.12. 6. Actions Permitted without Express Authority ------------------------------------------- The Custodian may in its discretion, without express authority from the Fund on behalf of each applicable Portfolio: 1) make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Contract, PROVIDED that all such payments shall be accounted for to the Fund on behalf of the Portfolio; 2) surrender securities in temporary form for securities in definitive form; 3) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and 4) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board of Trustees of the Fund. 7. Evidence of Authority --------------------- The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the Fund. The Custodian may receive and accept a certified copy of a vote of the Board of Trustees of the Fund as conclusive evidence (a) of the authority of any person to act in accordance with such vote or (b) of any determination or of any action by the Board of Trustees pursuant to the Trust Instrument as described in such vote, and such vote may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary. 19 8. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income ------------------------------------------------------------ If, and to the extent requested by the Fund, the Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Board of Trustees of the Fund to keep the books of account of each Portfolio and/or compute the net asset value per share of the outstanding shares of each Portfolio or, if directed in writing to do so by the Fund on behalf of the Portfolio, shall itself keep such books of account and/or compute such net asset value per share. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Fund's currently effective prospectus related to such Portfolio and shall advise the Fund and the Transfer Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. The calculations of the net asset value per share and the daily income of each Portfolio shall be made at the time or times described from time to time in the Fund's currently effective prospectus related to such Portfolio. 9. Records ------- The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Contract in such manner as will meet the obligations of the Fund under the Investment Company Act of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Fund and employees and agents of the Securities and Exchange Commission. The Custodian shall, at the Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. 10. Opinion of Fund's Independent Accountant ---------------------------------------- The Custodian shall take all reasonable action, as the Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities and Exchange Commission and with respect to any other requirements of such Commission. 20 11. Reports to Fund by Independent Public Accountants ------------------------------------------------- The Custodian shall provide the Fund, on behalf of each Portfolio at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities System, relating to the services provided by the Custodian under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 12. Compensation of Custodian ------------------------- The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between the Fund on behalf of each applicable Portfolio and the Custodian. 13. Responsibility of Custodian --------------------------- So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Contract and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Contract, but shall be kept indemnified by and shall be without liability to the Fund for any action taken or omitted by it in good faith without negligence. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. As a condition to the indemnification provided for in this Section 13, if in any case the indemnifying party is asked to indemnify and hold the indemnified party harmless, the indemnified party shall fully and promptly advise the indemnifying party of all pertinent facts concerning the situation in question, and shall use all reasonable care to identify, and promptly notify the indemnifying party of, any situation which presents or appears likely to present the probability of such a claim for indemnification against the indemnifying party. The indemnifying party shall be entitled, at its own expense, to participate in the investigation and to be consulted as to the defense of any such claim, and in such event, the indemnified party shall keep the indemnifying party fully and currently informed of all developments 21 relating to such investigation or defense. At any time, the indemnifying party shall be entitled at its own expense to conduct the defense of any such claim, provided that the indemnifying party: (a) reasonably demonstrates to the other party its ability to pay the full amount of potential liability in connection with such claim and (b) first admits in writing to the other party that such claim is one in respect of which the indemnifying party is obligated to indemnify the other party hereunder. Upon satisfaction of the foregoing conditions, the indemnifying party shall take over complete defense of the claim, and the indemnified party shall initiate no further legal or other expenses for which it shall seek indemnification. The indemnified party shall in no case confess any claim or make any compromise in any case in which the indemnifying party may be asked to indemnify the indemnified party, except with the indemnifying party's prior written consent. If the Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, the Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it. 14. Effective Period, Termination and Amendment ------------------------------------------- This Contract shall become effective as of its execution, shall continue in full force and effect with respect to each Portfolio until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; PROVIDED, however that the Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees of the Fund has approved the use of a particular Securities System by such Portfolio as required by Rule 17f-4 under the Investment Company Act of 1940, as amended and that the Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Trustees has approved the initial use of the Direct Paper System by such Portfolio and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Trustees has reviewed the use by such Portfolio of the Direct Paper System; PROVIDED FURTHER, however, that the Fund shall not amend or terminate this Contract in contravention of any applicable federal or state regulations, or any provision of the Trust Instrument, and further provided, that the Fund on behalf of one or more of the Portfolios may at any time by action of its Board of Trustees (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) 22 immediately terminate this Contract in the event of the appointment of a conservator or receiver for the Custodian by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Contract, the Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements. Termination of the Contract with respect to one Portfolio (but less than all of the Portfolios) will not constitute termination of the Contract, and the terms of the Contract continue to apply to the other Portfolios. 15. Successor Custodian ------------------- If a successor custodian for the Fund, of one or more of the Portfolios shall be appointed by the Board of Trustees of the Fund, the Custodian shall, upon termination, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System. If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of a certified copy of a vote of the Board of Trustees of the Fund, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such vote. In the event that no written order designating a successor custodian or certified copy of a vote of the Board of Trustees shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the Investment Company Act of 1940, doing business in Boston, Massachusetts, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Contract on behalf of each applicable Portfolio and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Trustees to appoint a successor custodian, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, 23 funds and other properties and the provisions of this Contract relating to the duties and obligations of the Custodian shall remain in full force and effect. 16. Interpretive and Additional Provisions -------------------------------------- In connection with the operation of this Contract, the Custodian and the Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Contract as may in their joint opinion be consistent with the general tenor of this Contract. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, PROVIDED that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the Trust Instrument of the Fund. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Contract. 17. Additional Funds ---------------- In the event that the Fund establishes one or more series of Shares in addition to Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger & Berman Partners Trust, Neuberger & Berman Manhattan Trust, and Neuberger & Berman Selected Sectors Trust with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder. 18. Massachusetts Law to Apply -------------------------- This Contract shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts. 19. Limitation of Trustee, Officer and Shareholder Liability -------------------------------------------------------- It is expressly agreed that the obligations of the Fund and each Portfolio hereunder shall not be binding upon any of the Trustees, officers, agents or employees of the Fund or upon the shareholders of any Portfolio personally, but shall only bind the assets and property of the Fund, as provided in its Trust Instrument. The execution and delivery of this Contract have been authorized by the Trustees of the Fund, and this Contract has been executed and delivered by an authorized officer of the Fund acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them 24 personally, but shall bind only the assets and property of the Fund, as provided in its Trust Instrument. 20. No Liability of Other Portfolios -------------------------------- Notwithstanding any other provision of this Contract, the parties agree that the assets and liabilities of each Portfolio are separate and distinct from the assets and liabilities of each other Portfolio and that no Portfolio shall be liable or shall be charged for any debt, obligation or liability of any other Portfolio, whether arising under this Contract or otherwise. 21. Confidentiality --------------- The Custodian agrees that all books, records, information and data pertaining to the business of the Fund which are exchanged or received pursuant to the negotiation or carrying out of this Contract shall remain confidential, shall not be voluntarily disclosed to any other person, except as may be required by law, and shall not be used by the Custodian for any purpose not directly related to the business of the Fund, except with the Fund's written consent. 22. Assignment ---------- Neither the Fund nor the Custodian shall have the right to assign any of its rights or obligations under this Contract without the prior written consent of the other party. 23. Severability ------------ If any provision of this Contract is held to be unenforceable as a matter of law, the other terms and provisions hereof shall not be affected thereby and shall remain in full force and effect. 24. Prior Contracts --------------- This Contract supersedes and terminates, as of the date hereof, all prior contracts between the Fund on behalf of each of the Portfolios, or any predecessor(s) thereto, and the Custodian relating to the custody of the Fund's assets. 25. Shareholder Communications Election ----------------------------------- Securities and Exchange Commission Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of 25 beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs the Fund to indicate whether it authorizes the Custodian to provide the Fund's name, address, and share position to requesting companies whose securities the Fund owns. If the Fund tells the Custodian "no", the Custodian will not provide this information to requesting companies. If the Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For the Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below. YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions. NO [x] The Custodian is not authorized to release the Fund's name, address, and share positions. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the 2nd day of August, 1993. ATTEST NEUBERGER & BERMAN EQUITY TRUST /s/ Claudia A. Brandon /s/ Stanley Egener ---------------------- By ------------------------------ Claudia A. Brandon Stanley Egener CEO ATTEST STATE STREET BANK AND TRUST COMPANY /s/ Officer /s/ Ronald E. Logue _____________________ By --------------------------------- Ronald E. Logue Executive Vice President 26 EX-99.B9(A)(I) 9 TRANSFER AGENCY AND SERVICE AGREEMENT between NEUBERGER & BERMAN EQUITY TRUST and STATE STREET BANK AND TRUST COMPANY TABLE OF CONTENTS ----------------- Page ---- 1. Terms of Appointment; Duties of the Bank . . . . . . . . 1 2. Fees and Expenses . . . . . . . . . . . . . . . . . 4 3. Representations and Warranties of the Bank . . . . . 4 4. Representations and Warranties of the Fund . . . . . 5 5. Data Access and Proprietary Information . . . . . . 5 6. Indemnification . . . . . . . . . . . . . . . . . . 7 7. Covenants of the Fund and the Bank . . . . . . . . . 8 8. Termination of Agreement . . . . . . . . . . . . . . 9 9. Additional Funds . . . . . . . . . . . . . . . . . . 10 10. Assignment . . . . . . . . . . . . . . . . . . . . . 10 11. Amendment . . . . . . . . . . . . . . . . . . . . . 10 12. Massachusetts Law to Apply . . . . . . . . . . . . . 10 13. Force Majeure . . . . . . . . . . . . . . . . . . . 11 14. Consequential Damages . . . . . . . . . . . . . . . 11 15. Merger of Agreement . . . . . . . . . . . . . . . . 11 16. Limitations of Liability of the Trustees, Shareholders, Officers, Employees and Agent . . . . 11 17. Counterparts . . . . . . . . . . . . . . . . . . . . 11 18. Notices . . . . . . . . . . . . . . . . . . . . . . 11 TRANSFER AGENCY AND SERVICE AGREEMENT ------------------------------------- AGREEMENT made as of the 2nd day of August, 1993, by and between NEUBERGER & BERMAN EQUITY TRUST, a Delaware business trust, having its principal office and place of business at 605 Third Avenue, New York, New York 10158 (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Bank"). WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and WHEREAS, the Fund intends to initially offer shares in five series, Neuberger & Berman Genesis Trust, Neuberger & Berman Guardian Trust, Neuberger & Berman Partners Trust, Neuberger & Berman Manhattan Trust, and Neuberger & Berman Selected Sectors Trust, (each such series, together with all other Portfolios subsequently established by the Fund and made subject to this Agreement in accordance with Article 9, being herein referred to as a "Portfolio", and collectively as the "Portfolios"); WHEREAS, the Fund on behalf of the Portfolios desires to appoint the Bank as its transfer agent, dividend disbursing agent, custodian of certain retirement plans and agent in connection with certain other activities, and the Bank desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: 1. Terms of Appointment; Duties of the Bank ---------------------------------------- 1.1 Subject to the terms and conditions set forth in this Agreement, the Fund, on behalf of the Portfolios, hereby employs and appoints the Bank to act as, and the Bank agrees to act as, its transfer agent for the Fund's authorized and issued shares of beneficial interest of the Fund representing interests in each of the respective Portfolios ("Shares"), dividend disbursing agent, custodian of certain retirement plans and agent in connection with any accumulation, open-account or similar plans provided to the shareholders of each of the respective Portfolios of the Fund ("Shareholders") and set out in the currently effective prospectus and statement of additional information ("prospectus") of the Fund on behalf of the applicable Portfolio, including without limitation any periodic investment plan or periodic withdrawal program. 1.2 The Bank agrees that it will perform the following services: (a) In accordance with procedures established from time to time by agreement between the Fund on behalf of each of the Portfolios, as applicable, and the Bank, the Bank shall: (i) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the Custodian of the Fund authorized pursuant to the Trust Instrument of the Fund (the "Custodian"); (ii) Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account; (iii) Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian: (iv) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders; (v) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions; (vi) Prepare and transmit (or credit the appropriate shareholder account) payments for dividends and distributions declared by the Fund on behalf of the applicable Portfolio; (vii) Issue replacement certificates for those certificates alleged to have been lost, stolen or destroyed upon receipt by the Bank of indemnification satisfactory to the Bank and protecting the Bank and the Fund, and the Bank at its option, may issue replacement certificates in place of mutilated stock certificates upon presentation thereof and without such indemnity; 2 (viii) Maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and (ix) Record the issuance of shares of the Fund and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of shares of the Fund which are authorized, based upon data provided to it by the Fund, and issued and outstanding. The Bank shall also provide the Fund on a regular basis with the total number of shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund. (b) In addition to and neither in lieu nor in contravention of the services set forth in the above paragraph (a), the Bank shall: (i) perform the customary services of a transfer agent, dividend disbursing agent, custodian of certain retirement plans and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program), including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, receiving and tabulating proxies, mailing Shareholder reports and prospectuses to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information and (ii) provide a system which will enable the Fund to monitor the total number of Shares sold in each State. (c) In addition, the Fund shall (i) identify to the Bank in writing those transactions and assets to be treated as exempt from blue sky reporting for each State and (ii) verify the establishment of transactions for each State 3 on the system prior to activation and thereafter monitor the daily activity for each State. The responsibility of the Bank for the Fund's blue sky State registration status is solely limited to the initial establishment of transactions subject to blue sky compliance by the Fund and the reporting of such transactions to the Fund as provided above. (d) Procedures as to who shall provide certain of these services in Section 1 may be established from time to time by agreement between the Fund on behalf of each Portfolio and the Bank per the attached service responsibility schedule. The Bank may at times perform only a portion of these services and the Fund or its agent may perform these services on the Fund's behalf. (e) The Bank shall provide additional services on behalf of the Fund (i.e., escheatment services) which may be agreed upon in writing between the Fund and the Bank. 2. Fees and Expenses ----------------- 2.1 For the performance by the Bank pursuant to this Agreement, the Fund, on behalf of each Portfolio agrees to pay the Bank an annual maintenance fee for each Shareholder account as set out in the initial fee schedule attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.2 below may be changed from time to time subject to mutual written agreement between the Fund and the Bank. 2.2 In addition to the fee paid under Section 2.1 above, the Fund, on behalf of the applicable Portfolio, agrees to reimburse the Bank for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by the Bank at the request or with the consent of the Fund, will be reimbursed by the Fund on behalf of the applicable Portfolio. 2.3 The Fund, on behalf of the applicable Portfolio, agrees to pay all fees and reimbursable expenses within five days following the mailing of the respective billing notice. Postage for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Bank by the Fund at least seven (7) days prior to the mailing date of such materials. 4 3. Representations and Warranties of the Bank ------------------------------------------ The Bank represents and warrants to the Fund that: 3.1 It is a trust company duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts. 3.2 It is duly qualified to carry on its business in the Commonwealth of Massachusetts. 3.3 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement. 3.4 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement. 3.5 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. 4. Representations and Warranties of the Fund ------------------------------------------ The Fund represents and warrants to the Bank that: 4.1 It is a business trust duly organized and existing and in good standing under the laws of Delaware. 4.2 It is empowered under applicable laws and by its Trust Instrument and By-Laws to enter into and perform this Agreement. 4.3 All corporate proceedings required by said Trust Instrument and By-Laws have been taken to authorize it to enter into and perform this Agreement. 4.4 It is an open-end management investment company registered under the Investment Company Act of 1940, as amended. 4.5 A registration statement under the Securities Act of 1933, as amended, on behalf of each of the Portfolios is currently effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale. 5. Data Access and Proprietary Information --------------------------------------- 5.1 The Fund acknowledges that the computer programs, screen formats, report formats (except such screen formats and report formats as may be necessary to respond to shareholder problems or inquiries), interactive design techniques, and documentation manuals furnished to the Fund by the Bank as part of the Fund's ability to access certain Fund-related data ("Customer Data") 5 maintained by the Bank on data bases under the control and ownership of the Bank or other third party ("Data Access Services") constitute copyrighted, trade secret, or other proprietary information (collectively, "Proprietary Information") of substantial value to the Bank or other third party. In no event shall Proprietary Information be deemed Customer Data. The Fund agrees to treat all Proprietary Information as proprietary to the Bank and further agrees that it shall not divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Fund agrees for itself and its employees and agents: (a) to access Customer Data solely from locations as may be designated in writing by the Bank and solely in accordance with the Bank's applicable user documentation; (b) to refrain from copying or duplicating in any way the Proprietary Information; (c) to refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with the Bank's instructions; (d) to honor all reasonable written requests made by the Bank to protect at the Bank's expense the rights of the Bank in Proprietary Information at common law, under federal copyright law and under other federal or state law. Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 5. The obligations of this Section shall survive any earlier termination of this Agreement. 5.2 If the Fund notifies the Bank that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Bank shall endeavor in a timely manner to correct such failure. Organizations from which the Bank may obtain certain data included in the Data Access Services are solely responsible for the contents of such data and the Fund agrees to make no claim against the Bank arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 6 5.3 If the transactions available to the Fund include the ability to originate electronic instructions to the Bank in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information (such transactions constituting a "COEFI"), then in such event the Bank shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with security procedures established by the Bank from time to time. 6. Indemnification --------------- 6.1 The Bank shall not be responsible for, and the Fund shall on behalf of the applicable Portfolio indemnify and hold the Bank harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to: (a) All actions of the Bank or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct. (b) The Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder. (c) The reliance on or use by the Bank or its agents or subcontractors of information, records, documents or services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent or registrar. (d) The reasonable reliance on, or the carrying out by the Bank or its agents or subcontractors of any instructions or requests of the Fund on behalf of the applicable Portfolio. (e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. 6.2 The Bank shall indemnify and hold the Fund and each Portfolio thereof harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributed to any action or failure or omission 7 to act by the Bank as a result of the lack of good faith, negligence or willful misconduct. 6.3 At any time the Bank may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be liable and shall be indemnified by the Fund on behalf of the applicable Portfolio for any action taken or omitted by it in reasonable reliance upon such instructions or upon the opinion of such counsel. The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Bank or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund. The Bank, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Fund, and the proper countersignature of any former transfer agent or former registrar, or of a co-transfer agent or co-registrar. 6.4 In order that the indemnification provisions contained in this Section 6 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the Fund of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim or to defend against said claim in its own name or in the name of the other party. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent. 7. Covenants of the Fund and the Bank ---------------------------------- 7.1 The Fund shall on behalf of each Portfolio promptly furnish to the Bank the following: (a) A certified copy of the resolution of the Trustees of the Fund authorizing the appointment of the Bank and the execution and delivery of this Agreement. (b) A copy of the Trust Instrument and By-Laws of the Fund and all amendments thereto. 8 7.2 The Bank hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices. 7.3 The Bank shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request. 7.4 The Bank and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law. 7.5 In case of any requests or demands for the inspection of the Shareholder records of the Fund, the Bank will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person. 7.6 Notwithstanding any other provision of this Agreement, the parties agree that the assets and liabilities of each Portfolio of the Fund are separate and distinct from the assets and liabilities of each other Portfolio and that no Portfolio shall be liable or shall be charged for any debt, obligation or liability of any other Portfolio, whether arising under this Agreement or otherwise. 8. Termination of Agreement ------------------------ 8.1 This Agreement may be terminated by either party upon one hundred twenty (120) days written notice to the other. 8.2 Should the Fund exercise its right to terminate, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund on behalf of the applicable Portfolio(s). Additionally, the Bank reserves the right to charge for any other reasonable expenses associated with such termination. 9 9. Additional Funds ---------------- In the event that the Fund establishes one or more series of Shares in addition to Neuberger & Berman Genesis Fund, Neuberger & Berman Guardian Fund, Neuberger & Berman partners Fund, Neuberger & Berman Manhattan Fund, and Neuberger & Berman Selected Sectors Fund, with respect to which it desires to have the Bank render services as transfer agent under the terms hereof, it shall so notify the Bank in writing, and if the Bank agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder. 10. Assignment ---------- 10.1 Except as provided in Section 10.3 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. 10.2 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. 10.3 The Bank may, without further consent on the part of the Fund, subcontract for the performance hereof with (i) Boston Financial Data Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as a transfer agent pursuant to Section 17A(c)(l) of the Securities Exchange Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered as a transfer agent pursuant to Section 17A(c)(l) or (iii) a BFDS affiliate; provided, however, that the Bank shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions. 11. Amendment --------- This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Trustees of the Fund. 12. Massachusetts Law to Apply -------------------------- This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts. 13. Force Majeure ------------- In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its 10 control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes. 14. Consequential Damages --------------------- Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement. 15. Merger of Agreement ------------------- This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written. 16. Limitations of Liability of the Trustees, Shareholders, Officers, Employees and Agent ----------------------------------------------------------------- A copy of the Trust Instrument of the Fund is on file with the Secretary of the State Of Delaware. The parties agree that neither the Shareholders, Trustees, officers, employees nor any agent of the Fund (other than the transfer agent) shall be liable hereunder and that the parties to this Agreement other than the Fund shall look solely to the Fund property for the performance of this Agreement or payment of any claim under this Agreement. 17. Counterparts ------------ This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 18. Notices ------- All notices, requests, consents and other communications hereunder (collectively "communications") shall be in writing and shall be personally delivered or mailed, first class postage prepaid, (a) if to the Fund, to Neuberger & Berman Equity Trust 605 Third Avenue New York, N.Y. 10158 Attention: Michael J. Weiner Vice President 11 (b) if to the Bank, to Boston Financial Data Services, Inc. Two Heritage Drive North Quincy, MA 02171 Attn: Paul Alsama or such other address as either party shall have furnished to the other in writing; PROVIDED that any communication may be sent by "tested" telex or any other form of electronic transmission capable of producing a permanent record and agreed upon by the parties in writing. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written. NEUBERGER & BERMAN EQUITY TRUST BY: /s/ Michael J. Weiner -------------------------- Michael J. Weiner ATTEST: /s/ Claudia A. Brandon ------------------------ Claudia A. Brandon STATE STREET BANK AND TRUST COMPANY BY: /s/ Ronald E. Logue ------------------------------- Ronald E. Logue Executive Vice President ATTEST: /s/ Officer ----------------------- 12 STATE STREET BANK & TRUST COMPANY FUND SERVICE RESPONSIBILITIES Service Performed Responsibility ----------------- -------------- Bank Fund ---- ---- 1. Receive orders for the X X purchase of Shares. (if in writing) (if by phone) 2. Issue Shares and hold Shares X in Shareholders accounts. 3. Receive redemption requests. X X (if in writing) (if by phone) 4. Effect transactions 1-3 X above directly with broker- (2 is always dealers. BFDS) 5. Pay over monies to redeeming X Shareholders. 6. Effect transfers of Shares. X 7. Prepare and transmit X dividends and distributions. 8. Issue Replacement X Certificates. 9. Reporting of abandoned X property. 10. Maintain records of account. X 11. Maintain and keep a current X and accurate control book for each issue of securities. 12. Mail proxies. X 13. Mail Shareholder reports. X 14. Mail prospectuses to current X Shareholders. 15. Withhold taxes on U.S. X resident and non-resident alien accounts. 16. Prepare and file U.S. X Treasury Department forms. 13 Service Performed Responsibility ----------------- -------------- Bank Fund ---- ---- 17. Prepare and mail account and X confirmation statements for Shareholders. 18. Provide Shareholder account X information. 19. Blue Sky reporting. X * Such services are more fully described in Section 1.2 (a), (b) and (c) of the Agreement. NEUBERGER & BERMAN EQUITY TRUST BY: /s/ Michael J. Weiner ------------------------------ Michael J. Weiner ATTEST: /s/ Claudia A. Brandon -------------------------- Claudia A. Brandon STATE STREET BANK AND TRUST COMPANY BY: /s/ Ronald E. Logue ------------------------------- Ronald E. Logue Executive Vice President ATTEST: /s/Officer -------------------------- 14 EX-99.B9(A)(II) 10 VIA FEDERAL EXPRESS ------------------- Sharon Baker Morin, Esq. State Street Bank and Trust Company 1776 Heritage Drive North Quincy, Massachusetts 02171-2197 Dear Sharon: Pursuant to section 9 of the transfer agency contract between State Street Bank and Trust Company ("State Street") and Neuberger & Berman Equity Trust dated as of August 2, 1993, we request that Neuberger & Berman NYCDC Socially Responsive Trust ("SR Trust") be added as a Portfolio governed by that transfer agency contract. The addition of SR Trust is effective as of March 7, 1994. Please indicate State Street's acceptance of this request by having a duly authorized officer of State Street sign in the space indicated below. Sincerely, /s/ Michael J. Weiner ------------------------ Name: Michael J. Weiner Title: Vice President Neuberger & Berman Equity Trust Accepted by State Street Bank and Trust Company /s/ Ronald E. Logue -------------------------------- Name: Ronald E. Logue Title: Executive Vice President EX-99.B9(A)(III) 11 FIRST AMENDMENT TO THE TRANSFER AGENCY AND SERVICE AGREEMENT This First Amendment dated as of March 1, 1995 between NEUBERGER & BERMAN EQUITY TRUST, a Delaware business trust, having its principal office and place of business at 605 Third Avenue, 2nd Floor, New York, NY 10158-0006 (the "Fund") and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, having its principal office and place of business at 225 Franklin Street, Boston, MA 02110 (the "Bank") is made to the Transfer Agency and Service Agreement dated as of August 2, 1993 between the Fund and the Bank (the "Agreement"). WHEREAS, pursuant to Section 10.3 of the Agreement, the Bank has subcontracted certain of its duties, such as the receipt of net orders for Fund shares (the "Shares"), to Boston Financial Data Services, Inc. ("BFDS"); and WHEREAS, BFDS provides its services through the DST System and certain subsystems of DST, such as DFE (collectively, "DST"); and WHEREAS, the Bank and the Fund desire to amend the terms and conditions of the Agreement to provide for changes related to the use of DST by the Fund and recordkeepers performing services for the Fund. NOW, THEREFORE, in consideration of the promises and mutual covenants hereinafter contained, the parties agree as follows: ARTICLE 1. DUTIES OF THE BANK The parties hereto agree that the Agreement is amended to add Section 1.2(f) as follows: Net orders may be transmitted to the Bank on DST or by facsimile or telephone. The Bank is not authorized to receive orders transmitted on DST from any party other than (i) NBMI and (ii) those parties set forth on Schedule A attached hereto, which shall be updated from time to time by the Fund (the "Designated Parties"). The Bank shall receive written approval from the Fund prior to authorizing any additional Designated Parties to use DST to place orders for Fund Shares. A Designated Party shall only be authorized to use DST to (i) transmit net orders for the purchase and redemption of Shares and (ii) review the account of that Designated Party's historical transactions. NBMI and the Designated Parties are authorized to place orders for trades received before 4:00 p.m. EST on a business day the New York Stock Exchange is open for business ("Business Day"), up to 9:30 p.m. EST that Business Day. No transactions occurring on a given Business Day are authorized to be transmitted on DST on the next Business Day. ARTICLE 2. MISCELLANEOUS (a) All other terms and conditions of the Agreement remain in full force and effect. (b) Terms used herein but not defined herein shall have the meanings set forth in the Agreement. (c) This First Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same First Amendment. Attest: NEUBERGER & BERMAN EQUITY TRUST /s/ Stacy Cooper-Shugrue /s/ Daniel J.Sullivan Stacy Cooper-Shugrue By: Daniel J. Sullivan ____________________________ ___________________________________ Assistant Secretary Title: Vice President Attest: STATE STREET BANK AND TRUST COMPANY /s/ S. Cesso /s/ Ronald E. Logue ____________________________ By: Ronald E. Logue ___________________________________ Title: Executive Vice President - 2 - SCHEDULE A DESIGNATED PARTIES HEWITT SERVICES STATE STREET BANK AND TRUST COMPANY FEDERATED RETIREMENT PLAN SERVICES THE SHAREHOLDERS SERVICE GROUP WILLIAM M. MERGER PLAN PARTICIPANT SERVICES EX-99.B9(B)(I) 12 ADMINISTRATION AGREEMENT This Agreement is made as of August 3, 1993, between Neuberger & Berman Equity Trust, a Delaware business trust ("Trust"), and Neuberger & Berman Management Incorporated, a New York corporation ("Administrator"). WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end, diversified management investment company and has established several separate series of shares ("Series"), with each Series having its own assets and investment policies; and WHEREAS, the Trust desires to retain the Administrator to furnish administrative services, including shareholder accounting, recordkeeping, and other services to shareholders, to each Series listed in Schedule A attached hereto, and to such other Series of the Trust hereinafter established as agreed to from time to time by the parties, evidenced by an addendum to Schedule A (hereinafter "Series" shall refer to each Series which is subject to this Agreement and all agreements and actions described herein to be made or taken by a Series shall be made or taken by the Trust on behalf of the Series), and the Administrator is willing to furnish such services, NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties agree as follows: 1. SERVICES OF THE ADMINISTRATOR. 1.1 ADMINISTRATIVE SERVICES. The Administrator shall supervise each Series's business and affairs and shall provide such services required for effective administration of such Series as are not provided by employees or other agents engaged by such Series; PROVIDED, that the Administrator shall not have any obligation to provide under this Agreement any direct or indirect services to a Series's shareholders, any services related to the distribution of a Series's shares, or any other services that are the subject of a separate agreement or arrangement between a Series and the Administrator. Subject to the foregoing, in providing administrative services hereunder, the Administrator shall: 1.1.1 OFFICE SPACE, EQUIPMENT AND FACILITIES. Furnish without cost to each Series, or pay the cost of, such office space, office equipment and office facilities as are adequate for the Series's needs; 1.1.2 PERSONNEL. Provide, without remuneration from or other cost to each Series, the services of individuals competent to perform all of the Series's executive, administrative and clerical functions that are not performed by employees or other agents engaged by the Series or by the Administrator acting in some other capacity pursuant to a separate agreement or arrangement with the Series; 1.1.3 AGENTS. Assist each Series in selecting and coordinating the activities of the other agents engaged by the Series, including the Series's shareholder servicing agent, custodian, independent auditors and legal counsel; 1.1.4 TRUSTEES AND OFFICERS. Authorize and permit the Administrator's directors, officers or employees who may be elected or appointed as trustees or officers of the Trust to serve in such capacities, without remuneration from or other cost to the Trust or any Series; 1.1.5 BOOKS AND RECORDS. Assure that all financial, accounting and other records required to be maintained and preserved by each Series are maintained and preserved by it or on its behalf in accordance with applicable laws and regulations; and 1.1.6 REPORTS AND FILINGS. Assist in the preparation of (but not pay for) all periodic reports by each Series to shareholders of such Series and all reports and filings required to maintain the registration and qualification of the Series and the Series's shares, or to meet other regulatory or tax requirements applicable to the Series, under federal and state securities and tax laws. 1.2 SHAREHOLDER AND RELATED SERVICES. The Administrator shall provide each of the following services as may be required by any Series, its shareholders (each of which must be either a broker-dealer, pension plan administrator, or other institution that provides certain accounting, recordkeeping and other services to its accounts ("Accounts") and which has entered into an administrative services agreement with the Administrator (each, an "Institution"), or the Accounts, as specified; PROVIDED, that the Administrator's obligation to furnish any service to Accounts or Account holders of any Institution shall be dependent upon receipt of all necessary information from that Institution: 1.2.1 PURCHASE ORDERS. Receive for acceptance, as agent for the Series, orders from Institutions and Accounts for the purchase of Series shares transmitted or delivered to the office of the Administrator, note the time and date of each order when received, promptly deliver payment for such purchases to the Series' custodian ("Custodian"), and coordinate with the Series or its designees for the issuance of the appropriate number of shares so purchased to the appropriate Institution or Account; 1.2.2 RECORDS. Maintain records of the number of shares of each Series attributable to each Account (including name, address and taxpayer identification number), record all changes to such shares held in each Account on a daily basis, and furnish to each Series each business day the total number of shares of such Series attributable to all Accounts; 1.2.3 REDEMPTION REQUESTS. Receive for acceptance requests and directions from Institutions and Accounts for the - 2 - redemption of Series shares transmitted or delivered to the office of the Administrator, note the time and date of each request when received, process such requests and directions in accordance with the redemption procedures set forth in the then current Prospectus and Statement of Additional Information ("SAI") of the Series, and deliver the appropriate documentation to the Custodian; 1.2.3 WIRE TRANSFERS. Coordinate and implement bank-to-bank wire transfers in connection with Series share purchases and redemptions by Institutions; 1.2.4 REDEMPTION PAYMENTS. Upon receipt of monies paid to it by the Custodian with respect to any redemption of Series shares, pay or cause such monies to be paid pursuant to instructions by the appropriate Account or Institution. 1.2.5 EXCHANGES. Receive and execute orders from Accounts and Institutions to exchange shares by concurrent purchases and redemptions of shares of a Series and shares of other Series or of other investment companies or series thereof pursuant to each Series's then current Prospectus and SAI; 1.2.6 DIVIDENDS. Based upon information received from a Series regarding dividends or other distributions on Series shares, calculate the dividend or distribution attributable to each Account; if such dividend or distribution is payable in shares or by reinvestment in shares, calculate such shares for each Account and record same in the share records for each Account, and if such dividend or distribution is payable in cash, upon receipt of monies therefor from the Custodian, pay or cause such monies to be paid to the appropriate Account or as such Account may direct; 1.2.7 INQUIRIES. Respond to telephonic, mail, and in-person inquiries from Institutions, Account holders, or their representatives requesting information regarding matters such as shareholder account or transaction status, net asset value ("NAV") of Series shares, Series performance, Series services, plans and options, Series investment policies, Series portfolio holdings, and Series distributions and taxation thereof; 1.2.8 COMPLAINTS. Deal with complaints and correspondence of Institutions and Account holders directed to or brought to the attention of the Administrator; 1.2.9 REPORTS; PROXIES. Distribute as appropriate to all Account holders all Series reports, dividend and distribution notices, and proxy material relating to any meeting of Series shareholders, and soliciting, processing and tabulating proxies for such meetings; 1.2.10 SPECIAL REPORTS. Generate or develop and distribute special data, notices, reports, programs and literature - 3 - required by Institutions or by Account holders generally in light of developments, such as changes in tax laws; and 1.2.11 AGENTS. Assist any institutional servicing agent ("Agent") engaged by the Series in the development, implementation and maintenance of the following special programs and systems to enhance each Series's capability to service its shareholders and Account holders servicing capability: (a) Training programs for personnel of such Agent; (b) Joint programs with such Agent for the development of systems software, shareholder information reports, and other special reports; (c) Automatic data exchange facilities with shareholders and such Agent; (d) Automated clearing house transfer procedures between shareholders and such Agent; and (e) Touch-tone telephone information and transaction systems for shareholders. 2. EXPENSES OF EACH SERIES. 2.1 EXPENSES TO BE PAID BY THE ADMINISTRATOR. The Administrator shall pay all salaries, expenses and fees of the officers, trustees, or employees of the Trust who are officers, directors or employees of the Administrator. If the Administrator pays or assumes any expenses of the Trust or a Series not required to be paid or assumed by the Administrator under this Agreement, the Administrator shall not be obligated hereby to pay or assume the same or any similar expense in the future; PROVIDED, that nothing herein contained shall be deemed to relieve the Administrator of any obligation to the Trust or to a Series under any separate agreement or arrangement between the parties. 2.2 EXPENSES TO BE PAID BY THE SERIES. Each Series shall bear all expenses of its operation, except those specifically allocated to the Administrator under this Agreement or under any separate agreement between such Series and the Administrator. Expenses to be borne by such Series shall include both expenses directly attributable to the operation of that Series and the offering of its shares, as well as the portion of any expenses of the Trust that is properly allocable to such Series in a manner approved by the trustees of the Trust ("Trustees"). Subject to any separate agreement or arrangement between the Trust or a Series and the Administrator, the expenses hereby allocated to each Series, and not to the Administrator, include, but are not limited to: - 4 - 2.2.1 CUSTODY. All charges of depositories, custodians, and other agents for the transfer, receipt, safekeeping, and servicing of its cash, securities, and other property; 2.2.2 SHAREHOLDER SERVICING. All expenses of maintaining and servicing shareholder accounts, including but not limited to the charges of any shareholder servicing agent, dividend disbursing agent or other agent (other than the Administrator hereunder) engaged by a Series to service shareholder accounts; 2.2.3 SHAREHOLDER REPORTS. All expenses of preparing, setting in type, printing and distributing reports and other communications to shareholders of a Series; 2.2.4 PROSPECTUSES. All expenses of preparing, setting in type, printing and mailing annual or more frequent revisions of a Series's Prospectus and SAI and any supplements thereto and of supplying them to shareholders of the Series and Account holders; 2.2.5 PRICING AND PORTFOLIO VALUATION. All expenses of computing a Series's net asset value ("NAV") per share, including any equipment or services obtained for the purpose of pricing shares or valuing the Series's investment portfolio; 2.2.6 COMMUNICATIONS. All charges for equipment or services used for communications between the Administrator or the Series and any custodian, shareholder servicing agent, portfolio accounting services agent, or other agent engaged by a Series; 2.2.7 LEGAL AND ACCOUNTING FEES. All charges for services and expenses of a Series's legal counsel and independent auditors; 2.2.8 TRUSTEES' FEES AND EXPENSES. All compensation of Trustees other than those affiliated with the Administrator, all expenses incurred in connection with such unaffiliated Trustees' services as Trustees, and all other expenses of meetings of the Trustees or committees thereof; 2.2.9 SHAREHOLDER MEETINGS. All expenses incidental to holding meetings of shareholders, including the printing of notices and proxy materials, and proxy solicitation therefor; 2.2.10 FEDERAL REGISTRATION FEES. All fees and expenses of registering and maintaining the registration of the Trust and each Series under the 1940 Act and the registration of each Series's shares under the Securities Act of 1933 (the "1933 Act"), including all fees and expenses incurred in connection with the preparation, setting in type, printing, and filing of any Registration Statement, Prospectus and SAI under the 1933 Act or the 1940 Act, and any amendments or supplements that may be made from time to time; - 5 - 2.2.11 STATE REGISTRATION FEES. All fees and expenses of qualifying and maintaining the qualification of the Trust and each Series and of each Series's shares for sale under securities laws of various states or jurisdictions, and of registration and qualification of each Series under all other laws applicable to a Series or its business activities (including registering the Series as a broker-dealer, or any officer of the Series or any person as agent or salesman of the Series in any state); 2.2.12 SHARE CERTIFICATES. All expenses of preparing and transmitting a Series's share certificates, if any; 2.2.13 CONFIRMATIONS. All expenses incurred in connection with the issue and transfer of a Series's shares, including the expenses of confirming all share transactions; 2.2.14 BONDING AND INSURANCE. All expenses of bond, liability, and other insurance coverage required by law or regulation or deemed advisable by the Trustees, including, without limitation, such bond, liability and other insurance expense that may from time to time be allocated to the Series in a manner approved by the Trustees; 2.2.15 BROKERAGE COMMISSIONS. All brokers' commissions and other charges incident to the purchase, sale or lending of a Series's portfolio securities; 2.2.16 TAXES. All taxes or governmental fees payable by or with respect to a Series to federal, state or other governmental agencies, domestic or foreign, including stamp or other transfer taxes; 2.2.17 TRADE ASSOCIATION FEES. All fees, dues and other expenses incurred in connection with a Series's membership in any trade association or other investment organization; 2.2.18 NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring and extraordinary expenses as may arise, including the costs of actions, suits, or proceedings to which the Series is a party and the expenses a Series may incur as a result of its legal obligation to provide indemnification to the Trust's officers, Trustees and agents; 2.2.19 ORGANIZATIONAL EXPENSES. All organizational expenses of each Series paid or assessed by the Administrator, which such Series shall reimburse to the Administrator at such time or times and subject to such condition or conditions as shall be specified in the Prospectus and SAI pursuant to which such Series makes the initial public offering of its shares; and 2.2.20 INVESTMENT ADVISORY SERVICES. Any fees and expenses for investment advisory services that may be incurred or contracted for by a Series. - 6 - 3. ADMINISTRATION FEE. 3.1 FEE. As compensation for all services rendered, facilities provided and expenses paid or assumed by the Administrator to or for each Series under this Agreement, such Series shall pay the Administrator an annual fee as set out in Schedule B to this Agreement. 3.2 COMPUTATION AND PAYMENT OF FEE. The administration fee shall accrue on each calendar day, and shall be payable monthly on the first business day of the next succeeding calendar month. The daily fee accruals for each Series shall be computed by multiplying the fraction of one divided by the number of days in the calendar year by the applicable annual administration fee rate (as set forth in Schedule B hereto), and multiplying this product by the NAV of such Series, determined in the manner set forth in such Series's then-current Prospectus, as of the close of business on the last preceding business day on which such Series's NAV was determined. 3.3 STATE EXPENSE LIMITATION. If in any fiscal year a Series's operating expenses plus such Series's pro rata portion of the operating expenses of any portfolio of Equity Managers Trust in which such Series invests all or substantially all of its assets ("Aggregate Operating Expenses"), which includes any fees or expense reimbursements payable to the Administrator pursuant to this Agreement and any compensation payable to the Administrator pursuant to (i) the Management Agreement between such portfolio and the Administrator, or (ii) any other agreement or arrangement with respect to such Series, but excluding interest, taxes, brokerage commissions, litigation and indemnification expenses, and other extraordinary expenses not incurred in the ordinary course of such Series's business) exceed the lowest applicable percentage expense limitation imposed under the securities law and regulations of any state in which such Series's shares are qualified for sale (the "State Expense Limitation"), then the administration fee payable to the Administrator under this Agreement by such Series shall be reduced by the amount of such excess; PROVIDED, that the Administrator shall have no obligation hereunder to reimburse the Series for any such expenses which exceed such administration fee. Any reduction in the administration fee shall be made monthly, by annualizing the Aggregate Operating Expenses of such Series for each month as of the last day of such month. An adjustment shall be made on or before the last day of the first month of the next succeeding fiscal year if Aggregate Operating Expenses for such Series's fiscal year do not exceed the State Expense Limitation or if for such fiscal year there is no applicable State Expense Limitation. 4. OWNERSHIP OF RECORDS. All records required to be maintained and preserved by each Series pursuant to the provisions or rules or regulations of the Securities and Exchange Commission ("SEC") under Section 31(a) of the 1940 Act and maintained and preserved by the Administrator on behalf of such Series are the property of such Series and shall be surrendered by the Administrator promptly on request by the - 7 - Series; PROVIDED, that the Administrator may at its own expense make and retain copies of any such records. 5. REPORTS TO ADMINISTRATOR. Each Series shall furnish or otherwise make available to the Administrator such copies of that Series's Prospectus, SAI, financial statements, proxy statements, reports, and other information relating to its business and affairs as the Administrator may, at any time or from time to time, reasonably require in order to discharge its obligations under this Agreement. 6. REPORTS TO EACH SERIES. The Administrator shall prepare and furnish to each Series such reports, statistical data and other information in such form and at such intervals as such Series may reasonably request. 7. OWNERSHIP OF SOFTWARE AND RELATED MATERIALS. All computer programs, written procedures and similar items developed or acquired and used by the Administrator in performing its obligations under this Agreement shall be the property of the Administrator, and no Series will acquire any ownership interest therein or property rights with respect thereto. 8. CONFIDENTIALITY. The Administrator agrees, on its own behalf and on behalf of its employees, agents and contractors, to keep confidential any and all records maintained and other information obtained hereunder which relates to any Series or to any of a Series's former, current or prospective shareholders, EXCEPT that the Administrator may deliver records or divulge information (a) when requested to do so by duly constituted authorities after prior notification to and approval in writing by such Series (which approval will not be unreasonably withheld and may not be withheld by such Series where the Administrator advises such Series that it may be exposed to civil or criminal contempt proceedings or other penalties for failure to comply with such request) or (b) whenever requested in writing to do so by such Series. 9. THE ADMINISTRATOR'S ACTIONS IN RELIANCE ON SERIES' INSTRUCTIONS, LEGAL OPINIONS, ETC.; SERIES' COMPLIANCE WITH LAWS. 9.1 The Administrator may at any time apply to an officer of the Trust for instructions, and may consult with legal counsel for a Series or with the Administrator's own legal counsel, in respect of any matter arising in connection with this Agreement; and the Administrator shall not be liable for any action taken or omitted to be taken in good faith in and with due care in accordance with such instructions or with the advice or opinion of such legal counsel. The Administrator shall be protected in acting upon any such instructions, advice or opinion and upon any other paper or document delivered by a Series or such legal counsel which the Administrator believes to be genuine and to have been signed by the proper person or persons, and the Administrator shall not be held to have notice of any change of status or authority of any officer or representative of the Trust, until receipt of written notice thereof from the Series. - 8 - 9.2 Except as otherwise provided in this Agreement or in any separate agreement between the parties and except for the accuracy of information furnished to each Series by the Administrator, each Series assumes full responsibility for the preparation, contents, filing and distribution of its Prospectus and SAI, and full responsibility for other documents or actions required for compliance with all applicable requirements of the 1940 Act, the Securities Exchange Act of 1934, the 1933 Act, and any other applicable laws, rules and regulations of governmental authorities having jurisdiction over such Series. 10. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the freedom of the Administrator or any affiliated person of the Administrator to render administrative or shareholder services to other investment companies, to act as administrator to other persons, firms, or corporations, or to engage in other business activities. 11. LIMITATION OF LIABILITY REGARDING THE TRUST. The Administrator shall look only to the assets of each Series for performance of this Agreement by the Trust on behalf of such Series, and neither the Trustees of the Trust ("Trustees") nor any of the Trust's officers, employees or agents, whether past, present or future shall be personally liable therefor. 12. INDEMNIFICATION BY SERIES. Each Series shall indemnify the Administrator and hold it harmless from and against any and all losses, damages and expenses, including reasonable attorneys' fees and expenses, incurred by the Administrator that result from: (i) any claim, action, suit or proceeding in connection with the Administrator's entry into or performance of this Agreement with respect to such Series; or (ii) any action taken or omission to act committed by the Administrator in the performance of its obligations hereunder with respect to such Series; or (iii) any action of the Administrator upon instructions believed in good faith by it to have been executed by a duly authorized officer or representative of the Trust with respect to such Series; PROVIDED, that the Administrator shall not be entitled to such indemnification in respect of actions or omissions constituting negligence or misconduct on the part of the Administrator or its employees, agents or contractors. Before confessing any claim against it which may be subject to indemnification by a Series hereunder, the Administrator shall give such Series reasonable opportunity to defend against such claim in its own name or in the name of the Administrator. 13. INDEMNIFICATION BY THE ADMINISTRATOR. The Administrator shall indemnify each Series and hold it harmless from and against any and all losses, damages and expenses, including reasonable attorneys' fees and expenses, incurred by such Series which result from: (i) the Administrator's failure to comply with the terms of this Agreement with respect to such Series; or (ii) the Administrator's lack of good faith in performing its obligations hereunder with respect to such Series; or (iii) the Administrator's negligence or misconduct or its employees, agents or contractors in connection herewith with respect to such Series. A Series shall not be entitled to such indemnification in respect of actions or - 9 - omissions constituting negligence or misconduct on the part of that Series or its employees, agents or contractors other than the Administrator unless such negligence or misconduct results from or is accompanied by negligence or misconduct on the part of the Administrator, any affiliated person of the Administrator, or any affiliated person of an affiliated person of the Administrator. Before confessing any claim against it which may be subject to indemnification hereunder, a Series shall give the Administrator reasonable opportunity to defend against such claim in its own name or in the name of the Trust on behalf of such Series. 14. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to require the Trust or any Series to take any action contrary to the Trust Instrument or By-laws of the Trust or any applicable law, regulation or order to which it is subject or by which it is bound, or to relieve or deprive the Trustees of their responsibility for and control of the conduct of the business and affairs of the Series or Trust. 15. TERM OF AGREEMENT. The term of this Agreement shall begin on the date first above written with respect to each Series listed in Schedule A on the date hereof and, unless sooner terminated as hereinafter provided, this Agreement shall remain in effect through August 3, 1995. With respect to each Series added by execution of an Addendum to Schedule A, the term of this Agreement shall begin on the date of such execution and, unless sooner terminated as hereinafter provided, this Agreement shall remain in effect to the date two years after such execution. Thereafter, in each case this Agreement shall continue in effect with respect to each Series from year to year, subject to the termination provisions and all other terms and conditions hereof; PROVIDED, such continuance with respect to a Series is approved at least annually by vote or written consent of the Trustees, including a majority of the Trustees who are not interested persons of either party hereto ("Disinterested Trustees"); and PROVIDED FURTHER, that the Administrator shall not have notified a Series in writing at least sixty days prior to the first expiration date hereof or at least sixty days prior to any expiration date in any year thereafter that it does not desire such continuation. The Administrator shall furnish any Series, promptly upon its request, such information as may reasonably be necessary to evaluate the terms of this Agreement or any extension, renewal or amendment thereof. 16. AMENDMENT OR ASSIGNMENT OF AGREEMENT. Any amendment to this Agreement shall be in writing signed by the parties hereto; PROVIDED, that no such amendment shall be effective unless authorized on behalf of any Series (i) by resolution of the Trustees, including the vote or written consent of a majority of the Disinterested Trustees, or (ii) by vote of a majority of the outstanding voting securities of such Series. This Agreement shall terminate automatically and immediately in the event of its assignment; provided, that with the consent of a Series, the Administrator may subcontract to another person any of its responsibilities with respect to such Series. 17. TERMINATION OF AGREEMENT. This Agreement may be terminated at any time by either party hereto, without the payment of any penalty, - 10 - upon at least sixty days' prior written notice to the other party; PROVIDED, that in the case of termination by any Series, such action shall have been authorized (i) by resolution of the Trustees, including the vote or written consent of the Disinterested Trustees, or (ii) by vote of a majority of the outstanding voting securities of such Series. 18. NAME OF A SERIES. Each Series hereby agrees that if the Administrator shall at any time for any reason cease to serve as administrator to a Series, such Series shall, if and when requested by the Administrator, eliminate from such Series's name the name "Neuberger & Berman" and thereafter refrain from using the name "Neuberger & Berman" or the initials "N&B" in connection with its business or activities, and the foregoing agreement of each Series shall survive any termination of this Agreement and any extension or renewal thereof. 19. INTERPRETATION AND DEFINITION OF TERMS. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the Act shall be resolved by reference to such term or provision of the 1940 Act and to interpretation thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the SEC validly issued pursuant to the 1940 Act. Specifically, the terms "vote of a majority of the outstanding voting securities," "interested persons," "assignment" and "affiliated person," as used in this Agreement shall have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition, when the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is modified, interpreted or relaxed by a rule, regulation or order of the SEC, whether of special or of general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order. 20. CHOICE OF LAW. This Agreement is made and to be principally performed in the State of New York, and except insofar as the Act or other federal laws and regulations may be controlling, this Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York. 21. CAPTIONS. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 22. EXECUTION IN COUNTERPARTS. This Agreement may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. - 11 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized and their respective seals to be hereunto affixed, as of the day and year first above written. NEUBERGER & BERMAN EQUITY TRUST Attest: By /s/ Michael J. Weiner --------------------------- Michael J. Weiner /s/ Claudia A. Brandon Vice President ------------------------- --------------------------- Claudia A. Brandon Title Secretary NEUBERGER & BERMAN MANAGEMENT INCORPORATED Attest: By /s/ Stanley Egener --------------------------- Stanley Egener /s/ Ellen Metzger President -------------------- --------------------------- Ellen Metzger Title Secretary - 12 - EX-99.B9(B)(II) 13 NEUBERGER & BERMAN EQUITY TRUST ADMINISTRATION AGREEMENT SCHEDULE A The Series of Neuberger & Berman Equity Trust currently subject to this Agreement are as follows: INITIAL SERIES Neuberger & Berman Focus Trust Neuberger & Berman Genesis Trust Neuberger & Berman Guardian Trust Neuberger & Berman Manhattan Trust Neuberger & Berman Partners Trust ADDITIONAL SERIES Neuberger & Berman NYCDC Socially Responsive Trust EX-99.B9(B)(III) 14 NEUBERGER & BERMAN EQUITY TRUST ADMINISTRATION AGREEMENT SCHEDULE B Compensation pursuant to Paragraph 3 of the Neuberger & Berman Equity Trust Administration Agreement ("Agreement") shall be 0.40% per annum of the average daily net assets of each Series, except Neuberger & Berman NYCDC Socially Responsive Trust. Compensation pursuant to Paragraph 3 of the Agreement for Neuberger & Berman NYCDC Socially Responsive Trust shall be 0.05% per annum of the average daily net assets of such Series. EX-99.B11(A) 15 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Financial Highlights" in the Prospectus and "Reports to Shareholders", "Independent Auditors/Accountants" and "Financial Statements" in the Statement of Additional Information in Post-Effective Amendment Number 8 to the Registration Statement (Form N-1A No. 33-64368) of Neuberger & Berman Equity Trust, and to the incorporation by reference of our reports dated September 29, 1995 on the Neuberger & Berman Genesis Trust, Neuberger & Berman Focus Trust, Neuberger & Berman Guardian Trust and Neuberger & Berman Partners Trust, four of the series comprising Neuberger & Berman Equity Trust, and on Neuberger & Berman Genesis Portfolio, Neuberger & Berman Focus Portfolio, Neuberger & Berman Guardian Portfolio and Neuberger & Berman Partners Portfolio, four of the series comprising Equity Managers Trust, included in the 1995 Annual Report to Shareholders of Neuberger & Berman Equity Trust. /s/ Ernst & Young LLP ERNST & YOUNG LLP Boston, Massachusetts December 15, 1995 EX-99.B11(B) 16 CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees of Neuberger & Berman Equity Trust and Equity Managers Trust We consent to the incorporation by reference in Part B. Statement of Additional Information in Post-Effective amendment No. 8 to the Registration Statement on Form N-1A of Neuberger & Berman Manhattan Trust, and Neuberger & Berman NYCDC Socially Responsive Trust of our reports dated October 6, 1995, on our audits of the financial statements and financial highlights of the Neuberger & Berman Manhattan Trust and Portfolio and Neuberger & Berman NYCDC Socially Responsive Trust and Portfolio which reports are included in the Annual Reports to Shareholders for the fiscal year ended August 31, 1995, which is incorporated by reference in Part B of the Registration Statement. We also consent to the reference to our Firm which respect to the Neuberger & Berman Manhattan Trust and Portfolio and Neuberger & Berman NYCDC Socially Responsive Trust and Portfolio under the captions "Independent Auditors/Accountants" and "Financial Statements" in Part B of the Registration Statement. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. Boston, Massachusetts December 15, 1995 EX-27.1 17
6 This schedule contains summary financial information extracted from the Neuberger&Berman Focus Trust Annual Report and is qualified in its entirety by reference to such document. 0000906926 NEUBERGER&BERMAN EQUITY TRUST 04 NEUBERGER&BERMAN FOCUS TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 0 14,427 88 29 0 14,544 0 0 73 73 0 12,718 1,004 140 25 0 115 0 1,613 14,471 67 9 0 (44) 32 111 1,542 1,685 0 (11) 0 0 1,054 (191) 1 12,884 4 (2) 0 0 0 0 137 4,672 11.36 .05 3.05 (.05) 0 0 14.41 .96 0 0
EX-27.2 18
6 This schedule contains summary financial information extracted from the Neuberger&Berman Genesis Trust Annual Report and is qualified in its entirety by reference to such document. 0000906926 NEUBERGER&BERMAN EQUITY TRUST 03 NEUBERGER&BERMAN GENESIS TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 0 30,625 12 29 0 30,666 0 0 29 29 0 25,086 2,421 291 0 0 523 0 5,028 30,637 248 12 0 (312) (52) 482 4,936 5,366 0 0 (11) 0 2,223 (94) 1 27,550 (2) 5 0 0 0 0 381 21,921 10.59 (.01) 2.08 0 (.01) 0 12.65 1.42 0 0
EX-27.3 19
6 This schedule contains summary financial information extracted from the Neuberger&Berman Guardian Trust Annual Report and is qualified in its entirety by reference to such document. 0000906926 NEUBERGER&BERMAN EQUITY TRUST 01 NEUBERGER&BERMAN GUARDIAN TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 0 679,569 3,940 28 0 683,537 0 0 471 471 0 583,155 49,401 6,723 1,392 0 6,187 0 92,332 683,066 4,467 1,874 0 (2,531) 3,810 5,025 88,893 97,728 0 (2,568) 0 0 52,405 (9,940) 213 607,301 150 (97) 0 0 0 0 2,703 282,669 11.27 .13 2.55 (.12) 0 0 13.83 .90 0 0
EX-27.4 20
6 This schedule contains summary financial information extracted from the Neuberger&Berman Manhattan Trust Annual Report and is qualified in its entirety by reference to such document. 0000906926 NEUBERGER&BERMAN EQUITY TRUST 02 NEUBERGER&BERMAN MANHATTAN TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 0 35,492 97 29 0 35,618 0 0 37 37 0 28,773 2,738 1,165 0 0 835 0 5,973 35,581 206 16 0 (228) (6) 977 5,693 6,664 0 (17) (69) 0 2,196 (632) 9 23,503 8 (47) 0 0 0 0 315 21,635 10.37 0 2.67 (.01) (.04) 0 12.99 1.06 0 0
EX-27.5 21
6 This schedule contains summary financial information extracted from the Neuberger&Berman Partners Trust Annual Report and is qualified in its entirety by reference to such document. 0000906926 NEUBERGER&BERMAN EQUITY TRUST 05 NEUBERGER&BERMAN PARTNERS TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 0 61,245 137 29 0 61,411 0 0 77 77 0 50,567 4,838 447 241 0 3,012 0 7,514 61,334 504 62 0 (301) 265 3,113 7,316 10,694 0 (32) (130) 0 4,960 (584) 15 56,621 8 38 0 0 0 0 403 32,613 10.54 .05 2.19 (.02) (.08) 0 12.68 .92 0 0
EX-27.6 22
6 This schedule contains summary financial information extracted from the Neuberger&Berman NYCDC Socially Responsive Trust Annual Report and is qualified in its entirety by reference to such document. 0000906926 NEUBERGER&BERMAN EQUITY TRUST 06 NEUBERGER&BERMAN NYCDC SOCIALLY RESPONSIVE TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 0 88,559 (11) 34 0 88,582 0 0 39 39 0 73,811 7,219 68,586 609 0 932 0 13,191 88,543 1,114 251 0 (442) 923 1,705 11,139 13,767 0 (740) 0 0 1,994 (1,424) 75 19,957 426 (772) 0 0 0 0 628 73,460 10.43 .13 1.82 (.11) 0 0 12.27 .60 0 0
EX-27.7 23 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 This schedule contains summary financial information extracted from the Neuberger&Berman Focus Portfolio Annual Report and is qualified in its entirety by reference to such document. 0000910055 EQUITY MANAGERS TRUST 04 NEUBERGER&BERMAN FOCUS PORTFOLIO 1,000 12-MOS AUG-31-1995 AUG-31-1995 674,465 984,159 6,693 36 96 990,984 17,447 0 4,364 21,811 0 557,907 0 0 15,139 0 88,309 0 307,818 969,173 10,454 1,097 0 (4,055) 7,496 50,732 139,750 197,978 0 0 0 0 0 0 0 324,162 7,643 37,577 0 0 3,758 0 4,055 714,153 0 0 0 0 0 0 0 .57 0 0
EX-27.8 24 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 This schedule contains summary financial information extracted from the Neuberger&Berman Guardian Portfolio Annual Report and is qualified in its entirety by reference to such document. 0000910055 EQUITY MANAGERS TRUST 01 NEUBERGER&BERMAN GUARDIAN PORTFOLIO 1,000 12-MOS AUG-31-1995 AUG-31-1995 3,590,685 4,736,345 25,961 125 32 4,762,463 61,722 0 87,545 149,267 0 3,237,636 0 0 91,725 0 147,623 0 1,136,212 4,613,196 51,765 17,135 0 (15,110) 53,790 124,394 627,968 806,152 0 0 0 0 0 0 0 2,132,860 37,935 23,229 0 0 14,274 0 15,110 3,123,421 0 0 0 0 0 0 0 .48 0 0
EX-27.9 25 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 This schedule contains summary financial information extracted from the Neuberger&Berman Manhattan Portfolio Annual Report and is qualified in its entirety by reference to such document. 0000910055 NEUBERGER&BERMAN MANHATTAN PORTFOLIO 02 EQUITY MANAGERS TRUST 1,000 12-MOS AUG-31-1995 AUG-31-1995 502,959 659,762 1,833 37 1,047 662,679 2,583 0 14,690 17,273 0 406,837 0 0 5,190 0 76,576 0 156,803 645,406 4,992 344 0 (3,130) 2,206 44,742 85,917 132,865 0 0 0 0 0 0 0 123,671 2,984 31,834 0 0 2,832 0 3,130 528,830 0 0 0 0 0 0 0 .59 0 0
EX-27.10 26 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 This schedule contains summary financial information extracted from the Neuberger&Berman Partners Portfolio Annual Report and is qualified in its entirety by reference to such document. 0000910055 EQUITY MANAGERS TRUST 05 NEUBERGER&BERMAN PARTNERS PORTFOLIO 1,000 12-MOS AUG-31-1995 AUG-31-1995 1,358,401 1,616,574 20,084 81 6 1,636,745 12,439 0 780 13,219 0 1,069,830 0 0 26,044 0 269,479 0 258,173 1,623,526 20,063 2,770 0 (7,309) 15,524 165,254 109,257 290,035 0 0 0 0 0 0 0 283,242 10,520 104,225 0 0 6,830 0 7,309 1,378,999 0 0 0 0 0 0 0 .53 0 0
EX-27.11 27 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 This schedule contains summary financial information extracted from the Neuberger&Berman Genesis Portfolio Annual Report and is qualified in its entirety by reference to such document. 0000910055 EQUITY MANAGERS TRUST 03 NEUBERGER&BERMAN GENESIS PORTFOLIO 1,000 12-MOS AUG-31-1995 AUG-31-1995 108,413 141,999 487 11 178 142,675 385 0 129 515 0 95,366 0 0 601 0 12,607 0 33,586 142,160 1,508 77 0 (1,250) 335 6,666 17,448 24,449 0 0 0 0 0 0 0 3,591 266 5,941 0 0 1,135 0 1,295 133,493 0 0 0 0 0 0 0 .94 0 0
EX-27.12 28 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 This schedule contains summary financial information extracted from the Neuberger&Berman Socially Repsonsive Portfolio Annual Report and is qualified in its entirety by reference to such document. 0000910055 EQUITY MANAGERS TRUST 06 NEUBERGER&BERMAN SOCIALLY RESPONSIVE PORTFOLIO 1,000 12-MOS AUG-31-1995 AUG-31-1995 83,395 97,603 135 24 56 97,818 998 0 73 1,071 0 80,146 0 0 1,330 0 1,063 0 14,208 96,747 1,189 269 0 (533) 925 1,842 12,075 14,842 0 0 0 0 0 0 0 283,242 405 (779) 0 0 431 0 533 78,399 0 0 0 0 0 0 0 .68 0 0
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