-----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, HoMqoEV1sUMYM4uluGL+RMzp7tjYekZ7AOhkKy6K1K5fJBDCotDf7lCsfTs6PiXX MSpF96i2/sgcnWi9/CKH0w== 0000898432-99-000507.txt : 19990427 0000898432-99-000507.hdr.sgml : 19990427 ACCESSION NUMBER: 0000898432-99-000507 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990426 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: N-30D SEC ACT: SEC FILE NUMBER: 811-07784 FILM NUMBER: 99600722 BUSINESS ADDRESS: STREET 1: 605 THIRD AVE STREET 2: 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10158-0006 BUSINESS PHONE: 2124768800 FORMER COMPANY: FORMER CONFORMED NAME: NEUBERGER & BERMAN EQUITY TRUST DATE OF NAME CHANGE: 19930615 N-30D 1 NEUBERGER BERMAN NEUBERGER BERMAN EQUITY TRUST-Registered Trademark- - ------------------------------------------------------------------------------ FOCUS TRUST SEMI-ANNUAL REPORT GENESIS TRUST FEBRUARY 28, 1999 GUARDIAN TRUST INTERNATIONAL TRUST MANHATTAN TRUST MILLENNIUM TRUST PARTNERS TRUST EQUITY ASSETS-Registered Trademark- - ------------------------------------------------------------------------------ SOCIALLY RESPONSIVE TRUST TABLE OF CONTENTS
THE FUNDS CHAIRMAN'S LETTER A-4 PORTFOLIO COMMENTARY Focus Trust A-5 Genesis Trust A-8 Guardian Trust A-11 International Trust A-14 Manhattan Trust A-17 Millennium Trust A-20 Partners Trust A-24 Socially Responsive Trust A-27 PERFORMANCE HIGHLIGHTS B-1 FINANCIAL STATEMENTS B-4 FINANCIAL HIGHLIGHTS PER SHARE DATA Focus Trust B-16 Genesis Trust B-17 Guardian Trust B-18 International Trust B-19 Manhattan Trust B-20 Millennium Trust B-21 Partners Trust B-22 Socially Responsive Trust B-23 THE PORTFOLIOS SCHEDULE OF INVESTMENTS TOP TEN EQUITY HOLDINGS Focus Portfolio C-1 Genesis Portfolio C-3 Guardian Portfolio C-7 International Portfolio C-10 Manhattan Portfolio C-15 Millennium Portfolio C-18 Partners Portfolio C-20 Socially Responsive Portfolio C-23 FINANCIAL STATEMENTS C-28 FINANCIAL HIGHLIGHTS Focus Portfolio C-46 Genesis Portfolio C-47 Guardian Portfolio C-48 International Portfolio C-49 Manhattan Portfolio C-50 Millennium Portfolio C-51 Partners Portfolio C-52 Socially Responsive Portfolio C-53 DIRECTORY D-1 OFFICERS AND TRUSTEES D-2
A-3 CHAIRMAN'S LETTER April 16, 1999 Dear Fellow Shareholder, The first half of fiscal 1999 was the best of times and worst of times for equities investors. In September 1998, the first month of this reporting period, global economic and financial market turmoil sent stocks plummeting. Then, with three waves of interest rate cuts, Federal Reserve Chairman Alan Greenspan seemed to make the market's problems disappear and stocks surged back to record highs. However, not all stocks participated equally in the market recovery. Growth stocks performed significantly better than value stocks across the market capitalization spectrum, and large-cap stocks, in general, outperformed mid- and small-cap stocks. These short-term performance trends are reflected in the varying returns achieved by our different funds this time period. No one knows what the market has in store for us in the future or which investment style or capitalization sector will be most productive. That's why we've introduced our new small-cap growth fund, Neuberger Berman Millennium Trust, a move that will help round out Neuberger Berman's product line to offer a complete menu of quality products in virtually all equity style and capitalization categories. We believe prudent investors should diversify, rather than put all or most of their eggs in whatever style/capitalization portfolio has produced the most generous recent returns. That means making and maintaining positions in current laggards as well as current leaders. In closing, I urge shareholders to consider an investment in Neuberger Berman's new Millennium Trust. Many industry professionals were surprised we chose to introduce a small-cap growth fund after years of lagging performance in this sector. However, at Neuberger Berman, we are dedicated to offering quality funds managed by talented and experienced investors, not rushing to market with the latest "hot" product. To that end, we are very excited about Millennium and are pleased to welcome the fund into our family of investment products. Sincerely, /s/ Stanley Egener Stanley Egener Chairman of the Board Neuberger Berman Equity Trust Neuberger Berman Equity Assets A-4 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Focus Trust PORTFOLIO MANAGER KENT SIMONS EMPLOYS A BOTTOM-UP STOCK SELECTION PROCESS SEEKING HIGH-QUALITY COMPANIES TRADING AT DISCOUNTED VALUATIONS. IDEALLY, PORTFOLIO HOLDINGS HAVE ABOVE MARKET AVERAGE EARNINGS GROWTH AND TRADE AT BELOW MARKET AVERAGE PRICE/EARNINGS MULTIPLES. AS THE NAME IMPLIES, THE FOCUS PORTFOLIO IS MORE CONCENTRATED THAN OUR OTHER EQUITY FUNDS, GENERALLY HOLDING 60 STOCKS OR LESS, WITH THE TEN LARGEST POSITIONS REPRESENTING A SIGNIFICANT PORTION OF PORTFOLIO ASSETS. For the six-month period ended February 28, 1999, Focus Trust-Registered Trademark- gained 36.31% versus the Standard & Poor's 500 Index's 30.32% return (see page B-1 for average annual total returns through March 31, 1999).* The same industry groups and many of the same stocks that restrained performance in the early part of last year rebounded during the six-month reporting period and posted strong gains -- rewarding our patience and, once again, validating our thesis that owning high-quality companies at discounted valuations is a productive long-term investment strategy. Our two largest industry group commitments, financial services and technology, which represent a total of approximately 36% of the portfolio assets, performed well during the past six months. In fact, all five of the portfolio's largest holdings are within these two groups, and, on average, they appreciated more than 40%. Within financial services, the portfolio's holdings rebounded after experiencing severe pressure following the Russian default in August, an event that Wall Street quickly characterized as a crisis. Aided considerably by three interest rate cuts by the Federal Reserve last fall, this "crisis" did not, in fact, materialize, and the stocks returned to their prior, and in our opinion, more normal valuations. It is worth noting that during the turmoil in the financial markets last summer, the actual businesses of our financial holdings held up quite well. One of our basic assumptions when we established our core positions in Citigroup, Chase Manhattan and Morgan Stanley Dean Witter was that over time, we believed these firms would increase their market share because of their product breadth, financial strength and superior management. This, in fact, proved to be the case during last summer's turmoil. A-5 - ---------------------------------------------------------------------- Focus Trust (Cont'd) Moreover, the long-term case for our positions in financial services remains very much intact. Demographics in the United States point to increased savings and investment as baby boomers prepare for retirement. In addition, we expect to see accelerated investment banking activity overseas as the rest of the world follows the U.S. model and more corporate assets come under public ownership. To make the most of an opportunity, we believe a firm needs to have an institutional and retail presence, a global reach, and a strong balance sheet. Our core holdings -- Citigroup, Chase and Morgan Stanley -- meet these criteria. Our technology holdings posted good gains during this reporting period -- in aggregate, up more than 70%. These attractive returns did not come from high multiple market favorites like Intel, Microsoft, Dell Computer or Lucent Technologies -- all great companies, but well out of the value range. Our gains came from high-quality, but previously out-of-favor companies like Applied Materials and KLA-Tencor, both of which are semi-conductor equipment manufacturers, as well as Texas Instruments, a leading maker of digital service providers (DSP), and software companies Oracle and Rational Software. Of course, we did have some disappointments during this reporting period, both on a negative return and opportunity-lost basis. The stock price of Sierra Health Services, one of our health care positions declined during this period. In hindsight, it appears our sale of Merrill Lynch during this period was premature. In our opinion, Morgan Stanley Dean Witter emerged from the third quarter 1998 global financial debacle looking healthier than Merrill, which had suffered substantial trading losses. While Merrill was laying off workers, Morgan Stanley Dean Witter was using its excess capital to repurchase shares. Since our earnings projections for both companies were virtually identical and Merrill was trading up to 20% higher than Morgan Stanley Dean Witter, we decided to sell Merrill and add to our Morgan Stanley Dean Witter position. In closing, I want to stress a few things about our approach and focused portfolios in general. First, we take substantial positions in industry groups, not because we are making top-down macro- A-6 - ---------------------------------------------------------------------- Focus Trust (Cont'd) economic judgments, but rather because that is where we find the most compelling investment values. Secondly, although over the short term, our more concentrated portfolio will most likely be more volatile than a more widely diversified fund, this does not necessarily reflect volatile operating results for our portfolio companies. In the recently released Morgan Stanley Dean Witter 1998 Annual Report, the Chairman expresses his puzzlement over the wide swings in the company's stock price during a period in which revenues and profits held steady. Unfortunately, short-term stock price volatility is something we may all have to endure. Longer term, we believe quality companies that can consistently grow revenues and earnings will provide good returns. Finally, contrary to today's conventional wisdom, you don't always have to pay up for great companies. The fact that our portfolio has a price/earnings ratio lower than the S&P 500 with above market average projected earnings growth (by Institutional Brokers Estimate System), demonstrates that you can buy some very good companies at reasonable valuations. Sincerely, /s/ Kent Simons Kent Simons PORTFOLIO MANAGER *The S&P 500 Index is an unmanaged index generally considered to be representative of stock market activity. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of this index are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described index. The composition, industries and holdings of the Portfolio are subject to change. No single holding of Focus Portfolio makes up more than a small fraction of the Portfolio's total assets. While the value-oriented approach is intended to limit risks, the Portfolio -- with its concentration in sectors -- may be more greatly affected by any single economic, political or regulatory development than a more diversified mutual fund. Please remember that past performance is not indicative of future results. A-7 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Genesis Trust PORTFOLIO CO-MANAGERS JUDITH VALE AND ROBERT D'ALELIO FOCUS ON "EASY-TO-UNDERSTAND" COMPANIES IN THE LESS GLAMOROUS SECTORS OF THE SMALL-CAPITALIZATION STOCK UNIVERSE. BY AVOIDING THE CUTTING-EDGE TECHNOLOGY COMPANIES THAT ATTRACT SO MUCH SPECULATIVE ATTENTION IN THE SMALL-CAP MARKET, THEY ARE BETTER ABLE TO IDENTIFY FUNDAMENTALLY UNDERVALUED STOCKS WITH EXCEPTIONAL GROWTH POTENTIAL. THIS VALUE-ORIENTED APPROACH TO SMALL-CAP INVESTING TRANSLATES INTO A PORTFOLIO WITH FAVORABLE RISK/REWARD CHARACTERISTICS. For the six-month period ended February 28, 1999, Genesis Trust gained 7.39% versus the Russell 2000 Index's 16.79% return (see page B-1 for average annual total returns through March 31, 1999).* The Genesis portfolio's lagging performance, relative to its benchmark, is largely explained by the small-cap market's strong bias to growth during this reporting period. To further illustrate this point, we'd like to point out that the Russell 2000-Registered Trademark-Growth Index gained 29.28% over the last six months, compared to the Russell 2000-Registered Trademark- Value Index's considerably more modest 4.93% return.* Three Federal Reserve interest rate cuts last fall seemed to inspire small-cap investors to throw caution to the wind and bid up the most attractive stocks in the small-cap growth arena, most notably the already richly-valued Internet group. The more mundane, but in our view, much more attractively priced small-cap stocks, languished. In general, our holdings posted relatively good earnings gains -- meeting or exceeding our expectations. However, investors just didn't seem to notice or care. Only time will tell whether paying sky-high multiples to earnings -- in those instances where earnings even exist -- will continue to be productive. Our feeling is that many of the most sensational small-cap performers during this reporting period will have a very hard time meeting investors' increasingly grandiose expectations. If earnings realities fail to live up to current fantasies, small-cap speculators will likely get burned. On an absolute and relative basis, our best returns during this reporting period came from the consumer staples sector, highlighted by strong gains for Brinker International, Church & Dwight, and First Brands, which was acquired by Clorox. The First Brands/Clorox deal illustrates a trend in the market that we believe will ultimately breathe more life into undervalued small-cap stocks. These two companies are A-8 - ---------------------------------------------------------------------- Genesis Trust (Cont'd) in similar businesses and have comparable earnings growth rates. Clorox, which at the time of the acquisition was trading at around 33 times earnings, was able to use its richly-valued stock to pay a 100% premium for First Brands, which prior to the announcement of the deal, was trading at just 13 times earnings. If you combine the earnings of both companies, the deal was particularly attractive for Clorox, even before factoring in very large potential cost savings. We've since sold our position in Clorox and taken profits; however, we believe going forward, more and more richly-valued, large-cap companies will use their stock as currency to buy smaller undervalued companies within their own industries. This should eventually lead to increased investor recognition for small-cap stocks. As a group, our consumer cyclical investments also performed well, with stocks like 99 Cents Only Stores, Black Box Corp, and St. John Knits all posting strong gains. In addition, our financial holdings, in particular, small regional banks, consumer credit companies, and insurers, contributed positive returns for the portfolio. On the negative side, our energy investments continued to disappoint during the six-month period. However, we are still overweighted in energy, primarily in small oil services companies, because we believe we see light at the end of what has been a dark tunnel for these stocks. In our view, oil prices are creeping higher and non-OPEC supply is being depleted. In addition, we believe global demand should pick up as Asian economies recover. When combined, these factors seem to us to point to renewed drilling activity and a potential profit recovery for small oil services companies. As a result, we see a lot of upside potential for these severely depressed stocks. While our over-weighting in small utilities companies helped us during the sharp market decline in September, since then, our utilities holdings have been ho-hum performers. That's because small-cap investors have tended to focus on faster-growth industries. We continue to believe the utilities sector presents a great store of value, and are optimistic that the opportunities in this area will surface via accelerating cost driven consolidation in this newly deregulated industry. Our "low voltage" technology investments have also languished. In general, these portfolio companies have legitimate high teens/low twenties earnings A-9 - ---------------------------------------------------------------------- Genesis Trust (Cont'd) growth rates. But, that hasn't been exciting enough for tech investors, who have been willing to pay up for companies with faster earnings growth potential. Like most small-cap investors, we are somewhat dismayed that much more richly-valued, large-cap stocks continue to outperform what we view as much better fundamental bargains in the small-cap sector. It is not unusual for small-cap stocks to underperform large-caps for extended periods of time. These periods have been followed by briefer periods in which small caps outperformed -- often by a wide margin. While it is impossible to predict precisely when this performance tide will turn, we believe it tends to happen when everyone least expects it to. Who would have known at the end of 1990 -- a terrible year for small-cap stocks -- that they would come roaring back and outperform large caps by nearly 50% over the next three years? We will remain patient and dedicated to uncovering quality small-cap companies that are trading at reasonable valuations. When small-cap stocks reassert themselves, we believe the Genesis portfolio is well positioned to benefit. Sincerely, /s/ Judith Vale /s/ Robert D'Alelio Judith Vale and Robert D'Alelio PORTFOLIO CO-MANAGERS *The Russell 2000-Registered Trademark- Index is an unmanaged index consisting of securities of the 2,000 issuers having the smallest capitalization in the Russell 3000-Registered Trademark- Index, representing approximately 11% of the Russell 3000 total market capitalization. The smallest company's market capitalization is roughly $222 million. The Russell 2000 Growth Index measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Value Index measures the performance of those Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described indices. The composition, industries and holdings of the Portfolio are subject to change. Genesis Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATIONS ARE SET FORTH IN THE PROSPECTUS. Please remember that past performance is not indicative of future results. A-10 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Guardian Trust PORTFOLIO CO-MANAGERS KEVIN RISEN AND RICK WHITE FOCUS ON "FIRST-RATE" COMPANIES IN INDUSTRIES THAT ARE CURRENTLY OUT OF FAVOR. RECOGNIZING THAT "CHEAP" STOCKS ARE NOT NECESSARILY UNDERVALUED, THEY SEEK WELL-MANAGED, FINANCIALLY SOUND COMPANIES TRADING AT FUNDAMENTALLY ATTRACTIVE PRICES RELATIVE TO THEIR LONG-TERM EARNINGS GROWTH POTENTIAL. BY CONCENTRATING THE PORTFOLIO IN HIGH-QUALITY WALL STREET "ORPHANS," THE PORTFOLIO MANAGEMENT TEAM ATTEMPTS TO CONSISTENTLY TAKE ADVANTAGE OF OPPORTUNITIES CREATED BY INVESTORS' OVERREACTION TO REAL OR PERCEIVED PROBLEMS. For the six-month period ended February 28, 1999, Guardian Trust gained 24.64% versus the Russell 1000-Registered Trademark- Value Index's 22.53% advance and the Standard & Poor's 500 Index's 30.32% return (see page B-1 for average annual total returns through March 31, 1999).* We are pleased to report that the Guardian portfolio materially outperformed the Russell 1000 Value Index in first half fiscal 1999. We achieved such competitive results versus the S&P 500 during a period in which growth continued to outperform value. In fact, for the five-month period beginning at the end of September (a particularly difficult month for value stocks and our portfolio), we actually outperformed the S&P 500. A lot of the good things, and some of the not so good things, that happened to the portfolio in first half fiscal 1999 can be traced back to the events of late summer/early fall 1998. Ongoing economic turmoil in Southeast Asia, the Russian debt default, and the well-publicized problems of highly leveraged hedge funds culminated in a swift and merciless market decline in September. The basic materials, capital goods, energy, financial services, and technology sectors all fell sharply in response to global economic and financial market turmoil. During this chaos, we were in the process of restructuring the portfolio -- both in terms of choosing the stocks we wanted to keep and those we wanted to discard, as well as taking steps to further diversify the portfolio. We didn't escape the September market massacre unscathed, but, in our opinion, the decisions we made during those trying times have generally worked in our favor. In the technology sector, we elected to own shares in out-of-favor semi-conductor equipment manufacturers like Applied Materials, KLA-Tencor, and Teradyne, all of which posted 100% plus gains during A-11 - ---------------------------------------------------------------------- Guardian Trust (Cont'd) this six-month reporting period. We also stayed with Micron Technology, Sun Microsystems and Texas Instruments, companies that rewarded our patience with large gains. In addition, we've gradually reduced positions in some of the big winners in the portfolio and have recently been moving into larger, more diversified technology companies like IBM and Xerox. These companies are less cyclical because they serve many different industries, and in our opinion, they have better valuation support at current prices. In the financial services sector, our best returns in this reporting period came from two money center banks, Citigroup and Chase Manhattan, as well as Morgan Stanley Dean Witter, a blue chip broker/ asset manager. While the bulk of Citigroup's positive performance surfaced after the merger with Travelers Group, in our view, all of these companies were substantially undervalued after sharp declines in late summer/early fall 1998. Because these stocks are no longer quite as inexpensive, we have been reducing our positions there. Instead, we have been gravitating to domestic financial services franchises that we find more fundamentally appealing, primarily because their fortunes are not directly linked to the relative health of the global capital and credit markets. Such examples include banks, like Banc One and Wells Fargo, whose operations are concentrated in the U.S., and consumer finance companies such as Associates First Capital Corp., which we expect to benefit from ongoing strength in consumer spending in the U.S. Although the portfolio has been underweighted in communications services and energy, both groups contributed to six-month positive returns. In addition to reaping positive returns from our holdings in MCI Worldcom, the portfolio got a big lift when AirTouch agreed to be acquired by Vodaphone. Recently, we have established a small position in AT&T. We would like to own more telecommunications stocks, but we won't stretch our value parameters to do so. Our decision back in September to trade out of oil services companies and into larger, more financially robust international oils helped us generate attractive returns in a sector that posted only modest gains. On the other hand, several stocks we chose to hold have not recovered much of the ground lost in September. For example, our basic materials and capital goods investments have languished. With global economic weakness continuing to restrain commodities prices and A-12 - ---------------------------------------------------------------------- Guardian Trust (Cont'd) capital goods spending, we are taking another hard look at stocks in these sectors. We think these stocks have valuation support at current prices, but we would like to see more evidence of a potential turnaround in the form of firming commodities prices and increased capital goods spending. In addition, we were disappointed in our airline holdings and believe we may have already seen peak earnings for this cycle. However, we think the industry is now somewhat less cyclical than it was in the past and with current airline valuations very depressed, we are inclined to remain patient with our current positions. In closing, we are pleased with the portfolio's impressive performance compared to the Russell 1000 Value Index and competitive performance relative to the S&P 500. We believe most of the decisions we made in September 1998, following a very difficult period for the portfolio, have worked in shareholders' favor. Looking ahead, we believe Guardian has the potential to generate more consistent returns with less risk and lower volatility. Sincerely, /s/ Kevin Risen /s/ Rick White Kevin Risen and Rick White PORTFOLIO CO-MANAGERS *The S&P 500 Index is an unmanaged index generally considered to be representative of stock market activity. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 89% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described indices. The composition, industries and holdings of the Portfolio are subject to change. Guardian Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Please remember that past performance is not indicative of future results. A-13 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- International Trust PORTFOLIO MANAGER VALERIE CHANG USES BOTH GROWTH AND VALUE INVESTMENT STYLES IN HER APPROACH TO INTERNATIONAL EQUITIES MARKETS. THE BOTTOM-UP STOCK SELECTION PROCESS IS RESEARCH INTENSIVE, FEATURING FREQUENT MEETINGS WITH CORPORATE MANAGEMENTS AND THEIR COMPETITORS IN ADDITION TO THE ANALYSIS OF INCOME STATEMENTS AND BALANCE SHEETS. THE GOAL IS TO LOOK BEYOND "THE NUMBERS" TO FIND THOSE INTERNATIONAL COMPANIES WITH THE BEST LONG-TERM INVESTMENT PROSPECTS. SHE ALSO LOOKS AT THE WORLD FROM A TOP-DOWN PERSPECTIVE, WHICH INVOLVES ANALYZING THE POLITICAL, SOCIAL, ECONOMIC, AND STOCK MARKET ENVIRONMENTS OF COUNTRIES AROUND THE GLOBE BEFORE SELECTING THOSE INTERNATIONAL INVESTMENT ARENAS BELIEVED TO OFFER THE BEST FUNDAMENTAL VALUE. For the fiscal six-month period ended February 28, 1999, International Trust advanced 8.22%, versus EAFE-Registered Trademark-Index's 14.00% gain over the same period (see page B-1 for average annual total returns as of March 31, 1999).* The international investment arena continues to present new challenges. At the time we issued our last report, back in September, we were in the midst of a second wave of market upset in the emerging regions, ignited by the Russian financial crisis that began in mid-August. This wave of turmoil continued into the early part of October, when we began to see signs of stability. Shortly thereafter, during the fourth quarter of 1998, the Fund posted very strong absolute performance, evidenced by a 16.43% return. Year-to-date 1999, the fund gained 0.95% vs. a 2.63% decline for the MSCI EAFE. The Fund was nearly fully invested as of the end of February with approximately 4% of assets held in cash. The most notable allocation change from the period ending August 31, 1998 was our increased exposure to the Pacific Basin region. We now have approximately 20% of the portfolio allocated to this region with investments primarily in the markets of Japan, Hong Kong, and Singapore, up from a negligible position six months ago. This strategy has proved profitable: Japan and Singapore in particular have been among our top performing markets over the period. Our European exposure has remained stable with some minor adjustments to the component countries, as has our exposure to emerging markets. Our commitment to Latin America remains very low, and in A-14 - ---------------------------------------------------------------------- International Trust (Cont'd) fact, is down nearly 1.0% from a 3.2% weighting at the end of August. It is our intention to take a cautious stance toward Latin America as we monitor the developments with Brazil's economic reform, the success or failure of which will continue to be a barometer for the region. Finally, we initiated a small position in Bermuda with the purchase of Global Crossing, a telecommunications company that provides global undersea fiber optic communication networks. On an absolute return basis, Global Crossing was one of our best-performing securities for the period. Our top five performing stocks for the period were Overseas Union Bank (Singapore), Specialised Outsourcing (South Africa), Sonere Group (Finland), Nokia (Finland) and Computer Configuration Holdings (South Africa). Overseas Union Bank and Specialised Outsourcing are both names in the banking and financial services sector, which was the second largest sector weighting for the fund at the end of February. Sonere Group and Nokia are both telecommunications companies while Computer Configuration Holdings is a technology company. There were no significant changes made to our sector diversification weightings over the period. The portfolio continues to favor the Banking & Finance, Telecommunications, Technology, and Pharmaceuticals sectors. The Fund's largest positions at the end of the period, as measured by percentage of total net assets, were France Telecom (France), Nokia (Finland), Aegon (Netherlands), Tieto Corp. (Finland), and Takeda Chemicals (Japan). France Telecom and Nokia are telecommunications companies. France Telecom is primarily a fixed-line provider while Nokia, a consistent performer and long-term holding, specializes in cellular communications manufacturing equipment and provides access lines. Aegon is a Netherlands-based international insurance group, Tieto Corp. manufactures and sells computer software, and Takeda Chemicals is a global chemical and pharmaceuticals company. On the other hand, the Fund did experience some missed opportunities during the reporting period due to the fact that we had lowered our exposures to the emerging market regions of Eastern Europe, South Africa and Latin America during the third quarter. These areas rebounded strongly during our reporting period and the Fund would have benefited handsomely had we had more significant commitments. A-15 - ---------------------------------------------------------------------- International Trust (Cont'd) In addition, while our performance lagged its benchmark, it's important for investors to remember that the portfolio seeks to identify opportunities across all capitalization ranges and geographic regions, including emerging markets, while the EAFE Index focuses primarily on large-cap companies in developed markets. In closing, while we have a more optimistic outlook now than six months ago, we remain cautious about unfulfilled economic reforms needed in Brazil and Russia and the subsequent impact these markets can have on their respective regions. Within the Pacific Basin, significant reforms are taking place throughout the component countries. We plan to continue monitoring the individual developments of those Pacific Basin countries in an effort to capture investment opportunities created by these steps toward reform. As always, we remain flexible in our regional allocation as market conditions warrant and will continue to invest selectively on a security-by-security basis. Sincerely, /s/ Valerie Chang Valerie Chang PORTFOLIO MANAGER *The EAFE-Registered Trademark- Index, also known as the Morgan Stanley Capital International Europe, Australasia, Far East Index, is an unmanaged index of over 1,000 foreign stock prices. The index is translated into U.S. dollars. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of this index are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio may invest in many securities not included in the above-described index. The composition, industries and holdings of the Portfolio are subject to change. International Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. INVESTING IN FOREIGN SECURITIES INVOLVES GREATER RISKS THAN INVESTING IN SECURITIES OF U.S. ISSUERS, INCLUDING CURRENCY FLUCTUATIONS, INTEREST RATES AND POLITICAL CONDITIONS. IN AN ATTEMPT TO REDUCE OVERALL VOLATILITY, NBMI DIVERSIFIES THE PORTFOLIO HOLDINGS OVER A WIDE ARRAY OF COUNTRIES AND INDIVIDUAL STOCKS. Please remember that past performance is not indicative of future results. A-16 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Manhattan Trust PORTFOLIO CO-MANAGERS JENNIFER SILVER AND BROOKE COBB LOVE SURPRISES -- POSITIVE EARNINGS SURPRISES THAT IS. THEIR RESEARCH REVEALS THAT THE STOCKS OF COMPANIES CONSISTENTLY EXCEEDING CONSENSUS EARNINGS ESTIMATES HAVE TENDED TO BE TERRIFIC PERFORMERS. THEY USE A COMPUTER TO SCREEN THE MID-CAP GROWTH STOCK UNIVERSE TO ISOLATE STOCKS WHOSE MOST RECENT EARNINGS HAVE BEAT THE STREET'S EXPECTATIONS. THEY THEN ROLL UP THEIR SLEEVES AND, THROUGH DILIGENT FUNDAMENTAL RESEARCH, STRIVE TO IDENTIFY THOSE COMPANIES MOST LIKELY TO RECORD A STRING OF POSITIVE EARNINGS SURPRISES. THEIR GOAL IS TO INVEST TODAY IN THE FAST GROWING MID-SIZED COMPANIES THAT WILL COMPRISE TOMORROW'S FORTUNE 500. For the six-month period ending February 28, 1999, Manhattan Trust-Registered Trademark- gained 27.26% versus the Russell Midcap-Trademark- Growth Index's 33.27% return (see page B-1 for average annual total returns through March 31, 1999).* We are pleased with the portfolio's progress in what has been an uneven and volatile mid-cap stock market. During this six-month reporting period, our consumer cyclical investments performed quite well, with specialty retailers Abercrombie & Fitch and Linens 'n Things posting strong gains. Value retailers also reported strong gains, with companies like Costco, Staples, and TJX leading the pack. However, the real star of this industry group category was Amazon.com, which continued to surpass analysts' projections for revenue and earnings growth. Our healthcare investments also buoyed returns. Biogen was the biggest winner as Avonex, its new drug for the treatment of multiple sclerosis, quickly reached blockbuster status. As a group, our financial holdings performed well with broker/dealer Donaldson Lufkin & Jenrette, asset manager Northern Trust, and State Street, one of the leading custodian/transfer agents for the mutual fund industry, each gaining more than 40%. On the other hand, while returns from our technology holdings were generous on an absolute basis (in aggregate up 26.8%), they were less impressive than more aggressive funds that really cashed in on the Internet stock frenzy. Our approach to the Internet group has been conservative -- we focused on companies we believed had legitimate earnings growth prospects and staying power. As a result, we have been A-17 - ---------------------------------------------------------------------- Manhattan Trust (Cont'd) modestly overweighted in the group and our selections have been great performers, with Infoseek, Yahoo!, and lesser known companies like VERITAS SOFTWARE and Network Appliances, all gaining more than 100% in this six-month reporting period. We did miss out on some spectacular short-term gains in some other ".com" companies which, in our opinion, had more sizzle than substance. However, we can envision these gains evaporating quickly if reality fails to live up to the hype surrounding these companies. And, true to our sell discipline, technology holdings like CBT Group, J.D. Edwards and SmarTalk were sold during the period because they failed to meet our earnings expectations. In addition, some of our investments in capital goods companies were disappointing. Although our capital goods holdings, as a group, posted modest gains, earnings continued to be restrained by weak global demand and a lack of pricing flexibility. In terms of indices, the Russell Midcap Growth Index outperformed the S&P 500 Index during the six-month reporting period. However, most of the mid-cap sector's outperformance occurred during a spirited, but relatively short-lived rally in November/December 1998. During the first two months of 1999, the S&P outperformed once again, leaving mid-cap investors wondering just what it takes to keep up with the large-cap competition. We recently conducted a survey of earnings growth and valuations in these two capitalization sectors. In 1998, S&P 500 earnings advanced 2%. By comparison, Russell Midcap Index and Russell Midcap Growth Index earnings grew by 8% and 25%, respectively. If you look at earnings growth for these three indices on an unweighted basis (earnings from all component stocks given equal weighting in calculating the indices' earnings growth rate), the discrepancy was even greater. Within that context, S&P 500 earnings were flat, and Russell Midcap and Russell Midcap Growth earnings grew by 13% and 36%, respectively. The results of this survey may seem confusing. In view of these earnings dynamics, it would appear that the two mid-cap indices should have outperformed the large-cap benchmark in 1998. In fact, just the opposite occurred -- they materially lagged the S&P 500. The reason may be that large-cap valuations have been growing much faster than earnings, which has resulted in even better relative value in the mid-cap A-18 - ---------------------------------------------------------------------- Manhattan Trust (Cont'd) sector. Presently, on a price/sales, price/earnings, and P/E relative to earnings growth rate basis, mid-cap stocks are at or near historical lows versus large-cap stocks. The question then becomes if, and when, this will change. One indication of value in the mid-cap sector is increasing merger and acquisition activities. Over the last six months, four of our portfolio holdings, Ascend Communications, Sofamor Danek Group, SunAmerica, Inc., and HBO & Company, have been acquired. A fifth, Level One Communications, is in the midst of negotiating an acquisition by Intel. It seems that while the investment public has yet to fully acknowledge value in the mid-cap sector, business buyers are steadily taking advantage of bargains. In closing, the Manhattan portfolio continued to reward shareholders in the first few months of 1999. We can't predict what will happen over the next six months, but the portfolio has the critical fundamental characteristics -- superior earnings growth potential and reasonable valuations relative to projected earnings growth rates -- that we believe has the potential to translate into excellent long-term performance. Sincerely, /s/ Jennifer Silver /s/ Brooke Cobb Jennifer Silver and Brooke Cobb PORTFOLIO CO-MANAGERS *The S&P 500 Index is an unmanaged index generally considered to be representative of stock market activity. The Russell Midcap Growth Index is an unmanaged index which measures the performance of those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap-Trademark- Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represents approximately 35% of the total market capitalization of the Russell 1000 Index (which in turn, consists of the 1,000 largest U.S. companies, based on market capitalization). Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described indices. The composition, industries and holdings of the Portfolio are subject to change. Manhattan Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Please remember that past performance is not indicative of future results. A-19 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Millennium Trust PORTFOLIO CO-MANAGERS MICHAEL MALOUF AND JENNIFER SILVER BELIEVE BIG INVESTMENT RETURNS OFTEN COME IN SMALL PACKAGES. IN THEIR SEARCH FOR SMALL-CAP COMPANIES, THE TEAM USES A THREE-STEP STOCK SELECTION PROCESS. FIRST, THEY IDENTIFY SMALL-CAP STOCKS GROWING EARNINGS BY AT LEAST 15% ANNUALLY AND THAT, IN THEIR JUDGEMENT, EXHIBIT THE CAPABILITY TO CONSISTENTLY SURPASS CONSENSUS EARNINGS ESTIMATES. THEN, THEY EVALUATE FINANCIAL STRENGTH AND MANAGEMENT DEPTH AND TALENT. FINALLY, THEY FAVOR STOCKS TRADING AT REASONABLE VALUATIONS RELATIVE TO THEIR INDUSTRY PEER GROUP AND THE MARKET. For the period of October 20, 1998 through February 28, 1999, Millennium Trust gained 48.58%, versus gains of 21.27% and 11.73% for the Russell 2000 Growth Index and Russell 2000 Indexes, respectively.* Technology, one of the portfolio's largest industry group concentrations, was responsible for much of this strong advance. Big winners included Internet portal Infoseek and Micromuse, a company that specializes in monitoring traffic on corporate data networks. Infoseek's new GO Network helped propel the stock to a more than 150% gain during this reporting period while Micromuse's stock nearly doubled during the same time period. As can be expected in a group in which earnings disappointments are quickly and often severely punished, we had some technology stock losers as well. Software company BEA Systems "missed its numbers," and true to our dispassionate sell discipline, the stock was quickly eliminated from the portfolio. In addition, our holdings in Quanta Services and SFX Entertainment posted strong gains. Quanta is a telecommunications company that outsources maintenance and construction projects for utilities and SFX Entertainment, a consumer cyclical holding, is the most dominant company in the outdoor concert arena business. On the other hand, several of our healthcare services investments were disappointments. One example is Province Healthcare, an owner and operator of rural hospitals. While Province's earnings met our A-20 - ---------------------------------------------------------------------- Millennium Trust (Cont'd) expectations, like most hospital companies, the stock was hurt by concern that increased federal regulatory scrutiny may have a negative impact on future earnings. Since this is our first opportunity to address our shareholders, we want to provide some detail on our investment methodology. In selecting stocks for the portfolio, we employ a three-part process, which begins with an effort to identify small companies with favorable growth characteristics and the realistic potential to consistently surpass consensus growth expectations. We are looking at growth over three time horizons: the near-term, defined as the next three months; intermediate-term, defined as the next three calendar quarters; and the long-term, defined as the next three years. In the near-term, since we like target companies to hit the portfolio running, we favor companies whose earnings we believe with a high degree of certainty will at least meet next quarter's expectations. In the intermediate-term, we look out over the next three quarters and evaluate the potential for positive earnings surprises. Finally, in the long-term, we adjust our research telescopes to look three years into the future to try to determine whether investment candidates can sustain above average growth. Here is where taking a hard look at a target company's markets and longer-term business strategies is particularly critical. We don't want to own shooting stars -- companies whose earnings flame out after spectacular, but short-lived, advances. The next step is to evaluate management and balance sheets. We like to see management depth rather than just one person wearing all the critical management hats. We are looking for proactive management that we believe can anticipate and respond quickly to changes in the marketplace. We like to see managers' own substantial stakes in their own firms so that their interests are consistent with shareholders' -- namely to grow the value of their investment. We also like to find an independent board of directors, which has the experience to help management, and if and when necessary, challenge management decisions. We want to see strong balance sheets because rapidly growing A-21 - ---------------------------------------------------------------------- Millennium Trust (Cont'd) companies often need a lot of money to grow. We prefer seeing this money come from internally generated cash flow rather than excessive debt or secondary equities offerings that can dilute the holdings of existing shareholders. The third step in this process is that we don't want to overpay for good growth companies. To accomplish that, we realize that we need more than one standard of relative value. For more mature small companies in more developed industries, we look at price/earnings ratios relative to their peers and the market. In some instances, the price/cash flow ratio is a better barometer of relative value. In the case of companies in new, explosive growth businesses, like the Internet, we may focus on price/sales ratios. Whatever fundamental yardstick we use to measure value, the continual goal is to buy small, quality growth companies at reasonable valuations. Finally, we attempt to limit risk in the portfolio through broad diversification. The portfolio will generally own 60-80 individual securities in at least 12 different industry groups. No single position will exceed 5% of total portfolio assets. In closing, we are delighted that Millennium has gotten off to such a fast start. Our confidence in this asset class and our disciplined approach is demonstrated by the fact that we have put a significant percentage of our personal net worths into the portfolio. We believe introducing this kind of a product at this time underscores Neuberger Berman's commitment to quality investment products rather than marketing whatever may be "hot" at the time. Sincerely, /s/ Michael Malouf /s/ Jennifer Silver Michael Malouf and Jennifer Silver PORTFOLIO CO-MANAGERS A-22 - ---------------------------------------------------------------------- Millennium Trust (Cont'd) *These are cumulative returns and are not annualized. The cumulative returns for Neuberger Berman Millennium Trust and the Russell 2000 Growth Index are from October 20, 1998, which is the inception of the Fund, through February 28, 1999. Because this is a new fund, short-term results may not be duplicated. Average net assets of the Portfolio for its first four months were approximately $16.2 million. It may be easier to achieve higher returns in a small fund than in a larger fund. Neuberger Berman Management Inc. ("NBMI") currently absorbs certain expenses of the Fund. This arrangement is subject to change, and without this arrangement, the Fund's returns would have been less. Total return includes reinvestment of dividends and distributions. Past performance does not guarantee future results and shares when redeemed may be worth more or less than original cost. *The Russell 2000 Index is an unmanaged index consisting of the securities of the 2,000 issuers having the smallest capitalization the Russell 3000 Index, representing approximately 11% of the Russell 3000 total market capitalization. The smallest company's market capitalization is roughly $222 million. The Russell 2000 Growth Index measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by NBMI and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described indices. The composition, industries and holdings of the Portfolio are subject to change. Millennium Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS. A-23 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Partners Trust PORTFOLIO CO-MANAGERS MICHAEL KASSEN, ROBERT GENDELMAN AND S. BASU MULLICK FOCUS ON OUT-OF-FAVOR LARGE-CAP STOCKS AND MID-SIZED COMPANIES LESS WIDELY FOLLOWED BY WALL STREET ANALYSTS. THEY ARE PARTICULARLY PARTIAL TO GROWTH STOCKS THAT HAVE EXPERIENCED TEMPORARY SETBACKS, BUT WHOSE LONGER-TERM FUNDAMENTAL OUTLOOK REMAINS STRONG. THE PORTFOLIO MANAGEMENT TEAM VIEWS STOCKS AS PIECES OF BUSINESSES THEY WOULD LIKE TO OWN RATHER THAN PIECES OF PAPER TO TRADE BASED ON SHORT-TERM PRICE FLUCTUATIONS. THE GOAL IS TO FIND QUALITY COMPANIES TRADING AT A DISCOUNT TO THEIR INTRINSIC ECONOMIC VALUE. For the six-month period ended February 28, 1999, Partners Trust returned 20.19% versus the Russell 1000 Value Index's 22.53% advance and the S&P 500 Index's 30.32% gain (see page B-1 for average annual total returns through March 31, 1999).* During the first half of fiscal 1999, our technology investments performed particularly well -- in aggregate, up more than 60%. We achieved these strong returns without owning high price/earnings multiple market darlings like Intel, Microsoft, Dell Computer, Lucent, or any of the sizzling Internet stocks. Our focus on high-quality companies like Texas Instruments, Hewlett-Packard and Northern Telecom, whose multiples are below the market average, validated our belief that buying quality technology companies at opportunistic prices can generate attractive risk-adjusted returns. Our healthcare positions also performed quite well. Once again, we did not own the glamour stocks like Merck and Pfizer. Instead, we held smaller, and in our opinion, much more reasonably valued drug companies like ALZA, Biogen, and Baxter International. Each of these companies has new drug introductions we believe will have a very favorable impact on future results. In the consumer staples sector, we did well with our holdings in Anheuser-Busch (beer), McDonald's (fast foods), Tricon Global Restaurants (pizza, fried chicken and tacos), and Nabisco Holdings (cookies). Kimberly Clark (diapers) and MediaOne Group (cellular telephone and cable television) also rewarded us. A-24 - ---------------------------------------------------------------------- Partners Trust (Cont'd) Our financial holdings were mixed. In the banking group, Bank One, Chase Manhattan and Citigroup performed well, while our holdings in BankBoston disappointed. And even as our holdings in Morgan Stanley Dean Witter, a broker/asset manager, soared, we had flat returns in Countrywide Credit, a mortgage finance company. In general, our larger-capitalization financial holdings performed materially better than our mid-cap positions. In aggregate, the portfolio's capital goods, transportation, and energy holdings declined over this reporting period. Capital goods companies continue to suffer the aftereffects of the Asian economic flu -- slack demand and no pricing flexibility. We believe our current capital goods investments represent high quality and great value. However, over the short-to-intermediate term, we believe our patience will likely continue to be tested. The same can be said for our energy holdings, which have suffered as oil prices have remained depressed. We are not anticipating a sharp rise in oil prices in the immediate future. However, we are sufficiently contrarian to challenge the current consensus that oil prices will stay at current levels indefinitely. Our airline holdings, primarily Continental Airlines, declined during this six-month reporting period. Wall Street seems to believe we have seen peak earnings in this cycle and consequently, price/earnings multiples have contracted. We believe airline earnings will level off, but not plunge the way they have during previous down cycles. Within utilities, The Williams Companies, the only big winner among our otherwise disappointing holdings there, is really two companies -- a large gas pipeline and a telecommunications network. Several years ago, Williams used its steady cash flow from the pipeline business to build a telecommunications network (WilTel), which it eventually sold at a handsome profit to Worldcom (now MCI Worldcom). It is doing it all over again, laying an advanced fiber optic network along its 32,000 miles of gas pipeline. Recently, SBC Communications (formerly Southwestern Bell), has contracted for the use of this new fiber optic network and taken a 10% stake in the business. We believe the combined value of the gas pipeline and telecommunications network is a bit higher than $40 per share -- above Williams' $37 per A-25 - ---------------------------------------------------------------------- Partners Trust (Cont'd) share price at the end of this reporting period. Williams has announced it will be spinning off a portion of this new communications network business to the public. We believe this should help surface value and perhaps foreshadow a more complete restructuring. We reserve the right to change our opinion on Williams Companies should circumstances warrant it. But, right now, we think it has excellent upside potential. In the first two months of 1999, growth stocks continued to outperform value stocks and large-cap stocks continued to outperform smaller companies. However, our stock picking discipline produced generous absolute returns in this uneven market. We believe our portfolio represents quality and value -- the cornerstones of a prudent and productive investment program. Sincerely, /s/ Robert Gendelman /s/ Michael Kassen /s/ S. Basu Mullick Robert Gendelman, Michael Kassen, and S. Basu Mullick, PORTFOLIO CO-MANAGERS *The S&P 500 Index is an unmanaged index generally considered to be representative of stock market activity. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 89% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described indices. The composition, industries and holdings of the Portfolio are subject to change. Partners Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Please remember that past performance is not indicative of future results. A-26 PORTFOLIO COMMENTARY Neuberger Berman - ---------------------------------------------------------------------- Socially Responsive Trust PORTFOLIO MANAGER JANET PRINDLE BELIEVES DOING GOOD IS GOOD BUSINESS AND HAS THE POTENTIAL TO PRODUCE POSITIVE INVESTMENT RESULTS. SHE FOCUSES ON COMPANIES THAT ARE AGENTS OF FAVORABLE CHANGE IN WORKPLACE POLICIES, PARTICULARLY FOR WOMEN AND MINORITIES, ARE GOOD CORPORATE CITIZENS, AND ARE RESPONSIVE TO ENVIRONMENTAL ISSUES. SHE DOES NOT INVEST IN TOBACCO, ALCOHOL, GAMBLING, NUCLEAR POWER, OR WEAPONS COMPANIES. BUT, SOCIAL RESPONSIBILITY ALONE DOES NOT QUALIFY A COMPANY AS A GOOD INVESTMENT. TRUE TO NEUBERGER BERMAN'S PRINCIPLES, PORTFOLIO CANDIDATES MUST FIRST APPEAR FUNDAMENTALLY ATTRACTIVE. THEN, AND ONLY THEN, ARE SOCIAL SCREENS APPLIED. THE OBJECTIVE IS SIMPLE AND STRAIGHTFORWARD -- TO SERVE BOTH SOCIETY AND SHAREHOLDERS. For the six-month period ended February 28, 1999, Socially Responsive Trust gained 24.61% versus the Standard & Poor's 500 Index's 30.32% return (see page B-1 for average annual total returns through March 31, 1999).* In a period in which growth investing once again materially outperformed value investing, we credit our stock selection for the portfolio's competitive returns versus the growth stock dominated S&P 500. Our technology, healthcare, and consumer staples holdings excelled -- in aggregate, returning approximately 56%, 40% and 39%, respectively. Big winners in the technology sector included Analog Devices, Perkin Elmer, and Unisys -- high-quality companies we were able to accumulate at discounted valuations. Good performers in the consumer staples category included Kimberly Clark and Valassis Communications -- once again, top-tier companies bought at bargain prices. In the healthcare arena, previously out-of-favor stocks Biogen, C.R. Bard and Wellpoint Health Networks posted strong gains. However, our capital goods and utilities investments disappointed on both an absolute and relative performance basis. Plagued by slack global demand and the absence of pricing power, multinationals like Minnesota Mining and Manufacturing and Raychem Corp. struggled. We may have to wait for the global economy to stabilize before these and other high-quality capital goods holdings can advance. In addition, our utilities holdings have been restrained by uncertainty regarding how A-27 - ---------------------------------------------------------------------- Socially Responsive Trust (Cont'd) the ongoing deregulation of the utilities industry would impact earnings and most recently, by rising interest rates. We didn't buy utilities for earnings or yield, but rather because we expect ongoing industry-wide consolidations to reduce operating expenses for many of these companies, which, in turn, should reveal their intrinsic value. In this report we would like to highlight three companies that we believe represent socially responsive companies which are also excellent investment opportunities. We have chosen to highlight drug maker Biogen, computer hardware and services company Unisys, and retailer Dayton Hudson. Be reminded we reserve the right to alter our opinion on these and all the stocks in the portfolio if changing circumstances dictate. First, Biogen is a company whose stock has more than doubled in the last six months. Its success in part is driven by the overwhelming reception for Avonex, its new drug for the treatment of multiple sclerosis. As the only drug that has proven effective in treating MS during all its stages, we believe Avonex has true blockbuster potential. Research reveals that since Avonex's introduction, early stage diagnosis of MS has increased, indicating the market for this product may be even larger than generally recognized. While Biogen's stock is no longer cheap, we believe if Avonex reaches its full potential and the company can bring other promising drugs in its pipeline to market, it may still be a long-term bargain at current prices. We applaud Biogen's success with Avonex and its ongoing commitment to finding treatments for other diseases. Second, Unisys, a computer hardware and services company, has exhibited strong performance over the last six months. Its management is now focusing on the higher margin computer network and systems integration business. This strategy, along with a much-improved balance sheet, is attracting investor attention. Unisys also deserves credit for re-engineering its facilities to dramatically reduce manufacturing emissions. This move has not only helped the company by producing future cost savings estimated at $6 million dollars annually, but it also benefited the communities located near its manufacturing facilities. A A-28 - ---------------------------------------------------------------------- Socially Responsive Trust (Cont'd) clearer business strategy, a healthier balance sheet, and cleaner air for its neighbors has earned our investment and socially responsive stamps of approval. And third, retailer Dayton Hudson, another of the portfolio's excellent performers during the past six months, owes much of its progress to its Target Store discount chain. Target's profits are accelerating and now account for approximately 70% of parent Dayton Hudson's earnings. The Target formula -- low prices combined with more attractive merchandising and a higher level of service than that provided by many other discount retailers -- has turned out to be a winning strategy and one we believe can continue to propel Dayton Hudson's stock. Dayton Hudson also deserves high corporate citizenship marks for donating 5% of its pre-tax profits to charities and for its diverse board of directors that includes three women and two ethnic minority members. In closing, most value-oriented investors have struggled to keep pace with the S&P 500 over the last six months. Consequently, we are particularly pleased with the portfolio's performance during first half fiscal 1999. As always, we are pleased to have been able to reward shareholders whose quest for financial security is coupled with a well-developed social conscience. Sincerely, /s/ Janet Prindle Janet Prindle PORTFOLIO MANAGER *The S&P 500 Index is an unmanaged index generally considered to be representative of stock market activity. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of this index are prepared or obtained by Neuberger Berman Management Inc. ("NBMI") and include reinvestment of all dividends and capital gain distributions. The Portfolio invests in many securities not included in the above-described index. The composition, industries and holdings of the Portfolio are subject to change. Socially Responsive Portfolio is invested in a wide array of stocks and no single holding makes up more than a small fraction of the Portfolio's total assets. Please remember that past performance is not indicative of future results. A-29 (This page has been left blank intentionally.) A-30 PERFORMANCE HIGHLIGHTS
FOR PERIODS ENDED 3/31/99 SIX MONTH --------------------------------- NEUBERGER BERMAN PERIOD EQUITY TRUST AND EQUITY ENDED AVERAGE ANNUAL TOTAL RETURNS(1) ASSETS 2/28/99(1) 1 YR 5 YR 10 YR - --------------------------------------------------------------------------------------------------- FOCUS TRUST-REGISTERED TRADEMARK-(2) +36.31 % +1.44% +19.19% +16.84% GUARDIAN TRUST +24.64 % -6.85% +14.97% +14.43% PARTNERS TRUST-REGISTERED TRADEMARK- +20.19 % -2.81% +19.68% +15.82% SOCIALLY RESPONSIVE TRUST +24.61 % +0.75% +19.11% +17.45%(3) S&P 500 INDEX(4) +30.32 % +18.43% +26.19% +18.92% RUSSELL 1000-REGISTERED TRADEMARK- VALUE INDEX(4) +22.53 % +5.04% +22.07% +16.71% MANHATTAN TRUST +27.26 % +0.58% +15.61% +14.05% RUSSELL MIDCAP-TM- GROWTH INDEX(4) +33.27 % +8.89% +18.87% +16.97% GENESIS TRUST +7.39 % -19.51% +13.91% +12.16% RUSSELL 2000-REGISTERED TRADEMARK- INDEX(4) +16.79 % -16.26% +11.22% +11.46% MILLENNIUM TRUST +48.58 %* +61.76%* N/A N/A RUSSELL 2000-REGISTERED TRADEMARK- GROWTH INDEX(4) +21.27 %* +25.59%* N/A N/A INTERNATIONAL TRUST +8.22 % -12.19% +9.20%(3) N/A EAFE-REGISTERED TRADEMARK- INDEX(4) +14.00 % +6.37% N/A N/A
* THESE ARE CUMULATIVE RETURNS AND ARE NOT ANNUALIZED. THE CUMULATIVE RETURNS FOR NEUBERGER BERMAN MILLENNIUM TRUST-SM- AND THE RUSSELL 2000 GROWTH INDEX ARE FROM OCTOBER 20, 1998, WHICH IS THE COMMENCEMENT OF OPERATIONS OF NEUBERGER BERMAN MILLENNIUM FUND-SM-, THROUGH FEBRUARY 28, 1999 AND MARCH 31, 1999, RESPECTIVELY. THE CUMULATIVE RETURN FOR MILLENNIUM TRUST FROM NOVEMBER 4, 1998, WHICH IS THE COMMENCEMENT OF OPERATIONS OF MILLENNIUM TRUST, THROUGH FEBRUARY 28, 1999 AND MARCH 31, 1999, RESPECTIVELY WAS +38.60% AND +50.90%. BECAUSE THIS IS A NEW FUND, SHORT-TERM RESULTS MAY NOT BE DUPLICATED. AVERAGE NET ASSETS OF THE PORTFOLIO THROUGH MARCH 31, 1999 WERE APPROXIMATELY $18.5 MILLION. IT MAY BE EASIER TO ACHIEVE HIGHER RETURNS IN A SMALL FUND THAN IN A LARGER FUND. NEUBERGER BERMAN MANAGEMENT INC.-REGISTERED TRADEMARK- CURRENTLY ABSORBS CERTAIN OPERATING EXPENSES SO THAT ITS EXPENSE RATIO PER ANNUM WILL NOT EXCEED THE EXPENSE RATIO OF MILLENNIUM FUND BY MORE THAN 0.10% OF MILLENNIUM TRUST'S AVERAGE DAILY NET ASSETS, NOT TO EXCEED 1.75%, UNTIL DECEMBER 31, 1999. ABSENT THIS ARRANGEMENT, WHICH IS SUBJECT TO CHANGE WITH 60 DAYS' NOTICE, MILLENNIUM TRUST'S RETURNS WOULD HAVE BEEN LESS. THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION ARE SET FORTH IN THE PROSPECTUS. Each Fund commenced operations in August 1993 (except Neuberger Berman Socially Responsive Trust-SM-, Neuberger Berman International Trust-SM- and Neuberger Berman Millennium Trust which began in March 1997, June 1998, and November 1998, respectively). The Funds have identical investment objectives and policies, and invest in the same Portfolio as other funds ("Sister Funds") of similar names, which are also B-1 managed by Neuberger Berman Management Inc. The performance information for the Funds prior to their commencement of operations are for the Sister Funds. Neuberger Berman Management Inc. currently agrees to absorb certain operating expenses of each Fund (with the exception of Millennium Trust) so that its 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 (not to exceed 1.70% for International Trust). These arrangements can be terminated upon 60 days' notice. Neuberger Berman Management Inc. previously agreed to waive a portion of the management fee borne directly by Neuberger Berman Genesis Portfolio-SM- and indirectly by Neuberger Berman Genesis Trust-Registered Trademark-. Absent such arrangements, the average annual total returns would have been less. The total returns for periods prior to the Funds' commencement of operations would have been lower had they reflected the higher expense ratios of the Funds as compared to those of the Sister Funds. 1) Results are shown on a "total return" basis and include reinvestment of all dividends and capital gain distributions. Performance data quoted represents past performance, which is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that the shares, when redeemed, may be worth more or less than their original cost. 2) Prior to November 1, 1991, the investment policies of its Sister Fund required that it invest a substantial portion of its assets in the energy field. 3) From inception of Sister Fund. 4) The S&P 500 Index is an unmanaged index generally considered to be representative of stock market activity. The Russell 1000-Registered Trademark- Index measures the performance of the 1,000 largest companies in the Russell 3000-Registered Trademark- Index (which measures the performance of the 3,000 largest U.S. companies based on total market capitalization). The Russell 1000 Index represents approximately 89% of the total market capitalization of the Russell 3000-Registered Trademark- Index. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Growth Index measures the performance of those Russell Midcap-TM- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represents approximately 35% of the total market capitalization of the Russell 1000 Index (which, in turn, consists of the 1,000 largest U.S. companies, based on market capitalization). The Russell 2000 Index is an unmanaged index that measures the performance of the 2,000 issuers having the smallest capitalization in the Russell 3000 Index, representing approximately 11% of the Russell 3000 total market capitalization. The smallest company's market capitalization is roughly $222 million. The Russell 2000 Growth Index measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The EAFE Index, also known as the Morgan Stanley Capital International Europe, Australasia, Far East Index, is an unmanaged index of over 1,000 foreign stock prices. The index is translated into U.S. dollars. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices are prepared or obtained by Neuberger Berman Management Inc. and include reinvestment of all dividends and capital gain distributions. The Portfolios invest in many securities not included in any of the above-described indices. THE RISKS INVOLVED IN SEEKING CAPITAL APPRECIATION FROM INVESTMENTS PRIMARILY IN COMPANIES WITH SMALL MARKET CAPITALIZATION OR THAT ARE BASED OUTSIDE THE U.S. ARE SET FORTH IN THE PROSPECTUS. B-2 (This page has been left blank intentionally.) B-3 STATEMENTS OF ASSETS AND LIABILITIES Neuberger Berman - ----------------------------------------------------------------------
EQUITY TRUST ------------------------------------------------ (000'S OMITTED EXCEPT PER SHARE FOCUS GENESIS GUARDIAN AMOUNTS) TRUST TRUST TRUST ------------------------------------------------ ASSETS Investment in corresponding Portfolio, at value (Note A) $ 236,434 $ 686,283 $ 1,479,966 Deferred organization costs (Note A) -- -- -- Receivable for Trust shares sold 310 1,717 1,471 Receivable from administrator -- net (Note B) -- -- -- ------------------------------------------------ 236,744 688,000 1,481,437 ------------------------------------------------ LIABILITIES Payable for Fund expenses (Note B) -- -- -- Payable for Trust shares redeemed 224 1,141 3,997 Payable to administrator -- net (Note B) 78 227 464 Accrued organization costs (Note A) -- -- -- Accrued expenses 42 187 145 ------------------------------------------------ 344 1,555 4,606 ------------------------------------------------ NET ASSETS at value $ 236,400 $ 686,445 $ 1,476,831 ------------------------------------------------ NET ASSETS consist of: Par value $ 10 $ 38 $ 91 Paid-in capital in excess of par value 180,926 766,949 1,139,625 Accumulated undistributed net investment income (loss) (105) 3,245 2,682 Accumulated net realized gains (losses) on investment (4,202) (36,847) 106,639 Net unrealized appreciation (depreciation) in value of investment 59,771 (46,940) 227,794 ------------------------------------------------ NET ASSETS at value $ 236,400 $ 686,445 $ 1,476,831 ------------------------------------------------ SHARES OUTSTANDING ($.001 par value; unlimited shares authorized) 10,136 37,600 90,993 ------------------------------------------------ NET ASSET VALUE, offering and redemption price per share $23.32 $18.26 $16.23 ------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-4 February 28, 1999 (Unaudited) - ----------------------------------------------------------------------
EQUITY ASSETS EQUITY TRUST -------------- ----------------------------------------------------------------- SOCIALLY INTERNATIONAL MANHATTAN MILLENNIUM PARTNERS RESPONSIVE TRUST TRUST TRUST TRUST TRUST ---------------------------------------------------------------------------------- ASSETS Investment in corresponding Portfolio, at value (Note A) $ 2,060 $ 53,714 $ 1,280 $ 864,766 $ 18,956 Deferred organization costs (Note A) 79 -- -- -- 68 Receivable for Trust shares sold 1 59 1 6,079 66 Receivable from administrator -- net (Note B) 54 -- 38 -- -- ---------------------------------------------------------------------------------- 2,194 53,773 1,319 870,845 19,090 ---------------------------------------------------------------------------------- LIABILITIES Payable for Fund expenses (Note B) 24 -- 12 -- -- Payable for Trust shares redeemed -- 109 -- 1,744 1 Payable to administrator -- net (Note B) -- 19 -- 287 3 Accrued organization costs (Note A) 92 -- -- -- -- Accrued expenses 23 32 34 73 29 ---------------------------------------------------------------------------------- 139 160 46 2,104 33 ---------------------------------------------------------------------------------- NET ASSETS at value $ 2,055 $ 53,613 $ 1,273 $ 868,741 $ 19,057 ---------------------------------------------------------------------------------- NET ASSETS consist of: Par value $ -- $ 4 $ -- $ 49 $ 1 Paid-in capital in excess of par value 2,304 42,558 1,175 797,164 17,055 Accumulated undistributed net investment income (loss) (8) (164) (3) 4,990 2 Accumulated net realized gains (losses) on investment (264) 1,069 71 5,627 (173) Net unrealized appreciation (depreciation) in value of investment 23 10,146 30 60,911 2,172 ---------------------------------------------------------------------------------- NET ASSETS at value $ 2,055 $ 53,613 $ 1,273 $ 868,741 $ 19,057 ---------------------------------------------------------------------------------- SHARES OUTSTANDING ($.001 par value; unlimited shares authorized) 137 3,823 92 48,635 1,452 ---------------------------------------------------------------------------------- NET ASSET VALUE, offering and redemption price per share $15.01 $14.02 $13.86 $17.86 $13.13 ----------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-5 STATEMENTS OF OPERATIONS Neuberger Berman - ----------------------------------------------------------------------
EQUITY TRUST ------------------------------------------ FOCUS GENESIS GUARDIAN TRUST TRUST TRUST For the For the For the Six Months Six Months Six Months Ended Ended Ended February 28, February 28, February 28, 1999 1999 1999 (000'S OMITTED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ------------------------------------------ INVESTMENT INCOME Investment income from corresponding Portfolio (Note A) $ 1,027 $ 8,178 $ 12,182 ------------------------------------------ Expenses: Administration fee (Note B) 439 1,581 3,170 Amortization of deferred organization and initial offering expenses (Note A) -- -- -- Auditing fees 2 3 2 Custodian fees 5 5 5 Legal fees 7 9 11 Registration and filing fees 30 141 29 Shareholder reports 23 185 108 Shareholder servicing agent fees 11 14 13 Trustees' fees and expenses 2 6 11 Miscellaneous 1 1 10 Expenses from corresponding Portfolio (Notes A & B) 563 2,931 3,651 ------------------------------------------ Total expenses 1,083 4,876 7,010 Expenses reimbursed by administrator and/or reduced by custodian fee expense offset arrangement (Note B) (40) (2) (1) ------------------------------------------ Total net expenses 1,043 4,874 7,009 ------------------------------------------ Net investment income (loss) (16) 3,304 5,173 ------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING PORTFOLIO (NOTE A) Net realized gain (loss) on investment securities 977 (36,443) 86,702 Net realized gain on option contracts 10 -- 805 Net realized gain (loss) on financial futures contracts -- -- 22,143 Net realized loss on foreign currency transactions -- -- -- Net realized loss on equity swap contracts -- -- -- Change in net unrealized appreciation (depreciation) of investment securities, financial futures contracts, option contracts, equity swap contracts, translation of assets and liabilities in foreign currencies, and foreign currency contracts 66,234 86,960 245,667 ------------------------------------------ Net gain on investments from corresponding Portfolio (Note A) 67,221 50,517 355,317 ------------------------------------------ Net increase in net assets resulting from operations $ 67,205 $ 53,821 $ 360,490 ------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-6 - ----------------------------------------------------------------------
EQUITY TRUST EQUITY ASSETS ----------------------------------------------------------------- -------------- MILLENNIUM TRUST For the SOCIALLY INTERNATIONAL MANHATTAN Period from PARTNERS RESPONSIVE TRUST TRUST November 4, TRUST TRUST 1998 For the For the (Commencement For the For the Six Months Six Months of Operations) Six Months Six Months Ended Ended to Ended Ended February 28, February 28, February 28, February 28, February 28, 1999 1999 1999 1999 1999 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ---------------------------------------------------------------------------------- INVESTMENT INCOME Investment income from corresponding Portfolio (Note A) $ 8 $ 135 $ 1 $ 8,841 $ 120 ---------------------------------------------------------------------------------- Expenses: Administration fee (Note B) 4 104 1 1,677 33 Amortization of deferred organization and initial offering expenses (Note A) 9 -- -- -- 11 Auditing fees 1 2 2 3 5 Custodian fees 5 5 3 5 5 Legal fees 7 7 20 7 7 Registration and filing fees 11 13 37 123 30 Shareholder reports 10 14 24 48 10 Shareholder servicing agent fees 1 8 -- 11 9 Trustees' fees and expenses -- 1 -- 6 1 Miscellaneous 1 1 -- 3 1 Expenses from corresponding Portfolio (Notes A & B) 11 152 3 1,968 50 ---------------------------------------------------------------------------------- Total expenses 60 307 90 3,851 162 Expenses reimbursed by administrator and/or reduced by custodian fee expense offset arrangement (Note B) (44) (8) (86) -- (54) ---------------------------------------------------------------------------------- Total net expenses 16 299 4 3,851 108 ---------------------------------------------------------------------------------- Net investment income (loss) (8) (164) (3) 4,990 12 ---------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM CORRESPONDING PORTFOLIO (NOTE A) Net realized gain (loss) on investment securities (124) 1,101 71 6,952 (171) Net realized gain on option contracts -- -- -- -- -- Net realized gain (loss) on financial futures contracts (24) -- -- -- -- Net realized loss on foreign currency transactions (38) -- -- -- -- Net realized loss on equity swap contracts (1) -- -- -- -- Change in net unrealized appreciation (depreciation) of investment securities, financial futures contracts, option contracts, equity swap contracts, translation of assets and liabilities in foreign currencies, and foreign currency contracts 367 11,326 30 137,602 3,557 ---------------------------------------------------------------------------------- Net gain on investments from corresponding Portfolio (Note A) 180 12,427 101 144,554 3,386 ---------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 172 $ 12,263 $ 98 $ 149,544 $ 3,398 ----------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-7 STATEMENTS OF CHANGES IN NET ASSETS Neuberger Berman - ----------------------------------------------------------------------
EQUITY TRUST FOCUS TRUST GENESIS TRUST Six Months Six Months Ended Year Ended Year February 28, Ended February 28, Ended 1999 August 31, 1999 August 31, (000'S OMITTED) (UNAUDITED) 1998 (UNAUDITED) 1998 ------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (16) $ 374 $ 3,304 $ 5,007 Net realized gain (loss) on investments from corresponding Portfolio (Note A) 987 (5,390) (36,443) 7,821 Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 66,234 (41,253) 86,960 (208,363) ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 67,205 (46,269) 53,821 (195,535) ------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (312) (80) (5,066) -- Net realized gain on investments -- (3,917) (8,444) (4,127) ------------------------------------------------------------- Total distributions to shareholders (312) (3,997) (13,510) (4,127) ------------------------------------------------------------- FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold 40,066 167,271 188,503 930,187 Proceeds from reinvestment of dividends and distributions 311 3,473 11,221 3,118 Payments for shares redeemed (64,034) (88,211) (258,095) (411,875) ------------------------------------------------------------- Net increase (decrease) from Trust share transactions (23,657) 82,533 (58,371) 521,430 ------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 43,236 32,267 (18,060) 321,768 NET ASSETS: Beginning of period 193,164 160,897 704,505 382,737 ------------------------------------------------------------- End of period $ 236,400 $ 193,164 $ 686,445 $ 704,505 ------------------------------------------------------------- Accumulated undistributed net investment income (loss) at end of period $ (105) $ 223 $ 3,245 $ 5,007 ------------------------------------------------------------- NUMBER OF TRUST SHARES: Sold 1,949 7,536 9,825 41,459 Issued on reinvestment of dividends and distributions 13 174 569 144 Redeemed (3,096) (4,005) (13,557) (18,685) ------------------------------------------------------------- Net increase (decrease) in shares outstanding (1,134) 3,705 (3,163) 22,918 -------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-8 - ----------------------------------------------------------------------
EQUITY TRUST INTERNATIONAL TRUST Period from GUARDIAN TRUST June 29, 1998 MANHATTAN TRUST (Commencement Six Months Six Months of Six Months Ended Year Ended Operations) Ended Year February 28, Ended February 28, to February 28, Ended 1999 August 31, 1999 August 31, 1999 August 31, (UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998 --------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 5,173 $ 11,466 $ (8) $ (2) $ (164) $ (297) Net realized gain (loss) on investments from corresponding Portfolio (Note A) 109,650 157,109 (187) (77) 1,101 2,923 Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 245,667 (546,539) 367 (344) 11,326 (8,490) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 360,490 (377,964) 172 (423) 12,263 (5,864) --------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (3,984) (12,284) -- -- -- -- Net realized gain on investments (143,040) (161,079) -- -- (2,903) (9,083) --------------------------------------------------------------------------------------------- Total distributions to shareholders (147,024) (173,363) -- -- (2,903) (9,083) --------------------------------------------------------------------------------------------- FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold 195,832 740,850 350 2,252 15,947 29,973 Proceeds from reinvestment of dividends and distributions 146,789 172,922 -- -- 2,902 9,082 Payments for shares redeemed (608,752) (1,102,701) (228) (68) (20,699) (29,068) --------------------------------------------------------------------------------------------- Net increase (decrease) from Trust share transactions (266,131) (188,929) 122 2,184 (1,850) 9,987 --------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (52,665) (740,256) 294 1,761 7,510 (4,960) NET ASSETS: Beginning of period 1,529,496 2,269,752 1,761 -- 46,103 51,063 --------------------------------------------------------------------------------------------- End of period $ 1,476,831 $ 1,529,496 $ 2,055 $ 1,761 $ 53,613 $ 46,103 --------------------------------------------------------------------------------------------- Accumulated undistributed net investment income (loss) at end of period $ 2,682 $ 1,493 $ (8) $ -- $ (164) $ -- --------------------------------------------------------------------------------------------- NUMBER OF TRUST SHARES: Sold 12,312 38,806 25 132 1,195 2,011 Issued on reinvestment of dividends and distributions 9,095 10,159 -- -- 200 695 Redeemed (37,802) (58,140) (15) (5) (1,544) (1,971) --------------------------------------------------------------------------------------------- Net increase (decrease) in shares outstanding (16,395) (9,175) 10 127 (149) 735 ---------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-9 STATEMENTS OF CHANGES IN NET ASSETS(Cont'd) Neuberger Berman - ----------------------------------------------------------------------
EQUITY TRUST MILLENNIUM TRUST Period from November 4, 1998 (Commencement of Operations) to February 28, 1999 (000'S OMITTED) (UNAUDITED) ------------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (3) Net realized gain (loss) on investments from corresponding Portfolio (Note A) 71 Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 30 ------ Net increase (decrease) in net assets resulting from operations 98 ------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- Net realized gain on investments -- ------ Total distributions to shareholders -- ------ FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold 1,402 Proceeds from reinvestment of dividends and distributions -- Payments for shares redeemed (227) ------ Net increase (decrease) from Trust share transactions 1,175 ------ NET INCREASE (DECREASE) IN NET ASSETS 1,273 NET ASSETS: Beginning of period -- ------ End of period $ 1,273 ------ Accumulated undistributed net investment income (loss) at end of period $ (3) ------ NUMBER OF TRUST SHARES: Sold 108 Issued on reinvestment of dividends and distributions -- Redeemed (16) ------ Net increase (decrease) in shares outstanding 92 ------
SEE NOTES TO FINANCIAL STATEMENTS B-10 - ----------------------------------------------------------------------
EQUITY TRUST EQUITY ASSETS SOCIALLY PARTNERS TRUST RESPONSIVE TRUST Six Months Six Months Ended Year Ended Year February 28, Ended February 28, Ended 1999 August 31, 1999 August 31, (UNAUDITED) 1998 (UNAUDITED) 1998 ------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 4,990 $ 5,089 $ 12 $ 39 Net realized gain (loss) on investments from corresponding Portfolio (Note A) 6,952 29,585 (171) 113 Change in net unrealized appreciation (depreciation) of investments from corresponding Portfolio (Note A) 137,602 (140,295) 3,557 (1,847) ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 149,544 (105,621) 3,398 (1,695) ------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- (2,430) (42) (8) Net realized gain on investments (22,347) (53,755) (139) (82) ------------------------------------------------------------- Total distributions to shareholders (22,347) (56,185) (181) (90) ------------------------------------------------------------- FROM TRUST SHARE TRANSACTIONS: Proceeds from shares sold 211,227 597,753 4,440 9,617 Proceeds from reinvestment of dividends and distributions 22,046 54,739 181 90 Payments for shares redeemed (221,395) (231,594) (2,197) (2,238) ------------------------------------------------------------- Net increase (decrease) from Trust share transactions 11,878 420,898 2,424 7,469 ------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 139,075 259,092 5,641 5,684 NET ASSETS: Beginning of period 729,666 470,574 13,416 7,732 ------------------------------------------------------------- End of period $ 868,741 $ 729,666 $ 19,057 $ 13,416 ------------------------------------------------------------- Accumulated undistributed net investment income (loss) at end of period $ 4,990 $ -- $ 2 $ 32 ------------------------------------------------------------- NUMBER OF TRUST SHARES: Sold 12,210 32,171 351 753 Issued on reinvestment of dividends and distributions 1,228 3,207 14 8 Redeemed (12,681) (12,535) (174) (176) ------------------------------------------------------------- Net increase (decrease) in shares outstanding 757 22,843 191 585 -------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS B-11 NOTES TO FINANCIAL STATEMENTS Neuberger Berman February 28, 1999 (Unaudited) - ---------------------------------------------------------------------- Equity Trust and Equity Assets NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1) GENERAL: Neuberger Berman Focus Trust-Registered Trademark- ("Focus"), Neuberger Berman Genesis Trust ("Genesis"), Neuberger Berman Guardian Trust-SM- ("Guardian"), Neuberger Berman International Trust ("International"), Neuberger Berman Manhattan Trust-Registered Trademark- ("Manhattan"), Neuberger Berman Millennium Trust ("Millennium"), and Neuberger Berman Partners Trust-Registered Trademark- ("Partners") are separate operating series of Neuberger Berman Equity Trust ("Equity Trust"), a Delaware business trust organized pursuant to a Trust Instrument dated May 6, 1993. Neuberger Berman Socially Responsive Trust ("Socially Responsive") is a separate operating series of Neuberger Berman Equity Assets ("Equity Assets"), a Delaware business trust organized pursuant to a Trust Instrument dated October 18, 1993. These eight aforementioned series are collectively referred to as the "Funds." Equity Trust and Equity Assets (collectively, the "Trusts") are registered as diversified, open-end management investment companies under the Investment Company Act of 1940, as amended (the "1940 Act"), and their shares are registered under the Securities Act of 1933, as amended (the "1933 Act"). International and Millennium had no operations until June 29, 1998 and November 4, 1998, respectively, other than matters relating to their organization and registration as diversified, open-end management investment companies under the 1940 Act and registration of their shares under the 1933 Act. The trustees of the Trusts may establish additional series or classes of shares without the approval of shareholders. The assets of each Fund belong only to that Fund, and the liabilities of each Fund are borne solely by that Fund and no other. Each Fund seeks to achieve its investment objective by investing all of its net investable assets in its corresponding portfolio of Equity Managers Trust (Global Managers Trust with respect to International) (each a "Portfolio") having the same investment objective and policies as the Fund. The value of each Fund's investment in its corresponding Portfolio reflects that Fund's proportionate interest in the net assets of that Portfolio (14.43%, 40.80%, 26.92%, 1.68%, 8.57%, 4.75%, 21.84%, and 5.33%, for Focus, Genesis, Guardian, International, Manhattan, Millennium, Partners, and Socially Responsive, respectively, at February 28, 1999). 64.87% of Neuberger Berman Socially Responsive Portfolio is held by another regulated investment company, which has only a single shareholder and is B-12 sponsored by Neuberger Berman Management Inc. ("Management"). The performance of each Fund is directly affected by the performance of its corresponding Portfolio. The financial statements of each Portfolio, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the corresponding Fund's financial statements. 2) PORTFOLIO VALUATION: Each Fund records its investment in its corresponding Portfolio at value. Investment securities held by each Portfolio are valued as indicated in the notes following the Portfolios' Schedule of Investments. 3) TAXES: The Funds are treated as separate entities for U.S. Federal income tax purposes. It is the policy of Focus, Genesis, Guardian, International, Manhattan, Partners, and Socially Responsive to continue to and the intention of Millennium to qualify as regulated investment companies by complying with the provisions available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to make distributions of investment company taxable income and net capital gains (after reduction for any amounts available for U.S. Federal income tax purposes as capital loss carryforwards) sufficient to relieve it from all, or substantially all, U.S. Federal income taxes. Accordingly, each Fund paid no U.S. Federal income taxes and no provision for U.S. Federal income taxes was required. 4) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Each Fund earns income, net of Portfolio expenses, daily on its investment in its corresponding Portfolio. Income dividends and distributions from net realized capital gains, if any, are normally distributed in December. Guardian generally distributes substantially all of its net investment income, if any, at the end of each calendar quarter. Income dividends and capital gain distributions to shareholders are recorded on the ex-dividend date. To the extent each Fund's net realized capital gains, if any, can be offset by capital loss carryforwards ($122,792 and $71,985 expiring in 2006 for Focus and International, respectively, determined as of August 31, 1998), it is the policy of each Fund not to distribute such gains. Each Fund distinguishes between dividends on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Differences in the recognition or classification of income between the financial statements and tax earnings and profits which result in temporary over-distributions for financial statement purposes are classified as distributions in excess of net investment income or accumulated net realized gains. 5) ORGANIZATION EXPENSES: Expenses incurred by International and Socially Responsive in connection with their organization are being amortized on a straight-line basis over a five-year period. At February 28, 1999, the unamortized balance B-13 of such expenses amounted to $79,280 and $68,260, for International and Socially Responsive, respectively. The accrued organization costs for International are payable to Management, the administrator to the Fund. 6) EXPENSE ALLOCATION: Each Fund bears all costs of its operations. Expenses incurred by the Trusts with respect to any two or more funds are allocated in proportion to the net assets of such funds, except where a more appropriate allocation of expenses to each fund can otherwise be made fairly. Expenses directly attributable to a fund are charged to that fund. 7) OTHER: All net investment income and realized and unrealized capital gains and losses of each Portfolio are allocated pro rata among its respective Funds and any other investors in the Portfolio. NOTE B -- ADMINISTRATION FEES, DISTRIBUTION ARRANGEMENTS, AND OTHER TRANSACTIONS WITH AFFILIATES: Each Fund retains Management as its administrator under an Administration Agreement ("Agreement"). Pursuant to this Agreement each Fund pays Management an administration fee at the annual rate of 0.40% of that Fund's average daily net assets. Each Fund indirectly pays for investment management services through its investment in its corresponding Portfolio (see Note B of Notes to Financial Statements of the Portfolios). Management has voluntarily undertaken to reimburse each Fund for its operating expenses plus its pro rata portion of its corresponding Portfolio's operating expenses (including the fees payable to Management but excluding interest, taxes, brokerage commissions, and extraordinary expenses) ("Operating Expenses") which exceed, in the aggregate, by more than 0.10% (for International and Millennium, not to exceed 1.70% and 1.75%, respectively) the expense ratio per annum (each an "Expense Limitation") of a certain other mutual fund ("Sister Fund") which also invests in the same Portfolio. Each undertaking is subject to termination by Management upon at least 60 days' prior written notice to the appropriate Fund. For the six months ended February 28, 1999, such excess expenses amounted to $40,039, $44,042, $7,791, $85,562, and $53,500, for Focus, International, Manhattan, Millennium, and Socially Responsive, respectively. For the six months ended February 28, 1999, there was no reimbursement of expenses by Management to Genesis, Guardian, and Partners. Millennium has agreed to repay Management through December 31, 2000, for its excess Operating Expenses that Management reimbursed through December 31, 1999, so long as Millennium's Operating Expenses during that period do not exceed its Expense Limitation. For the period ended February 28, 1999, Millennium has not reimbursed Management. Since inception of International and Millennium, Management has voluntarily undertaken to pay certain expenses of each Fund as an advance. These expenses will be repaid by each Fund to Management in the future, and are included under the caption Payable for Fund expenses in the Statements of Assets and Liabilities. B-14 All of the capital stock of Management is owned by individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a member firm of The New York Stock Exchange and sub-adviser to each Portfolio. Several individuals who are officers and/or trustees of the Trusts are also principals of Neuberger and/or officers and/or directors of Management. Each Fund also has a distribution agreement with Management. Management receives no compensation therefor and no commissions for sales or redemptions of shares of beneficial interest of each Fund. Each Portfolio has an expense offset arrangement in connection with its custodian contract. In addition, in connection with the Securities Lending Agreement between each Portfolio and Morgan Stanley & Co. Incorporated ("Morgan"), Morgan has agreed to reimburse each Portfolio for transaction costs incurred on security lending transactions charged by the custodian. The impact of these arrangements, respectively, reflected in the Statements of Operations under the caption Expenses from corresponding Portfolio, was a reduction of $23 and $236, $67 and $1,432, $85 and $439, $2 and $28, $10 and $255, $10 and $17, $36 and $392, and $5 and $23, for Focus, Genesis, Guardian, International, Manhattan, Millennium, Partners, and Socially Responsive, respectively. NOTE C -- INVESTMENT TRANSACTIONS: During the six months ended February 28, 1999, additions and reductions in each Fund's investment in its corresponding Portfolio were as follows:
ADDITIONS REDUCTIONS - ------------------------------------------------------------------------------- FOCUS $ 19,009,786 $ 43,870,073 GENESIS 68,956,439 144,358,908 GUARDIAN 34,452,303 460,286,897 INTERNATIONAL 309,857 190,745 MANHATTAN 11,852,986 16,746,403 MILLENNIUM 1,386,365 205,704 PARTNERS 94,806,543 113,450,148 SOCIALLY RESPONSIVE 3,732,567 1,570,027
At February 28, 1999, Neuberger Berman International Portfolio's cost of investments for U.S. Federal income tax purposes was $92,607,503. Gross unrealized appreciation of investments was $43,788,417 and gross unrealized depreciation of investments was $2,080,187, resulting in net unrealized appreciation of $41,708,230, based on cost for U.S. Federal income tax purposes. NOTE D -- UNAUDITED FINANCIAL INFORMATION: The financial information included in this interim report is taken from the records of each Fund without audit by independent accountants/auditors. Annual reports contain audited financial statements. B-15 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Focus Trust(1)(2) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.14 $ 21.27 $ 14.83 $ 14.41 $ 11.36 $ 10.03 ------------------------------------------------------------------- Income From Investment Operations Net Investment Income (Loss) -- .03 .01 .06 .05 .05 Net Gains or Losses on Securities (both realized and unrealized) 6.21 (3.66) 6.49 .46 3.05 1.31 ------------------------------------------------------------------- Total From Investment Operations 6.21 (3.63) 6.50 .52 3.10 1.36 ------------------------------------------------------------------- Less Distributions Dividends (from net investment income) (.03) (.01) (.06) (.02) (.05) (.02) Distributions (from net capital gains) -- (.49) -- (.08) -- (.01) ------------------------------------------------------------------- Total Distributions (.03) (.50) (.06) (.10) (.05) (.03) ------------------------------------------------------------------- Net Asset Value, End of Period $23.32 $ 17.14 $ 21.27 $ 14.83 $ 14.41 $ 11.36 ------------------------------------------------------------------- Total Return(3) +36.31%(4) -17.45% +43.93% +3.62% +27.44% +13.58% ------------------------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $236.4 $ 193.2 $ 160.9 $ 55.6 $ 14.5 $ 1.6 ------------------------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) .95%(6) .94% .96% .99% -- -- ------------------------------------------------------------------- Ratio of Net Expenses to Average Net Assets(7) .95%(6) .94% .96% .99% .96% .85% ------------------------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets (.01%)(6) .17% .11% .63% .67% .92% -------------------------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-16 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Genesis Trust(1) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------- Net Asset Value, Beginning of Period $17.28 $ 21.45 $ 14.99 $ 12.65 $ 10.59 $ 10.05 ------------------------------------------------------------------- Income From Investment Operations Net Investment Income (Loss) .08 .12 (.01) (.02) (.01) (.01) Net Gains or Losses on Securities (both realized and unrealized) 1.22 (4.14) 6.61 2.68 2.08 .56 ------------------------------------------------------------------- Total From Investment Operations 1.30 (4.02) 6.60 2.66 2.07 .55 ------------------------------------------------------------------- Less Distributions Dividends (from net investment income) (.12) -- -- -- -- -- Distributions (from net capital gains) (.20) (.15) (.14) (.32) (.01) (.01) ------------------------------------------------------------------- Total Distributions (.32) (.15) (.14) (.32) (.01) (.01) ------------------------------------------------------------------- Net Asset Value, End of Period $18.26 $ 17.28 $ 21.45 $ 14.99 $ 12.65 $ 10.59 ------------------------------------------------------------------- Total Return(3) +7.39%(4) -18.88% +44.31% +21.44% +19.51% +5.47% ------------------------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $686.4 $ 704.5 $ 382.7 $ 65.2 $ 30.6 $ 3.1 ------------------------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.23%(6) 1.17% 1.26% 1.38% -- -- ------------------------------------------------------------------- Ratio of Net Expenses to Average Net Assets 1.23%(6) 1.17%(7) 1.25%(7) 1.38%(7) 1.42%(7) 1.36%(7) ------------------------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets .84%(6) .68% (.16%) (.27%) (.24%) (.21%) -------------------------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-17 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Guardian Trust(1) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 --------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 14.24 $ 19.47 $ 14.24 $ 13.83 $ 11.27 $ 10.27 --------------------------------------------------------------------------- Income From Investment Operations Net Investment Income .06 .09 .08 .16 .13 .09 Net Gains or Losses on Securities (both realized and unrealized) 3.44 (3.93) 5.48 .55 2.55 .99 --------------------------------------------------------------------------- Total From Investment Operations 3.50 (3.84) 5.56 .71 2.68 1.08 --------------------------------------------------------------------------- Less Distributions Dividends (from net investment income) (.04) (.10) (.10) (.14) (.12) (.07) Distributions (from net capital gains) (1.47) (1.29) (.23) (.16) -- (.01) --------------------------------------------------------------------------- Total Distributions (1.51) (1.39) (.33) (.30) (.12) (.08) --------------------------------------------------------------------------- Net Asset Value, End of Period $ 16.23 $ 14.24 $ 19.47 $ 14.24 $ 13.83 $ 11.27 --------------------------------------------------------------------------- Total Return(3) +24.64%(4) -20.88% +39.56% +5.19% +24.01% +10.57% --------------------------------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $1,476.8 $ 1,529.5 $ 2,269.8 $ 1,340.1 $ 683.1 $ 75.8 --------------------------------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) .88%(6) .87% .88% .92% -- -- --------------------------------------------------------------------------- Ratio of Net Expenses to Average Net Assets .88%(6) .87% .88% .92%(7) .90%(7) .80%(7) --------------------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets .65%(6) .50% .47% 1.26% 1.35% 1.50% ---------------------------------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-18 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- International Trust(1) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Period from Six June Months 29, Ended 1998(8) February to 28, August 1999 31, (UNAUDITED) 1998 ------------------- Net Asset Value, Beginning of Period $13.87 $17.13 ------------------- Income From Investment Operations Net Investment Loss (.06) (.02) Net Gains or Losses on Securities (both realized and unrealized) 1.20 (3.24) ------------------- Total From Investment Operations 1.14 (3.26) ------------------- Net Asset Value, End of Period $15.01 $13.87 ------------------- Total Return(3)(4) +8.22% -19.03% ------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $ 2.1 $ 1.8 ------------------- Ratio of Gross Expenses to Average Net Assets(5)(6) 1.70% 1.70% ------------------- Ratio of Net Expenses to Average Net Assets(6)(7) 1.70% 1.70% ------------------- Ratio of Net Investment Loss to Average Net Assets(6) (.84%) (.54%) -------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-19 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Manhattan Trust(1) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------- Net Asset Value, Beginning of Period $11.61 $ 15.77 $ 12.18 $ 12.99 $ 10.37 $ 10.01 ------------------------------------------------------------------- Income From Investment Operations Net Investment Income (Loss) (.04) (.07) (.04) (.04) -- .01 Net Gains or Losses on Securities (both realized and unrealized) 3.22 (1.40) 4.55 (.34) 2.67 .36 ------------------------------------------------------------------- Total From Investment Operations 3.18 (1.47) 4.51 (.38) 2.67 .37 ------------------------------------------------------------------- Less Distributions Dividends (from net investment income) -- -- -- -- (.01) (.01) Distributions (from net capital gains) (.77) (2.69) (.92) (.43) (.04) -- ------------------------------------------------------------------- Total Distributions (.77) (2.69) (.92) (.43) (.05) (.01) ------------------------------------------------------------------- Net Asset Value, End of Period $14.02 $ 11.61 $ 15.77 $ 12.18 $ 12.99 $ 10.37 ------------------------------------------------------------------- Total Return(3) +27.26%(4) -11.23% +38.84% -2.98% +25.90% +3.70% ------------------------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $ 53.6 $ 46.1 $ 51.1 $ 48.2 $ 35.6 $ 12.1 ------------------------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) 1.15%(6) 1.04% 1.09% 1.08% -- -- ------------------------------------------------------------------- Ratio of Net Expenses to Average Net Assets(7) 1.15%(6) 1.04% 1.09% 1.08% 1.06% .96% ------------------------------------------------------------------- Ratio of Net Investment Income (Loss) to Average Net Assets (.63%)(6) (.52%) (.30%) (.38%) (.03%) .16% -------------------------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-20 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Millennium Trust(1) The following table includes selected data for a share outstanding throughout the period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Period from November 4, 1998(8) to February 28, 1999 (UNAUDITED) ----------- Net Asset Value, Beginning of Period $ 10.00 ----------- Income From Investment Operations Net Investment Loss (.03) Net Gains or Losses on Securities (both realized and unrealized) 3.89 ----------- Total From Investment Operations 3.86 ----------- Net Asset Value, End of Period $ 13.86 ----------- Total Return(3)(4) +38.60% ----------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $ 1.3 ----------- Ratio of Gross Expenses to Average Net Assets(5)(6) 1.76% ----------- Ratio of Net Expenses to Average Net Assets(6)(7) 1.75% ----------- Ratio of Net Investment Loss to Average Net Assets(6) (1.27%) -----------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-21 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Partners Trust(1) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------- Net Asset Value, Beginning of Period $15.24 $ 18.80 $ 13.39 $ 12.68 $ 10.54 $ 10.01 ------------------------------------------------------------------- Income From Investment Operations Net Investment Income .10 .11 .07 .08 .05 .03 Net Gains or Losses on Securities (both realized and unrealized) 2.98 (1.82) 6.06 1.59 2.19 .53 ------------------------------------------------------------------- Total From Investment Operations 3.08 (1.71) 6.13 1.67 2.24 .56 ------------------------------------------------------------------- Less Distributions Dividends (from net investment income) -- (.08) (.08) (.07) (.02) (.01) Distributions (from net capital gains) (.46) (1.77) (.64) (.89) (.08) (.02) ------------------------------------------------------------------- Total Distributions (.46) (1.85) (.72) (.96) (.10) (.03) ------------------------------------------------------------------- Net Asset Value, End of Period $17.86 $ 15.24 $ 18.80 $ 13.39 $ 12.68 $ 10.54 ------------------------------------------------------------------- Total Return(3) +20.19%(4) -10.15% +47.11% +13.76% +21.52% +5.61% ------------------------------------------------------------------- Ratios/Supplemental Data Net Assets, End of Period (in millions) $868.7 $ 729.7 $ 470.6 $ 128.5 $ 61.3 $ 4.7 ------------------------------------------------------------------- Ratio of Gross Expenses to Average Net Assets(5) .92%(6) .90% .91% .94% -- -- ------------------------------------------------------------------- Ratio of Net Expenses to Average Net Assets .92%(6) .90%(7) .91%(7) .94%(7) .92%(7) .81%(7) ------------------------------------------------------------------- Ratio of Net Investment Income to Average Net Assets 1.19%(6) .70% .64% .84% .81% .47% -------------------------------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-22 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Socially Responsive Trust(1) The following table includes selected data for a share outstanding throughout each period and other performance information derived from the Financial Statements. It should be read in conjunction with its corresponding Portfolio's Financial Statements and notes thereto.
Six Months Ended Period from February March 3, 1997(8) 28, Year Ended to 1999 August 31, August 31, (UNAUDITED) 1998 1997 ------------------------------------------ Net Asset Value, Beginning of Period $10.64 $ 11.43 $ 10.00 ------------------------------------------ Income From Investment Operations Net Investment Income .01 .03 -- Net Gains or Losses on Securities (both realized and unrealized) 2.61 (.71) 1.43 ------------------------------------------ Total From Investment Operations 2.62 (.68) 1.43 ------------------------------------------ Less Distributions Dividends (from net investment income) (.03) (.01) -- Distributions (from net capital gains) (.10) (.10) -- ------------------------------------------ Total Distributions (.13) (.11) -- ------------------------------------------ Net Asset Value, End of Period $13.13 $ 10.64 $ 11.43 ------------------------------------------ Total Return(3) +24.61%(4) -6.05% +14.30%(4) ------------------------------------------ Ratios/Supplemental Data Net Assets, End of Period (in millions) $ 19.1 $ 13.4 $ 7.7 ------------------------------------------ Ratio of Gross Expenses to Average Net Assets(5) 1.29%(6) 1.20% 1.58%(6) ------------------------------------------ Ratio of Net Expenses to Average Net Assets(7) 1.29%(6) 1.20% 1.58%(6) ------------------------------------------ Ratio of Net Investment Income to Average Net Assets .14%(6) .33% .06%(6) ------------------------------------------
SEE NOTES TO FINANCIAL HIGHLIGHTS B-23 NOTES TO FINANCIAL HIGHLIGHTS Neuberger Berman February 28, 1999 (Unaudited) - ---------------------------------------------------------------------- Equity Trust and Equity Assets 1) The per share amounts and ratios which are shown reflect income and expenses, including each Fund's proportionate share of its corresponding Portfolio's income and expenses. 2) Prior to January 1, 1995, its name was Neuberger&Berman Selected Sectors Trust. 3) Total return based on per share net asset value reflects the effects of changes in net asset value on the performance of each Fund during each fiscal period and assumes dividends and other distributions, if any, were reinvested. Results represent past performance and do not guarantee future results. Investment returns and principal may fluctuate and shares when redeemed may be worth more or less than original cost. Total return would have been lower if Management had not reimbursed certain expenses. In addition, for Genesis, total return would have been lower if the investment manager had not waived a portion of the management fee. 4) Not annualized. 5) For fiscal periods ending after September 1, 1995, the Fund is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 6) Annualized. 7) After reimbursement of expenses by Management as described in Note B of Notes to Financial Statements. Had Management not undertaken such action the annualized ratios of net expenses to average daily net assets would have been:
Six Months Ended February 28, Year Ended August 31, FOCUS 1999 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------- Net Expenses .99% .97% 1.06% 1.27% 2.50% 2.50%
Year Ended August 31, GUARDIAN 1996 1995 1994 - --------------------------------------------------------------------------- Net Expenses .92% .96% 1.52%
Six Months Ended Period from February June 29, 1998 28, to August 31, INTERNATIONAL 1999 1998 - --------------------------------------------------------------------------- Net Expenses 6.26% 6.02%
B-24
Six Months Ended February 28, Year Ended August 31, MANHATTAN 1999 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------- Net Expenses 1.18% 1.15% 1.23% 1.25% 1.46% 2.50%
Period from November 4, 1998 to February 28, MILLENNIUM 1999 - ------------------------------------------------------------------ Net Expenses 38.39%
Year Ended August 31, PARTNERS 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------- Net Expenses .91% .94% 1.06% 1.24% 2.50%
Period from Six Months Ended Year Ended March 3, 1997 February 28, August 31, to August 31, SOCIALLY RESPONSIVE 1999 1998 1997 - ----------------------------------------------------------------------------------------------------- Net Expenses 1.93% 2.05% 3.33%
After reimbursement of expenses by Management as described in Note B of Notes to Financial Statements and/or the waiver of a portion of the management fee by the investment manager as described in Note B of Notes to Financial Statements of Neuberger Berman Genesis Portfolio. Had Management not undertaken such action the annualized ratios of net expenses to average daily net assets would have been:
Year Ended August 31, GENESIS 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------- Net Expenses 1.19% 1.35% 1.65% 1.78% 2.50%
8) The date investment operations commenced. B-25 (This page has been left blank intentionally.) B-26 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Focus Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. Citigroup Inc. 8.7% 2. Chase Manhattan 7.3% 3. Capital One Financial 7.2% 4. Morgan Stanley Dean Witter 7.0% 5. Compaq Computer 5.4% 6. Wellpoint Health Networks 5.4% 7. Countrywide Credit Industries 4.7% 8. General Motors 3.1% 9. BankBoston Corp. 3.1% 10. MCI WorldCom 3.0%
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ COMMON STOCKS (98.3%) AUTOMOTIVE (3.8%) 467,900 Cabot Corp. $ 11,785 620,000 General Motors 51,189 ------------ 62,974 ------------ FINANCIAL SERVICES (50.6%) 798,500 ADVANTA Corp. Class A 9,332 (2) 802,500 ADVANTA Corp. Class B 7,273 (2) 670,000 Bank One 36,012 1,236,000 BankBoston Corp. 49,981 922,500 Capital One Financial 117,734 1,505,000 Chase Manhattan 119,836 2,421,250 Citigroup Inc. 142,248 2,015,000 Countrywide Credit Industries 76,318 601,000 Hartford Financial Services Group 32,492 1,265,000 Morgan Stanley Dean Witter 114,482 655,000 Nationwide Financial Services 29,762 Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 522,000 PartnerRe Ltd. $ 22,577 1,198,000 Travelers Property Casualty 45,449 659,000 Washington Mutual 26,360 ------------ 829,856 ------------ HEALTH CARE (6.4%) 1,977,900 Foundation Health Systems 15,823 1,122,000 Wellpoint Health Networks 88,498 ------------ 104,321 ------------ RETAIL (6.8%) 555,000 Barnes & Noble 16,407 1,982,800 Furniture Brands International 42,382 225,000 Jones Apparel Group 6,286 520,000 Payless ShoeSource 28,535 520,000 Promus Hotel 18,298 ------------ 111,908 ------------ TECHNOLOGY (30.7%) 931,000 3Com Corp. 29,268 245,000 Applied Materials 13,628 1,090,000 Atmel Corp. 18,734 375,000 Autodesk Inc. 15,047 2,512,500 Compaq Computer 88,566 295,000 Compuware Corp. 16,502 265,000 Etec Systems 11,743 560,000 KLA-Tencor 29,015 1,640,000 Maxtor Corp. 13,530 591,500 MCI WorldCom 48,799 530,000 Microchip Technology 14,442 140,000 Micron Technology 8,067 331,000 Novellus Systems 19,550 330,000 Oracle Corp. 18,439 145,000 PeopleSoft, Inc. 2,737 1,010,000 Photronics, Inc. 20,768 1,820,000 PLATINUM Technology 24,115 1,495,000 Rational Software 44,383
C-1 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Focus Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 1,060,000 Saville Systems ADR $ 21,134 492,000 Texas Instruments 43,880 ------------ 502,347 ------------ TOTAL COMMON STOCKS (COST $991,719) 1,611,406 ------------ Principal Amount - ---------- SHORT-TERM INVESTMENTS (4.0%) $17,170,000 General Electric Capital Corp., 4.72%, due 3/1/99 17,170 48,892,335 N&B Securities Lending Quality Fund, LLC 48,892 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $66,062) 66,062(3) ------------ TOTAL INVESTMENTS (102.3%) (COST $1,057,781) 1,677,468(4) Liabilities, less cash, receivables and other assets [(2.3%)] (38,930) ------------ TOTAL NET ASSETS (100.0%) $1,638,538 ------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-2 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Genesis Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. Alliant Techsystems 3.4% 2. AptarGroup Inc. 2.6% 3. Dallas Semiconductor 2.4% 4. Webster Financial 2.3% 5. Trigon Healthcare 2.2% 6. Newport News Shipbuilding 2.2% 7. Bank United 2.0% 8. Montana Power 1.9% 9. Universal Health Services Class B 1.9% 10. Cordant Technologies 1.7%
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ COMMON STOCKS (93.4%) AEROSPACE (6.5%) 1,781,350 AAR Corp. $ 26,943 (2) 1,244,500 Aviall Inc. 17,190 (2) 755,800 Cordant Technologies 29,429 468,300 DONCASTERS PLC ADR 8,283 (2) 299,850 Ducommun Inc. 3,748 121,600 Howmet International 1,961 425,000 Ladish Co. 3,001 343,000 Moog, Inc. Class A 10,933 257,300 Orbital Sciences 7,108 ------------ 108,596 ------------ AUTOMOTIVE (0.6%) 597,200 Donaldson Co. 10,787 ------------ BANKING & FINANCIAL (9.1%) 866,400 Bank United 34,223 604,300 Community First Bankshares 11,784 333,800 Cullen/Frost Bankers 15,793 552,500 FirstFed Financial 9,358 285,400 Ocean Financial 4,245 Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 678,300 Peoples Heritage Financial Group $ 11,531 116,212 Queens County Bancorp 3,377 227,600 Reliance Bancorp 6,970 726,675 Sterling Bancshares 8,720 357,850 Texas Regional Bancshares 9,125 1,243,400 Webster Financial 38,002 ------------ 153,128 ------------ BASIC MATERIALS (1.0%) 299,200 Lone Star Industries 9,874 165,160 Southdown, Inc. 7,793 ------------ 17,667 ------------ BUILDING, CONSTRUCTION & FURNISHINGS (0.7%) 157,200 Lincoln Electric Holdings 3,222 220,100 Simpson Manufacturing 7,800 ------------ 11,022 ------------ BUSINESS SERVICES (1.1%) 300,000 Metzler Group 12,750 109,000 Valassis Communications 5,232 ------------ 17,982 ------------ CHEMICALS (0.4%) 399,900 Lawter International 2,849 201,000 Lilly Industries 3,430 ------------ 6,279 ------------ CONSUMER CYCLICALS (0.6%) 466,600 Coachmen Industries 9,449 ------------ CONSUMER PRODUCTS & SERVICES (6.5%) 658,800 Alberto-Culver Class A 14,329 530,638 Block Drug 20,695 141,800 Bush Boake Allen 4,529 521,300 Church & Dwight 21,764 131,200 Matthews International 3,756
C-3 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Genesis Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 372,400 Omega Protein $ 2,281 888,900 Richfood Holdings 21,111 800,700 Ruddick Corp. 14,763 457,000 The First Years 6,969 ------------ 110,197 ------------ DEFENSE (6.4%) 715,400 Alliant Techsystems 56,651 (2) 1,272,900 Newport News Shipbuilding 36,834 337,000 Primex Technologies 14,007 (2) ------------ 107,492 ------------ DIAGNOSTIC EQUIPMENT (1.1%) 1,043,300 ADAC Laboratories 18,649 (2) ------------ ELECTRONICS (2.9%) 1,158,600 Dallas Semiconductor 40,985 237,700 SCI Systems 7,354 ------------ 48,339 ------------ ENERGY (0.7%) 425,000 Cabot Oil & Gas 4,648 661,990 Swift Energy 3,972 855,800 Unit Corp. 3,530 ------------ 12,150 ------------ HEALTH CARE (10.1%) 977,800 Acuson Corp. 14,667 214,600 Arrow International 5,271 445,400 CONMED Corp. 13,752 709,000 DENTSPLY International 18,079 1,176,000 Haemonetics Corp. 19,625 542,000 Mentor Corp. 8,333 429,950 Patterson Dental 17,413 503,700 STAAR Surgical 4,754 1,055,200 Trigon Healthcare 36,998 767,900 Universal Health Services Class B 31,196 ------------ 170,088 ------------ Market Value(1) Number (000's of Shares omitted) - ---------- ------------ INDUSTRIAL & COMMERCIAL PRODUCTS & SERVICES (6.8%) 789,700 BMC Industries $ 3,850 449,900 Brady Corp. 10,741 282,000 Dionex Corp. 10,399 1,496,800 Hussmann International 21,142 284,700 IDEX Corp. 6,761 676,300 Kaydon Corp. 20,627 235,000 NN Ball & Roller 1,322 187,000 Pentair, Inc. 7,083 183,100 Roper Industries 4,051 814,400 SOS Staffing Services 7,228 (2) 809,800 Wallace Computer Services 18,322 203,750 Woodhead Industries 2,318 ------------ 113,844 ------------ INSURANCE (3.8%) 836,200 Annuity and Life Re 18,553 600,800 FBL Financial Group 12,054 392,300 Orion Capital 12,970 229,000 Penn-America Group 2,548 61,700 Trenwick Group 1,789 570,500 W. R. Berkley 16,331 ------------ 64,245 ------------ LODGING (0.5%) 846,000 Prime Hospitality 8,671 ------------ MACHINERY & EQUIPMENT (0.2%) 178,800 Allied Products 883 226,500 Gardner Denver Machinery 2,888 ------------ 3,771 ------------ OFFICE EQUIPMENT (1.2%) 1,091,900 United Stationers 19,995 ------------ OIL SERVICES (4.0%) 350,700 Cal Dive International 5,041 468,500 Friede Goldman International 5,007
C-4 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Genesis Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 700,800 Global Industries $ 3,548 520,000 IRI International 1,625 569,500 Nabors Industries 6,549 1,446,712 National-Oilwell 12,840 588,400 Oceaneering International 5,884 781,600 Offshore Logistics 6,815 777,300 Pride International 3,886 463,400 Smith International 11,266 267,500 Tuboscope Inc. 1,438 398,200 UTI Energy 2,315 247,400 Willbros Group 1,206 ------------ 67,420 ------------ PACKING & CONTAINERS (2.6%) 1,612,900 AptarGroup Inc. 44,153 ------------ PUBLISHING & BROADCASTING (0.6%) 133,866 Pulitzer Publishing 10,692 ------------ REAL ESTATE/REITS (2.5%) 277,700 Crescent Real Estate Equities 5,797 495,000 Health Care Property Investors 14,540 415,000 Nationwide Health Properties 7,470 778,100 Prime Retail 6,225 421,800 SL Green Realty 8,146 ------------ 42,178 ------------ RESTAURANTS (1.4%) 830,650 Brinker International 24,037 ------------ RETAILING (2.3%) 472,968 99 Cents Only Stores 22,378 529,500 Claire's Stores 11,682 222,000 Schultz Sav-O Stores 3,857 ------------ 37,917 ------------ TECHNOLOGY (5.2%) 679,700 Analysts International 9,686 194,900 Black Box 6,286 527,600 CACI International 8,705 Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 2,500 Dialogic Corp. $ 69 2,606,300 Inprise Corp. 13,032(2) 1,350,400 Methode Electronics Class A 14,179 800,900 Reynolds & Reynolds 15,117 795,600 Zebra Technologies 20,536 ------------ 87,610 ------------ TEXTILES & APPAREL (0.2%) 100,000 St. John Knits 2,669 ------------ TRANSPORTATION, SHIPPING & FREIGHT (0.2%) 112,000 Air Express International 1,967 213,600 Maritrans Inc. 1,242 ------------ 3,209 ------------ UTILITIES, ELECTRIC & GAS (14.2%) 1,257,500 AGL Resources 23,971 183,200 Aquila Gas Pipeline 1,603 344,800 Atmos Energy 8,275 63,800 Avista Corp. 1,045 282,500 Central Hudson Gas & Electric 10,241 430,100 Connecticut Energy 11,209 129,300 Eastern Enterprises 4,970 149,000 Interstate Energy 4,107 535,100 Montana Power 32,574 341,200 National Fuel Gas 13,755 384,700 Nevada Power 9,209 298,800 NICOR Inc. 11,410 290,000 Northwest Natural Gas 7,096 450,900 NUI Corp. 10,342 374,300 ONEOK, Inc. 10,083 115,100 Orange & Rockland Utilities 6,460 266,500 Otter Tail Power 9,877 360,500 Public Service Co. of New Mexico 5,543 490,100 Rochester Gas & Electric 12,804 401,100 Sierra Pacific Resources 13,763
C-5 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Genesis Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ 271,500 UtiliCorp United $ 9,333 457,400 Washington Gas Light 10,949 319,600 WICOR, Inc. 6,751 120,000 WPS Resources 3,570 ------------ 238,940 ------------ TOTAL COMMON STOCKS (COST $1,625,933) 1,571,176 ------------ WARRANTS (0.1%) 355,000 Golden State Bancorp (COST $2,161) 1,797 ------------ Principal Amount - ---------- REPURCHASE AGREEMENTS (3.0%) $50,440,000 State Street Bank and Trust Co. Repurchase Agreement, 4.70%, due 3/1/99, dated 2/26/99, Maturity Value $50,459,756, Collateralized by $44,340,000 U.S. Treasury Bonds, 7.25%, due 5/15/16 (Collateral Value $51,961,071) (COST $50,440) 50,440(3) ------------ Market Value1 Principal (000's Amount omitted) - ---------- ------------ SHORT-TERM INVESTMENTS (5.0%) $3,000,000 General Electric Capital Corp., 4.79%, due 3/2/99 $ 29,996 2,000,000 Ford Motor Credit Co., 4.83%, due 3/3/99 19,995 34,356,306 N&B Securities Lending Quality Fund, LLC 34,356 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $84,347) 84,347(3) ------------ TOTAL INVESTMENTS (101.5%) (COST $1,762,881) 1,707,760(4) Liabilities, less cash, receivables and other assets [(1.5%)] (25,498) ------------ TOTAL NET ASSETS (100.0%) $1,682,262 ------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-6 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Guardian Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. Capital One Financial 4.8% 2. Wellpoint Health Networks 4.7% 3. General Motors 4.3% 4. Countrywide Credit Industries 3.5% 5. Conseco, Inc. 3.4% 6. Aetna Inc. 3.4% 7. MCI WorldCom 3.3% 8. Philip Morris 2.8% 9. Chase Manhattan 2.7% 10. PacifiCare Health Systems Class B 2.6%
Market Value(1) Number (000's of Shares omitted) - ----------- ------------ COMMON STOCKS (89.0%) BANKING & FINANCIAL (9.1%) 608,000 Allstate Corp. $ 22,800 2,184,600 Bank One 117,422 1,121,000 BankAmerica Corp. 73,215 2,313,000 BankBoston Corp. 93,532 (5) 1,853,800 Chase Manhattan 147,609 1,126,000 SLM Holding 48,277 ------------ 502,855 ------------ BASIC MATERIALS (3.0%) 3,841,000 Cabot Corp. 96,745 (2) 2,472,000 Millennium Chemicals 44,650 455,560 Potash Corp. of Saskatchewan 25,825 ------------ 167,220 ------------ CAPITAL GOODS (4.5%) 5,337,000 Republic Services 93,064 (2) 792,900 SCI Systems 24,530 863,800 Solectron Corp. 38,601 1,800,000 Waste Management 87,975 ------------ 244,170 ------------ Market Value(1) Number (000's of Shares omitted) - ----------- ------------ COMMUNICATION SERVICES (5.8%) 978,000 AT&T Corp. $ 80,318 1,019,700 Bell Atlantic 58,569 2,178,900 MCI WorldCom 179,759 ------------ 318,646 ------------ CONSUMER CYCLICALS (7.6%) 5,800,100 Cendant Corp. 96,064 2,840,000 General Motors 234,478 1,651,600 Lear Corp. 58,322 519,100 Tandy Corp. 28,875 ------------ 417,739 ------------ CONSUMER STAPLES (7.3%) 1,133,800 Keebler Foods 44,218 1,795,000 Kimberly-Clark 84,814 900,000 McDonald's Corp. 76,500 3,900,000 Philip Morris 152,588 1,545,100 Sara Lee 42,007 ------------ 400,127 ------------ ENERGY (4.1%) 640,100 Amerada Hess 29,045 356,400 Chevron Corp. 27,398 1,443,000 Conoco Inc. 29,311 906,800 Halliburton Co. 25,617 799,500 Mobil Corp. 66,508 985,000 Texaco, Inc. 45,864 ------------ 223,743 ------------ FINANCIAL SERVICES (21.6%) 2,038,000 Associates First Capital 82,794 2,086,000 Capital One Financial 266,226 1,563,200 Citigroup Inc. 91,838 6,168,000 Conseco, Inc. 184,655 5,010,800 Countrywide Credit Industries 189,784 2,350,000 Hartford Financial Services Group 127,047 3,067,100 IndyMac Mortgage Holdings 32,588 320,000 Loews Corp. 25,020
C-7 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Guardian Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ----------- ------------ 1,104,500 Morgan Stanley Dean Witter $ 99,957 2,448,700 Wells Fargo 89,990 ------------ 1,189,899 ------------ HEALTH CARE (12.3%) 2,487,100 Aetna Inc. 184,201 1,469,900 American Home Products 87,459 1,995,564 PacifiCare Health Systems Class B 144,179 (2) 3,295,996 Wellpoint Health Networks 259,972 ------------ 675,811 ------------ TECHNOLOGY (12.0%) 1,389,900 3Com Corp. 43,695 1,917,800 Compaq Computer 67,602 1,168,900 Hewlett-Packard 77,659 569,650 IBM 96,841 500,000 KLA-Tencor 25,906 (5) 378,800 Micron Technology 21,828 824,300 Motorola, Inc. 57,907 2,045,000 Rational Software 60,711 530,400 Sun Microsystems 51,615 469,500 Teradyne, Inc. 22,360 602,700 Texas Instruments 53,753 (5) 1,428,600 Xerox Corp. 78,841 ------------ 658,718 ------------ TRANSPORTATION (1.7%) 502,900 AMR Corp. 27,880 1,005,000 Continental Airlines Class B 34,798 1,301,400 Northwest Airlines 32,535 ------------ 95,213 ------------ TOTAL COMMON STOCKS (COST $3,977,212) 4,894,141 ------------ PREFERRED STOCKS (1.1%) 2,258,200 News Corp. ADR (COST $56,624) 59,278 ------------ Market Value(1) Principal (000's Amount omitted) - ----------- ------------ U.S. TREASURY SECURITIES (2.4%) $132,840,000 U.S. Treasury Bills, 4.345% & 4.425%, due 4/1/99 & 4/22/99 (COST $132,260) $ 132,238 ------------ REPURCHASE AGREEMENTS (2.4%) 131,215,000 State Street Bank and Trust Co. Repurchase Agreement, 4.70%, due 3/1/99, dated 2/26/99, Maturity Value $131,266,393, Collateralized by $115,340,000 U.S. Treasury Bonds, 7.25%, due 5/15/16 (Collateral Value $135,164,409) (COST $131,215) 131,215 (3) ------------ SHORT-TERM INVESTMENTS (6.0%) 50,000,000 Koch Industries, Inc., 4.76%, due 3/1/99 50,000 50,000,000 Pitney Bowes Inc., 4.85%, due 3/1/99 50,000 25,000,000 Vulcan Materials Co., 4.81%, due 3/1/99 25,000 40,550,000 National Australia Funding, 4.80%, due 3/2/99 40,544 50,000,000 Export Development Corp., 4.80%, due 3/3/99 49,987 50,000,000 Ford Motor Credit Co., 4.84%, due 3/4/99 49,980
C-8 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Guardian Portfolio (Cont'd)
Market Value(1) Principal (000's Amount omitted) - ----------- ------------ $30,000,000 Enterprise Funding Corp., 4.87%, due 3/5/99 $ 29,984 26,202,000 USAA Capital Corp., 4.81%, due 3/5/99 26,188 7,002,158 N&B Securities Lending Quality Fund, LLC 7,002 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $328,685) 328,685(3) ------------ TOTAL INVESTMENTS (100.9%) (COST $4,625,996) 5,545,557(4) Liabilities, less cash, receivables and other assets [(0.9%)] (48,020) ------------ TOTAL NET ASSETS (100.0%) $5,497,537 ------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-9 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- International Portfolio
TOP TEN EQUITY HOLDINGS ---------------------------------------------------------------------------------------------- HOLDING COUNTRY INDUSTRY PERCENTAGE 1. France Telecom ADR France Telecommunications 3.7% 2. Nokia Corp. ADR Finland Telecommunications 3.3% 3. Aegon NV-New York Netherlands Insurance 2.2% 4. Tieto Corp. Finland Technology 2.2% 5. Takeda Chemical Industries Japan Pharmaceutical 2.1% 6. Computer Configurations Holdings South Africa Technology 1.8% 7. Orange PLC United Kingdom Telecommunications 1.8% 8. Dassault Systemes ADR France Technology 1.7% 9. Mannesmann AG Germany Machinery & Equipment 1.6% 10. Autogrill SpA Italy Restaurants 1.5%
Market Value(1) Number (000's of Shares omitted) - --------- ------------- COMMON STOCKS (94.8%) ARGENTINA (0.4%) 14,570 YPF SA ADR $ 423 ------------- BELGIUM (3.3%) 15,151 Mobistar SA 1,199 8,060 Telinfo SA 1,280 3,200 Tractebel 564 20,000 UCB SA 1,040 ------------- 4,083 ------------- BERMUDA (0.8%) 17,000 Global Crossing 1,003 ------------- CANADA (0.5%) 24,000 BioChem Pharma 589 ------------- CZECH REPUBLIC (0.8%) 33,300 Ceske Radiokomunikace GDR 1,032 (6) ------------- DENMARK (0.8%) 13,500 Unidanmark AS, A Shares 962 ------------- Market Value(1) Number (000's of Shares omitted) - --------- ------------- FINLAND (7.7%) 22,000 Helsingin Puhelin $ 1,371 30,000 Nokia Corp. ADR 4,069 19,800 Pohjola Insurance Group, B Shares 1,088 15,000 Sonera Group 258 66,000 Tieto Corp. 2,649 ------------- 9,435 ------------- FRANCE (10.3%) 52,500 Dassault Systemes ADR 2,093 49,080 France Telecom ADR 4,482 16,720 Lagardere SCA 643 18,000 Scor SA ADR 927 6,000 Suez Lyonnaise des Eaux 1,201 6,000 Synthelabo 1,392 7,000 Vivendi 1,828 ------------- 12,566 ------------- GERMANY (4.0%) 26,200 Continental AG 654 7,300 Henkel KGaA 548 15,000 Mannesmann AG 2,017
C-10 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- International Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - --------- ------------- 12,000 Metro AG $ 849 13,000 Volkswagen AG 842 ------------- 4,910 ------------- HONG KONG (2.0%) 31,100 Asia Satellite Telecommunications Holdings ADR 517 100,000 Cheung Kong 681 65,000 Hang Seng Bank 529 25,200 HSBC Holdings 709 ------------- 2,436 ------------- HUNGARY (1.0%) 20,400 Matav RT ADR 556 15,850 OTP Bank GDR 624 ------------- 1,180 ------------- INDONESIA (0.8%) 37,400 PT Indosat ADR 486 80,700 PT Telekomunikasi Indonesia ADR 515 ------------- 1,001 ------------- IRELAND (2.1%) 9,900 Allied Irish Banks ADR 1,022 44,200 CRH PLC 819 10,100 Elan Corp. ADR 775 ------------- 2,616 ------------- ITALY (2.8%) 189,380 Autogrill SpA 1,893 50,000 ENI SpA 289 45,975 IFI 654 93,023 Telecom Italia 629 ------------- 3,465 ------------- JAPAN (11.3%) 12,300 Acom Co. 727 120,000 Bank of Tokyo-Mitsubishi 1,447 101,000 Chugai Pharmaceutical 967 28,000 Kao Corp. 559 Market Value(1) Number (000's of Shares omitted) - --------- ------------- 8,700 Kita Kyushu Coca-Cola Bottling $ 330 15,000 Mikuni Coca-Cola Bottling 324 89,000 Mitsubishi Trust & Banking 756 5,500 Nintendo Corp. 464 65 NTT Corp. 536 20 NTT Mobile Communication Network 813 26,000 Sankyo Co. 559 17,400 Sanyo Coca-Cola Bottling 334 12,800 Sony Corp. 969 75,000 Takeda Chemical Industries 2,580 60,000 Terumo Corp. 1,224 24,000 Yamanouchi Pharmaceutical 732 18,000 York-Benimaru Co. 524 ------------- 13,845 ------------- MEXICO (1.9%) 300,000 Cemex SA, B Shares 926 240,000 Corporacion Interamericana de Entretenimiento, B Shares 628 30,000 Fomento Economico Mexicano ADR 789 ------------- 2,343 ------------- NETHERLANDS (5.9%) 26,000 Aegon NV-New York 2,720 20,148 Getronics NV 881 11,900 ING Groep 667 25,000 Laurus NV 715 8,200 Unilever NV 592 14,000 VNU NV 576 5,700 Wolters Kluwer 1,100 ------------- 7,251 -------------
C-11 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- International Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - --------- ------------- NORWAY (2.2%) 145,000 Merkantildata ASA $ 1,503 33,400 Tomra Systems 1,161 ------------- 2,664 ------------- PORTUGAL (1.0%) 25,000 Portugal Telecom ADR 1,225 ------------- RUSSIA (0.8%) 16,800 Global TeleSystems Group 932 ------------- SINGAPORE (4.8%) 848,000 Datacraft Asia 1,696 65,000 Elec & Eltek International 354 200,000 Overseas Union Bank 731 49,500 Singapore Press Holdings 563 150,000 United Overseas Bank 880 285,000 Venture Manufacturing 1,200 900,000 Vickers Ballas Holdings 452 ------------- 5,876 ------------- SOUTH AFRICA (3.2%) 400,134 Computer Configurations Holdings 2,261 200,000 Specialised Outsourcing 1,615 ------------- 3,876 ------------- SPAIN (4.8%) 43,850 Banco Bilbao Vizcaya ADR 647 32,990 Banco Santander ADR 650 50,000 Endesa ADR 1,319 11,683 Telefonica SA ADR 1,606 200,000 TelePizza, SA 1,638 ------------- 5,860 ------------- Market Value(1) Number (000's of Shares omitted) - --------- ------------- SWEDEN (3.8%) 12,500 Assa Abloy $ 585 30,000 NetCom Systems, B Shares 1,147 82,000 Skandia Forsakrings 1,507 52,800 Skandinaviska Enskilda Banken, A Shares 590 20,000 WM-Data 867 ------------- 4,696 ------------- SWITZERLAND (2.4%) 400 Kudelski SA 1,295 364 Novartis AG 639 30 Roche Holding 380 1,680 Swisscom AG 664 ------------- 2,978 ------------- TAIWAN (1.0%) 28,800 ASE Test 1,170 ------------- UNITED KINGDOM (14.4%) 55,000 Alliance & Leicester 742 48,800 Barclays PLC 1,304 32,300 Bodycote International 427 84,000 COLT Telecom Group 1,554 60,000 Diageo PLC 658 36,000 EMAP PLC 773 67,200 Energis PLC 1,610 40,500 Glaxo Wellcome 1,293 95,000 Hays PLC 909 150,000 Orange PLC 2,171 120,000 Rentokil Initial 887 40,000 Sage Group 1,294 60,000 SEMA Group 673 25,000 Serco Group 563 266,125 Stagecoach Holdings 1,017 51,000 United Utilities 647 140,000 WPP Group 1,109 ------------- 17,631 ------------- TOTAL COMMON STOCKS (COST $74,935) 116,048 -------------
C-12 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- International Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - --------- ------------- PREFERRED STOCKS (1.5%) 2,000 BMW AG, Germany $ 814 300 BMW AG-New, Germany 125 2,500 SAP AG-Vorzug, Germany 945 ------------- TOTAL PREFERRED STOCKS (COST $1,289) 1,884 ------------- Principal Amount - --------- U.S. TREASURY SECURITIES (2.4%) $3,000,000 U.S. Treasury Bills, 4.48% & 4.54%, due 4/22/99 (COST $2,981) 2,981(3) ------------- REPURCHASE AGREEMENTS (0.2%) 240,000 State Street Bank and Trust Co. Repurchase Agreement, 4.70%, due 3/1/99, dated 2/26/99, Maturity Value $240,094, Collateralized by $215,000 U.S. Treasury Bonds, 7.25%, due 5/15/16 (Collateral Value $251,954) (COST $240) 240 (3) ------------- Market Value(1) Principal (000's Amount omitted) - --------- ------------- SHORT-TERM INVESTMENTS (10.8%) $4,800,000 General Electric Capital Corp., 4.72%, due 3/1/99 $ 4,800 8,363,438 N&B Securities Lending Quality Fund, LLC 8,363 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $13,163) 13,163(3) ------------- TOTAL INVESTMENTS (109.7%) (COST $92,608) 134,316 Liabilities, less cash, receivables and other assets [(9.7%)] (11,884) ------------- TOTAL NET ASSETS (100.0%) $ 122,432 -------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-13 SUMMARY SCHEDULE OF INVESTMENTS BY INDUSTRY Neuberger Berman - -------------------------------------------------------------------------------- International Portfolio
Market Value(1) (000's Percentage of Industry omitted) Net Assets ------------------------------ ------------- ------------- Telecommunications $ 30,152 24.6% Banking & Financial 15,053 12.3% Technology 13,485 11.0% Pharmaceutical 10,946 8.9% Electronics 6,432 5.3% Insurance 6,243 5.1% Diversified 5,663 4.6% U.S. Treasury Securities & Other Assets-Net 4,500 3.7% Restaurants 3,531 2.9% Publishing & Broadcasting 3,013 2.5% Machinery & Equipment 2,601 2.1% Food & Beverage 2,435 2.0% Manufacturing 2,363 1.9% Retailing 2,088 1.7% Utilities 1,966 1.6% Automotive 1,781 1.5% Building Materials 1,744 1.4% Industrial Goods & Services 1,450 1.2% Hospital Supplies 1,224 1.0% Consumer Goods & Services 1,152 0.9% Advertising 1,109 0.9% Media & Entertainment 1,092 0.9% Transportation 1,017 0.8% Oil & Gas 711 0.6% Holding Companies 681 0.6% ------------- ------------- TOTAL NET ASSETS $ 122,432 100.0% ------------- -------------
C-14 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Manhattan Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. Donaldson, Lufkin & Jenrette 2.2% 2. Citrix Systems 2.1% 3. Staples, Inc. 2.0% 4. Elan Corp. ADR 2.0% 5. Kansas City Southern Industries 1.9% 6. TJX Cos. 1.8% 7. Capital One Financial 1.8% 8. Dollar Tree Stores 1.8% 9. Intuit Inc. 1.7% 10. Republic Services 1.7%
Market Value(1) Number (000's of Shares omitted) - ----------- ------------- COMMON STOCKS (96.3%) BUSINESS SERVICES (6.6%) 364,900 Avis Rent A Car $ 8,370 282,600 Cambridge Technology Partners 7,100 106,500 International Network Services 5,445 97,800 NCR Corp. 4,004 397,500 Saville Systems ADR 7,925 179,800 Valassis Communications 8,630 ------------- 41,474 ------------- CAPITAL GOODS (1.7%) 621,700 Republic Services 10,841 ------------- COMMUNICATIONS (5.8%) 223,300 American Tower 5,987 278,900 ICG Communications 5,247 225,100 Intermedia Communications 4,080 94,100 Jones Intercable Class A 3,811 Market Value(1) Number (000's of Shares omitted) - ----------- ------------- 102,100 NTL Inc. $ 7,932 336,300 RSL Communications 9,606 ------------- 36,663 ------------- CONSUMER CYCLICALS (19.9%) 132,600 Abercrombie & Fitch 10,078 65,300 Amazon.com 8,367 83,300 Costco Cos. 6,690 277,900 Dollar Tree Stores 11,116 346,500 Furniture Brands International 7,406 180,500 Hayes Lemmerz International 4,693 267,800 Lennar Corp. 6,210 273,900 Linens 'n Things 9,860 229,100 Office Depot 8,176 329,775 Outdoor Systems 9,213 434,400 Staples, Inc. 12,774 320,600 Sylvan Learning Systems 10,660 395,200 TJX Cos. 11,288 320,500 Tower Automotive 5,969 140,400 Travel Services International 2,141 ------------- 124,641 ------------- CONSUMER STAPLES (10.3%) 81,500 American Italian Pasta 2,078 178,500 Brinker International 5,165 335,500 Capstar Broadcasting 6,773 112,150 Cardinal Health 8,096 245,000 Chancellor Media 10,719 350,900 CKE Restaurants 9,321 80,600 Estee Lauder 6,997 70,900 Jones Apparel Group 1,981 86,600 SFX Entertainment 5,293 217,300 Suiza Foods 8,040 ------------- 64,463 -------------
C-15 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Manhattan Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ----------- ------------- ELECTRICAL EQUIPMENT (5.5%) 149,100 Altera Corp. $ 7,250 122,800 KLA-Tencor 6,363 170,100 Level One Communications 5,698 75,800 Micron Technology 4,368 98,700 PMC-Sierra 6,995 45,700 RF Micro Devices 3,519 ------------- 34,193 ------------- FINANCIAL SERVICES (9.8%) 87,700 Capital One Financial 11,193 241,100 Donaldson, Lufkin & Jenrette 13,743 187,100 FINOVA Group 9,507 152,000 Nationwide Financial Services 6,906 231,300 North Fork Bancorp. 5,088 82,700 Providian Financial 8,446 87,500 State Street 6,710 ------------- 61,593 ------------- HARDWARE (7.0%) 343,000 Adaptec, Inc. 6,838 136,200 Ascend Communications 10,479 194,300 Network Appliance 8,161 201,700 Sanmina Corp. 10,539 90,700 Uniphase Corp. 7,993 ------------- 44,010 ------------- HEALTH CARE (15.3%) 345,000 Alternative Living Services 7,072 100,900 ALZA Corp. 5,291 110,600 Biogen, Inc. 10,631 167,500 C. R. Bard 9,443 Market Value(1) Number (000's of Shares omitted) - ----------- ------------- 159,600 Elan Corp. ADR $ 12,239 53,500 Immunex Corp. 7,570 226,400 Mylan Laboratories 6,184 349,100 Omnicare, Inc. 8,357 385,600 Safeskin Corp. 8,965 7,900 Sepracor Inc. 986 263,500 STERIS Corp. 8,663 69,900 Sunrise Assisted Living 2,700 158,600 Watson Pharmaceuticals 7,662 ------------- 95,763 ------------- INTERNET (4.4%) 123,100 Infoseek Corp. 8,809 109,600 Intuit Inc. 10,844 78,400 Safeguard Scientifics 2,930 33,600 Yahoo! Inc. 5,158 ------------- 27,741 ------------- SOFTWARE (8.1%) 182,300 BMC Software 7,451 173,750 Citrix Systems 13,400 144,800 Compuware Corp. 8,100 178,800 Network Associates 8,404 227,500 Novell, Inc. 4,408 122,900 VERITAS Software 8,726 ------------- 50,489 ------------- TRANSPORTATION (1.9%) 254,400 Kansas City Southern Industries 11,893 ------------- TOTAL COMMON STOCKS (COST $489,643) 603,764 -------------
C-16 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Manhattan Portfolio (Cont'd)
Market Value(1) Principal (000's Amount omitted) - ----------- ------------- SHORT-TERM INVESTMENTS (21.3%) $21,800,000 General Electric Capital Corp., 4.72%, due 3/1/99 $ 21,800 111,711,022 N&B Securities Lending Quality Fund, LLC 111,711 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $133,511) 133,511(3) ------------- TOTAL INVESTMENTS (117.6%) (COST $623,154) 737,275(4) Liabilities, less cash, receivables and other assets[(17.6%)] (110,263) ------------- TOTAL NET ASSETS (100.0%) $ 627,012 -------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-17 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Millennium Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. CSK Auto 3.8% 2. Profit Recovery Group International 3.2% 3. Corporate Executive Board 3.2% 4. Flextronics International 2.8% 5. SFX Entertainment 2.7% 6. Osteotech, Inc. 2.6% 7. Corinthian Colleges 2.5% 8. White Cap Industries 2.5% 9. Micromuse Inc. 2.4% 10. Infoseek Corp. 2.4%
Market Value(1) Number (000's of Shares omitted) - --------- ------------- COMMON STOCKS (97.2%) BUSINESS SERVICES (19.2%) 4,000 Consolidated Graphics $ 243 30,000 Corinthian Colleges 671 35,000 Corporate Executive Board 857 8,000 F.Y.I. Inc. 241 36,000 First Consulting Group 508 5,000 Lason, Inc. 271 8,000 Metzler Group 340 35,000 Packaged Ice 298 26,000 Profit Recovery Group International 859 16,000 Provant, Inc. 310 9,000 Sylvan Learning Systems 299 50,000 UniCapital Corp. 291 ------------- 5,188 ------------- CONSUMER CYCLICALS (8.1%) 23,000 Blue Rhino 392 35,000 Comfort Systems USA 473 12,000 School Specialty 265 Market Value(1) Number (000's of Shares omitted) - --------- ------------- 12,000 SFX Entertainment $ 733 9,000 Speedway Motorsports 321 ------------- 2,184 ------------- ELECTRICAL EQUIPMENT (3.9%) 9,000 Lattice Semiconductor 359 10,000 Level One Communications 335 7,000 PRI Automation 210 3,000 Vitesse Semiconductor 138 ------------- 1,042 ------------- ENERGY (2.0%) 24,000 Hanover Compressor 525 ------------- FINANCIAL SERVICES (1.9%) 15,000 Affiliated Managers Group 390 5,000 HealthCare Financial Partners 131 ------------- 521 ------------- HARDWARE (7.6%) 27,000 ACT Networks 314 50,000 Ancor Communications 312 20,000 Flextronics International 754 2,500 RF Micro Devices 193 12,000 Visual Networks 471 ------------- 2,044 ------------- HEALTH CARE (14.6%) 12,000 Alternative Living Services 246 27,000 Anesta Corp. 535 40,000 Karrington Health 495 14,000 Kendle International 338 25,000 MEDE AMERICA 428 25,000 Ocular Sciences 613 13,000 Osteotech, Inc. 704
C-18 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Millennium Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - --------- ------------- 10,000 Priority Healthcare $ 389 12,000 Province Healthcare 182 ------------- 3,930 ------------- INTERNET (6.6%) 3,000 Exodus Communications 220 9,000 Infoseek Corp. 644 5,000 Safeguard Scientifics 187 6,000 theglobe.com 278 7,000 USWeb Corp. 236 5,000 VerticalNet, Inc. 206 ------------- 1,771 ------------- RETAIL (12.5%) 30,000 CSK Auto 1,029 20,000 Dave & Buster's 394 15,000 Group 1 Automotive 378 12,000 Insight Enterprises 279 18,000 Sonic Automotive 290 9,000 Tweeter Home Entertainment Group 341 45,000 White Cap Industries 664 ------------- 3,375 ------------- SOFTWARE (15.7%) 30,000 Best Software 488 22,000 Catalyst International 341 70,000 Descartes Systems Group 481 13,000 Engineering Animation 588 30,000 Exchange Applications 495 20,000 Micromuse Inc. 645 5,000 VERITAS Software 355 12,000 Visio Corp. 345 60,000 VISTA Information Solutions 502 ------------- 4,240 ------------- Market Value(1) Number (000's of Shares omitted) - --------- ------------- TELECOMMUNICATIONS (3.6%) 15,000 Quanta Services $ 405 20,000 RSL Communications 571 ------------- 976 ------------- TRANSPORTATION (1.5%) 25,000 United Road Services 412 ------------- TOTAL COMMON STOCKS (COST $24,647) 26,208 ------------- Principal Amount - --------- U.S. TREASURY SECURITIES (1.2%) $ 335,000 U.S. Treasury Bills, 4.13%, due 3/18/99 (COST $334) 334(3) ------------- SHORT-TERM INVESTMENTS (26.4%) 440,000 General Electric Capital Corp., 4.72%, due 3/1/99 440 6,665,000 N&B Securities Lending Quality Fund, LLC 6,665 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $7,105) 7,105 (3) ------------- TOTAL INVESTMENTS (124.8%) (COST $32,086) 33,647 (4) Liabilities, less cash, receivables and other assets [(24.8%)] (6,680) ------------- TOTAL NET ASSETS (100.0%) $ 26,967 -------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-19 SCHEDULE OF INVESTMENTS Neuberger Berman - -------------------------------------------------------------------------------- Partners Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. Bank One 3.1% 2. CIGNA Corp. 3.1% 3. Northern Telecom 3.0% 4. MCI WorldCom 2.9% 5. MediaOne Group 2.8% 6. SLM Holding 2.5% 7. American Home Products 2.5% 8. Xerox Corp. 2.5% 9. Chase Manhattan 2.4% 10. Baxter International 2.4%
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ COMMON STOCKS (97.4%) AIRLINES (1.3%) 1,532,100 Continental Airlines Class B $ 53,049 ------------ AUTOMOBILE MANUFACTURING (1.5%) 710,000 General Motors 58,619 ------------ AUTO/TRUCK REPLACEMENT PARTS (2.5%) 1,215,000 AutoZone, Inc. 42,525 1,070,000 Delphi Automotive Systems 19,728 1,036,000 Lear Corp. 36,584 ------------ 98,837 ------------ BANKING & FINANCIAL (10.4%) 2,297,000 Bank One 123,464 988,000 BankAmerica Corp. 64,529 1,185,000 Chase Manhattan 94,356 2,063,300 Countrywide Credit Industries 78,147 1,309,400 Household International 53,194 ------------ 413,690 ------------ CHEMICALS (0.5%) 415,000 duPont 21,295 ------------ Market Value(1) Number (000's of Shares omitted) - ---------- ------------ COMMUNICATIONS (4.9%) 319,500 AT&T Corp. $ 26,239 945,400 Bell Atlantic 54,301 1,391,600 MCI WorldCom 114,807 ------------ 195,347 ------------ ELECTRICAL & ELECTRONICS (3.6%) 1,720,000 General Motors Class H 81,162 1,165,000 Raytheon Co. Class A 61,599 ------------ 142,761 ------------ ELECTRONICS (1.7%) 2,191,200 Loral Space & Communications 39,442 615,000 Teradyne, Inc. 29,289 ------------ 68,731 ------------ ENERGY (3.0%) 1,899,200 McDermott International 37,865 1,917,500 Texas Utilities 81,374 ------------ 119,239 ------------ ENTERTAINMENT (1.1%) 2,240,000 Mirage Resorts 43,680 ------------ FINANCIAL SERVICES (3.4%) 390,000 Morgan Stanley Dean Witter 35,295 2,338,800 SLM Holding 100,276 ------------ 135,571 ------------ FOOD & TOBACCO (6.7%) 940,000 Anheuser-Busch 72,086 2,293,900 ConAgra, Inc. 69,104 2,112,000 Nabisco Holdings 93,720 745,000 Philip Morris 29,148 ------------ 264,058 ------------ FOOD PRODUCTS (1.5%) 115,200 Diageo PLC ADR 5,213 1,940,000 Sara Lee 52,744 ------------ 57,957 ------------
C-20 February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Partners Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ---------- ------------ GAS (1.6%) 1,751,600 Praxair, Inc. $ 61,197 ------------ HEALTH CARE (15.9%) 1,670,000 ALZA Corp. 87,571 1,665,000 American Home Products 99,067 1,340,000 Baxter International 94,302 1,490,000 Becton, Dickinson & Co. 49,915 1,361,900 Boston Scientific 36,090 1,082,000 Centocor, Inc. 44,971 1,550,000 CIGNA Corp. 121,675 630,000 McKesson HBOC 42,840 2,711,000 Tenet Healthcare 53,373 ------------ 629,804 ------------ INDUSTRIAL GOODS & SERVICES (1.0%) 1,585,700 Owens-Illinois 37,958 ------------ INSURANCE (4.1%) 1,835,000 Ace, Ltd. 50,004 650,000 Aetna Inc. 48,141 501,000 Allstate Corp. 18,787 230,000 NAC Re 12,434 560,600 XL Capital 34,337 ------------ 163,703 ------------ OIL & GAS (4.4%) 490,000 Chevron Corp. 37,669 410,000 Schlumberger Ltd. 19,910 1,575,000 Texaco Inc. 73,336 2,100,000 Tosco Corp. 43,444 ------------ 174,359 ------------ REAL ESTATE (0.8%) 2,825,300 Host Marriott 30,549 ------------ RETAILING (3.8%) 1,208,000 Consolidated Stores 30,426 1,180,000 Harcourt General 54,059 1,205,000 Tandy Corp. 67,028 ------------ 151,513 ------------ Market Value(1) Number (000's of Shares omitted) - ---------- ------------ STEEL (0.8%) 1,435,000 AK Steel Holding $ 31,301 ------------ TECHNOLOGY (11.3%) 1,857,100 Computer Associates 77,998 1,073,000 Hewlett-Packard 71,287 470,000 IBM 79,900 2,475,000 Parametric Technology 38,053 1,728,300 Quantum Corp. 28,409 575,000 Texas Instruments 51,283 1,790,000 Xerox Corp. 98,786 ------------ 445,716 ------------ TELECOMMUNICATIONS (7.5%) 1,050,800 GTE Corp. 68,171 2,045,000 MediaOne Group 111,452 2,036,600 Northern Telecom 118,250 ------------ 297,873 ------------ UTILITIES (4.1%) 657,000 PG&E Corp. 20,696 2,120,000 The Williams Cos. 78,440 1,760,000 Unicom Corp. 62,590 ------------ 161,726 ------------ TOTAL COMMON STOCKS (COST $3,492,631) 3,858,533 ------------ PREFERRED STOCKS (1.1%) 1,660,000 News Corp. ADR (COST $43,439) 43,575 ------------
C-21 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Partners Portfolio (Cont'd)
Market Value(1) Principal (000's Amount omitted) - ---------- ------------ REPURCHASE AGREEMENTS (1.3%) $51,050,000 State Street Bank and Trust Co. Repurchase Agreement, 4.70%, due 3/1/99, dated 2/26/99, Maturity Value $51,066,995, Collateralized by $44,875,000 U.S. Treasury Bonds, 7.25%, due 5/15/16 (Collateral Value $52,588,025) (COST $51,050) $ 51,050(3) ------------ SHORT-TERM INVESTMENTS (3.1%) 6,000,000 USAA Capital Corp., 4.80%, due 3/2/99 5,999 25,000,000 Vulcan Materials Co., 4.85%, due 3/2/99 24,997 92,088,729 N&B Securities Lending Quality Fund, LLC 92,089 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $123,085) 123,085 (3) ------------ TOTAL INVESTMENTS (102.9%) (COST $3,710,205) 4,076,243 (4) Liabilities, less cash, receivables and other assets [(2.9%)] (116,483) ------------ TOTAL NET ASSETS (100.0%) $ 3,959,760 ------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-22 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Socially Responsive Portfolio
TOP TEN EQUITY HOLDINGS --------------------------------------------------- HOLDING PERCENTAGE 1. Citigroup Inc. 3.6% 2. MCI WorldCom 3.5% 3. C. R. Bard 3.2% 4. Intel Corp. 2.7% 5. Wal-Mart Stores 2.7% 6. ALZA Corp. 2.7% 7. Wellpoint Health Networks 2.6% 8. Unisys Corp. 2.5% 9. Tyco International 2.5% 10. Fannie Mae 2.5%
Market Value(1) Number (000's of Shares omitted) - ---------- ------------- COMMON STOCKS (95.8%) ADVERTISING (2.2%) 330,000 True North Communications $ 7,693 ------------- AUTOMOTIVE (1.7%) 137,200 Borg-Warner Automotive 5,977 ------------- BANKING & FINANCIAL (2.4%) 160,000 Bank One 8,600 ------------- CHEMICALS (1.2%) 100,000 Minerals Technologies 4,294 ------------- CONSUMER GOODS & SERVICES (2.0%) 150,000 Kimberly-Clark 7,088 ------------- DIVERSIFIED (2.5%) 120,000 Tyco International 8,933 ------------- ENERGY (1.7%) 80,000 Chevron Corp. 6,150 ------------- ENTERTAINMENT (2.2%) 300,000 Fox Entertainment Group 7,800 ------------- Market Value(1) Number (000's of Shares omitted) - ---------- ------------- FINANCIAL SERVICES (10.5%) 150,000 Ambac Financial Group $ 8,400 217,500 Citigroup Inc. 12,778 200,000 Dun & Bradstreet 6,850 125,000 Fannie Mae 8,750 53,500 Indigo Aviation ADR 401 ------------- 37,179 ------------- FOOD & BEVERAGE (1.9%) 80,000 McDonald's Corp. 6,800 ------------- FURNISHINGS (2.1%) 350,000 Leggett & Platt 7,328 ------------- HEALTH CARE (13.7%) 180,000 ALZA Corp. 9,439 85,000 Biogen, Inc. 8,171 250,000 Invacare Corp. 5,937 90,000 Johnson & Johnson 7,684 120,000 Warner-Lambert 8,287 118,000 Wellpoint Health Networks 9,307 ------------- 48,825 ------------- HOSPITAL SUPPLIES (5.2%) 150,000 Beckman Coulter 7,247 200,000 C. R. Bard 11,275 ------------- 18,522 ------------- INDUSTRIAL & COMMERCIAL PRODUCTS (2.2%) 350,000 Raychem Corp. 7,984 ------------- INSURANCE (3.9%) 380,000 ESG Re 6,436 160,000 ReliaStar Financial 7,260 ------------- 13,696 ------------- OIL & GAS (1.3%) 200,000 Cooper Cameron 4,625 ------------- PAPER & FOREST PRODUCTS (1.6%) 190,000 Mead Corp. 5,783 -------------
C-23 SCHEDULE OF INVESTMENTS Neuberger Berman February 28, 1999 (Unaudited) - -------------------------------------------------------------------------------- Socially Responsive Portfolio (Cont'd)
Market Value(1) Number (000's of Shares omitted) - ---------- ------------- PUBLISHING & BROADCASTING (4.1%) 240,000 CMP Media $ 7,200 150,000 Valassis Communications 7,200 ------------- 14,400 ------------- RECYCLING (0.7%) 187,500 IMCO Recycling 2,355 ------------- RETAIL GROCERY (1.9%) 120,000 Albertson's Inc. 6,840 ------------- RETAIL STORES (4.6%) 160,000 Circuit City Stores 8,680 120,000 Dayton Hudson 7,508 ------------- 16,188 ------------- RETAILING (2.7%) 110,000 Wal-Mart Stores 9,501 ------------- TECHNOLOGY (12.8%) 230,000 Analog Devices 5,764 160,000 Compaq Computer 5,640 120,000 Hewlett-Packard 7,973 80,000 Intel Corp. 9,595 300,000 Unisys Corp. 8,944 140,000 Xerox Corp. 7,726 ------------- 45,642 ------------- TELECOMMUNICATIONS (4.0%) 150,000 MCI WorldCom 12,375 303,200 Metromedia International Group 1,762 ------------- 14,137 ------------- TRANSPORTATION (1.9%) 120,000 AMR Corp. 6,653 ------------- UTILITIES, ELECTRIC & GAS (4.8%) 180,000 Cinergy Corp. 5,254 300,000 DPL Inc. 5,343 250,000 KeySpan Energy 6,625 ------------- 17,222 ------------- TOTAL COMMON STOCKS (COST $260,523) 340,215 ------------- Market Value(1) Principal (000's Amount omitted) - ---------- ------------- U.S. TREASURY SECURITIES (1.2%) $4,370,000 U.S. Treasury Bills, 4.30% & 4.485%, due 3/25/99 & 4/22/99 (COST $4,347) $ 4,347(3) ------------- REPURCHASE AGREEMENTS (3.2%) 11,340,000 State Street Bank and Trust Co. Repurchase Agreement, 4.70%, due 3/1/99, dated 2/26/99, Maturity Value $11,344,442, Collateralized by $9,970,000 U.S. Treasury Bonds, 7.25%, due 5/15/16 (Collateral Value $11,683,624) (COST $11,340) 11,340 (3) ------------- SHORT-TERM INVESTMENTS (1.8%) 100,000 Self Help Credit Union, 4.66%, due 5/24/99 100 6,293,657 N&B Securities Lending Quality Fund, LLC 6,294 ------------- TOTAL SHORT-TERM INVESTMENTS (COST $6,394) 6,394 (3) ------------- TOTAL INVESTMENTS (102.0%) (COST $282,604) 362,296 (4) Liabilities, less cash, receivables and other assets [(2.0%)] (6,964) ------------- TOTAL NET ASSETS (100.0%) $ 355,332 -------------
SEE NOTES TO SCHEDULE OF INVESTMENTS C-24 NOTES TO SCHEDULE OF INVESTMENTS February 28, 1999 (Unaudited) - ---------------------------------------------------------------------- Equity Managers Trust and Global Managers Trust 1) Investment securities of each Portfolio are valued at the latest sales price; securities for which no sales were reported, unless otherwise noted, are valued at the mean between the closing bid and asked prices, with the exception of securities held by Neuberger Berman International Portfolio, which are valued at the last available bid price. The Portfolios value all other securities by a method the trustees of Equity Managers Trust and Global Managers Trust believe accurately reflects fair value. Foreign security prices are furnished by independent quotation services expressed in local currency values. Foreign security prices are translated from the local currency into U.S. dollars using current exchange rates. Short-term debt securities with less than 60 days until maturity may be valued at cost which, when combined with interest earned, approximates market value. 2) Affiliated issuer (see Note E of Notes to Financial Statements). 3) At cost, which approximates market value. 4) At February 28, 1999, selected Portfolio information on a U.S. Federal income tax basis was as follows:
NET GROSS GROSS UNREALIZED UNREALIZED UNREALIZED APPRECIATION NEUBERGER BERMAN COST APPRECIATION DEPRECIATION (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------------ FOCUS PORTFOLIO $ 1,059,364,728 $ 679,640,706 $ 61,537,630 $618,103,076 GENESIS PORTFOLIO 1,762,881,325 182,036,789 237,157,652 (55,120,863) GUARDIAN PORTFOLIO 4,631,212,166 1,236,374,590 322,029,482 914,345,108 MANHATTAN PORTFOLIO 623,154,006 151,141,461 37,020,222 114,121,239 MILLENNIUM PORTFOLIO 32,086,645 3,086,232 1,525,656 1,560,576 PARTNERS PORTFOLIO 3,713,681,052 512,732,171 150,170,224 362,561,947 SOCIALLY RESPONSIVE PORTFOLIO 282,603,942 93,521,367 13,829,456 79,691,911
5) The following securities were held in escrow at February 28, 1999, to cover outstanding call options written:
MARKET VALUE PREMIUM MARKET SECURITIES AND OF ON VALUE NEUBERGER BERMAN SHARES OPTIONS SECURITIES OPTIONS OF OPTIONS - -------------------------------------------------------------------------------------------------------------------------------- GUARDIAN PORTFOLIO 200,000 BankBoston Corp. $ 8,087,500 $ 543,982 $ 700,000 May 1999 @ 40 500,000 KLA-Tencor 25,906,250 1,947,435 2,187,500 March 1999 @ 50 100,000 Texas Instruments 8,918,750 671,978 125,000 March 1999 @ 100
C-25 6) Security exempt from registration under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers under Rule 144A. At February 28, 1999, this security amounted to $1,032,300 or 0.8% of net assets for Neuberger Berman International Portfolio. SEE NOTES TO FINANCIAL STATEMENTS C-26 (This page has been left blank intentionally.) C-27 STATEMENTS OF ASSETS AND LIABILITIES - ----------------------------------------------------------------------
EQUITY MANAGERS TRUST ------------------------------------------------ FOCUS GENESIS GUARDIAN (000'S OMITTED) PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------ ASSETS Investments in securities, at market value* (Notes A & E) -- see Schedule of Investments: Unaffiliated issuers $ 1,660,863 $ 1,545,777 $ 5,211,569 Non-controlled affiliated issuers 16,605 161,983 333,988 ------------------------------------------------ 1,677,468 1,707,760 5,545,557 Cash 6 4 10 Deferred organization costs (Note A) -- -- -- Dividends and interest receivable 1,404 3,276 8,768 Prepaid expenses and other assets 23 47 115 Receivable for securities sold 42,727 20,410 106,079 ------------------------------------------------ 1,721,628 1,731,497 5,660,529 ------------------------------------------------ LIABILITIES Option contracts written, at market value (Note A) -- -- 3,012 Payable for collateral on securities loaned (Note A) 48,892 34,356 7,002 Payable for securities purchased 32,914 12,641 146,184 Payable for variation margin (Note A) -- -- 2,261 Payable to investment manager (Note B) 627 988 1,928 Accrued expenses and other payables 657 1,250 2,605 ------------------------------------------------ 83,090 49,235 162,992 ------------------------------------------------ NET ASSETS Applicable to Investors' Beneficial Interests $ 1,638,538 $ 1,682,262 $ 5,497,537 ------------------------------------------------ NET ASSETS consist of: Paid-in capital $ 1,018,851 $ 1,737,383 $ 4,555,306 Net unrealized appreciation (depreciation) in value of investment securities, financial futures contracts, option contracts, translation of assets and liabilities in foreign currencies, and foreign currency contracts 619,687 (55,121) 942,231 ------------------------------------------------ NET ASSETS $ 1,638,538 $ 1,682,262 $ 5,497,537 ------------------------------------------------ *Cost of investments: Unaffiliated issuers $ 1,024,810 $ 1,584,548 $ 4,264,323 Non-controlled affiliated issuers 32,971 178,333 361,673 ------------------------------------------------ Total cost of investments $ 1,057,781 $ 1,762,881 $ 4,625,996 ------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-28 February 28,1999 (Unaudited) - ----------------------------------------------------------------------
GLOBAL MANAGERS EQUITY MANAGERS TRUST TRUST --------------------------------------------------------- ------------ SOCIALLY INTERNATIONAL MANHATTAN MILLENNIUM PARTNERS RESPONSIVE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------ ASSETS Investments in securities, at market value* (Notes A & E) -- see Schedule of Investments: Unaffiliated issuers $ 134,316 $ 737,275 $ 33,647 $ 4,076,243 $ 362,296 Non-controlled affiliated issuers -- -- -- -- -- ------------------------------------------------------------------------ 134,316 737,275 33,647 4,076,243 362,296 Cash 11 4 4 8 9 Deferred organization costs (Note A) 3 -- -- -- -- Dividends and interest receivable 436 2,253 28 7,237 722 Prepaid expenses and other assets 11 59 -- 70 7 Receivable for securities sold 613 5,468 34 1,438 6,009 ------------------------------------------------------------------------ 135,390 745,059 33,713 4,084,996 369,043 ------------------------------------------------------------------------ LIABILITIES Option contracts written, at market value (Note A) -- -- -- -- -- Payable for collateral on securities loaned (Note A) 8,364 111,711 6,665 92,089 6,293 Payable for securities purchased 4,185 3,851 15 28,145 6,907 Payable for variation margin (Note A) -- -- -- -- -- Payable to investment manager (Note B) 82 263 17 1,396 149 Accrued expenses and other payables 327 2,222 49 3,606 362 ------------------------------------------------------------------------ 12,958 118,047 6,746 125,236 13,711 ------------------------------------------------------------------------ NET ASSETS Applicable to Investors' Beneficial Interests $ 122,432 $ 627,012 $ 26,967 $ 3,959,760 $ 355,332 ------------------------------------------------------------------------ NET ASSETS consist of: Paid-in capital $ 80,726 $ 512,891 $ 25,406 $ 3,593,722 $ 275,640 Net unrealized appreciation (depreciation) in value of investment securities, financial futures contracts, option contracts, translation of assets and liabilities in foreign currencies, and foreign currency contracts 41,706 114,121 1,561 366,038 79,692 ------------------------------------------------------------------------ NET ASSETS $ 122,432 $ 627,012 $ 26,967 $ 3,959,760 $ 355,332 ------------------------------------------------------------------------ *Cost of investments: Unaffiliated issuers $ 92,608 $ 623,154 $ 32,086 $ 3,710,205 $ 282,604 Non-controlled affiliated issuers -- -- -- -- -- ------------------------------------------------------------------------ Total cost of investments $ 92,608 $ 623,154 $ 32,086 $ 3,710,205 $ 282,604 ------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-29 STATEMENTS OF OPERATIONS - ----------------------------------------------------------------------
EQUITY MANAGERS TRUST ------------------------------------------ FOCUS GENESIS GUARDIAN PORTFOLIO PORTFOLIO PORTFOLIO For the For the For the Six Months Six Months Six Months Ended Ended Ended February 28, February 28, February 28, 1999 1999 1999 (000'S OMITTED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ------------------------------------------ INVESTMENT INCOME Income: Dividend income -- unaffiliated issuers $ 6,393 $ 16,601 $ 28,153 Dividend income -- non-controlled affiliated issuers 243 391 845 Interest income 497 3,155 16,496 Foreign taxes withheld (Note A) (37) -- (554) ------------------------------------------ Total income 7,096 20,147 44,940 ------------------------------------------ Expenses: Investment management fee (Note B) 3,723 6,961 12,941 Accounting fees 5 5 5 Amortization of deferred organization and initial offering expenses (Note A) -- -- -- Auditing fees 21 23 24 Custodian fees (Note B) 122 181 426 Insurance expense 10 13 44 Legal fees 13 16 14 Trustees' fees and expenses 11 15 36 Miscellaneous -- 22 -- ------------------------------------------ Total expenses 3,905 7,236 13,490 Expenses reduced by custodian fee expense offset arrangement (Note B) (2) (4) (2) ------------------------------------------ Total net expenses 3,903 7,232 13,488 ------------------------------------------ Net investment income (loss) 3,193 12,915 31,452 ------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investment securities sold in unaffiliated issuers 67,598 (81,908) 443,851 Net realized loss on investment securities sold in non-controlled affiliated issuers (5,311) (1,491) -- Net realized gain on option contracts (Note A) 54 -- 3,042 Net realized gain (loss) on financial futures contracts (Note A) -- -- 81,082 Net realized loss on foreign currency transactions (Note A) -- -- -- Net realized loss on equity swap contracts (Note A) -- -- -- Change in net unrealized appreciation (depreciation) of investment securities, financial futures contracts, option contracts, equity swap contracts, translation of assets and liabilities in foreign currencies, and foreign currency contracts (Note A) 395,546 217,640 767,858 ------------------------------------------ Net gain on investments 457,887 134,241 1,295,833 ------------------------------------------ Net increase in net assets resulting from operations $ 461,080 $ 147,156 $ 1,327,285 ------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-30 - ----------------------------------------------------------------------
GLOBAL MANAGERS TRUST EQUITY MANAGERS TRUST ------------ --------------------------------------------------------- MILLENNIUM PORTFOLIO For the Period from SOCIALLY INTERNATIONAL MANHATTAN October 20, PARTNERS RESPONSIVE PORTFOLIO PORTFOLIO 1998 PORTFOLIO PORTFOLIO (Commencement For the For the of For the For the Six Months Six Months Operations) Six Months Six Months Ended Ended to Ended Ended February 28, February 28, February 28, February 28, February 28, 1999 1999 1999 1999 1999 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ------------------------------------------------------------------------ INVESTMENT INCOME Income: Dividend income -- unaffiliated issuers $ 224 $ 578 $ -- $ 38,731 $ 2,013 Dividend income -- non-controlled affiliated issuers -- -- -- -- -- Interest income 339 976 32 3,279 353 Foreign taxes withheld (Note A) (33) -- -- (107) -- ------------------------------------------------------------------------ Total income 530 1,554 32 41,903 2,366 ------------------------------------------------------------------------ Expenses: Investment management fee (Note B) 518 1,595 50 8,923 896 Accounting fees 5 5 4 5 5 Amortization of deferred organization and initial offering expenses (Note A) 6 -- -- -- 3 Auditing fees 16 31 6 23 15 Custodian fees (Note B) 105 92 18 303 53 Insurance expense 1 4 -- 24 2 Legal fees 18 13 9 9 8 Trustees' fees and expenses 10 6 2 25 5 Miscellaneous 3 7 -- -- -- ------------------------------------------------------------------------ Total expenses 682 1,753 89 9,312 987 Expenses reduced by custodian fee expense offset arrangement (Note B) (2) (3) (1) (2) (1) ------------------------------------------------------------------------ Total net expenses 680 1,750 88 9,310 986 ------------------------------------------------------------------------ Net investment income (loss) (150) (196) (56) 32,593 1,380 ------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investment securities sold in unaffiliated issuers (5,875) 16,611 2,226 157,610 6,144 Net realized loss on investment securities sold in non-controlled affiliated issuers -- -- -- -- -- Net realized gain on option contracts (Note A) -- -- -- -- -- Net realized gain (loss) on financial futures contracts (Note A) (1,217) -- -- -- -- Net realized loss on foreign currency transactions (Note A) (2,018) -- -- -- -- Net realized loss on equity swap contracts (Note A) (274) -- -- -- -- Change in net unrealized appreciation (depreciation) of investment securities, financial futures contracts, option contracts, equity swap contracts, translation of assets and liabilities in foreign currencies, and foreign currency contracts (Note A) 19,444 126,995 1,561 537,283 63,179 ------------------------------------------------------------------------ Net gain on investments 10,060 143,606 3,787 694,893 69,323 ------------------------------------------------------------------------ Net increase in net assets resulting from operations $ 9,910 $ 143,410 $ 3,731 $ 727,486 $ 70,703 ------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-31 STATEMENTS OF CHANGES IN NET ASSETS - ----------------------------------------------------------------------
EQUITY MANAGERS TRUST FOCUS GENESIS PORTFOLIO PORTFOLIO Six Months Six Months Ended Year Ended Year February 28, Ended February 28, Ended 1999 August 31, 1999 August 31, (000'S OMITTED) (UNAUDITED) 1998 (UNAUDITED) 1998 ------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 3,193 $ 10,123 $ 12,915 $ 23,438 Net realized gain (loss) on investments 62,341 74,686 (83,399) 35,406 Change in net unrealized appreciation (depreciation) of investments 395,546 (360,086) 217,640 (545,041) ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 461,080 (275,277) 147,156 (486,197) ------------------------------------------------------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 25,197 178,065 115,426 1,557,053 Reductions (165,217) (158,751) (392,675) (342,152) ------------------------------------------------------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests (140,020) 19,314 (277,249) 1,214,901 ------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 321,060 (255,963) (130,093) 728,704 NET ASSETS: Beginning of period 1,317,478 1,573,441 1,812,355 1,083,651 ------------------------------------------------------------- End of period $ 1,638,538 $ 1,317,478 $ 1,682,262 $ 1,812,355 -------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-32 - ----------------------------------------------------------------------
EQUITY MANAGERS GLOBAL MANAGERS EQUITY MANAGERS TRUST TRUST TRUST GUARDIAN INTERNATIONAL MANHATTAN PORTFOLIO PORTFOLIO PORTFOLIO Six Months Six Months Six Months Ended Year Ended Year Ended Year February 28, Ended February 28, Ended February 28, Ended 1999 August 31, 1999 August 31, 1999 August 31, (UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998 --------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 31,452 $ 78,026 $ (150) $ 391 $ (196) $ (343) Net realized gain (loss) on investments 527,975 893,833 (9,384) (10,675) 16,611 45,585 Change in net unrealized appreciation (depreciation) of investments 767,858 (2,420,985) 19,444 (596) 126,995 (106,156) --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,327,285 (1,449,126) 9,910 (10,880) 143,410 (60,914) --------------------------------------------------------------------------------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 46,875 391,142 49,074 91,654 18,985 53,069 Reductions (1,664,428) (1,912,418) (64,374) (68,216) (58,742) (90,539) --------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests (1,617,553) (1,521,276) (15,300) 23,438 (39,757) (37,470) --------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (290,268) (2,970,402) (5,390) 12,558 103,653 (98,384) NET ASSETS: Beginning of period 5,787,805 8,758,207 127,822 115,264 523,359 621,743 --------------------------------------------------------------------------------------- End of period $ 5,497,537 $ 5,787,805 $ 122,432 $ 127,822 $ 627,012 $ 523,359 ---------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-33 STATEMENTS OF CHANGES IN NET ASSETS(Cont'd) - ----------------------------------------------------------------------
EQUITY MANAGERS TRUST MILLENNIUM PORTFOLIO Period from October 20, 1998 (Commencement of Operations) to February 28, 1999 (000'S OMITTED) (UNAUDITED) ----------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (56) Net realized gain (loss) on investments 2,226 Change in net unrealized appreciation (depreciation) of investments 1,561 ------- Net increase (decrease) in net assets resulting from operations 3,731 ------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 23,454 Reductions (218) ------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests 23,236 ------- NET INCREASE (DECREASE) IN NET ASSETS 26,967 NET ASSETS: Beginning of period -- ------- End of period $ 26,967 -------
SEE NOTES TO FINANCIAL STATEMENTS C-34 - ----------------------------------------------------------------------
EQUITY MANAGERS TRUST SOCIALLY PARTNERS RESPONSIVE PORTFOLIO PORTFOLIO Six Months Six Months Ended Year Ended Year February 28, Ended February 28, Ended 1999 August 31, 1999 August 31, (UNAUDITED) 1998 (UNAUDITED) 1998 ------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 32,593 $ 46,344 $ 1,380 $ 2,863 Net realized gain (loss) on investments 157,610 408,784 6,144 26,331 Change in net unrealized appreciation (depreciation) of investments 537,283 (872,798) 63,179 (50,773) ------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 727,486 (417,670) 70,703 (21,579) ------------------------------------------------------------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Additions 135,861 743,583 25,042 71,633 Reductions (484,924) (320,149) (23,263) (23,485) ------------------------------------------------------------- Net increase (decrease) in net assets resulting from transactions in investors' beneficial interests (349,063) 423,434 1,779 48,148 ------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 378,423 5,764 72,482 26,569 NET ASSETS: Beginning of period 3,581,337 3,575,573 282,850 256,281 ------------------------------------------------------------- End of period $ 3,959,760 $ 3,581,337 $ 355,332 $ 282,850 -------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS C-35 NOTES TO FINANCIAL STATEMENTS February 28, 1999 (Unaudited) - ---------------------------------------------------------------------- Equity Managers Trust and Global Managers Trust NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1) GENERAL: Neuberger Berman Focus Portfolio ("Focus"), Neuberger Berman Genesis Portfolio ("Genesis"), Neuberger Berman Guardian Portfolio ("Guardian"), Neuberger Berman Manhattan Portfolio ("Manhattan"), Neuberger Berman Millennium Portfolio ("Millennium"), Neuberger Berman Partners Portfolio ("Partners"), and Neuberger Berman Socially Responsive Portfolio ("Socially Responsive") are separate operating series of Equity Managers Trust ("Managers Trust"), a New York common law trust organized as of December 1, 1992. Neuberger Berman International Portfolio ("International") is a separate operating series of Global Managers Trust ("Global"), a New York common law trust organized as of March 18, 1994, with its principal office in the Cayman Islands. These eight aforementioned series are collectively referred to as the "Portfolios." Managers Trust and Global (collectively, the "Trusts") are registered as diversified, open-end management investment companies under the Investment Company Act of 1940, as amended (the "1940 Act"). Millennium had no operations until October 20, 1998, other than matters relating to its organization and registration as a series of Managers Trust. Other regulated investment companies sponsored by Neuberger Berman Management Inc. ("Management"), whose financial statements are not presented herein, also invest in the Trusts. Global currently has only one Portfolio. The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. 2) PORTFOLIO VALUATION: Investment securities are valued as indicated in the notes following the Portfolios' Schedule of Investments. 3) FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, other assets and liabilities. Purchase and sale prices of securities, and income and expenses are translated into U.S. dollars at the prevailing rate of exchange on the respective dates of such transactions. 4) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Dividend income is recorded on the ex-dividend date or, for certain foreign dividends, as soon as the Portfolio becomes aware of the dividends. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, including accretion of original issue discount, where applicable, and accretion of C-36 discount on short-term investments, is recorded on the accrual basis. Realized gains and losses from securities transactions and foreign currency transactions are recorded on the basis of identified cost. 5) FORWARD FOREIGN CURRENCY CONTRACTS: The Portfolios may enter into forward foreign currency contracts ("contracts") in connection with planned purchases or sales of securities to hedge the U.S. dollar value of portfolio securities denominated in a foreign currency. International may also enter into such contracts to increase or decrease its exposure to a currency other than U.S. dollars. The gain or loss arising from the difference between the original contract price and the closing price of such contract is included in net realized gains or losses on foreign currency transactions. Fluctuations in the value of forward foreign currency contracts are recorded for financial reporting purposes as unrealized gains or losses by each Portfolio. The Portfolios have no specific limitation on the percentage of assets which may be committed to these types of contracts. The Portfolios could be exposed to risks if a counterparty to a contract were unable to meet the terms of its contract or if the value of the foreign currency changes unfavorably. The U.S. dollar value of foreign currency underlying all contractual commitments held by each Portfolio is determined using forward foreign currency exchange rates supplied by an independent pricing service. 6) TAXES: Managers Trust intends to comply with the requirements of the Internal Revenue Code. Each Portfolio of the Trusts also intends to conduct its operations so that each of its investors (in the case of Global, its U.S. investors) will be able to qualify as a regulated investment company. Each Portfolio will be treated as a partnership for U.S. Federal income tax purposes and is therefore not subject to U.S. Federal income tax. There is, at present, no direct taxation in the Cayman Islands, and therefore interest, dividends, and capital gains derived by Global are not subject to taxes in that jurisdiction. 7) FOREIGN TAXES: Foreign taxes withheld represent amounts withheld by foreign tax authorities, net of refunds recoverable. 8) ORGANIZATION EXPENSES: Expenses incurred by International and Socially Responsive in connection with their organization are being amortized on a straight-line basis over a five-year period. At February 28, 1999, the unamortized balance of such expenses amounted to $3,375 and $233, for International and Socially Responsive, respectively. 9) EXPENSE ALLOCATION: Each Portfolio bears all costs of its operations. Expenses incurred by each of the Trusts with respect to any two or more Portfolios are allocated in proportion to the net assets of such Portfolios, except where a more appropriate allocation of expenses to each Portfolio can otherwise be made fairly. Expenses directly attributable to a Portfolio are charged to that Portfolio. C-37 10) CALL OPTIONS: Premiums received by each Portfolio upon writing a covered call option are recorded in the liability section of each Portfolio's Statement of Assets and Liabilities and are subsequently adjusted to the current market value. When an option is exercised, closed, or expired, the Portfolio realizes a gain or loss and the liability is eliminated. A Portfolio bears the risk of a decline in the price of the security during the period, although any potential loss during the period would be reduced by the amount of the option premium received. In general, written covered call options may serve as a partial hedge against decreases in value in the underlying securities to the extent of the premium received. All securities covering outstanding options are held in escrow by the custodian bank. Summary of option transactions for the six months ended February 28, 1999:
VALUE WHEN FOCUS NUMBER WRITTEN - ------------------------------------------------------------------------- CONTRACTS OUTSTANDING 8/31/98 0 $ 0 CONTRACTS WRITTEN 10,180 3,425,092 CONTRACTS EXPIRED (1,880) (920,082) CONTRACTS EXERCISED (3,525) (870,436) CONTRACTS CLOSED (4,775) (1,634,574) ------------------------ CONTRACTS OUTSTANDING 2/28/99 0 $ 0 ------------------------
VALUE WHEN GUARDIAN NUMBER WRITTEN - -------------------------------------------------------------------------- CONTRACTS OUTSTANDING 8/31/98 7,018 $ 3,498,330 CONTRACTS WRITTEN 42,000 17,810,913 CONTRACTS EXPIRED (12,518) (5,081,776) CONTRACTS EXERCISED (15,000) (8,098,489) CONTRACTS CLOSED (13,500) (4,965,583) ------------------------- CONTRACTS OUTSTANDING 2/28/99 8,000 $ 3,163,395 -------------------------
11) FINANCIAL FUTURES CONTRACTS: Focus, Guardian, International, Millennium, and Socially Responsive may each buy and sell financial futures contracts to hedge against a possible decline in the value of their portfolio securities. Also, Focus and Guardian may each buy and sell stock index futures contracts for purposes of managing cash flow. International may also buy and sell financial futures contracts for non-hedging purposes. At the time a Portfolio enters into a financial futures contract, it is required to deposit with its custodian a specified amount of cash or liquid securities, known as "initial margin," ranging upward from 1.1% of the value of the financial futures contract being traded. Each day, the futures contract is valued at the official settlement price of the board of trade or U.S. commodity exchange on which such futures contract is traded. Subsequent payments, known C-38 as "variation margin," to and from the broker are made on a daily basis as the market price of the financial futures contract fluctuates. Daily variation margin adjustments, arising from this "mark to market," are recorded by the Portfolios as unrealized gains or losses. Although some financial futures contracts by their terms call for actual delivery or acceptance of financial instruments, in most cases the contracts are closed out prior to delivery by offsetting purchases or sales of matching financial futures contracts. When the contracts are closed, a Portfolio recognizes a gain or loss. Risks of entering into futures contracts include the possibility there may be an illiquid market and/or a change in the value of the contract may not correlate with changes in the value of the underlying securities. For U.S. Federal income tax purposes, the futures transactions undertaken by a Portfolio may cause that Portfolio to recognize gains or losses from marking to market even though its positions have not been sold or terminated, may affect the character of the gains or losses recognized as long-term or short-term, and may affect the timing of some capital gains and losses realized by the Portfolios. Also, a Portfolio's losses on transactions involving futures contracts may be deferred rather than being taken into account currently in calculating such Portfolio's taxable income. During the period ended February 28, 1999, Focus, Millennium, and Socially Responsive did not enter into any financial futures contracts. During the six months ended February 28, 1999, International had entered into various financial futures contracts. At February 28, 1999, there were no open positions. At February 28, 1999, open positions in financial futures contracts for Guardian were as follows:
UNREALIZED EXPIRATION OPEN CONTRACTS POSITION APPRECIATION - ------------------------------------------------------------------------------------------------------- March 1999 1,507 S&P 500 Futures Long $22,519,480
At February 28, 1999, Guardian had the following securities deposited in a segregated account to cover margin requirements on open financial futures contracts:
PRINCIPAL AMOUNT SECURITY ----------------------------------------------------------- $ 10,205,000 U.S. Treasury Bills, 4.345%, due 4/1/1999 21,500,000 U.S. Treasury Bills, 4.425%, due 4/22/1999
12) SECURITY LENDING: Securities loans involve certain risks in the event a borrower should fail financially, including delays or inability to recover the lent securities or foreclose against the collateral. The investment manager, under the general supervision of the Trusts' Boards of Trustees, monitors the creditworthiness of the C-39 parties to whom the Portfolios make security loans. The Portfolios will not lend securities on which covered call options have been written, or lend securities on terms which would prevent each of their investors from qualifying as a regulated investment company. Effective June 1, 1998, the Portfolios entered into a Securities Lending Agreement with Morgan Stanley & Co. Incorporated ("Morgan"). The Portfolios receive cash collateral equal to at least 100% of the current market value of the loaned securities. The Portfolios invest the cash collateral in the N&B Securities Lending Quality Fund, LLC ("investment vehicle"), which is managed by State Street Bank and Trust Company pursuant to guidelines approved by the Trusts' investment manager. Income earned on the investment vehicle is paid to Morgan monthly. The Portfolios receive a fee, payable monthly, negotiated by the Portfolios and Morgan, based on the number and duration of the lending transactions. At February 28, 1999, the value of the securities loaned and the value of the collateral were as follows:
VALUE OF SECURITIES VALUE OF LOANED COLLATERAL - -------------------------------------------------------------------------------- FOCUS $ 47,933,652 $ 48,892,335 GENESIS 33,682,579 34,356,306 GUARDIAN 6,864,855 7,002,158 INTERNATIONAL 8,199,450 8,363,438 MANHATTAN 109,520,578 111,711,022 MILLENNIUM 6,577,912 6,665,000 PARTNERS 90,283,072 92,088,729 SOCIALLY RESPONSIVE 6,170,250 6,293,657
13) REPURCHASE AGREEMENTS: Each Portfolio may enter into repurchase agreements with institutions that each Portfolio's investment manager has determined are creditworthy. Each repurchase agreement is recorded at cost. A Portfolio requires that the securities purchased in a repurchase transaction be transferred to the custodian in a manner sufficient to enable a Portfolio to obtain those securities in the event of a default under the repurchase agreement. A Portfolio monitors, on a daily basis, the value of the securities transferred to ensure that their value, including accrued interest, is greater than amounts owed to a Portfolio under each such repurchase agreement. 14) SWAPS: International has entered into equity swap contracts to gain exposure to specific foreign equities. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified security prices or interest rates. The payment flows are usually netted against each other, with the difference being paid by one party to the other. C-40 Risks may arise as a result of the failure of another party to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net payment to be received by the Portfolio and/or the termination value at the end of the contract. Therefore, International considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying equities. International records a net receivable or payable for the amount expected to be received or paid under the contract. The fluctuation in the market value of the underlying security is recorded as unrealized appreciation (depreciation) of investments. Premium payments made to enter into a swap contract are capitalized and amortized over the life of the swap contract. Management periodically reviews the value of the unamortized balance of the premium payment and may accelerate the amortization. At February 28, 1999, International had no outstanding equity swap contracts. NOTE B -- MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES: Each Portfolio retains Management as its investment manager under a Management Agreement. For such investment management services, each Portfolio (except Genesis, International, and Millennium) pays Management a fee at the annual rate of 0.55% of the first $250 million of that Portfolio's average daily net assets, 0.525% of the next $250 million, 0.50% of the next $250 million, 0.475% of the next $250 million, 0.45% of the next $500 million, and 0.425% of average daily net assets in excess of $1.5 billion. Genesis and Millennium pay Management a fee for investment management services at the annual rate of 0.85% of the first $250 million of that Portfolio's average daily net assets, 0.80% of the next $250 million, 0.75% of the next $250 million, 0.70% of the next $250 million, and 0.65% of average daily net assets in excess of $1 billion. Prior to December 15, 1997, Management had voluntarily agreed to waive a portion of the management fee borne directly by Genesis and indirectly by any entity that invested in Genesis to reduce the annual fee by 0.10% per annum of average daily net assets of Genesis. Effective December 15, 1997, the above waiver was terminated. International pays 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, 0.825% of the next $250 million, 0.80% of the next $250 million, 0.775% of the next $250 million, 0.75% of the next $500 million, and 0.725% of average daily net assets in excess of $1.5 billion. All of the capital stock of Management is owned by individuals who are also principals of Neuberger Berman, LLC ("Neuberger"), a member firm of The New York Stock Exchange and sub-adviser to each Portfolio. Neuberger is retained by C-41 Management to furnish it with investment recommendations and research information without added cost to each Portfolio. Several individuals who are officers and/or trustees of the Trusts are also principals of Neuberger and/or officers and/or directors of Management. Each Portfolio has an expense offset arrangement in connection with its custodian contract. In addition, in connection with the Securities Lending Agreement between each Portfolio and Morgan, Morgan has agreed to reimburse each Portfolio for transaction costs incurred on security lending transactions charged by the custodian. The impact of these arrangements, respectively, reflected in the Statements of Operations under the caption Custodian fees, was a reduction of $162 and $1,632, $166 and $3,536, $315 and $1,624, $116 and $1,792, $116 and $2,944, $301 and $520, $168 and $1,856, and $100 and $448, for Focus, Genesis, Guardian, International, Manhattan, Millennium, Partners, and Socially Responsive, respectively. NOTE C -- SECURITIES TRANSACTIONS: During the six months ended February 28, 1999, there were purchase and sale transactions (excluding short-term securities, financial futures contracts, forward foreign currency contracts, option contracts, and equity swap contracts) as follows:
PURCHASES SALES - ------------------------------------------------------------------------------------ FOCUS $ 397,301,619 $ 525,042,028 GENESIS 232,202,486 474,841,102 GUARDIAN 2,144,893,710 4,020,900,683 INTERNATIONAL 41,094,507 53,577,696 MANHATTAN 283,532,028 321,578,824 MILLENNIUM 33,864,943 11,426,582 PARTNERS 3,272,942,139 3,435,597,084 SOCIALLY RESPONSIVE 95,860,433 90,481,097
During the six months ended February 28, 1999, International had entered into various contracts to deliver currencies at specified future dates. At February 28, 1999, there were no open contracts. C-42 During the six months ended February 28, 1999, there were brokerage commissions on securities paid to Neuberger and other brokers as follows:
OTHER NEUBERGER BROKERS TOTAL - -------------------------------------------------------------------------------------------- FOCUS $ 518,826 $ 561,853 $ 1,080,679 GENESIS 528,353 536,852 1,065,205 GUARDIAN 2,043,446 4,106,527 6,149,973 INTERNATIONAL 4,692 277,294 281,986 MANHATTAN 195,212 288,686 483,898 MILLENNIUM 11,550 9,437 20,987 PARTNERS 4,586,919 3,987,457 8,574,376 SOCIALLY RESPONSIVE 165,385 76,638 242,023
NOTE D -- COMBINED LINE OF CREDIT: At February 28, 1999, Genesis, Manhattan, and Millennium were three of the holders of a committed, unsecured $100,000,000 combined line of credit with State Street Bank and Trust Company, to be used only for temporary or emergency purposes. Interest is charged on borrowings under this agreement at the overnight Federal Funds Rate plus 0.75% per annum. A facility fee of 0.07% per annum of the available line of credit is charged, of which Genesis, Manhattan, and Millennium each has agreed to pay its pro rata share, based on the ratio of its individual net assets to the net assets of all the participants at the time the fee is due and payable. The fee is paid quarterly in arrears. No compensating balance is required. Other investment companies managed by Management also participate in the line of credit on the same terms. Because several investment companies participate, there is no assurance that an individual Portfolio will have access to the entire $100,000,000 at any particular time. Genesis, Manhattan, and Millennium had no loans outstanding pursuant to this line of credit at February 28, 1999. During the six months ended February 28, 1999, Genesis, Manhattan, and Millennium did not utilize this line of credit. At February 28, 1999, International was one of two holders of a $20,000,000 combined uncommitted, secured line of credit with State Street Bank and Trust Company to be used for temporary or emergency purposes or for leverage. Interest is charged at LIBOR, or the overnight Federal Funds Rate, plus a spread to be determined at the time of borrowing. Another investment company managed by Management also participates in the line of credit on the same terms. Because another investment company participates, there is no assurance that an individual Portfolio will have access to the entire $20,000,000 at any particular time. International had no loans outstanding pursuant to this line of credit at February 28, 1999, nor had it utilized this line of credit at any time prior to that date. C-43 NOTE E -- INVESTMENTS IN NON-CONTROLLED AFFILIATES*:
BALANCE OF GROSS GROSS BALANCE OF SHARES HELD PURCHASES SALES SHARES HELD VALUE FOCUS AUGUST 31, AND AND FEBRUARY 28, FEBRUARY 28, NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------- ADVANTA Corp. Class A 948,694 0 150,194 798,500 $ 9,332,469 ADVANTA Corp. Class B 910,000 0 107,500 802,500 7,272,656 Sierra Health Services** 1,360,000 0 1,360,000 0 0
BALANCE OF GROSS GROSS BALANCE OF SHARES HELD PURCHASES SALES SHARES HELD VALUE GENESIS AUGUST 31, AND AND FEBRUARY 28, FEBRUARY 28, NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999 - ------------------------------------------------------------------------------------------------------------------------------- AAR Corp. 1,748,650 60,900 28,200 1,781,350 $ 26,942,919 ADAC Laboratories 1,003,100 42,200 2,000 1,043,300 18,648,988 Alliant Techsystems 648,500 90,600 23,700 715,400 56,650,738 Aviall Inc. 1,194,100 50,400 0 1,244,500 17,189,656 DONCASTERS PLC ADR 468,300 0 0 468,300 8,283,056 Eltron International** 420,000 0 420,000 0 0 Inprise Corp. 2,606,300 0 0 2,606,300 13,031,500 Pameco Corp.** 281,800 0 281,800 0 0 Primex Technologies 235,000 102,000 0 337,000 14,006,563 SOS Staffing Services 641,900 172,500 0 814,400 7,227,800
C-44
BALANCE OF GROSS GROSS BALANCE OF SHARES HELD PURCHASES SALES SHARES HELD VALUE GUARDIAN AUGUST 31, AND AND FEBRUARY 28, FEBRUARY 28, NAME OF ISSUER: 1998 ADDITIONS REDUCTIONS 1999 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Cabot Corp. 3,841,000 0 0 3,841,000 $ 96,745,188 Capital One Financial** 3,087,900 0 1,001,900 2,086,000 266,225,750 Coltec Industries** 4,863,900 0 4,863,900 0 0 Countrywide Credit Industries** 6,590,000 0 1,579,200 5,010,800 189,784,050 Foundation Health Systems** 9,939,900 0 9,939,900 0 0 Mark IV Industries** 2,942,081 0 2,942,081 0 0 PacifiCare Health Systems Class B 1,988,564 7,000 0 1,995,564 144,179,499 Republic Services 3,835,000 1,502,000 0 5,337,000 93,063,938 UCAR International** 2,176,200 0 2,176,200 0 0 Wellpoint Health Networks** 3,674,996 25,000 404,000 3,295,996 259,971,685
*AFFILIATED ISSUERS, AS DEFINED IN THE 1940 ACT, INCLUDE ISSUERS IN WHICH THE PORTFOLIO HELD 5% OR MORE OF THE OUTSTANDING VOTING SECURITIES. **AT FEBRUARY 28, 1999, THE ISSUERS OF THESE SECURITIES WERE NO LONGER AFFILIATED WITH THE PORTFOLIO. NOTE F -- UNAUDITED FINANCIAL INFORMATION: The financial information included in this interim report is taken from the records of each Portfolio without audit by independent accountants/auditors. Annual reports contain audited financial statements. C-45 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Focus Portfolio
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 --------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .51%(2) .51% .53% .54% -- -- --------------------------------------------------------------------------- Net Expenses .51%(2) .51% .53% .54% .57% .58% --------------------------------------------------------------------------- Net Investment Income .42%(2) .59% .54% 1.04% 1.05% 1.16% --------------------------------------------------------------------------- Portfolio Turnover Rate 26% 64% 63% 39% 36% 52% --------------------------------------------------------------------------- Net Assets, End of Period (in millions) $1,638.5 $1,317.5 $1,573.4 $1,122.4 $969.2 $645.0 ---------------------------------------------------------------------------
1) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 2) Annualized. C-46 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Genesis Portfolio
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .74%(2) .72% .77% .85% -- -- ------------------------------------------------------------------------- Net Expenses .74%(2) .72%(3) .77%(3) .85%(3) .94%(3) .98% ------------------------------------------------------------------------- Net Investment Income 1.32%(2) 1.13% .32% .27% .25% .18% ------------------------------------------------------------------------- Portfolio Turnover Rate 13% 18% 18% 21% 37% 63% ------------------------------------------------------------------------- Net Assets, End of Period (in millions) $1,682.3 $1,812.4 $1,083.7 $259.9 $142.2 $138.6 -------------------------------------------------------------------------
1) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 2) Annualized. 3) Had the investment manager not waived a portion of the management fee, the annualized ratios of net expenses to average daily net assets would have been:
YEAR ENDED AUGUST 31, 1998 1997 1996 1995 - -------------------------------------------------------------------- Net Expenses .74% .87% .95% .97% ------------------------------------------
C-47 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Guardian Portfolio
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .46%(2) .46% .46% .46% -- -- ------------------------------------------------------------------------------- Net Expenses .46%(2) .46% .46% .46% .48% .50% ------------------------------------------------------------------------------- Net Investment Income 1.07%(2) .92% .89% 1.72% 1.72% 1.66% ------------------------------------------------------------------------------- Portfolio Turnover Rate 41% 60% 50% 37% 26% 24% ------------------------------------------------------------------------------- Net Assets, End of Period (in millions) $5,497.5 $5,787.8 $8,758.2 $6,232.5 $4,613.2 $2,480.3 -------------------------------------------------------------------------------
1) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 2) Annualized. C-48 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- International Portfolio
Six Months Period from Ended June 15, February 1994(1) 28, to August 1999 Year Ended August 31, 31, (UNAUDITED) 1998 1997 1996 1995 1994 -------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(2) 1.12%(3) 1.18% 1.21% 1.37% -- -- -------------------------------------------------------------------------- Net Expenses 1.12%(3) 1.18% 1.21% 1.37%(4) .70%(4) .70%(3)(4) -------------------------------------------------------------------------- Net Investment Income (Loss) (.25%)(3) .29% .47% .58% 1.74% 1.63%(3) -------------------------------------------------------------------------- Portfolio Turnover Rate 36% 46% 37% 45% 41% 5% -------------------------------------------------------------------------- Net Assets, End of Period (in millions) $122.4 $127.8 $115.3 $57.0 $26.4 $6.1 --------------------------------------------------------------------------
1) The date investment operations commenced. 2) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 3) Annualized. 4) After reimbursement of expenses by the investment adviser. Had the investment adviser not undertaken such action, the annualized ratios of net expenses to average daily net assets would have been:
PERIOD FROM YEAR ENDED JUNE 15, 1994 AUGUST 31, TO AUGUST 31, 1996 1995 1994 - -------------------------------------------------------------- Net Expenses 1.49% 2.24% 2.50%
C-49 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Manhattan Portfolio
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .58%(2) .57% .59% .58% -- -- ------------------------------------------------------------------ Net Expenses .58%(2) .57% .59% .58% .59% .59% ------------------------------------------------------------------ Net Investment Income (Loss) (.07%)(2) (.05%) .20% .13% .42% .53% ------------------------------------------------------------------ Portfolio Turnover Rate 49% 90% 89% 53% 44% 50% ------------------------------------------------------------------ Net Assets, End of Period (in millions) $627.0 $523.4 $621.7 $567.4 $645.4 $521.7 ------------------------------------------------------------------
1) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 2) Annualized. C-50 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Millennium Portfolio
Period from October 20, 1998(1) to February 28, 1999 (UNAUDITED) -------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(2)(3) 1.52% ----------- Net Expenses(3) 1.50% ----------- Net Investment Loss(3) (.95%) ----------- Portfolio Turnover Rate 82% ----------- Net Assets, End of Period (in millions) $27.0 -----------
1) The date investment operations commenced. 2) The Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 3) Annualized. C-51 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Partners Portfolio
Six Months Ended February 28, 1999 Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(1) .47%(2) .47% .48% .51% -- -- ------------------------------------------------------------------------------- Net Expenses .47%(2) .47% .48% .51% .53% .54% ------------------------------------------------------------------------------- Net Investment Income 1.64%(2) 1.11% 1.05% 1.26% 1.13% .75% ------------------------------------------------------------------------------- Portfolio Turnover Rate 85% 109% 77% 96% 98% 75% ------------------------------------------------------------------------------- Net Assets, End of Period (in millions) $3,959.8 $3,581.3 $3,575.6 $1,999.6 $1,623.5 $1,340.3 -------------------------------------------------------------------------------
1) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 2) Annualized. C-52 FINANCIAL HIGHLIGHTS Neuberger Berman - -------------------------------------------------------------------------------- Socially Responsive Portfolio
Six Months Period from Ended March 14, February 1994 (1) 28, to August 1999 Year Ended August 31, 31, (UNAUDITED) 1998 1997 1996 1995 1994 ------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: Gross Expenses(2) .60%(3) .60% .63% .65% -- -- ------------------------------------------------------------------------- Net Expenses .60%(3) .60% .63% .65% .68% .69%(3) ------------------------------------------------------------------------- Net Investment Income .84%(3) .92% 1.08% 1.02% 1.18% 1.33%(3) ------------------------------------------------------------------------- Portfolio Turnover Rate 29% 47% 51% 53% 58% 14% ------------------------------------------------------------------------- Net Assets, End of Period (in millions) $355.3 $282.9 $256.3 $158.5 $96.7 $70.7 -------------------------------------------------------------------------
1) The date investment operations commenced. 2) For fiscal periods ending after September 1, 1995, the Portfolio is required to calculate an expense ratio without taking into consideration any expense reductions related to expense offset arrangements. 3) Annualized. C-53 (This page has been left blank intentionally.) C-54 DIRECTORY INVESTMENT MANAGER, ADMINISTRATOR AND DISTRIBUTOR Neuberger Berman Management Inc. 605 Third Avenue 2nd Floor New York, NY 10158-0180 800.877.9700 or 212.476.8800 Institutional Services 800.366.6264 SUB-ADVISER Neuberger Berman, LLC 605 Third Avenue New York, NY 10158-3698 CUSTODIAN AND SHAREHOLDER SERVICING AGENT State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110 ADDRESS CORRESPONDENCE TO: Neuberger Berman Funds Institutional Services 605 Third Avenue 2nd Floor New York, NY 10158-0180 LEGAL COUNSEL Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, NW 2nd Floor Washington, DC 20036-1800 - -C- 1999 Neuberger Berman Management Inc. D-1 OFFICERS AND TRUSTEES EQUITY MANAGERS TRUST/ NEUBERGER BERMAN EQUITY TRUST/ NEUBERGER BERMAN EQUITY ASSETS Stanley Egener CHAIRMAN OF THE BOARD AND TRUSTEE Lawrence Zicklin PRESIDENT AND TRUSTEE Faith Colish TRUSTEE Howard A. Mileaf TRUSTEE Edward I. O'Brien TRUSTEE John T. Patterson, Jr. TRUSTEE John P. Rosenthal TRUSTEE Cornelius T. Ryan TRUSTEE Gustave H. Shubert TRUSTEE Daniel J. Sullivan VICE PRESIDENT Michael J. Weiner VICE PRESIDENT Richard Russell TREASURER Claudia A. Brandon SECRETARY Barbara DiGiorgio ASSISTANT TREASURER Celeste Wischerth ASSISTANT TREASURER Stacy Cooper-Shugrue ASSISTANT SECRETARY C. Carl Randolph ASSISTANT SECRETARY GLOBAL MANAGERS TRUST Stanley Egener CHAIRMAN OF THE BOARD AND TRUSTEE Lawrence Zicklin PRESIDENT Howard A. Mileaf TRUSTEE John T. Patterson, Jr. TRUSTEE John P. Rosenthal TRUSTEE Daniel J. Sullivan VICE PRESIDENT Michael J. Weiner VICE PRESIDENT Richard Russell TREASURER Claudia A. Brandon SECRETARY Barbara DiGiorgio ASSISTANT TREASURER Jacqueline Henning ASSISTANT TREASURER Celeste Wischerth ASSISTANT TREASURER Stacy Cooper-Shugrue ASSISTANT SECRETARY Lenore Joan McCabe ASSISTANT SECRETARY C. Carl Randolph ASSISTANT SECRETARY D-2 Statistics and projections in this report are derived from sources deemed to be reliable but cannot be regarded as a representation of future results of the Funds. This report is prepared for the general information of shareholders and is not an offer of shares of the Funds. Shares are sold only through the currently effective prospectus, which must precede or accompany this report. NEUBERGER BERMAN NEUBERGER BERMAN MANAGEMENT INC. 605 Third Avenue 2nd Floor New York, NY 10158-0180 SHAREHOLDER SERVICES 800.877.9700 INSTITUTIONAL SERVICES 800.366.6264 www.nbfunds.com [LOGO] NMATR5610499 -----END PRIVACY-ENHANCED MESSAGE-----